Document:

exv10w28

Exhibit 10.28

Portions
of this exhibit were omitted and filed separately with the Secretary
of the Securities and Exchange Commission (the “Commission”) pursuant to an application for confidential
treatment filed with the Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. Such portions are marked by a series of asterisks.

LICENSE AGREEMENT

defined hereinafter as “Agreement”

by and between

Nuance Communications, Inc.

One Wayside Road

Burlington, MA 01803

Hereinafter referred to as “Nuance” and / or “Licensor”

and

MedQuist Inc.

1000 Bishops Gate Blvd, #300

Mount Laurel, NJ 08054

Hereinafter referred to as “MedQuist” and / or “Licensee”

 

			
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	Effective Date:

	 	November 10, 2009

Licensor Corporate Name:

Nuance Communications, Inc.

One Wayside Road

Burlington, MA 01803

	 	 	 
	Tel:

	 	(781) 565-5134
	Fax:

	 	+(781) 565-5562

	 	 	 
	Nuance Notices Address:

	 	Nuance Communications, Inc.
	 

	 	One Wayside Road
	 

	 	Burlington, MA 01803
	Attention:

	 	Legal Department
	Phone:

	 	781-565-5000
	Fax:

	 	781-565-5562

Contract Owner: -

Contract Manager (if different):

Licensee Corporate Name:

MedQuist Inc.

1000 Bishops Gate Blvd, #300

Mount Laurel, NJ 08054

	 	 	 
	Tel:

	 	(856) 206-4000
	Fax:

	 	(856) 206-4215

	 	 	 
	Contract Owner:

	 	Emmy Weber

Contract Manager (if different):

 

			
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ARTICLE 1: DEFINITIONS

The following terms shall have the meanings ascribed to them herein whenever they are used in this
Agreement, unless clearly indicated otherwise by the context.

	1.1	 	“Affiliates” shall mean any corporation, limited liability company, partnership or other
legal entity, present or future, which is owned or controlled or owns or controls or is under
common control with, directly or indirectly, a Party to this Agreement, as the case may be, as
long as such ownership or control exists and where control means ownership or control of more
than fifty (50) percent of voting stock in the case of a stock issuing entity, or more than
fifty (50) percent of voting control of a non-stock issuing entity.
	 
	1.2	 	“Agreement” shall mean this license agreement, including as an integral part, the Addenda,
all duly initialed, signed or otherwise accepted by the parties, and attached hereto or
included by reference, and any modifications and/or changes made from time to time in
accordance with the provisions hereof.
	 
	1.3	 	“ConText” shall mean a specific speech recognition software module, which can be added to the
Development Software, containing a specialized class of language resources optimized for a
specific user or application group (e.g. radiology)
	 
	1.4	 	“Designated Application” shall mean the applications made by Licensee specified in Addendum
B.
	 
	1.5	 	“Development Software” shall mean the Licensor’s Software Development Kit, specified in
Addendum A, including any ConText as per Addendum A , to be integrated into the Designated
Application in accordance with the Documentation, as provided by Licensor for the “Development
Software”. The items specified in Addendum A (i) and (ii) have been delivered to Licensee as
of the Effective Date. Development Software includes any Updates or Upgrades, including any
Updates and Upgrades to the ConTexts that Licensor makes available to all its customers as
part of its Maintenance services obligations, if applicable, as per Addendum E.
	 
	1.6	 	“Documentation” shall mean those visually readable materials, developed by or for Licensor
and made available to Licensee for use in connection with the Development

 

			
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	 	 	Software. Documentation includes operating instructions, input information and format
specifications.
	 
	1.7	 	“Effective Date” shall mean the date noted above in this Agreement.
	 
	1.8	 	“End-User” shall mean any customer of Licensee and/or of Third Parties, who will only be
granted the right to use the Run-Time Software in connection with the Designated Application.
	 
	1.9	 	“Run-Time Software” shall mean an object code / executable copy of software derived from the
Development Software (or any portion thereof) which is integrated into the Designated
Application.
	 
	1.10	 	“MedQuist “ and “Licensee” shall mean MedQuist Inc.
	 
	1.11	 	“Nuance” and “Licensor” shall mean Nuance Communications, Inc.
	 
	1.12	 	“Royalty Report” shall mean the monthly report submitted by Licensee as per Section 3.6.
	 
	1.13	 	“Third Parties” shall mean system houses, value added resellers and other such entities
engaged in doing business with Licensee, and who acquire the Designated Application,
incorporating the Run-Time Software into their applications, for marketing and distribution
purposes to End-Users.
	 
	1.14	 	“Territory” shall mean the country or countries as specified in Addendum C.

ARTICLE 2: GRANT OF SOFTWARE LICENSE

	2.1	 	Subject to the terms and conditions hereof, Licensor hereby grants to Licensee and Licensee
accepts from Licensor, a non-exclusive, non-transferable license for the Territory to:

	 	2.1.1	 	use the Development Software solely in connection with Licensee’s development,
distribution and provision of technical support, for Designated Application
incorporating Run-Time Software;

 

			
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	 	2.1.2	 	make Run-Time Software copies based on the Development Software solely for
incorporating into the Designated Application;
	 
	 	2.1.3	 	distribute and sublicense to End-Users directly or through Third Parties, copies
of the Run-Time Software incorporated into the Designated Application, and Documentation
in the Territory as it applies to Run-Time Software with ConText for Radiology and
Run-Time Software with ConText for Multi-Med, as per Addendum C 1 (a) and (b)
respectively, provided, that such sub-licenses to Third Parties shall be in compliance
with the provisions set forth in Section 2.2 hereof.
	 
	 	2.1.4	 	use copies of the Run-Time Software for the sole purposes of promotion,
demonstration, sales, implementation, testing, customer support in a non-production
environment on systems operated by Licensee.

	2.2	 	All licensing and distributions by Third Parties as referred to in Section 2.1.3 shall be
pursuant to written agreements with Licensee that comply with the applicable terms and
conditions hereof, including appropriate methods of calculation, reporting and payment of
applicable royalties.
	 
	2.3	 	Without prejudice to the provisions of this Article 2, it is furthermore expressly agreed
that the only right granted by Licensee to Third Parties is the right to distribute the
Designated Application incorporating the Run-Time Software.
	 
	2.4	 	Licensor’s language models and ConTexts will continue to be exclusively owned by Licensor and
shall be used and distributed by Licensee only with the Run-Time Software based on the
Development Software of Licensor.
	 
	2.5	 	Open Source Software: Licensee shall not perform any actions with regard to the Development
Software or Run-Time Software that would require the Development Software or any derivative
work thereof to be licensed under Open License Terms. These actions include but are not
limited to:
	 
	 	 	(i) combining the Development Software or Run-Time Software or a derivative work thereof with
Open Source Software, by means of incorporation or linking or otherwise; or
	 
	 	 	(ii) using Open Source Software to create a derivative work of the Development Software or
Run-Time Software.

 

			
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	 	 	“Open Source Software” shall mean any open source software that if linked, combined or used
with the Development Software or Run-Time Software would create a risk, or have the “viral”
effect, of requiring the disclosure or licensure of the Development Software or Run-Time
Software as open source under the GNU General Public License or under the terms of any other
comparable viral open source license.
	 
	2.6	 	Development Software as per Addendum A, has specifications which are unique to Licensee,
which is different from Licensor’s generally commercially available version of SpeechMagic SDK
software. During the Term, Licensee may request Licensor to provide Development and Consulting
Services, to be paid as per the rates in Addendum C and subject to a mutually agreed Statement
of Work (SOW) , to enhance, modify or update the Development Software to match the
specifications of Licensor’s generally commercially available version of SpeechMagic SDK
software.

ARTICLE 3: Minimum Volume and Payment Commitment

	3.1	 	Minimum Volume Commitment: In consideration for the additional rights granted to Licensee
herein, including the additional license grant as per Article 2 for the inclusion of ConText
for Multi-Med into Development Software (as per Addendum A(iii)), and the Term, as per Article
7, Licensee makes the following minimum volume commitments (“MVC”):
	 
	 	 	3.1.1 Eighty-Five percent (85%) of all licenses of Front-End Speech Recognition software (such as the
Designated Application or similar) granted by Licensee to all its customers within the
Territory, will incorporate royalty bearing licenses of Run-Time Software as per this
Agreement (“Front-End MVC”).
	 
	 	 	3.1.2 Eighty-Five percent (85%) of total Lines (as defined below), generated by Licensee in Licensee’s
business of providing Transcription Services and by Licensee in its business of providing
Service Bureau Services, that utilize any Back-End Speech Recognition software (such as
Licensee’s DocQment Enterprise Platform or similar), will be generated using SpeechMagic,
the software product defined as the “Licensed Product”, as per that certain licensing
agreement (the “DEP Licensing Agreement”) dated May 22, 2000, as amended between MedQuist
Inc. and Philips Speech Recognition Systems Gmbh (“Back-End MVC”).
	 
	3.1.3	 	 The following terms are ascribed the corresponding meaning:

     (a) “Speech Recognition” means conversion of speech to text via a software program.

 

			
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     (b) “Front-End Speech Recognition” means the Speech Recognition process which takes
place on the client computer rather than the server.

     (c) “Back-End Speech Recognition” means any Speech Recognition process which takes
place on a server rather than on a client computer.

     (d) “Line” means *******.

     (e) “Services Bureau Services” means the licensing of remote access to Licensee’s
software and hardware systems to enable Speech Recognition, with or without manual
transcription or editing services.

     (f) “Transcription Services” are the medical transcription and/or editing services
provided by Licensee to convert Dictation into Transcript. “Dictation” is the dictated audio
by a physician, recorded on digital media as a computer digital audio file for conversion
from voice into text or data and “Transcript” means the document or computer file resulting
from the conversion of Dictation into text or data.

