Document:

exv10w1

 

LITE DePALMA GREENBERG

& RIVAS, LLC

JOSEPH J. DePALMA (JD 7697)

Two Gateway Center, 12th Floor

Newark, NJ 07102-5003

Telephone: 973/623-3000

973/623-0858 (fax)

Liaison Counsel

[Additional counsel appear on signature page.]

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

	 	 	 	 	 	 	 
	WILLIAM STEINER, Individually and
	)	 	 	No. 1:04-CV-05487-JBS-AMD
	On Behalf of Himself and All Others
	)	 	 	 	 	 
	Similarly Situated,
	)	 	 	CLASS ACTION
	 
	)	 	 	 	 	 
	Plaintiffs,
	)	 	 	Judge Jerome B. Simandle
	 
	)	 	 	 	 	 
	vs.
	)	 	 	STIPULATION OF SETTLEMENT
	 
	)	 	 	 	 	 
	MEDQUIST, INC., et al.,
	)	 	 	 	 	 
	 
	)	 	 	 	 	 
	Defendants.
	)	 	 	 	 	 
	______________________________________
	)	 	 	 	 	 

 

 

     This Stipulation of Settlement dated as of March 23, 2007 (the “Stipulation”), is
made and entered into by and among the following Settling Parties (as defined further
in Section IV hereof) to the above-entitled Litigation: (i) the Lead Plaintiff (on behalf
of itself and each of the Settlement Class Members), by and through its counsel of
record in the Litigation; and (ii) the Defendants, by and through their counsel of
record in the Litigation. The Stipulation is intended by the Settling Parties to fully,
finally and forever resolve, discharge and settle the Released Claims, upon and subject
to the terms and conditions hereof.

	I.	 	THE LITIGATION

     On and after November 8, 2004, the captioned action was filed in the United States
District Court for the District of New Jersey as a purported securities fraud class
action on behalf of purchasers of the publicly-traded securities of MedQuist Inc.
(“MedQuist”) during a defined period of time. Named as defendants in the action are
MedQuist, Brian J. Kearns, David A. Cohen, John A. Donohoe, Ethan Cohen, John W.
Quaintance, and Ronald F. Scarpone (collectively “Defendants”). The action is referred to
herein as the “Litigation.”

     On March 11, 2005, the Court appointed Greater Pennsylvania Carpenters Pension
Fund as Lead Plaintiff pursuant to §2lD(a)(3)(B) of the Securities Exchange Act of 1934
(the “Exchange Act”) as amended by the Private Securities Litigation Reform Act of 1995,
and approved its selection of Lerach Coughlin Stoia Geller Rudman & Robbins LLP as Lead
Counsel.

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     The operative complaint in the Litigation is the Second Amended Complaint (the
“Complaint”), filed November 15, 2005. The Complaint alleges violations of §§ 10(b) and
20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder on behalf of a class of
all purchasers of the publicly-traded securities of MedQuist between and including March
29, 2000 and June 14, 2004.

	II.	 	DEFENDANTS’ DENIALS OF WRONGDOING AND LIABILITY

     The Defendants, individually and collectively, have denied and continue to deny each
and all of the claims and contentions alleged by the Lead Plaintiff in the Litigation.
The Defendants expressly have denied and continue to deny all charges of wrongdoing or
liability against them arising out of any of the conduct, statements, acts or omissions
alleged, or that could have been alleged, in the Litigation. The Defendants also have
denied and continue to deny, inter alia, the allegations that the Lead Plaintiff or the
Settlement Class have suffered damage, that the prices of MedQuist securities were
artificially inflated by reasons of alleged misrepresentations, non-disclosures or
otherwise, and that the Lead Plaintiff or the Settlement Class were harmed by the conduct
alleged in the Complaint, and Defendants believe that the evidence developed to date
supports their position.

     Nonetheless, the Defendants have concluded that further conduct of the
Litigation would be protracted and expensive, and that it is desirable that the
Litigation be fully and finally settled in the manner and upon the terms and conditions

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set forth in this Stipulation. The Defendants also have taken into account the
uncertainty and risks inherent in any litigation, especially in complex cases like the
Litigation. The Defendants have, therefore, determined that it is desirable and
beneficial to them that the Litigation be settled in the manner and upon the terms and
conditions set forth in this Stipulation.

	III.	 	CLAIMS OF THE LEAD PLAINTIFF AND BENEFITS OF SETTLEMENT

     The Lead Plaintiff believes that the claims asserted in the Litigation have merit
and that the evidence developed to date supports the claims. However, the Lead
Plaintiff recognizes and acknowledges the expense and length of continued
proceedings necessary to prosecute the Litigation against the Defendants through trial
and through appeals. The Lead Plaintiff has also taken into account the uncertain
outcome and the risk of any litigation, especially in complex actions such as the
Litigation, as well as the difficulties and delays inherent in such litigation. The Lead
Plaintiff is also mindful of the inherent problems of proof, and possible defenses to the
securities law violations asserted in the Litigation. The Lead Plaintiff believes that
the settlement set forth in the Stipulation confers substantial benefits upon the
Settlement Class. Based on their evaluation, the Lead Plaintiff and Lead Counsel
have determined that the settlement set forth in the Stipulation is in the best interests
of the Lead Plaintiff and the Settlement Class.

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	IV.	 	TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

     NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Lead
Plaintiff (for itself and the Settlement Class Members) and the Defendants, by and
through their respective counsel or attorneys of record, that, subject to the approval of
the Court, the Litigation and the Released Claims shall be finally and fully compromised,
settled and released, and the Litigation shall be dismissed with prejudice, as to all
Settling Parties, upon and subject to the terms and conditions of the Stipulation, as
follows.

     1.     Definitions

     As used in the Stipulation, the following terms have the meanings specified below:

     1.1 “Authorized Claimant” means any Settlement Class Member whose claim for recovery
has been allowed pursuant to the terms of the Stipulation.

     1.2 “Claimant” means any Settlement Class Member who files a Proof of Claim in such
form and manner, and within such time, as the Court shall prescribe.

     1.3 “Claims Administrator” means Gilardi & Co. LLC.

     1.4 “Defendants” means MedQuist and the Individual Defendants, as defined below.

     1.5 “Effective Date” means the first date by which all of the events and conditions specified
in ¶7.1 of the Stipulation have been met and have occurred.

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     1.6 “Escrow Agent” means the law firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP or
its successor(s).

     1.7 “Final” means when the last of the following with respect to the Judgment
approving the Stipulation, substantially in the form of Exhibit B hereto, shall occur:
(i) the expiration of the time to file a motion to alter or amend the Judgment under
Federal Rule of Civil Procedure 59(e) has passed without any such motion having been
filed; (ii) the expiration of the time in which to appeal the Judgment has passed without
any appeal having been taken, which date shall be deemed to be thirty (30) days following
the entry of the Judgment, unless the date to take such an appeal shall have been
extended by Court order or otherwise, or unless the 30th day falls on a weekend or a
Court holiday, in which case the date for purposes of this Stipulation shall be deemed to
be the next business day after such 30th day; and (iii) if such motion to alter or amend
is filed or if an appeal is taken, immediately after the determination of that motion or
appeal so that it is no longer subject to any further judicial review or appeal
whatsoever, whether by reason of affirmance by a court of last resort, lapse of time,
voluntary dismissal of the appeal or otherwise, and in such a manner as to permit the
consummation of the settlement substantially in accordance with the terms and conditions
of this Stipulation. For purposes of this paragraph, an “appeal” shall include any
petition for a writ of certiorari or other writ that may be filed in connection with
approval or disapproval of this settlement, but shall not include any appeal that
concerns only the issue of

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attorneys’ fees and reimbursement of costs or the Plan of Allocation of the Settlement
Fund.

     1.8 “Individual Defendants” means Brian J. Kearns, David A. Cohen, John A. Donohoe, Ethan
Cohen, John W. Quaintance and Ronald F. Scarpone.

     1.9 “Judgment” means the judgment to be rendered by the Court, substantially in the form
attached hereto as Exhibit B.

     1.10 “Lead Counsel” means Lerach Coughlin Stoia Geller Rudman & Robbins LLP.

     1.11 “Lead Plaintiff” means Greater Pennsylvania Carpenters Pension Fund.

     1.12 “MedQuist” means MedQuist Inc.

     1.13 “Person” means an individual, corporation, partnership, limited partnership,
association, joint stock company, estate, legal representative, trust, unincorporated
association, government or any political subdivision or agency thereof, and any business
or legal entity and their spouses, heirs, predecessors, successors, representatives, or
assignees.

     1.14 “Plan of Allocation” means a plan or formula of allocation of the
Settlement Fund whereby the Settlement Fund shall be distributed to Authorized
Claimants after payment of expenses of notice and administration of the settlement,
Taxes and Tax Expenses, such attorneys’ fees, costs, expenses and interest as may be
awarded by the Court. Any Plan of Allocation is not part of the Stipulation and

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Defendants and their Related Parties shall have no responsibility therefore or liability
with respect thereto.

     1.15 “Related Parties” means each of a Defendant’s past or present directors,
officers, employees, partners, insurers, co-insurers, reinsurers, agents, controlling
shareholders, attorneys, accountants, auditors, advisors, investment advisors, personal
or legal representatives, predecessors, successors, parents, subsidiaries, divisions,
joint ventures, assigns, spouses, heirs, related or affiliated entities, any entity in
which a Defendant has a controlling interest, any members of an Individual
Defendant’s immediate family, or any trust of which an Individual Defendant is the
settlor or which is for the benefit of an Individual Defendant’s family.

     1.16 “Released Claims” shall collectively mean all claims (including “Unknown
Claims” as defined in ¶1.23 hereof), demands, rights, liabilities and causes of action
of every nature and description whatsoever, known or unknown, suspected or unsuspected,
contingent or non-contingent, whether or not concealed or hidden, which now exist, or
heretofore has existed, asserted or that might have been asserted, including, without
limitation, claims for negligence, gross negligence, breach of duty of care and/or breach
of duty of loyalty, fraud, breach of fiduciary duty, or violations of any state or
federal statutes, rules or regulations or common law principles and/or any claims arising
out of and/or related to the issuance of any of MedQuist’s financial statements, by the
Lead Plaintiff or any Settlement Class Member against the Defendants or their Related
Parties arising out of, relating to, or in connection with the

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purchase of the publicly-traded securities of MedQuist by the Lead Plaintiff or any Settlement
Class Member during the Settlement Class Period. However, Released Claims will specifically exclude
the claims presently asserted in South Broward Hospital District v. MedQuist, Inc., No.
1:05-CV-02206-JBS-AMD; Myers v. MedQuist, Civil No. 05-4608(JBS); and Kanter v. MedQuist, Civil No.
04-5542(JBS).

     1.17 “Released Persons” means each and all of the Defendants and each and all of their Related
Parties.

     1.18 “Settlement Class” means all Persons who purchased the publicly-traded securities of
MedQuist between and including March 29, 2000 and June 14, 2004. Excluded from the Settlement Class
are Defendants and their Related Parties. Also excluded from the Settlement Class are those Persons
who timely and validly request exclusion from the Settlement Class pursuant to the Notice of
Pendency and Proposed Settlement of Class Action.

     1.19 “Settlement Class Member” or “Member of the Settlement Class” means a Person who falls
within the definition of the Settlement Class as set forth in ¶1.18 of the Stipulation.

     1.20 “Settlement Class Period” means the period between and including March 29, 2000 and June
14, 2004.

     1.21 “Settlement Fund” means the principal amount of Seven Million Seven Hundred Fifty
Thousand Dollars ($7,750,000) in cash paid to the Escrow Agent

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pursuant to ¶2.1 of this Stipulation, plus all interest earned thereon pursuant to ¶¶2.1, 2.2 and
2.6.

     1.22 “Settling Parties” means, collectively, each of the Defendants, and the Lead Plaintiff on
behalf of itself and the Settlement Class Members.

     1.23 “Unknown Claims” shall collectively mean all claims, demands, rights, liabilities, and
causes of action of every nature and description which the Lead Plaintiff or any Settlement Class
Member does not know or suspect to exist in his, her or its favor at the time of the release of the
Released Persons which, if known by him, her or it, might have affected his, her or its settlement
with and release of the Released Persons, or might have affected his, her or its decision not to
object to this settlement. With respect to any and all Released Claims, the Settling Parties
stipulate and agree that, upon the Effective Date, the Lead Plaintiff shall expressly waive, and
each of the Settlement Class Members shall be deemed to have waived, and by operation of the
Judgment shall have waived, the provisions, rights and benefits of California Civil Code §1542,
which provides:

     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.

The Lead Plaintiff shall expressly and each of the Settlement Class Members shall be deemed to
have, and by operation of the Judgment shall have, expressly waived any and all provisions, rights
and benefits conferred by any law of any state or territory of

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the United States, or principle of common law, which is similar, comparable or equivalent to
California Civil Code § 1542. The Lead Plaintiff and Settlement Class Members may hereafter
discover facts in addition to or different from those which he, she or it now knows or believes to
be true with respect to the subject matter of the Released Claims, but the Lead Plaintiff shall
expressly fully, finally and forever settle and release, and each Settlement Class Member, upon the
Effective Date, shall be deemed to have, and by operation of the Judgment shall have, fully,
finally, and forever settled and released, any and all Released Claims, known or unknown, suspected
or unsuspected, contingent or non-contingent, whether or not concealed or hidden, which now exist,
or heretofore have existed, upon any theory of law or equity now existing or coming into existence
in the future, including, but not limited to, conduct which is negligent, intentional, with or
without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or
existence of such different or additional facts. The Lead Plaintiff acknowledges, and the
Settlement Class Members shall be deemed by operation of the Judgment to have acknowledged, that
the foregoing waiver was separately bargained for and a key element of the settlement of which this
release is a part.

	 	2.	 	The Settlement

	 	a.	 	The Settlement Fund

     2.1 The principal amount of Seven Million Seven Hundred Fifty Thousand Dollars ($7,750,000) in
cash was deposited by or on behalf of Defendants into an

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interest bearing account designated by the Escrow Agent on April 24, 2007. The Individual
Defendants do not have any responsibility for contributing to or funding the settlement.

	 	b.	 	The Escrow Agent

     2.2 The Escrow Agent may invest the Settlement Fund deposited pursuant to ¶2.1 hereof in
instruments backed by the full faith and credit of the United States Government or fully insured by
the United States Government or an agency thereof and shall reinvest the proceeds of these
instruments as they mature in similar instruments at their then-current market rates. The Escrow
Agent shall bear all risks related to investment of the Settlement Fund.

