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1.   10-Q: FORM 10-Q
2.   EX-10.1: EX-10.1

3.   EX-10.2: EX-10.2

4.   EX-10.4: EX-10.4
5.   EX-10.5: EX-10.5

6.   EX-31.1: EX-31.1

7.   EX-31.2: EX-31.2
8.   EX-32.1: EX-32.1

9.   EX-32.2: EX-32.2
Table of Contents


                             UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                                                                    Washington, D.C. 20549



                                                                       Form 10-Q
(Mark One)
                   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                   OF 1934
                      For the quarterly period ended June 30, 2009.
                                                                               OR
                   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                   OF 1934
                      For the transition period from           to

                                                             Commission file number: 001-13326


                                                         MEDQUIST INC.
                                                      (Exact name of registrant as specified in its charter)
                               New Jersey                                                                             22-2531298
                      (State or other jurisdiction of                                                              (I.R.S. Employer
                     incorporation or organization)                                                               Identification No.)
                 1000 BISHOPS GATE BOULEVARD                                                                          08054-4632
                               SUITE 300                                                                              (Zip Code)
                   MOUNT LAUREL, NEW JERSEY
                  (Address of principal executive offices)

                                                                        (856) 206-4000
                                                     (Registrant’s telephone number, including area code)
   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes     No
   Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes    No
   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer                     Accelerated filer                           Non-accelerated filer                       Smaller reporting company
                                                                             (Do not check if a smaller reporting company)
   Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes        No
   The number of registrant’s shares of common stock, no par value, outstanding as of July 28, 2009 was 37,555,893.
                                                          MEDQUIST INC.
                                                             INDEX
                                                                                                   Page
PART I.    FINANCIAL INFORMATION                                                                    3
Item 1.    Financial Statements                                                                     3
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations   18
Item 4.    Controls and Procedures                                                                 26
PART II.   OTHER INFORMATION                                                                       27
Item 1.    Legal Proceedings                                                                       27
Item 1A.   Risk Factors                                                                            30
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds                             30
Item 3.    Defaults Upon Senior Securities                                                         30
Item 4.    Submission of Matters to a Vote of Security Holders                                     30
Item 5.    Other Information                                                                       30
Item 6.    Exhibits                                                                                30
           Transcription Services Agreement
           Alan Gold Employment Agreement
           Kevin Piltz Employment Agreement
           Settlement and License Agreement
           Certification of Chief Executive Officer
           Certification of Chief Financial Officer
           Certification of Chief Executive Officer
           Certification of Chief Financial Officer
                                                                     2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements


                                                            MedQuist Inc. and Subsidiaries
                                                        Consolidated Statements of Operations
                                                       (In thousands, except per share amounts)
                                                                      Unaudited
                                                                                               Three months ended                      Six months ended
                                                                                                    June 30,                               June 30,
                                                                                            2009                2008            2009                      2008
Net revenues                                                                            $ 77,471            $ 82,454        $ 156,415               $ 166,179
Operating costs and expenses:
Cost of revenues                                                                          51,357              58,015         105,225                 119,273
Selling, general and administrative                                                        8,451              12,066          17,889                  24,950
Research and development                                                                   2,380               3,735           4,796                   7,854
Depreciation                                                                               2,669               2,996           5,221                   5,924
Amortization of intangible assets                                                          1,504               1,373           3,015                   2,734
Cost of legal proceedings and settlements, net                                            10,134               2,466          12,058                   9,075
Restructuring charges                                                                         —                  (45)             —                      (45)
Total operating costs and expenses                                                        76,495              80,606         148,204                 169,765
Operating income (loss)                                                                      976               1,848           8,211                  (3,586)
Equity in income of affiliated company                                                       356                  25             428                      41
Other income                                                                                  —                   —               —                      438
Interest income, net                                                                          19                 895              65                   2,183
Income (loss) before income taxes                                                          1,351               2,768           8,704                    (924)
Income tax provision                                                                         515                 933           1,014                   1,658
Net income (loss)                                                                       $    836            $ 1,835         $ 7,690                 $ (2,582)
Net income (loss) per share:
Basic                                                                                   $     0.02          $     0.05      $     0.20              $      (0.07)
Diluted                                                                                 $     0.02          $     0.05      $     0.20              $      (0.07)
Weighted average shares outstanding:
Basic                                                                                       37,556              37,544          37,556                    37,544
Diluted                                                                                     37,556              37,553          37,556                    37,544


                                  The accompanying notes are an integral part of these consolidated financial statements.
                                                                           3
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                                                            MedQuist Inc. and Subsidiaries
                                                             Consolidated Balance Sheets
                                                                   (In thousands)
                                                                     Unaudited
                                                                                                                                June 30,   December 31,
                                                                                                                                  2009         2008
Assets
Current assets:
Cash and cash equivalents                                                                                                   $ 54,165       $  39,918
Accounts receivable, net of allowance of $3,879 and $4,802, respectively                                                       44,996         50,374
Income tax receivable                                                                                                             183            154
Other current assets                                                                                                            7,322          8,053
Total current assets                                                                                                          106,666         98,499
Property and equipment, net                                                                                                    13,428         15,785
Goodwill                                                                                                                       40,731         40,545
Other intangible assets, net                                                                                                   38,161         39,877
Deferred income taxes                                                                                                           1,355          1,204
Other assets                                                                                                                    7,609          6,295
Total assets                                                                                                                $ 207,950      $ 202,205
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable                                                                                                            $     7,274    $    7,487
Accrued expenses                                                                                                                  9,020        11,994
Accrued compensation                                                                                                             12,982        11,204
Customer accommodation                                                                                                           11,973        12,055
Deferred income tax liability — current                                                                                             651           651
Deferred revenue                                                                                                                 13,700        15,630
Total current liabilities                                                                                                        55,600        59,021
Deferred income taxes                                                                                                             1,240           799
Other non-current liabilities                                                                                                     2,295         2,033
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock — no par value; authorized 60,000 shares;
37,556 and 37,556 shares issued and outstanding, respectively                                                                 238,003        237,907
Accumulated deficit                                                                                                           (91,506)       (99,198)
Accumulated other comprehensive income                                                                                          2,318          1,643
Total shareholders’ equity                                                                                                    148,815        140,352
Total liabilities and shareholders’ equity                                                                                  $ 207,950      $ 202,205


                                  The accompanying notes are an integral part of these consolidated financial statements.
                                                                           4
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                                                             MedQuist Inc. and Subsidiaries
                                                          Consolidated Statements of Cash Flows
                                                                     (In thousands)
                                                                        Unaudited
                                                                                                                                        Six months ended
                                                                                                                                            June 30,
                                                                                                                                 2009                      2008
Operating activities:
Net income (loss)                                                                                                            $    7,690             $ (2,582)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization                                                                                                     8,236                     8,658
Equity in income of affiliated company                                                                                             (428)                      (41)
Deferred income tax provision                                                                                                       435                     1,491
Stock option expense                                                                                                                 96                       162
Provision for doubtful accounts                                                                                                      89                     1,205
Loss on disposal of property and equipment                                                                                           26                        38
Changes in operating assets and liabilities
Accounts receivable                                                                                                             5,287                 (1,334)
Income tax receivable                                                                                                             (29)                    99
Other current assets                                                                                                              743                   (837)
Other non-current assets                                                                                                          (34)                   116
Accounts payable                                                                                                                  361                 (2,065)
Accrued expenses                                                                                                               (3,872)                (5,405)
Accrued compensation                                                                                                            1,765                   (309)
Customer accommodation                                                                                                             —                  (5,593)
Deferred revenue                                                                                                               (2,045)                   172
Other non-current liabilities                                                                                                     112                      8
Net cash provided by (used in) operating activities                                                                          $ 18,432               $ (6,217)
Investing activities:
Purchase of property and equipment                                                                                               (2,135)                   (3,078)
Capitalized software                                                                                                             (1,283)                   (1,862)
Proceeds from sale of investments                                                                                                    —                        692
Investment in A-Life Medical, Inc.                                                                                                 (852)                       —
Net cash used in investing activities                                                                                            (4,270)                   (4,248)
Financing activities:
Net cash provided by financing activities                                                                                          —                       —
Effect of exchange rate changes                                                                                                    85                     (22)
Net increase (decrease) in cash and cash equivalents                                                                           14,247                 (10,487)
Cash and cash equivalents — beginning of period                                                                                39,918                 161,582
Cash and cash equivalents — end of period                                                                                    $ 54,165               $ 151,095
Supplemental cash flow information:
Cash paid for income taxes                                                                                                   $      197             $         263
Accommodation payments paid with credits                                                                                     $       82             $         611


                                   The accompanying notes are an integral part of these consolidated financial statements.
                                                                            5
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                                                                 MedQuist Inc. and Subsidiaries
                                                           Notes to Consolidated Financial Statements
                                                          (In thousands, except for per share amounts)
                                                                           Unaudited
   1. Basis of Presentation
   The consolidated financial statements included herein are unaudited and have been prepared by us pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.
generally accepted accounting principles (GAAP) have been omitted pursuant to such rules and regulations although we believe that the disclosures are
adequate to make the information presented not misleading. The consolidated financial statements include our accounts and the accounts of all of our wholly-
owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
   These statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for the fair presentation of the information
contained herein. These consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition
and Results of Operations. As permitted under GAAP, interim accounting for certain expenses is based upon full year assumptions. Such amounts are
expensed in full in the year incurred. For interim financial reporting purposes, income taxes are recorded based upon actual year to date income tax rates as
permitted by Financial Accounting Standards Board (FASB) Interpretation 18, “Accounting for Income Taxes in Interim Periods.”
   Our accounting policies are set forth in detail in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended
December 31, 2008 filed with the SEC on March 11, 2009. These interim consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, 2008.
    In May 2009 the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events” (“FAS 165”). FAS 165 requires management
to evaluate subsequent events through the date the financial statements were issued or the date the financial statements were available to be issued. FAS 165
is effective for annual and interim periods ending after June 15, 2009 and should be applied prospectively. We have evaluated subsequent events through the
issuance of the second quarter 10-Q on July 30, 2009.
   In June 2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R) ,” which amends Interpretation 46(R) to require an
enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest
entity (which would result in the enterprise being deemed the primary beneficiary of that entity and, therefore, obligated to consolidate the variable interest
entity in its financial statements); to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to revise
guidance for determining whether an entity is a variable interest entity; and to require enhanced disclosures that will provide more transparent information
about an enterprise’s involvement with a variable interest entity. FAS No. 167 is effective for interim periods as of the beginning of the first annual reporting
period beginning after November 15, 2009. The Company is currently evaluating the provisions of SFAS No. 167 to determine the impact on the Company’s
results of operations, cash flows or financial position.
    In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting
Principles a replacement of FASB Statement No. 162.” SFAS No. 168 replaces SFAS No. 162, “The Hierarchy of Generally Accepted Accounting
Principles.” SFAS No. 168 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with GAAP in the United States (the GAAP hierarchy). SFAS No. 168 establishes
the Codification as the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of
the SEC under federal securities laws are also sources of authoritative GAAP for SEC registrants. All guidance contained in the Codification carries an equal
level of authority. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009.
   Certain reclassifications were made to prior period financial statements to conform to the current presentation. Expenses and charges of $738 for the three
months ended June 30, 2008 and $949 for the six months ended June 30, 2008 related to the Anthurium, Reseller and Shareholder lawsuits (Note 6) had
previously been included in Selling, General and Administrative expenses. Due to the significant amount of such expenses in 2009, such costs are now
included in the line item Cost of legal proceedings and settlements, net.

   2. Stock-Based Compensation
  The following table summarizes our stock-based compensation expense related to employee stock options recognized under SFAS No. 123R, “ Share
Based Payment,” (SFAS 123R):
                                                                         6
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                                                               MedQuist Inc. and Subsidiaries
                                                         Notes to Consolidated Financial Statements
                                                        (In thousands, except for per share amounts)
                                                                         Unaudited
                                                                                                Three months ended June 30,            Six months ended June 30,
                                                                                                2009                 2008             2009                  2008
Selling, general and administrative                                                         $        48           $       49      $        96           $      105
Research and development                                                                             —                    21               —                    45
Cost of revenues                                                                                     —                    —                —                    12
Total                                                                                       $        48           $       70      $        96           $      162
   As of June 30, 2009, total unamortized stock-based compensation cost related to non-vested stock options, net of expected forfeitures, was $437, which is
expected to be recognized over a period of 2.3 years.
   Information with respect to our common stock options is as follows:
                                                                                                                                   Weighted
                                                                                                                   Weighted         Average
                                                                                             Shares                Average         Remaining             Aggregate
                                                                                            Subject to             Exercise       Contractual             Intrinsic
                                                                                             Options                Price         Life in Years            Value
Outstanding, December 31, 2008                                                                   1,816            $   23.34
Granted                                                                                             —                    —
Exercised                                                                                           —                    —
Forfeited                                                                                           —                    —
Canceled                                                                                          (285)               21.61
Outstanding, June 30, 2009                                                                       1,531                24.32                3.6          $          —
Exercisable, June 30, 2009                                                                       1,235                28.17                2.3          $          —
Options vested and expected to vest as of June 30, 2009                                          1,531            $   24.32                3.6          $          —
The aggregate intrinsic value is calculated using the difference between the closing stock price on the last trading day of the quarter and the option exercise
price, multiplied by the number of in-the-money options. As of June 30, 2009 all outstanding options are out of the money.
There were no options granted or exercised during the six months ended June 30, 2009 and 2008. In the first quarter of 2009, we modified the stock options
previously granted in the third quarter of 2008 to our Chief Executive Officer. The grant price was increased from $4.85 per share to $8.25 per share by a
committee of our board of directors. There was no incremental cost of the modification. We estimated fair value for the modified option granted as of the
date of the modification by applying the Black-Scholes option pricing valuation model. The application of this model involves assumptions that are
judgmental and sensitive in the determination of compensation expense. The key assumptions used in determining the fair value of the options modified in
the first quarter of 2009 were:
Expected term (years)                                                                                                                                  5.92
Expected volatility                                                                                                                                  54.46%
Dividend yield                                                                                                                                            0%
Expected risk free interest rate                                                                                                                       3.25%
   A summary of outstanding and exercisable common stock options as of June 30, 2009 is as follows:
                                                                          7
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                                                                      MedQuist Inc. and Subsidiaries
                                                                Notes to Consolidated Financial Statements
                                                               (In thousands, except for per share amounts)
                                                                                Unaudited
                                                 Options outstanding                                                                            Options exercisable
                                                                                                Weighted
                                                                                                 Average                 Weighted                                 Weighted
                                                                                                Remaining                Average                                  Average
                                                                              Number          Contractual Life           Exercise         Number                  Exercise
                      Range of Exercise Prices                                of Shares         (in years)                Price           of Shares                Price
$2.71 — $10.00                                                                     314                    8.7            $     8.10             18            $        5.71
$10.01 — $20.00                                                                    382                    3.5            $    15.85            382            $       15.85
$20.01 — $30.00                                                                    565                    2.1            $    26.41            565            $       26.41
$30.01 — $40.00                                                                     81                    0.9            $    32.70             81            $       32.70
$40.01 — $70.00                                                                    189                    1.0            $    58.63            189            $       58.63
                                                                                 1,531                    3.6            $    24.32          1,235            $       28.17
As of June 30, 2009, there were 900 additional options available for grant under our stock option plans.
   3. Other Comprehensive Income (Loss)
   Other comprehensive income (loss) was as follows:
                                                                                                   Three months ended June 30,             Six months ended June 30,
                                                                                                   2009                 2008              2009                  2008
Net income (loss)                                                                              $      836            $       1,835    $     7,690             $ (2,582)
Foreign currency translation adjustment                                                               942                       65            677                  (39)
Other Comprehensive income (loss)                                                              $    1,778            $       1,900    $     8,367             $ (2,621)
   4. Net Income (Loss) per Share
   Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during each period.
Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding, as adjusted for the dilutive effect
of common stock equivalents, which consist only of stock options, using the treasury stock method.
   The following table reflects the weighted average shares outstanding used to compute basic and diluted net income (loss) per share:
                                                                                                   Three months ended June 30,             Six months ended June 30,
                                                                                                   2009                 2008              2009                  2008
Net income (loss)                                                                              $       836           $       1,835    $     7,690             $ (2,582)
Weighted average shares outstanding:
Basic                                                                                              37,556                37,544           37,556                   37,544
Effect of dilutive shares                                                                              —                      9               —                        —
Diluted                                                                                            37,556                37,553           37,556                   37,544
Net income (loss) per share:
Basic                                                                                          $      0.02           $        0.05    $      0.20             $       (0.07)
Diluted                                                                                        $      0.02           $        0.05    $      0.20             $       (0.07)
   The computation of diluted net income (loss) per share does not assume conversion, exercise or issuance of shares that would have an anti-dilutive effect
on diluted net income (loss) per share. Shares having an anti-dilutive effect on net income (loss) per share and, therefore, excluded from the calculation of
diluted net income (loss) per share, totaled 1,565 for the six months ended June 30, 2008.
   5. Customer Accommodation
   In November 2003, one of our employees raised allegations that we had engaged in improper billing practices. In response, our board of directors
undertook an independent review of these allegations (Review). In response to our customers’ concern over the public disclosure of certain findings from the
Review, we made the decision in the fourth quarter of 2005 to take action to try to avoid litigation and preserve and solidify our customer business
relationships by offering a financial accommodation to certain of our customers.
                                                                               8
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                                                               MedQuist Inc. and Subsidiaries
                                                         Notes to Consolidated Financial Statements
                                                        (In thousands, except for per share amounts)
                                                                         Unaudited
   We are unable to predict how many customers, if any, may accept the outstanding accommodation offers on the terms proposed by us, nor are we able to
predict the timing of the acceptance (or rejection) of any outstanding accommodation offers. Until any offers are accepted, we may withdraw or modify the
accommodation program or any outstanding offers at any time. In addition, we are unable to predict how many future offers, if made, will be accepted on the
terms proposed by us. We regularly evaluate whether to proceed with, modify or withdraw the accommodation program or any outstanding offers.
   The following is a summary of the financial statement activity related to the customer accommodation which is included as a separate line item in the
accompanying consolidated balance sheets as of June 30, 2009 and December 31, 2008:
                                                                                                                              Six months ended         Year ended
                                                                                                                                June 30, 2009       December 31, 2008
Beginning balance                                                                                                             $         12,055      $         18,459
Payments and other adjustments                                                                                                              —                 (5,664)
Credits                                                                                                                                    (82)                 (740)
Ending balance                                                                                                                $         11,973      $         12,055

6. Cost of Legal Proceedings and Settlements, Net
   For the three months ended June 30, 2009 and 2008, we recorded charges of $10,134 and $2,466, respectively, and for the six months ended June 30,
2009 and 2008, we recorded charges of $12,058 and $9,075, respectively for costs associated with the billing matter, Anthurium, Reseller and Shareholder
matters. The following is a summary of the amounts recorded as Cost of legal proceedings and settlements, net, in the accompanying consolidated statements
of operations:
                                                                                               Three months ended June 30,               Six months ended June 30,
                                                                                               2009                 2008                2009                  2008
Legal fees                                                                                 $  4,384              $    2,344         $  6,278              $   7,216
Other professional fees                                                                          —                      122               30                    359
Settlements                                                                                   5,750                      —             5,750                  1,500
Total                                                                                      $ 10,134              $    2,466         $ 12,058              $   9,075
    Other professional fees represent accounting and dispute analysis costs and document search and retrieval costs. The 2008 settlement amount of $1,500 is
for the settlement of all claims related to the consolidated medical transcriptionists putative class action. (See Note 9). The 2009 settlement amount of $5,750
is for the settlement related to the Anthurium patent claim which was settled and paid in June 2009.

7. Restructuring Plans
2008 Restructuring Plans
   During the fourth quarter of 2008, we implemented a restructuring plan related to a reduction in workforce of 189 employees in order to better align costs
with revenues (2008 Plan). We recorded $2,135 in severance charges related to the 2008 restructuring plan. The remaining restructuring costs are included in
accrued expenses in the accompanying consolidated balance sheet as of June 30, 2009. The table below reflects the financial statement activity related to the
2008 Plan which is included in accrued expenses in the accompanying consolidated balance sheets:
                                                                                                                              Six Months Ended         Year Ended
                                                                                                                                June 30, 2009       December 31, 2008
Beginning balance                                                                                                             $          1,323      $             —
Charge                                                                                                                                      —                  2,135
Cash paid                                                                                                                               (1,143)                 (812)
Ending balance                                                                                                                $            180      $          1,323
                                                                               9
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                                                               MedQuist Inc. and Subsidiaries
                                                         Notes to Consolidated Financial Statements
                                                        (In thousands, except for per share amounts)
                                                                         Unaudited

8. Income Taxes
   Our consolidated income tax expense consists principally of an increase in deferred tax liabilities related to goodwill amortization deductions for income
tax purposes during the applicable period as well as state and foreign income taxes. We have recorded a valuation allowance to reduce our net deferred tax
assets to an amount that is more likely than not to be realized in future years.
   Under FASB Interpretation 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109 (FIN 48), we classify penalties
and interest related to uncertain tax positions as part of income tax expense. There were no material changes to our uncertain tax positions, including
penalties and interest for the three and six months ended June 30, 2009.

9. Commitments and Contingencies
Customer Litigation
   Kaiser Litigation
       On June 6, 2008, plaintiffs Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, The Permanente Medical Group, Inc., Kaiser Foundation
Health Plan of the Mid-Atlantic States, Inc., and Kaiser Foundation Health Plan of Colorado (collectively, Kaiser) filed suit against MedQuist Inc. and
MedQuist Transcriptions, Ltd. (collectively, MedQuist) in the Superior Court of the State of California in and for the County of Alameda. The action is
entitled Foundation Health Plan Inc., et al v. MedQuist Inc. et al., Case No. CV-078-03425 PJH. The complaint asserts five causes of action, for common law
fraud, breach of contract, violation of California Business and Professions Code section 17200, unjust enrichment, and a demand for an accounting. More
specifically, Kaiser alleges that we fraudulently inflated the payable units of measure in medical transcription reports generated by us for Kaiser pursuant to
the contracts between the parties. The damages alleged in the complaint include an estimated $7 million in compensatory damages, as well as punitive
damages, attorneys’ fees and costs, and injunctive relief. We contend that we did not breach the contracts with Kaiser, or commit the fraud alleged, and we
intend to defend the suit vigorously. The parties participated in private mediation on July 24, 2008, but the case was not settled. We removed the case to the
United States District Court for the Northern District of California, and we filed motions to dismiss Kaiser’s complaint and to transfer venue of the case to
the United Stated District Court for the District of New Jersey. Kaiser stipulated to transfer, and the case was transferred to the United States District Court
for the District of New Jersey on or about August 26, 2008.
   The parties exchanged initial disclosures on October 6, 2008 and appeared before the court for an initial scheduling conference on October 14, 2008.
Kaiser’s initial disclosures claim damages, including compensatory damages, punitive damages, and prejudgment interest, in excess of $12 million.
Following the scheduling conference, the court ordered the parties to appear in person for mediation. The parties exchanged mediation statements on
February 13, 2009, and mediation was held on February 27, 2009 but the case was not settled. The court heard argument on our motion to dismiss on
March 19, 2009. On April 8, 2009, the court entered an order denying our motion to dismiss, except that our motion to dismiss plaintiffs’ claim under the
fraudulent prong of the California Unfair Competition Law was granted. The court issued a scheduling order on April 17, 2009, setting a pretrial schedule.
We filed our answer to plaintiff’s complaint on April 23, 2009.
   Kaiser served an initial set of discovery requests on May 7, 2009. On May 20, 2009, the court temporarily stayed discovery to address allegations of
ethical misconduct by Kaiser’s trial counsel, Greenberg Traurig, LLP. On July 1, 2009, the court granted us leave to conduct limited written discovery
regarding Greenberg Traurig’s alleged ethical misconduct and continued the temporary stay of all other discovery. On July 14, 2009, we moved for sanctions
against Greenberg Traurig for breach of the New Jersey Rules of Professional Conduct, and we moved to stay the litigation pending resolution of the motion
for sanctions. These motions are set to be heard by the court in August 2009.

The Consolidated Medical Transcriptionist Litigation
   The following matters which were brought against us by or on behalf of certain of our current and former medical transcriptionists were consolidated in
April 2006 in the United States District Court for the District of New Jersey: (i) a putative class action lawsuit entitled Brigitte Hoffmann, et al. v. MedQuist
Inc., et al., Case No. 1:04-CV-3452, filed on November 29, 2004 in the United States District Court for the Northern District of Georgia, (ii) a putative class
action entitled Force v. MedQuist Inc. and MedQuist Transcriptions, Ltd., Case No. 05-cv-2608-WSD, filed on October 11, 2005 in the United States District
Court for the Northern District of Georgia, and (iii) a putative class action entitled Myers, et al. v. MedQuist Inc. and MedQuist Transcriptions, Ltd., Case
No. 05-cv-4608 (JBS), filed on September 22, 2005 in the United States District Court for the District of New Jersey.
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                                                               MedQuist Inc. and Subsidiaries
                                                         Notes to Consolidated Financial Statements
                                                        (In thousands, except for per share amounts)
                                                                         Unaudited
    On or about April 21, 2008, the parties reached an agreement in principle to settle all claims on behalf of a class of medical transcriptionists paid by the
line for the period from November 29, 1998 through August 11, 2008 in exchange for payment of $1.5 million plus certain injunctive relief. The parties
executed a final settlement agreement, and the court preliminarily approved the settlement on November 7, 2008. On December 23, 2008, the Court entered a
further order preliminarily approving the settlement and modifying the notice schedule as agreed to by the parties. Notice was mailed to the settlement class,
and summary notice was published. The deadlines to object to or request exclusion from the settlement class passed, and the Court issued a final judgment
and order of dismissal with prejudice on March 31, 2009. Neither we, nor any other party, admitted liability or any wrongdoing in connection with the
settlement.