	3.2	 	Minimum Payment:
	 
	3.2.1	 	During the Term, as set forth in Section 4.1.2, Licensee will pay Licensor a minimum amount
equal to (i) the per license fees and the Maintenance Fees derived from the Front-End MVC plus (ii) the
Back-End MVC fees, (collectively, the “Minimum Payment”) calculated as follows:

Total number of licenses of Front-End Speech Recognition software licensed by
Licensee in its business X (multiplied by) applicable per license fee and
Maintenance Fee as per Addendum C of this Agreement X (multiplied by) Eighty-Five
percent (85%)

Plus

Total number of Lines generated by Licensee, in Licensee’s business of providing
Transcription Services and by Licensee in its business of providing Service Bureau
Services, that utilize Back-End Speech Recognition software X (multiplied by) per
ASR Line rate set forth in the DEP Licensing Agreement X (multiplied by)
Eighty-Five percent (85%).

	3.3	 	Licensee acknowledges that Licensor is entering into
this Agreement and has granted certain additional rights to
Licensee as inducement and in reliance of the MVC and the associated
Minimum Payment by Licensee, and that but for the agreement by Licensee
to the MVC and the associated Minimum Payment obligation pursuant to
Section 3.2, Licensor would not have granted such additional rights and
entered into this Agreement. In the event that Licensee does not meet the
MVC, Licensor’s sole remedy shall be the payment of the Minimum Payment
by Licensee as set forth in Section 3.2. A breach of the Minimum Payment
obligation by Licensee would be a substantial and material breach of this Agreement.
	 
	3.4	 	The parties further agree and clarify that:
	 
	 	 	(a) Back-End MVC and the associated Minimum Payment shall not include Acquired Volume.
“Acquired Volume” means those Lines and associated fees generated by an entity that is
acquired by Licensee after the Effective Date, which entity is engaged in the business of
providing medical transcription and editing services through the utilization of Back-End
Speech Recognition software for customers that such acquired entity has written agreements
with as of the date of its acquisition by Licensee. Acquired Volume shall include any Lines
added subsequent to the acquisition of such entity, for such customers with whom the
acquired entity has written agreements with as of the date of its acquisition by Licensee.
	 
	 	 	(b) Back-End MVC and the associated Minimum Payment shall always include (but not be limited
to) Existing Volume, irrespective of the (i) dictation/transcription platform used by
Licensee (i.e. Licensee’s DocQment Enterprise Platform or any other) to provide its services
or (ii) the Back-End Speech Recognition software utilized by Licensee to provide its
services. “Existing Volume” means the Lines, and the associated fees, generated by Licensee,
in Licensee’s business of providing Transcription Services and by Licensee in its business
of providing Service Bureau Services, that utilize Back-End Speech Recognition software that
are attributable to all Licensee customers as of the Effective Date.
	 
	 	 	(c) Back-End MVC and the associated Minimum Payment shall always include (but not be limited
to) New Volume, irrespective of (i) dictation/transcription platform used by Licensee (i.e.
Licensee’s DocQment Enterprise Platform) to provide its services or

 

			
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	 	 	(ii) the Back-End Speech Recognition software utilized by Licensee to provide its services.
“New Volume” means the Lines, and the associated fees, generated by Licensee, in Licensee’s
business of providing Transcription Services and by Licensee in its business of providing
Service Bureau Services, that utilize Back-End Speech Recognition software that are
attributable to all new Licensee customers acquired anytime after the Effective Date, but
not including Acquired Volume.

ARTICLE 4: LICENSE FEES / PAYMENTS

	4.1	 	Fees

     4.1.1 For all licenses of Run-Time Software incorporated in the Designated Application
licensed to End Users, Licensee will pay the license fees and Maintenance Fees as per the rates in
Addendum C of this Agreement.

     4.1.2 Licensee shall only pay the Minimum Payment amount as set forth in Section 3.2 if such
Minimum Payment amount is greater than the sum total of (i) the license fees and Maintenance Fee
due as per Section 4.1.1, and (ii) the fees due under the DEP Licensing Agreement.

4.2 Other Fees: Any support, training or other services other than Maintenance services provided by
Licensor under this Agreement will be invoiced at the end of each month (or, unless otherwise
agreed in an SOW, at the end of each calendar quarter with respect to the Development and
Consulting Services set forth in Section 6.3) in which said services are provided. Unless otherwise
provided in writing, all invoices are payable within ******* of date of invoice. Maintenance
services to be invoiced as per Section 6.5 of this Agreement.

4.3 Licensor is entitled to change the payment conditions to advance payment if Licensor is
reasonably of the opinion that Licensee did not fulfill its payment obligations as set forth in
this Agreement with respect to any undisputed invoiced and did not remedy this situation within
******* days after receipt of a respective reminder.

4.4 Late Payments: If Licensee fails to pay any undisputed invoiced amount due to Licensor within
******* , Licensor is entitled to claim from Licensee interest from maturity date to date of actual
payment of such amount, at the rate of seven and one-half percent (7.5%)

 

			
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above the prevailing bank rate as of the date of maturity, on the unpaid balance, together with any
Licensor costs of collection (including reasonable attorney’s fees). If Licensee disputes any of
the amounts payable by Licensee under this Agreement, Licensee shall so notify Licensor in writing
not later than the time at which such fees or other amounts are due, and such notice (a “Dispute
Notice”) shall provide reasonable detail regarding the amount and nature of the dispute. Upon
delivery of such Dispute Notice to Licensor, the parties agree to negotiate in good faith the
resolution of the payment dispute described in the Dispute Notice and resolve such payment dispute
within thirty (30) calendar days of delivery of the Dispute Notice.

4.5 Licensee will provide reports to Licensor, at end of each calendar month, in the form of a
written electronic statement, in connection with Licensee’s grant to its End-Users of licenses for
a Designated Application incorporating the Run-Time Software. The reports will include the relevant
data necessary to calculate the amount of the Licensee fees payable pursuant to this Agreement with
respect to each month, and the corresponding amount of license fees payable to Licensor in
connection therewith, shall be submitted to Licensor not later than the 20th of the
month following the end of each calendar month. Licensee shall submit to Licensor a detailed report
containing information with respect to each End-User as identified by a unique assigned number or
identifier, its state, its city, and the number of licenses delivered during the immediately
preceding calendar month, and the rolling total for the respective calendar year.

4.6 Licensee will provide a letter, at the end of each calendar quarter, signed by an authorized
officer of Licensee, certifying Licensee’s compliance with the terms of this Agreement, in
particular Article 3 of this Agreement.

4.7 In the event, an End-User does not accept a license for Designated Application incorporating
the Run-Time Software, after such license have been delivered to such End-User and reported by
Licensee in a Royalty Report, Licensee may transfer or redeploy such licenses to another End-User,
without incurring additional fees. The Maintenance Term for such redeployed licenses will be the
original delivery date when such licenses were first reported in a Royalty Report. This right to
redeploy licenses does not apply if the licenses are terminated after initial acceptance of the
Designated Application incorporating the Run-Time Software by the End-User. Furthermore, Licensee
cannot return such licenses to Licensor for a refund of

 

			
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any fees and Licensee’s payment obligation on these licenses will remain unchanged.

ARTICLE 5: WARRANTY

5.1 Licensor warrants that it has the right to grant the licenses contained in this Agreement.

5.2 Licensor warrants that the Development Software will perform substantially in accordance with
the specifications mentioned in the Documentation. Licensee acknowledges that the Development
Software is of such complexity, that it may have inherent defects. Licensee agrees that, if any
significant deviations from the Documentation exist, as Licensee’s exclusive remedy and Licensor’s
sole responsibility, Licensor shall use its commercially best efforts to eliminate any such
significant deviations reported to it by Licensee in writing. This warranty shall expire three (3)
months after delivery of each new release of the Development Software (the “Warranty Period”).

5.3 The express warranties stipulated in this clause constitute the sole warranty in respect of the
Development Software. Licensor offers no other warranty and therefore excludes all other warranties
of any nature whatsoever regarding the Development Software, whether express or implied, including
without limitation, warranties of merchantability or fitness for a particular purpose. Licensor
does not warrant that performance of the Development Software will be error-free or uninterrupted,
or that the functions contained in the Development Software will be suitable for or meet
Licensee’s, Third Parties’ or End-Users’ requirements. Licensee acknowledges that Licensor has made
no representations regarding warranty or liability other than as stated in this Agreement.

5.4 For the avoidance of doubt, this Agreement does not exclude warranties which cannot be excluded
as a result of applicable law and any liability incurred thereby shall be limited to correction or
replacement of the Development Software, at Licensor’s option.

ARTICLE 6: MAINTENANCE/TRAINING

6.1 Licensee commits to participate in integration training and training for support teams offered
by Licensor and insofar as Third Parties are involved by Licensee will also ensure that these Third
Parties participate. Licensor will provide ample opportunities at the Vienna

 

			
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location or at a location chosen by Licensee upon request. Upon passing the above training,
Licensee and / or Third Parties are allowed to provide end-user training and other related
services.

6.2 Unless otherwise agreed, Licensee and Third Parties shall at all times have in their
organization a minimum of two (2) technical support persons that have passed the training for
support teams as specified in Section 6.1. If a new version of the Licensee’s solution is
released, Licensee needs to make sure that its development team has participated in integration
training. When the Software is released, the integration shall be validated by Licensor.

	6.3	 	Licensor may provide Licensee, if mutually agreed in writing, with training services pursuant
to Section 6.1 and 6.2, and Development and Consulting Services related to Development
Software, as per the hourly rates in Addendum C, all of which will be invoiced separately.
	 
	 	 	6.3.1 Licensor will assign a minimum of *******  to provide ongoing Development and
Consulting Services to Licensee, at the hourly rate as per Addendum C. In consideration for
this minimum staffing level, Licensee will pay a minimum amount of ******* , beginning from
the Effective Date (“Development Minimum”). The initial ******* Development Minimum shall be
pro-rated based on the elapsed time of the ******* within which the Effective Date occurs and
the final ******* Development Minimum shall be pro-rated to reflect the termination date of
this Agreement.
	 