     2.3 The Escrow Agent shall not disburse the Settlement Fund except as provided in the
Stipulation, by an order of the Court, or with the written agreement of counsel for MedQuist.

     2.4 Subject to further order and/or direction as may be made by the Court, the Escrow Agent is
authorized to execute such transactions on behalf of the Settlement Class Members as are consistent
with the terms of the Stipulation.

     2.5 All funds held by the Escrow Agent shall be deemed and considered to be in custodia legis
of the Court, and shall remain subject to the jurisdiction of the Court, until such time as such
funds shall be distributed pursuant to the Stipulation and/or further order(s) of the Court.

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     2.6 Within five (5) days after payment of the Settlement Fund to the Escrow Agent pursuant to
¶2.1 hereof, the Escrow Agent may establish a “Class Notice and Administration Fund,” and may
deposit up to $100,000 from the Settlement Fund in it. The Class Notice and Administration Fund may
be used by Lead Counsel to pay costs and expenses reasonably and actually incurred in connection
with providing notice to the Settlement Class, locating Settlement Class Members, assisting with
the filing of claims, administering and distributing the Settlement Fund to Authorized Claimants,
processing Proof of Claim and Release forms and paying escrow fees and costs, if any. The Class
Notice and Administration Fund may also be invested and earn interest as provided for in ¶2.2 of
this Stipulation. In no event shall Defendants have any responsibility for or liability with
respect to the Escrow Agent or its actions or the Class Notice and Administration Fund. Any costs
or expenses expended for notice or claims administration in excess of $100,000 shall be paid from
the Settlement Fund, subject to approval of Lead Counsel.

	 	c.	 	Taxes

     2.7 (a) The Settling Parties and the Escrow Agent agree to treat the Settlement Fund as being
at all times a “qualified settlement fund” within the meaning of Treas, Reg. §1.468B-1. In
addition, the Escrow Agent shall timely make such elections as necessary or advisable to carry out
the provisions of this ¶2.7, including the “relation-back election” (as defined in Treas. Reg. §
1.468B-1) back to the earliest permitted date. Such elections shall be made in compliance with the
procedures and

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requirements contained in such regulations. It shall be the responsibility of the Escrow Agent to
timely and properly prepare and deliver the necessary documentation for signature by all necessary
parties, and thereafter to cause the appropriate filing to occur.

          (b) For the purpose of § 1.468B of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, the “administrator” shall be the Escrow Agent. The Escrow Agent
shall timely and properly file all informational and other tax returns necessary or advisable with
respect to the Settlement Fund (including without limitation the returns described in Treas. Reg.
§1.468B-2(k)). Such returns (as well as the election described in ¶2.7(a) hereof) shall be
consistent with this ¶2.7 and in all events shall reflect that all Taxes (including any estimated
Taxes, interest or penalties) on the income earned by the Settlement Fund shall be paid out of the
Settlement Fund as provided in ¶2.7(c) hereof.

          (c) All (a) Taxes (including any estimated Taxes, interest or penalties) arising with respect
to the income earned by the Settlement Fund, including any Taxes or tax detriments that may be
imposed upon the Defendants or their Related Parties with respect to any income earned by the
Settlement Fund for any period during which the Settlement Fund does not qualify as a “qualified
settlement fund” for federal or state income tax purposes (“Taxes”), and (b) expenses and costs
incurred in connection with the operation and implementation of this ¶2.7 (including, without
limitation, expenses of tax attorneys and/or accountants and mailing and distribution

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costs and expenses relating to filing (or failing to file) the returns described in this ¶2.7)
(“Tax Expenses”), shall be paid out of the Settlement Fund; in no event shall the Defendants or
their Related Parties have any responsibility for or liability with respect to the Taxes or the Tax
Expenses. The Escrow Agent shall indemnify and hold each of the Defendants and their Related
Parties harmless for Taxes and Tax Expenses (including, without limitation, Taxes payable by reason
of any such indemnification). Further, Taxes and Tax Expenses shall be treated as, and considered
to be, a cost of administration of the Settlement Fund and shall be timely paid by the Escrow Agent
out of the Settlement Fund without prior order from the Court and the Escrow Agent shall be
obligated (notwithstanding anything herein to the contrary) to withhold from distribution to
Authorized Claimants any funds necessary to pay such amounts including the establishment of
adequate reserves for any Taxes and Tax Expenses (as well as any amounts that may be required to be
withheld under Treas. Reg. § 1.468B-2(1)(2)); neither the Defendants nor their Related Parties are
responsible therefore nor shall they have any liability with respect thereto. The parties hereto
agree to cooperate with the Escrow Agent, each other, and their tax attorneys and accountants to
the extent reasonably necessary to carry out the provisions of this ¶2.7.

          (d) For the purpose of this ¶2.7, references to the Settlement Fund shall include both the
Settlement Fund and the Class Notice and Administration Fund and shall also include any earnings
thereon.

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	 	d.	 	Termination of Settlement

     2.8 In the event that the Stipulation is not approved, or is terminated, canceled, or fails to
become effective for any reason, the Settlement Fund and the Class Notice and Administration Fund
(in each case, including accrued interest), less reasonable costs and expenses of class notice and
administration and taxes actually incurred and properly due and owing in connection with the
settlement provided for herein, shall be refunded pro rata to the entities contributing to the
Settlement Fund, as provided in ¶7.3 below.

	 	3.	 	Notice Order and Settlement Hearing

     3.1 Promptly after execution of the Stipulation, the Settling Parties shall submit the
Stipulation together with its Exhibits to the Court and shall apply for entry of an order (the
“Notice Order”), substantially in the form of Exhibit A hereto, requesting, inter alia, the
preliminary approval of the settlement set forth in the Stipulation, and approval for mailing the
Notice of Pendency and Proposed Settlement of Class Action (the “Notice”), substantially in the form of Exhibit A-l hereto and publication of
a summary notice, substantially in the form of Exhibit A-3 hereto. The Notice shall include the
general terms of the settlement set forth in the Stipulation, the proposed Plan of Allocation, the
general terms of the Fee and Expense Application and the date of the Settlement Hearing.

     3.2 Lead Counsel shall request that after notice is given, the Court hold a hearing (the
“Settlement Hearing”) and approve the settlement of the Litigation as set

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forth herein. At or after the Settlement Hearing, Lead Counsel also will request that the Court
approve the proposed Plan of Allocation and the Fee and Expense Application.

	 	4.	 	Releases

     4.1 Upon the Effective Date, as defined in ¶l.5 hereof, the Lead Plaintiff, and each of the
Settlement Class Members shall be deemed to have, and by operation of the Judgment shall have,
fully, finally, and forever released, relinquished and discharged all Released Claims against the
Released Persons, whether or not such Settlement Class Member executes and delivers a Proof of
Claim and Release form.

     4.2 The Proof of Claim and Release to be executed by Settlement Class Members shall release
all Released Claims against the Released Persons and shall be substantially in the form contained
in Exhibit A-2 hereto.

     4.3 Upon the Effective Date, as defined in ¶1.5 hereof, each of the Released Persons shall be
deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released,
relinquished and discharged the Lead Plaintiff, each and all of the Settlement Class Members, and
Lead Counsel from all claims (including Unknown Claims) arising out of, relating to, or in
connection with the institution, prosecution, assertion, settlement or resolution of the Litigation
or the Released Claims.

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	 	5.	 	Administration and Calculation of Claims, Final Awards and Supervision and Distribution of
Settlement Fund

     5.1 The Claims Administrator shall administer and calculate the claims submitted by Settlement
Class Members.

     5.2 The Settlement Fund shall be applied as follows:

          (a) to pay all the costs and expenses reasonably and actually incurred in connection with
providing notice, locating Settlement Class Members, assisting with the filing of claims,
administering and distributing the Settlement Fund to Authorized Claimants, processing Proof of
Claim and Release forms and paying escrow fees and costs, if any;

          (b) to pay the Taxes and Tax Expenses described in ¶2.7 hereof;

          (c) to pay Lead Counsel’s attorneys’ fees and expenses (the “Fee and Expense Award”), if and
to the extent allowed by the Court;

          (d) after the Effective Date, to distribute the balance of the Settlement Fund (the “Net
Settlement Fund”) to Authorized Claimants as allowed by the Stipulation, the Plan of Allocation, or
the Court.

     5.3 Upon the Effective Date and thereafter, and in accordance with the terms of the
Stipulation, the Plan of Allocation, or such further approval and further order(s) of the Court as
may be necessary or as circumstances may require, the Net Settlement Fund shall be distributed to
Authorized Claimants, subject to and in accordance with the following.

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     5.4 Within ninety (90) days after the mailing of the Notice or such other time as may be set
by the Court, each Person claiming to be an Authorized Claimant shall be required to submit to the
Claims Administrator a completed Proof of Claim and Release, substantially in the form of Exhibit
A-2 hereto, signed under penalty of perjury and supported by such documents as are specified in the
Proof of Claim and Release and as are reasonably available to the Authorized Claimant.

     5.5 All Settlement Class Members who fail to timely submit a Proof of Claim and Release within
such period, or such other period as may be ordered by the Court, or otherwise allowed, shall be
forever barred from receiving any payments pursuant to the Stipulation and the settlement set forth
herein, but will in all other respects be subject to and bound by the provisions of the
Stipulation, the releases contained herein, and the Judgment.

     5.6 The Net Settlement Fund shall be distributed to Authorized Claimants substantially in
accordance with a Plan of Allocation to be described in the Notice and approved by the Court. If
there is any balance remaining in the Net Settlement Fund after six (6) months from the date of
distribution of the Net Settlement Fund (whether by reason of tax refunds, uncashed checks or
otherwise), Lead Counsel shall, if feasible, reallocate such balance among Authorized Claimants in
an equitable and economic fashion. Thereafter, any balance which still remains in the Net
Settlement Fund shall be donated to an appropriate, non-profit organization agreed upon by Lead
Counsel.

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     5.7 This is not a claims-made settlement and, if all conditions of the Stipulation are
satisfied and the settlement becomes Final, no portion of the Settlement Fund will be returned to
the Defendants or their insurers. The Defendants and their Related Parties shall have no
responsibility for, interest in, or liability whatsoever with respect to the distribution of the
Net Settlement Fund, the Plan of Allocation, the determination, administration, or calculation of
claims, the payment or withholding of Taxes or Tax Expenses, or any losses incurred in connection
therewith.

     5.8 No Person shall have any claim against Lead Counsel, the Claims Administrator or other
entity designated by Lead Counsel based on distributions made substantially in accordance with the
Stipulation and the settlement contained herein, the Plan of Allocation, or further order(s) of the
Court.

     5.9 It is understood and agreed by the Settling Parties that any proposed Plan of Allocation
of the Net Settlement Fund including, but not limited to, any adjustments to an Authorized
Claimant’s claim set forth therein, is not a part of the Stipulation and is to be considered by the
Court separately from the Court’s consideration of the fairness, reasonableness and adequacy of the
settlement set forth in the Stipulation, and any order or proceeding relating to the Plan of
Allocation shall not operate to terminate or cancel the Stipulation or affect or delay the finality
of the Court’s Judgment approving the Stipulation and the settlement set forth therein (including
the releases contained therein), or any other orders entered pursuant to the Stipulation.

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	 	6.	 	Lead Counsel’s Attorneys’ Fees and Reimbursement of
Expenses

     6.1 Lead Counsel may submit an application or applications (the “Fee and Expense
Application”) for distributions to them from the Settlement Fund for: (a) an award of attorneys’
fees; plus (b) reimbursement of actual expenses, including the fees of any experts or consultants,
incurred in connection with prosecuting the Litigation, plus any interest on such attorneys’ fees
and expenses at the same rate and for the same periods as earned by the Settlement Fund (until
paid), as may be awarded by the Court. Lead Counsel reserve the right to make additional
applications for fees and expenses incurred.

     6.2 The attorneys’ fees and expenses, as awarded by the Court, shall be paid to Lead
Counsel from the Settlement Fund, as ordered, immediately after the Court executes an order
awarding such fees and expenses. In the event that the Effective Date does not occur, or the
Judgment or the order making the Fee and Expense Award is reversed or modified, or the Stipulation
is canceled or terminated for any other reason, and in the event that the Fee and Expense Award
has been paid to any extent, then Lead Counsel shall within five (5) business days from receiving
notice from MedQuist’s counsel or from a court of appropriate jurisdiction, refund to the
Settlement Fund the fees and expenses previously paid to them from the Settlement Fund plus
interest thereon at the same rate as earned by the Settlement Fund in an amount consistent with
such reversal or modification.

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     6.3 The procedure for and the allowance or disallowance by the Court of any applications by
Lead Counsel for attorneys’ fees and expenses, including the fees of experts and consultants, to be
paid out of the Settlement Fund, are not part of the settlement set forth in the Stipulation, and
are to be considered by the Court separately from the Court’s consideration of the fairness,
reasonableness and adequacy of the settlement set forth in the Stipulation, and any order or
proceedings relating to the Fee and Expense Application, or any appeal from any order relating
thereto or reversal or modification thereof, shall not operate to terminate or cancel the
Stipulation, or affect or delay the finality of the Judgment approving the Stipulation and the
settlement of the Litigation set forth therein (including the releases contained therein).

     6.4 Defendants and their Related Parties shall have no responsibility for or liability with
respect to any payment of attorneys’ fees and expenses to Lead Counsel over and above payment from
the Settlement Fund.

	 	7.	 	Conditions of Settlement, Effect of Disapproval, Cancellation or Termination

     7.1 The Effective Date of the Stipulation shall be conditioned on the occurrence of all of
the following events:

          (a) The Settling Parties acknowledge that the Settlement Fund has been deposited by or on
behalf of MedQuist into an interest bearing account maintained by the Escrow Agent as required by
¶2.1 hereof;

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          (b) MedQuist has not exercised its option to terminate the Stipulation pursuant to ¶7.6
hereof;

          (c) the Court has entered the Notice Order, as required by ¶3.1 hereof;

          (d) the Court has entered the Judgment, or a judgment substantially in the form of Exhibit B
hereto; and

          (e) the Judgment has become Final, as defined in ¶l.7 hereof.