Shareholder Litigation
   Kahn Putative Class Action
    On January 22, 2008, Alan R. Kahn, one of our shareholders, filed a shareholder putative class action lawsuit against us, Koninklijke Philips Electronics
N.V. (Philips), our former majority shareholder, and four of our former non-independent directors, Clement Revetti, Jr., Stephen H. Rusckowski, Gregory M.
Sebasky and Scott Weisenhoff. The action, entitled Alan R. Kahn v. Stephen H. Rusckowski, et al., Docket No. BUR-C-000007-08, was venued in the
Superior Court of New Jersey, Chancery Division, Burlington County. In the action, plaintiff purports to bring the action on his own behalf and on behalf of
all current holders of our common stock. The original complaint alleged that defendants breached their fiduciary duties of good faith, fair dealing, loyalty,
and due care by purportedly agreeing to and initiating a process for our sale or a change of control transaction which will allegedly cause harm to plaintiff
and members of the putative class. Plaintiff sought damages in an unspecified amount, plus costs and interest, a judgment declaring that defendants breached
their fiduciary duties and that any proposed transactions regarding our sale or change of control are void, an injunction preventing our sale or any change of
control transaction that is not entirely fair to the class, an order directing us to appoint three independent directors to our board of directors, and attorneys’
fees and expenses.
    On June 12, 2008, plaintiff filed an amended class action complaint against us, eight of our current and former directors, and Philips in the Superior Court
of New Jersey, Chancery Division. In the amended complaint, plaintiff alleged that our current and former directors breached their fiduciary duties of good
faith, fair dealing, loyalty, and due care by not providing our public shareholders with the opportunity to decide whether they wanted to participate in a share
purchase offer with non-party CBaySystems Holdings Ltd. (CBaySystems Holdings) that would have allowed the public shareholders to sell their shares of
our common stock for an amount above market price. Plaintiff further alleged that CBaySystems Holdings made the share purchase offer to Philips and that
Philips breached its fiduciary duties by accepting CBaySystems Holdings’ offer. Based on these allegations, plaintiff sought declaratory, injunctive, and
monetary relief from all defendants. Plaintiff claimed that we were only named as a party to the litigation for purposes of injunctive relief.
    On July 14, 2008, we moved to dismiss plaintiff’s amended class action complaint, arguing (1) that plaintiff’s amended class action complaint did not
allege that we engaged in any wrongdoing which supported a breach of fiduciary duty claim and (2) that a breach of fiduciary duty claim is not legally
cognizable against a corporation. Plaintiff filed an opposition to our motion to dismiss on July 21, 2008.
   On November 21, 2008, the Court granted our motion and the motions filed by the other defendants and dismissed plaintiff’s amended class action
complaint with prejudice. On December 31, 2008, plaintiff filed an appeal of the trial court’s dismissal order with the New Jersey Appellate Division. The
matter is now pending before the Appellate Division. The issues have been fully briefed and the parties are waiting for oral arguments to be scheduled. We
will vigorously oppose any issues that plaintiff raises on appeal.
   Reseller Arbitration Demand
    On October 1, 2007, we received from counsel to nine current and former resellers of our products (Claimants), a copy of an arbitration demand filed by
the Claimants, initiating an arbitration proceeding styled Diskriter, Inc., Electronic Office Systems, Inc., Milner Voice & Data, Inc., Nelson Systems, Inc.,
NEO Voice and Communications, Inc., Office Business Systems, Inc., Roach-Reid Office Systems, Inc., Stiles Office Systems, Inc., and Travis Voice and
Data, Inc. v. MedQuist Inc. and MedQuist Transcriptions, Ltd. (collectively MedQuist) (filed on September 27, 2007, AAA, 30-118-Y-00839-07). The
arbitration demand purports to set forth claims for breach of contract; breach of covenant of good faith and fair dealing; promissory estoppel;
misrepresentation; and tortious interference with contractual relations. The Claimants allege that we breached our written agreements with the Claimants by:
(i) failing to provide reasonable training, technical support, and other services; (ii) using the Claimants’ confidential information to
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                                                                MedQuist Inc. and Subsidiaries
                                                          Notes to Consolidated Financial Statements
                                                         (In thousands, except for per share amounts)
                                                                          Unaudited
compete against the Claimants; (iii) directly competing with the Claimants’ territories; and (iv) failing to make new products available to the Claimants. In
addition, the Claimants allege that we made false oral representations that we: (i) would provide new product, opportunities and support to the Claimants;
(ii) were committed to continuing to use Claimants; (iii) did not intend to create our own sales force with respect to the Claimants’ territory; and (iv) would
stay out of Claimants’ territories and would not attempt to take over the Claimants business and relationships with the Claimants’ customers and end-users.
The Claimants assert that they are seeking damages in excess of $24.3 million. We also moved to dismiss MedQuist Inc. as a party to the arbitration since
MedQuist Inc. is not a party to the Claimants’ agreements, and accordingly, has never agreed to arbitration. The AAA initially agreed to rule on these
matters, but then decided to defer a ruling to the panel of arbitrators selected pursuant to the parties’ agreements (Panel). In response, we informed the Panel
that a court, not the Panel, should rule on these issues. When it appeared that the Panel would rule on these issues, we initiated a lawsuit in the Superior Court
of DeKalb County (the Court) and requested an injunction enjoining the Panel from deciding these issues. The Court denied the request, and indicated that a
new motion could be filed if the Panel’s ruling was adverse to MedQuist Inc. or MedQuist Transcriptions, Ltd. On May 6, 2008, the Panel dismissed
MedQuist Inc. as a party, but ruled against our opposition to a consolidated arbitration. We asked the Court to stay the arbitration in order to review that
decision. The Court initially granted the stay, but later lifted the stay. The Court did not make any substantive rulings regarding consolidation, and in fact, left
that decision and others to the assigned judge, who was unable to hear those motions. Accordingly, until further order of the Court, the arbitration will
proceed forward.
   We filed an answer and counterclaim in the arbitration, which generally denied liability. In the lawsuit, the defendants filed a motion to dismiss alleging
that our complaint failed to state an actionable claim for relief. On July 25, 2008, we filed our response which opposed the motion to dismiss in all respects.
On September 10, 2008, the Court heard argument on defendants’ motion to dismiss. The Court did not issue a decision, but rather, took the matter under
advisement.
    During discovery in the arbitration, Claimants have repeatedly modified the individual damage claims and now allege that they are asserting two
alternative damage theories. Claimants have not specified what the two alternative damage theories are, but have stated that they are seeking alternative
damage amounts for each Claimant. The Panel issued a Revised Scheduling Order, which tentatively scheduled the arbitration to begin in February of 2010.
   On July 13, 2009, we filed our first of two motions for summary judgment arguing that (i) the contracts at issue bar the type of damages sought by
Claimants with respect to their breach of contract and good faith and fair dealing claims; (ii) Claimants cannot recover damages under any theory beyond the
expiration of their agreements; (iii) Claimants alleged contract damages are not recoverable under applicable law; (iv) Georgia does not recognize a claim for
the violation of the covenant of good faith and fair dealing; (v) Claimants’ fraud and promissory estoppel claims fail given the presence of agreements
requiring amendments in writing; and (vi) the releases signed by the Claimants bar any claims or damages sought prior to the date the respective releases
were executed. The Panel has requested argument regarding our initial Motion during the week of August 17, 2009. In the meantime, the parties are
continuing with depositions. We deny all wrongdoing and intend to defend ourselves vigorously including asserting counterclaims against the Claimants as
appropriate.
   Anthurium Patent Litigation
    On November 6, 2007, Anthurium Solutions, Inc. (Anthurium) filed an action entitled Anthurium Solutions, Inc. v. MedQuist Inc., et al., Civil Action
No. 2-07CV-484, in the United States District Court for the Eastern District of Texas, alleging that we infringed and continue to infringe United States Patent
No. 7,031,998 (the ‘998 Patent) through our DocQment™ Enterprise Platform.. The complaint also alleged patent infringement claims against Spheris, Inc.
and Arrendale Associates, Inc. We denied the allegations set forth in the complaint and asserted affirmative defenses alleging that the ‘998 patent is invalid,
not infringed and unenforceable. We entered into a Settlement and License Agreement (the Settlement Agreement) with Anthurium on June 19, 2009
(Effective Date). Pursuant to the Settlement Agreement, we paid Anthurium $5.75 million and CBaySystems Holdings paid Anthurium $0.1 million in return
for a non-exclusive, fully paid-up, royalty-free, and worldwide license of the Anthurium Patents to us, our subsidiaries, CBaySystems Holdings and the
medical transcription companies controlled by CBaySystems Holdings (collectively , MedQuist Affiliates). The settlement for us and our subsidiaries was
negotiated separately and independently from the settlement for CBaySystems Holdings and the other medical transcription companies controlled by
CBaySystems Holdings. For convenience, both settlements were addressed in the single Settlement Agreement. The Anthurium Patents are defined as (i) the
‘998 Patent, (ii) any other patent owned or controlled by Anthurium as of the Effective Date, (iii) any patent which issues after the Effective Date from an
application owned or controlled by Anthurium prior to the Effective Date and (iv) any and all other patents and applications from which any or all of the
foregoing patents claim priority or are derived through continued prosecution, division, continuation, continuation-in-part, reissue, reexamination, extension,
or foreign prosecution.
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                                                               MedQuist Inc. and Subsidiaries
                                                         Notes to Consolidated Financial Statements
                                                        (In thousands, except for per share amounts)
                                                                         Unaudited
    The Settlement Agreement further provides that the MedQuist Affiliates and Anthurium release one another from any and all liability or obligations, past
or present, arising under, out of, or in any manner connected with the alleged infringement of the Anthurium Patents. In addition, pursuant to the Settlement
Agreement, Anthurium is precluded from asserting against the MedQuist Affiliates any claim arising from or related to any infringement, misappropriation
or violation of any intellectual property right (other than a trademark right), for a period of three (3) years following the Effective Date. We did not admit to
liability or any wrongdoing in connection with the settlement.

SEC Investigations of Former Officers
   With respect to our historical billing practices, the SEC is pursuing civil litigation against one of our current employees, who was our former controller
but who does not currently serve in a senior management or financial reporting oversight role, and our former chief financial officer, whose employment with
us ended in July 2004. Pursuant to our bylaws, we have indemnification obligations for the legal fees for these former officers.

Other Matters
   From time to time, we have been involved in various claims and legal actions arising in the ordinary course of business. In our opinion, the outcome of
such actions will not have a material adverse effect on our consolidated financial position, results of operations, liquidity or cash flows.
   We provide certain indemnification provisions within our standard agreement for the sale of software and hardware (collectively, Products) to protect our
customers from any liabilities or damages resulting from a claim of U.S. patent, copyright or trademark infringement by third parties relating to our Products.
We believe that the likelihood of any future payout relating to these provisions is remote. Accordingly, we have not recorded any liability in our consolidated
financial statements as of June 30, 2009 or December 31, 2008 related to these indemnification provisions.
   We have insurance policies which provided coverage for certain of the matters related to the legal actions described herein and certain other legal actions
that were previously settled or dismissed.
    Network and information systems, the Internet and other technologies are critical to our business activities. Substantially all of our transcription services
are dependent upon the use of network and information systems, including the use of our DEP and our license to use speech recognition software which is
licensed from a third party. If information systems including the Internet or our DEP are disrupted, or if the third party does not renew our license to use
speech recognition software, we could face a significant disruption of services. We have an active disaster recovery program in place for our information
systems and DEP. We believe there are alternative speech recognition software vendors that could replace the current vendor. We have periodically
experienced short term outages with our DEP, which have not significantly disrupted our business.

10. Related Party Transactions
   From time to time, we enter into transactions in the normal course of business with related parties. Prior to August 6, 2008, Philips owned approximately
69.5% ownership interest in MedQuist. This ownership interest was sold to CBaySystems Holdings on August 6, 2008 (CBaySystems Holdings Purchase).
Accordingly Philips ceased to be a related party on that date and CBaySystems Holdings (and affiliated entities) commenced to be a related party on that
date. The Audit Committee of our board of directors has been charged with the responsibility of approving or ratifying all related party transactions other
than those which were previously entered into between us and Philips prior to August 6, 2008. In any situation where the Audit Committee sees fit to do so,
any related party transaction, other than those previously entered into between us and Philips prior to August 6, 2008, are presented to disinterested members
of our board of directors for approval or ratification.
   On September 15, 2008, our wholly-owned subsidiary, MedQuist Transcriptions, Ltd., entered into a transcription services agreement (the 2008 TSA)
with CBay Systems & Services, Inc. (CBay Systems), a wholly-owned subsidiary of CBaySystems Holdings, pursuant to which we outsource certain medical
transcription services to CBay Systems. The 2008 TSA will expire on September 15, 2010 unless sooner terminated by either party. For the three months
ended June 30, 2009 and 2008 we incurred expenses of $0 and $0, respectively, and for the six months ended June 30, 2009 and 2008, we incurred expenses
of $958 and $0, respectively, which were recorded in Cost of revenues. As of June 30, 2009 and December 31, 2008, Accounts payable included $0 and
$283, respectively, for amounts due to CBay Systems for services performed under the terms of the 2008 TSA.
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                                                             MedQuist Inc. and Subsidiaries
                                                       Notes to Consolidated Financial Statements
                                                      (In thousands, except for per share amounts)
                                                                       Unaudited
   On April 3, 2009, MedQuist Transcriptions, Ltd. entered into a transcription services agreement (Transcription Services Agreement) with CBay Systems,
pursuant to which we outsource certain medical transcription services to CBay Systems. The Transcription Services Agreement will expire on April 16, 2012
unless sooner terminated by either party. Under the Transcription Services Agreement, we pay CBay Systems a per line fee based on each transcribed line of
text processed and the specific type of service provided. CBay Systems will perform its services using our DocQment Enterprise Platform and will be held to
certain performance standards and quality guidelines set forth in the Transcription Services Agreement. The specific services to be performed will be set
forth in order forms delivered by us to CBay Systems from time to time during the term of the Transcription Services Agreement. For the three months ended
June 30, 2009 we incurred expenses of $1,541, which were recorded in Cost of revenues. As of June 30, 2009, Accounts payable included $650 for amounts
due to CBay Systems for services performed under the terms of the Transcription Services Agreement.
   On March 31, 2009, MedQuist Transcriptions, Ltd. entered into a transcription services subcontracting agreement (Subcontracting Agreement) with CBay
Systems, pursuant to which CBay Systems will subcontract certain medical transcription, editing and related services to us. Under the Subcontracting
Agreement, we will provide the medical transcription, editing and related services to CBay Systems using labor located within the United States using our
DocQment Enterprise Platform. The specific services to be performed will be set forth in order forms delivered by CBay Systems to us from time to time
during the term of the Subcontracting Agreement. We will receive 98% of the net monthly fees collected by CBay Systems from its customers for the
services provided us. For the three months ended June 30, 2009, we recorded revenue of $469 under the terms of the Subcontracting agreement. As of
June 30, 2009, Accounts receivable included $469 for amounts due from CBay Systems for services provided under the terms of the Subcontracting
agreement.
   For the three months ended June 30, 2009 and 2008, we incurred services expenses with CBay Inc. of $350 and $0, respectively, and for the six months
ended June 30, 2009 and 2008, we incurred services expenses with CBay Inc. of $699 and $0, respectively, which has been recorded in Selling, general and
administrative expense. As of June 30, 2009 and December 31, 2008, Accrued expenses included $350 and $342, respectively, for amounts due to CBay Inc.
for services performed.
   Also, as of June 30, 2009 and December 31, 2008, Accounts payable includes $14 and $40, respectively, related to travel expenses incurred by CBay
Inc.’s executives on our behalf.
   We are a party to various agreements with Philips, our former majority shareholder. All material transactions between Philips and us were reviewed and
approved by the former supervisory committee of our board of directors. The supervisory committee was comprised of directors independent from Philips.
On August 6, 2008, the supervisory committee of our board of directors was eliminated by our board of directors after the consummation of the
CBaySystems Holdings Purchase.
   Listed below is a summary of our material agreements with Philips.
   Licensing Agreement
   We are a party to a Licensing Agreement with Philips Speech Processing GmbH, an affiliate of Philips which is now known as Philips Speech
Recognition Systems GmbH (PSRS), on May 22, 2000 (Licensing Agreement). The Licensing Agreement was subsequently amended by the parties as of
January 1, 2002, February 23, 2003, August 10, 2003, September 1, 2004, December 30, 2005 and February 13, 2007. During 2008, our competitor, Nuance
Communications, Inc. (Nuance) purchased PSRS. PSRS is now a business unit of Nuance.
    Under the Licensing Agreement, we license from PSRS its SpeechMagic speech recognition and processing software, including any updated versions of
the software developed by PSRS during the term of the License Agreement (Licensed Product), for use by us anywhere in the world. We pay a fee for use of
this license based upon a per line fee for each transcribed line of text processed through the Licensed Product.
   Upon the expiration of its initial term on June 28, 2005, the Licensing Agreement was renewed for an additional five year term. As part of the
CBaySystems Holdings Purchase, Philips waived, through June 30, 2011, its right to provide prior to June 30, 2011 a two year advance notice to terminate
the Licensing Agreement. This waiver was conditioned upon a similar waiver from us which we have provided.
   In connection with the Licensing Agreement, we have a consulting arrangement with PSRS whereby PSRS assists us with the integration of its speech and
transcription technologies.
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                                                              MedQuist Inc. and Subsidiaries
                                                        Notes to Consolidated Financial Statements
                                                       (In thousands, except for per share amounts)
                                                                        Unaudited
   OEM Supply Agreement
  On September 21, 2007, we entered into an Amended and Restated OEM Supply Agreement (Amended OEM Agreement) with PSRS. The Amended
OEM Agreement amends and restates a previous OEM Supply Agreement with PSRS dated September 23, 2004. In connection with the Amended OEM
Agreement certain amounts paid to PSRS were capitalized in fixed assets and are being amortized over a three-year period. During 2008, our competitor,
Nuance purchased PSRS. PSRS is now a business unit of Nuance.
   Pursuant to the Amended OEM Agreement, we purchased a co-ownership interest in all rights and interests in and to SpeechQ for Radiology together
with its components, including object and source code for the SpeechQ for Radiology application and the SpeechQ for Radiology integration SDK
(collectively, the Product), but excluding the SpeechMagic speech recognition and processing software, which we separately license from PSRS for a fee
under the Licensing Agreement. Additionally, the Amended OEM Agreement provides that we shall receive, in exchange for a fee, the exclusive right in the
United States, Canada and certain islands of the Caribbean (collectively the Exclusive Territory) to sell, service and deliver the Product. In addition, PSRS
has agreed that for the term of the Amended OEM Agreement it will not release a front-end multi-user reporting solution (including one similar to the
Product) in the medical market in the Exclusive Territory nor will it directly authorize or assist any of its affiliates to do so either; provided that the
restriction does not prevent PSRS’s affiliates from integrating SpeechMagic within their general medical application products. The Amended OEM
Agreement further provides that we shall make payments to PSRS for PSRS’s development of an interim version of the software included in the Product
(Interim Version). Except for the Interim Version which we and PSRS will co-own, the Amended OEM Agreement provides that any improvements,
developments or other enhancements either we or PSRS makes to the Product (collectively, Improvements) shall be owned exclusively by the party that
developed such Improvement. Each party has the right to seek patent or other protection of the Improvements it owns independent of the other party.
   The term of the Amended OEM Agreement extends through June 30, 2010 and will automatically renew for an additional three year term provided that
we are in material compliance with the Amended OEM Agreement as of such date. If PSRS decides to discontinue all business relating to the Product in the
Exclusive Territory on or after June 30, 2010, PSRS can effect such discontinuation by terminating the Amended OEM Agreement by providing us with six
months’ prior written notice of such discontinuation, provided the earliest such notice can be delivered is June 30, 2010. Either party may terminate the
Amended OEM Agreement for cause immediately in the event that a material breach by the other party remains uncured for more than 30 days following
delivery of written notice or in the event that the other party becomes insolvent or files for bankruptcy.
   Equipment Purchases
   We purchased certain dictation related equipment from Philips.
   Insurance Coverage
  Prior to the closing of the CBaySystems Holdings Purchase on August 6, 2008, we obtained all of our business insurance coverage (other than workers’
compensation) through Philips.
   Other
      From time to time prior to the CBaySystems Holdings Purchase, we entered into other miscellaneous transactions with Philips including Philips
purchasing certain products and implementation services from us. We recorded net revenues from sales to Philips of $39 for the six months ended June 30,
2008.
      Listed below is a summary of the expenses incurred by us in connection with the various Philips agreements noted above for the three and six months
ended June 30, 2008. Philips ceased being a related party on August 6, 2008. Charges related to these agreements are included in Cost of revenues and
Selling, general and administrative expenses in the accompanying consolidated statements of operations.
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                                                              MedQuist Inc. and Subsidiaries
                                                        Notes to Consolidated Financial Statements
                                                       (In thousands, except for per share amounts)
                                                                        Unaudited
                                                                                                                          Three Months Ended    Six Months Ended
                                                                                                                             June 30, 2008        June 30, 2008
Licensing agreement                                                                                                       $              910    $         1,715
OEM supply agreement                                                                                                                     625              1,500
Equipment purchases                                                                                                                      188                489
Insurance coverage                                                                                                                       167                334
Cbay Transaction                                                                                                                        (119)              (119)
Other                                                                                                                                     —                 (39)
Ending balance                                                                                                            $            1,771    $         3,880
  On July 29, 2004, we entered into an agreement with Nightingale and Associates, LLC (Nightingale) under which Nightingale agreed to provide interim
chief executive officer services to us. On July 30, 2004, our board of directors appointed Howard S. Hoffmann to serve as our non-employee chief executive
officer. Mr. Hoffmann served as the Managing Partner of Nightingale. Our board of directors appointed Mr. Hoffmann to the additional position of president
in June 2007.
   Mr. Hoffmann served as our president and chief executive officer pursuant to the terms of the agreement between us and Nightingale which was amended
on March 14, 2008 (Amendment). The Amendment, among other things, extended the term of Mr. Hoffmann’s role as our president and chief executive
officer through August 1, 2008. Our agreement with Nightingale also permitted us to engage additional personnel employed by Nightingale to provide
consulting services to us from time to time. Mr. Hoffman’s service as president and chief executive officer and the related engagement of Nightingale
terminated consensually on June 10, 2008.
   For the three months ended June 30, 2008, we incurred charges of $432 and for the six months ended June 30, 2008 we incurred charges of $1,073 for
Nightingale services, which were recorded in Selling, general and administrative expenses in the accompanying consolidated statements of operations.
11. Investment in A-Life Medical, Inc. (A-Life)
   As of June 30, 2009 and December 31, 2008, we have an investment of $7,529 and $6,252 respectively, in A-Life, a privately held entity which provides
advanced natural language processing technology for the medical industry. Our investment is recorded under the equity method of accounting since we
owned 36% and 34% of A-Life’s outstanding voting shares as of June 30, 2009 and December 31, 2008. In the second quarter of 2009, we made additional
investments in A-Life of $852. This additional investment increased our percentage ownership from 34% to 36%. Our investment in A-Life is recorded in
Other assets in the accompanying consolidated balance sheets.
    Our investment in A-Life included a note receivable plus accrued interest due from A-Life which matured on December 31, 2003. Prior to 2007, this note
receivable and accrued interest had been recorded in Other assets. In January 2008, A-Life paid us $1,250 to satisfy this note receivable and accrued interest
in full, as well as all other disputes and claims between A-Life and us. In January 2008, we recorded $438 of other income related to this transaction.

12. Financial Instruments
    Effective January 1, 2008, we adopted SFAS 157 for financial assets and financial liabilities recognized at fair value on a recurring basis. The partial
adoption of SFAS 157 for these items did not have a material impact on our financial position, results of operations and cash flows. The statement establishes
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad categories. Level 1: Quoted market prices
in active markets for identical assets or liabilities that the company has the ability to access. Level 2: Observable market based inputs or unobservable inputs
that are corroborated by market data such as quoted prices, interest rates and yield curves. Level 3: Inputs are unobservable data points that are not
corroborated by market data. At June 30, 2009, we held one financial asset, our Executive Deferred Compensation Plan assets (EDCP) included in Other
current assets with a fair value of $759. We measure the fair value of our EDCP on a recurring basis using Level 2 (significant other observable) inputs as
defined by SFAS 157. The adoption of SFAS 157 did not have an impact on the basis for measuring the fair value of these items. Our EDCP previously
allowed certain members of management and other highly compensated employees to defer a certain percentage of their income. Our board of directors
indefinitely suspended the EDCP in June 2004.
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                                                               MedQuist Inc. and Subsidiaries
                                                         Notes to Consolidated Financial Statements
                                                        (In thousands, except for per share amounts)
                                                                         Unaudited
   The following table presents our fair value hierarchy for those financial assets measured at fair value on a recurring basis in our consolidated balance
sheets as of June 30, 2009 and December 31, 2008:
                                                                                                        Quoted Prices In
                                                                                                       Active Markets for       Significant Other      Significant
                                                                                         June 30,           Identical              Observable         Unobservable
                                                                                           2009         Assets (Level 1)         Inputs (Level 2)    Inputs (Level 3)
Assets
Executive Deferred Compensation Plan assets                                              $ 759         $                —       $           759      $           —
                                                                                                            Quoted Prices In
                                                                                                           Active Markets for    Significant Other     Significant
                                                                                        December 31             Identical           Observable        Unobservable
                                                                                           2008             Assets (Level 1)      Inputs (Level 2)   Inputs (Level 3)
Assets
Executive Deferred Compensation Plan assets                                             $      787         $              —      $           787     $           —
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
    This report contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, the industry in which
we operate and other matters, as well as management’s beliefs and assumptions and other statements regarding matters that are not historical facts. These
statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as “projects,” “expects,”
“anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or “may,” variations of
such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of the Securities Exchange Act of 1934 (Exchange Act). Our forward-looking
statements are subject to risks and uncertainties. Actual events or results may differ materially from the results anticipated in these forward-looking
statements as a result of a variety of factors. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from
those estimated by us include:
    •     each of the factors discussed in Item 1A, Risk Factors, of this report as well as risks discussed elsewhere in this report;
    •     each of the matters discussed in Part II, Item 1, Legal Proceedings;
    •     our ability to recruit and retain qualified medical transcriptionists (MTs) and other employees;
    •     changes in law, including, without limitation, the impact HIPAA will have on our business;
    •     the impact of our new services and products on the demand for our existing services and products;
    •     our increased dependence on speech recognition technology, which we license, but do not own;
    •     our current dependence on medical transcription for substantially all of our business;
    •     our ability to expand our customer base;
    •     infringement on the proprietary rights of others;
    •     our ability to diversify into other businesses;
    •     our increased dependence on offshore medical transcription subcontractors;
    •     our ability to effectively integrate newly-acquired operations, if any;
    •     competitive pricing and service feature pressures in the medical transcription industry and our response to those pressures;
    •     difficulties relating to our significant management turnover; and
    •     general conditions in the economy and capital markets.
These and other risks and uncertainties that could affect our actual results are discussed in this report and in our other filings with the SEC.
   Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance, or achievements. We do not assume responsibility for the accuracy and completeness of the forward-looking statements other than as
required by applicable law. We do not undertake any duty to update any of the forward-looking statements after the date of this report to conform them to
actual results, except as required by the federal securities laws.
  You should read this section in combination with the section entitled Management’s Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 2008, included in our Annual Report on Form 10-K for the year ended December 31, 2008.