	 	 	6.3.2 This Development Minimum may be reduced or modified by Licensee *******. Upon mutual
agreement of a statement of work (SOW) for these Development and Consulting Services Licensor
will use reasonable efforts to hire or assign resources to the agreed upon staffing level as
soon as commercially practical.
	 
	 	 	6.3.3 At all times during the Term of this Agreement, Licensor shall maintain staffing levels
commensurate with the Development Minimum, as agreed upon as of the Effective Date as per
Section 6.3.1, and subsequently adjusted as per Section 6.3.2 of this Agreement, to provide
ongoing Development and Consulting Services to Licensee. In addition, Licensor agrees and
acknowledges that it shall have a sufficient number of appropriately trained back-up FTE’s
available at all times to ensure that the staffing levels associated with the then-current
Development Minimum shall be continuously maintained in the event regular staff assigned to
provide Development and Consulting Services to Licensee (i) terminates his or her employment
with Licensor or (ii) is unavailable because of vacation, illness or other leave.
	 
	 	 	6.3.4 “Development and Consulting Services” means services that are outside the scope of the
Maintenance services such as feature enhancement requests, additional software development,
professional services, etc., related to the Development Software and Designated Application,
as applicable. All Development and Consulting Services are

 

			
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	 	 	subject to a written SOW that describes in detail the deliverables and total price based on
number of hours required for these services, agreed in writing and signed by both parties.
	 
	6.4	 	The maintenance and support services are set forth in Addendum E (“Maintenance”). Maintenance
is provided by Licensor subject to Licensee paying the corresponding Maintenance fee as
specified in Addendum C (“Maintenance Fee”).
	 
	 	 	Maintenance services will begin upon delivery of each license of Run-Time Software
incorporated into the Designated Application, to an End-User, for an initial term of *******,
and will be invoiced as further described in Section 6.5 below. Thereafter, Maintenance shall
automatically renew for ******* terms (each, a “Renewal Service Term”) and Licensor will
continue to invoice annually unless (i) canceled in writing by either party at least thirty
(30) days prior to the ******* renewal date or (ii) termination of the entire Agreement.
Maintenance services will be provided as long as Licensee pays the corresponding Maintenance
Fee (“Maintenance Term”). Unless otherwise agreed, Maintenance with respect to End-User
licenses shall be purchased for all copies of the Run-Time Software licensed to such
End-User.
	 
	6.5	 	Maintenance Fees for the initial term of ******* will be invoiced following each *******
Royalty Report of new licenses, as per Addendum C. Nuance will invoice Licensee for
Maintenance Fees in respect of each Renewal Service Term at the percentage rate as per
Addendum C, prior to the first day of such Renewal Service Term. Licensee will pay such
Maintenance Fees within ******* of the invoice date.
	 
	6.6	 	If there is a break between the expiration or termination of Maintenance services and the
reinstatement of Maintenance services specific to an End-User, Licensee shall pay Nuance (i)
the Maintenance Fees that would have accrued during the intervening period between expiration
or termination of the Maintenance and the reinstatement thereof, and (ii) for any professional
services, at Nuance’s then-current rates, for the repairs or modifications necessary to bring
Licensee into compliance with Nuance’s then-current specifications. Such payments shall be
made prior to renewing any Maintenance, which will be renewed at then current Licensor rates.

 

			
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	6.7	 	The parties acknowledge that, as of the Effective Date, Licensor has ******* employed to
provide Maintenance services provided for in this Agreement based on the amount of Maintenance
Fees paid by Licensee as of the Effective Date (the “Minimum Maintenance Staff”). Licensor
further agrees to adjust the number of Minimum Maintenance Staff FTEs proportionate to the
change in the amount of Maintenance Fees paid by Licensee during the Term. In addition,
Licensor agrees and acknowledges that it shall have a sufficient number of appropriately
trained back-up FTE’s available at all times to ensure that the Minimum Maintenance Staff
levels shall be continuously maintained in the event regular staff assigned to provide
Maintenance services to Licensee (i) terminates his or her employment with Licensor or (ii) is
unavailable because of vacation, illness or other leave.

ARTICLE 7: TERM

7.1 Initial Term and Renewal Terms. This Agreement shall, when signed by duly authorized
representatives of both parties, remain valid as follows:

	 	 	7.1.1 This Agreement shall become effective on the Effective Date and continue until June
30, 2015 (the “Initial Term”).
	 
	 	 	7.1.2 Following the Initial Term, and subject to Section 7.1.3 and 7.1.4, the Agreement may
be renewed, for two (2) successive terms of five (5) years each (each a “Renewal Term”). To
renew the Agreement for each Renewal Term, Licensee at its sole option must indicate its
intent to renew the Agreement by providing a written notice to Licensor, to be provided no
less than six (6) months prior to the end of the then-current Initial Term or Renewal Term
(each a “Notice Period”).
	 
	 	 	7.1.3 The parties agree that the same terms and conditions of this Agreement in effect at
the end of the then-current Initial Term or Renewal Term, will apply upon a renewal of this
Agreement as provided herein, including but not limited to the Minimum Payment as per
Article 3 of this Agreement, except for the pricing, as per Addendum C Section 2, which new
pricing must be determined and agreed to in writing by the

 

			
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	 	 	parties, based upon Licensor’s standard market prices for the Development Software and
services, in effect at the end of the then-current Initial Term or Renewal Term.
	 
	  	 	7.1.4 The parties shall negotiate new pricing upon receipt of Licensee’s written notice by
Licensor pursuant to Section 7.1.2. In the event that within thirty (30) days following
MedQuist providing Licensor with written notice of Licensee’s intent to renew pursuant to
Section 7.1.2, (i) Licensor does not respond to such notice from Licensee, or (ii) the
parties are unable to agree in writing to new pricing as per Section 7.1.3 for the proposed
Renewal Term, the Agreement will terminate on the date that is two (2) years from the end of
the then current Initial Term, or Renewal Term (the “Termination Period”). During the
Termination Period, all terms and conditions of this Agreement in effect at the end of the
then-current Initial Term or Renewal Term will apply, except for the Minimum Payment terms
as per Article 3 of this Agreement.

7.2 Notwithstanding Section 7.1 hereof, this Agreement may be terminated at anytime as follows:

	 	 	7.2.1 by Licensor: if Licensee fails to make timely payments or provide royalty reports as
required as per Article 4 of this Agreement, and any such failure is not remedied within
thirty (30) days after receipt by Licensee of Licensor’s written notice;
	 
	 	 	7.2.2 by Licensor: if Licensee expressly repudiates this Agreement by defaulting on or
refusing to observe the restricted use or confidentiality requirements as mentioned in this
Agreement, Licensor may terminate this Agreement immediately by providing written notice to
Licensee stating such breach, and any such breach is not remedied, where remediable, within
thirty (30) days after receipt by Licensee of such notice;
	 
	 	 	7.2.3 by either party: if a party ceases its business activities as a result of bankruptcy,
dissolution, liquidation, or other causes, the other party may immediately terminate this
Agreement by providing written notice to that party;
	 
	 	 	7.2.4 by either party: in case any substantial breach of this Agreement is not remedied by
the party in breach within thirty (30) days after receipt of the other party’s written notice
thereto.

7.3 Any termination of this Agreement shall terminate Licensee’s rights as defined in Article 2,
provided however that such termination does not terminate or affect sublicenses previously and
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7.4 Furthermore, upon any termination of this Agreement Licensee shall stop using the Development
Software and promptly return all Development Software and Documentation and any copies thereof, or
at Licensor’s request destroy such Development Software and Documentation and certify in writing by
a duly authorized representative that it has destroyed all such Development Software and
Documentation and any copies thereof, within ten (10) days upon Licensor’s first written request
thereto.

7.5 Upon termination of this Agreement neither party hereto shall be liable to the other party for
any damages, loss of profits or prospective profits of any kind or nature sustained, arising out of
or alleged to have arisen out of such termination, nor for any goodwill payments or similar
compensation.

7.6 The termination of this Agreement shall however not relieve or release Licensee from making
payments which are due under the terms hereof, nor shall termination of this Agreement affect any
right, liability or obligation of either party hereunder arising by reason of any event other then
termination. If this Agreement is terminated for cause by Licensor as per Section 7.2, Licensee
shall be obligated to pay Licensor the Minimum Payment and Development Minimum amount payments,
committed by Licensee as per Section 3.2 and 6.3.1 of this Agreement, that would otherwise be due
and payable for the balance of the then-current Initial Term or Renewal Term of this Agreement, and
the remaining term of the DEP Licensing Agreement, even though Licensee’s right to use the
Development Software is terminated upon such termination pursuant to Section 7.4. The termination
of this Agreement as per its terms shall not terminate the DEP Licensing Agreement.

ARTICLE 8: INTELLECTUAL PROPERTY RIGHTS INDEMNIFICATION

8.1 Subject to the provisions set forth herein, Licensor shall, at its own expense, defend any suit
brought against Licensee insofar as such suit is based upon a claim that the Development or
Run-Time Software in the form as delivered by Licensor hereunder and not modified in any way by
Licensee, alone and not in combination with any other product, directly infringes any third party
United States patent, copyright, trade secret or other intellectual property right (“third party IP
Rights”) when used in accordance with the terms of this Agreement, provided

 

			
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however that Licensor is notified promptly in writing by Licensee of such claim or suit for
infringement, is given full authority, at Licensor’s option, to settle or conduct the defense
thereof and is provided all information and reasonable assistance by Licensee in connection
therewith. In case these conditions have been met Licensor shall indemnify Licensee against any
final award of damages and costs in such suit. In case a third party refuses to grant a license
with a royalty based on the purchase price of the Development or Run-Time Software, Licensor will
only reimburse Licensee with an equitable percentage of the product price. Licensor shall not
reimburse costs and expenses made by Licensee without Licensor’s prior written consent. In the
event that the use of Development or Run-Time Software is held to constitute an infringement, or in
Licensor’s opinion such claim is likely to succeed, Licensor shall, at its option and at its
expense, either obtain for Licensee the right to continue using the Development Software or
Run-Time Software, substitute other software with equivalent functional capabilities, modify the
Development Software or Run-Time Software so that it is no longer infringing while retaining
equivalent functions or terminate this Agreement and refund the pro-rata royalties paid by Licensee
under Addendum C of this Agreement, in which case the applicable provisions of Sections 7.3 and 7.4
shall apply correspondingly.

