SETTLEMENT AGREEMENT AND RELEASE

THIS SETTLEMENT AGREEMENT AND RELEASE (“Agreement”) is made and entered into by
and between MedQuist Inc. and MedQuist Transcriptions, Ltd. (collectively,
“MedQuist” or “Defendants”), on the one hand, and Kaiser Foundation Health Plan,
Inc., Kaiser Foundation Hospitals, The Permanente Medical Group, Inc., Southern
California Permanente Medical Group, Kaiser Foundation Health Plan of the
Mid-Atlantic States, Inc., and Kaiser Foundation Health Plan of Colorado,
(collectively, “Plaintiffs”), on the other hand. MedQuist and Plaintiffs are
each individually referred to herein as a “Party,” and collectively as the
“Parties.” This Agreement shall become binding and effective on the date it is
fully executed by all Parties and their counsel (the “Effective Date”).

1. Recitals

1.1. There is now pending in the United States District Court, District of New
Jersey, an action entitled Kaiser Foundation Health Plan, Inc., et al. v.
MedQuist Inc. et al., Case No. 08-cv-4376-JBS-AMD (the “Action”).

1.2. Plaintiffs filed the Action against MedQuist alleging, inter alia, that
Defendants over-billed Plaintiffs for medical transcription services provided to
Plaintiffs by MedQuist. In the Complaint, Plaintiffs aver, inter alia, causes of
action for common law fraud, violation of California Business and Professions
Code §17200, breach of contract, demand for accounting, and unjust enrichment,
as more fully reflected in Plaintiffs’ Complaint. MedQuist has denied any
liability for the allegations of the Action, as more fully reflected in
MedQuist’s Answer and Separate Defenses.

1.3. Any and all claims that were asserted in the Action or could have been
asserted in the Action based on the facts alleged therein, including the facts
alleged in the Complaint and the Answer and Separate Defenses thereto, are
collectively referred to herein as the “Dispute.”

1.4. The Parties have reached an agreement in principle on the terms of a
complete and final resolution of the Dispute as, by and among MedQuist and
Plaintiffs.

2. Agreement

In consideration of the recitals above, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties agree as follows:

2.1. Settlement Payment. MedQuist agrees to pay the total sum of Two (2) Million
Dollars (the “Settlement Payment”), by wire transfer payable to Kaiser
Foundation Health Plan, Inc. to the account listed in Attachment A in accordance
with the instructions set forth therein. The Settlement Payment shall be paid
within three (3) business days after the Effective Date of this Agreement.
Plaintiffs shall be solely responsible for determining the allocation of and
distributing the Settlement Payment to and among Plaintiffs and/or their
counsel. Other than being responsible for paying the Settlement Payment as
outlined above, MedQuist shall not have any responsibility or liability with
respect to the payment, allocation, or distribution of any sum to any of the
individual Plaintiffs and/or their counsel. To the extent that any disputes may
arise between or among Plaintiffs regarding distribution of the Settlement
Payment, such disputes shall be resolved solely by and among Plaintiffs and
their counsel and shall not forestall or otherwise impact or affect the
Effective Date of this Agreement and/or the Releases contained in Section 3.

2.2. Voluntary Dismissal of Action. On July 15, 2010, after the Parties notified
the Court that they had reached an agreement in principle to settle the Action,
the Court entered an Order of Dismissal without costs and without prejudice to
the right, upon motion and good cause shown, within 60 days, to reopen the
Action. Upon payment of the Settlement Payment to Plaintiffs, the Parties agree
that the Dismissal shall become final, with prejudice and without right of
appeal, and the Parties further agree that each of the Parties shall be solely
responsible for their own costs. The Parties also agree that the Court shall
retain continuing jurisdiction over implementation of this Agreement.

3. Releases

Immediately upon payment of the Settlement Payment by MedQuist as set forth in
Section 2.1, and subject to the provisions of this Agreement, the following
releases shall become binding and enforceable:

3.1 Matters Released by Plaintiffs. Except as to such rights or claims as may be
created by this Agreement, Plaintiffs, on behalf of themselves and their related
and/or associated facilities and affiliates, and all of their respective
divisions, joint venturers, parents, subsidiaries, predecessor and successor
corporations, and all past and present partners, directors, officers,
shareholders, agents, servants, employees, representatives, assigns, heirs,
successors in interest, predecessors in interest, administrators, adjustors and
attorneys, hereby release, remise and forever discharge MedQuist, including all
of its related and/or associated facilities and affiliates, and all of its
respective divisions, affiliates, parents, subsidiaries, predecessor and
successor corporations, and all past and present partners, directors, officers,
shareholders, agents, servants, employees, representatives, assigns, heirs,
successors in interest, predecessors in interest, administrators, adjustors and
attorneys, from any and all claims, demands, causes of action, obligations under
any implied covenant of good faith and fair dealing, damages and liabilities
heretofore or hereafter arising out of or related to the Action and/or the
Dispute.