Executive Overview
   We are a leading provider of medical transcription services and a leader in technology enabled clinical documentation workflow. We service health
systems, hospitals and large group medical practices throughout the U.S., and we are the largest employer of MTs in the U.S. In the clinical documentation
workflow, we provide, in addition to medical transcription technology and services, digital dictation, speech recognition and electronic signature services.
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   We were incorporated in New Jersey in 1984 and reorganized in 1987 as a group of outpatient healthcare businesses affiliated with a non-profit healthcare
provider. In May 1994, we acquired our first medical transcription business. Through the date of this report, we have acquired over 50 companies. By the end
of 1995, we had divested all of our non-medical transcription businesses.
   On August 6, 2008, CBaySystems Holdings Limited (CBaySystems Holdings) purchased Philips’ 69.5% interest in MedQuist. CBaySystems Holdings is
a company that is publicly traded on the AIM market of the London Stock Exchange with a portfolio of investments in medical transcription, which includes
a company that competes with us in the medical transcription market, healthcare technology, and healthcare financial services.
   In 2001, we acquired Speech Machines, a company based in the United Kingdom, whose technology has since developed into our DocQment™
Enterprise Platform (DEP). In 2002, we began the process of migrating our customers to our DEP from our many disparate transcription platforms and
completed this process in the first quarter of 2007. As a result of this process, we encountered customer attrition.
    We have devoted significant resources over the past few years to improving our fundamental business systems, including our corporate governance
functions, financial controls, and operational infrastructure. In addition, during this period we also devoted a significant portion of our time and attention to
matters outside the ordinary course of business such as cooperating with federal investigations, responding to ongoing legal proceedings and reviewing past
allegations of improper billing practices. As our organization was focusing on all of these issues, we also pursued major operational initiatives to consolidate
technology platforms, communicate actively with our customers, and restructure our business.
   During this same period there have been several significant developments in the medical transcription industry, including:
   •    A shortage of qualified domestic MTs has increased the demand for outsourced medical transcription services by U.S.-based healthcare providers.
        This demand for qualified MTs, as well as budgetary pressures experienced by healthcare providers, has also caused many more U.S.-based
        healthcare providers to evaluate and consider the use of offshore medical transcription labor;
   •    Several low cost providers have emerged and aggressively moved into our market offering medical transcription services (performed both
        domestically and offshore) at prices significantly below our traditional price point. One of these low cost providers is owned by CBaySystems
        Holdings. While we believe the market for outsourced medical transcription continues to expand, the growing acceptance by customers of the use
        of offshore labor has further increased the competitive environment in the medical transcription industry;
   •    Technological advances by us and our competitors which have reduced the length of time required to transcribe medical reports, in turn reducing
        the overall cost of medical transcription services; and
   •    Increasing requirements for electronic medical records, driving up demand for transcription services in some cases where records used to be paper
        based, and driving down demand in other cases as customers attempt to implement electronic medical records.
   Although we remain the leading provider of medical transcription services in the U.S., we experience competition from many local, regional and national
businesses. The medical transcription industry is highly fragmented, and we believe there are hundreds of companies in the U.S. performing medical
transcription services. There are currently two large service providers, one of which is us and the other of which is Spheris Inc., several mid-sized service
providers with annual revenues of between $15 million and $100 million and hundreds of smaller, independent businesses with annual revenues of less than
$15 million.
   We believe the outsourced portion of the medical transcription services market will increase due in part to healthcare providers seeking the following:
   •    reduction in overhead and other administrative costs, driven by current and projected U.S. economic conditions;
   •    improvement in the quality and speed of delivery of transcribed medical reports;
   •    access to leading technologies, such as speech recognition technology, without any development and investment risk;
   •    expertise in implementing and managing a medical transcription system tailored to the providers’ specific requirements;
   •    access to skilled MTs; and
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  •      support for compliance with governmental and industry mandated privacy and security requirements and electronic health record (EHR) initiatives.
   Although we believe the outsourced portion of the medical transcription services market continues to grow, in order to benefit from this trend we must
overcome the following challenges: reverse recent market share decline, increase profit margins and continue to benefit from technological advances.
   We evaluate our performance based upon the following factors:
   •    revenues;
   •    operating income;
   •    net income per share;
   •    net cash provided by operating activities; and
   •    days sales outstanding.
   Our goal is to execute our strategy to yield growth in net revenues, operating income and net income per share.

Critical Accounting Policies, Judgments and Estimates
   Our discussion and analysis of our financial condition and consolidated results of operations are based upon our consolidated financial statements, which
have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of our consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our estimates based upon historical experience and various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Our actual results may differ from these estimates. These critical accounting policies and estimates have
been discussed with the Audit Committee of our board of directors.
    We believe that our critical accounting policies affect our more significant estimates and judgments used in the preparation of our consolidated financial
statements. Our Annual Report on Form 10-K for the year ended December 31, 2008 contains a discussion of these critical accounting policies. There have
been no significant changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31,
2008 other than as described in Note 1 of the “Notes to Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
    In May 2009 the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events” (“FAS 165”). FAS 165 requires management
to evaluate subsequent events through the date the financial statements were issued or the date the financial statements were available to be issued. FAS 165
is effective for annual and interim periods ending after June 15, 2009 and should be applied prospectively. We have evaluated subsequent events through the
issuance of the second quarter 10-Q on July 30, 2009.
   In June 2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R) ,” which amends Interpretation 46(R) to require an
enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest
entity (which would result in the enterprise being deemed the primary beneficiary of that entity and, therefore, obligated to consolidate the variable interest
entity in its financial statements); to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to revise
guidance for determining whether an entity is a variable interest entity; and to require enhanced disclosures that will provide more transparent information
about an enterprise’s involvement with a variable interest entity. FAS No. 167 is effective for interim periods as of the beginning of the first annual reporting
period beginning after November 15, 2009. The Company is currently evaluating the provisions of SFAS No. 167 to determine the impact on the Company’s
results of operations, cash flows or financial position.
    In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting
Principles a replacement of FASB Statement No. 162.” SFAS No. 168 replaces SFAS No. 162, “The Hierarchy of Generally Accepted Accounting
Principles.” SFAS No. 168 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with GAAP in the United States (the GAAP hierarchy). SFAS No. 168 establishes
the Codification as the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of
the SEC under federal securities laws are also sources of authoritative GAAP for SEC registrants. All guidance contained in the Codification carries an equal
level of authority. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009.
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   Certain reclassifications were made to prior period financial statements to conform to the current presentation. Expenses and charges of $0.7 million for
the three months ended June 30, 2008 and $0.9 million for the six months ended June 30, 2008 related to the Anthurium, Reseller and Shareholder lawsuits
had previously been included in Selling, general and administrative expenses. Due to the significant amount of such expenses in 2009, such costs are now
included in Cost of legal proceedings and settlements, net.
   Basis of Presentation
   Sources of Revenues
   We derive revenues primarily from the provision of medical transcription services to health systems, hospitals and large group medical practices. Our
customers are generally charged a rate times the volume of work that we transcribe or edit. In the clinical documentation workflow, we provide, in addition
to medical transcription technology and services, maintenance services, digital dictation, speech recognition and electronic signature services. Our medical
transcription revenues (excluding the impact of our customer accommodation program) have been declining over the past several years, as prices have
declined and some customers have switched to alternative vendors. Our technology products and services revenues also declined over the past several years,
as many products reached the end of their life and revenues from new products have not replaced the lost revenues.
   Cost of Revenues
   Cost of revenues includes compensation of MTs, other payroll costs (primarily related to operational and production management, quality assurance,
quality control and customer and field service personnel), telecommunication and facility costs. Cost of revenues also includes the direct cost of technology
products sold to customers. MT payroll cost is directly related to medical transcription revenues and is based on lines transcribed or edited multiplied by a
specific rate. Therefore, MT costs trend directly in line with revenues. Fixed costs have been reduced though not at the same pace as net revenues.
   Selling, General and Administrative (SG&A)
   Our SG&A expenses include marketing and sales costs, accounting costs, information technology costs, professional fees, corporate facility costs,
corporate payroll and benefit administration expenses.
   Research and Development (R&D)
   Our R&D expenses consist primarily of personnel and related costs, including salaries and employee benefits for software engineers and consulting fees
paid to independent consultants who provide software engineering services to us. To date, our R&D efforts have been devoted to new products and services
offerings and increases in features and functionality of our existing products and services.
   Depreciation and amortization
    Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets which range from two to seven years for furniture,
equipment and software, and the lesser of the lease term or estimated useful life for leasehold improvements. Intangible assets are being amortized using the
straight-line method over their estimated useful lives which range from three to 20 years.
   Cost of legal proceedings and settlements, net
   Cost of legal proceedings and settlements, net include legal fees incurred in connection with investigations by the U.S. Securities and Exchange
Commission (SEC) and the U.S. Department of Justice (DOJ), both of which were settled in 2008 and proceedings and the defense of civil litigation matters
and the Anthurium, Reseller and Shareholder matters.

Consolidated Results of Operations
   The following tables set forth our consolidated results of operations for the periods indicated below:
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Comparison of Three Months Ended June 30, 2009 and 2008
                                                                        Three Months Ended June 30,
                                                               2009                                   2008
                                                                       % of Net                              % of Net
($ in thousands)                                     Amount            Revenues             Amount           Revenues           $ Change          % Change
Net revenues                                       $ 77,471               100.0%          $ 82,454              100.0%         $ (4,983)               (6.0%)
Operating costs and expenses:
Cost of revenues                                      51,357               66.3%             58,015              70.4%            (6,658)             (11.5%)
Selling, general and administrative                    8,451               10.9%             12,066              14.6%            (3,615)             (30.0%)
Research and development                               2,380                3.1%              3,735               4.5%            (1,355)             (36.3%)
Depreciation                                           2,669                3.4%              2,996               3.6%              (327)             (10.9%)
Amortization of intangible assets                      1,504                1.9%              1,373               1.7%               131                9.5%
Cost of legal proceedings and settlements,
net                                                  10,134                13.1%            2,466                 3.0%           7,668                310.9%
Restructuring charges                                    —                   —                (45)               (0.1%)             45               (100.0%)
Total operating costs and expenses                   76,495                98.7%           80,606                97.8%          (4,111)                (5.1%)
Operating income                                        976                 1.3%            1,848                 2.2%            (872)               (47.2%)
Equity in income of affiliated company                  356                 0.5%               25                 0.0%             331              1,324.0%
Other income                                             —                   —                 —                   —                —                   n.a.
Interest income, net                                     19                 0.0%              895                 1.1%            (876)               (97.9%)
Income before income taxes                            1,351                 1.7%            2,768                 3.4%          (1,417)               (51.2%)
Income tax provision                                    515                 0.7%              933                 1.1%            (418)               (44.8%)
Net income                                         $    836                 1.1%          $ 1,835                 2.2%         $ (999)                (54.4%)

Net revenues
Net revenues decreased $5.0 million, or 6.0%, to $77.5 million for the three months ended June 30, 2009 compared with $82.5 million for the three months
ended June 30, 2008. This decrease was attributable primarily to reduced service revenues of $2.7 million resulting primarily from lower prices to our
medical transcription customers. Other revenues decreased $2.3 million.

Cost of revenues
  Cost of revenues decreased $6.7 million, or 11.5% to $51.4 million for the three months ended June 30, 2009 compared with $58.0 million for the three
months ended June 30, 2008. This decrease was attributable primarily to:
  •     Reduced medical transcription payroll costs of $1.9 million related directly to our increased use of speech recognition technology, which reduces
        the payroll costs associated with the production of revenues;
  •     Reduced technology product costs of $0.3 million;
  •     Reduced medical transcription costs of $1.6 million related to the increase in our outsourced medical transcription volumes to our international
        labor partners;
  •     Reduced costs of $1.7 million resulting from headcount reductions taken in 2008 to better align our overhead costs with our lower revenues levels;
  •     a one time benefit of $1.2 million related to the release of a reserve for prior period medical claims; and
   As a percentage of net revenues, cost of revenues decreased to 66.3% for the three months ended June 30, 2009 from 70.4% for the same period in 2008,
largely as a result of our increased use of speech recognition technology and actions taken to better align our fixed costs with our lower revenue levels.

Selling, general and administrative
   SG&A expenses decreased $3.6 million, or 30.0% to $8.5 million for the three months ended June 30, 2009 compared with $12.1 million for the three
months ended June 30, 2008. This decrease was attributable to a decrease of $1.2 million of legal fees; a decrease of $0.6 million due to reduced professional
fees related to our evaluation of strategic alternatives; a decrease of $0.9 million related to compensation expense as a result of reductions in workforce; a
decrease of $0.4 million related to reduced advertising and
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marketing expenses; and a decrease of $0.4 million related to the expiration of our contract with Nightingale. SG&A expense in the three month period ended
June 30, 2009 as a percentage of net revenues was 10.9% compared with 14.6% for the same period in 2008.

Research & development
   R&D expenses decreased $1.4 million, or 36.3%, to $2.4 million for the three months ended June 30, 2009 compared with $3.7 million for the three
months ended June 30, 2008. This decrease was related to a decrease of $1.0 million related to compensation expense as a result of reductions in workforce; a
decrease in consulting expense of $0.2 million; and a decrease in other costs of $0.1 million. R&D expenses as a percentage of net revenues were 3.1% for
the three months ended June 30, 2009 compared with 4.5% for the three months ended June 30, 2008.

Depreciation
   Depreciation expense decreased $0.3 million, or 10.9% to $2.7 million for the three months ended June 30, 2009 compared with $3.0 million for the three
months ended June 30, 2008. This decrease was primarily the result of reduced capital spending in 2008. Depreciation expense as a percentage of net
revenues was 3.4% for the three months ended June 30, 2009 compared with 3.6% for the same period in 2008.

Amortization
   Amortization expense increased $0.1 million, or 9.5%, to $1.5 million for the three months ended June 30, 2009 compared with $1.4 million for the three
months ended June 30, 2008. This increase was primarily the result of amortization expense associated with software development projects which were
completed in 2008. Amortization expense as a percentage of net revenues was 1.9% for the three months ended June 30, 2009 compared with 1.7% for the
same period in 2008.

Cost of legal proceedings and settlements, net
Costs of legal proceedings and settlements, net increased $7.7 million, or 310.9%, to $10.2 million for the three months ended June 30, 2009 compared with
$2.5 million for the three months ended June 30, 2008. This increase in costs was due primarily to the Anthurium settlement of $5.8 million and related legal
fees of $1.9 million as compared to the same period in 2008. We expect to incur additional legal fees in accordance with the indemnification of two former
officers, and the defense of the Reseller, Kaiser and Shareholder matters.

Interest income, net
   Interest income, net reflects interest earned on cash and cash equivalent balances. Interest income, net decreased $0.9 million, or 97.9%, to $0.0 million
for the three months ended June 30, 2009 compared with $0.9 million for the three months ended June 30, 2008. This decrease was attributable to the
reduced cash available for investment following the cash dividend payout of $103.3 million in August 2008, combined with lower weighted average interest
rates earned in the 2009 period (0.2%) compared with the 2008 period (2.4%).

Income tax provision
  The effective income tax rate for the three months ended June 30, 2009 was 38.1% compared with an effective income tax rate of 33.7% for the three
months ended June 30, 2008. The 2009 rate consists primarily of provisions for the deferred tax liability related to the current year tax goodwill amortization
which is indefinite in nature as well as a decrease in the valuation allowance related to deferred tax assets utilized to offset earnings in the current quarter.
The provisions also include state and foreign income taxes. The higher 2009 rate is due primarily to lower pretax income in the period ended June 30, 2009
compared to the period ended June 30, 2008.
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Comparison of Six Months Ended June 30, 2009 and 2008
                                                                        Six Months Ended June 30,
                                                               2009                                  2008
                                                                      % of Net                              % of Net
($ in thousands)                                     Amount           Revenues             Amount           Revenues           $ Change          % Change
Net revenues                                       $ 156,415             100.0%          $ 166,179            100.0%           $ (9,764)               (5.9%)
Operating costs and expenses:
Cost of revenues                                     105,225              67.3%            119,273              71.8%           (14,048)             (11.8%)
Selling, general and administrative                   17,889              11.4%             24,950              15.0%            (7,061)             (28.3%)
Research and development                               4,796               3.1%              7,854               4.7%            (3,058)             (38.9%)
Depreciation                                           5,221               3.3%              5,924               3.6%              (703)             (11.9%)
Amortization of intangible assets                      3,015               1.9%              2,734               1.6%               281               10.3%
Cost of legal proceedings and settlements,
net                                                  12,058                7.7%             9,075               5.5%              2,983               32.9%
Restructuring charges                                    —                  —                 (45)             (0.0%)                45             (100.0%)
Total operating costs and expenses                  148,204               94.8%           169,765             102.2%            (21,561)             (12.7%)
Operating income (loss)                               8,211                5.2%            (3,586)             (2.2%)            11,797             (329.0%)
Equity in income of affiliated company                  428                0.3%                41               0.0%                387              943.9%
Other income                                             —                  —                 438               0.3%               (438)            (100.0%)
Interest income, net                                     65                0.0%             2,183               1.3%             (2,118)             (97.0%)
Income (loss) before income taxes                     8,704                5.6%              (924)             (0.6%)             9,628           (1,042.0%)
Income tax provision                                  1,014                0.6%             1,658               1.0%               (644)             (38.8%)
Net income (loss)                                  $ 7,690                 4.9%          $ (2,582)             (1.6%)          $ 10,272             (397.8%)

Net revenues
   Net revenues decreased $9.8 million, or 5.9% to $156.4 million for the six months ended June 30, 2009 compared with $166.2 million for the six months
ended June 30, 2008. This decrease was attributable primarily to reduced service revenues of $7.3 million resulting primarily from lower prices to our
medical transcription customers. Other revenues decreased $2.5 million.

Cost of revenues
  Cost of revenues decreased $14.1 million, or 11.8% to $105.2 million for the six months ended June 30, 2009 compared with $119.3 million for the six
months ended June 30, 2008. This decrease was attributable primarily to:
  •     Reduced medical transcription payroll costs of $5.0 million related directly to our increased use of speech recognition technology, which reduces
        the payroll costs associated with the production of revenues;
  •     Reduced technology product costs of $1.2 million;
  •     Reduced medical transcription costs of $2.3 million related to the increase in our outsourced medical transcription volumes to our international
        labor partners;
  •     Reduced medical transcription payroll costs of $1.1 million related to the decrease in our outsourced medical transcription volumes and cost
        controls;
  •     Reduced costs of $3.4 million resulting from headcount reductions taken in 2008 to better align our overhead costs with our lower revenues levels;
  •     a one time benefit of $1.2 million related to the release of a reserve for prior period medical claims;
   As a percentage of net revenues, cost of revenues decreased to 67.3% for the six months ended June 30, 2009 from 71.8% for the same period in 2008,
largely as a result of our increased use of speech recognition technology and actions taken to better align our fixed costs with our lower revenue levels.
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Selling, general and administrative
   SG&A expenses decreased $7.1 million, or 28.3%, to $17.9 million for the six months ended June 30, 2009 compared with $25.0 million for the six
months ended June 30, 2008. This decrease was attributable to a decrease of $2.3 million of legal fees; $1.4 million due to reduced professional fees related
to our evaluation of strategic alternatives; a decrease of $1.9 million related to compensation expense as a result of reductions in workforce; and a decrease of
$1.0 million related to the expiration of our contract with Nightingale. SG&A expense in the six month period ended June 30, 2009 as a percentage of net
revenues was 11.4% compared with 15.0% for the same period in 2008.

Research & development
   R&D expenses decreased $3.1 million, or 38.9%, to $4.8 million for the six months ended June 30, 2009 compared with $7.9 million for the six months
ended June 30, 2008. This decrease was related to a decrease of $1.7 million related to compensation expense as a result of reductions in workforce; an
increase in the amounts we capitalized for software development of $0.7 million; a decrease in consulting expense of $0.4 million; and a decrease in other
costs of $0.3 million. R&D expenses as a percentage of net revenues were 3.1% for the six months ended June 30, 2009 compared with 4.7% for the six
months ended June 30, 2008.

Depreciation
   Depreciation expense decreased $0.7 million, or 11.9%, to $5.2 million for the six months ended June 30, 2009 compared with $5.9 million for the six
months ended June 30, 2008. This decrease was primarily the result of reduced capital spending in 2008. Depreciation expense as a percentage of net
revenues was 3.3% for the six months ended June 30, 2009 compared with 3.6% for the same period in 2008.

Amortization
   Amortization expense increased $0.3 million, or 10.3%, to $3.0 million for the six months ended June 30, 2009 compared with $2.7 million for the six
months ended June 30, 2008. This increase was primarily the result of amortization expense associated with software development projects which were
completed in 2008. Amortization expense as a percentage of net revenues was 1.9% for the six months ended June 30, 2009 compared with 1.6% for the
same period in 2008.

Cost of legal proceedings and settlements, net
   Costs of legal proceedings and settlements, net increased $3.0 million, or 32.9%, to $12.1 million for the six months ended June 30, 2009 compared with
$9.1 million for the six months ended June 30, 2008. This increase in costs was due primarily to the Anthurium settlement of $5.8 million; offset by a
reduction in legal fees of $1.3 million as compared to the same period in 2008 and the proposed settlement of $1.5 million related to the medical
transcriptionists putative class action which was accrued in 2008. We expect to incur additional legal fees in accordance with the indemnification of two
former officers, and the defense of the Reseller, Kaiser and Shareholder matters.

Interest income, net
   Interest income, net reflects interest earned on cash and cash equivalent balances. Interest income, net decreased $2.1 million, or 97.0%, to $0.1 million
for the six months ended June 30, 2009 compared with $2.2 million for the six months ended June 30, 2008. This decrease was attributable to the dividend
payout of $103.3 million in August 2008, combined with lower weighted average interest rates earned in the 2009 period (0.2%) compared with the 2008
period (2.9%).

Income tax provision
    The effective income tax rate for the six months ended June 30, 2009 was 11.6% compared with an effective income tax rate of 179.4% for the six months
ended June 30, 2008. The 2009 rate consists primarily of provisions for the deferred tax liability related to the current year tax goodwill amortization which
is indefinite in nature as well as a decrease in the valuation allowance related to deferred tax assets utilized to offset earnings in the current period. The
provisions also include state and foreign income taxes. The lower 2009 rate is due primarily to reduced tax expense attributable to the deferred tax liabilities
associated with indefinite life intangible assets related to goodwill which was impaired in 2008 and a reduction in the overall valuation allowance in the
period ended June 30, 2009 compared to an increase in the valuation allowance in the period ended June 30, 2008 due to pretax income for the period ended
June 30, 2009 compared to a pretax loss for the period ended June 30, 2008.
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Liquidity and Capital Resources
   As of June 30, 2009, we had working capital of $51.1 million compared with $39.5 million as of December 31, 2008. Our principal source of liquidity
was cash from operations and available cash on hand. Cash and cash equivalents increased $14.2 million in the six months ended June 30, 2009 to
$54.2 million from $39.9 million as of December 31, 2008. This increase was driven primarily by cash provided by operating activities of $18.4 million
offset by cash used to purchase property and equipment of $2.1 million, cash used for software development activities of $1.3 million and the additional
investments in A-Life of $0.9 million.
   We believe our existing cash and cash equivalents combined with cash expected to be generated from operations will be sufficient to finance our
operations for the foreseeable future. However, if we fail to generate adequate cash flows from operations in the future, due to an unexpected decline in our
net revenues, or due to increased cash expenditures in excess of the net revenues generated, then our cash balances may not be sufficient to fund our
continuing operations without obtaining additional debt or equity. There are no assurances that sufficient funding from external sources will be available to
us on acceptable terms, if at all.

Off-Balance Sheet Arrangements
   We are not involved in any off-balance sheet arrangements that have or are reasonably likely to have a material current or future impact on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
    Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the
Exchange Act, as of the last day of the fiscal period covered by this report, June 30, 2009. The term disclosure controls and procedures means our controls
and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing
similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our
principal financial officer concluded that, as of June 30, 2009, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting
   There have been no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2009 that materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
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                                                            PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Customer Litigation
   Kaiser Litigation
      On June 6, 2008, plaintiffs Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, The Permanente Medical Group, Inc., Kaiser Foundation
Health Plan of the Mid-Atlantic States, Inc., and Kaiser Foundation Health Plan of Colorado (collectively, Kaiser) filed suit against MedQuist Inc. and
MedQuist Transcriptions, Ltd. (collectively, MedQuist) in the Superior Court of the State of California in and for the County of Alameda. The action is
entitled Foundation Health Plan Inc., et al v. MedQuist Inc. et al., Case No. CV-078-03425 PJH. The complaint asserts five causes of action, for common law
fraud, breach of contract, violation of California Business and Professions Code section 17200, unjust enrichment, and a demand for an accounting. More
specifically, Kaiser alleges that we fraudulently inflated the payable units of measure in medical transcription reports generated by us for Kaiser pursuant to
the contracts between the parties. The damages alleged in the complaint include an estimated $7 million in compensatory damages, as well as punitive
damages, attorneys’ fees and costs, and injunctive relief. We contend that we did not breach the contracts with Kaiser, or commit the fraud alleged, and we
intend to defend the suit vigorously. The parties participated in private mediation on July 24, 2008, but the case was not settled. We removed the case to the
United States District Court for the Northern District of California, and we filed motions to dismiss Kaiser’s complaint and to transfer venue of the case to
the United Stated District Court for the District of New Jersey. Kaiser stipulated to transfer, and the case was transferred to the United States District Court
for the District of New Jersey on or about August 26, 2008.
     The parties exchanged initial disclosures on October 6, 2008 and appeared before the court for an initial scheduling conference on October 14, 2008.
Kaiser’s initial disclosures claim damages, including compensatory damages, punitive damages, and prejudgment interest, in excess of $12 million.
Following the scheduling conference, the court ordered the parties to appear in person for mediation. The parties exchanged mediation statements on
February 13, 2009, and mediation was held on February 27, 2009 but the case was not settled. The court heard argument on our motion to dismiss on
March 19, 2009. On April 8, 2009, the court entered an order denying our motion to dismiss, except that our motion to dismiss plaintiffs’ claim under the
fraudulent prong of the California Unfair Competition Law was granted. The court issued a scheduling order on April 17, 2009, setting a pretrial schedule.
We filed our answer to plaintiff’s complaint on April 23, 2009.
      Kaiser served an initial set of discovery requests on May 7, 2009. On May 20, 2009, the court temporarily stayed discovery to address allegations of
ethical misconduct by Kaiser’s trial counsel, Greenberg Traurig, LLP. On July 1, 2009, the court granted us leave to conduct limited written discovery
regarding Greenberg Traurig’s alleged ethical misconduct and continued the temporary stay of all other discovery. On July 14, 2009, we moved for sanctions
against Greenberg Traurig for breach of the New Jersey Rules of Professional Conduct, and we moved to stay the litigation pending resolution of the motion
for sanctions. These motions are set to be heard by the court in August 2009.

