Exhibit 10.1

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“Agreement”) is effective as of July 15, 2005 by
and between MedQuist Inc. (the “Company”), and John Simmons (“Indemnitee”).

 

WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its
subsidiaries as directors, officers and in other capacities;

 

WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the directors, officers, employees and other
agents of the Company, the significant increases in the cost of such insurance
and the general reductions and limitations in the coverage of such insurance;

 

WHEREAS, the Company and the Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees and other agents serving corporations to expensive litigation risks at
the same time as the availability and coverage of liability insurance has been
severely limited;

 

WHEREAS, the Company has adopted bylaws (the “Bylaws”) providing for the
indemnification of directors, officers, employees and other agents of the
Company, including persons serving at the request of the Company in such
capacities with other corporations or enterprises, as authorized by New Jersey
law;

 

WHEREAS, the Bylaws and New Jersey law, by their non-exclusive nature, permit
agreements between the Company and its directors, officers, employees and other
agents with respect to indemnification of such persons; and

 

WHEREAS, in order to induce Indemnitee to accept a position with the Company as
a director, officer or in another capacity or capacities and/or continue to
provide services to the Company as a director, officer or in another capacity or
capacities, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent now or hereafter
permitted by law;

 

NOW, THEREFORE, the Company and Indemnitee hereby agree as follows.

 

1.                                       Indemnification.

 

(a)                                  Third Party Proceedings.  The Company shall
indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made
a party to any threatened, pending or completed action, suit, proceeding or any
arbitration or other alternative dispute resolution mechanism, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee

 

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or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys’ fees), judgments, fines and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) actually and
reasonably incurred by Indemnitee in connection with such action, suit or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee’s conduct was unlawful.  The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

(b)                                 Proceedings By or in the Right of the
Company.  The Company shall indemnify Indemnitee if Indemnitee was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Company or any subsidiary of the
Company to procure a judgment in its favor by reason of the fact that Indemnitee
is or was a director, officer, employee or agent of the Company, or any
subsidiary of the Company, or by reason of the fact that Indemnitee is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys’ fees) and, to the fullest extent
permitted by law, amounts paid in settlement, actually and reasonably incurred
by Indemnitee in connection with the defense or settlement of such action or
suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in or not opposed to the best interests of the Company, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which Indemnitee shall have been adjudged to be liable to the Company
unless and only to the extent that the New Jersey court or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which the New Jersey court or such other court shall deem proper.

 

(c)                                  Mandatory Payment of Expenses.  To the
extent that Indemnitee has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Sections 1(a) or (b) hereof, or
in defense of any claim, issue or matter therein, Indemnitee shall be
indemnified against expenses (including attorneys’ fees) actually and reasonably
incurred by Indemnitee in connection therewith.

 

2.                                       Advancement of Expenses; Notice;
Indemnification Procedure.

 

(a)                                  Advancement of Expenses.  The Company shall
advance all expenses incurred by Indemnitee in connection with the
investigation, defense, settlement or appeal of any civil or criminal action,
suit or proceeding referenced in Section 1(a) or (b) hereof (but not amounts
actually paid in settlement of any such action, suit or proceeding).  Indemnitee
hereby undertakes to repay such amounts advanced only if, and to the extent
that, it shall ultimately be determined that Indemnitee is not entitled to be
indemnified by the Company as authorized hereby.

 

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(b)                                 Notice of Indemnification Claim; Cooperation
by Indemnitee.  Indemnitee shall, as a condition precedent to his or her right
to be indemnified under this Agreement, give the Company notice in writing as
soon as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the General Counsel of the Company at the address
indicated on the signature page of this Agreement (or such other address as the
Company shall designate in writing to Indemnitee). Notice shall be deemed
received as provided in Section 13 hereof.  Indemnitee also shall provide the
Company such information and cooperation as the Company may reasonably require
and as shall be within Indemnitee’s power.