     7.2 Upon the occurrence of all of the events referenced in ¶7.1 hereof, any and all remaining
interest or right of Defendants in or to the Settlement Fund, if any, shall be absolutely and
forever extinguished. If all of the conditions specified in ¶7.1 hereof are not met, then the
Stipulation shall be canceled and terminated subject to ¶7.4 hereof unless Lead Counsel and counsel
for MedQuist mutually agree in writing to proceed with the Stipulation.

     7.3 Unless otherwise ordered by the Court, in the event the Stipulation shall terminate, or
be canceled, or shall not become effective for any reason, then within ten (10) business days
after written notification of such event is sent by counsel for MedQuist to the Escrow Agent and
in accordance with the terms of ¶2.8 hereof, the Settlement Fund (including accrued interest), plus
any amount then remaining in the Class Notice and Administration Fund (including accrued interest), less expenses and any costs
which have either been disbursed pursuant to ¶2.6 hereof or are determined to be chargeable to the
Class Notice and Administration Fund, shall be refunded by the Escrow Agent to MedQuist, pursuant
to written instructions from MedQuist or its

-22-

 

successor-in-interest. At the request of counsel to MedQuist, the Escrow Agent or its designee
shall apply for any tax refund owed on the Settlement Fund and pay the proceeds, after deduction of
any fees or expenses incurred in connection with such application(s) for refund, pursuant to
written direction from MedQuist or its successor-in-interest.

     7.4 In the event that the Stipulation is not approved by the Court or the settlement set forth in
the Stipulation is terminated or fails to become effective in accordance with its terms, the
Settling Parties shall be restored to their respective positions in the Litigation as of
March 23, 2007. In such event, the terms and provisions of the Stipulation, with the
exception of ¶¶2.7, 2.8, 7.3-7.5, and 8.3 hereof, shall have no further force and effect with
respect to the Settling Parties and shall not be used in this Litigation or in any other
proceeding for any purpose, and any judgment or order entered by the Court in accordance with
the terms of the Stipulation shall be treated as vacated, nunc pro tunc. No order of the
Court or modification or reversal on appeal of any order of the Court concerning the Plan of
Allocation or the amount of any attorneys’ fees, costs, expenses and interest awarded by the
Court to Lead Counsel shall constitute grounds for cancellation or termination of the
Stipulation. In addition, if the Settlement is not approved by the Court or is otherwise
terminated, the Individual Defendants’ answers will be due, absent an additional written
agreement by the Settling Parties setting a new date, 6 weeks after entry of an

-23-

 

order denying final approval by the Court or after such other termination of the Settlement.

     7.5 If the Effective Date does not occur, or if the Stipulation is terminated pursuant to
its terms, neither the Lead Plaintiff nor Lead Counsel shall have any obligation to repay any
amounts actually and properly disbursed from the Class Notice and Administration Fund. In addition,
any expenses already incurred and properly chargeable to the Class Notice and Administration Fund
pursuant to ¶2.6 hereof at the time of such termination or cancellation, but which have not been
paid, shall be paid by the Escrow Agent in accordance with the terms of the Stipulation prior to
the balance being refunded in accordance with ¶¶2.8 and 7.3
hereof.

     7.6 If prior to the Settlement Hearing, the aggregate number of MedQuist publicly-traded
securities purchased by Persons who would otherwise be Members of the Settlement Class, but who
request exclusion from the Settlement Class, exceeds the sum specified in a separate Supplemental
Agreement Regarding Requests for Exclusion (“Supplemental Agreement”) between the Settling Parties,
MedQuist shall have, in its sole and absolute discretion, the option to terminate this Stipulation
in accordance with the procedures set forth in the Supplemental Agreement. The Supplemental
Agreement will not be filed with the Court unless and until a dispute among the Settling Parties
concerning its interpretation or application arises.

     7.7 If a case is commenced in respect to any Defendant under Title 11 of the United States
Code (Bankruptcy), or a trustee, receiver or conservator is appointed

-24-

 

under any similar law, and in the event of the entry of a final order of a court of competent
jurisdiction determining the transfer of the Settlement Fund, or any portion thereof, by or on
behalf of such Defendant to be a preference, voidable transfer, fraudulent transfer or similar
transaction, then, at Lead Plaintiff’s option, as to such Defendant, the releases given and
Judgment entered in favor of such Defendant pursuant to this Stipulation shall be null and void.

	 	8.	 	Miscellaneous Provisions

     8.1 The Settling Parties (a) acknowledge that it is their intent to consummate this
agreement; and (b) agree to cooperate to the extent reasonably necessary to effectuate and
implement all terms and conditions of the Stipulation and to exercise their reasonable best efforts
to accomplish the foregoing terms and conditions of the Stipulation.

     8.2 The Settling Parties intend this settlement to be a final and complete resolution of all
disputes between them with respect to the Litigation. The settlement compromises claims which are
contested and shall not be deemed an admission by any Settling Party as to the merits of any claim
or defense. The Final Judgment will contain a statement that during the course of the Litigation,
the parties and their respective counsel at all times complied with the requirements of Federal
Rule of Civil Procedure 11. While retaining their right to deny liability, the Defendants agree
that the amount paid to the Settlement Fund and the other terms of the settlement were negotiated
in good faith by the Settling Parties, and reflect a settlement that was

-25-

 

reached voluntarily after consultation with competent legal counsel. The Settling Parties reserve
their right to rebut, in a manner that such party determines to be appropriate, any contention made
in any public forum that the Litigation was brought or defended in bad faith or without a
reasonable basis.

     8.3 Neither the Stipulation nor the settlement contained therein, nor any act performed or
document executed pursuant to or in furtherance of the Stipulation or the settlement: (a) is or may
be deemed to be or may be used as an admission of, or evidence of, the validity of any Released
Claim, or of any wrongdoing or liability of the Defendants; or (b) is or may be deemed to be or may
be used as an admission of, or evidence of, any fault or omission of any of the Defendants in any
civil, criminal or administrative proceeding in any court, administrative agency or other
tribunal. Defendants may file the Stipulation and/or the Judgment in any action that may be brought
against them in order to support a defense or counterclaim based on principles of res judicata,
collateral estoppel, release, good faith settlement, judgment bar or reduction or any other theory
of, without limitation, claim preclusion or issue preclusion or similar defense or counterclaim.

     8.4 All agreements made and orders entered during the course of the Litigation relating
to the confidentiality of information shall survive this Stipulation, pursuant to their terms.

     8.5 All of the Exhibits to the Stipulation are material and integral parts hereof and are
fully incorporated herein by this reference.

-26-

 

     8.6 The Stipulation may be amended or modified only by a written instrument signed by or
on behalf of all Settling Parties or their respective successors-in-interest.

     8.7 The Stipulation and the Exhibits attached hereto and the Supplemental Agreement
constitute the entire agreement among the parties hereto and no representations, warranties or
inducements have been made to any party concerning the Stipulation, its Exhibits, or the
Supplemental Agreement other than the representations, warranties and covenants contained and
memorialized in such documents. Except as otherwise provided herein, each party shall bear its own
costs.

     8.8 Lead Counsel, on behalf of the Settlement Class, are expressly authorized by the Lead
Plaintiff to take all appropriate action required or permitted to be taken by the Settlement Class
pursuant to the Stipulation to effectuate its terms and also are expressly authorized to enter into
any modifications or amendments to the Stipulation on behalf of the Settlement Class which they
deem appropriate.

     8.9 Each counsel or other Person executing the Stipulation or any of its Exhibits on behalf
of any party hereto hereby warrants that such Person has the full authority to do so.

     8.10 The Stipulation may be executed in one or more counterparts. All executed counterparts
and each of them shall be deemed to be one and the same instrument. A complete set of original
executed counterparts shall be filed with the Court.

-27-

 

     8.11 The Stipulation shall be binding upon, and inure to the benefit of, the successors and
assigns of the parties hereto.

     8.12 The Court shall retain jurisdiction with respect to implementation and enforcement of
the terms of the Stipulation, and all parties hereto submit to the jurisdiction of the Court for
purposes of implementing and enforcing the settlement embodied in the Stipulation.

     8.13 The Stipulation and the Exhibits hereto shall be considered to have been negotiated,
executed and delivered, and to be wholly performed, in the State of New Jersey, and the rights and
obligations of the parties to the Stipulation shall be construed and enforced in accordance
with, and governed by, the internal, substantive laws of the State of New Jersey without giving
effect to that State’s choice-of-law principles.

     IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed, by their
duly authorized attorneys dated as of March 23, 2007.

	 	 	 	 	 
	 	LITE DePALMA GREENBERG
& RIVAS, LLC

JOSEPH J. DePALMA

 	 
	 	/s/ JOSEPH J. DePALMA
 	 
	 	JOSEPH J. DePALMA
 	 
	 	Two Gateway Center, 12th Floor

Newark, NJ 07102-5003

Telephone: 973/623-3000

973/623-0858 (fax)

Liaison Counsel 	 

-28-

 

	 	 	 	 	 

	 	 	 	 	 
	 	LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

JOY ANN BULL

 	 
	 	/s/ JOY ANN BULL
 	 
	 	JOY ANN BULL
 	 
	 	655 West Broadway, Suite 1900

San Diego, CA 92101-3301

Telephone:  619/231-1058

619/231-7423 (fax)

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

JEFFREY W. LAWRENCE

SHIRLEY H. HUANG

100 Pine Street, Suite 2600

San Francisco, CA 94111

Telephone:  415/288-4545

415/288-4534 (fax)

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

SAMUEL H. RUDMAN

DAVID A. ROSENFELD

58 South Service Road, Suite 200

Melville, NY 11747

Telephone:  631/367-7100

631/367-1173 (fax)

Lead Counsel for Plaintiffs 	 

-29-

 

	 	 	 	 	 

	 	 	 	 	 
	 	GREENBAUM ROWE SMITH
& DAVID LLP

MARC GROSS

6 Becker Farm Road

Roseland, NJ 07068-1735

Telephone: 973/535-1600

975/535-1698 (fax)

Attorneys for Defendant Ronald F.

Scarpone, MedQuist Inc.

WINSTON & STRAWN LLP

NEAL MARDER

GAIL J. STANDISH

 	 
	 	/s/ GAIL J. STANDISH
 	 
	 	GAIL J. STANDISH
 	 
	 	333 South Grand Avenue, 38th Floor

Los Angeles, CA 90071-1543

Telephone: 213/615-1700

213/615-1750 (fax)

Attorneys for Defendant Ronald F.

Scarpone, MedQuist, Inc. 	 
	 
	 	BUCHANAN INGERSOLL &
ROONEY PC

PAUL C. MADDEN

 	 
	 	/s/ PAUL C. MADDEN
 	 
	 	PAUL C. MADDEN
 	 
	 	1835 Market Street, 14th Floor

Philadelphia, PA 19103

Telephone:  215/665-6920

215/665-8760 (fax)

Attorneys for Defendant, John W.

Quaintance 	 

-30-

 

	 	 	 	 	 

	 	 	 	 	 
	 	LATHAM & WATKINS LLP

EDWARD J. SHAPIRO

 	 
	 	/s/ EDWARD J. SHAPIRO
 	 
	 	EDWARD J. SHAPIRO
 	 
	 	555 11th Street, N.W., Suite 1000

Washington, D.C. 20004

Telephone: 202/637-2200

202/637-2201 (fax)

Attorneys for Defendant Brian J. Kearns 	 
	 
	 	MONTGOMERY, MCCRACKEN,
WALKER & RHOADS, LLP

JOHN J. LEVY

 	 
	 	
 	 
	 	JOHN J. LEVY
 	 
	 	Liberty View

457 Haddonfield Road, Suite 600

Cherry Hill, NJ 08002

Telephone: 856/488-7700

856/488-7720 (fax)

Attorneys for Defendant Ethan Cohen 	 
	 
	 	DECHERT LLP

DAVID A. KOTLER

 	 
	 	
 	 
	 	DAVID A. KOTLER 	 
	 
	 	Princeton Pike Corporate Center

997 Lenox Drive, Suite 210

Lawrenceville, NJ 08648

Telephone: 609/620-3200

609/620-3259 (fax)

 	 

-31-

 

	 	 	 	 	 

	 	 	 	 	 
	 	LATHAM & WATKINS LLP

EDWARD J. SHAPIRO

 	 
	 	
 	 
	 	EDWARD J. SHAPIRO
 	 
	 	555 11th Street, N.W., Suite 1000

Washington, D.C. 20004

Telephone: 202/637-2200

202/637-2201 (fax)

Attorneys for Defendant Brian J. Kearns 	 
	 
	 	MONTGOMERY, MCCRACKEN,

WALKER & RHOADS, LLP

JOHN J. LEVY

 	 
	 	/s/ JOHN J. LEVY
 	 
	 	JOHN J. LEVY
 	 
	 	Liberty View

457 Haddonfield Road, Suite 600

Cherry Hill, NJ 08002

Telephone: 856/488-7700

856/488-7720 (fax)

Attorneys for Defendant Ethan Cohen 	 
	 
	 	DECHERT LLP

DAVID A. KOTLER

 	 
	 	
 	 
	 	DAVID A. KOTLER 	 
	 
	 	Princeton Pike Corporate Center

997 Lenox Drive, Suite 210

Lawrenceville, NJ 08648

Telephone: 609/620-3200

609/620-3259 (fax)

 	 

-32-

 

	 	 	 	 	 

	 	 	 	 	 
	 	LATHAM & WATKINS LLP

EDWARD J. SHAPIRO

 	 
	 	
 	 
	 	EDWARD J. SHAPIRO
 	 
	 	555 11th Street, N.W., Suite 1000

Washington, D.C. 20004

Telephone: 202/637-2200

202/637-2201 (fax)

Attorneys for Defendant Brian J. Kearns 	 
	 
	 	MONTGOMERY, MCCRACKEN,

WALKER & RHOADS, LLP

JOHN J. LEVY

 	 
	 	
 	 
	 	JOHN J. LEVY
 	 
	 	Liberty View

457 Haddonfield Road, Suite 600

Cherry Hill, NJ 08002

Telephone: 856/488-7700

856/488-7720 (fax)

Attorneys for Defendant Ethan Cohen 	 
	 
	 	DECHERT LLP

DAVID A. KOTLER

 	 
	 	/s/ DAVID A. KOTLER
 	 
	 	DAVID A. KOTLER 	 
	 
	 	Princeton Pike Corporate Center

997 Lenox Drive, Suite 210

Lawrenceville, NJ 08648

Telephone: 609/620-3200

609/620-3259 (fax)

 	 

-33-

 

	 	 	 	 	 