The Consolidated Medical Transcriptionist Litigation
   The following matters which were brought against us by or on behalf of certain of our current and former medical transcriptionists were consolidated in
April 2006 in the United States District Court for the District of New Jersey: (i) a putative class action lawsuit entitled Brigitte Hoffmann, et al. v. MedQuist
Inc., et al., Case No. 1:04-CV-3452, filed on November 29, 2004 in the United States District Court for the Northern District of Georgia, (ii) a putative class
action entitled Force v. MedQuist Inc. and MedQuist Transcriptions, Ltd., Case No. 05-cv-2608-WSD, filed on October 11, 2005 in the United States District
Court for the Northern District of Georgia, and (iii) a putative class action entitled Myers, et al. v. MedQuist Inc. and MedQuist Transcriptions, Ltd., Case
No. 05-cv-4608 (JBS), filed on September 22, 2005 in the United States District Court for the District of New Jersey.
    On or about April 21, 2008, the parties reached an agreement in principle to settle all claims on behalf of a class of medical transcriptionists paid by the
line for the period from November 29, 1998 through August 11, 2008 in exchange for payment of $1.5 million plus certain injunctive relief. The parties
executed a final settlement agreement, and the court preliminarily approved the settlement on November 7, 2008. On December 23, 2008, the Court entered a
further order preliminarily approving the settlement and modifying the notice schedule as agreed to by the parties. Notice was mailed to the settlement class,
and summary notice was published. The deadlines to object to or request exclusion from the settlement class passed, and the Court issued a final judgment
and order of dismissal with prejudice on March 31, 2009. Neither we, nor any other party, admitted liability or any wrongdoing in connection with the
settlement.

Shareholder Litigation
   Kahn Putative Class Action
   On January 22, 2008, Alan R. Kahn, one of our shareholders, filed a shareholder putative class action lawsuit against us, Koninklijke Philips Electronics
N.V. (Philips), our former majority shareholder, and four of our former non-independent directors, Clement Revetti, Jr., Stephen H. Rusckowski, Gregory M.
Sebasky and Scott Weisenhoff. The action, entitled Alan R. Kahn v. Stephen H. Rusckowski, et al., Docket No. BUR-C-000007-08, was venued in the
Superior Court of New Jersey, Chancery Division,
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Burlington County. In the action, plaintiff purports to bring the action on his own behalf and on behalf of all current holders of our common stock. The
original complaint alleged that defendants breached their fiduciary duties of good faith, fair dealing, loyalty, and due care by purportedly agreeing to and
initiating a process for our sale or a change of control transaction which will allegedly cause harm to plaintiff and members of the putative class. Plaintiff
sought damages in an unspecified amount, plus costs and interest, a judgment declaring that defendants breached their fiduciary duties and that any proposed
transactions regarding our sale or change of control are void, an injunction preventing our sale or any change of control transaction that is not entirely fair to
the class, an order directing us to appoint three independent directors to our board of directors, and attorneys’ fees and expenses.
    On June 12, 2008, plaintiff filed an amended class action complaint against us, eight of our current and former directors, and Philips in the Superior Court
of New Jersey, Chancery Division. In the amended complaint, plaintiff alleged that our current and former directors breached their fiduciary duties of good
faith, fair dealing, loyalty, and due care by not providing our public shareholders with the opportunity to decide whether they wanted to participate in a share
purchase offer with non-party CBaySystems Holdings Ltd. (CBaySystems Holdings) that would have allowed the public shareholders to sell their shares of
our common stock for an amount above market price. Plaintiff further alleged that CBaySystems Holdings made the share purchase offer to Philips and that
Philips breached its fiduciary duties by accepting CBaySystems Holdings’ offer. Based on these allegations, plaintiff sought declaratory, injunctive, and
monetary relief from all defendants. Plaintiff claimed that we were only named as a party to the litigation for purposes of injunctive relief.
    On July 14, 2008, we moved to dismiss plaintiff’s amended class action complaint, arguing (1) that plaintiff’s amended class action complaint did not
allege that we engaged in any wrongdoing which supported a breach of fiduciary duty claim and (2) that a breach of fiduciary duty claim is not legally
cognizable against a corporation. Plaintiff filed an opposition to our motion to dismiss on July 21, 2008.
   On November 21, 2008, the Court granted our motion and the motions filed by the other defendants and dismissed plaintiff’s amended class action
complaint with prejudice. On December 31, 2008, plaintiff filed an appeal of the trial court’s dismissal order with the New Jersey Appellate Division. The
issues have been fully briefed and the parties are waiting for oral arguments to be scheduled. The matter is now pending before the Appellate Division. We
will vigorously oppose any issues that plaintiff raises on appeal.
   Reseller Arbitration Demand
    On October 1, 2007, we received from counsel to nine current and former resellers of our products (Claimants), a copy of an arbitration demand filed by
the Claimants, initiating an arbitration proceeding styled Diskriter, Inc., Electronic Office Systems, Inc., Milner Voice & Data, Inc., Nelson Systems, Inc.,
NEO Voice and Communications, Inc., Office Business Systems, Inc., Roach-Reid Office Systems, Inc., Stiles Office Systems, Inc., and Travis Voice and
Data, Inc. v. MedQuist Inc. and MedQuist Transcriptions, Ltd. (collectively MedQuist) (filed on September 27, 2007, AAA, 30-118-Y-00839-07). The
arbitration demand purports to set forth claims for breach of contract; breach of covenant of good faith and fair dealing; promissory estoppel;
misrepresentation; and tortious interference with contractual relations. The Claimants allege that we breached our written agreements with the Claimants by:
(i) failing to provide reasonable training, technical support, and other services; (ii) using the Claimants’ confidential information to compete against the
Claimants; (iii) directly competing with the Claimants’ territories; and (iv) failing to make new products available to the Claimants. In addition, the
Claimants allege that we made false oral representations that we: (i) would provide new product, opportunities and support to the Claimants; (ii) were
committed to continuing to use Claimants; (iii) did not intend to create our own sales force with respect to the Claimants’ territory; and (iv) would stay out of
Claimants’ territories and would not attempt to take over the Claimants business and relationships with the Claimants’ customers and end-users. The
Claimants assert that they are seeking damages in excess of $24.3 million. We also moved to dismiss MedQuist Inc. as a party to the arbitration since
MedQuist Inc. is not a party to the Claimants’ agreements, and accordingly, has never agreed to arbitration. The AAA initially agreed to rule on these
matters, but then decided to defer a ruling to the panel of arbitrators selected pursuant to the parties’ agreements (Panel). In response, we informed the Panel
that a court, not the Panel, should rule on these issues. When it appeared that the Panel would rule on these issues, we initiated a lawsuit in the Superior Court
of DeKalb County (the Court) and requested an injunction enjoining the Panel from deciding these issues. The Court denied the request, and indicated that a
new motion could be filed if the Panel’s ruling was adverse to MedQuist Inc. or MedQuist Transcriptions, Ltd. On May 6, 2008, the Panel dismissed
MedQuist Inc. as a party, but ruled against our opposition to a consolidated arbitration. We asked the Court to stay the arbitration in order to review that
decision. The Court initially granted the stay, but later lifted the stay. The Court did not make any substantive rulings regarding consolidation, and in fact, left
that decision and others to the assigned judge, who was unable to hear those motions. Accordingly, until further order of the Court, the arbitration will
proceed forward.
   We filed an answer and counterclaim in the arbitration, which generally denied liability. In the lawsuit, the defendants filed a motion to dismiss alleging
that our complaint failed to state an actionable claim for relief. On July 25, 2008, we filed our response which opposed the motion to dismiss in all respects.
On September 10, 2008, the Court heard argument on defendants’ motion to dismiss. The Court did not issue a decision, but rather, took the matter under
advisement.
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    During discovery in the arbitration, Claimants have repeatedly modified the individual damage claims and now allege that they are asserting two
alternative damage theories. Claimants have not specified what the two alternative damage theories are, but have stated that they are seeking alternative
damage amounts for each Claimant. The Panel issued a Revised Scheduling Order, which tentatively scheduled the arbitration to begin in February of 2010.
   On July 13, 2009, we filed our first of two motions for summary judgment arguing that (i) the contracts at issue bar the type of damages sought by
Claimants with respect to their breach of contract and good faith and fair dealing claims; (ii) Claimants cannot recover damages under any theory beyond the
expiration of their agreements; (iii) Claimants alleged contract damages are not recoverable under applicable law; (iv) Georgia does not recognize a claim for
the violation of the covenant of good faith and fair dealing; (v) Claimants’ fraud and promissory estoppel claims fail given the presence of agreements
requiring amendments in writing; and (vi) the releases signed by the Claimants bar any claims or damages sought prior to the date the respective releases
were executed. The Panel has requested argument regarding our initial Motion during the week of August 17, 2009. In the meantime, the parties are
continuing with depositions. We deny all wrongdoing and intend to defend ourselves vigorously including asserting counterclaims against the Claimants as
appropriate.

Anthurium Patent Litigation
    On November 6, 2007, Anthurium Solutions, Inc. (Anthurium) filed an action entitled Anthurium Solutions, Inc. v. MedQuist Inc., et al., Civil Action
No. 2-07CV-484, in the United States District Court for the Eastern District of Texas, alleging that we infringed and continue to infringe United States Patent
No. 7,031,998 (the ‘998 Patent) through our DocQment™ Enterprise Platform.. The complaint also alleged patent infringement claims against Spheris, Inc.
and Arrendale Associates, Inc. We denied the allegations set forth in the complaint and asserted affirmative defenses alleging that the ‘998 patent is invalid,
not infringed and unenforceable. We entered into a Settlement and License Agreement (the Settlement Agreement) with Anthurium on June 19, 2009
(Effective Date). Pursuant to the Settlement Agreement, we paid Anthurium $5,750,000 and CBay Systems Holdings paid Anthurium $100,000 in return for
a non-exclusive, fully paid-up, royalty-free, and worldwide license of the Anthurium Patents to us, our subsidiaries, CBaySystems Holdings and the medical
transcription companies controlled by CBaySystems Holdings (collectively , MedQuist Affiliates). The settlement for us and our subsidiaries was negotiated
separately and independently from the settlement for CBaySystems Holdings and the other medical transcription companies controlled by CBaySystems
Holdings. For convenience, both settlements were addressed in the single Settlement Agreement. The Anthurium Patents are defined as (i) the ‘998 Patent,
(ii) any other patent owned or controlled by Anthurium as of the Effective Date, (iii) any patent which issues after the Effective Date from an application
owned or controlled by Anthurium prior to the Effective Date and (iv) any and all other patents and applications from which any or all of the foregoing
patents claim priority or are derived through continued prosecution, division, continuation, continuation-in-part, reissue, reexamination, extension, or foreign
prosecution.
    The Settlement Agreement further provides that the MedQuist Affiliates and Anthurium release one another from any and all liability or obligations, past
or present, arising under, out of, or in any manner connected with the alleged infringement of the Anthurium Patents. In addition, pursuant to the Settlement
Agreement, Anthurium is precluded from asserting against the MedQuist Affiliates any claim arising from or related to any infringement, misappropriation
or violation of any intellectual property right (other than a trademark right), for a period of three (3) years following the Effective Date. We did not admit to
liability or any wrongdoing in connection with the settlement.

SEC Investigations of Former Officers
   With respect to our historical billing practices, the SEC is pursuing civil litigation against one of our current employees, who was our former controller
but who does not currently serve in a senior management or financial reporting oversight role, and our former chief financial officer, whose employment with
us ended in July 2004. Pursuant to our bylaws, we have indemnification obligations for the legal fees for these former officers.

Other Matters
   From time to time, we have been involved in various claims and legal actions arising in the ordinary course of business. In our opinion, the outcome of
such actions will not have a material adverse effect on our consolidated financial position, results of operations, liquidity or cash flows.
   We provide certain indemnification provisions within our standard agreement for the sale of software and hardware (collectively, Products) to protect our
customers from any liabilities or damages resulting from a claim of U.S. patent, copyright or trademark infringement by third parties relating to our Products.
We believe that the likelihood of any future payout relating to these provisions is remote. Accordingly, we have not recorded any liability in our consolidated
financial statements as of June 30, 2009 or December 31, 2008 related to these indemnification provisions.
                                                                               29
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   We have insurance policies which provided coverage for certain of the matters related to the legal actions described herein and certain other legal actions
that were previously settled or dismissed.
    Network and information systems, the Internet and other technologies are critical to our business activities. Substantially all of our transcription services
are dependent upon the use of network and information systems, including the use of our DEP and our license to use speech recognition software which is
licensed from a third party. If information systems including the Internet or our DEP are disrupted, or if the third party does not renew our license to use
speech recognition software, we could face a significant disruption of services. We have an active disaster recovery program in place for our information
systems and our DEP. We believe there are alternative speech recognition software vendors that could replace the current vendor. We have periodically
experienced short term outages with our DEP, which have not significantly disrupted our business.
Item 1A. Risk Factors
    There have been no material changes to the risks to our business described in our Annual Report on Form 10-K for the year ended December 31, 2008
filed with the SEC on March 11, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   None.
Item 3. Defaults Upon Senior Securities
   None.
Item 4. Submission of Matters to a Vote of Security Holders
   None.
Item 5. Other Information
   None.
Item 6. Exhibits
      (a) Exhibits
No.                                                                                  Description
10.1                 Transcription Services Agreement by and between MedQuist Transcriptions, Ltd. and CBay Systems & Services, Inc. dated April 3, 2009 (*)
10.2                 Employment Agreement by and between Alan Gold and MedQuist Inc. dated February 26, 2009
10.3(1)              Employment Agreement by and between Dominick Golio and MedQuist Inc. dated April 9, 2009
10.4                 Employment Agreement by and between Kevin Piltz and MedQuist Inc. dated May 18, 2009
10.5                 Settlement and License Agreement by and between Anthurium Solutions, Inc. and MedQuist Inc. dated June 19, 2009
31.1                 Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
                     pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2                 Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
                     pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                                                                                   30
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No.                                                                                 Description
32.1            Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2            Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(1)    Incorporated by reference to our Current Report on Form 8-K filed with the SEC on April 15, 2009
(*)    Portions of this Exhibit were omitted and filed separately with the Secretary of the SEC pursuant to a request for confidential treatment that has been
       filed with the SEC.
                                                                               31
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                                                                       SIGNATURES
   Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
                                                                           MEDQUIST INC.
Date: July 30, 2009                                                         /s/ Peter Masanotti
                                                                            Peter Masanotti
                                                                            President and Chief Executive Officer
                                                                            (Principal Executive Officer)
Date: July 30, 2009                                                         /s/ Dominick Golio
                                                                            Dominick Golio
                                                                            Chief Financial Officer
                                                                            (Principal Financial Officer)
                                                                              32
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                                                                   Exhibit Index
No.                                                                          Description
10.1          Transcription Services Agreement by and between MedQuist Transcriptions, Ltd. and CBay Systems & Services, Inc. dated April 3, 2009 (*)
10.2          Employment Agreement by and between Alan Gold and MedQuist Inc. dated February 26, 2009
10.4          Employment Agreement by and between Kevin Piltz and MedQuist Inc. dated May 18, 2009
                                                                       33
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No.                                                                                 Description
10.5            Settlement and License Agreement by and between Anthurium Solutions, Inc. and MedQuist Inc. dated June 19, 2009
31.1            Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2            Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1            Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2            Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(*)    Portions of this Exhibit were omitted and filed separately with the Secretary of the SEC pursuant to a request for confidential treatment that has been
       filed with the SEC.
                                                                               34
                                                                                                                                                    Exhibit 10.1
Portions of this exhibit were omitted and filed separately with the Secretary of 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.


                                                      TRANSCRIPTION SERVICES AGREEMENT
   THIS TRANSCRIPTION SERVICES AGREEMENT (this “Agreement”) dated April 3, 2009 is entered into by and between MEDQUIST
TRANSCRIPTIONS, LTD. (the “Company”) and CBAY SYSTEMS & SERVICES, INC. (the “Supplier”). This Agreement shall be effective upon the date
of mutual execution by the parties below (the “Effective Date”).


                                                                      BACKGROUND
   WHEREAS, Supplier provides medical transcription and editing services, and Company wishes to obtain medical transcription and editing services from
Supplier on the terms set forth herein in order to meet obligations to the Company’s customers pursuant to agreements between the Company and such
customers.
   NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained and intending to be legally bound hereby, the
parties hereby agree as follows:


                                                                         ARTICLE I
                                                                        DEFINITIONS
   Section 1.1. Definitions. In this Agreement, and in the Exhibits to this Agreement, the following terms, whether used in the singular or plural, shall have
the respective meanings set forth below:
      “Account Effective Date” shall mean the date on which any Client Facility begins to receive Services from Supplier hereunder.
      “Administrative Safeguards” are administrative actions, policies and procedures to manage the selection, development, implementation and
   maintenance of security measures to protect EPHI and to manage the conduct of Supplier’s workforce in relation to the production of that information as
   defined in 45 CFR §164.304.
       “Affiliate” means any individual or entity directly or indirectly controlling, controlled by or under common control with, a party to this Agreement.
   For purposes of this Agreement, the direct or indirect ownership of over fifty percent (50%) of the outstanding voting securities of an entity, or the right
   to receive over fifty percent (50%) of the profits or earnings of an entity, shall be deemed to constitute control.
      “Business Day Equivalent” means average daily volume for a given week, with a week defined as six (6) business days (each weekday equals one
   business day, each weekend day equals one-half of a business day, and each US holiday equals one-half business day).


***** - Denotes material that has been omitted and filed separately with the Commission
      “Customer Contractual Service Level Agreement” means the Turn Around Time, Quality Assurance levels, customer profile requirements, service
   level definitions, and any other service commitments Company provides to Company customers.
      “Client Facility” means a Company customer on the DEP which represents an organization that originates dictation and work types.
      “Commencement Date” means the date that is the earlier of the first (1st) of the month or the sixteenth (16th) of the month following the Effective Date.
      “Confidential Information” means all non-public information of a confidential or proprietary nature (whether or not specifically labeled or identified
   as “confidential”), in any form or medium, that relates to the business, products, financial condition, services or research or development of either of the
   parties to this Agreement and each of its Affiliates, suppliers, distributors, customers, independent contractors or other business relations, including all
   trade secrets, know-how, compilations of data and analyses, techniques, systems, formulae, recipes, research, records, reports, manuals, documentation,
   models, data and data bases relating thereto; inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all
   similar or related information. Notwithstanding the foregoing, Confidential Information does not include any information that: (i) is or becomes generally
   available to the public other than as a result of an unauthorized disclosure by one of the parties hereto; or (ii) was within the receiving party’s possession
   or becomes available to the receiving party, in either case, on a non-confidential basis from a source other than the furnishing party, provided that such
   source is not bound by a confidentiality agreement with the furnishing party or otherwise prohibited from transmitting the information to the receiving
   party. Confidential Information of the Company shall include, without limitation, the Company Content (as defined in Section 6.1 herein).
      “Effective Date” shall be the date first set forth above.
      “EPHI” means “Electronic Protected Health Information” as that term is defined by 45 CFR §164.513.
      “Force Majeure Event” means any cause beyond the reasonable control of the non-performing party to this Agreement including, without limitation,
   acts of God or public enemy, fires, floods, storms, tornadoes, earthquakes, riots, strikes, blackouts, telephone outage, acts of terrorism, war or war
   operations, restraints of government, delays by suppliers and/or manufacturers, governmental acts, staff unavailability due to illness or airline flight delay
   or other causes which cannot with reasonable diligence be controlled or prevented by the non-performing party.
      “HIPAA” means the Health Insurance Portability and Accountability Act of 1996.
      “Laws” means all applicable federal, municipal, state, local or foreign statutes or laws, and shall be deemed also to refer to all rules and regulations
   promulgated thereunder, by any applicable regulatory authority or otherwise, unless context requires otherwise. Any reference to a particular law or
   regulation will be interpreted to include any revision of or successor to such statute, law, rule or regulation regardless of how it is numbered or classified.
      “Line” shall mean *****.
      “PHI” means Protected Health Information as defined in 45 CFR §164.501.


***** - Denotes material that has been omitted and filed separately with the Commission
                                                                             -2-
      “Technical Safeguards” means the technology and the policy and procedures for its use that protect EPHI and control access to it as defined in 45 CFR
   §164.304.


                                                                        ARTICLE II
                                                                        SERVICES
   Section 2.1 Services. Supplier shall provide medical transcription and editing services to the Company as set forth in this Agreement (the “Services”)
beginning on the Commencement Date as defined herein. For the purpose of providing the Services, voice and/or data files will be securely imported into the
Company’s DocQment Enterprise Platform (DEP) for processing by Supplier. The Company shall provide Supplier with access to the DEP at no additional
cost. All Services performed for Company under this Agreement shall be performed solely within the DEP and no voice files, data files or reports shall be
moved outside of the DEP environment or maintained, saved, extracted or otherwise retained by Supplier or any individuals or entities who assist Supplier in
fulfilling its obligations under this Agreement in the absence of obtaining the prior written authorization of Company. Supplier shall take all reasonable
precautions to ensure that all individuals or entities that assist Supplier in fulfilling its obligations under this Agreement are aware of the aforementioned
requirement. Company will make a test site available within the DEP as necessary for Supplier to provide secure training to Supplier-employed or Supplier-
engaged medical transcriptionists and editors. Supplier shall provide Services and customer service support twenty-four (24) hours a day, seven (7) days a
week. Supplier shall comply with the Customer Contractual Service Level Agreements, which will be specific to each Client Facility implementation, and the
Service Level Definitions identified in Exhibit 6 to this Agreement. Supplier shall provide Services for all work types and respective Customer Contractual
Service Level Agreements, as assigned by Company.
   Section 2.2 Order Form. Within fifteen (15) days of the Effective Date of this Agreement, and not less than once per quarter thereafter, Company shall
propose to Supplier the projected volume in hours of dictation per Business Day Equivalent by issuing an Order Form to Supplier in the form attached hereto
as Exhibit 5. Such order will include the current volume run rate plus any additional volume. The parties must negotiate in good faith and use commercially
reasonable efforts to mutually execute the Order Form within fifteen (15) days of its issuance by Company. Company must offer Supplier not less than *****
percent ***** of all volume projections mutually agreed upon in an executed Order Form. Company’s volume commitment to Supplier may be delayed,
suspended, or reduced by Company at Company’s sole discretion should Supplier be in breach of this Agreement or should Supplier’s performance of
Services fail to meet the standards defined herein.
  Section 2.3 Turnaround Time Requirements. Supplier shall deliver transcribed or edited medical reports within the turnaround time stipulated by
Company at the time of Supplier’s receipt of the relevant voice or data file seven (7) days per week, three hundred sixty-five (365) days per year (the “TAT
Requirement”). The TAT Requirement will be calculated at the Client Facility level. *****.
   Section 2.4 Quality Assurance.
      a) Services shall be performed by Supplier in accordance with Company’s quality assurance guidelines (“QA Program”) attached hereto as Exhibit 2
   and Exhibit 3 (as updated by the Company in its sole discretion from time to time).


***** - Denotes material that has been omitted and filed separately with the Commission
                                                                             -3-
      b) Supplier may route up to ***** percent ***** of transcribed and edited reports for a Client Facility in any billing period after the Implementation
   Period as defined in Section 2.5(b) below without penalty (“QA Threshold”). *****.
      c) After the Implementation Period, Supplier shall audit and provide to the Company (and the Company reserves the right in its sole discretion to
   independently review the audit) a report within ten (10) days of the close of each billing period detailing Supplier’s compliance with Company’s QA
   Program. *****.
       d) The Company reserves the right to perform focused QA audits which will include ***** transcribed or edited reports *****. In the event Supplier’s
   accuracy rate in the sample from the focused QA audit is determined to be less than ***** percent ***** according to the QA Program, the Company
   reserves the right to take corrective action. Additionally, Supplier shall promptly correct any errors or omissions identified by the Company in the sample
   at no cost.
      e) Company may, in its sole discretion, route specific dictators, work types, or entire Client Facilities to Company’s QA resources should the
   Company identify and validate QA issues deemed to pose a risk to customer satisfaction or patient care. Such volume will be subject to the QA Credit.
   Such routing may be discontinued once issue resolution by Supplier has been confirmed by Company and/or Company’s Customer in writing. Supplier
   reserves the right to appeal any QA Credits assessed as a result of routing directed by Company under its sole discretion under this paragraph 2.4(e). The
   remedies identified in this Section 2.4(e) are in addition to the remedies described in Section 2.2 and Section 7.3 herein.
     f) The parties acknowledge that certain Client Facilities mandate in the DEP Client Profile that specific work, worktypes, or reports be routed to
   Company or Client QA resources. If applicable, such work, worktypes or reports routed to QA resources shall not be factored in calculating the QA
   Threshold or Supplier’s accuracy rating in calculating QA Invoice Reductions.
   Section 2.5 New Account Implementation Process.
        a) Account Orientation Period. The first fifteen (15) days after the first day Supplier begins to transcribe or edit limited volume of live dictated reports
   of a new Client Facility shall be deemed the “Account Orientation Period.” During the Account Orientation Period, Supplier may accept as much or as
   little volume as it is able to reasonably handle without penalty. Company shall route one-hundred percent (100%) of the transcribed or edited reports to
   the Company’s QA resources for full review and feedback utilizing DEP QASAR (Company’s QA Scoring and Reporting tool).
      b) Implementation Period. The Implementation Period is defined as a forty-five (45) day period beginning the first day that Supplier transcribes or
   edits a live dictated report following the Account Orientation Period.
         i) Turnaround Time Performance within Implementation Period. Within fifteen (15) days of onset of the Implementation Period, Supplier shall
      deliver transcribed or edited reports with an absolute compliance level no less than Company’s historical compliance level, based on Company’s
      absolute TAT compliance for the month prior to the Account Orientation Period for the respective Client Facility. Failure to meet such


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          compliance level, from day sixteen (16) through day forty-five (45) of the Implementation Period, at the Client Facility Level, shall result in
                a. a ***** percent ***** reduction in the applicable billing for each ***** percent ***** absolute TAT compliance is below Company’s
             historical compliance level but no more then ***** percentage points below the Company’s historical compliance level;
                b. a ***** percent ***** reduction in applicable billing for each ***** percent ***** absolute TAT compliance is more than *****
             percentage points below the Company’s historical compliance level but not more than ***** percentage points below the Company’s historical
             compliance level; and
                c. a ***** percent ***** reduction in applicable billing for each ***** percent ***** absolute TAT compliance is more than *****
             percentage points below the Company’s historical compliance level.
             ii) Quality Assurance within Implementation Period. During the first seven (7) days of the Implementation Period, Company shall route one-
          hundred percent (100%) of the transcribed or edited reports to the Company’s QA resources for full review and feedback utilizing DEP QASAR
          (Company’s QA Scoring and Reporting tool). Supplier shall provide report quality (text and demographics) equal to or greater than ***** on all
          transcribed and edited reports intended to be routed directly to Customer beginning day one (1) of the Implementation Period. Beginning on day eight
          (8) of the Implementation Period and continuing for the remainder of the Implementation Period, Supplier may submit transcribed and edited reports
          to Company’s QA resources for assistance in completion as needed without subjection to QA Credits defined in Section 2.4(b) above.