8.2 Except as provided above, Licensor shall have no liability to Licensee, Third Parties and/or
End-Users in the event infringement of any third party IP Rights arises from components of a
Designated Application which are not derived directly from the Development Software or Run-Time
Software, operating of the Designated Application, but which are introduced into the Designated
Application by Licensee, or use of the Development or Run-Time Software for purposes for which
these were not intended, or which result from compliance with Licensee’s designs, specifications or
instructions, or from modification of the Development Software by Licensee.

8.3 The foregoing states the entire liability of Licensor in connection with infringement of third
party IPR by the Development Software and/or Run-Time Software supplied by Licensor hereunder and
except as stated in this clause, Licensor shall not be liable for any loss or damage of any kind
whatsoever, including any incidental, indirect, special or consequential damages, loss of
(prospective) profits and turnover, suffered or incurred by Licensee, Third Parties and/or
End-Users in respect of or in connection with the infringement of any third party IP Rights.

 

			
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8.4 Notwithstanding anything to the contrary elsewhere in this Agreement, purchase or acquisition
of any Development Software or Run-Time Software under this Agreement DOES NOT convey an implied
license under any patent right that may be asserted by Licensor to use or operate the Development
Software or Run-Time Software in conjunction with other software, hardware or systems that may be
used with speech/voice recognition-type applications. In particular, Licensor and/ or respectively
its Affiliates has one or more patents that cover the use and/or operation of speech recognition
technology, as embodied in such Development Software or Run-Time Software, in conjunction with, or
coupled to, other software, hardware or telecommunication systems for which no patent license is
granted herein.

ARTICLE 9: LIABILITY

9.1 LIMITATION ON LIABILITY:

	 	 	9.1.1 EXCEPT FOR BREACH OF ARTICLE 10, IN NO EVENT SHALL LICENSOR BE LIABLE FOR ANY LOSS OF
OR DAMAGE TO REVENUES, PROFITS OR GOODWILL OR OTHER SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES OF ANY KIND, RESULTING FROM ITS PERFORMANCE OR FAILURE TO PERFORM
PURSUANT TO THE TERMS OF THIS AGREEMENT OR RESULTING FROM THE FURNISHING, PERFORMANCE, OR USE
OR LOSS OF USE OF ANY DEVELOPMENT SOFTWARE, RUN-TIME SOFTWARE OR OTHER MATERIALS DELIVERED TO
LICENSEE HEREUNDER, INCLUDING, WITHOUT LIMITATION, ANY INTERRUPTION OF BUSINESS, WHETHER
RESULTING FROM BREACH OF CONTRACT, BREACH OF WARRANTY, OR ANY OTHER CAUSE.
	 
	 	 	9.1.2 EXCEPT FOR A BREACH OF SECTION 2.1 AND ARTICLE 10, IN NO EVENT SHALL LICENSEE BE LIABLE
FOR ANY LOSS OF OR DAMAGE TO REVENUES, PROFITS OR GOODWILL OR OTHER SPECIAL, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND, RESULTING FROM ITS PERFORMANCE OR FAILURE TO
PERFORM PURSUANT TO THE TERMS OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY

 

			
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	 	 	INTERRUPTION OF BUSINESS, WHETHER RESULTING FROM BREACH OF CONTRACT, BREACH OF WARRANTY, OR
ANY OTHER CAUSE.

9.2 MAXIMUM LIABILITY: LICENSOR’S TOTAL LIABILITY TO LICENSEE FROM ANY AND ALL CAUSES SHALL BE
LIMITED TO THE TOTAL AMOUNT OF ALL LICENSEE PAYMENTS ACTUALLY PAID BY LICENSEE TO LICENSOR UNDER
THIS AGREEMENT DURING THE TWELVE (12) MONTH PERIOD IMMEDIATELY PRECEDING THE DATE THAT LICENSOR IS
NOTIFIED IN WRITING BY LICENSEE OF A CLAIM UNDER THIS AGREEMENT. THIS LIMITATION OF LIABILITY IS
CUMULATIVE WITH ALL LICENSOR PAYMENTS BEING AGGREGATED TO DETERMINE SATISFACTION OF THE LIMIT. THE
EXISTENCE OF MORE THAN ONE CLAIM SHALL NOT ENLARGE OR EXTEND THE LIMIT.

9.3 ANY CLAIM FOR DAMAGE UNDER THIS AGREEMENT SHALL BE PRESENTED TO THE LICENSOR AS SOON AS
POSSIBLE AFTER OCCURRENCE OF ANY OF SUCH EVENT, ULTIMATELY WITHIN ONE (1) YEAR AFTER THE
OCCURRENCE, WHEREAS ALL REASONABLE EFFORTS SHALL BE MADE TO MITIGATE SUCH DAMAGE.

ARTICLE 10: CONFIDENTIAL INFORMATION

10.1 “Confidential Information” shall mean any information conveyed in written, graphic,
machine-readable or other tangible form, or any information conveyed orally. Notwithstanding the
above, information shall not be deemed Confidential Information to the extent that it (i) was
generally known and available in the public domain at the time it was disclosed or subsequently
becomes generally known and available in the public domain through no fault of the recipient; (ii)
was known to and recorded by the recipient at the time of disclosure; (iii) is disclosed with the
prior written approval of the disclosing party; (iv) can be demonstrated by the recipient to have
been independently developed by it without any use of the disclosing party’s Confidential
Information; or (v) becomes known to the recipient from a source other than the disclosing party
without breach of this Agreement. The obligation not to use or disclose said Confidential
Information will remain in effect until one of these exceptions occurs.

 

			
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10.2 Both parties agree not to disclose any Confidential Information made available to it by the
other party. Each party shall protect the other party’s Confidential Information from unauthorized
dissemination and use with the same degree of care that such party uses to protect its own like
information. Neither party will use the other party’s Confidential Information for purposes other
than necessary to directly further the purpose of this Agreement and as permitted in Article 2.
Neither party will disclose to third parties the other party’s Confidential Information without the
prior written consent of such other party. Except as expressly provided in this Agreement, no
ownership or license rights are granted in any trade secrets or Confidential Information.

10.3 Both parties agree that the terms and conditions hereof, and this Agreement itself shall be
considered as Confidential Information, except as expressly otherwise stated in this Agreement. Any
press releases concerning this Agreement, must be approved in writing by Licensor prior to release.

ARTICLE 11: RESTRICTED USE

11.1 Licensee shall not use, distribute or have distributed the Development Software as such, nor
shall Licensee use, distribute or have distributed any Run-Time Software in connection with or on
any application other than the Designated Applications.

11.2 Licensee shall pay for the Run-Time Software the license fee(s) in accordance with the model
defined in Addendum C. Licensee will implement the licensing conditions towards its End-customer in
a manner which provides sufficient transparency to Licensor that the obligations of Licensee for
the payment of the fees based on the applicable License models are met.

11.3 Licensee shall not recreate, generate or reverse-engineer any portion or version of the
Development Software or attempt any of the foregoing, or assist, abet or permit others to do so.
Licensee is not allowed to make any derivative works based on or make any modifications to the
Development Software, other than expressly agreed to in this Agreement. Furthermore,

 

			
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Licensee undertakes not to change, remove or obscure any labels, plates, (copyright-) notices or
other markings which appear on or are embodied in the said Software.

11.4 Licensee acknowledges that unauthorized reproduction or use of the Development Software and/or
Run-Time Software as provided in this Article 11 is a breach of a material obligation of this
Agreement and is subject to any available remedies for such breach.

ARTICLE 12: TITLE AND RIGHTS TO SOFTWARE AND MODIFICATIONS

12.1 Title, interests and rights in and to the Development Software, the Run-Time Software, in all
language versions, and Documentation is and shall remain with Licensor. The grant of license and
distribution rights by Licensor to Licensee under Article 2 hereof is Licensee’s only right to the
Development Software and the Run-Time Software.

12.2 Title, interests and rights to knowledge bases, localization help files and tutor, created and
compiled by Licensee shall remain with Licensee.

12.3 In order to protect the intellectual property rights of Licensor, the business and product
reputation of Licensor’s software, and the reputation of speech recognition products generally,
Licensor shall have the following rights: (1) to review all versions of the Designated Application,
including executable graphic user interface elements, overview text, “about boxes”, “Read-Me”
files, “splash-screens” and online help; (2) to review hardcopy documentation; (3) to test the
reliability of the Designated Application; (4) to assess the level of Licensee’s customer support;
(5) to review press releases about the Designated Application and sales and marketing materials,
whenever deemed appropriate by both parties; and (6) to require any reasonable changes in any of
the foregoing. Licensor shall have the right to delegate the rights 1 to 6 above to authorized
representatives. Licensee shall have the right to require Licensor to delegate the rights in
Section 12.3 (1), (2), (3) and (4) above to an independent third party, provided the parties share
in half the cost of such review by an independent third party appointed at Licensee’s request.
Licensor’s exercise of its right as per Section 12.3 (1) through (4) is limited to once in every
twelve month period as measured from the Effective Date or each anniversary of the Effective Date.

 

			
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12.4 Licensee and/or Third Party shall be responsible for the preparation of all
documentation, both in hard copy format and electronic format to be sold with the Designated
Application, subject, however to Licensor’s rights to review the same as defined in Section 12.3.
Licensee and/or Third Parties shall also provide all customer support for the Designated
Application at its / their own expense. Licensor shall have access to Licensee’s facilities in
order to review and audit Licensee’s compliance with the terms and conditions set forth herein.
Such access shall be granted upon two (2) days prior notice from Licensor.