	 	 	 	 	 
	 	DECHERT LLP

ROBERT JOSSEN

30 Rockefeller Plaza

New York, NY 10112

Telephone: 212/698-3500

212/698-3599 (fax)

Attorneys for Defendant David A. Cohen
 	 
	 
	 	KATTEN MUCHIN ROSENMAN LLP

SCOTT A. RESNIK

JOEL W. STERNMAN

ANTHONY L. PACCIONE

 	 
	 	/s/ JOEL W. STERNMAN
 	 
	 	JOEL W. STERNMAN 	 
	 
	 	575 Madison Avenue

New York, NY 10022

Telephone: 212/940-8800

212/940-8776 (fax)

Attorneys for Defendant John A. Donohoe

 	 

-34-

 

EXHIBIT A

 

 

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

	 	 	 	 	 
	WILLIAM STEINER, Individually and
	 	)	 	No. l:04-CV-05487-JBS-AMD
	On Behalf of Himself and All Others
	 	)	 	 
	Similarly Situated,
	 	)	 	CLASS ACTION 
	 
	 	)	 	 
	                                        Plaintiffs,
	 	)	 	Judge Jerome B. Simandle 
	 
	 	)	 	 
	           vs.
	 	)	 	[PROPOSED] ORDER
	 
	 	)	 	PRELIMINARILY APPROVING
	MEDQUIST, INC., et al.,
	 	)	 	SETTLEMENT AND PROVIDING
	 
	 	)	 	FOR NOTICE
	                                         Defendants,
	 	)	 	 
	 
	 	)	 	EXHIBIT A
	 	 	 	 

 

 

     WHEREAS,
a class action is pending before the Court entitled Steiner v.
MedQuist, Inc., et al., No. 1:04-CV-05487-JBS-AMD (the “Litigation”);

     WHEREAS, the Court has received the Stipulation of Settlement dated as of March 23, 2007 (the
“Stipulation”), that has been entered into by the Lead Plaintiff and Defendants, and the Court has
reviewed the Stipulation and its attached Exhibits;

     WHEREAS, the parties having made application, pursuant to Federal Rule of Civil Procedure 23(e),
for an order preliminarily approving the settlement of this Litigation, in accordance with the
Stipulation which, together with the Exhibits annexed thereto sets forth the terms and conditions
for a proposed settlement of the Litigation and for dismissal of the Litigation with prejudice
upon the terms and conditions set forth therein; and the Court having read and considered the
Stipulation
and the Exhibits annexed thereto; and

     WHEREAS, all defined terms contained herein shall have the same meanings as set forth in the
Stipulation;

     NOW, THEREFORE, IT IS HEREBY ORDERED:

     1. The Court does hereby preliminarily approve the Stipulation and the
settlement set forth therein, subject to further consideration at the Settlement Hearing described
below.

     2. A hearing (the “Settlement Hearing”) shall be held before this Court on                     , 2007,
at___:___.m., at the Mitchell H. Cohen Building & U.S. Courthouse, 4th & Cooper Streets, Camden,
New Jersey, to determine whether the proposed

-1-

 

settlement of the Litigation on the terms and conditions provided for in the Stipulation is fair,
reasonable and adequate to the Settlement Class and should be approved by the Court; whether a
Judgment as provided in ¶1.9 of the Stipulation should be entered herein; whether the proposed Plan
of Allocation should be approved; and to determine the amount of fees and expenses that should be
awarded to Lead Counsel. The Court may adjourn the Settlement Hearing without further notice to
Members of the
Settlement Class.

     3. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, the Court
preliminarily certifies, for purposes of effectuating this settlement, a Settlement Class of all
Persons who purchased the publicly-traded securities of MedQuist between and including March 29,
2000 and June 14, 2004. Excluded from the Settlement Class are Defendants and their Related
Parties. Also excluded from the Settlement Class are those Persons who timely and validly request
exclusion from the Settlement Class
pursuant to the Notice of Pendency and Proposed Settlement of Class Action.

     4. With respect to the Settlement Class, this Court preliminarily finds for purposes of
effectuating this settlement that: (a) the Members of the Settlement Class are so numerous that
joinder of all Settlement Class Members in the Litigation is impracticable; (b) there are questions
of law and fact common to the Settlement Class which predominate over any individual questions; (c)
the claims of the Lead Plaintiff are typical of the claims of the Settlement Class; (d) the Lead
Plaintiff and Lead Counsel have fairly and adequately represented and protected the interests of all of the

-2-

 

Settlement Class Members; and (e) a class action is superior to other available methods for the
fair and efficient adjudication of the controversy, considering: (i) the interests of the Members
of the Settlement Class in individually controlling the prosecution of the separate actions; (ii)
the extent and nature of any litigation concerning the controversy already commenced by Members of the Settlement Class; (iii) the
desirability or undesirability of continuing the litigation of these claims in this particular
forum; and (iv) the difficulties likely to be encountered in the management of the Litigation.

     5. The Court approves, as to form and content, the Notice of Pendency and
Proposed Settlement of Class Action (the “Notice”), the Proof of Claim and Release form (the “Proof
of Claim”), and Summary Notice for publication annexed as Exhibits A-1, A-2 and A-3 hereto, and
finds that the mailing and distribution of the Notice and publishing of the Summary Notice
substantially in the manner and form set forth in ¶¶6-7 of this Order meet the requirements of
Federal Rule of Civil Procedure 23 and
due process, and is the best notice practicable under the circumstances and shall constitute due
and sufficient notice to all Persons entitled thereto.

     6. Pursuant to Rule 53(c) of the Federal Rules of Civil Procedure, the Court appoints Gilardi & Co.
LLC (“Claims Administrator”) to supervise and administer the notice procedure as well as the
processing of claims as more fully set forth below:

          (a) Not later than                     , 2007 (the “Notice Date”), Lead Counsel
shall cause a copy of the Notice and the Proof of Claim, substantially in the forms

-3-

 

annexed as Exhibits A-l and A-2 hereto, to be mailed by first class mail to all Settlement Class
Members who can be identified with reasonable effort;

          (b) Not later than                     , 2007, Lead Counsel shall cause the
Summary Notice to be published once in Investor’s Business Daily

          (c) Not later than                     , 2007, Lead Counsel shall cause the
Complaint, the Stipulation and its exhibits to be posted on the following websites:
www.gilardi.com and www.lerachlaw.com: and

          (d) At least seven (7) calendar days prior to the Settlement Hearing,
Lead Counsel shall cause to be served on Defendants’ counsel and filed with the Court proof, by
affidavit or declaration, of such mailing and publishing.

     7. Nominees who purchased MedQuist publicly-traded securities between
March 29, 2000 and June 14, 2004, shall send the Notice and the Proof of Claim to all beneficial
owners of such MedQuist securities within ten (10) days after receipt thereof, or send a list of
the names and addresses of such beneficial owners to the Claims Administrator within ten (10) days
of receipt thereof, in which event the Claims Administrator shall promptly mail the Notice and the
Proof of Claim to such beneficial owners. Lead Counsel shall, if requested, reimburse banks,
brokerage houses or other nominees solely for their reasonable out-of-pocket expenses incurred in
providing notice to beneficial owners who are Settlement Class Members out of the Class Notice and
Administration Fund, which expenses would not have been incurred

-4-

 

except for the sending of such notice, subject to further order of this Court with respect to any
dispute concerning such compensation.

     8. All Members of the Settlement Class shall be bound by all determinations
and judgments in the Litigation concerning the settlement, whether favorable or unfavorable to the
Settlement Class.

     9. Settlement Class Members who wish to participate in the settlement shall complete and submit
Proof of Claim forms in accordance with the instructions contained therein. Unless the Court orders
otherwise, all Proof of Claim forms must be postmarked no later than ninety (90) days from the
Notice Date. Any Settlement Class Member who does not timely submit a Proof of Claim within the
time provided for shall be barred from sharing in the distribution of the proceeds of the Net
Settlement Fund, unless otherwise ordered by the Court.

     10. Any Person who desires to request exclusion from the Settlement Class
shall do so within the time set forth and in the manner described in the Notice. All Persons who
submit valid and timely requests for exclusion in the manner set forth in the Notice shall have no
rights under the Stipulation, shall not share in the distribution of the Net Settlement Fund, and
shall not be bound by the Stipulation or the Judgment
entered in the Litigation.

     11. Any Member of the Settlement Class may enter an appearance in the
Litigation, at their own expense, individually or through counsel of their own choice. If they do
not enter an appearance, they will be represented by Lead Counsel.

-5-

 

     12. Any Member of the Settlement Class may appear and show cause, if he,
she or it has any reason, why the proposed settlement of the Litigation should or should not be
approved as fair, reasonable and adequate, why a judgment should or should not be entered thereon,
why the Plan of Allocation should or should not be approved, or why attorneys’ fees and expenses
should or should not be awarded to Lead Counsel; provided, however, that no Settlement Class Member
or any other Person shall be heard or entitled to contest the approval of the terms and conditions
of the proposed settlement, or, if approved, the Judgment to be entered thereon approving the same,
or the order approving the Plan of Allocation, or the attorneys’fees and expenses to be awarded to
Lead Counsel, unless that Person has delivered by hand or sent by first class mail written
objections and copies of any papers and briefs such that they are received on or before                     ,
2007, by: Lerach Coughlin Stoia Geller Rudman & Robbins LLP, Joy Ann Bull, 655 W. Broadway, Suite
1900, San Diego, CA 92101; and Winston & Strawn LLP, Gail J, Standish, 333 South Grand Avenue, 38th Floor,
Los Angeles, CA 90071-1543, and filed said objections, papers and briefs with the Clerk of the
United States District Court for the District of New Jersey, on or before                     , 2007. Any Member
of the Settlement Class who does not make his, her or its objection in the manner provided shall be
deemed to have waived such objection and shall forever be foreclosed from making any objection to
the fairness or adequacy of the proposed settlement as set forth in the Stipulation, to

-6-

 

the Plan of Allocation, or to the award of attorneys’ fees and expenses to Lead Counsel, unless
otherwise ordered by the Court.

     13. All funds held by the Escrow Agent shall be deemed and considered to be in custodia legis of
the Court, and shall remain subject to the jurisdiction of the Court, until such time as such funds
shall be distributed pursuant to the Stipulation and/or further order(s) of the Court.

     14. All papers in support of the settlement, the Plan of Allocation, and the application by Lead
Counsel for attorneys’ fees or reimbursement of expenses shall be filed and served seven (7)
calendar days before the Settlement Hearing.

     15. Neither the Defendants nor their Related Parties shall have any
responsibility for or liability with respect to the Plan of Allocation or any application for
attorneys’ fees or reimbursement of expenses submitted by Lead Counsel, and such matters will be
considered separately from the fairness, reasonableness and adequacy of the settlement.

     16. At or after the Settlement Hearing, the Court shall determine whether the Plan of Allocation
proposed by Lead Counsel, and any application for attorneys’ fees or reimbursement of expenses
shall be approved.

     17. All reasonable expenses incurred in identifying and notifying Settlement Class Members, as well
as administering the Settlement Fund, shall be paid as set forth in the Stipulation. In the event
the settlement is not approved by the Court, or otherwise fails to become effective, neither the
Lead Plaintiff nor Lead Counsel shall

-7-

 

have any obligation to repay any amounts actually and properly disbursed from the Class Notice and
Administration Fund.

     18. Neither the Stipulation, nor any of its terms or provisions, nor any of the negotiations or
proceedings connected with it, shall be construed as an admission or concession by Defendants of
the truth of any of the allegations in the Litigation, or of any liability, fault, or wrongdoing
of any kind and shall not be construed as, or deemed to be evidence of or an admission or
concession that Lead Plaintiff or any Settlement Class Members have suffered any damages, harm, or
loss.

     19. In the event that the settlement does not become effective in accordance with the terms of the
Stipulation or the Effective Date does not occur, or in the event that the Settlement Fund, or any
portion thereof, is returned to the Defendants, then this Order shall be rendered null and void to
the extent provided by and in accordance with the Stipulation and shall be vacated and, in such
event, all orders entered and releases delivered in connection herewith shall be null and void to the extent provided by and in
accordance with the Stipulation.

     20. The Court reserves the right to adjourn the date of the Settlement Hearing without further
notice to the Members of the Settlement Class, and retains jurisdiction to consider all further
applications arising out of or connected with the proposed

-8-

 

settlement. The Court may approve the settlement, with such modifications as may be agreed to by
the Settling Parties, if appropriate, without further notice to the
Settlement Class.

	 	 	 	 	 	 	 
	DATED:
	 	 	 	 	 	 
	 

	 	 

	 	 

THE HONORABLE JEROME B. SIMANDLE 

UNITED STATES DISTRICT JUDGE
	 	 

Submitted by:

LITE DePALMA GREENBERG

& RIVAS, LLC

JOSEPH J. DePALMA

	 	 	 
	 
	 

JOSEPH J. DePALMA

	 	 

Two Gateway Center, 12th Floor

Newark, NJ 07102-5003

Telephone: 973/623-3000

973/623-0858 (fax)

Liaison Counsel

-9-

 

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

JOY ANN BULL

655 West Broadway, Suite 1900

San Diego, CA 92101-3301

Telephone: 619/231-1058

619/231-7423 (fax)

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

JEFFREY W. LAWRENCE

SHIRLEY H. HUANG

100 Pine Street, Suite 2600

San Francisco, CA 94111

Telephone: 415/288-4545

415/288-4534 (fax)

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

SAMUEL H. RUDMAN

DAVID A. ROSENFELD

58 South Service Road, Suite 200

Melville, NY 11747

Telephone: 631/367-7100

631/367-1173 (fax)

Lead Counsel for Plaintiffs

-10-

 

EXHIBIT A-1

 

 

LITE DePALMA GREENBERG

& RIVAS, LLC

JOSEPH J. DePALMA (JD 7697)

Two Gateway Center, 12th Floor

Newark, NJ 07102-5003

Telephone: 973/623-3000

973/623-0858 (fax)

Liaison Counsel

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

	 	 	 	 	 	 	 	 	 
	WILLIAM STEINER, Individually and

	 	 	)	 	 	No. l:04-CV-05487-JBS-AMD

	On Behalf of Himself and All Others

	 	 	)	 	 	 
	Similarly Situated,

	 	 	)	 	 	CLASS ACTION
	 
	 	 	)	 	 	 
	          Plaintiffs,

	 	 	)	 	 	Judge Jerome B. Simandle
	 
	 	 	)	 	 	 
	vs.