                                                                            ARTICLE III
                                                                              FEES
   Section 3.1 The price(s) to be paid by the Company for Services provided by the Supplier hereunder shall be as follows:
Type of
Service                                                                   Service Descriptions                                                              Price
  A       Transcription performed by Supplier’s transcriptionists for Company Customers located in the UNITED STATES OF AMERICA                             *****
  B       Transcription performed using the Company’s Automated Speech Recognition application (with editing performed by Supplier) for Company
          Customers located in the UNITED STATES OF AMERICA                                                                                                 *****
The parties agree that the pricing will be reviewed on each anniversary of the Agreement and, upon such review, the parties agree to enter into good faith
negotiations to revise the pricing, if warranted due to significant changes in market conditions.
      a) Competitive Pricing. The prices, terms, and conditions under this Agreement must be equal to or better than those offered to any other customer of
    Supplier. To the extent that


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   Supplier is not in compliance with this Section 3.1(a), Supplier must refund to Company the difference between the then-current pricing under this
   Agreement and the lower, competitive price in violation of this Section 3.1(a). Within thirty (30) days of the Company’s determination that Supplier is
   not in compliance, Supplier agrees that it will (i) provide the Company with the more favorable prices, terms, and conditions and (ii) amend this
   Agreement to reflect the change in pricing. The provisions of this clause are limited to instances of other contracts providing for reasonably similar
   volumes and revenues and characters taken in the aggregate and not taken on a prospective basis only.
    Section 3.2 Company’s Automated Speech Recognition (“ASR”) application is the DEP’s workflow technology that routes qualifying dictation through
the Company’s voice recognition engine and delivers the original audio file, along with the ASR recognized text file, to Supplier’s transcriptionist/editor.
Type B Services (as applicable above) will be utilized for qualifying reports where: (a) the individual practitioners performing the dictation and work type are
eligible for and enabled on the ASR application; and (b) the recognized text has been presented to the Supplier for editing.
   Section 3.3 Supplier assumes responsibility for all excise, sales, use and similar taxes, export or import duties and shipment, and delivery or installation
fees. When applicable, and upon mutual consent between both parties, the Supplier may invoice such items as separate line items to the Company. An
invoice will be generated by Supplier and payment is due within thirty (30) calendar days after the Company’s receipt of the invoice and any other
contractual reporting obligations of Supplier due during the applicable billing period.
   Section 3.4 In the event that any invoiced amount is disputed by the Company or any TAT Invoice Reductions, QA Invoice Reductions, or QA Credits are
applicable, the Company shall deliver written notice of such disputed amount to Supplier within thirty (30) calendar days after the date the invoice is due.
Upon receipt of written notice of a billing dispute or any invoice reductions or credits, Supplier and Company shall promptly exchange any backup or other
information reasonably necessary to support the correctness of any disputed amount. The parties shall thereafter have thirty (30) calendar days (“Invoice
Review Period”) in which to examine such information, and to the extent such information substantiates payment, reductions or credits in the applicable
invoice, such will be applied promptly. Thereafter, if Supplier and the Company are unable to reach an agreement as to any remaining disputed amount,
Supplier and the Company shall immediately enter into good faith negotiations to resolve any remaining dispute. In the event the parties are unable to resolve
such dispute within fifteen (15) calendar days after the end of the Invoice Review Period, the dispute shall be settled pursuant to the provisions of
Section 11.3(b) of this Agreement.
    Section 3.5 Operational Excellence. In the event Supplier meets all service level metrics including TAT Requirements, QA Threshold, and at least *****
percent ***** accuracy under the QA Program for all volume of reports transcribed and edited during a billing period, Supplier shall be entitled to an
additional ***** for the applicable billing period (“Operational Excellence Fee”). Supplier shall not be entitled to an Operation Excellence Fee if Supplier is
in breach of this Agreement.
    Section 3.6 Company shall provide initial technical and DEP training to Supplier at no cost at a venue within the United States or via online training to be
determined by the Company; provided, however, that Supplier shall be responsible for all travel, lodging and related expenses incidental to such training.
Any subsequent training shall be provided by the Company at rates specified by the Company. Supplier shall provide the Company with any necessary
training and technical support relative to Supplier’s business or operations to the extent such is agreed to by and between the parties, provided,


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                                                                             -6-
however, that the Company shall be responsible for all travel, lodging and related expenses incidental to such training.


                                                                 ARTICLE IV
                                                REPRESENTATIONS, WARRANTIES AND COVENANTS
   Section 4.1 Supplier represents and warrants that it is fully authorized to enter into this Agreement and that its entry into this Agreement does not violate
any contractual obligation it owes to a third party. Supplier further represents and warrants that all Services will be performed in a professional and
workmanlike manner consistent with the highest industry standards.
   Section 4.2 Supplier shall provide any operational, technical, production and quality assurance support to reasonably meet the sales and operations
requirements of the Company. However, should any such request on the part of Company require travel by individuals or entities who assist Supplier in
fulfilling its obligations under this Agreement from their home station, Company shall be responsible for all such travel, lodging and related expenses of
these individuals or entities to the extent such expenses are submitted and approved by Company prior to the expense being incurred by Supplier.
   Section 4.3 The Company and Supplier agree that they shall designate operational, sales, and administrative personnel as points of contact, and each Party
shall maintain appropriate levels of communication as required to fulfill their obligations under this Agreement.
    Section 4.4 Supplier represents and warrants that no individuals or entities shall assist Supplier in fulfilling Supplier’s obligations and duties under this
Agreement unless those individuals or entities: (a) are employees of Supplier, Supplier Affiliates and other entities identified in Exhibit 4 attached hereto
(“Covered Entities”), or employees of Covered Entities; (b) if located outside of the United States, perform all services in connection with this Agreement in
a secure site and shall not at any time perform Services remotely or outside of the Supplier’s premises or the Covered Entities’ premises designated for
performance of Services; (c) will in all cases have executed and as such present to the Company upon Company’s reasonable request such business
agreements, HIPAA confidentiality agreements, employee verifications and other similar documentation as may be required by the Company; and
(d) perform all services pursuant to this Agreement in full compliance with the terms of Company’s “International Labor Vendor Standards and Safeguards
for HIPAA Compliance” (as more fully defined and expressly limited in Section 5.6 herein) and any written modifications of such presented to Supplier
during the Term of this Agreement. Supplier further represents and warrants that it shall not subcontract or assign any Services, duties or obligations under
this Agreement in the absence of the prior written authorization from Company.
   Section 4.5 Supplier acknowledges and agrees that the Company shall be permitted to use, hire or contract with any number of third party providers in
addition to Supplier to perform transcription and editing services for Company similar to the Services contemplated by this Agreement. Supplier and any
individuals or entities who assist Supplier in fulfilling its obligations under this Agreement shall not, for the Term of this Agreement (including any
extensions of the Agreement) and for a period of one (1) year after this Agreement is terminated or expires, in the absence of obtaining the prior written
consent from Company: (a) provide Services directly or indirectly through any of its Affiliates or Covered Entities to any Client Facility or (b) hire
personnel, employees, independent contractors, or agents of any other third party providers which Company is under contract with for the provision of
transcription and editing services. Nothing in Section 4.5(b) shall limit Supplier’s right to hire personnel, employees, independent contractors, or agents of
any other third party providers which Company is under contract


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with for the provision of transcription and editing services who responds to a general solicitation for employment not targeted to such person or entity.


                                                                        ARTICLE V
                                                                    HIPAA COMPLIANCE
   Section 5.1 Supplier will:
      a) Not use or further disclose any PHI other than as permitted or required by this Agreement or as required by law;
     b) Report to the Company’s Corporate Director of Information Privacy and Security any use or disclosure of the PHI not provided for by this
   Agreement within forty-eight (48) hours of becoming aware of the unauthorized use or disclosure;
      c) Have procedures in place for mitigating, to the maximum extent practicable, any deleterious effects from the use or disclosure of PHI in a manner
   contrary to this Agreement;
      d) Ensure that any individuals or entities who assist Supplier in fulfilling its obligations under this Agreement agree, in writing, to substantially the
   same restrictions and conditions that apply to Supplier with respect to such PHI. Supplier shall obtain reasonable assurances from any such individuals or
   entities that: (i) the information being disclosed will be held confidentially and used or further disclosed only as required by law, (ii) the individuals or
   entities will use the appropriate Administrative, Physical and Technical Safeguards to prevent the unauthorized use or disclosure of the PHI and EPHI;
   and (iii) the individuals or entities will immediately notify Supplier of any instance of a breach of any of the PHI terms set forth herein;
       e) Ensure that all individuals and entities who assist Supplier in fulfilling its obligations under the Agreement are or shall be appropriately informed of
   the terms of this Agreement and are under a legal obligation, by contract or otherwise, sufficient to enable each individual and entity to fully comply with
   all provisions of this Agreement. Supplier will ensure that all individuals and entities who assist Supplier in fulfilling its obligations under this Agreement
   are educated on the Company’s privacy and security policies (as further defined in Section 5.6 herein) and that sanctions are imposed for non-compliance
   with those policies and procedures. Supplier will also ensure that all individuals and entities who assist Supplier in fulfilling its obligations under the
   Agreement have signed Protected Health Information Confidentiality Agreements;
      f) Make available to the Company such information as the Company may require to fulfill the Company’s obligations to provide access to, provide a
   copy of, and account for disclosures with respect to PHI pursuant to HIPAA and the HIPAA Regulations, including, but not limited to, 45 CFR §164.524
   and §164.528;
     g) Make the Company’s PHI available as the Company may require to fulfill the Company’s obligations to amend PHI pursuant to HIPAA and the
   HIPAA Regulations, including but not limited to 45 CFR §164.526. Supplier shall, as directed by the Company, incorporate any amendments to the
   Company’s PHI into copies of such PHI maintained by Supplier;
      h) Make available the information required to provide an accounting of disclosures in accordance with 45 CFR §164.528;


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       i) Make its internal practices, books, and records relating to the use and disclosure of PHI received from, or created or received by Supplier on behalf
   of, the Company available to the Secretary of the U.S. Department of Health and Human Services for purposes of determining the Company’s or a
   Company customer’s compliance with HIPAA;
      j) Upon termination or expiration of the Agreement, or any time during the Term of this Agreement, with respect to PHI that Supplier maintains in any
   form, recorded on any medium or stored in any storage system, including PHI retained or stored by individuals and entities who assist Supplier in
   fulfilling its obligations under the Agreement, at the Company’s direction and if feasible, return to the Company or destroy all such PHI. A senior officer
   of Supplier shall certify in writing to the Company, within thirty (30) days after termination or other expiration of the Agreement, that all PHI has been
   returned or disposed of as provided above and that Supplier no longer retains any such Protected Health Information in any form;
       k) If return or destruction of PHI is infeasible, notify the Company in writing within thirty (30) days after termination or other expiration of the
   Agreement. Such notification shall include: (i) a statement that Supplier has determined that it is infeasible to return or destroy the PHI in its possession;
   and (ii) the specific reasons for such determination. In addition to providing such notification, Supplier shall certify within such thirty (30) day period that
   it will, and will require individuals and entities who assist Supplier in fulfilling its obligations under the Agreement to, extend any and all protections,
   limitations and restrictions contained in this Agreement to any PHI retained after termination of the Agreement and to limit any further uses and/or
   disclosures to those purposes that make the return or destruction of the PHI infeasible;
      l) Implement Administrative, Physical and Technical Safeguards that reasonably and appropriately protect the confidentiality, integrity and availability
   of EPHI that Supplier creates, receives, maintains or transmits on behalf of the Company;
     m) Report to the Company’s Director of Information Privacy and Security within forty eight (48) hours, any “security incident” of which it becomes
   aware, as such term is defined in the HIPAA Security Rule;
      n) Ensure that any individuals and entities who assist Supplier in fulfilling its obligations under the Agreement to whom Supplier provides EPHI agree
   in writing, to implement reasonable and appropriate safeguards to protect EPHI as required herein; and
      o) Upon request, provide to the Company a list of names of any individuals or entities used to outsource Company’s transcription and evidence of
   written assurances from those individuals or entities (as required in 5.1 (d)) that they will agree to substantially the same restrictions and conditions that
   apply to Supplier with respect to such PHI.
   Section 5.2 Supplier, in its capacity as Business Associate (as that term is defined in the HIPAA Regulations) to the Company, shall be permitted to use
and disclose PHI in a manner that would not violate the requirements of the HIPAA Regulations as follows: (a) for the proper management and
administration of Supplier; (b) to carry out the legal responsibilities of Supplier and to fulfill Supplier’s duties and responsibilities under this Agreement
including in part disclosure to individuals and entities who assist Supplier in fulfilling its obligations under the Agreement; and (c) to provide data
aggregation services relating to the health care operations of the Company.
   Section 5.3 Notwithstanding anything to the contrary set forth herein, the Company may immediately terminate this Agreement, or any specified contracts
between the Company and Supplier, if


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                                                                             -9-
Supplier has breached a material term of this Article V. The Company may exercise said right to terminate the Agreement by providing Supplier with written
notice of its intent to terminate, specifying the material breach of the Agreement that provides the basis for termination. Such termination shall be effective
immediately or at such date as specified in the notice.
   Section 5.4 Supplier acknowledges that the Company is not conveying any right or title in the PHI to Supplier.
   Section 5.5 Notwithstanding anything to the contrary set forth herein, Supplier shall indemnify, defend and hold harmless the Company and any of the
Company’s directors, officers, employees and agents from and against any claim, liability, or expense (including reasonable attorneys’ fees), arising out of or
relating to any non-permitted use or disclosure of PHI or EPHI or other breach of this Article V by Supplier or any individuals and entities who assist
Supplier in fulfilling Supplier’s obligations under the Agreement.
    Section 5.6 Following the execution of this Agreement, Supplier shall at all times comply in all material respects with the terms of Company’s
International Labor Vendor Standard and Safeguards for HIPAA Compliance and any written modifications of such presented to Supplier during the Term of
this Agreement (the “Company HIPAA Compliance Standards”). Company shall give the Supplier five (5) business days to consider and accept any
modifications to the Company HIPAA Compliance Standards, and if Supplier does not object to such modifications within the aforementioned time period,
then such modifications shall be considered accepted by Supplier and incorporated by reference. To the extent that Supplier objects to any modification of
the Company HIPAA Compliance Standards, the parties will discuss in good faith the negotiation of mutually acceptable terms. However, should the parties
not be able to reach agreement of the modifications within ten (10) days, Company shall have the right to terminate this Agreement effective immediately
upon written notice. The Company HIPAA Compliance Standards shall be hereby incorporated by reference into this Agreement and a most current version
has been supplied by the Company along with the fully executed Agreement. Company shall be permitted at any time, at Company’s sole cost and expense,
reasonable access to and the ability to examine all information, in any form, which is necessary or appropriate (as determined by Company in its sole
discretion) to review Supplier’s compliance with the Company HIPAA Compliance Standards (an “Audit”). In the event that the Company in its sole
discretion determines as a result of an Audit that Supplier is not in material compliance with the Company HIPAA Compliance Standards (a “Negative
Finding”), and notwithstanding anything herein to the contrary, (a) Supplier shall promptly pay to the Company, as liquidated damages and not as a penalty,
(i) all costs and expenses associated with the Audit, and (ii) all costs and expenses incurred by the Supplier in connection with any liability, loss, damage
(including, without limitation, special, exemplary, punitive, consequential or incidental damages), claim or cause of action relating directly or indirectly to
the Negative Finding including, without limitation, reasonable attorney’s fees; and (b) the Agreement shall be terminated effective immediately upon written
notice from Company to Supplier and, upon such termination, Supplier shall immediately return to the Company all Confidential Information (including,
without limitation, all PHI) in its possession or in the possession of any individuals and entities who assist Supplier in fulfilling its obligations under the
Agreement.


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                                                                             -10-
                                                                   ARTICLE VI
                                                         INTELLECTUAL PROPERTY MATTERS
   Section 6.1 Any and all designs, artwork, logos, graphics, video, text, data code and other proprietary or confidential materials supplied by the Company
to Supplier in connection with this Agreement shall remain the sole and exclusive property of the Company (the “Company Content”). No copyrights,
patents, trademarks or other intellectual property rights shall be transferred from the Company to Supplier with respect to any of the Company Content.
However, the Company hereby grants to Supplier a worldwide, non-exclusive, unlimited fully paid-up license to use, copy, modify, enhance, create
derivative works of and otherwise use the Company Content in any manner reasonably necessary in connection with the performance of the Services
hereunder (the “Company Content License”).
   Section 6.2 Nothing in this Agreement shall be construed to grant to Supplier any right to or interest in any trademark, trade name, trade dress, service
mark, copyright, patent, trade secret or know-how owned or asserted to be owned by the Company (“Intellectual Property”). Supplier’s use of the Intellectual
Property shall be limited to the performance of the Services as contemplated hereby. Any other use of the Intellectual Property shall constitute an
infringement thereof and/or a violation of the Company’s rights resulting in irreparable injury to the Company and entitling the Company to immediate
injunctive relief and to any other remedies at law or equity.
   Section 6.3 Any and all designs, artwork, logos, graphics, video, text, data code and other proprietary or confidential materials supplied by the Supplier to
Company in connection with this Agreement shall remain the sole and exclusive property of the Supplier (the “Supplier Content”). No copyrights, patents,
trademarks or other intellectual property rights shall be transferred from the Supplier to Company with respect to any of the Supplier Content. However, the
Supplier hereby grants to Company a worldwide, non-exclusive, unlimited fully paid-up license to use, copy, modify, enhance, create derivative works of
and otherwise use the Supplier Content in any manner reasonably necessary in connection with the performance of the Transcription Services hereunder (the
“Supplier Content License”).
   Section 6.4 Nothing in this Agreement shall be construed to grant to Company any right to or interest in any trademark, trade name, trade dress, service
mark, copyright, patent, trade secret or know-how owned or asserted to be owned by the Supplier (“Intellectual Property”). Company’s use of the Intellectual
Property shall be limited to the performance of the Transcription Services as contemplated hereby. Any other use of the Intellectual Property shall constitute
an infringement thereof and/or a violation of the Supplier’s rights resulting in irreparable injury to the Supplier and entitling the Supplier to immediate
injunctive relief and to any other remedies at law or equity.
   Section 6.5 Application Service Provider License.
      a) Through the use of software applications (the “Applications”) hosted on the Company’s DocQment Enterprise Platform and made available by
   means of the Internet, Supplier shall have the ability to access the DocQment Enterprise Platform for the purpose of providing the Services described
   herein. Subject to the terms and conditions set forth herein, the Company hereby grants to Supplier for the Term of this Agreement a non-transferable,
   non-exclusive limited right of access to, and use of, the Applications solely for the purposes of performing the Services hereunder. From time to time, the
   Company may require the agreement to and acknowledgement of an end-user license, terms and conditions and/or other agreements prior to Supplier
   accessing the Applications.


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      b) With respect to its use of the Applications, Supplier, at its own cost and expense, shall: (i) not permit any individual or entity, other than authorized
   individuals and entities under this Agreement, to use or gain access to the Applications; (ii) provide reasonable security devices to protect against
   unauthorized usage; (iii) not adapt the Applications in any way or use it to create a derivative work (other than reports that are transcribed or edited using
   the Applications); and (iv) not remove, obscure, hinder or alter Company’s (or any other third party’s) proprietary notices, trademarks, or other
   proprietary rights notices affixed to or contained in the Applications.
      c) The Applications are the exclusive property of the Company and/or the Company’s licensors, which shall retain all right, title and interest in and to
   the Applications, including, without limitation, the intellectual property rights and any other rights under United States and international copyright,
   patent, trademark, trade secret or other law. Supplier may not use the Applications for the benefit of any third parties or allow access to the Applications
   by any third party, except as otherwise explicitly authorized hereunder.
      d) Supplier has developed and may continue to develop proprietary software tools (the “Tools”) to enhance the productivity of its workforce, and/or
   better meet HIPAA compliance requirements. Supplier may at its sole discretion share these Tools with the Company. Should the Company use these
   Tools, either with or without compensation to the Supplier, the Company warrants it will not share these Tools with any third party without the specific
   written permission of the Supplier.


                                                                        ARTICLE VII
                                                                   TERM AND TERMINATION
  Section 7.1 Term. This Agreement shall commence on the Commencement Date and terminate three (3) years from the Commencement Date (the
“Expiration Date”), unless sooner terminated by the Company in accordance with this Article VII.
   Section 7.2 Termination by the Company or Supplier. Both the Company and the Supplier shall have the right to terminate this Agreement with or without
cause at any time upon six (6) months’ prior notice to the other party to the Agreement.
    Section 7.3 Termination for Material Default. The Company may terminate this Agreement effective immediately upon written notice if Supplier:
(a) breaches any material obligation under this Agreement and fails to cure such breach within thirty (30) days written notice to Supplier specifying in
reasonable detail the nature of the breach; or (b) (i) files a voluntary petition for bankruptcy, (ii) is adjudicated bankrupt, (iii) has a court assume jurisdiction
of its assets under a federal reorganization act, (iv) becomes insolvent or suspends business, or (v) makes an assignment of its assets for the benefit of its
creditors.
   The Supplier may terminate this Agreement effective immediately upon written notice if Supplier: (a) breaches any material obligation under this
Agreement, including, but not limited to, failure by the Company timely to pay all non-disputed invoices, and fails to cure such breach within thirty (30) days
written notice to Company specifying in reasonable detail the nature of the breach; or (b) (i) files a voluntary petition for bankruptcy, (ii) is adjudicated
bankrupt, (iii) has a court assume jurisdiction of its assets under a federal reorganization act, (iv) becomes insolvent or suspends business, or (v) makes an
assignment of its assets for the benefit of its creditors.


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   Section 7.4 Effect of Termination. Termination of this Agreement shall not relieve the parties of any obligation accruing prior to such termination, and the
provisions of this Section 7.4 and Articles IV, V, VI, VII, IX, X and XI hereof shall survive the termination of this Agreement. Any termination of this
Agreement shall be without prejudice to the rights of either party against the other accrued or accruing under this Agreement prior to termination.


                                                                    ARTICLE VIII
                                                          INDEMNIFICATION AND INSURANCE
   Section 8.1 Indemnification Obligations.
      a) Supplier hereby indemnifies and holds the Company harmless from and against any and all liability, loss, damage, claim or cause of action, and
   expenses connected therewith, including, without limitation, reasonable attorney’s fees and expenses, for bodily injury or damage to real or tangible
   personal property, to the extent caused directly or indirectly by the Supplier, its employees or agents.
      b) Company hereby indemnifies and holds the Supplier harmless from and against any and all liability, loss, damage, claim or cause of action, and
   expenses connected therewith, including, without limitation, reasonable attorney’s fees and expenses, for bodily injury or damage to real or tangible
   personal property, to the extent caused directly or indirectly by the Company, its employees or agents.
   Section 8.2 Insurance. Supplier represents and warrants that during the Term of this Agreement, it shall maintain the types and amounts of insurance set
forth below:
       a) General liability insurance, including contractual liability coverage of all of Supplier’s obligations under this Agreement and products
   liability/completed operations coverage with a minimum limit equal to the minimum limit currently maintained by Supplier on the date hereof.
      b) Such insurance shall be evidenced by a certificate of insurance which shall provide that the Company shall receive thirty (30) days’ prior written
   notice of cancellation or material change of such policy.


                                                                  ARTICLE IX
                                                     CONFIDENTIALITY AND NONSOLICITATION
   Section 9.1 Confidentiality. Supplier and the Company acknowledge that Confidential Information is to be considered highly confidential. Each party
shall use Confidential Information disclosed to it by or on behalf of the other party only for the purposes contemplated by this Agreement and shall not
disclose such Confidential Information to any third party without the prior written consent of the disclosing party. The foregoing obligations shall survive the
expiration or termination of this Agreement for a period of ten (10) years. These obligations shall not apply to Confidential Information that:


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                                                                             -13-
      a) Is known by the receiving party at the time of its receipt, and not through a prior disclosure by the disclosing party, as documented by business
   records;
      b) Is published at the time of disclosure, or thereafter becomes published or otherwise part of the public domain without breach of this Agreement by
   the receiving party;
      c) Is subsequently disclosed to the receiving party by a third party who has the right to make such disclosure;
      d) Is developed by the receiving party independently of Confidential Information or other information received from the disclosing party and such
   independent development is properly documented by the receiving party; or
      e) Is required to be disclosed by law or court order, provided that notice is promptly delivered to the other party in order to provide an opportunity to
   seek a protective order or other similar order with respect to such Confidential Information and thereafter discloses only the minimum information
   required to be disclosed in order to comply with the request, whether or not a protective order or other similar order is obtained by the other party.
Nothing herein shall be interpreted to prohibit the Company from publishing the results of its studies in accordance with industry practices.
    Section 9.2 No Publicity. A party may not use the name of the other party in any publicity or advertising and may not issue a press release or otherwise
publicize or disclose the existence of this Agreement, any information related to this Agreement, or the terms or conditions hereof, without the prior written
consent of the other party. Nothing in the foregoing, however, shall prohibit a party from making such disclosures as may be necessary or reasonably
appropriate in order to comply with applicable federal, state or provincial securities laws or any rule or regulation of any nationally recognized securities
exchange; in such event, however, the disclosing party shall use good faith efforts to consult with the other party prior to such disclosure and, where
applicable, shall request confidential treatment to the extent available. However, the Supplier may disclose to the entities set forth in Exhibit 4, that Supplier
is performing work on behalf of the Company. Any Supplier agreements with such entities shall include restrictions materially consistent with those set forth
in this Section restricting such entities from further disclosing their relationship with Company.
   Section 9.3 Non-Solicitation. So long as this Agreement is in effect and for a period of twelve (12) months thereafter, Supplier and Company shall not
solicit, hire or engage any person who during the Term of this Agreement is or has been an employee, consultant, or transcriptionist of the other party.