3.2. Matters Released by MedQuist. Except as to such rights or claims as may be
created by this Agreement, MedQuist on behalf of itself and its related and/or
associated facilities and affiliates, and all of its respective divisions,
affiliates, parties, joint venturers, parents, subsidiaries, predecessor and
successor corporations, and all past and present partners, directors, officers,
shareholders, agents, servants, employees, representatives, assigns, heirs,
successors in interest, predecessors in interest, administrators, adjustors and
attorneys, hereby releases, remises and forever discharges Plaintiffs, including
all of their related and/or associated facilities and affiliates, and all of
their respective divisions, affiliates, parents, subsidiaries, predecessor and
successor corporations, and all past and present partners, directors, officers,
shareholders, agents, servants, employees, representatives, assigns, heirs,
successors in interest, predecessors in interest, administrators, adjustors and
attorneys, from any and all claims, demands, causes of action, obligations under
any implied covenant of good faith and fair dealing, damages and liabilities
heretofore or hereafter arising out of, or related to the Action and/or the
Dispute. Notwithstanding the foregoing, the Parties agree that MedQuist is not
waiving, and expressly reserves, the right to seek payment from Plaintiffs for
any and all accounts receivable, including any and all accounts receivable over
30 days as of the Effective Date, provided that such accounts receivable
(1) pertain to services provided to Plaintiffs on or after May 1, 2005 and
(2) do not pertain to any accounts billed based on an AAMT line. The Parties
further agree that Plaintiffs are not waiving, and expressly reserve, the right
to contest any such alleged accounts receivable on any grounds.

3.3. The matters released by Plaintiffs in Section 3.1 and the matters released
by MedQuist in Section 3.2 are collectively referred to as the “Released
Matters.” It is the intention of the Parties that this Agreement be effective as
a full and final release of each and every matter referred to in the Released
Matters. In furtherance of this intention, each Party acknowledges that it may
hereafter discover facts in addition to or different from those which it now
knows or believes to be true with respect to the subject matter of this
Agreement, but it is their intention to fully and finally and forever settle and
release any and all matters, disputes and differences, known or unknown,
suspected or unsuspected, which do now exist, may exist or heretofore have
existed between them which relate to the Released Matters.

3.4. The Releases contained in this Agreement shall be and remain in effect as
full and complete general releases, notwithstanding the discovery or existence
of any additional or different facts. In particular, each Party hereby expressly
waives California Civil Code § 1542, which states: “A general release does not
extend to claims which the creditor does not know or suspect to exist in his or
her favor at the time of executing the release, which if known by him or her
must have materially affected his or her settlement with the debtor.” Each Party
also hereby waives any and all federal and state statutes similar in substance,
meaning or application to California Civil Code § 1542.

3.5 Each Party warrants and represents to each other Party that the effect and
import of the release and waiver provisions above have been explained to it by
its attorney.

4. Representations and Warranties

Each Party represents and warrants to and agrees with the other as follows:

4.1 This Agreement is being entered into by Plaintiffs and Defendants, on their
own behalf and on behalf of each of their own respective divisions, partners,
joint venturers and affiliates, etc., as set forth more fully in Sections 3.1
and 3.2 above.

4.2 The Parties have not been induced to enter into this Agreement by any
representations and warranties made by any other Party to this Agreement (other
than such representations which are expressly contained in this Agreement).

4.3 The Parties each have had the opportunity to receive independent legal
advice from attorneys of their choice with respect to the advisability of making
the settlement and release provided herein and of executing this Agreement.
Before the execution of the Agreement, each Party and/or its attorneys have
reviewed the Agreement and have had the opportunity to negotiate revisions to
the Agreement. Further, each Party acknowledges, represents, and declares that
it has carefully read this Agreement, knows the contents, and executes the same
voluntarily and without duress or pressure.

4.4 There have been no other agreements or understandings between the Parties
hereto with respect to this Agreement with the exception of those agreements and
understandings memorialized in writing in this Agreement.

4.5 Each Party is the sole and lawful owner of all rights, title and interest in
and to every claim and other matter released herein, and no Party has assigned,
granted or transferred in any way to any other person or entity any of the
claims, causes of action, costs or demands, or any part thereof, of the Released
Matter.

4.7 The execution, delivery and performance of this Agreement have been duly
authorized by all requisite action on the part of each such Party.