	 	 	)	 	 	NOTICE OF PENDENCY AND

	 
	 	 	)	 	 	PROPOSED SETTLEMENT OF

	MEDQUIST,INC., et al.,

	 	 	)	 	 	CLASS ACTION
	 
	 	 	)	 	 	 
	          Defendants.

	 	 	)	 	 	EXHIBIT A-1

	 
	 	 	)	 	 	 
	______________________________
	 	 	)	 	 	 

 

 

IF YOU PURCHASED THE PUBLICLY-TRADED SECURITIES OF
MEDQUIST INC. (“MEDQUIST”) BETWEEN AND INCLUDING MARCH 29,
2000 AND JUNE 14, 2004, YOU COULD RECEIVE A PAYMENT FROM A
CLASS ACTION SETTLEMENT.

     A federal court authorized this Notice. This is not a solicitation from a lawyer.

     Securities and Time Period: MedQuist common stock (CUSIP No.
584949101) purchased between and including March 29, 2000 and June 14, 2004.

     Settlement Fund: $7,750,000 in cash. Your recovery will depend on the number of shares of
MedQuist common stock purchased and the timing of your purchases, and any sales. Depending on the
number of shares of MedQuist common stock that participate in the settlement and when those shares
were purchased and sold, the estimated average recovery per share of common stock will be
approximately $1.04 before deduction of Court-approved fees and expenses.

     Reasons for Settlement: Avoids the costs and risks associated with continued litigation,
including the danger of no recovery, and provides a substantial benefit to the Settlement Class
now.

     If the Case Had Not Settled: The settlement must be compared to the risk of no recovery after
contested motions, trial and likely appeals. While Lead Counsel were prepared to go to trial and
were confident about the case, a trial is a risky proposition and Lead Plaintiff might not have
prevailed. The claims in this case involve numerous complex legal and factual issues that would
require extensive and costly expert testimony. Among the many key issues about which the two sides
do

-1-

 

not agree are; (1) whether any of the Defendants violated the securities laws or otherwise engaged
in any wrongdoing; (2) whether the facts alleged by the Lead Plaintiff were material, false,
misleading or otherwise actionable under the securities laws; (3) the extent (if any) that various
facts alleged by the Lead Plaintiff influenced the trading prices of MedQuist securities during the
relevant period; (4) the method for determining whether MedQuist securities were artificially
inflated during the relevant period; (5) the amount (if any) of such inflation; and (6) the amount
of damages (if any) that could be recovered at trial.

     Attorneys’ Fees and Expenses: Lead Counsel have not received any payment for their work investigating the facts, conducting this litigation
and negotiating the settlement on behalf of the Lead Plaintiff and the Settlement Class.
Court-appointed Lead Counsel will ask the Court for attorneys’ fees of approximately___% of the
Settlement Fund and reimbursement of out-of-pocket expenses not to exceed $_________ to be
paid from the Settlement Fund. If the above amounts are requested and approved by the Court, the
average cost per share of common stock will be $___.

     Deadlines:

	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Submit Claim:	 	 	 	______________, 2007	 	 	 	 
	 
	 
	 	Request Exclusion:	 	 	 	______________, 2007	 	 	 	 
	 
	 
	 	File Objection:	 	 	 	______________, 2007	 	 	 	 

     Court Hearing on Fairness of Settlement: ______________, 2007

-2-

 

More Information: www.gilardi.com or www.lerachlaw.com

	 	 	 	 	 
	 
	 	Claims Administrator:
	 	Lead Counsel:

	 
	 
	 	MedQuist Securities
Litigation	 	Rick Nelson
	 
	 	c/o Gilardi & Co. LLC	 	Shareholder Relations
	 
	 	Claims Administrator	 	Lerach Coughlin Stoia Geller
	 
	 	P.O. Box 8040	 	Rudman & Robbins LLP
	 
	 	San Rafael, CA 94912-8040	 	655 West Broadway, Suite 1900
	 
	 	 	 	San Diego, CA 92101-3301

	•	 	Your legal rights are affected whether you act, or don’t
act. Read this Notice carefully.

YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT:

	 	 	 
	SUBMIT A CLAIM FORM

	 	The only way to receive a payment.
	 
	 	 
	OBJECT

	 	You may write to the Court if you do not like this
settlement.
	 
	 	 
	GO TO A HEARING

	 	You may ask to speak in Court about the fairness of
the settlement.
	 
	 	 
	DO NOTHING

	 	Receive no payment.
	 
	 	 
	EXCLUDE YOURSELF

	 	Receive no payment. This is the only option that
allows you to participate in another lawsuit against the
Defendants relating to the claims being released in
this case.

-3-

 

	 	•	 	These rights and options — and the deadlines to
exercise them — are explained in this
Notice.
	 
	 	•	 	The Court in charge of this case must decide whether to approve the settlement. Payments
will be made if the Court approves the settlement and, if there are any appeals, after appeals are
resolved. Please be patient.

BASIC INFORMATION

	 	1. 	 	Why Did I Receive This Notice Package?

     You or someone in your family may have purchased publicly-traded securities of MedQuist
between and including March 29, 2000 and June 14, 2004.

     The Court sent you this Notice because you have a right to know about a proposed settlement of
a class action lawsuit, and about all of your options, before the Court decides whether to approve
the settlement. If the Court approves it and after any objections or appeals are resolved, the
Claims Administrator appointed by the Court will make the payments that the settlement allows.

     This package explains the lawsuit, the settlement, your legal rights, what benefits are available,
who is eligible for them, and how to get them.

     The Court in charge of the case is the United States District Court for the District of New Jersey,
and the case is known as Steiner v. MedQuist, Inc., et al, No. 1:04-CV-05487-JBS-AMD. The pension
fund that sued is called the Lead Plaintiff, and the company and the individuals it sued, MedQuist,
Brian J. Kearns, David A.

-4-

 

     Cohen, John A. Donohoe, Ethan Cohen, John W. Quaintance and Ronald F. Scarpone, are called the
Defendants.

	 	2. 	 	What Is This Lawsuit About?

     This case was brought as a class action alleging that Defendants made false and misleading
statements and omissions during the period March 29, 2000 to June 14, 2004, about its revenues and
profits. The case asserts that the Defendants manipulated MedQuist’s billing systems to overcharge
its customers and underpay its employees for its medical transcription services. The case alleges
that these false financial statements were reported to the market resulting in the artificial
inflation of the prices of MedQuist publicly-traded securities between and including March 29, 2000
and June 14, 2004. Defendants deny that they did anything wrong.

	 	3. 	 	 Why Is This a Class Action?

     In a class action, one or more people called class representatives (in this case the
Court-appointed Lead Plaintiff, Greater Pennsylvania Carpenters Pension Fund) sue on behalf of
people who have similar claims. Here, all these people are called a Settlement Class or Settlement
Class Members. One court resolves the issues for all Settlement Class Members, except for those who
timely and validly exclude themselves from the Settlement Class. Judge Jerome B. Simandle is in
charge of this class action.

-5-

 

	 	4. 	 	 Why Is There a Settlement?

     The Court did not decide in favor of Lead Plaintiff or Defendants. Instead, both sides agreed
to a settlement. That way, they avoid the cost and uncertainty of a trial, and eligible Settlement
Class Members who submit valid claims will receive compensation. The Lead Plaintiff and its
attorneys think the settlement is best for all Settlement Class Members.

WHO IS IN THE SETTLEMENT

     To see if you will receive money from this settlement, you first have to determine if you are
a Settlement Class Member.

	 	5. 	 	
How Do I Know if I Am Part of the Settlement?

     The
Settlement Class includes all persons who purchased the publicly-traded securities of
MedQuist between and including March 29, 2000 and June 14,
2004.

	 	6. 	 	
What Are the Exceptions to Being Included?

     You are not a Settlement Class Member if you are a Defendant or a Related Party of a
Defendant. Related Parties is defined as each of a Defendant’s past or present directors, officers,
employees, partners, insurers, co-insurers, reinsurers, agents, controlling shareholders,
attorneys, accountants, auditors, advisors, investment advisors, personal or legal representatives,
predecessors, successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses,
heirs, related or affiliated entities, any entity in which a Defendant has a controlling interest,
any members of an Individual Defendant’s immediate family, or any trust of which an Individual

-6-

 

Defendant is the settlor or which is for the benefit of an Individual Defendant’s family. You are
also not a Settlement Class Member if you timely and validly request exclusion from the Settlement
Class pursuant to this Notice.

     If you sold MedQuist securities between and including March 29, 2000 and June 14, 2004, that alone
does not make you a Settlement Class Member. You are a Settlement Class Member only if you
purchased the publicly-traded securities of MedQuist between and including March 29, 2000 and June
14, 2004.

	 	7. 	 	I’m Still Not Sure if I Am Included.

     If you are still not sure whether you are included, you can ask for free help. You can call
Rick Nelson at 619/231-1058 for more information. Or you can fill out and return the claim form
described in question 10, to see if you qualify.

THE SETTLEMENT BENEFITS — WHAT YOU GET

	 	8. 	 	 What Does the Settlement Provide?

     Defendants have agreed to pay $7.75 million in cash. The balance of this fund after payment of
Court-approved attorneys’ fees and expenses and the costs of claims administration, including the
costs of printing and mailing this Notice and the cost of publishing newspaper notice (the “Net
Settlement Fund”) will be divided among all eligible Settlement Class Members who send in valid
claim forms.

	 	9. 	 	 How Much Will My Payment Be?

     Your share of the Net Settlement Fund will depend on the number of valid claim forms that
Settlement Class Members send in and how many shares of

-7-

 

MedQuist common stock you purchased during the relevant period and when you bought and sold them, A
claim will be calculated as follows:

          (a) For
shares of MedQuist common stock purchased on March 29,
2000 through March 15, 2004, and

               (i) sold on or before March 15, 2004, the claim per share is $0;

               (ii) sold on March 16, 2004, the claim per share is the lesser of (a) the purchase price less
the sales price, or (b) $0.31 (March 16, 2004 price decline);

               (iii) sold on March 17, 2004 through March 24, 2004, the claim per share is the lesser of (a)
the purchase price less the sales price, or (b) $0.62 (March 16, 2004 & March 17, 2004 price
declines);

               (iv) sold on March 25, 2004 through June 14, 2004, the claim per
share is the lesser of (a) the purchase price less the sales price, or (b)$1.15 (March 16, 2004,
March 17, 2004 and March 25, 2004 price declines);

               (v) held at the close of trading on June 14, 2004, the claim per
share is the lesser of (a) the purchase price less $11.70 (June 15, 2004 closing price), or (b)
$2.35 (March 16, 2004, March 17, 2004, March 25, 2004 & June 15, 2004 price declines).

          (b) For
shares of MedQuist common stock purchased on March 16,
2004, and

               (i) sold on March 16, 2004, the claim per share is $0;

-8-

 

               (ii) sold on March 17, 2004 through March 24, 2004, the claim per share is the lesser of (a)
the purchase price less the sales price, or (b) $0.31 (March 17, 2004 price decline);

               (iii) sold on March 25, 2004 through June 14, 2004, the claim per share is the lesser of (a)
the purchase price less the sales price, or (b) $0.84 (March 17, 2004 & March 25, 2004 price
declines);

               (iv) held at the close of trading on June 14, 2004, the claim per share is the lesser of (a)
the purchase price less $11.70 (June 15, 2004 closing price), or (b) $2.04 (March 17, 2004, March
25, 2004 & June 15, 2004 price declines).

          (c) For
shares of MedQuist common stock purchased on March 17,
2004 through March 24, 2004, and

               (i) sold on or before March 24, 2004, the claim per share is $0;

               (ii) sold on March 25, 2004 through June 14, 2004, the claim per share is the lesser of (a)
the purchase price less the sales price, or (b) $0.53 (March 25, 2004 price decline);

               (iii) held at the close of trading on June 14, 2004, the claim per share is the lesser of (a)
the purchase price less $11.70 (June 15, 2004 closing price), or (b) $1.73 (March 25, 2004 & June
15, 2004 price declines).

          (d) For
shares of MedQuist common stock purchased on March 25,
2004 through June 14, 2004, and

               (i) sold on or before June 14, 2004, the claim per share is $0;

-9-

 

               (ii) held at the close of trading on June 14, 2004, the claim per share is the lesser of (a)
the purchase price less $11.70 (June 15, 2004 closing price), or (b) $1,20 (June 15, 2004 price
decline).

     The payment you receive will reflect your pro rata share of the Net Settlement Fund. Depending
on the number of eligible shares that participate in the settlement and when those shares were
purchased and sold, the estimated average payment will be approximately $1.04 for each share of
common stock before deduction of Court-approved fees and expenses. The number of claimants who send
in claims varies widely from case to case. If fewer than anticipated Settlement Class Members send
in a claim form, you could receive more money.

     The date of purchase or sale is the “contract” or “trade” date as distinguished from the
“settlement” date.

     For Settlement Class Members who held MedQuist common stock at the beginning of the Settlement
Class Period or made multiple purchases or sales during the Settlement Class Period, the first-in,
first-out (“FIFO”) method will be applied to such holdings, purchases and sales for purposes of
calculating a claim. Under the FIFO method, sales of securities during the Settlement Class Period
will be matched, in chronological order, first against securities held at the beginning of the Settlement Class
Period. The remaining sales of securities during the Settlement Class Period will then be matched,
in chronological order, against securities purchased during the Settlement Class Period.

-10-

 

     A Settlement Class Member will be eligible to receive a distribution from the
Net Settlement Fund only if a Settlement Class Member had a net loss, after all profits
from transactions in MedQuist securities during the Settlement Class Period are
subtracted from all losses.

HOW YOU OBTAIN A PAYMENT — SUBMITTING A CLAIM FORM

	 	10.	 	How Will I Obtain a Payment?

     To qualify for payment, you must be an eligible Settlement Class Member, send
in a valid claim form, and properly document your claim as requested in the claim
form. A claim form is enclosed with this Notice. Read the instructions carefully, fill
out the form, include all the documents the form asks for, sign it, and mail it in the
enclosed envelope postmarked no later than                     , 2007.

	 	11.	 	When Will I Receive My Payment?

     The Court will hold a hearing on                     , 2007, to decide whether to
approve the settlement. If Judge Simandle approves the settlement, there may be
appeals. It is always uncertain whether these appeals can be resolved, and resolving
them can take time, perhaps several years. Everyone who sends in a claim form will
be informed of the determination with respect to their claim. Please be patient.