                                                                          ARTICLE X
                                                                          RECORDS
   Section 10.1 Supplier shall maintain records with respect to the performance of its obligations under this Agreement. All such records shall be available
for inspection, audit and copying by the Company and its representatives and agents, including the Company’s auditors, at the Company’s cost and expense
upon reasonable request during normal business hours. All such records shall be maintained during the Term of this Agreement, or such longer period as may
be required by relevant Law.


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                                                                             -14-
                                                                         ARTICLE XI
                                                                       MISCELLANEOUS
   Section 11.1 Assignment, Subcontracting. Notwithstanding anything to the contrary contained herein, neither this Agreement nor any or all of the rights
and obligations of a party hereunder shall be assigned, delegated, sold, transferred, sublicensed, subcontracted (except as otherwise provided herein) or
otherwise disposed of, by operation of law or otherwise, to any third party without the prior written consent of the other party, and any attempted assignment,
delegation, sale, transfer, sublicense, subcontract or other disposition, by operation of law or otherwise, of this Agreement or of any rights or obligations
hereunder contrary to this Section shall be a material breach of this Agreement by the attempting party, and shall be void and without force or effect;
provided, however, that the Company may, without such consent, assign the Agreement and its rights and obligations hereunder: (a) to an Affiliate, (b) in
connection with the transfer or sale of all or substantially all of its assets related to, or (c) in the event of its merger or consolidation or change in control or
similar transaction.
   Section 11.2 Force Majeure. The parties shall be excused from performing hereunder in the event of any Force Majeure Event, provided that the non-
performing Party cannot reasonably circumvent the delay through the use of commercially reasonable alternate sources, workaround plans or other means. In
such event the non-performing party shall be excused from further performance or observance of the obligation(s) so affected for as long as such
circumstances prevail and such party continues to use commercially reasonable efforts to recommence performance or observance whenever and to whatever
extent possible without delay. Any Party so prevented, hindered or delayed in its performance shall immediately notify the Party to whom performance is due
by telephone (to be confirmed in writing within five (5) days of the inception of such delay) and reasonably describe the circumstances of the Force Majeure
Event.
   Section 11.3 Injunctive Relief; Arbitration; and Governing Law.
      a) Injunctive Relief. The parties to this Agreement acknowledge and agree that remedies at law are inadequate in the event of any breach or threatened
   breach by any party of its agreements and obligations as set forth in Section 4.5, Article VI, and Article IX of this Agreement. Notwithstanding
   Section 11.3(b), in addition to any other remedy which may be available, the non-breaching party shall be entitled to petition for injunctive and/or other
   equitable relief restraining the breach or threatened breach of the provisions and/or obligations in Section 4.5, Article VI, and Article IX of this
   Agreement.
      b) Arbitration; Governing Law. Except as set forth in Section 11.3(a), any controversy or claim arising out of or relating to this Agreement, or the
   breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules,
   and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. This Agreement shall be governed by
   and construed, and the legal relations between the parties shall be determined in accordance with the laws of the State of New Jersey, excluding
   application of any conflict of laws principles, and the parties irrevocably waive all rights to trial by jury for any litigation between them related to this
   Agreement. Client hereby consents to the jurisdiction of any state or federal court of competent jurisdiction in the State of New Jersey for any litigation
   between the parties related to this Agreement.
   Section 11.4 Waiver. Any delay or failure in enforcing a party’s rights under this Agreement or any waiver as to a particular default or other matter shall
not constitute a waiver of such party’s rights


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                                                                             -15-
to the future enforcement of its rights under this Agreement, nor operate to bar the exercise or enforcement thereof at any time or times thereafter, excepting
only as to an express written and signed waiver as to a particular matter for a particular period of time.
   Section 11.5 Independent Relationship. The relationship established between Company and Supplier under this Agreement is that of independent
contractors and nothing contained in this Agreement will be deemed to establish or otherwise create a relationship of principal and agent, franchisor and
franchisee, joint venturers or partnership between them. Supplier’s employees are not and shall not be deemed to be employees of the Company. Supplier
shall be solely responsible for the payment of all compensation to its employees, including provisions for employment taxes, workmen’s compensation and
any similar taxes associated with employment of Supplier’s personnel. Neither party nor any of its agents or employees will have any right or authority to
assume or create any obligations of any kind, whether express or implied, on behalf of the other party. All financial obligations associated with each
respective party’s business are the sole responsibility of such party.
   Section 11.6 Entire Agreement; Amendment. This Agreement including any Exhibits and Schedules hereto, sets forth the complete and final agreement
and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the parties hereto and supersedes and
terminates all prior agreements, writings and understandings between the parties with respect to the subject matter hereof. The parties agree that there are no
covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the parties other than as are set
forth herein and therein. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the parties unless reduced to
writing and signed by an authorized officer of each party.
   Section 11.7 Notices. Each notice required or permitted to be given or sent under this Agreement shall be given by facsimile transmission (with
confirmation copy by registered first-class mail), by registered or overnight courier (return receipt requested), or by electronic mail (with confirmation of
receipt) to the parties at the contact information indicated below.
           If to Supplier:
           CBay Systems and Services, Inc
           2661 Riva Road, Bldg 800
           Annapolis, MD 21401
           Attention: Managing Director
           with a copy to:


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          If to the Company:
          MedQuist Transcriptions, Ltd.
          1000 Bishops Gate Boulevard, Suite 300
          Mt. Laurel, NJ 08054-4632
          Facsimile No.: 856.206.4215
          Attention: President
          with a copy to:
          MedQuist Transcriptions, Ltd.
          1000 Bishops Gate Boulevard, Suite 300
          Mt. Laurel, NJ 08054-4632
          Facsimile No.: 856.206.4215
          Attention: Chief Legal Officer
Any such notice shall be deemed to have been received on the earlier of the date actually received or the date five (5) days after the same was posted or sent.
Either party may change its address or its facsimile number by giving the other party written notice, delivered in accordance with this section.
   Section 11.8 Severability. If any provision of this Agreement is declared invalid or unenforceable by a court having competent jurisdiction, it is mutually
agreed that this Agreement shall continue in effect except for the part declared invalid or unenforceable by order of such court. The parties shall consult and
use their best efforts to agree upon a valid and enforceable provision which shall be a reasonable substitute for such invalid or unenforceable provision in
light of the intent of this Agreement.
   Section 11.9 Counterparts. This Agreement shall become binding when any one or more counterparts hereof, individually or taken together, have been
executed on behalf of each of the parties hereto. This Agreement may be executed in any number of counterparts and by facsimile, each of which shall be an
original as against any party whose signature appears thereon, but all of which taken together shall constitute but one and the same instrument.


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    IN WITNESS WHEREOF, the Company and Supplier have caused this Agreement to be executed by their duly authorized officers as of the day and year
first above written.
CBAY SYSTEM & SERVICES, INC.                                 MEDQUIST TRANSCRIPTIONS, LTD.
By:     /s/ Jason Kolinoski                                  By:    /s/ Peter Masanotti
Name: Jason Kolinoski                                        Name: Peter Masanotti
Title: Chief Operating Officer                               Title: President & CEO
Date: April 3, 2009                                          Date: April 3, 2009


                           [Signature page to Services Agreement by and between MedQuist Transcriptions, Ltd. and Supplier]


                                              [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


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                                                                             -18-
                                                                      EXHIBIT 1




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                                                                           EXHIBIT 2
                                                                      QUALITY REVIEW
AMOUNT: Supplier shall perform a quality assurance review each billing period of ***** percent ***** of production randomly chosen by Company for
each Client Facility in the DocQment Enterprise Platform. Results are to be reported to Company no later than ten (10) days following the close of each
billing period.
CRITERIA: Random samples encompassing all report types with voice comparison.
ERRORS: Attached hereto as Exhibit 3 is the Quality Score Sheet listing all error types.
STANDARD: Company’s acceptable quality standard is > *****.


                                                                     QUALITY REPORTS
The following report is an illustration of Company’s continuous quality assurance score sheet. Company utilizes a team of QA auditors to systematically
audit documents against the dictated voice and disseminate the findings.
Calculation formula: Total error points divided by total payroll lines = total error fraction. 1.0 minus total error fraction = accuracy fraction; multiply by 100
for percentage.


                                                 CLASSIFICATION OF ERRORS AND ERROR VALUES
The Association for Healthcare Documentation Integrity (“AHDI”) recommends specific error categories, error values, and conversion factors for error
values in line length situations. Following the recommendations creates a true definition of quality in the medical transcription industry and allows for proper
comparative assessments. AHDI recommends that the following error classifications be applied to these error types relative to their impact on patient care.
             Critical Errors: Defined as those that impact patient safety. Specifically, AHDI identifies the following: medical word misuse, incorrect drug or
             drug dosage, incorrect lab values and test names, omitted dictation, patient identification error, including incorrect choice of the patient name or
             specific patient visit.
             Major Errors: Defined as those that impact document integrity. Specifically, AHDI identifies the following: medical word misspelling, English
             word misspelling, incorrect verbiage, failure to flag a document, abuse of flagging documents, protocol failures.
             Minor Errors: Specifically, AHDI identifies the following: grammar, punctuation, typographical errors, formatting errors.
             Dictation Flaws: Specifically, AHDI identifies the following: critical, major, and minor as defined by patient safety and document integrity
             impact. It is crucially important to realize the impact that auditory quality of the dictation has on the transcribed document. Recognizing and
             documenting occurrences allows for identification of flaws and an opportunity for assisting dictators in their quest for patient safety and
             document integrity.


                                 DEFINITION OF DICTATED OR TRANSCRIBED ERRORS AND ERROR VALUES
CRITICAL ERRORS (PATIENT SAFETY RISK): A critical error is given the highest negative point value because of the seriousness of its
consequences. With > ***** percent accuracy as a benchmark, a report containing a critical error should not pass QA. A critical error should be reserved for
only those errors that directly compromise patient safety.


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      Error #1: Medical Word Misuse — 3.0 pts
This category includes wrong drug or drug doses, wrong lab values, and/or wrong test names that directly compromise patient safety. For instance, a wrong
disease could be incorrectly attributed to a patient and then carried in the medical record for life, causing incorrect treatment and incorrect medical decisions,
as well as inaccurate billing of the patient’s accounts. Similarly, a wrong lab value could result in a patient not receiving treatment or further testing when
such treatment or testing is warranted. If a misuse is repeated throughout the entire report, it should be counted as only one error in the report, since it reflects
one wrong piece of information on the part of the transcriptionist. This category also includes improper use of abbreviations, acronyms, and symbols that are
not to be used according to the client profile.
       Error #2: Omitted Dictation — 3.0 pts
This category covers dictated information of a critical nature that was either carelessly omitted by the transcriptionist or deliberately omitted because the
transcriptionist did not understand what was being said. Examples include omission of an entire laboratory finding because the value itself could not be
heard, deleting negative or normal findings, or omitting entire sentences because the main part of it could not be understood. Creative transcription is also
included in this category. This refers to “making up” dictation (words and/or phrases) when what is dictated is not clear. Consideration should be given for
difficult authors or dictation of poor quality.
Research, assistance from others, flagging the report, and leaving a blank constitute appropriate actions rather than omission. This category does not apply to
missing words that are inconsequential, such as articles or conjunctions. It also does not apply to what appear to be words missed (adjectives, adverbs) from
typing too fast, unless they have serious consequences to the medical meaning. In these types of situations, the error would be downgraded to major or minor,
depending on the consequence to the document. Clipped sentences are allowed if they reflect the dictator’s style. This category is meant to apply to
purposeful and/or serious omissions and/or fabrication(s).
      Error #3: Patient Identification Error — 3.0 pts
A patient identification error is one in which the wrong patient information is tied to the dictation. For example, a report that is dictated for 50-year-old John
E. Doe (male) but is attributed to a chart for 20-year-old Joni Do (female). As with the other critical errors in this category, the error must directly
compromise patient safety in order to be assessed this error weight (see error #12).
      Error #4: Upgrade of Major or Minor error due to patient safety impact — 3.0 pts
This category is for major or minor errors from the categories below that directly compromise patient safety. For example, “failure to flag” is considered a
major error worthy of 1.0 pt., but a right/left discrepancy that poses a risk management issue and is not flagged by the transcriptionist could be upgraded to a
critical error.
MAJOR ERRORS (DOCUMENT INTEGRITY RISK): A major error carries a higher negative point value because of the impact it has on the integrity
of the document. Major errors in this category do not pose a risk to patient safety. A major error that impacts both the integrity of the document and patient
safety should be upgraded to a critical error.
       Error #5: Abuse of Flagging/Blanks — 2.0 pts
This category covers blanks left that, through research, the transcriptionist could have resolved. This is sometimes referred to as “tossing it over the fence” —
when a transcriptionist clearly chooses to leave a blank rather than research a term. The purpose of this category is to limit abuse of blanks for the sake of
speed, which reflects a lazy attitude or desire for higher line counts in a production environment. Obviously, students and entry-level transcriptionists will
leave more blanks in the beginning and this is preferred to guessing. This error should be used only in those cases where the blank or flag is truly considered
abusive.
      Error #6: Medical Word Misspelling — 1.5 pts
In addition to any medical words or medications that are misspelled, this category includes the use of an incorrect form of a medical word. An example
would be “lingula” instead of “lingular” or “femur” instead of “femoral.” This also includes failure to use combining forms, and incorrect entries from text
expanders. For instance, an author


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dictates that the patient is to see physical therapy (dictated as PT) for follow-up; transcriptionist uses “pt” to expand for “patient” and the final copy of the
report reads, “the patient is to see patient for follow-up.” (However, if an incorrect expansion results in a critical error, such as incorrect diagnosis, this would
be upgraded to a critical error.)
       Error #7: English Word Misspelling — 1.5 pts
In addition to misspelling English words, this category refers to misuse errors, which have more serious consequences, such as nouns, verbs, or important
qualifying adjectives and adverbs (e.g., elicit/illicit, dissent/descent, affect/effect, apprise/appraise). These errors directly impact the integrity of the report.
For instance: “the risks and complications were given allowed (aloud).”
      Error #8: Incorrect Verbiage — 1.5 pts
This category refers to dictation that is transcribed differently than dictated, but without significant impact on the medical meaning. This includes
inappropriate/excessive editing. Care should be taken to remain true to the dictator’s style while still maintaining accuracy. Therefore, this does not pertain to
changes made for the purpose of correcting grammar or word usage. This also differs from creative transcription (see error #2).
      Error #9: Failure to Flag — 1.0 pt
This category pertains to times when a report should be flagged for clarification and the transcriptionist fails to do so. Examples of failure to flag include
gender, age or right-vs.-left discrepancies that should have been recognized by the transcriptionist and flagged but were not.
      Error #10: Protocol Failure — 1.0 pt
A protocol failure is one in which a transcriptionist fails to follow a specific protocol or facility preference. For example, a facility may require the date of
service be filled in on each document, and the transcriptionist fails to include this.
      Error #11: Upgrade of Minor Error due to impact on integrity of document — 1.5 pts
This category is used to upgrade a minor error that compromises the integrity of the document. For instance, a physician dictates an inflammatory or
derogatory remark about the patient that puts the physician at risk for a lawsuit, and the transcriptionist fails to edit these remarks.
      Error #12: Downgrade of Critical Error due to less than critical impact — 1.5 pts
This category is used to downgrade a critical error that does not compromise patient safety but still impacts the integrity of the document. An example would
be using the wrong medical word (medical word misuse) without directly affecting patient safety (stating there is a family history of “corporal” tunnel
syndrome, for example).
      Error #13: Improper Encounter — 1.5 pts
This category is used when the correct patient is chosen, but the wrong visit or encounter is selected.
MINOR ERRORS: A minor error is meant to point out recommended areas of improvement for the transcriptionist. These errors do not compromise patient
safety or the integrity of the report. The primary goal of a minor error designation is instructional.
      Error #14: Grammar Error — 0.5 pt
Grammar errors may include incorrect subject-verb agreement, incorrect use of medical abbreviations, use of the wrong part of speech, incorrect use of
singular and plural nouns, use of the wrong verb (e.g., laying/lying) or verb tense, failure to correct redundancies and inconsistencies, and failure to edit slang
or inflammatory remarks when appropriate.
       Error #15: Miscellaneous/Other — 0.5 pt
This category covers errors that do not fit into the other categories. For instance, improper capitalization, addition of words that were not dictated but that do
not significantly affect the meaning of the sentence or report, and errors of questionable cause when the recording quality is poor or a foreign accent is at
fault. This category also covers formatting errors.


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      Error #16: Downgrade of Error due to minimal impact — 0.25 pt
This category can be used to downgrade any error that has little to no impact on the integrity of the report and does not compromise patient safety. An
example would be omission of the word “the” in “The patient was in acute distress.”
      Error #17: Punctuation and Typos — 0.0 pt
Punctuation errors may include misplaced commas that do not alter the meaning of the sentence and the improper use of colons or semicolons, quotation
marks, and misplaced periods. This category also includes typographical errors that do not significantly affect the meaning of the dictation.
NEGATIVE DICTATOR EFFECT ERRORS: These errors have no point values but are used to recognize a transcriptionist’s error or difficulties in the
context of poor dictation.
      Error #18: Critical Negative Dictator Effect — 0.0 pt
This category would be used to point out an error of a critical nature that was clearly attributed to poor dictation. For example, omitted dictation based on
difficulty interpreting a very heavy accent. Another example would be incorrect patient identification due to inaccurate or insufficient information given by
the dictator. This error may be utilized whether or not the transcriptionist flagged the document, since the purpose is to determine the difficulty encountered
in producing an accurate document.
       Error #19: Major Negative Dictator Effect — 0.0 pt
This category would be used to address a documentation error in any of the major categories that was obviously incurred because of poor dictation quality or
inaccurate information given by the dictator. Once again, this error may be utilized whether or not the transcriptionist flagged the document, since the
purpose is to determine the difficulties in producing an accurate document.
      Error #20: Minor Negative Dictator Effect — 0.0 pt
This category would be used to draw attention to a minor flaw caused by poor dictation. For example, the dictator has used the wrong form of a verb, which
may or may not have been corrected by the transcriptionist.


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                                                                             -24-
                                                                      EXHIBIT 3
                                                               QUALITY SCORE SHEET


                                                               CUSTOMER QA AUDIT
CUSTOMER:                                                        REVIEW PERIOD:
                                             Type of Error                                Points   Total Errors   Total Points
Medical Word Misuse                                                                       3.00          0              0
Downgrade of Critical Error due to less than critical impact                              1.50          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Omitted Dictation                                                                         3.00          0              0
Downgrade of Critical Error due to less than critical impact                              1.50          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Patient Identification Error                                                              3.00          0              0
Downgrade of Critical Error due to less than critical impact                              1.50          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Abuse of Flagging/Blanks                                                                  2.00          0              0
Upgrade of Major — Patient Safety Impact                                                  3.00          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Medical Word Misspelling                                                                  1.50          0              0
Upgrade of Major — Patient Safety Impact                                                  3.00          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
English Word Misspelling                                                                  1.50          0              0
Upgrade of Major — Patient Safety Impact                                                  3.00          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Incorrect Verbiage                                                                        1.50          0              0
Upgrade of Major — Patient Safety Impact                                                  3.00          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Failure to Flag                                                                           1.00          0              0
Upgrade of Major — Patient Safety Impact                                                  3.00          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Protocol Failure                                                                          1.00          0              0
Upgrade of Major — Patient Safety Impact                                                  3.00          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Improper Encounter                                                                        1.50          0              0
Upgrade of Major — Patient Safety Impact                                                  3.00          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Grammar Error                                                                             0.50          0              0
Upgrade of Minor — Patient Safety Impact                                                  3.00          0              0


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                                           Type of Error                                  Points   Total Errors   Total Points
Upgrade of Minor — Integrity of Document                                                  1.50          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Miscellaneous/Other                                                                       0.50          0              0
Upgrade of Minor — Patient Safety Impact                                                  3.00          0              0
Upgrade of Minor — Integrity of Document                                                  1.50          0              0
Downgrade Error — Minimal Impact                                                          0.25          0              0
Punctuation/Typos                                                                         0.00          0              0
Upgrade of Minor — Patient Safety Impact                                                  3.00          0              0
Upgrade of Minor — Integrity of Document                                                  1.50          0              0
Critical Negative Dictator Effect                                                         0.00          0              0
Major Negative Dictator Effect                                                            0.00          0              0
Minor Negative Dictator Effect                                                            0.00          0              0
Total MedQuist Errors                                                                                   0              0


                                                              Summary
Total Reports Reviewed                                                                                                 0
Total Lines Reviewed                                                                                                   0
Line Error Rate = Total MedQuist Errors/Total Lines                                                                 0.00
MedQuist Line Error Percent = MedQuist Line Error Rate x 100%                                                       0.00%
MedQuist Line Accuracy Rate = 100% — MedQuist Line Error Percent                                                  100.00%


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                                                                      EXHIBIT 4
                                                                 COVERED ENTITIES
*****


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                                                                        EXHIBIT 5
                                                                      ORDER FORM
The following Order Form is issued pursuant to the terms of Section 2.2 in the Transcription Services Agreement (the “Agreement”) executed by and
between MEDQUIST TRANSCRIPTIONS, LTD. (the “Company”) and CBAY SYSTEMS & SERVICES, INC. (“Supplier”) and effective as of
            , 2009:
Period Covered:
Company Customers Cancelled (if applicable):
Volume Projection in Hours of Dictation Per Day (existing/new), by SLA(*):
(e.g.)                              Hours, by SLA                                           [4-12]                   [12]               [12+]
                                    100                                                     12                       50                 38



* could also be represented in a detailed schedule by Client Facility, by SLA or worktype
Additional Comments/Discussion (if applicable):
CBAY SYSTEMS & SERVICES, INC.                                  MEDQUIST TRANSCRIPTIONS, LTD.
By:                                                            By:
Name:                                                          Name:
Title:                                                         Title:
Date:                                                          Date:


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                                                                         EXHIBIT 6
                                                               SERVICE LEVEL DEFINITION
                                           Time to
           Severity Levels               Acknowledge                                           Time To Resolution
            Severity 1                   30 minutes                                              4 Hours
            Severity 2                     4 Hours                                              24 Hours
            Severity 3                     8 Hours                                              72 Hours
            Severity 4                    24 Hours                                         168 hours (7 days)
            Severity 5                    24 hours                            Determined based on issue and team assignment
Time to Acknowledge: Calculated from the time the ticket is opened to the time when the assignee acknowledges the ticket in QCare and makes the initial
contact with the customer.
Time to Resolution: Calculated from the time the ticket is opened to the time the ticket is either closed or placed in another QCare status.
Severity                     Type                                                              Description
                                       Technical: Critical impact problem with system down, business outage, or immediate work stoppage that threatens
                                       current and future production.
   1                Critical Impact    Operational: Critical customer issues that put the customer at risk for loss of business due to ongoing, unresolved
                                       service issues or issues previously communicated, but not recorded or addressed in a timely manner.
                                       Technical: High-impact problem where production is proceeding, but in a significantly impaired fashion; a problem
                                       with a time-sensitive issue important to long-term productivity that is not causing immediate work stoppage.
   2                  High Impact      Operational: High-impact issues with document delivery, turn around, quality, changing work types on a document
                                       or other service related issues that have a major customer impact. This could also include payroll related issues or
                                       contract issues.
                                       Technical: Moderate-impact problem that is an important issue, but does not have significant current productivity
                                       impact.
   3               Moderate Impact     Operational: Moderate-impact problems that are important, but not a major issue that can be resolved in a 24 hour
                                       period. This would include issues with document delivery, turn around, quality, edits, or other service related issues
                                       that have a moderate customer impact.
                                       Technical: Minor inconvenience requiring ultimate, but not immediate resolution.
   4                 Minor Impact      Operational: Minor customer inconvenience impacting some reports, but not all. This would include items such as
                                       dual signature issues, adding a physician standard, minor edit, or other minor service related issues.
   5                Enhancement,       Requested system or Interface improvements to features or functions by individual client, Product Enhancement,
                   Product Defects,    Product Defects.
                   Work Requests


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                                                                                                                                              EXHIBIT 10.2
                                                             Corporate Offices
                                                             1000 Bishops Gate Blvd, Suite 300
                                                             Mount Laurel, NJ 08054-4632