12.5 Upon request of Licensor, Licensee will provide any materials in its possession as may be
reasonably requested by Licensor in order to execute its rights as set forth in 12.3 and 12.4.

ARTICLE 13: TAXES

The Run-Time Software licensed hereunder is intended for use by End-Users and therefore should be
exempt from sales, use, excise and other similar taxes. However, if such tax, or any import duty,
or export duty, should be imposed on Licensor, Licensee shall either bear such tax or duty by a
direct payment to the taxing authority or shall reimburse Licensor for such tax or duty paid by
Licensor.

ARTICLE 14: USE OF LOGO 

Unless otherwise instructed by Licensor in writing at any moment in time Licensee and/or Third
Parties are obliged to use “powered by SpeechMagicTM” logo for all Designated Applications,
packaging, internet, advertising, initial splash screen and related SpeechMagic marketing material
of Licensee’s Designated Applications, or in the accompanying documentation. In addition the
“SpeechMagicTM” word marks can be used provided and as long as Licensee adheres to the Nuance
Corporate Guidelines, set forth by Addendum D to this Agreement.

ARTICLE 15: MISCELLANEOUS

15.1 Governing Law. The parties hereby agree that this Agreement will be governed by and construed
and interpreted in accordance with the laws of the State of New York and the laws of

 

			
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the United
States applicable in the State of New York, The parties agree that the U.N. Convention on Contracts
for the International Sale of Goods does not apply to this Agreement.

15.2 The invalidity or un-enforceability of any particular provision of this Agreement shall not
affect the other provisions, and this Agreement shall be construed in all respects as if such
invalid or un-enforceable provisions were omitted.

15.3 The failure of either party to insist in any one or more instances upon the performance of any
of the terms of this Agreement or to exercise any right hereunder, shall not be construed as a
waiver of the future performance of any such term or the future exercise of such right.

15.4 Whenever any occurrence (e.g. an event of “force majeure”) is delaying or threatens to delay
either party’s timely performance under this Agreement, such party will promptly give notice
thereof, including all relevant information with respect thereto, to the other party.

15.5 Any terms of this Agreement that by their nature extend beyond termination or expiration, such
as but not limited to Articles 3, 4, 5, 6, 7, 8, 9, 10 and 11 shall survive and continue and shall
bind the parties, their successors, their assigns and their legal representatives.

15.6 This Agreement sets forth and shall constitute the entire agreement between Licensee and
Licensor with respect to the subject matter thereof, and shall supersede any and all prior
agreements, understandings, promises and representations made by one party to the other, in writing
or orally, concerning the subject matter herein and the terms and conditions applicable thereto.
This Agreement may not be released, discharged, supplemented, interpreted, amended or modified in
any manner except by an instrument in writing signed by a duly authorized representative of each of
the parties hereto.

15.7 In making and performing this Agreement the parties act and shall act at all times as
independent contractors and nothing contained in this Agreement shall be construed or implied
to create the relationship of partner or of employer and employees, between the parties. At no time
shall either party make commitments for or in the name of the other party.

 

			
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15.8 This Agreement is personal to the Parties, and therefore, it may not be assigned by either
Party whether voluntarily or involuntarily or by operation of law, in whole or in part, to any
party without the prior written consent of the other Party, which consent will not be unreasonably
withheld. No such assignment by either Party, howsoever occurring, will relieve the Parties of
their obligations under this Agreement. Notwithstanding the foregoing, either Party may assign this
Agreement without consent: (a) if this Party undergoes a change of control, whether by means of a
sale or issuance of shares or otherwise; (b) to any of its Affiliates or (c) to any purchaser of
substantially all of the assets or the business of this respective Party.

15.9 All notices under this Agreement shall be sent to the address mentioned above in this
Agreement. All such notices shall be deemed to be received by the other party three (3) days after
the postal date or on the date of signature of the receipt of delivery by a courier mail company.

15.10 The Addenda referenced in this Agreement, and the specifications referenced therein, as well
as other documentation which now or hereafter may become expressly incorporated to this Agreement
form part of this Agreement with the same force and effect as if fully set forth herein. In case of
any inconsistency between the provisions of this Agreement and those set forth in the referenced
Addenda or other referenced specifications or documentation, the terms and conditions of this
Agreement shall prevail, unless expressly set forth otherwise in any Addendum.

[SIGNATURES CONTAINED ON FOLLOWING PAGE]

 

			
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Licensee AND Licensor ACKNOWLEDGE THAT THEY HAVE READ AND AGREE TO BE BOUND BY THE ATTACHED TERMS
AND CONDITIONS.

IN WITNESS WHEREOF, THIS AGREEMENT HAS BEEN DULY SIGNED AND EXECUTED BY THE AUTHORISED
REPRESENTATIVES OF BOTH PARTIES HERETO, AS OF THE EFFECTIVE DATE.

SO AGREED AND SIGNED:

	 	 	 	 	 	 	 	 	 
	LICENSEE	 	 	 	LICENSOR
	 
	 	 	 	 	 	 	 	 
	MEDQUIST INC.	 	 	 	NUANCE COMMUNICATIONS, INC.
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Peter Masanotti
	 	 	 	By:
	 	/s/ John Shagoury
	 

	 	 
	 	 	 	 	 	 
	 

	 	Name: Peter Masanotti
	 	 	 	 	 	Name: John Shagoury
	 

	 	Title: President & CEO
	 	 	 	 	 	Title: President, Healthcare
	 
	 

	 	Date: November 10,2009
	 	 	 	 	 	Date: November 10, 2009

 

			
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ADDENDUM A

DEVELOPMENT SOFTWARE SPECIFICATION

Development Software:

	A.	 	(i) SpeechMagic Version 5.1(Alderaan) for the client portion of the software, as
customized and delivered to for MedQuist, consisting of the Software Development Kit
including API’s, Active X control interfaces and software building blocks, known as:
SpeechMagic Alderaan.

	 	 	(ii)	 	ConText for Radiology — North American English and United Kingdom English
	 
	 	 	(iii)	 	ConText for Multi-Med — North American English

 

			
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ADDENDUM B

DESIGNATED APPLICATION

1. Name of Partner’s application/solution:

(a) SpeechQ for Radiology, and

(b) SpeechQ for General Medicine

 

			
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ADDENDUM C

TERRITORY, PRICING and ORDERING

1. Territory:

(a) Territory for Run Time Software with Context for Radiology— North America, Australia and
United Kingdom.

(b) Territory for Run Time Software with ConText for Multi-Med—North America.

“North America” shall specifically include, without limitation: (i) the United States of America;
(ii) the Dominion of Canada; (iii) those islands in the Caribbean Basin beginning with Bermuda to
the north and extending to Grenada and Barbados in the south, as the borders of such countries are
configured as of the Effective Date of this Agreement.

The United States of America shall expressly include: (i) the following dependent areas of the
United States of America: American Samoa, Baker Island, Guam, Howland Island, Jarvis Island,
Johnston Atoll, Kingman Reef, the Midway Islands, Navassa Island, the Northern Mariana Islands,
Palmyra Atoll, Puerto Rico, the U.S. Virgin Islands, and Wake Island; (ii) those areas leased by
the United States from separate sovereign nations, including without limitation Guantanamo Bay,
Cuba;

The Dominion of Canada shall expressly include Hans Island, in the Kennedy Channel between
Ellesmere Island and Greenland, which area is subject to a border dispute between the Dominion of
Canada and the Kingdom of Denmark.

“Australia” shall specifically include, without limitation (i) the Australian continent; (ii)
the major island of Tasmania; (iii) the Australian controlled islands in the Southern, Indian and
Pacific Oceans; and (iv) New Zealand (including the North Island and the South Island and the other
islands controlled by New Zealand, most notably Stewart Island/Rakiura and the Chatham Islands).

“United Kingdom” shall specifically include, without limitation: (i) the United Kingdom of Great
Britain and Northern Ireland (including England, Northern Ireland, Scotland and Wales); (ii) The
Crown Dependencies of the Channel Islands and the Isle of Man; and (iii) the British Overseas
Territories.

2. Pricing licenses , product prices and payment terms

(a)

Run Time Software with ConText for Radiology

	 	 	 	 	 
	 	 	 	 	License Fees payable to
	 	 	SpeechMagic SDK Runtime License Fee items	 	Nuance
	1.1

	 	SpeechMagic per Server License Fee
	 	*******
	 
	 	 	 	 
	1.2

	 	SpeechMagic per Workstation License
Fee*
	 	********
	 
	 	 	 	 
	1.3

	 	SpeechMagic per Concurrent User
License Fee*
	 	********

			
	 
	*	 	For every concurrent user or workstation, a Report Station needs to be purchased.

 

			
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A concurrent user is a user that is logged into SpeechMagic: For example, if the number of
concurrent users is limited to 10, then the 11th users that wants to log into the system has to
wait until one user logs off. The number of concurrent users must be tracked by the Designated
Application.

The MSRP is subject to change upon notification by Licensor to Licensee; provided that,
notwithstanding such changes to the MSRP from time to time, each of the items in rows 1.2 and 1.3
shall in no event exceed *******.

Maintenance Fee: Run Time Software with ConText for Radiology—******* of license fees payable as
per above table.

(b)

Run Time Software with ConText for Multi-Med

*******

* License fee payable to Licensor by Licensee is based on total number of individual users or
named-user licenses per End-User customer order. Licensee is not entitled to a cumulative
discount, or lower license fee based on multiple unique customer licenses. Licensee shall be
entitled to transfer a named-user license within an End-User, without incurring additional fees,
upon the departure of an individual user associated with the named-user license at the End-User.

Maintenance Fee: Run Time Software with ConText for Multi-Med— ******* of license fees
payable as per above table.

(c) Development and Consulting Services, and Training Fees: ******* . Beginning *******, Licensor
reserves the right to update these fees to *******.

(d) Invoices will be issued in US Dollars

(e) As of the Effective Date of this Agreement, Licensee has pre-paid ******* to be applied towards
hourly fees for Development and Consulting Services and/or training services, to be used anytime
during the Term.