	 	12.	 	What Am I Giving Up to Receive a Payment or Stay in the Settlement Class?

     Unless you timely and validly exclude yourself, you are staying in the
Settlement Class, and that means that you cannot sue, continue to sue, or be part of
any other lawsuit against the Defendants about the Released Claims in this case. It

-11-

 

also means that all of the Court’s orders will apply to you and legally bind you and
you will release your claims in this case against the Defendants. The terms of the
release are included in the claim form that is enclosed.

EXCLUDING YOURSELF FROM THE SETTLEMENT

     If you do not want a payment from this settlement, but you want to keep the
right to sue or continue to sue the Defendants on your own for the Released Claims in
this case, then you must take steps to get out of the Settlement Class. This is called
excluding yourself or is sometimes referred to as opting out of the Settlement Class.

	 	13.	 	How Do I Get Out of the Settlement Class?

     To exclude yourself from the Settlement Class, you must send a letter by mail
stating that you want to be excluded from Steiner v. MedQuist, Inc., et al., No. 1:04-
CV-05487-JBS-AMD. You must include your name, address, telephone number, your
signature, and the number of shares of MedQuist common stock you purchased
between and including March 29, 2000 and June 14, 2004, the number of shares sold
during this time period, if any, and the dates of such purchases and sales. You must
mail your exclusion request postmarked no later than                     , 2007 to:

MedQuist Securities Litigation

c/o Gilardi & Co. LLC

Claims Administrator

P.O. Box 8040

San Rafael, CA 94912-8040

     You cannot exclude yourself on the phone or by e-mail. If you ask to be
excluded, you are not eligible to receive any settlement payment, and you cannot

-12-

 

object to the settlement. You will not be legally bound by anything that happens in
this lawsuit.

	 	14.	 	If I Do Not Exclude Myself, Can I Sue the Defendants for the
Same Thing Later?

     No. Unless you timely and validly exclude yourself, you give up any right to
sue the Defendants for the Released Claims in this settlement. If you have a pending
lawsuit against any of the Defendants, speak to your lawyer in that case immediately.
Remember, the exclusion deadline is                     , 2007.

	 	15.	 	If I Exclude Myself, Can I Receive Money from This Settlement?

     No. If you exclude yourself, do not send in a claim form. But, you may be able
to sue, continue to sue, or be part of a different lawsuit involving the Released Claims
against the Defendants.

THE LAWYERS REPRESENTING YOU

	 	16.	 	Do I Have a Lawyer in This Case?

     The Court asked the law firm of Lerach Coughlin Stoia Geller Rudman &
Robbins LLP to represent you and other Settlement Class Members. These lawyers
are called Lead Counsel. You will not be charged for these lawyers. If you want to be
represented by your own lawyer, you may hire one at your own expense.

	 	17.	 	How Will the Lawyers Be Paid?

     Lead Counsel will ask the Court for attorneys’ fees of approximately ___% of
the Settlement Fund (an average of $                     per share of common stock) and for
reimbursement of their out-of-pocket expenses up to $                     ($       per share of

-13-

 

common stock), which were advanced in connection with the litigation, and which
includes approximately $                     for reimbursement for out-of-pocket expenses
for the Lead Plaintiff. Such sums as may be approved by the Court will be paid from
the Settlement Fund. Settlement Class Members are not personally liable for any such
fees or expenses.

     The attorneys’ fees and expenses requested will be the only payment to Lead
Counsel for their efforts in achieving this settlement and for their risk in undertaking
this representation on a wholly contingent basis. Lead Counsel have committed
significant time and expenses in litigating this case for the benefit of the Settlement
Class since its inception in 2004. To date, Lead Counsel have not been paid for their
services in conducting this litigation on behalf of the Lead Plaintiff and the Settlement
Class, nor for their substantial out-of-pocket expenses. The fee requested will
compensate Lead Counsel for their work in achieving the Settlement Fund and is well
within the range of fees awarded to class counsel under similar circumstances in other
cases of this type. The Court may award less than this amount.

OBJECTING TO THE SETTLEMENT

     You can tell the Court that you do not agree with the settlement or some part of it.

	 	18.	 	How Do I Tell the Court that I Do Not Like the Settlement?

     If you are a Settlement Class Member, you can object to the settlement if you
do not like any part of it, including the Plan of Allocation and the request for

-14-

 

attorneys’ fees. You can state the reasons why you think the Court should not approve
it. The Court will consider your views. To object, you must send a letter saying that
you object to the settlement in Steiner v. MedQuist, Inc., et
al.,
No. 1:04-CV-05487-
JBS-AMD. Be sure to include your name, address, telephone number, your signature,
the number of shares of MedQuist common stock purchased and sold between and
including March 29, 2000 and June 14, 2004, and the reasons you object. Any
objection must be mailed or delivered such that it is received by
each of the following
no later than                     , 2007:

Court:

Clerk of the Court

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

Mitchell H. Cohen Building & U.S. Courthouse

4th & Cooper Streets, Room 1050

Camden, NJ 08101

Counsel
for Lead Plaintiff:

Joy Ann Bull

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

655 West Broadway, Suite 1900

San Diego, CA 92101

Counsel
for MedQuist:

Gail J. Standish

WINSTON & STRAWN LLP

333 South Grand Avenue, 38th Floor

Los Angeles, CA 90071-1543

-15-

 

	 	19.	 	What’s the Difference Between Objecting and Excluding?

     Objecting is simply telling the Court that you do not like something about the
settlement. You can object only if you stay in the Settlement Class. Excluding
yourself is telling the Court that you do not want to be part of the Settlement Class. If
you exclude yourself, you have no basis to object because the case no longer affects
you.

THE COURT’S FAIRNESS HEARING

     The Court will hold a hearing to decide whether to approve the settlement. You
may attend and you may ask to speak, but you do not have to.

	 	20.	 	When and Where Will the Court Decide Whether to Approve the
Settlement?

     The
Court will hold a fairness hearing at ___ a.m., on                     , 2007, at the
Mitchell H. Cohen Building & U.S. Courthouse, 4th & Cooper Streets, Camden, New
Jersey. At this hearing the Court will consider whether the settlement is fair,
reasonable, and adequate. If there are objections, the Court will consider them. Judge
Simandle will listen to people who have asked to speak at the hearing. The Court will
also consider how much to pay to Lead Counsel. The Court may decide these issues
at the hearing or take them under consideration. We do not know how long these
decisions will take.

	 	21.	 	Do I Have to Come to the Hearing?

     No. Lead Counsel will answer questions Judge Simandle may have. But, you
are welcome to come at your own expense. If you send an objection, you do not have

-16-

 

to come to Court to talk about it. As long as you mailed your written objection on
time, the Court will consider it. You may also pay your own lawyer to attend, but it is
not necessary.

	 	22.	 	May I Speak at the Hearing?

     You may ask the Court for permission to speak at the fairness hearing. To do
so, you must send a letter saying that it is your intention to appear
in Steiner v.
MedQuist, Inc., et al., No. 1:04-CV-05487-JBS-AMD. Be sure to include your name,
address, telephone number, your signature, and the number of shares of MedQuist
common stock purchased between and including March 29, 2000 and June 14, 2004.
Your notice of intention to appear must be received no later than                     , 2007, and be sent to the Clerk of the Court, Lead Counsel, and Defendants’ counsel, at
the three addresses listed in question 18. You cannot speak at the hearing if you exclude yourself from the Settlement Class.

IF YOU DO NOTHING

	 	23.	 	What Happens if I Do Nothing at All?

     If you do nothing, you will not receive any money from this settlement. But,
unless you exclude yourself, you won’t be able to start a lawsuit, continue with a
lawsuit, or be part of any other lawsuit against the Defendants about the Released
Claims in this case.

-17-

 

GETTING MORE INFORMATION

	 	24.	 	Are There More Details About the Settlement?

     This Notice summarizes the proposed settlement. More details are in the
Stipulation of Settlement dated as of March 23, 2007. You can obtain a copy of the
Stipulation of Settlement by writing to Rick Nelson, c/o Lerach Coughlin Stoia Geller
Rudman & Robbins LLP, 655 West Broadway, Suite 1900, San Diego, CA 92101,
from the Clerk’s office at the United States District Court for the District of New
Jersey, Mitchell H. Cohen Building & U.S. Courthouse, 4th & Cooper Streets, Room
1050, Camden, New Jersey during regular business hours, or by going to
www.gilardi.com or www.lerachlaw.com.

	 	25.	 	How Do I Get More Information?

     You can call 619/231-1058 or write to Rick Nelson, Lerach Coughlin Stoia
Geller Rudman & Robbins LLP, 655 West Broadway, Suite 1900, San Diego, CA
92101, or visit one of the following websites: www.gilardi.com or
www.lerachlaw.com.

DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE

SPECIAL NOTICE TO NOMINEES

     The Court has ordered that if you held shares of any MedQuist common stock
purchased between and including March 29, 2000 and June 14, 2004 as nominee for a
beneficial owner, then, within ten (10) days after you receive this Notice, you must

-18-

 

either: (1) send a copy of this Notice by first class mail to all such Persons; or (2)
provide a list of the names and addresses of such Persons to the Claims Administrator:

MedQuist
Securities Litigation

c/o Gilardi & Co. LLC

Claims Administrator

P.O. Box 8040

San Rafael, CA 94912-8040

     If you choose to mail the Notice and Proof of Claim yourself, you may obtain
from the Claims Administrator (without cost to you) as many additional copies of
these documents as you will need to complete the mailing.

     Regardless of whether you choose to complete the mailing yourself or elect to
have the mailing performed for you, you may obtain reimbursement for or
advancement of reasonable administrative costs actually incurred or expected to be
incurred in connection with forwarding the Notice and which would not have been
incurred but for the obligation to forward the Notice, upon submission of appropriate
documentation to the Claims Administrator.

	 	 	 	 	 
	DATED:
	 	BY ORDER OF THE COURT
UNITED STATES
DISTRICT COURT
DISTRICT OF NEW JERSEY 	 	 
	 

	 	 	 	 

-19-

 

EXHIBIT A-2

 

 

LITE DePALMA GREENBERG

& RIVAS, LLC

JOSEPH J. DePALMA (JD 7697)

Two Gateway Center, 12th Floor

Newark, NJ 07102-5003

Telephone: 973/623-3000

973/623-0858 (fax)

Liaison Counsel

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

	 	 	 	 
	WILLIAM STEINER, Individually and
	)	 	No. l:04-CV-05487-JBS-AMD
	On Behalf of Himself and All Others
	)	 	 
	Similarly Situated,
	)	 	CLASS ACTION
	 
	)	 	 
	Plaintiffs,
	)	 	Judge Jerome B. Simandle
	 
	)	 	 
	vs.
	)	 	PROOF OF CLAIM AND RELEASE
	 
	)	 	 
	MEDQUIST, INC., et al.,
	)	 	EXHIBIT A-2
	 
	)	 	 
	Defendants.
	)	 	 
	 
	)	 	 

 

 

	I.	 	GENERAL INSTRUCTIONS

     1. To recover as a Member of the Settlement Class based on your claims in
the action entitled Steiner v. MedQuist, Inc., et al., No. 1:04-CV-05487-JBS-AMD
(the “Litigation”), you must complete and, on
page ___ hereof, sign this Proof of
Claim and Release. If you fail to file a properly addressed (as set forth in paragraph 3
below) Proof of Claim and Release, your claim may be rejected and you may be
precluded from any recovery from the Net Settlement Fund created in connection with
the proposed settlement of the Litigation.

     2. Submission of this Proof of Claim and Release, however, does not assure
that you will share in the proceeds of settlement in the Litigation.

     3. YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF
CLAIM AND RELEASE POSTMARKED ON OR BEFORE ___, 2007,
ADDRESSED AS FOLLOWS:

MedQuist Securities Litigation

c/o Gilardi & Co. LLC

Claims Administrator

P.O. Box 8040

San Rafael, CA 94912-8040

If you are NOT a Member of the Settlement Class, as defined in the Notice of
Pendency and Proposed Settlement of Class Action (“Notice”), DO NOT submit a
Proof of Claim and Release form.

-1-

 

     4. If you are a Member of the Settlement Class, you are bound by the terms
of any judgment entered in the Litigation, WHETHER OR NOT YOU SUBMIT A
PROOF OF CLAIM AND RELEASE FORM.

	II.	 	DEFINITIONS

     1. “Defendants” means MedQuist and the Individual Defendants, as defined
below.

     2. “Individual Defendants” means Brian J. Kearns, David A. Cohen, John
A. Donohoe, Ethan Cohen, John W. Quaintance and Ronald F. Scarpone.

     3. “Released Persons” means each and all of the Defendants and each and
all of their Related Parties.

	III.	 	CLAIMANT IDENTIFICATION

     1. If you purchased the publicly-traded securities of MedQuist and held the
certificate(s) in your name, you are the beneficial purchaser as well as the record
purchaser. If, however, the certificate(s) were registered in the name of a third party,
such as a nominee or brokerage firm, you are the beneficial purchaser and the third
party is the record purchaser.

     2. Use Part I of this form entitled “Claimant Identification” to identify each
purchaser of record (“nominee”), if different from the beneficial purchaser of
MedQuist securities which form the basis of this claim. THIS CLAIM MUST BE
FILED BY THE ACTUAL BENEFICIAL PURCHASER OR PURCHASERS, OR

-2-

 

THE LEGAL REPRESENTATIVE OF SUCH PURCHASER OR PURCHASERS
OF THE MEDQUIST SECURITIES UPON WHICH THIS CLAIM IS BASED.

     3. All joint purchasers must sign this claim. Executors, administrators,
guardians, conservators and trustees must complete and sign this claim on behalf of
Persons represented by them and their authority must accompany this claim and their
titles or capacities must be stated. The Social Security (or taxpayer identification)
number and telephone number of the beneficial owner may be used in verifying the
claim. Failure to provide the foregoing information could delay verification of your
claim or result in rejection of the claim.

	IV.	 	CLAIM FORM

     1. Use Part II of this form entitled “Schedule of Transactions in MedQuist
Publicly-Traded Securities” to supply all required details of your transaction(s) in
MedQuist securities. If you need more space or additional schedules, attach separate
sheets giving all of the required information in substantially the same form. Sign and
print or type your name on each additional sheet.