                                                                     February 26, 2009
Mr. Alan J. Gold
c/o MedQuist
1000 Bishops Gate Blvd.
Mt. Laurel, NJ 08057
Dear Alan:
   On behalf of MedQuist Inc. (the “Company”), this Agreement describes the terms of your new employment as the Company’s Senior Vice President of
Sales and Marketing, which must commence on a date mutually agreed to in writing by you and the Company (the “Employment Commencement Date”).
For purposes of this Agreement, you are referred to as the “Employee.” Other capitalized terms used in this Agreement have the meanings defined in
Section 7, below.
   1. Term. The Company shall employ Employee hereunder for a three (3) year term commencing on the Employment Commencement Date hereof (the
“Term”), which Term will be automatically extended for additional one (1) year periods beginning on the third anniversary of the Employment
Commencement Date and upon each subsequent anniversary thereof unless either party provides the other party with at least ninety (90) days prior written
notice of its intention not to renew this Agreement unless terminated earlier pursuant to Sections 3 or 5 of this Agreement.
   2. Compensation. As consideration for all services rendered by Employee to the Company and for the Covenants contained herein, Employee will be
entitled to:
      a. base salary at an annual rate of $240,000, subject to review and adjustment annually during the Term;
       b. participate in MedQuist’s Management Bonus Plan for 2009. Your target bonus in this plan will be 45% of your base salary for 2009 and following
years; provided, however that your bonus for 2009 shall be prorated based upon your Employment Commencement Date. The target bonus is the payment
amount that the Employee shall be eligible to receive if the Company and Employee both attain the pre-established bonus plan target objectives. The actual
bonus award may be higher or lower than the target bonus amount based upon achievement of the objectives by Employee and the Company. Management
Bonus Plan target objectives shall be developed on or before February 28th of each year of the Management Bonus Plan. Payment of $45,000 of your annual
target bonus for the year ending December 31, 2009 is guaranteed;
      c. participate in the same employee benefit plans available generally to other senior executive employees of the Company, subject to the terms of those
plans (as the same may be modified, amended or terminated from time to time); (benefits information package enclosed);
      d. if Employee’s employment is terminated by the Company without Cause, the severance pay and benefits described below in Section 5.
  3. Long Term Incentives. In addition, from time to time, the Board may review the performance of the Company and Employee and, in its sole discretion,
may provide long term incentive to Employee to reward extraordinary performance and/or to encourage Employee’s future efforts on behalf of the Company.
The grant of any such long term incentives will be subject to the terms of the Company’s long term incentive plan, if any, and will be evidenced by a separate
award agreement by and between the Company and Employee.
   4. Covenants.
     a. Non-Solicitation. While employed by the Company and for the one (1) year period following the cessation of that employment for any reason (and
without regard to whether such cessation was initiated by Employee or the Company), Employee will not do any of the following without the prior written
consent of the Company:
          (1) solicit, entice or induce, either directly or indirectly, any person, firm or corporation who or which is a client or customer of the Company or any
of its subsidiaries to (i) end, modify or not renew its commercial relationship with the Company or any of its subsidiaries or (ii) become a client or customer
of any other person, firm or corporation that is in conflict or competition with business activities carried on by the Company, or being definitively planned by
the Company at the time of termination of Employee’s employment;
          (2) influence or attempt to influence, either directly or indirectly, any customer of the Company or its subsidiaries to terminate or modify any
written or oral agreement or course of dealing with the Company or its subsidiaries (except in Employee’s capacity as an employee of the Company); or
          (3) influence or attempt to influence, either directly or indirectly, any person to terminate or modify any employment, consulting, agency,
distributorship, licensing or other similar relationship or arrangement with the Company or its subsidiaries (except in Employee’s capacity as an employee of
the Company).
      b. Non-Disclosure. Employee shall not use for Employee’s personal benefit, or disclose, communicate or divulge to, or use for the direct or indirect
benefit of any person, firm, association or company other than Company, any “Confidential Information,” which term shall mean any information regarding
the business methods, business policies, policies, procedures, techniques, research or development projects or results, historical or projected financial
information, budgets, trade secrets, or other knowledge or processes of, or developed by, Company or any other confidential information relating to or
dealing with the business operations of Company, made known to Employee or learned or acquired by Employee while in the employ of Company, but
Confidential Information shall not include information otherwise lawfully known generally by or readily accessible to the general public. The foregoing
provisions of this subsection shall apply during and after the period when the Employee is an employee of the Company
                                                                               -2-
and shall be in addition to (and not a limitation of) any legally applicable protections of Company interest in confidential information, trade secrets, and the
like. At the termination of Employee’s employment with Company, Employee shall return to the Company all copies of Confidential Information in any
medium, including computer tapes and other forms of data storage.
       c. Non-Competition. While employed by the Company and for the one (1) year period following the cessation of that employment for any reason (and
without regard to whether such cessation was initiated by Employee or the Company), Employee shall not directly or indirectly engage in (as a principal,
shareholder, partner, director, officer, agent, employee, consultant or otherwise) or be financially interested in any business which is involved in business
activities which are in conflict or competition with business activities carried on by the Company, or being definitively planned by the Company at the time
of termination of Employee’s employment. Nothing contained in this subsection shall prevent Employee from holding for investment up to three percent
(3%) of any class of equity securities of a company whose securities are publicly traded on a national securities exchange or in a national market system.
      d. Intellectual Property & Company Creations.
          (1) Ownership. All right, title and interest in and to any and all ideas, inventions, designs, technologies, formulas, methods, processes, development
techniques, discoveries, computer programs or instructions (whether in source code, object code, or any other form), computer hardware, algorithms, plans,
customer lists, memoranda, tests, research, designs, specifications, models, data, diagrams, flow charts, techniques (whether reduced to written form or
otherwise), patents, patent applications, formats, test results, marketing and business ideas, trademarks, trade secrets, service marks, trade dress, logos, trade
names, fictitious names, brand names, corporate names, original works of authorship, copyrights, copyrightable works, mask works, computer software, all
other similar intangible personal property, and all improvements, derivative works, know-how, data, rights and claims related to the foregoing that have been
or are conceived, developed or created in whole or in part by the Employee (a) at any time and at any place that relates directly or indirectly to the business of
the Company, as then operated, operated in the past or under consideration or development or (b) as a result of tasks assigned to Employee by the Company
(collectively, “Company Creations”), shall be and become and remain the sole and exclusive property of the Company and shall be considered “works made
for hire” as that term is defined pursuant to applicable statutes and law.
          (2) Assignment. To the extent that any of the Company Creations may not by law be considered a work made for hire, or to the extent that,
notwithstanding the foregoing, Employee retains any interest in or to the Company Creations, Employee hereby irrevocably assigns and transfers to the
Company any and all right, title, or interest that Employee has or may have, either now or in the future, in and to the Company Creations, and any derivatives
thereof, without the necessity of further consideration. Employee shall promptly and fully disclose all Company Creations to the Company and shall have no
claim for additional compensation for Company Creations.
                                                                              -3-
The Company shall be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks, and service marks with respect to such
Company Creations.
           (3) Disclosure & Cooperation. Employee shall keep and maintain adequate and current written records of all Company Creations and their
development by Employee (solely or jointly with others), which records shall be available at all times to and remain the sole property of the Company.
Employee shall communicate promptly and disclose to the Company, in such form as the Company may reasonably request, all information, details and data
pertaining to any Company Creations. Employee further agrees to execute and deliver to the Company or its designee(s) any and all formal transfers and
assignments and other documents and to provide any further cooperation or assistance reasonably required by the Company to perfect, maintain or otherwise
protect its rights in the Company Creations. Employee hereby designates and appoints the Company or its designee as Employee’s agent and attorney-in-fact
to execute on Employee’s behalf any assignments or other documents deemed necessary by the Company to perfect, maintain or otherwise protect the
Company’s rights in any Company Creations.
        e. Acknowledgments. Employee acknowledges that the Covenants are reasonable and necessary to protect the Company’s legitimate business interests,
its relationships with its customers, its trade secrets and other confidential or proprietary information. Employee further acknowledges that the duration and
scope of the Covenants are reasonable given the nature of this Agreement and the position Employee holds or will hold within the Company. Employee
further acknowledges that the Covenants are included herein to induce the Company to enter into this Agreement and that the Company would not have
entered into this Agreement or otherwise employed or continued to employ the Employee in the absence of the Covenants. Finally, Employee also
acknowledges that any breach, willful or otherwise, of the Covenants will cause continuing and irreparable injury to the Company for which monetary
damages, alone, will not be an adequate remedy.
      f. Enforcement.
         (1) If any court determines that the Covenants, or any part thereof, is unenforceable because of the duration or scope of such provision, that court
will have the power to modify such provision and, in its modified form, such provision will then be enforceable.
          (2) The parties acknowledge that significant damages will be caused by a breach of any of the Covenants, but that such damages will be difficult to
quantify. Therefore, the parties agree that if Employee breaches any of the Covenants, liquidated damages will be paid by Employee in the following manner:
           (i) any Company stock options, stock appreciation rights, restricted stock units or similar equity incentives or other long term incentives then
held by Employee, whether or not then vested, will be immediately and automatically forfeited;
                                                                             -4-
           (ii) any shares of restricted stock issued by the Company, then held by Employee or his permitted transferee and then subject to forfeiture will be
immediately and automatically forfeited; and
            (iii) any obligation of the Company to provide severance pay or benefits (whether pursuant to Section 5 or otherwise) will cease.
         (3) In addition to the remedies specified in Section 4 and any other relief awarded by any court, if Employee breaches any of the Covenants:
             (i) Employee will be required to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other
benefits derived or received by Employee as a result of any such breach; and
            (ii) the Company will be entitled to injunctive or other equitable relief to prevent further breaches of the Covenants by Employee.
       (4) If Employee breaches Section 4, then the duration of the restriction therein contained will be extended for a period equal to the period that
Employee was in breach of such restriction.
    5. Termination. Employee’s employment by the Company may be terminated at any time. Upon termination, Employee will be entitled to the payment of
accrued and unpaid salary through the date of such termination. All salary, commissions and benefits will cease at the time of such termination, subject to the
terms of any benefit plans then in force or enforceable under applicable law and applicable to Employee, and the Company will have no further liability or
obligation hereunder by reason of such termination; provided, however, that subject to Section 4(f)(2)(iii), (i) if Employee’s employment is terminated by the
Company without Cause or (ii) Employee’s base salary or bonus target eligibility is decreased (unless all other senior executives experience a similar
decrease at the same time), or (iii) Employee is required to be based more than thirty-five (35) miles from the Company’s current headquarters in Mt. Laurel,
New Jersey, unless closer to Employee’s current residence, Employee will be entitled to continued payment of his base salary (at the rate in effect upon
termination) for a period of 6 months; Any severance to which Employee is entitled pursuant to this Section 5 shall be reduced by the amount, if any, of any
severance that Employee is receiving from a former employer during the 6 month period that Employee would be entitled to severance payments from the
Company pursuant to this Section 5. Notwithstanding the foregoing, no amount will be paid or benefit provided under this Section 5 unless and until
(x) Employee executes and delivers a general release of claims against the Company and its subsidiaries in a form prescribed by the Company, and (y) such
release becomes irrevocable. Any severance pay or benefits provided under this Section 5 will be in lieu of, not in addition to, any other severance
arrangement maintained by the Company.
   6. Miscellaneous.
     a. Other Agreements. Employee represents and warrants to the Company that there are no restrictions, agreements or understandings whatsoever to
which he is a party that would prevent or make unlawful his execution of this Agreement, that
                                                                             -5-
would be inconsistent or in conflict with this Agreement or Employee’s obligations hereunder, or that would otherwise prevent, limit or impair the
performance by Employee of his duties to the Company.
      b. Entire Agreement; Amendment. This Agreement contains the entire agreement and understanding of the parties hereto relating to the subject matter
hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to the employment of
Employee by the Company. This Agreement may not be changed or modified, except by an agreement in writing signed by each of the parties hereto.
      c. Waiver. Any waiver of any term or condition hereof will not operate as a waiver of any other term or condition of this Agreement. Any failure to
enforce any provision hereof will not operate as a waiver of such provision or of any other provision of this Agreement.
      d. Governing Law. This Agreement shall be governed by, and enforced in accordance with, the laws of the State of New Jersey without regard to the
application of the principles of conflicts of laws.
      e. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and
this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been herein
contained.
      f. Wage Claims. The parties intend that all obligations to pay compensation to Employee be obligations solely of the Company. Therefore, intending to
be bound by this provision, Employee hereby waives any right to claim payment of amounts owed to her, now or in the future, from directors or officers of
the Company in the event of the Company’s insolvency.
      g. Successors and Assigns. This Agreement is binding on the Company’s successors and assigns.
       h. Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and will not affect its
interpretation.
       i. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original and all of which together
will constitute but one and the same instrument.
      j. Indemnification. Employee shall be indemnified for acts performed in good faith as an officer, director or employee of the Company in the manner
provided in the Company’s charter and by-laws, and shall be covered by director and officer liability
                                                                            -6-
insurance coverage for such acts to the same extent that any such coverage is provided to the Company’s executive officers.
   7. Definitions. Capitalized terms used herein will have the meanings below defined:
       a. “Business” means electronic transcription services and other health information management solutions services businesses in which the Company or
its subsidiaries are engaged anywhere within the United States.
       b. “Cause” means the occurrence of any of the following:
(1) Employee’s refusal, willful failure or inability to perform (other than due to illness or disability) his employment duties or to follow the lawful directives
of his superiors, but only after written notice and a period of time to correct or otherwise remedy such conduct or failure within a time period specified by the
CEO or the Board, which shall not exceed 15 days; (2) misconduct or gross negligence by Employee in the course of employment; (3) conduct of Employee
involving any type of disloyalty to the Company or its subsidiaries, including, without limitation: fraud, embezzlement, theft or dishonesty in the course of
employment; (4) a conviction of or the entry of a plea of guilty or nolo contendere to a crime involving moral turpitude or that otherwise could reasonably be
expected to have an adverse effect on the operations, condition or reputation of the Company, (5) a material breach by Employee of any agreement with or
fiduciary duty owed to the Company; or (6) alcohol abuse or use of controlled drugs other than in accordance with a physician’s prescription.
      c. “Covenants” means the covenants set forth in Section 4 of this Agreement.
      To acknowledge your agreement to and acceptance of the terms and conditions of this Agreement, please sign below in the space provided within two
(2) days of the date of this Agreement and return a signed copy to my attention. If the Agreement is not signed and returned within two (2) days, the terms
and conditions of this Agreement will be deemed withdrawn.
                                                                           Sincerely,

                                                                             MEDQUIST INC.

                                                                             By: /s/ Peter Masanotti
                                                                                 Peter Masanotti
                                                                                 President & CEO

Accepted and Agreed:
/s/ Alan J. Gold
Alan J. Gold
                                                                               -7-
                                                                                                                                            EXHIBIT 10.4
                                                               Corporate Offices
                                                               1000 Bishops Gate Blvd, Suite 300
                                                               Mount Laurel, NJ 08054-4632


                                                                        May 18, 2009
Mr. Kevin Piltz
c/o MedQuist
1000 Bishops Gate Blvd.
Mt. Laurel, NJ 08057
Dear Kevin:
   On behalf of MedQuist Inc. (the “Company”), this Agreement describes the terms of your new employment as the Company’s Senior Vice President and
Chief Information Officer, which will commence on May 18, 2009 (the “Employment Commencement Date”). For purposes of this Agreement, you are
referred to as the “Employee.” Other capitalized terms used in this Agreement have the meanings defined in Section 6, below.
    1. Term and Location. The Company shall employ Employee hereunder for a three (3) year term commencing on the Employment Commencement Date
hereof (the “Term”), which Term will be automatically extended for additional one (1) year periods beginning on the third anniversary of the Employment
Commencement Date and upon each subsequent anniversary thereof unless either party provides the other party with at least ninety (90) days prior written
notice of its intention not to renew this Agreement unless terminated earlier pursuant to Section 4 of this Agreement. Employee shall be entitled to work
remotely and will be provided with office space (i) at the Company’s headquarters, currently based in Mt. Laurel, New Jersey and (ii) the Company’s
Atlanta, Georgia area location, currently based in Norcross, Georgia and Marietta, Georgia. The Company shall reimburse Employee for his reasonable costs
of travel and lodging associated with the performance of his employment responsibilities.
   2. Consideration.
       a. Compensation. As consideration for all services rendered by Employee to the Company and for the Covenants contained herein, Employee will be
entitled to:
              (1) base salary at an annual rate of $280,000;
             (2) participate in MedQuist’s Management Incentive Plan for 2009. Your target incentive in this plan will be 50% of your base salary for 2009
   and following years. The target incentive is the payment amount that the Employee shall be eligible to receive if the Company and Employee both attain
   the pre-established incentive plan target objectives. The actual incentive award may be higher or lower than the target incentive amount based upon
   achievement of the objectives by Employee and the Company. Payment of $140,000, which is 100% of the annual target incentive amount for 2009, is
   guaranteed. In order to receive the guaranteed annual target incentive amount for 2009, Employee must be employed by the Company on the scheduled
   date of the payment, which shall be no later than March 15, 2010. Management Incentive Plan target objectives shall be developed on or before
   February 28th of each year of the Management Incentive Plan;
             (3) participate in the same employee benefit plans available generally to other full-time employees of the Company, subject to the terms of those
   plans as the same may be modified, amended or terminated from time to time (benefits information package enclosed);
            (4) if Employee’s employment is terminated by the Company without Cause, the severance pay and benefits described below in Section 4.
      b. Long Term Incentives. The Board will provide a long term incentive to Employee designed to reward extraordinary performance and/or to
encourage Employee’s future efforts on behalf of the Company. The grant of the long term incentive will be subject to the terms of the Company’s long term
incentive plan, and will be evidenced by a separate award agreement by and between the Company and Employee.
   3. Covenants.
     a. Non-Solicitation. While employed by the Company and for the one (1) year period following the cessation of that employment for any reason (and
without regard to whether such cessation was initiated by Employee or the Company), Employee will not do any of the following without the prior written
consent of the Company:
             (1) solicit, entice or induce, either directly or indirectly, any person, firm or corporation who or which is a client or customer of the Company or
   any of its subsidiaries to become a client or customer of any other person, firm or corporation;
             (2) influence or attempt to influence, either directly or indirectly, any customer of the Company or its subsidiaries to terminate or modify any
   written or oral agreement or course of dealing with the Company or its subsidiaries (except in Employee’s capacity as an employee of the Company); or
             (3) influence or attempt to influence, either directly or indirectly, any person to terminate or modify any employment, consulting, agency,
   distributorship, licensing or other similar relationship or arrangement with the Company or its subsidiaries (except in Employee’s capacity as an
   employee of the Company).
      b. Non-Disclosure. Employee shall not use for Employee’s personal benefit, or disclose, communicate or divulge to, or use for the direct or indirect
benefit of any person, firm, association or company other than Company, any “Confidential Information,” which term shall mean any information regarding
the business methods, business policies, policies, procedures, techniques, research or development projects or results, historical or projected financial
information, budgets, trade secrets, or other knowledge or processes of, or developed by, Company or any other confidential information relating to or
dealing with the business operations of Company, made known to Employee or learned or acquired by Employee while in the employ of Company, but
Confidential Information shall not include information otherwise lawfully known generally
                                                                               -2-
by or readily accessible to the general public. The foregoing provisions of this subsection shall apply during and after the period when the Employee is an
employee of the Company and shall be in addition to (and not a limitation of) any legally applicable protections of Company interest in confidential
information, trade secrets, and the like. At the termination of Employee’s employment with Company, Employee shall return to the Company all copies of
Confidential Information in any medium, including computer tapes and other forms of data storage.
       c. Non-Competition. While employed by the Company and for the one (1) year period following the cessation of that employment for any reason (and
without regard to whether such cessation was initiated by Employee or the Company), Employee shall not directly or indirectly engage in (as a principal,
shareholder, partner, director, officer, agent, employee, consultant or otherwise) or be financially interested in any business which is involved in business
activities which are the same as or in direct competition with business activities carried on by the Company, or being definitively planned by the Company at
the time of termination of Employee’s employment. For purposes of clarification, a hospital shall not be considered a business which is involved in business
activities which are the same as or in direct competition with business activities carried on by the Company. Nothing contained in this subsection shall
prevent Employee from holding for investment up to three percent (3%) of any class of equity securities of a company whose securities are publicly traded on
a national securities exchange or in a national market system.
      d. Intellectual Property & Company Creations.
             (1) Ownership. All right, title and interest in and to any and all ideas, inventions, designs, technologies, formulas, methods, processes,
   development techniques, discoveries, computer programs or instructions (whether in source code, object code, or any other form), computer hardware,
   algorithms, plans, customer lists, memoranda, tests, research, designs, specifications, models, data, diagrams, flow charts, techniques (whether reduced to
   written form or otherwise), patents, patent applications, formats, test results, marketing and business ideas, trademarks, trade secrets, service marks, trade
   dress, logos, trade names, fictitious names, brand names, corporate names, original works of authorship, copyrights, copyrightable works, mask works,
   computer software, all other similar intangible personal property, and all improvements, derivative works, know-how, data, rights and claims related to
   the foregoing that have been or are conceived, developed or created in whole or in part by the Employee (a) at any time and at any place that relates
   directly or indirectly to the business of the Company, as then operated, operated in the past or under consideration or development or (b) as a result of
   tasks assigned to Employee by the Company (collectively, “Company Creations”), shall be and become and remain the sole and exclusive property of the
   Company and shall be considered “works made for hire” as that term is defined pursuant to applicable statutes and law.
            (2) Assignment. To the extent that any of the Company Creations may not by law be considered a work made for hire, or to the extent that,
   notwithstanding the foregoing, Employee retains any interest in or to the Company
                                                                             -3-
Creations, Employee hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that Employee has or may have, either now
or in the future, in and to the Company Creations, and any derivatives thereof, without the necessity of further consideration. Employee shall promptly and
fully disclose all Company Creations to the Company and shall have no claim for additional compensation for Company Creations. The Company shall be
entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks, and service marks with respect to such Company Creations.
             (3) Disclosure & Cooperation. Employee shall keep and maintain adequate and current written records of all Company Creations and their
   development by Employee (solely or jointly with others), which records shall be available at all times to and remain the sole property of the Company.
   Employee shall communicate promptly and disclose to the Company, in such form as the Company may reasonably request, all information, details and
   data pertaining to any Company Creations. Employee further agrees to execute and deliver to the Company or its designee(s) any and all formal transfers
   and assignments and other documents and to provide any further cooperation or assistance reasonably required by the Company to perfect, maintain or
   otherwise protect its rights in the Company Creations. Employee hereby designates and appoints the Company or its designee as Employee’s agent and
   attorney-in-fact to execute on Employee’s behalf any assignments or other documents deemed necessary by the Company to perfect, maintain or
   otherwise protect the Company’s rights in any Company Creations.
        e. Acknowledgments. Employee acknowledges that the Covenants are reasonable and necessary to protect the Company’s legitimate business interests,
its relationships with its customers, its trade secrets and other confidential or proprietary information. Employee further acknowledges that the duration and
scope of the Covenants are reasonable given the nature of this Agreement and the position Employee holds or will hold within the Company. Employee
further acknowledges that the Covenants are included herein to induce the Company to enter into this Agreement and that the Company would not have
entered into this Agreement or otherwise employed or continued to employ the Employee in the absence of the Covenants. Finally, Employee also
acknowledges that any breach, willful or otherwise, of the Covenants will cause continuing and irreparable injury to the Company for which monetary
damages, alone, will not be an adequate remedy.
      f. Enforcement.
             (1) If any court determines that the Covenants, or any part thereof, is unenforceable because of the duration or scope of such provision, that
   court will have the power to modify such provision and, in its modified form, such provision will then be enforceable.
             (2) The parties acknowledge that significant damages will be caused by a breach of any of the Covenants, but that such damages will be difficult
   to quantify. Therefore, the parties agree that if Employee breaches any of the Covenants, liquidated damages will be paid by Employee in the following
   manner:
                                                                              -4-
                (i) any Company stock options, stock appreciation rights, restricted stock units or similar equity incentives or other long term incentives then
       held by Employee, whether or not then vested, will be immediately and automatically forfeited;
                 (ii) any shares of restricted stock issued by the Company, then held by Employee or his permitted transferee and then subject to forfeiture
       will be immediately and automatically forfeited;
                (iii) any obligation of the Company to provide severance pay or benefits (whether pursuant to Section 4 or otherwise) will cease; and
           (3) In addition to the remedies specified in Section 3(f)(2) and any other relief awarded by any court, if Employee breaches any of the
   Covenants:
                 (i) Employee will be required to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other
       benefits derived or received by Employee as a result of any such breach; and
                (ii) the Company will be entitled to injunctive or other equitable relief to prevent further breaches of the Covenants by Employee.
          (4) If Employee breaches Section 3, then the duration of the restriction therein contained will be extended for a period equal to the period that
   Employee was in breach of such restriction.
       4. Termination. Employee’s employment by the Company may be terminated at any time. Upon termination, Employee will be entitled to the payment
of accrued and unpaid salary through the date of such termination. All salary, commissions and benefits will cease at the time of such termination, subject to
the terms of any benefit plans then in force or enforceable under applicable law and applicable to Employee, and the Company will have no further liability
or obligation hereunder by reason of such termination; provided, however, that subject to Section 3(f)(2), if Employee’s employment is terminated by the
Company without Cause, Employee will be entitled to continued payment of his base salary (at the rate in effect upon termination) for a period of six
(6) months; and notwithstanding the foregoing, no amount will be paid or benefit provided under this Section 4 unless and until (x) Employee executes and
delivers a general release of claims against the Company and its subsidiaries in a form prescribed by the Company, and (y) such release becomes irrevocable.
Any severance pay or benefits provided under this Section 4 will be in lieu of, not in addition to, any other severance arrangement maintained by the
Company.
      5. Miscellaneous.
        a. Other Agreements. Employee represents and warrants to the Company that there are no restrictions, agreements or understandings whatsoever to
   which he is a party that would prevent or make unlawful his execution of this Agreement, that would be inconsistent or in conflict with this Agreement or
   Employee’s obligations
                                                                            -5-
hereunder, or that would otherwise prevent, limit or impair the performance by Employee of his duties to the Company.
      b. Entire Agreement; Amendment. This Agreement contains the entire agreement and understanding of the parties hereto relating to the subject matter
hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature relating to the employment of
Employee by the Company. This Agreement may not be changed or modified, except by an agreement in writing signed by each of the parties hereto.
      c. Waiver. Any waiver of any term or condition hereof will not operate as a waiver of any other term or condition of this Agreement. Any failure to
enforce any provision hereof will not operate as a waiver of such provision or of any other provision of this Agreement.
      d. Governing Law. This Agreement shall be governed by, and enforced in accordance with, the laws of the State of New Jersey without regard to the
application of the principles of conflicts of laws.
      e. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and
this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been herein
contained.
      f. Wage Claims. The parties intend that all obligations to pay compensation to Employee be obligations solely of the Company. Therefore, intending to
be bound by this provision, Employee hereby waives any right to claim payment of amounts owed to her, now or in the future, from directors or officers of
the Company in the event of the Company’s insolvency.
      g. Successors and Assigns. This Agreement is binding on the Company’s successors and assigns.
       h. Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and will not affect its
interpretation.
       i. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original and all of which together
will constitute but one and the same instrument.
      j. Indemnification. Employee shall be indemnified for acts performed in good faith as an officer, director or employee of the Company in the manner
provided in the Company’s charter and by-laws, and shall be covered by director and officer liability
                                                                            -6-
insurance coverage for such acts to the same extent that any such coverage is provided to the Company’s executive officers.
   6. Definitions. Capitalized terms used herein will have the meanings below defined:
       a. “Business” means electronic transcription services and other health information management solutions services businesses in which the Company or
its subsidiaries are engaged anywhere within the United States.
      b. “Cause” means the occurrence of any of the following: (1) Employee’s refusal, willful failure or inability to perform (other than due to illness or
disability) his employment duties or to follow the lawful directives of his superiors; (2) misconduct or gross negligence by Employee in the course of
employment; (3) conduct of Employee involving any type of disloyalty to the Company or its subsidiaries, including, without limitation: fraud,
embezzlement, theft or dishonesty in the course of employment; (4) a conviction of or the entry of a plea of guilty or nolo contendere to a crime involving
moral turpitude or that otherwise could reasonably be expected to have an adverse effect on the operations, condition or reputation of the Company, (5) a
material breach by Employee of any agreement with or fiduciary duty owed to the Company; or (6) alcohol abuse or use of controlled drugs other than in
accordance with a physician’s prescription.
      c. “Covenants” means the covenants set forth in Section 3 of this Agreement.
      To acknowledge your agreement to and acceptance of the terms and conditions of this Agreement, please sign below in the space provided within two
(2) days of the date of this Agreement and return a signed copy to my attention. If the Agreement is not signed and returned within two (2) days, the terms
and conditions of this Agreement will be deemed withdrawn.
                                                                           Sincerely,

                                                                           MEDQUIST INC.