 

(c)                                  Indemnification Procedure.  Any
indemnification and/or advances provided for in Sections 1 and 2 hereof shall be
made no later than thirty (30) days after receipt of the written request of
Indemnitee.  If a claim under this Agreement, under any statute, or under any
provision of the Company’s Certificate of Incorporation or Bylaws providing for
indemnification, is not paid in full by the Company within thirty (30) days
after a written request for payment thereof has first been received by the
Company, Indemnitee may at any time thereafter bring an action against the
Company to recover the unpaid amount of the claim.  It shall be a defense to any
such action brought by Indemnitee (other than an action brought to enforce a
claim for expenses incurred in connection with any action, suit or proceeding in
advance of its final disposition) that Indemnitee has not met the standards of
conduct which make it permissible under applicable law for the Company to
indemnify Indemnitee for the amount claimed.  Notwithstanding the foregoing,
Indemnitee shall be entitled to receive advancements of expenses pursuant to
Section 2(a) hereof unless and until such defense may be finally adjudicated by
court order or judgment from which no further right of appeal exists.  It is the
intention of the parties that if the Company contests Indemnitee’s right to
indemnification, the question of Indemnitee’s right to indemnification shall be
for the court to decide, and neither the failure of the Company (including its
Board of Directors, any committee or other subgroup of the Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual determination by the Company (including it Board of
Directors, any committee or other subgroup of the Board of Directors,
independent legal counsel, or its stockholders) that Indemnitee has not met such
applicable standard of conduct, shall create a presumption that Indemnitee has
or has not met the applicable standard of conduct.

 

(d)                                 Notice to Insurers.  If, at the time of the
receipt of a notice of a claim pursuant to Section 2(b) hereof, the Company has
director and officer liability insurance in effect, the Company shall give
prompt notice of the commencement of such proceeding to the insurer in
accordance with the procedures set forth in the applicable policy.  The Company
shall thereafter take all action it deems reasonably necessary or advisable to
cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as
a result of such proceeding in accordance with the terms of such policies.

 

(e)                                  Selection of Counsel.  In the event the
Company shall be obligated under Section 2(a) hereof to pay the expenses of any
proceeding against Indemnitee, the Company shall be

 

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entitled to assume the defense of such proceeding, with counsel approved by
Indemnitee (such approval not to be unreasonably withheld), upon the delivery to
Indemnitee of written notice of its election to do so.  After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that Indemnitee shall have the right to
employ his or her own counsel in any such proceeding at Indemnitee’s own
expense, and provided further that Indemnitee shall have the right to employ his
or her own counsel in any such proceeding at the Company’s expense if
(i) employment of counsel by Indemnitee has been previously authorized by the
Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (iii) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding.

 

3.                                       Additional Indemnification Rights;
Nonexclusivity.

 

(a)                                  Scope of Indemnification Rights. 
Notwithstanding any other provision of this Agreement, the Company hereby agrees
to indemnify the Indemnitee to the fullest extent permitted by law,
notwithstanding that such indemnification is not specifically authorized by the
other provisions of this Agreement, the Company’s Certificate of Incorporation,
Bylaws or by statute.  In the event of any change, after the date of this
Agreement, in any applicable law, statute, or rule which expands the right of a
New Jersey corporation to indemnify a member of its board of directors or an
officer or other agent, such changes shall be incorporated automatically into
Indemnitee’s rights and the Company’s obligations under this Agreement without
further action of the parties.  In the event of any change in any applicable
law, statute or rule which narrows the right of a New Jersey corporation to
indemnify a member of its board of directors or an officer or other agent, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement shall have no effect on this Agreement or the rights
and obligations of the parties hereunder.

 

(b)                                 Nonexclusivity.  The indemnification
provided by this Agreement shall not be deemed exclusive of any rights to which
Indemnitee may be entitled under the Company’s Certificate of Incorporation,
Bylaws, any other agreement, any vote or approval of Company stockholders or
disinterested Directors, New Jersey law, or otherwise, both as to action in
Indemnitee’s official capacity and as to action in another capacity while
holding such office.

 

(c)                                  Continuing Right.  All agreements and
obligations of the Company included herein shall continue during the period
Indemnitee is a director, officer, employee or other agent of the Company and
shall continue thereafter as long as Indemnitee is subject to any possible
claim, action, suit, proceeding or any arbitration or other alternative dispute
resolution mechanism, whether civil, criminal, administrative or investigative,
by reason of the fact that Indemnity was serving in the capacity referred to
herein.