     2. On the schedules, provide all of the requested information with respect to
all of your purchases and all of your sales of MedQuist publicly-traded securities
which took place at any time between and including March 29, 2000 and June 14,
2004 (the “Settlement Class Period”), whether such transactions resulted in a profit or
a loss. Failure to report all such transactions may result in the rejection of your claim.

-3-

 

     3. List each transaction in the Settlement Class Period separately and in
chronological order, by trade date, beginning with the earliest. You must accurately
provide the month, day and year of each transaction you list.

     4. Broker confirmations or other documentation of your transactions in
MedQuist securities should be attached to your claim. Failure to provide this
documentation could delay verification of your claim or result in rejection of your
claim.

     5. The above requests are designed to provide the minimum amount of
information necessary to process the most simple claims. The Claims Administrator
may request additional information as required to efficiently and reliably calculate
your losses. In some cases where the Claims Administrator cannot perform the
calculation accurately or at a reasonable cost to the Settlement Class with the
information provided, the Claims Administrator may condition acceptance of the
claim upon the production of additional information and/or the hiring of an accounting
expert at the Claimant’s cost.

-4-

 

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

Steiner v. MedQuist, Inc., et al.

No. l:04-CV-05487-JBS-AMD

PROOF OF CLAIM AND RELEASE

Must be Postmarked No Later Than:

_________, 2007

Please Type or Print

PART I: CLAIMANT IDENTIFICATION

 

Beneficial Owner’s Name (First, Middle, Last)

 

Street Address

	 	 	 	 	 
	City

	 	State
	 	Zip Code
	 
	 	 	 	 
	Foreign Province

	 	Foreign Country	 	 
	 
	 	 	 	 
	 

	 	 	 	Individual
	Social Security Number or 

Taxpayer Identification Number

	 	 
	 	
_______        Corporation/Other
	 
	 
	 	 	 	(work)
	Area Code

	 	Telephone Number	 	 
	 
	 	 	 	(home)
	Area Code

	 	Telephone Number	 	 

 

Record Owner’s Name (if different from beneficial owner listed above)

-5-

 

			
	PART II:	 	SCHEDULE OF TRANSACTIONS IN MEDQUIST PUBLICLY —
TRADED SECURITIES

	 	A.	 	Number of shares of MedQuist common stock held at the beginning of
trading on March 29, 2000:_________
	 
	 	B.	 	Purchases of MedQuist common stock (March 29, 2000 — June 14, 2004,
inclusive):

	 	 	 	 	 	 	 	 	 	 	 
	 	 	Trade Date	 	 	 	Number of	 	 	 	 
	 	 	Mo. Day Year	 	 	 	Shares Purchased	 	 	 	Total Purchase Price
	1.
	 	 	 	1.	 	 	 	1.	 	 
	 
	 	 	 	 	 	 	 
	2.
	 	 	 	2.	 	 	 	2.	 	 
	 
	 	 	 	 	 	 	 
	3.
	 	 	 	3.	 	 	 	3.	 	 
	 
	 	 	 	 	 	 	 

	 	C.	 	Sales of MedQuist common stock (March 29, 2000 — June 14, 2004,
inclusive):

	 	 	 	 	 	 	 	 	 	 	 
	 	 	Trade Date	 	 	 	Number of	 	 	 	 
	 	 	Mo. Day Year	 	 	 	Shares Sold	 	 	 	Total Sales Price
	1.
	 	 	 	1.	 	 	 	1.	 	 
	 
	 	 	 	 	 	 	 
	2.
	 	 	 	2.	 	 	 	2.	 	 
	 
	 	 	 	 	 	 	 
	3.
	 	 	 	3.	 	 	 	3.	 	 
	 
	 	 	 	 	 	 	 

	 	D.	 	Number of shares of MedQuist common stock held at close of trading on
June 14, 2004: _________

If you require additional space, attach extra schedules in the same format as above.

Sign and print your name on each additional page.

YOU MUST READ AND SIGN THE RELEASE ON PAGE _________.

-6-

 

	V.	 	SUBMISSION TO JURISDICTION OF COURT AND
ACKNOWLEDGMENTS

     I, _________ submit this Proof of Claim and Release under the terms of the
Stipulation of Settlement dated as of March 23, 2007 (“Stipulation”) described in the
Notice. I also submit to the jurisdiction of the United States District Court for the
District of New Jersey, with respect to my claim as a Settlement Class Member (as
defined in the Notice) and for purposes of enforcing the release set forth herein. I
further acknowledge that I am bound by and subject to the terms of any judgment that
may be entered in the Litigation. I agree to furnish additional information to Lead
Counsel to support this claim if required to do so. I have not submitted any other
claim covering the same purchases or sales of MedQuist securities during the
Settlement Class Period and know of no other Person having done so on my behalf.

	VI.	 	RELEASE

     1. I hereby acknowledge full and complete satisfaction of, and do hereby
fully, finally and forever settle, release, relinquish and discharge, all of the Released
Claims against each and all of the Defendants and each and all of their “Related
Parties,” defined as each of a Defendant’s past or present directors, officers,
employees, partners, insurers, co-insurers, reinsurers, agents, controlling shareholders,
attorneys, accountants, auditors, advisors, investment advisors, personal or legal
representatives, predecessors, successors, parents, subsidiaries, divisions, joint
ventures, assigns, spouses, heirs, related or affiliated entities, any entity in which a

-7-

 

Defendant has a controlling interest, any members of an Individual Defendant’s
immediate family, or any trust of which an Individual Defendant is the settlor or
which is for the benefit of an Individual Defendant’s family.

     2. “Released Claims” shall collectively mean all claims (including
“Unknown Claims” as defined below), demands, rights, liabilities and causes of action
of every nature and description whatsoever, known or unknown, suspected or
unsuspected, contingent or non-contingent, whether or not concealed or hidden, which
now exist, or heretofore has existed, asserted or that might have been asserted,
including, without limitation, claims for negligence, gross negligence, breach of duty
of care and/or breach of duty of loyalty, fraud, breach of fiduciary duty, or violations
of any state or federal statutes, rules or regulations or common law principles and/or
any claims arising out of and/or related to the issuance of any of MedQuist’s financial
statements, by the Lead Plaintiff or any Settlement Class Member against the
Defendants or their Related Parties arising out of, relating to, or in connection with the
purchase of the publicly-traded securities of MedQuist by the Lead Plaintiff or any
Settlement Class Member and/or any claims arising out of and/or related to the
issuance of any of MedQuist’s financial statements during the Settlement Class
Period. “Released Claims” shall collectively mean all claims (including “Unknown
Claims” as defined in ¶1.23 hereof), demands, rights, liabilities and causes of action of
every nature and description whatsoever, known or unknown, suspected or
unsuspected, contingent or non-contingent, whether or not concealed or hidden, which

-8-

 

now exist, or
heretofore has existed, asserted or that might have been asserted,
including, without limitation, claims for negligence, gross negligence, breach of duty
of care and/or breach of duty of loyalty, fraud, breach of fiduciary duty, or violations
of any state or federal statutes, rules or regulations or common law principles, and/or
any claims arising out of and/or related to the issuance of any of MedQuist’s financial
statements by the Lead Plaintiff or any Settlement Class Member against the
Defendants or their Related Parties arising out of, relating to, or in connection with the
purchase of the publicly-traded securities of MedQuist by the Lead Plaintiff or any
Settlement Class Member during the Settlement Class Period. However, Released
Claims will specifically exclude the claims presently asserted in South Broward
Hospital District v. MedQuist, Inc., No. 1:05-CV-02206-JBS-AMD; Myers v.
MedQuist, Civil No. 05-4608(JBS); and Kanter v. MedQuist, Civil No. 04-5542(JBS).

     3. “Unknown Claims” shall collectively mean all claims, demands, rights,
liabilities, and causes of action of every nature and description which the Lead
Plaintiff or any Settlement Class Member does not know or suspect to exist in his, her
or its favor at the time of the release of the Released Persons which, if known by him,
her or it, might have affected his, her or its settlement with and release of the Released
Persons, or might have affected his, her or its decision not to object to this settlement.
With respect to any and all Released Claims, the Settling Parties stipulate and agree
that, upon the Effective Date, the Lead Plaintiff shall expressly waive, and each of the
Settlement Class Members shall be deemed to have waived, and by operation of the

-9-

 

Judgment shall have waived, the provisions, rights and benefits of California Civil
Code §1542, which provides:

     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.

The Lead Plaintiff shall expressly and each of the Settlement Class Members shall be
deemed to have, and by operation of the Judgment shall have, expressly waived any
and all provisions, rights and benefits conferred by any law of any state or territory of
the United States, or principle of common law, which is similar, comparable or
equivalent to California Civil Code §1542. The Lead Plaintiff and Settlement Class
Members may hereafter discover facts in addition to or different from those which he,
she or it now knows or believes to be true with respect to the subject matter of the
Released Claims, but the Lead Plaintiff shall expressly fully, finally and forever settle
and release, and each Settlement Class Member, upon the Effective Date, shall be
deemed to have, and by operation of the Judgment shall have, fully, finally, and
forever settled and released, any and all Released Claims, known or unknown,
suspected or unsuspected, contingent or non-contingent, whether or not concealed or
hidden, which now exist, or heretofore have existed, upon any theory of law or equity
now existing or coming into existence in the future, including, but not limited to,
conduct which is negligent, intentional, with or without malice, or a breach of any
duty, law or rule, without regard to the subsequent discovery or existence of such

-10-

 

different or additional facts. The Lead Plaintiff acknowledges, and the Settlement Class
Members shall be deemed by operation of the Judgment to have acknowledged, that the foregoing
waiver was separately bargained for and a key element of the settlement of which this release is a
part.

     4. This release shall be of no force or effect unless and until the Court approves the
Stipulation and it becomes effective on the Effective Date.

     5. I (We) hereby warrant and represent that I (we) have not assigned or transferred or
purported to assign or transfer, voluntarily or involuntarily, any matter released pursuant to this
release or any other part or portion thereof.

     6. I (We) hereby warrant and represent that I (we) have included
information about all of my (our) transactions in MedQuist publicly-traded securities that occurred
during the Settlement Class Period as well as the number and type of MedQuist securities held by me
(us) at the opening of trading on March 29, 2000, and at the close of trading on June 14, 2004.

-11-

 

SUBSTITUTE FORM W-9

Request for Taxpayer Identification Number (“TIN”) and Certification

PART I

	 	 	 
	 
	 	 
	NAME:

	 	 

Check appropriate box:

o     Individual/Sole Proprietor          
              o    Pension Plan

o     Corporation          
o  Partnership          
o   Trust

o     IRA          
            o  Other

     Enter TIN on appropriate line.

	 	•	 	For individuals, this is your Social Security Number (“SSN”).
	 
	 	•	 	For sole proprietors, you must show your individual name, but you may also enter your
business or “doing business as” name. You may enter either your SSN or your Employer Identification
Number (“EIN”).
	 
	 	•	 	For other entities, it is your EIN.

______-______-_________ 
    or     
______-____________

Social Security Number                         
Employer Identification Number

PART II

For Payees Exempt from Backup Withholding

If you are exempt from backup withholding, enter your correct TIN in Part I and write “exempt” on
the following line:                                 

PART III

Certification

UNDER THE PENALTY OF PERJURY, I (WE) CERTIFY THAT:

	 	1.	 	The number shown on this form is my correct TIN; and

-12-

 

	 	2.	 	I (We) certify that I am (we are) NOT subject to backup withholding under the
provisions of Section 3406 (a)(1)(C) of the Internal Revenue Code because: (a) I am (we are)
exempt from backup withholding; or (b) I (we) have not been notified by the Internal Revenue
Service that I am (we are) subject to backup withholding as a result of a failure to report all
interest or dividends; or (c) the Internal Revenue Service has notified me (us) that I am (we are)
no longer subject to backup withholding.

	NOTE: 	 	If you have been notified by the Internal Revenue Service that you are subject to backup
withholding, you must cross out Item 2 above.

     SEE ENCLOSED FORM W-9 INSTRUCTIONS

The Internal Revenue Service does not require your consent to any provision of this document other
than the certification required to avoid backup withholding.

     I declare under penalty of perjury under the laws of the United States of America that the
foregoing information supplied by the undersigned is true and correct.

     Executed this                      day of
                         ,

                 
                 
                          (Month/Year)

in                          ,
                                   .

          (City)           (State/Country)

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	 

(Sign your name here)
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

(Type or print your name here)
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

(Capacity of person(s) signing, e.g., Beneficial Purchaser, Executor or Administrator)
	 	 

-13-

 

ACCURATE CLAIMS PROCESSING TAKES A

SIGNIFICANT AMOUNT OF TIME.

THANK YOU FOR YOUR PATIENCE.

Reminder Checklist:

     1. Please sign the above release and declaration.

     2. Remember to attach supporting documentation, if available.

     3. Do not send original stock certificates.

     4. Keep a copy of your claim form for your records.

     5. If you desire an acknowledgment of receipt of your claim form, please send it Certified
Mail, Return Receipt Requested.

     6. If you move, please send us your new address.

-14-

 

EXHIBIT A-3

 

 

LITE DePALMA GREENBERG
&
RIVAS, LLC

JOSEPH J. DePALMA (JD 7697)

Two Gateway Center, 12th Floor

Newark, NJ 07102-5003

Telephone: 973/623-3000

973/623-0858 (fax)

Liaison Counsel

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

	 	 	 	 	 	 	 
	 
	WILLIAM STEINER, Individually and
	)	 	 	No. 1:04-CV-05487-JBS-AMD
	On Behalf of Himself and All Others
	)	 	 	 	 	 
	Similarly Situated,
	)	 	 	CLASS ACTION
	 
	)	 	 	 	 	 
	Plaintiffs,
	)	 	 	Judge Jerome B, Simandle
	 
	)	 	 	 	 	 
	vs.
	)	 	 	SUMMARY NOTICE
	 
	)	 	 	 	 	 
	MEDQUIST, INC., et al.,
	)	 	 	EXHIBIT A-3	 	 
	 
	)	 	 	 	 	 
	Defendants.
	)	 	 	 	 	 
	______________________________________
	)	 	 	 	 	 

 

 

			
	TO:	 	ALL PERSONS WHO PURCHASED THE PUBLICLY-TRADED
SECURITIES OF MEDQUIST, INC. (“MEDQUIST”) BETWEEN AND
INCLUDING MARCH 29, 2000 AND JUNE 14, 2004

     YOU ARE HEREBY NOTIFIED, pursuant to an Order of the United States
District Court for the District of New Jersey, that a hearing will be
held on                     ,
2007, at                     .m., before the Honorable Jerome B. Simandle at the Mitchell H.
Cohen Building & U.S. Courthouse, 4th & Cooper Streets, Camden, New Jersey, for
the purpose of determining (1) whether the proposed settlement of the claims in the
Litigation for the sum of $7,750,000 in cash should be approved by the Court as fair,
reasonable and adequate; (2) whether, thereafter, this Litigation should be dismissed
with prejudice pursuant to the terms and conditions set forth in the Stipulation of
Settlement dated as of March 23, 2007; (3) whether the Plan of Allocation is fair,
reasonable and adequate and therefore should be approved; and (4) whether the
application of Lead Counsel for the payment of attorneys’ fees and reimbursement of
expenses incurred in connection with this Litigation should be approved.