                                                                           By: /s/ Peter Masanotti
                                                                               Peter Masanotti
                                                                               President & CEO

Accepted and Agreed:
/s/ Kevin Piltz
Kevin Piltz

Date Accepted:5/18/2009
                                                                              -7-
                                                                                                                                                   Exhibit 10.5

                                                      SETTLEMENT AND LICENSE AGREEMENT
   This Settlement and License Agreement (“Agreement”) is entered into as of June 19, 2009, by and between Plaintiff, Anthurium Solutions, Inc.
(hereinafter referred to as “Anthurium” and more fully defined below) and MedQuist Inc. (hereinafter referred to as “MedQuist” and more fully defined
below), by and through their duly authorized representatives.


                                                                         RECITALS
   WHEREAS, on November 6, 2007, Anthurium initiated a lawsuit in the United States District Court for the Eastern District of Texas, currently styled
Anthurium Solutions, Inc. v. MedQuist, Inc., et al., Civil Action No. 2:07-cv-484 (“the Lawsuit”) seeking damages for the alleged infringement of United
States Patent No. 7,031,998, entitled “Systems and Methods for Automatically Managing Workflow Based on Optimization of Job Step Scheduling”
(hereinafter referred to as “the ‘998 Patent”);
   WHEREAS, MedQuist denies the allegations set forth in the Complaint filed by Anthurium in the Lawsuit, and has asserted affirmative defenses alleging
that the ‘998 patent is invalid, not infringed and unenforceable;
    WHEREAS, each party disputes various contentions and claims asserted by the other party in the Lawsuit, and the parties have determined that continued
litigation will be time consuming, protracted, and expensive; and
    WHEREAS, in view of the foregoing, Anthurium and MedQuist now desire to settle the Lawsuit, including all current causes of action between
Anthurium and MedQuist, without admitting in any way the other party’s claims or arguments, and to grant the release of one another from any and all
liability and/or obligations, past or present arising under, out of, or in any manner connected with the alleged infringement of the ‘998 Patent and any other
Anthurium Patents (defined below), including, but not limited to, U.S. Patent No. 6,604,124 (the “’124 Patent”), and U.S. Patent Application No. 0195429
A1, and any potential defenses or counterclaims thereto.
   NOW, THEREFORE, Anthurium and MedQuist, after carefully reviewing this Agreement and in exchange for the dismissal and releases of all claims and
counterclaims that have been or could have been raised by or against each other in the Lawsuit, for the monetary consideration provided herein, and for other
good and valuable considerations, the receipt and sufficiency of which is hereby expressly acknowledged, agree as follows:

1. DEFINITIONS
   1.1. “Anthurium” means, collectively, (i) Anthurium Solutions, Inc., a Delaware corporation, with its principal office located at 470 Atlantic Ave., Fourth
Floor, Boston, Massachusetts, (ii) the Anthurium Affiliates and Related Parties, and (iii) the respective assignees and successors-in-interest of each of the
foregoing.
   1.2. “Anthurium Affiliates and Related Parties” means (i) any Person that, at any time, directly or indirectly, controls, is controlled by or under common
control with Anthurium (including without limitation its assign or successors-in-interest); (ii) A:/SCRIBES, LLC, a
                                                                               1
Pennsylvania corporation with principal office at 1012 Robin Drive, West Chester, Pennsylvania, and any Person that, at any time, directly or indirectly,
controls, is controlled by or under common control with A:/SCRIBES, LLC. (including without limitation its assigns or successors-in-interest); (iii) Janice
Archbold, including her heirs and assigns; and (iv) Timothy Simard, including his heirs and assigns.
    1.3. “Anthurium Patents” means: (i) the ‘998 Patent and United States Patent No. 6,604,124; (ii) any patent owned or controlled by Anthurium as of the
Effective Date; (iii) any patent which issues after the Effective Date from an application owned or controlled by Anthurium prior to the Effective Date; and
(iv) any and all patents and applications from which any or all of the patents described in subparagraphs (i)-(iii) claim priority or are derived through
continued prosecution, division, continuation, continuation-in-part, reissue, reexamination, extension, or foreign prosecution.
   1.4. “Effective Date” shall mean the last date upon which this Agreement has been executed by both Anthurium and MedQuist.
    1.5. “MedQuist” means, collectively, (i) MedQuist Inc., a New Jersey corporation, with its corporate headquarters located at Mount Laurel, New Jersey,
(ii) the MedQuist Affiliates, and (iii) the respective assignees and successors-in-interest of each of the foregoing.
   1.6. “MedQuist Affiliate” means any Person, including but not limited to any MedQuist Company, that, at any time, directly or indirectly, controls, is
controlled by, or is under common control with, MedQuist (including without limitation its assigns or successors-in-interest). For the purpose of this
definition and the definition of Anthurium Affiliates and Related Parties, the term “control” means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities (as to which ownership of 50% or
more establishes control) or other interests, by contract or otherwise, including, in the case of a trust, the power to appoint or remove trustees or otherwise
direct the trust’s affairs. The terms “is controlled by or “is under common control” have the correlative meanings. For the purposes of clarity and without
limitation this definition is expressly intended to cover (a) CBay Systems Holdings, Ltd. (“CBay Holdings”) and the medical transcription companies
controlled by CBay Holdings, but (b) is expressly not intended to cover S.A.C. PEI CB Investment, L.P. (“S.A.C.”), or any other companies controlled by
S.A.C. (except in their capacity as direct or indirect owner of MedQuist), other than the companies falling under item (a).
  1.7. “MedQuist Company” means MedQuist Inc., MedQuist CM LLC, MedQuist IP LLC, MedQuist Canada Company, MedQuist of Delaware, Inc.,
MedQuist Transcriptions, Ltd., LCH Australia, Inc., LCH Canada or Speech Machines Limited.
   1.8. “MedQuist Product” means any product, component, device, software, system or service made, used, sold, offered for sale, exported or imported for
sale by MedQuist.
    1.9. “Owned or Controlled” means, with respect to a Anthurium’s relationship to a patent, patent application or invention, as of the specified time being
(a) owned by Anthurium, (b) owned by a third party that is contractually obligated to assign such patent, patent application or invention to Anthurium and
(c) held under license by Anthurium, with the
                                                                              2
sufficient rights to grant to MedQuist the rights granted under this Agreement, including without limitation the rights granted under Articles 2 and 3.
   1.10. “Parties” or “Party” means the signatories to this Agreement (Anthurium and MedQuist), collectively and individually.
    1.11. “Patents” means (i) all classes or types of patents, including utility patents, utility models, design patents, invention certificates, reexaminations,
reissues, extensions and renewals, in all jurisdictions of the world; and (ii) all applications (including provisional and nonprovisional applications),
continuations, divisionals, and continuations-in-part, for these classes or types of patents in all jurisdictions of the world. The term “Patents” does not include
any copyrights, trademarks, mask work rights, or trade secret rights.
   1.12. “Person” means a person or legal entity, including without limitation an entity organized as a corporation, partnership, limited liability partnership
and limited liability company.

2. RELEASES AND GRANTS
    2.1. Release of MedQuist. In consideration of the releases and rights granted in favor of and to Anthurium in this Agreement, Anthurium hereby releases
and discharges MedQuist from any and all past or present claims, demands, actions, causes of action, suits of any kind or nature, rights, damages, costs,
losses, expenses and compensation, in each case whether known or unknown, arising from or related to in whole or part any act occurring or circumstance
arising on or before the Effective Date, including, without limitation, any infringement of any Patent. For the avoidance of doubt, the foregoing release shall
become effective and irrevocable upon the execution of this Agreement and the payment of the amount specified in Section 4.1.
    2.2. Release of Anthurium. In consideration of the releases and rights granted in favor of and to MedQuist in this Agreement, MedQuist hereby releases
and discharges Anthurium from any and all past or present claims, demands, actions, causes of action, suits of any kind or nature, rights, damages, costs,
losses, expenses and compensation, in each case whether known or unknown, arising from or related to in whole or part any act occurring or circumstance
arising on or before the Effective Date, including, without limitation, any claims that were or may have been brought in the Lawsuit, and expressly including
all claims that were the subject of MedQuist’s motion to amend its answer and counterclaim. For the avoidance of doubt, the foregoing release shall become
effective and irrevocable upon the execution of this Agreement and the payment of the amount specified in Section 4.1.
   2.3. Anthurium License to MedQuist. Subject to the payment provided under Section 4.1, Anthurium hereby grants to MedQuist, and MedQuist hereby
accepts, a non-exclusive, non-transferable (subject to Section 8.1), fully paid-up, royalty-free, worldwide license, without the right to sublicense, under the
Anthurium Patents to make, have made, use, have used, import, have imported, export, have exported, offer to sell, sell and have sold, MedQuist Products.
This license shall continue until the expiration of the last to expire of the Anthurium Patents. For the avoidance of doubt, the license includes “have made”
rights which apply to any MedQuist Product covered by an Anthurium Patent that is manufactured or produced by a third party and sold by MedQuist.
                                                                                  3
3. LIMITED COVENANTS NOT TO ASSERT
    3.1. Covenant Not To Assert Against MedQuist. Once the payment specified in Section 4.1 is made, for a period of three (3) years following the
Effective Date, Anthurium hereby covenants not to assert against MedQuist any claim, whether known or unknown as of the Effective Date, whether existing
in the past, currently existing or which arises after the Effective Date, which claim arises from or is related to any infringement, misappropriation or violation
of any intellectual property right (other than a trademark right), and hereby fully and finally waives any damages that may arise or accrue with respect to such
claims during such three-year period. This covenant not to assert shall not restrict Anthurium from bringing a counterclaim in response to any suit brought by
MedQuist against Anthurium.
   3.2. Responsibilities of the Assignees of the Patent in Suit. In the event that Anthurium transfers or assigns ownership and/or control of any of the
Anthurium Patents, such transfer or assignment shall be subject to the release, license and covenant not to assert set forth in Articles 2 and 3 of this
Agreement, and such transfer or assignment shall not become effective unless and until the transferee party agrees in writing to be bound by this Agreement
and to accept Anthurium’s rights and obligations hereunder as applicable to such transferred Anthurium Patents.

4. PAYMENT
   4.1. Payment and Date. In return for the licenses, release and other consideration set forth herein, MedQuist will pay to Anthurium a lump sum of
$5,750,000 U.S. Dollars and CBay Holdings will pay to Anthurium a lump sum of $100,000 U.S. Dollars. These payments will be made within five (5) days
from the Effective Date of this agreement. Both Parties agree that this is just and fair consideration. These payments to Anthurium shall be made to the Client
Trust account of the firm of Holland & Knight, as follows:
   Bank of America IOLTA account
   Bank of America
   ABA #: 026009593
   Account #: 9429149562
   Account Name: Holland & Knight LLP IOLTA account
   For further credit to: 111739.00004

5. DISMISSAL
   5.1. Dismissal. Within five (5) days of the payment described in Section 4.1, above, the Parties shall file a Stipulation of Dismissal of the Lawsuit With
Prejudice in the form attached as Exhibit A.
   5.2. No Admission of Liability. The Parties expressly agree and acknowledge that by entering into this Agreement no Party admits any liability,
wrongdoing or the truth of any allegation contained in any claim, defense or counterclaim alleged in the Lawsuit. Neither this Agreement nor any release
contained within it may be construed or used as an admission of any issues, facts, wrongdoing, liability, or violation of law whatsoever.
                                                                              4
   5.3. Each Party to Pay Its Own Legal Fees. The Parties shall each pay their own legal fees and costs incurred in connection with the Lawsuit.

6. REPRESENTATIONS AND WARRANTIES
    6.1. Anthurium’s Sole Right and Authority. Anthurium represents and warrants that it is the sole owner of the ‘998 Patent and the Anthurium Patents
and possesses all rights necessary to grant the releases, licenses and covenants not to assert granted to MedQuist hereunder. Anthurium further warrants that
(i) no ownership interest in the ‘998 Patent or any Anthurium Patent is held by any third party, and (ii) the ‘998 Patent and the Anthurium Patents are not
subject to any encumbrance, lien or claim of ownership by any third party.
    6.2. Sole Owner of Claims. Each Party represents and warrants to the other Party that: (i) it is the sole owner of the claims or causes of action released in
this Agreement and has not previously assigned or transferred, or purported to assign or transfer, any interest in such claims or causes of action to any other
person or entity; and (ii) it is not in a disparate bargaining position with respect to the negotiation of this Agreement.
   6.3. MedQuist’s Sole Right and Authority. MedQuist represents and warrants that it has the full authority to enter into this Agreement on behalf of
MedQuist (including on behalf of all MedQuist Affiliates and Companies) and is competent to do so; and that this Agreement constitutes the legal, valid and
binding obligation of MedQuist enforceable against MedQuist in accordance with its terms.
   6.4. Anthurium’s Sole Right and Authority. Anthurium represents and warrants that it has the full authority to enter into this Agreement on behalf of
Anthurium (including on behalf of all Anthurium Affiliates and Related Parties) and is competent to do so; and this Agreement constitutes the legal, valid
and binding obligation of Anthurium enforceable against Anthurium in accordance with its terms.
   6.5. Signature Authority. The persons signing this Agreement each represent that they are duly authorized, with full authority to bind the Parties, and
that no signature of any other person or entity is necessary to bind the Parties.

7. CONFIDENTIALITY
    7.1. Confidentiality. Except for disclosure (i) pursuant to an order or subpoena of a court or governmental agency; (ii) to persons with a “need to know”
respecting corporate, financial, legal and contract matters, including insurers, lenders, investment bankers, auditors and contracting partners, who also agree
to treat such information as confidential; or (iii) as may otherwise be required by law, the parties agree to keep the contents of this Agreement confidential. In
the event that production of this Agreement is responsive to a discovery request received by a party in connection with litigation, this Agreement may be
produced only if there is a Protective Order that limits disclosure of the Agreement to outside counsel only and the Agreement is properly designated under
the provisions of the applicable Protective Order. To the extent that a Party to this Agreement is required to disclose the financial terms of this Agreement
pursuant to applicable law, regulation, discovery request or court order, such Party shall promptly inform the other Party of such requirement for disclosure
and shall afford the
                                                                                  5
other Party sufficient opportunity to limit such disclosure or to seek appropriate protective orders before any information is disclosed.
   7.2. Public Statements Regarding this Agreement. Upon execution of this Agreement, Anthurium may disclose solely that it has settled the Lawsuit
with MedQuist and has granted MedQuist a non-exclusive license, and shall not disclose any other terms of this Agreement.

8. OTHER REPRESENTATIONS, ACKNOWLEDGEMENTS AND AGREEMENTS
    8.1. Successors, Assigns and Beneficiaries. This Agreement shall inure to the benefit of and shall be binding upon the Parties hereto and their
successors, assigns, representatives, and beneficiaries. MedQuist may assign this Agreement (i) to any MedQuist Affiliate, (ii) in connection with the sale of
the stock of MedQuist, any merger of MedQuist or the sale of substantially all of the assets of MedQuist which relate to the subject matter of this Agreement,
to the Person that is the party to that transaction with MedQuist. In the event that, after the Effective Date, a Person that is not at such time a MedQuist
Affiliate (a) acquires control of MedQuist through the acquisition of 50% or more of MedQuist’s securities or (b) acquires substantially all of the assets of
MedQuist, or (c) MedQuist is merged into such Person, and at the time of such acquisition or merger, such Person has or had in the past products or services
covered by the Anthurium Patents, (the “Acquirer Products or Services”), then following such acquisition or merger MedQuist (or in the case of an asset
acquisition or where MedQuist is merged into another entity that is not a holding company, those portions of such acquirer or merged entity that comprise the
business of MedQuist that was acquired or merged, hereafter the “MedQuist Business”) shall continue to have all rights and benefits hereunder for its
existing and future products and services, but such rights and benefits shall not apply to the Acquirer Products or Services or any future products or services
that may be introduced by those portions of such acquirer’s business that are distinct from MedQuist or the MedQuist Business, as the case may be
(collectively, the “Other Products”). Such Other Products shall not be MedQuist Products hereunder and shall not have the benefit of the release, license or
covenant not to assert granted hereunder.
    8.2. Non-Cooperation. MedQuist acknowledges and agrees that the Anthurium Patents are valid. MedQuist warrants and agrees that it shall not, directly
or indirectly, challenge the validity of, or attempt to limit the scope of, the Anthurium Patents, whether in a court proceeding, in a reexamination proceeding,
or otherwise, nor will MedQuist assist, directly or indirectly, any third party in doing so, except (a) as required by law, regulation or court order and
(b) without limiting Sections 2.3 and 3.1, in defense to any claim asserted against MedQuist under any such Anthurium Patent.
   8.3. Attorneys’ Fees. In any litigation, arbitration or court proceeding between the Parties regarding the enforcement of any terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys’ fees and expenses and all costs of proceedings incurred in enforcing this Agreement.
   8.4. Jurisdiction and Choice of Law. This Agreement shall be interpreted, and the rights and duties of the parties hereto shall be determined, in
accordance with the laws of the State of Delaware, without regard to its conflicts of laws provisions. Any action brought to
                                                                               6
enforce the provisions of this Agreement shall be commenced in the United States District Court for the Eastern District of Texas.
   8.5. Entire Understanding. This Agreement and any attachments hereto constitute a single, integrated written contract expressing the entire agreement of
the Parties and shall not be modified, supplemented, or repealed except by a writing signed by each of the Parties. No covenants, agreements, representations,
or warranties of any kind whatsoever have been made by any Party, except as specifically set forth in this Agreement. All prior discussions, written
communications, and negotiations have been merged and integrated into and are superseded by this Agreement.
   8.6. Execution of Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all
executed counterparts together shall be deemed to be one and the same instrument.
   8.7. Construed as Jointly Prepared. This Agreement shall be construed as if the Parties jointly prepared it and any uncertainty or ambiguity shall not be
interpreted against any one Party because of the manner in which this Agreement was drafted or prepared.
    8.8. Invalidity. If any provision of this Agreement is held invalid, illegal, or unenforceable, the remaining provisions shall not be affected. The Parties
shall consult and use their reasonable and best efforts to agree upon a valid and enforceable provision, which shall be a reasonable substitute for the invalid,
illegal or unenforceable provision.
   8.9. Notices. All notices under this Agreement shall be in writing and delivered by facsimile transmission, overnight express mail, same or next day
courier service, or by personal delivery to such Party at the address given below, or such other address as provided by a Party by written notice:
 Anthurium:                                                                              Anthurium Solutions, Inc.
                                                                                         4th Floor
                                                                                         470 Atlantic Ave.
                                                                                         Boston, MA 02210
                                                                                         Holland & Knight
                                                                                         10 St. James Ave.
                                                                                         Boston, MA 02116
                                                                                         ATTN: Jeffrey Seul
 MedQuist:                                                                               MedQuist Inc.
                                                                                         1000 Bishops Gate Blvd., Suite 300
                                                                                         Mt. Laurel, NJ 08054
   8.10. Headings. The headings and captions used herein shall not be used to interpret or construe this Agreement.
                                                                             7
  IN WITNESS HEREOF, the Parties being fully authorized and empowered to bind themselves to this Agreement, have authorized and executed this
Agreement on the date set forth opposite their respective signatures.


                                                                     ANTHURIUM SOLUTIONS, INC.

DATED: June 19, 2009                                                 By:         /s/ TIMOTHY SIMARD
                                                                                   TIMOTHY SIMARD,
                                                                                     Chairman and CEO
                                                                     MEDQUIST INC.

DATED: June 19, 2009                                                 By:           /s/ MARK R. SULLIVAN
                                                                                     MARK R. SULLIVAN
                                                                                        General Counsel
                                                                     A:/SCRIBES, LLC
DATED: June 19, 2009                                                 By:             /s/ JANICE ARCHBOLD
                                                                                       JANICE ARCHBOLD
                                                                     Janice Archbold, and her heirs and assigns
DATED: June 19, 2009                                                 By:            /s/ JANICE ARCHBOLD
                                                                                      JANICE ARCHBOLD
                                                                     Timothy Simard, and his heirs and assigns
DATED: June 19, 2009                                                 By:               /s/ TIMOTHY SIMARD
                                                                                         TIMOTHY SIMARD
                                                                        8
                                                                           EXHIBIT A


                                                       IN THE UNITED STATES DISTRICT COURT
                                                        FOR THE EASTERN DISTRICT OF TEXAS
                                                                MARSHALL DIVISION
ANTHURIUM SOLUTIONS, INC.,                                               §
                                                                         §
                                                                         §          Civil Action No. 2:07-cv-484 (DF/CE)
                                                                         §
                                                                         §
Plaintiff,                                                               §          JURY
                                                                         §
v.                                                                       §
                                                                         §
MEDQUIST INC., ARRENDALE                                                 §
                                                                         §
ASSOCIATES, INC. and SPHERIS, INC.,                                      §
Defendants.


                                                    STIPULATION OF DISMISSAL WITH PREJUDICE
   IT IS STIPULATED, by and among Plaintiff Anthurium Solutions, Inc. (“Anthurium”) and MedQuist Inc.. (“MedQuist”) (together, the “Parties”),
through their counsel of record and subject to the approval of the Court that:
   (1) All claims presented by Anthurium’s Complaint as to MedQuist, as well as all of MedQuist’s counterclaims, shall be dismissed with prejudice as to
each of these parties;
     (2) This Stipulation of Dismissal With Prejudice shall not serve to operate as a dismissal of any other party named as a defendant in this action; and
                                                                                 9
    (3) The Parties shall bear their own costs and attorneys’ fees.
/s/ Joshua Krumholz                                                                                   /s/ Bryan Farney
ATTORNEYS FOR PLAINTIFF                                                                               ATTORNEYS FOR DEFENDANT
ANTHURIUM SOLUTIONS, INC.                                                                             MEDQUIST INC.


                                                                 CERTIFICATE OF SERVICE
   I hereby certify that the following counsel of record who are deemed to have consented to electronic service are being served this ___day of June, 2009,
with a copy of this document via the Court’s CM/ECF system per Local Rule CV-5(a)(3). Any other counsel of record will be served by electronic mail,
facsimile transmission and/or first class mail on this same date.
                                                                                         /s/ Joshua Krumholz



                                                                             10
                                                     IN THE UNITED STATES DISTRICT COURT
                                                      FOR THE EASTERN DISTRICT OF TEXAS
                                                              MARSHALL DIVISION
ANTHURIUM SOLUTIONS, INC.,                                             §
                                                                       §
                                                                       §          Civil Action No. 2:07-cv-484 (DF/CE)
                                                                       §
                                                                       §
Plaintiff,                                                             §          JURY
                                                                       §
v.                                                                     §
                                                                       §
MEDQUIST INC., ARRENDALE                                               §
                                                                       §
ASSOCIATES, INC. and SPHERIS, INC.,                                    §
Defendants.


                                                                          ORDER
  Before the Court is Plaintiff Anthurium Solutions, Inc.’s (“Anthurium”) and MedQuist Inc.’s (“MedQuist”) Stipulation of Dismissal With Prejudice,
which is hereby GRANTED.
     Accordingly, the claims presented by Anthurium’s Complaint as to MedQuist are hereby dismissed with prejudice as to each of these parties only.
     IT IS FURTHER ORDERED that each party shall bear its own costs.
                                                                             11
                                                                                                                                                        Exhibit 31.1
I, Peter Masanotti, certify that:
   1. I have reviewed this quarterly report on Form 10-Q of MedQuist Inc.;
    2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
   (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
          ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this report is being prepared;
   (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
          supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
          purposes in accordance with generally accepted accounting principles;
   (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
          quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
          the registrant’s internal control over financial reporting; and
   5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
          likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
          over financial reporting.
                                                                              By: /s/ Peter Masanotti
                                                                                   Name: Peter Masanotti
                                                                                   Title: President and Chief Executive Officer

Dated: July 30, 2009
                                                                                 33
                                                                                                                                                        Exhibit 31.2
I, Dominick Golio, certify that:
   1. I have reviewed this quarterly report on Form 10-Q of MedQuist Inc.;
    2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
   (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
          ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this report is being prepared;
   (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
          supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
          purposes in accordance with generally accepted accounting principles;
   (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
          quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
          the registrant’s internal control over financial reporting; and
   5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
          likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
          over financial reporting.
                                                                              By: /s/ Dominick Golio
                                                                                   Name: Dominick Golio
                                                                                   Title: Chief Financial Officer

Dated: July 30, 2009
                                                                                 34
                                                                                                                                                    Exhibit 32.1


                                                        CERTIFICATION PURSUANT TO
                                                            18 U.S.C. SECTION 1350,
                                                          AS ADOPTED PURSUANT TO
                                               SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
   In connection with the quarterly report of MedQuist Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2009 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Peter Masanotti, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
   (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
                                                                              /s/ Peter Masanotti
                                                                              Peter Masanotti
                                                                              President and Chief Executive Officer

Date: July 30, 2009
                                                                               35
                                                                                                                                                    Exhibit 32.2


                                                        CERTIFICATION PURSUANT TO
                                                            18 U.S.C. SECTION 1350,
                                                          AS ADOPTED PURSUANT TO
                                               SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
   In connection with the quarterly report of MedQuist Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2009 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Dominick Golio, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
   (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
                                                                              /s/ Dominick Golio
                                                                              Dominick Golio
                                                                              Chief Financial Officer

Date: July 30, 2009
                                                                               36

				
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