4.8 Any individual signing this Agreement on behalf of a corporation,
partnership or trust has full authority to do so.

5. Confidentiality

5.1 With the exception of the scope of the release set forth above in Section 3,
each Party agrees to keep the terms of this Agreement, including the amount of
the Settlement Payment, completely confidential, and not to disclose such
information (without first receiving the express written permission of the other
Parties) other than: (i) as may be required by applicable law, governmental
order, or regulation or by order or decree of any court of competent
jurisdiction; (ii) as part of its normal reporting requirements or review
procedures to its parent company(ies), auditors, attorneys or other professional
advisors; (iii) in connection with a possible sale, merger, or other
consolidation transaction involving it or its parent, subsidiary and/or
affiliated company(ies); or (iv) in cooperation with any official investigation
by any local, state or federal agency or officer. Specifically with regard to
disclosure of the Settlement Payment, the amount of the Settlement Payment shall
be confidential and not revealed to any third party, except as above.

5.2 In the event that any third party makes any inquiries about the Action or
the Dispute (other than a situation covered by the circumstances set forth
above), the Parties agree to state that “the dispute was amicably resolved
following settlement discussions” and shall not provide any other details
regarding the settlement or this Agreement. Except as set forth above, including
in Paragraph 5.1, neither Party shall divulge or disclose to any third party any
of the material terms and conditions of this Agreement without the prior written
consent of the other Party. In the event that disclosure is required pursuant to
clause (i) of the first sentence of Section 5.1, the person or Party making
disclosure shall seek confidential treatment of such information. In the event
that disclosure is required pursuant to clause (ii) or (iii) of the first
sentence of Section 5.1, the person or Party making disclosure shall take
reasonable efforts to ensure that the confidentiality of this Agreement and its
terms are maintained.

5.3 Upon payment of the Settlement Payment, Plaintiffs shall immediately
dissolve any bar or other prohibition that may have been put in place preventing
or restricting Plaintiffs from contracting with MedQuist Inc., or any affiliated
or related companies, as a result of the Dispute that is the subject of this
Agreement, and MedQuist Inc, and its affiliated and related companies are free
to compete for and enter into contracts with Plaintiffs.

6. No Admission

This Agreement represents the settlement of disputed claims, and it does not
represent any admission of liability on the part of any Party hereto, each of
which expressly denies such liability. This Agreement may not be introduced into
evidence or used in any action except in connection with an action to enforce
the terms of this Agreement.

7. Miscellaneous

7.1 Severability. If any term or provision of this Agreement shall be found to
be illegal or unenforceable, then, notwithstanding any such illegality or
unenforceability, this Agreement shall remain in full force and effect and such
term or provision shall be deemed to be deleted.

7.2 Entire Agreement. This Agreement constitutes the entire agreement of
settlement and release between Plaintiffs, on the one hand, and Defendants, on
the other hand, with respect to the Action and Dispute, and there are otherwise
no other agreements expanding or modifying its terms. All prior oral and/or
written agreements regarding settlement of the Action and Dispute are expressly
superseded by this Agreement and are of no further force and/or effect. MedQuist
does have other, separate agreements with certain Plaintiffs regarding the
continuing provision of medical transcription and/or other services, which
agreements are not released, modified or superseded by this Agreement.

7.3 Modification. The provisions of this Agreement may be modified or amended
only in a writing signed by each of the Parties and expressly state that
modification or amendment of this Agreement is intended.

7.4 No Waiver. No breach of any provision of this Agreement may be waived unless
in writing signed by the Party against whom a waiver is asserted. Waiver of any
one breach shall not be deemed to be a waiver of any other breach of the same or
any other provision hereof.

7.5 Counterparts. This Agreement may be signed by facsimile copies, .pdf, or
otherwise in counterparts, each of which shall be deemed an original, but all
originals together shall constitute only one and the same instrument, and it
shall be deemed fully executed when signed by all Parties whether the signatures
of all Parties appear on the original or one or more copies of this Agreement.
Each Party agrees to sign two (2) originals of this Agreement so that each side
of the Action will have a fully executed original version of the Agreement.

7.6 Construction. Each Party to this Agreement has participated in the drafting
and preparation of this Agreement. Neither this Agreement nor any of its terms
hereof shall be construed under a doctrine of contract interpretation (including
but not limited to, the doctrine of contra proferentum) that construes the
document against a Party or its representatives merely by reason of such Party
having responsibility for drafting or mutually proposing the Agreement or any
portion of it.

7.7 Attorneys’ Fees and Costs Related to the Dispute. The Parties shall bear
their own respective attorneys’ fees and costs which arose as a result of the
Dispute and Action. Nothing in this Agreement, however, shall impact any
separate agreement or obligation regarding payment of attorneys’ fees and/or
costs as between MedQuist and the Individual Defendants.

7.8 Survival of Representations. All representations, warranties, and other
agreements contained in this Agreement shall survive the execution and delivery
of this Agreement by all Parties hereto.

7.9 Admissibility of Agreement. In any action or proceeding relating to this
Agreement (including, but not limited to, actions or proceedings relating to the
releases, or retained rights contained in this Agreement), the Parties stipulate
that a fully executed copy of this Agreement may be admissible to the same
extent as the fully executed original of this Agreement.