 

4.                                       Partial Indemnification.  If Indemnitee
is entitled under any provision of this Agreement to indemnification by the
Company for some or a portion of the expenses, judgments, fines or penalties
actually or reasonably incurred by him or her in the investigation, defense,
appeal or settlement of any civil or criminal action, suit or proceeding, but
not, however, for the total

 

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amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion of such expenses, judgments, fines or penalties to which Indemnitee is
entitled.

 

5.                                       Mutual Acknowledgement.  Each of the
Company and Indemnitee acknowledges that in certain instances, Federal law or
applicable public policy may prohibit the Company from providing indemnification
under this Agreement or otherwise.  In particular, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission believes that
indemnification for liabilities arising under the Federal securities laws is
against public policy and, therefore, is unenforceable.  Indemnitee understands
and acknowledges that the Company has undertaken or may be required in the
future to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination regarding the Company’s right, in view of such public policy
considerations, to indemnify Indemnitee.

 

6.                                       Officer And Director Liability
Insurance.  The Company may, from time to time, make a determination whether or
not it is practicable for the Company to obtain and maintain a policy or
policies of insurance with insurance companies providing the directors and
officers of the Company with coverage for losses in connection with acts or
omissions by such directors and officers, or to ensure the Company’s performance
of its indemnification obligations under this Agreement.  Among other
considerations, the Company may weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage.  In all policies of
director and officer liability insurance, Indemnitee will be named as an insured
in such a manner as to provide Indemnitee the same rights and benefits as are
accorded to the most favorably insured of the Company’s directors, if Indemnitee
is a director; or of the Company’s officers, if Indemnitee is not a director of
the Company but is an officer.  Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain such insurance.

 

7.                                       Severability.  Nothing in this
Agreement is intended to require or shall be construed as requiring the Company
to do or fail to do any act in violation of applicable law. The Company’s
inability, pursuant to court order, to perform its obligations under this
Agreement shall not constitute a breach of this Agreement.  If this Agreement or
any portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the
full extent permitted by any applicable portion of this Agreement that shall not
have been invalidated, and the balance of this Agreement not so invalidated
shall be enforceable in accordance with its terms.

 

8.                                       Exceptions.  Notwithstanding any other
provision herein to the contrary, the Company shall not be obligated pursuant to
the terms of this Agreement:

 

(a)                                  Claims Initiated by Indemnitee.  To
indemnify or advance expenses to Indemnitee with respect to proceedings or
claims initiated or brought voluntarily by Indemnitee and not by way of defense,
except with respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law or otherwise as
required under 14A:3-5 of the New Jersey Business Corporation Act, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors has approved the initiation or bringing
of such suit; or

 

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(b)                                 Lack of Good Faith.  To indemnify Indemnitee
for any expenses incurred by the Indemnitee with respect to any proceeding
instituted by Indemnitee to enforce or interpret this Agreement, if a court of
competent jurisdiction determines that each of the material assertions made by
the Indemnitee in such proceeding was not made in good faith or was frivolous;
or

 

(c)                                  Duplication of Payments.  To indemnify
Indemnitee for expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts
paid in settlement) which actually have been paid to Indemnitee under a valid
and collectible insurance policy, a provision of the Company’s Certificate of
Incorporation or Bylaws, or another valid and enforceable indemnity agreement;
or

 

(d)                                 Claims Under Section 16(b) of 1934 Act.  To
indemnify Indemnitee for expenses and an accounting of profits arising from the
purchase and sale by Indemnitee of securities in violation of Section 16(b) of
the Securities Exchange Act of 1934, as amended, or any successor statute.

 

9.                                       Exceptions Under New Jersey Law. 
Notwithstanding any other provision of this Agreement, pursuant to the New
Jersey Business Corporation Act, no indemnification shall be made under this
Agreement to or on behalf of the Indemnitee if a judgment or other final
adjudication adverse to the Indemnitee establishes that the Indemnitee’s acts or
omissions (a) were in breach of Indemnitee’s duty of loyalty to the Company or
its shareholders (as defined in 14A:2-7(3) of the New Jersey Business
Corporation Act), (b) were not in good faith or involved a knowing violation of
law, or (c) resulted in receipt by the Indemnitee of an improper personal
benefit.