(f) Licensor may at its own expense audit and take copies of Licensee’s books of account relating
to Licensee’s obligations as per this Agreement, at the place where such books are kept, in order
to verify Licensee’s compliance with the payment and other terms of this Agreement. Any such audit
shall be conducted by an independent professional auditor, on then (10) working days prior written
notice and during normal business hours. A copy of the report made by such auditor shall be
provided to both Parties at the same time. If any such audit reveals any underpayment to Nuance,
Licensee shall immediately pay the same together with interest at the rate of 10% per annum
calculated from the date such payment was due until such payment is actually made. If such
underpayment amounts to more than 5% for the sums due to Nuance, Licensee shall, in addition to
correcting such underpayment in accordance with above,
pay, to Nuance, as an additional penalty, an amount twice as high as the underpayment plus the
costs for such audit.

 

			
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ADDENDUM D

CORPORATE COMPANY IDENTITY GUIDELINES OF LICENSOR

The guidelines below are valid at the time of signature of this License Agreement. It is the
Licensee’s responsibility to ensure that the latest guidelines are used (available from Nuance.

General

These guidelines explain how you, as an authorized partner, should employ the Nuance Corporate
Identity rules to ensure that the Nuance brand and “powered by SpeechMagicTM” stands out
from the brands of our competitors. If you have any questions about any aspect of the addendum,
please contact your Regional Marketing Manager.

Principles

1. powered by SpeechMagicTM

If you provide your own solution integrating or based on SpeechMagic, it is obligatory to use the
“powered by SpeechMagicTM” logo.

This logo has been especially introduced for our partner companies as both a designation and a mark
of excellence:

“powered by SpeechMagicTM” is synonymous with the following ACE values

	 	•	 	Accuracy: the right information, in the right place, at the right moment.
	 
	 	•	 	Convenience: saving time and energy, and cutting down frustration.
	 
	 	•	 	Efficiency: document creation with higher productivity for a shorter
turnaround time.

 

			
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“powered by SpeechMagicTM” is a sign that your solution is relying on industrial grade speech
recognition technology with highest accuracy levels for convenient workflow and efficient
information capturing.

 

			
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2. SpeechMagicTM

You may also use the SpeechMagic logo on your printed materials, your website and your advertising.
Respect a clear zone equal to the height of the ‘S’ around the wordmark.

Wherever possible the wordmark is to be shown in black on a white background. In situations where
there is a colored or photographic background the word mark can be shown in white.

The logos shown here are the only official SpeechMagic logos. No other logo (e.g. with a version
number) should be used.

The TM sign must be used with the name SpeechMagic in titles but not in continuous text.

3. Press

All press releases, which mention the names Nuance or SpeechMagic, need approval from Nuance
corporate communications department. A minimum of 4 working days is required for the approval of
press releases. As the approval process can take up to 2 weeks, we encourage consulting your
Regional Marketing Manager as early as possible.

4. Standard Texts

You may use the following texts to describe Nuance SpeechMagic. Translations are available on
request.

	 	•	 	develops and markets speech recognition technology
	 
	 	•	 	provides expertise and consultancy services including:

	 	•	 	Integration services
	 
	 	•	 	Deployment services
	 
	 	•	 	Support services
	 
	 	•	 	Productivity services

 

			
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With more than 8,000 installations worldwide, Nuance SpeechMagic has established itself at the
forefront in providing professional solutions integrated into the professional workflow for
document creation, dictation, transcription and information capture.

SpeechMagicTM — Industrial grade speech recognition

SpeechMagic rises to the challenges of a globalized business world. At the same time, it guarantees
maximum flexibility to develop locally adapted solutions which are tailored to the specific needs
of each user.

SpeechMagic includes speech recognition technology for a broad portfolio of languages, expertise,
consulting, integration support and statistical evaluation — the platform for a network-based
solution for distributed installations throughout a hospital or a region.

SpeechMagic ensures

	 	•	 	seamless accessibility of reliable information
	 
	 	•	 	instant availability of information for the successful communication in the electronic
health record
	 
	 	•	 	highest levels of protection to guard against system failures and ensure access to
authorized personnel only
	 
	 	•	 	support of a variety of reporting scenarios enabling the choice of the preferred and
most efficient document creation workflow. (back-end, front-end, mobile reporting, etc.)

powered by SpeechMagicTM in numbers:

	 	•	 	integrated by more than 200 healthcare IT vendors
	 
	 	•	 	more than 8,000 sites installed in 45 countries
	 
	 	•	 	scalability up to 15,000 users
	 
	 	•	 	25 supported languages
	 
	 	•	 	more than 150 specialized ConTexts

Our technology is constantly evolving. Please make sure that the information and texts that you use
are up-to-date. Contact your Regional Marketing Manager.

 

			
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ADDENDUM E

MAINTENANCE AND SUPPORT SERVICES

Definitions

“Bug Fixes” shall mean solutions or workarounds to particular problems with the programs as
reported to Nuance via the hotline service (email, fax or telephone).

“Licensee’s Services” shall mean the services provided by Licensee to the End-Users as more
specifically described below.

“First-Level Support” shall mean basic help-desk functions typically including initial call
handling, call logging, assignment of call priority, queue placement, initial problem
diagnostic services for identifying problems and generic application faults, analysis, and
where possible, problem resolution, detailed product problem analysis (including any problem
duplication), detailed problem diagnostic services for identifying complex problems and
application faults, application of any service releases or end-user-specific fixes and
interface.

“Update” means an easy to install service pack, fix pack or service release to update the
Development Software, which includes, bug fixes, workarounds and possibly some new
functionalities, which Update is recommended to be installed at all existing users. An
Update is typically identified by an increase in a release or version number to the right of
the first decimal (for example, an increase from Version 5.1 to 5.2 or from Version 5.1.1 to
5.1.2). “Update” shall not be construed to include Upgrades.

“Upgrade” means a new release of the Development Software which new release may include
service packs, updates and/or new technology that Nuance generally releases to its customers
as part of its Maintenance services which may include some feature enhancements and/or
additional capabilities (functionality) over versions previously supplied to Licensee, and
typically is identified by an increase in the release or version number to the left of the
decimal (for example, an increase from Version 5.2 to Version 6.0). Upgrades do not include
new software and/or products that Nuance, in its sole discretion, designates and markets as
being independent from the Development Software

Licensee Obligations

Licensee shall be responsible for providing First Level Support to the End-Users as follows:

To receive Updates and Bug Fixes as they become available during the Maintenance Term and deploy it
within the Designated Application for its End-Users;

To comply with Nuance’s procedures for problem reporting from time to time;

 

			
	*******	 	- Material has been omitted and filed separately with the Commission.

-33- 

 

To report the problems that cannot be resolved to Nuance’s local Product Hotline or to the Central
Product Hotline if no local Product Hotline is in place. Licensee shall describe the problem in
detail in the appropriate box of the Case Reporting Form to be provided to Licensee by Nuance.
Licensee must quote the name of the Development Software concerned, its release level, and the
latest date of the Update supplied to it or to the End-User concerned as well as a detailed
description of the problem;

To reproduce the problem also on their own test system in order to identify the problem;
and to provide all reasonably necessary test material and log files to make it possible to
reproduce a Problem on Nuance’s site, such as sound-files and image of the installed software.
Licensee will cooperate with Nuance in order to reproduce (duplicate) the Problem, to report to
Nuance how to reproduce the Problem and to help indicate that the Problem is located in the
Licensed Software.

To test Bug Fixes and, once satisfied, or if alternative solutions or workarounds to the problem
have been identified report that back to Nuance hotline that the problem is really solved

In order to facilitate the above Support, Licensee will be permitted to use Nuance’s hotline
service for problem reporting.

Nuance Obligations

Second Level Support is included in the Maintenance fees. Nuance shall be responsible for Second
Level Support with the following responsibilities:

Technical Support Hours, Monday — Friday, from 9.00 A.M. to 5.00 P.M. CET, excluding public
holidays.

Time and Material “overtime rates” available at the current prevailing hourly billable rates.

Supply to Licensee Second Level Support services during Nuance’s normal business hours which
include correction of errors found by Licensee in a supported release of the Development Software
(a) installed at any End-User’s testing area or at a pilot site or sites; or (b) installed by
End-Users;

Provide access to Bug Fixes on the Remote Access System (ftp server) chosen as appropriate by
Nuance for Bug Fixes or via email. It shall be Licensee’s responsibility to monitor the Remote
Access System to ensure that it becomes aware promptly of Bug Fixes, and to re-test all Bug Fixes
before supplying them to any End-User. It is Licensee’s responsibility to re-test the combination
of original Development Software releases and Updates and Upgrades prior to their installation at
End-User’s Site.

Subject to the nature and extent of the changes in the Development Software made by Nuance from
time to time, to supply to Licensee with either a different edition of the current release, an
Upgrade or Update. Nuance will support the most current version and one previously released version
of the Development Software. Upgrades and Updates, if and when available, will be

 

			
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-34- 

 

provided as part of the Maintenance services under the Agreement.

If, Nuance creates an Upgrade of the Development Software and Licensee has questions on such
Upgrade, Nuance, at its discretion, may provide up to 20 hours of remote technical support
services. If the total hourly time spent by Nuance exceeds 20 hours, any additional services are
subject to additional fees, based on standard professional services offering by Nuance.

Exclusions
from Maintenance: Unless otherwise agreed, Nuance shall not be obligated to
provide Maintenance for, or required as result of (i) any modification of Development Software by
anyone other than Nuance; (ii) if Development Software is used for other than its intended purpose;
(iii) if Licensee failed to properly install or maintain the Development Software (including any
associated equipment, software or firmware); (iv) any willful or negligent action or omission of
Licensee, (v) any computer malfunction not attributable to the Development Software; or (vi) damage
to Development Software from any external source, including computer viruses unattributable to
Nuance, computer hackers, or force majeure events.