7.10 Captions. The captions or headings of the Sections of this Agreement are
for convenience of reference only and in no way define, limit or affect the
scope or substance of any Section of this Agreement.

7.11 Notice and Cure.

7.11.1 All notices and other communications among the Parties in connection with
this Agreement shall be in writing addressed to the following persons or
Parties, and shall be deemed duly served, given and received (a) on the date of
service, if served personally or sent by telex or facsimile transmission (with
appropriate confirmation of receipt) to the Party to whom notice is to be given,
or (b) on the fourth day after mailing, if mailed by first class registered or
certified mail, return receipt requested, postage pre-paid in the United States
mail, or (c) on the next day if sent by a nationally recognized courier for next
day service and so addressed as follows:

      If to MedQuist:  
MedQuist Inc.
c/o Mark R. Sullivan, Esq.
1000 Bishops Gate Blvd., Suite 300
Mount Laurel, NJ 08054-4632
Facsimile: 856-206-4020
with a copy to:  
Winston & Strawn LLP
Stephen R. Smerek, Esq.
333 South Grand Ave.
Los Angeles, CA 90071
Facsimile: 213-615-1750
If to Plaintiffs:  
Kaiser Foundation Health Plan, Inc.
c/o Mark Zemelman, Esq.
SVP & General Counsel
1 Kaiser Plaza, Oakland, CA 94612
Facsimile: 510-267-2128
with a copy to:  
White & Williams LLP

Gale White, Esq.

1650 Market Street

One Liberty Place, Suite 1800

Philadelphia, PA 19103

Facsimile: 215-789-7534

7.11.2 The Parties, by like notice, may designate another or additional
address(es), facsimile number(s) or person(s) to which notices shall be given in
connection with this Agreement.

7.11.3 Except as otherwise expressly set forth herein, in the event that any
Party believes that another Party is in default or breach of any term of this
Agreement (not including any default or breach that cannot be remedied by
additional time), the aggrieved Party shall give written notice of the default
or breach by facsimile, personal service, overnight delivery by a nationally
recognized courier, or first class registered or certified mail, return receipt
requested, to the other Party at the addresses identified above. The other Party
shall then have ten (10) business days to rectify the alleged default or breach
and shall provide written notice to the complaining Party of steps taken to
rectify the alleged default or breach (the “Cure Period”). The complaining Party
shall withhold any legal action during the Cure Period, and to the extent that
any alleged default or breach shall be cured within the Cure Period, the Parties
agree to treat such default or breach as though it had not occurred.

7.12 Governing Law, Choice of Forum, Costs and Fees.

7.12.1 This Agreement shall be interpreted, construed, and enforced under and
according to the laws of the State of California, without regard to the choice
of law rules of that or any other jurisdiction. The Parties agree that any
dispute, claim, or controversy to enforce or interpret this Agreement, or
alleging the breach hereof, shall be resolved exclusively in the State of
California or New Jersey.

7.12.2 In any action brought to enforce or interpret this Agreement, or alleging
the breach hereof, the prevailing Party shall be entitled to recover its
reasonable expenses and costs, including but not limited to reasonable
attorneys’ fees.

IN WITNESS WHEREOF, the Parties hereby execute this Agreement with an
Effective Date as set forth above.

     
PLAINTIFFS KAISER FOUNDATION HEALTH PLAN,
INC., KAISER FOUNDATION HOSPITALS, KAISER
FOUNDATION HEALTH PLAN OF THE MID-ATLANTIC
STATES, INC., and KAISER FOUNDATION HEALTH
PLAN OF COLORADO
By:/s/ Mark Zemelman Dated: 8/11/10
  DEFENDANTS MEDQUIST INC. and MEDQUIST
TRANSCRIPTIONS, LTD.

By: /s/ Peter L. Masanotti Dated: 8/12/10
 
   
Mark Zemelman
SVP & General Counsel, Kaiser
Foundation Health Plan, Inc.
  Peter L. Masanotti
Its Chief Executive Officer

THE PERMANENTE MEDICAL GROUP, INC.
By:/s/ W. W. Petrick Dated:8/9/2010
 

 
 

Name: W.W. Petrick
Title: VP & General Counsel
 

SOUTHERN CALIFORNIA PERMANENTE MEDICAL
GROUP
By: /s/ Paul Minardi, MD Dated:8/9/10
 

 
 

Name: Paul Minardi, MD
Title: Medical Director of Operations
 

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APPROVED AS TO FORM:

     
WHITE & WILLIAMS, LLP
By: /s/ Gale White
  WINSTON & STRAWN LLP
By: /s/ Stephen R. Smerek
 
   
Gale White
Attorneys for Plaintiffs
  Stephen R. Smerek
Attorneys for Defendants

LA:208358.2
LA:208358.2

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