Exhibit 10.1
Subordinated Intercompany Note

      $19,000,000   New York, New York     Date: August 18, 2011

          FOR VALUE RECEIVED, CBay Inc. (the “Payor”), hereby promises to pay
Nineteen Million Dollars ($19,000,000) to the order of MedQuist Inc. (the
“Payee”), on the date two years after the date hereof, or if such date is not a
business day, the next preceding business day (the “Maturity Date”), in lawful
money of the United States of America, in immediately available funds at such
location as the Payee shall designate, and to pay interest on the unpaid
principal amount hereof at the rates and on the dates specified below.
          The Payor further agrees to pay interest to the Payee from the date
hereof on the unpaid principal amount hereof at a rate per annum equal to 15.00%
until the Maturity Date, and thereafter, until payment in full of the principal
amount hereof (whether before or after judgment) at a rate per annum equal to
17.00%. Interest shall be payable on the Maturity Date, on the date of any
prepayment and, after the Maturity Date, on demand.
          The Payor may prepay all or a portion of the principal amount of this
Note at any time by giving one business day’s notice to the Payee; provided that
each prepayment shall be in a minimum amount of $100,000 or a whole multiple
thereof and shall be accompanied by payment of accrued interest to the date of
prepayment.
          Reference is made to (i) that certain Credit Agreement, dated as of
October 1, 2010, among CBay Inc., a Delaware corporation, MedQuist Inc., a New
Jersey Corporation, MedQuist Transcriptions, Ltd., a New Jersey corporation,
MedQuist Holdings Inc., a Delaware corporation, the lenders party thereto and
General Electric Capital Corporation as administrative agent and collateral
agent (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Credit Agreement”), (ii) that certain Senior
Subordinated Note Purchase Agreement, dated as of September 30, 2010, among CBay
Inc., MedQuist Inc. and MedQuist Transcriptions, Ltd. as the issuers, MedQuist
Holdings Inc., and BlackRock Kelso Capital Corporation, Pennantpark Investment
Corporation, Citibank, N.A. and THL Credit, Inc. as the purchasers (as amended,
restated, extended, supplemented or otherwise modified in writing from time to
time, the “Note Purchase Agreement”) and (iii) that certain Subordination and
Intercreditor Agreement, dated as of October 1, 2010, among Blackrock Kelso
Capital Corporation, PennantPark Investment Corporation, Citibank, N.A., THL
Credit, Inc., CBay Inc., MedQuist Inc., MedQuist Transcriptions, Ltd. and
General Electric Capital Corporation as agent for all senior lenders party to
the Credit Agreement (the “Subordination and Intercreditor Agreement”).
          Anything in this Note to the contrary notwithstanding, the
indebtedness evidenced by this Note shall be subordinate and junior in right of
payment, to the extent and in the manner hereinafter set forth, to all
obligations of the Payor to pay principal, interest or any other amounts owing
under or in connection with the Credit Agreement and the Note Purchase Agreement
until the payment in full in cash of such obligations of the Payor (such
obligations and other indebtedness and obligations in connection with any
renewal, refunding, restructuring or refinancing thereof, including interest
thereon accruing after the commencement of any proceedings referred to in clause
(i) below, whether or not such interest is an allowed claim in such proceeding,
being hereinafter collectively referred to as “Senior Indebtedness”):

 

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     (i) in the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Payor or to its property, and in the event
of any proceedings for voluntary liquidation, dissolution or other winding up of
the Payor, whether or not involving insolvency or bankruptcy, then, if an Event
of Default has occurred and is continuing under (and as defined in) either the
Credit Agreement or the Note Purchase Agreement, (x) the holders of Senior
Indebtedness shall be paid in full in cash in respect of all amounts
constituting Senior Indebtedness before the Payee is entitled to receive
(whether directly or indirectly), or make any demands for, any payment on
account of this Note and (y) until the holders of Senior Indebtedness are paid
in full in cash in respect of all amounts constituting Senior Indebtedness, any
payment or distribution to which the Payee would otherwise be entitled (other
than debt securities of the Payor that are subordinated, to at least the same
extent as this Note, to the payment of all Senior Indebtedness then outstanding
(such securities being hereinafter referred to as “Restructured Debt
Securities”)) shall be made to the holders of Senior Indebtedness;
     (ii) if any Event of Default has occurred and is continuing with respect to
any Senior Indebtedness, then no payment or distribution of any kind or
character shall be made by or on behalf of the Payor or any other Person on its
behalf with respect to this Note; and
     (iii) if any payment or distribution of any character, whether in cash,
securities or other property (other than Restructured Debt Securities), in
respect of this Note shall (despite these subordination provisions) be received
by the Payee in violation of clause (i) or (ii) before all Senior Indebtedness
shall have been paid in full in cash, such payment or distribution shall be held
in trust for the benefit of, and shall be paid over or delivered to, the holders
of Senior Indebtedness (or their representatives), ratably according to the
respective aggregate amounts remaining unpaid thereon, to the extent necessary
to pay all Senior Indebtedness in full in cash.
          To the fullest extent permitted by law, no present or future holder of
Senior Indebtedness (or any of their representatives) shall be prejudiced in its
right to enforce the subordination of this Note by any act or failure to act on
the part of the Payor or by any act or failure to act on the part of such holder
or any trustee or agent for such holder. The Payee and the Payor hereby agree
that the subordination of this Note is for the benefit of the Administrative
Agent, the Lenders, the L/C Issuers, any Secured Hedging Counterparty and the
Purchasers, and each of the Administrative Agent, the Lenders, the L/C Issuers,
any Secured Hedging Counterparty, and the Purchasers may proceed to enforce the
subordination provisions herein. Anything in this Note to the contrary
notwithstanding, all provisions set forth herein are subject to the terms of the
Subordination and Intercreditor Agreement.
          Nothing contained in the subordination provisions set forth above is
intended to or will impair the obligations of the Payor, which are absolute and
unconditional, to pay to the Payee the principal of and interest on this Note as
and when due and payable in accordance with its terms, or is intended to or will
affect the relative rights of the Payee and other creditors of the Payor other
than the holders of Senior Indebtedness.
          The Payee is hereby authorized to record all loans and advances made
by it to the Payor (all of which shall be evidenced by this Note), and all
repayments or prepayments thereof, in its books and records, such books and
records constituting prima facie evidence of the accuracy of the information
contained therein.

 

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          The Payor hereby waives presentment, demand, protest or notice of any
kind in connection with this Note. All payments under this Note shall be made
without offset, counterclaim or deduction of any kind.
          This Note shall be binding upon the Payor and its successors and
assigns, and the terms and provisions of this Note shall inure to the benefit of
the Payee and its successors and assigns, including subsequent holders hereof.
The Payor’s obligations under this Note may not be assigned without the prior
written consent of the Payee.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
[signature pages follow]

 

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            CBAY INC.,
as Payor
      By:   /s/ Kashyap Joshi         Name:   Kashyap Joshi        Title:
    V.P. Finance        MEDQUIST INC.
as Payee
      By:   /s/ Anthony James         Name:   Anthony James        Title:    
Chief Financial Officer     

[Subordinated Intercompany Note]