 

10.                                 Construction Of Certain Phrases.  For
purposes of this Agreement, the following terms and references shall have the
following meanings:

 

(a)                                  References to the “Company” shall include,
in addition to the resulting corporation in any consolidation, merger or similar
business combination, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger or similar business
combination which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, and employees or agents, so
that if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.

 

(b)                                 References to “other enterprises” shall
include employee benefit plans;

 

(c)                                  References to “fines” shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;

 

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(d)                                 References to “serving at the request of the
Company” shall include any service as a director, officer, employee or agent of
the Company which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and

 

(e)                                  If Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to
have acted in a manner “not opposed to the best interests of the Company” as
referred to in this Agreement.

 

11.                                 Counterparts.  This Agreement may be
executed in one or more counterparts, each of which shall constitute an
original.

 

12.                                 Successors And Assigns.  This Agreement
shall be binding upon the Company and its successors and assigns, and shall
inure to the benefit of Indemnitee and Indemnitee’s estate, heirs, legal
representatives and assigns.  The Company shall require and cause any successor
(whether direct or indirect, and whether by purchase, merger, consolidation or
otherwise) to agree in writing to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.

 

13.                                 Attorneys’ Fees.  In the event that any
action is instituted by Indemnitee under this Agreement to enforce or interpret
any of the terms hereof, Indemnitee shall be entitled to be paid all costs and
expenses, including reasonable attorneys’ fees, incurred by Indemnitee with
respect to such action, unless as a part of such action, the court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
as a basis for such action were not made in good faith or were frivolous.  In
the event of an action instituted by or in the name of the Company under this
Agreement or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all costs and expenses, including
reasonable attorneys’ fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee’s counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee’s material defenses to such action were made in bad faith or were
frivolous.

 

14.                                 Notice.  All notices, requests, demands and
other communications under this Agreement shall be in writing and shall be
deemed duly given (i) if delivered by hand and receipted for by the party
addressee, on the date of such receipt or (ii) if mailed by domestic certified
or registered mail with postage prepaid, on the third business day after the
date postmarked. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by written notice.

 

15.                                 Consent To Jurisdiction.  The Company and
Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of
the State of New Jersey for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agree that any
action instituted under this Agreement shall be brought only in the state courts
of the State of New Jersey.

 

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16.                                 Choice Of Law.  This Agreement shall be
governed by and its provisions construed in accordance with the laws of the
State of New Jersey, as applied to contracts between New Jersey residents
entered into and to be performed entirely within New Jersey without regard to
the conflict of law principles thereof.

 

17.                                 Period Of Limitations. No legal action shall
be brought and no cause of action shall be asserted by or in the right of the
Company against Indemnitee, Indemnitee’s estate, spouse, heirs, executors or
personal or legal representatives after the expiration of two years from the
date of accrual of such cause of action, and any claim or cause of action of the
Company shall be extinguished and deemed released unless asserted by the timely
filing of a legal action within such two-year period; provided, however, that if
any shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.

 

18.                                 Subrogation.  In the event of payment under
this Agreement, the Company shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee, who shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Company effectively to bring suit to enforce such rights.

 

19.                                 Amendment; Termination. No amendment,
modification, termination or cancellation of this Agreement shall be effective
unless it is in writing signed by both the parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar), nor shall any such waiver
constitute a continuing waiver.

 

20.                                 No Construction as Employment Agreement. 
Nothing contained in this Agreement shall be construed as giving Indemnitee any
right to continue in the employment of the Company.

 

21.                                 Entire Agreement. This Agreement sets forth
the entire understanding between the parties hereto and supersedes and merges
all previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.

 

[signatures on following page]

 

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[signature page – Indemnification Agreement]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

COMPANY:

 

 

 

MEDQUIST INC.

 

 

 

By:

 

 

 

Howard S. Hoffmann, CEO

 

 

 

Address for service:

 

 

 

MedQuist Inc.

 

Attn: General Counsel

 

1000 Bishops Gate Blvd., Suite 300

 

Mt. Laurel, NJ 08054

 

 

 

 

 

AGREED TO AND ACCEPTED:

 

 

 

INDEMNITEE:

 

 

 

JOHN SIMMONS

 

 

 

 

 

Signature

 

 

 

Address for service:

 

 

 

 

 

 

 

 

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