 

			
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-35-ex10.htm

Exhibit 10.1

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

STATE CORPORATION COMMISSION

BUREAU OF FINANCIAL INSTITUTIONS

RICHMOND, VIRGINIA

	
Written Agreement by and among

 

CENTRAL VIRGINIA BANCSHARES, INC. 

Powhatan, Virginia

 

CENTRAL VIRGINIA BANK 

Powhatan, Virginia

 

FEDERAL RESERVE BANK OF RICHMOND 

Richmond, Virginia

 

and

 

STATE CORPORATION COMMISSION 

BUREAU OF FINANCIAL INSTITUTIONS 

Richmond, Virginia

 

	
 

 

  Docket Nos.  10-068 -WA/RB-HC

         10-068 -WA/RB-SM

 

 

WHEREAS, in recognition of their common goal to maintain the financial soundness of Central Virginia Bancshares, Inc., Powhatan, Virginia ("Bancshares"), a registered bank holding company, and its subsidiary bank, Central Virginia Bank, Powhatan, Virginia (the "Bank"), a state chartered bank that is a member of the Federal Reserve System, Bancshares, the Bank, the Federal Reserve Bank of Richmond (the "Reserve Bank"), and the State Corporation Commission Bureau of Financial Institutions (the "Bureau") have mutually agreed to enter into this Written Agreement (the "Agreement"); and

WHEREAS, on June 29, 2010, the boards of directors of Bancshares and the Bank, at duly constituted meetings, adopted resolutions authorizing and directing

  

  

  

 

 

Chairman Napier to enter into this Agreement on behalf of Bancshares and the Bank, and consenting to compliance with each and every applicable provision of this Agreement by Bancshares and the Bank, and their institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the "FDI Act") (12 U.S.C. §§ 1813(u) and 1818(b)(3)).

       NOW, THEREFORE, Bancshares, Bank, the-Reserve Bank, and the Bureau agree as follows:

Source of Strength

1.           The board of directors of Bancshares shall take appropriate steps to fully utilize Bancshares' financial and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the "Board of Governors") (12 C.F.R. § 225.4(a)), to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure that the Bank complies with this Agreement.

Corporate Governance and Management Review

2.           (a)          Within 30 days of this Agreement, the board of directors of the Bank shall retain an independent consultant acceptable to the Reserve Bank and the Bureau to conduct a review of the effectiveness of Bank's corporate governance, board and management structure (the "Review"), to assess staffing needs, and to prepare a written report of findings and recommendations (the "Report"). The Review shall, at a minimum, address, consider, and include:

 

	 	 (i)	
 the qualifications and performance of each of the Bank's senior executive officers to determine whether the individual possesses

 

the ability,  experience, and other qualifications to competently perform present and anticipated duties, including their ability 

 

to: adhere to applicable laws and regulations and the Bank's

 

 

           

  

2

  

established policies and procedures; restore and maintain the Bank to a safe and sound condition; and comply with the requirements of this Agreement;

	
  

	
(ii)

	
the identification of present and future management and staffing needs for each area of the Bank, particularly in the areas of loan review and workout, internal audit and credit risk management; and

	
  

	
(iii)

	
an assessment of the current structure, qualifications, and composition of the board of directors and their committees, and a determination of the structure and composition needed to adequately supervise the affairs of the Bank.

(b)           Within 20 days of the Reserve Bank's and the Bureau's approval of the independent consultant selection, the Bank shall submit an engagement letter to the Reserve Bank and the Bureau for approval. The engagement letter shall require the independent consultant to submit the Report within 45 days of regulatory approval of the engagement letter and to provide a copy of the Report to the Reserve Bank and the Bureau at the same time that it is provided to the Bank's board of directors.

3.          Within 30 days of receipt of the Report required by paragraph 2(b), the Bank's board of directors shall submit a written corporate governance and management plan to the Reserve Bank and the Bureau that fully addresses the findings and recommendations in the Report and describes the specific actions that the board of directors will take in order to strengthen the Bank's management and corporate governance, and to hire, as necessary, additional or replacement directors, officers or staff to properly oversee, manage and operate the

  

3

  

 

 

 

Bank.

 

Board Oversight

4.           Within 60 days of this Agreement, the board of directors of the Bank shall submit to the Reserve Bank and the Bureau a written plan to strengthen board oversight of the management and operations of the Bank. The plan shall, at a minimum, address, consider, and include:

(a)          The actions that the board of directors will take to improve the Bank's condition and maintain effective control over, and supervision of, the Bank's major operations and activities, including but not limited to, credit risk management, loan review, internal audit, processes to mitigate risks associated with credit concentrations, capital, earnings, liquidity, management information reports and systems, and investments;

(b)          the responsibility of the board of directors to monitor management's adherence to approved Bank policies and procedures, and to require management to document exceptions thereto;

(c)          the establishment of measures to ensure Bank staff's adherence to approved policies and procedures; and

(d)          a description of the information and reports that will be regularly reviewed by the board of directors in its oversight of the operations and management of the Bank, including information on the Bank's loan portfolio, adversely classified assets, concentrations of credits, allowance for loan and lease losses ("ALLL"), capital, liquidity, and earnings.

  

4

  

 

Credit Risk Management

5.         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to strengthen credit risk management and administration practices. The plan shall, at a minimum, address, consider, and include:

(a)          Periodic review and revision of risk exposure limits to address changes in market conditions;

(b)          strategies to minimize credit losses and reduce the level of problem assets;

(c)          stress testing of loan and portfolio segments; and

(d)          procedures to identify, limit, and manage concentrations of credit that are consistent with the Interagency Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, dated December 12, 2006 (SR 07-01); and

(e)          a schedule and methodology for reducing the level of commercial real estate concentrations, and timeframes for achieving the reduced levels.

Lending and Credit Administration

 6.          Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written credit administration program that shall, at a minimum, address, consider, and include:

  (a)           Standards for renewing, extending, or modifying existing loans, including, but not limited to, analysis, documentation, and approval requirements;

  (b)           an analysis of any guarantor's repayment sources, global financial condition, income, liquidity, cash flow and contingent liabilities;

  

5

  

 

(c)          enhancements to the internal loan grading system and other ongoing loan monitoring systems to ensure the timely and accurate identification of individual problem credits and recognition of losses; and

(d)          the development and implementation of appropriate workout plans for problem loans.

Loan Review Program

7.         Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written program for the ongoing review and grading of the Bank's loan portfolio by a qualified independent party. The program shall, at a minimum, address, consider, and include:

(a)          The scope and frequency of loan review;

(b)          standards and criteria for assessing the credit quality of loans;

(c)          application of loan grading standards and criteria to the loan portfolio;

(d)          controls to ensure adherence to the revised loan review and grading standards; and

(e)          written reports to the board of directors, at least monthly, that identify the status of those loans that are nonperforming or adversely graded and the prospects for full collection or strengthening of the quality of any such loans.

Internal Audit

8.         Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable enhanced written internal audit program that shall, at a minimum, provide for:

  (a)            Improved oversight of all aspects of the audit program by the board of

  

6

  

 

 

directors' audit committee;

(b)          completion, at least annually, of a written, board approved, risk-based audit plan that encompasses all appropriate areas of audit coverage;

(c)          controls to ensure that audits are completed on a timely basis in accordance with the approved audit plan;

(d)       requirements for detailed, comprehensive audit reports and adequate work papers from the independent firm and/or staff;

(e)           timely resolution of audit findings and follow-up reviews to ensure completion of corrective measures; and

(f)           comprehensive tracking and reporting of the status and resolution of audit and examination findings to the audit committee.

Asset Improvement

9.          The Bank shall not, directly or indirectly, extend, renew, or restructure any credit to or for the benefit of any borrower, including any related interest of the borrower, whose loans or other extensions of credit are criticized in the concurrent reports of examination conducted by the Reserve Bank and the Bureau that commenced on December 7, 2009 (the "Reports of Examination"), or in any subsequent report of examination, without the prior approval of a majority of the full board of directors or a designated committee thereof. The board of directors or its committee shall document in writing the reasons for the extension of credit, renewal, or restructuring, specifically certifying that: (i) the Bank's risk management policies and practices for loan workout activity are acceptable; (ii) the extension of credit is necessary to improve and protect the Bank's interest in the ultimate collection of the credit already granted and maximize its potential for collection; (iii) the extension of credit reflects prudent underwriting based on

  

7

  

 

reasonable repayment terms and is adequately secured; and all necessary loan documentation has been properly and accurately prepared and filed; (iv) the Bank has performed a comprehensive credit analysis indicating that the borrower has the willingness and ability to repay the debt as supported by an adequate workout plan, as necessary; and (v) the board of directors or its designated committee reasonably believes that the extension of credit will not impair the Bank's interest in obtaining repayment of-the already outstanding credit and that the extension of credit or renewal will be repaid according to its terms. The written certification shall be made a part of the minutes of the meetings of the board of directors or its committee, as appropriate, and a copy of the signed certification, together with the credit analysis and related information that was used in the determination, shall be retained by the Bank in the borrower's credit file for subsequent supervisory review. For purposes of this Agreement, the term "related interest" is defined as set forth in section 215.2(n) of Regulation O of the Board of Governors (12 C.F.R. § 215.2(n)).

10.          (a)          Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan designed to improve the Bank's position through repayment, amortization, liquidation, additional collateral, or other means on each loan, relationship, or other asset in excess of $750,000, including other real estate owned ("OREO"), that are past due as to principal or interest more than 90 days as of the date of this Agreement, are on the Bank's problem loan list, or were adversely classified in the Reports of Examination.

(b)          Within 30 days of the date that any additional loan, relationship, or other asset in excess of $750,000, including OREO, becomes past due as to principal or interest for more than 90 days, is on the Bank's problem loan list, or is adversely classified in any subsequent report of examination of the Bank, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to improve the Bank's position on such loan, relationship, or

  

8

  

 

asset.

 

     (c)Within 30 days after the end of each calendar quarter thereafter, the Bank shall submit a written progress report to the Reserve Bank and the Bureau to update each asset improvement plan, which shall include, at a minimum, the carrying value of the loan or other asset and changes in the nature and value of supporting collateral, along with a copy of the Bank's current problem loan list, a list of all loan renewals and extensions without full collection of interest in the last quarter, and past due/non-accrual report.

Allowance for Loan and Lease Losses

11.        (a)Within 10 days of this Agreement, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified "loss" in the Reports of Examination that have not been previously collected in full or charged off. The Bank shall, within 30 days from the receipt of any federal or state report of examination, charge off all assets classified "loss" unless otherwise approved in writing by the Reserve Bank and the Bureau.

     (b)Within 60 days of this Agreement, the Bank shall review and revise its ALLL methodology consistent with relevant supervisory guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the ALLL set forth in the Report of Examination, and submit a description of the revised methodology to the Reserve Bank and the Bureau. The revised ALLL methodology shall be designed to maintain an adequate ALLL and shall address, consider, and include, at a minimum, the reliability of the Bank's loan grading system, the volume of criticized loans, concentrations of credit, the current level of past due and nonperforming loans, past loan loss experience, evaluation

  

9

  

 

of probable losses in the Bank's loan portfolio, including adversely classified loans, and the impact of market conditions on loan and collateral valuations and collectability.

            (c)    Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written program for the maintenance of an adequate ALLL. The program shall include policies and procedures to ensure adherence to the Bank's revised ALLL methodology and provide for periodic reviews and updates to the ALLL methodology, as appropriate. The program shall also provide for a review of the ALLL by the board of directors on at least a quarterly calendar basis. Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the filing of the Consolidated Reports of Condition and Income, by additional provisions. The board of directors shall maintain written documentation of its review, including the factors considered and conclusions reached by the Bank in determining the adequacy of the ALLL. During the term of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau, within 30 days after the end of each calendar quarter, a written report regarding the board of directors' quarterly review of the ALLL and a description of any changes to the methodology used in determining the amount of the ALLL for that quarter.

Capital Plan

12.           Within 30 days of this Agreement, Bancshares and the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to maintain sufficient capital at the Bank. The plan shall, at a minimum, address, consider, and include:

    (a)            The Bank's current and future capital needs, including compliance with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);

  

10

  

 

(b)          the adequacy of the Bank's capital, taking into account the volume of classified credits, its risk profile, the adequacy of the ALLL, current and projected asset growth, and projected earnings;

(c)          the source and availability of additional funds necessary to fulfill the Bank's future capital requirements on a timely basis;

(d)          supervisory requests for additional capital at the Bank or the requirements of any supervisory action imposed on the Bank by its state or federal regulator; and

(e)          the requirements of section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R. § 225.4(a)) that Bancshares serve as a source of strength to the Bank.

13.          Bancshares and the Bank shall notify the Reserve Bank and the Bureau in writing no more than 30 days after the end of any quarter in which any of its capital ratios (total risk- based, Tier 1 risk-based, or leverage) fall below the approved capital plan's minimum ratios. Together with the notification, Bancshares and the Bank shall submit an acceptable written plan that details the steps it will take to increase its capital ratios to or above the approved capital plan's minimums.

Liquidity and Funds Management

14.          Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable revised written contingency funding plan that, at a minimum, includes adverse scenario planning and identifies and quantifies available sources of liquidity for each scenario.

Investment Portfolio Management

15.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable revised written investment policy that shall, at a minimum,

  

11

  

 

 

address,

consider, and include:

(a)          A description of acceptable and unacceptable types of investments within the categories of permissible investments;

(b)          periodic review of the credit quality of the investment portfolio;

(c)          enhancement to the pricing and ongoing monitoring of investments;

(d)          procedures to mitigate risk and control loss exposure;

(e)          reporting, review, and approval procedures to and by the board of directors;

(f)          procedures to assess for impairments and to ensure that the Bank's valuation processes and impairment analyses, including recognition of Other Than Temporary Impairment ("OTTI"), are in accordance with generally accepted accounting principles, including FASB Staff Position (FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of Other Than Temporary Impairments, and regulatory reporting instructions; and

(g)        an independent validation of OTTI.

Earnings Plan and Budget

16.          (a)   Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau a written business plan for the remainder of 2010 to improve the Bank's earnings and overall condition. The plan, at a minimum, shall provide for or describe:

(i)           a realistic and comprehensive budget for the remainder of calendar year 2010, including income statement and balance sheet projections; and

(ii)           a description of the operating assumptions that form the basis for, and adequately support, major projected income, expense, and balance sheet components.

  

12

  

 

 

(b)           During the term of this Agreement, a business plan and budget for each calendar year subsequent to 2010 shall be submitted to the Reserve Bank and the Bureau with the at least 30 days prior to the beginning of that calendar year.

Dividends and Distributions

17.           (a)          Bancshares and the Bank shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director of the Division of Banking Supervision and Regulation of the Board of Governors (the "Director"), and the Bureau.

    (b)           Bancshares and its nonbank subsidiary shall not directly or indirectly take any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank and the Bureau.

    (c)           Bancshares and its nonbank subsidiary shall not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank, the Director, and the Bureau.

    (d)           All requests for prior written approval shall be received at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities. All requests shall contain, at a minimum, current and projected information, as appropriate, on Bancshares' capital, earnings, and cash flow; the Bank's capital, asset quality, earnings, and ALLL needs; and identification of the sources of funds for the proposed payment or distribution. For requests to declare or pay dividends, Bancshares and the Bank, as appropriate, must also demonstrate that the requested declaration or payment of dividends is consistent with the Board of Governors' Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page

  

13

  

 

 

4-323), and Section 6.1-56 of the Code of Virginia.

Debt and Stock Redemption

18.          (a)           Bancshares and its nonbank subsidiary shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank and the Bureau. All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

   (b)            Bancshares shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank and the Bureau. Compliance with Laws and Regulations

19.          (a)           In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, the Bank shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

   (b)            The Bank shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation's regulations (12 C.F.R. Part 359).

Compliance with the Agreement

20.          (a)           Within 10 days of this Agreement, Bancshares' and the Bank's boards of directors shall appoint a joint committee (the "Compliance Committee") to monitor and coordinate Bancshares' and the Bank's compliance with the provisions of this Agreement. The

  

14

  

 

Compliance Committee shall consist of a majority of outside directors who are not executive officers of Bancshares and the Bank as defined in sections 215.2(e)(1) and 215.2(m)(1) of Regulation O of the Board of Governors (12 C.F.R. §§ 215.2(e)(1) and 215.2(m)(1)). The Compliance Committee shall meet at least monthly, keep detailed minutes of each meeting, and report its findings to Bancshares' and the Bank's boards of directors.

(b)          Within 30 days after the end of each calendar quarter following the date of this Agreement, Bancshares and the Bank shall submit to the Reserve Bank and the Bureau joint written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement and the results thereof.

Approval and Implementation of Plans and Programs

21.          (a)          The Bank and, as applicable, Bancshares shall submit written plans and programs that are acceptable to the Reserve Bank and the Bureau within the applicable time periods set forth in paragraphs 2, 5, 6, 7, 8, 10(a), 10(b), 11(c), 12, 14 and 15 of this Agreement.   An independent consultant acceptable to the Reserve Bank and the Bureau shall be retained in the time period set forth in paragraph 2(a).

  (b)           Within 10 days of approval by the Reserve Bank and the Bureau, the Bank and, as applicable, Bancshares shall adopt the approved plans and programs. Upon adoption, the Bank and, as applicable, Bancshares shall promptly implement the approved plans and programs, and thereafter fully comply with them.

  (c)           During the term of this Agreement, the approved plans and programs shall not be amended or rescinded without the prior written approval of the Reserve Bank and the Bureau.

 

 

  

15

  

Communications

 

22.           All communications regarding this Agreement shall be sent to:

 

(a)       Mr. Eugene W. Johnson, Jr.

    Vice President

Federal Reserve Bank of Richmond 

P.O. Box 27622

Richmond, Virginia 23261

 

(b)       Mr. John M. Crockett

Deputy Commissioner

State Corporation Commission Bureau of Financial Institutions

P.O. Box 640

Richmond, Virginia 23218

 

(c)        Mr. James T. Napier

Chairman

Central Virginia Bancshares, Inc. 

Central Virginia Bank

2351 Anderson Highway

Powhatan, Virginia 23139

 

Miscellaneous

23.           Notwithstanding any provision of this Agreement, the Reserve Bank and the Commissioner may, in their sole discretion, grant written extensions of time to Bancshares and the Bank to comply with any provision of this Agreement.

24            The provisions of this Agreement shall be binding upon Bancshares and the Bank and their institution-affiliated parties, in their capacities as such, and their successors and assigns.

25.           Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank and the Bureau.

26.           The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, the Bureau or any other federal or state agency from

  

16

  

 

taking any other action affecting Bancshares and the Bank or any of their current or former institution-affiliated parties and their successors and assigns.

27.           Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).

 

IN WITNESS-WHEREOF, the parties have caused this-Agreement to be executed as of

 

the 30th day of June, 2010.

 

	  	
CENTRAL VIRGINIA BANCSHARES, INC.

	  	
FEDERAL RESERVE BANK OF RICHMOND

	  	  	  	  
	
By:

	
/s/ James T. Napier

	
By:

	
/s/ Eugene W. Johnson, Jr.

	  	
James T. Napier

	  	
Eugene W. Johnson, Jr.

	  	
    Chairman

	  	
    Vice President

	  	  	  	  
	  	  	  	  
	  	
CENTRAL VIRGINIA BANK

	  	
STATE CORPORATION

COMMISSION – BUREAU OF

FINANCIAL INSTITUTIONS

	  	  	  	  
	
By:

	
/s/ James T. Napier

	
By:

	
/s/ John M. Crockett

	  	
James T. Napier

	  	
John M. Crockett

	  	
    Chairman

	  	
    Deputy Commissioner

 

  

17

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