     If you purchased the publicly-traded securities of MedQuist between and
including March 29, 2000 and June 14, 2004, your rights may be affected by the
settlement of this Litigation. If you have not received a detailed Notice of Pendency
and Proposed Settlement of Class Action (“Notice”) and a copy of the Proof of Claim
and Release, you may obtain copies by writing to MedQuist Securities Litigation, c/o
Gilardi & Co. LLC, Claims Administrator, P.O. Box 8040, San Rafael, CA 94912-
8040. If you are a Settlement Class Member, in order to share in the
distribution of

-1-

 

the Net Settlement Fund, you must submit a Proof of Claim and Release postmarked
no later than                     , 2007, establishing that you are entitled to recovery.

     If you desire to be excluded from the Settlement Class, you must submit a
request for exclusion postmarked by                     , 2007, in the manner and form
explained in the detailed Notice referred to above. All Members of the Settlement
Class who have not timely and validly requested exclusion from the Settlement Class
will be bound by any judgment entered in the Litigation pursuant to the terms and
conditions of the Stipulation of Settlement.

     Any objection to the settlement must be mailed or delivered such that it is
received by each of the following no later than                     , 2007:

CLERK OF THE COURT

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

Mitchell H. Cohen Building & U.S. Courthouse

4th & Cooper Streets, Room 1050

Camden, NJ 08101

Counsel for Lead Plaintiff:

LERACH COUGHLIN STOIA GELLER

 RUDMAN & ROBBINS LLP

JOY ANN BULL

655 West Broadway, Suite 1900

San Diego, CA 92101

Counsel for MedQuist:

WINSTON & STRAWN LLP

GAIL J. STANDISH

333 South Grand Avenue, 38th Floor

Los Angeles, CA 90071-1543

-2-

 

PLEASE DO NOT CONTACT THE COURT OR THE CLERK’S OFFICE
REGARDING THIS NOTICE. If you have any questions about the settlement, you
may contact counsel for the Lead Plaintiff at the address listed above or go to one of
the following websites: www.gilardi.com or www.lerachlaw.com.

	 	 	 	 	 
	DATED:

	 	 	 	BY ORDER OF THE COURT
	 

	 	 	 	UNITED STATES DISTRICT COURT
	 

	 	 	 	DISTRICT OF NEW JERSEY

-3-

 

EXHIBIT B

 

 

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

	 	 	 	 	 	 	 	 	 
	WILLIAM STEINER, Individually and
	 	 	)	 	 	No. 1:04-CV-05487-JBS-AMD
	On Behalf of Himself and All Others
	 	 	)	 	 	 	 	 
	Similarly Situated,
	 	 	)	 	 	CLASS ACTION
	 
	 	 	)	 	 	 	 	 
	Plaintiffs,
	 	 	)	 	 	Judge Jerome B. Simandle
	 
	 	 	)	 	 	 	 	 
	vs.
	 	 	)	 	 	[PROPOSED] FINAL JUDGMENT
	 
	 	 	)	 	 	AND ORDER OF DISMISSAL WITH	 	 
	MEDQUIST, INC., et al.,
	 	 	)	 	 	PREJUDICE	 	 
	 
	 	 	)	 	 	 	 	 
	Defendants.
	 	 	)	 	 	EXHIBIT B	 	 
	______________________________________
	 	 	)	 	 	 	 	 

 

 

     This matter came before the Court for hearing pursuant to an Order of this Court,
dated ________, 2007, on the application of the Settling Parties for approval of
the settlement set forth in the Stipulation of Settlement dated as of March 23, 2007 (the
“Stipulation”). Due and adequate notice having been given of the settlement as required
in said Order, and the Court having considered all papers filed and proceedings held
herein and otherwise being fully informed in the premises and good cause appearing
therefore, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:

     1. This Judgment incorporates by reference the definitions in the
Stipulation, and all terms used herein shall have the same meanings set forth in the
Stipulation.

     2. This Court has jurisdiction over the subject matter of the Litigation and
over all parties to the Litigation, including all Members of the Settlement Class.

     3. Except as to any individual claim of those Persons (identified in Exhibit 1
attached hereto) who have validly and timely requested exclusion from the Settlement
Class, the Litigation and all claims contained therein, including all of the Released
Claims, are dismissed with prejudice as to the Lead Plaintiff and the other Members of
the Settlement Class, and as against each and all of the Released Persons. The parties
are to bear their own costs, except as otherwise provided in the Stipulation.

     4. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court
hereby approves the settlement set forth in the Stipulation and finds that said

-1-

 

settlement is, in all respects, fair, reasonable and adequate to, and is in the best
interests of, the Lead Plaintiff, the Settlement Class and each of the Settlement Class
Members. This Court further finds the settlement set forth in the Stipulation is the
result of arm’s-length negotiations between experienced counsel representing the
interests of the Lead Plaintiff, the Settlement Class Members and the Defendants.
Accordingly, the settlement embodied in the Stipulation is hereby approved in all
respects and shall be consummated in accordance with its terms and provisions. The
Settling Parties are hereby directed to perform the terms of the Stipulation.

     5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, the Court
hereby certifies, for purposes of effectuating this settlement, a Settlement Class of all
Persons who purchased the publicly-traded securities of MedQuist between and
including March 29, 2000 and June 14, 2004, inclusive. Excluded from the Settlement
Class are Defendants and their Related Parties. Also excluded from the Settlement Class
are those Persons who timely and validly requested exclusion from the Settlement Class
pursuant to the Notice of Pendency and Proposed Settlement of Class Action.

     6. With respect to the Settlement Class, this Court finds for the purposes of
effectuating this settlement that: (a) the Members of the Settlement Class are so
numerous that joinder of all Settlement Class Members in the Litigation is
impracticable; (b) there are questions of law and fact common to the Settlement Class
which predominate over any individual questions; (c) the claims of the Lead Plaintiff

-2-

 

are typical of the claims of the Settlement Class; (d) the Lead Plaintiff and Lead Counsel
have fairly and adequately represented and protected the interests of all of the Settlement Class
Members; and (e) a class action is superior to other available methods for the fair and efficient
adjudication of the controversy, considering: (i) the interests of the Members of the Settlement
Class in individually controlling the prosecution of the separate actions; (ii) the extent and
nature of any litigation concerning the controversy already commenced by Members of the Settlement
Class; (iii) the desirability or undesirability of continuing the litigation of these claims in
this particular forum; and (iv) the difficulties likely to be encountered in the management of the
Litigation.

     7. Upon the Effective Date, the Lead Plaintiff and each of the Settlement Class Members
shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever
released, relinquished and discharged all Released Claims against the Released Persons, whether or
not such Settlement Class Member executes and delivers a Proof of Claim and Release form.

     8. Upon the Effective Date hereof, each of the Released Persons shall be deemed to have,
and by operation of this Judgment shall have, fully, finally, and forever released, relinquished
and discharged the Lead Plaintiff, each and all of the Settlement Class Members, and Lead Counsel
from all claims (including Unknown Claims), arising out of, relating to, or in connection with the
institution, prosecution, assertion, settlement or resolution of the Litigation or the Released
Claims.

-3-

 

     9. The distribution of the Notice of Pendency and Proposed Settlement of Class Action and
the publication of the Summary Notice as provided for in the Order Preliminarily Approving
Settlement and Providing for Notice constituted the best notice practicable under the
circumstances, including individual notice to all Members of the Settlement Class who could be
identified through reasonable effort. Said notice provided the best notice practicable under the
circumstances of those proceedings and of the matters set forth therein, including the proposed
settlement set forth in the Stipulation, to all Persons entitled to such notice, and said notice
fully satisfied the requirements of Federal Rule of Civil Procedure 23, the requirements of due
process, and any other applicable law.

     10. Any plan of allocation submitted by Lead Counsel or any order entered regarding the
attorneys’ fee and expense application shall in no way disturb or affect this Final Judgment and
shall be considered separate from this Final Judgment.

     11. Neither the Stipulation nor the settlement contained therein, nor any act performed or
document executed pursuant to or in furtherance of the Stipulation or the settlement: (a) is or may
be deemed to be or may be used as an admission of, or evidence of, the validity of any Released
Claim, or of any wrongdoing or liability of the Defendants; or (b) is or may be deemed to be or may
be used as an admission of, or evidence of, any fault or omission of any of the Defendants in any
civil, criminal or administrative proceeding in any court, administrative agency or other
tribunal. Defendants may file the Stipulation and/or the Judgment in any other action that may

-4-

 

be brought against them in order to support a defense or counterclaim based on principles of res
judicata, collateral estoppel, release, good faith settlement, judgment bar or reduction or any
other theory of claim preclusion or issue preclusion or similar defense or counterclaim.

     12. Without affecting the finality of this Judgment in any way, this Court hereby retains
continuing jurisdiction over: (a) implementation of this settlement and any award or distribution
of the Settlement Fund, including interest earned thereon; (b) disposition of the Settlement Fund;
(c) hearing and determining applications for attorneys’ fees and expenses in the Litigation; and
(d) all parties hereto for the purpose of construing, enforcing and administering the Stipulation.

     13. The Court finds that during the course of the Litigation, the Settling Parties and their
respective counsel at all times complied with the requirements of Federal Rule of Civil Procedure
11.

     14. In the event that the settlement does not become effective in accordance with the terms
of the Stipulation or the Effective Date does not occur, or in the event that the Settlement Fund,
or any portion thereof, is returned to the Defendants, then

-5-

 

this Judgment shall be rendered null and void to the extent provided by and in accordance with the
Stipulation and shall be vacated and, in such event, all orders entered and releases delivered in
connection herewith shall be null and void to the extent provided by and in accordance with the
Stipulation.

	 	 	 	 	 	 	 
	DATED:
	 	 	 	 	 	 
	 

	 	 

	 	 

THE HONORABLE JEROME B. SIMANDLE

UNITED STATES DISTRICT JUDGE
	 	 

Submitted by:

LITE DePALMA GREENBERG

& RIVAS, LLC

JOSEPH J. DePALMA

	 	 	 
	 
	 	 
	 

JOSEPH J. DePALMA

	 	 

Two Gateway Center, 12th Floor

Newark, NJ 07102-5003

Telephone: 973/623-3000

973/623-0858 (fax)

Liaison Counsel

LERACH COUGHLIN STOIA GELLER

    RUDMAN & ROBBINS LLP

JOY ANN BULL

655 West Broadway, Suite 1900

San Diego, CA 92101-3301

Telephone: 619/231-1058

619/231-7423 (fax)

-6-

 

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

JEFFREY W. LAWRENCE

SHIRLEY H. HUANG

100 Pine Street, Suite 2600

San Francisco, CA 94111

Telephone: 415/288-4545

415/288-4534 (fax)

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

SAMUEL H. RUDMAN

DAVID A. ROSENFELD

58 South Service Road, Suite 200

Melville, NY 11747

Telephone: 631/367-7100

631/367-1173 (fax)

Lead Counsel for Plaintiffs

-7-

 

EXHIBIT B

 

 

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

	 	 	 	 	 	 	 
	WILLIAM STEINER, Individually and
	)	 	 	No. 1:04-CV-05487-JBS-AMD
	On Behalf of Himself and All Others
	)	 	 	 	 	 
	Similarly Situated,
	)	 	 	CLASS ACTION
	 
	)	 	 	 	 	 
	Plaintiffs,
	)	 	 	Judge Jerome B. Simandle
	 
	)	 	 	 	 	 
	vs.
	)	 	 	[PROPOSED] FINAL JUDGMENT
	 
	)	 	 	AND ORDER OF DISMISSAL WITH
	MEDQUIST, INC., et al.,
	)	 	 	PREJUDICE
	 
	)	 	 	 	 	 
	Defendants.
	)	 	 	EXHIBIT B
	______________________________________
	)	 	 	 	 	 

 

 

     This matter came before the Court for hearing pursuant to an Order of this Court, dated                     , 2007, on the application of the Settling Parties for approval of the settlement
set forth in the Stipulation of Settlement dated as of March 23, 2007 (the “Stipulation”). Due and
adequate notice having been given of the settlement as required in said Order, and the Court having
considered all papers filed and proceedings held herein and otherwise being fully informed in the
premises and good cause appearing therefore, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:

     1. This Judgment incorporates by reference the definitions in the Stipulation, and all
terms used herein shall have the same meanings set forth in the Stipulation.

     2. This Court has jurisdiction over the subject matter of the Litigation and over all
parties to the Litigation, including all Members of the Settlement Class.

     3. Except as to any individual claim of those Persons (identified in Exhibit 1 attached
hereto) who have validly and timely requested exclusion from the Settlement Class, the Litigation
and all claims contained therein, including all of the Released Claims, are dismissed with
prejudice as to the Lead Plaintiff and the other Members of the Settlement Class, and as against
each and all of the Released Persons. The parties are to bear their own costs, except as otherwise
provided in the Stipulation.

     4. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court hereby approves
the settlement set forth in the Stipulation and finds that said

-1-

 

settlement is, in all respects, fair, reasonable and adequate to, and is in the best interests of,
the Lead Plaintiff, the Settlement Class and each of the Settlement Class Members. This Court
further finds the settlement set forth in the Stipulation is the result of arm’s-length
negotiations between experienced counsel representing the interests of the Lead Plaintiff, the
Settlement Class Members and the Defendants. Accordingly, the settlement embodied in the
Stipulation is hereby approved in all respects and shall be consummated in accordance with its
terms and provisions. The Settling Parties are hereby directed to perform the terms of the
Stipulation.

     5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, the Court hereby certifies,
for purposes of effectuating this settlement, a Settlement Class of all Persons who purchased the
publicly-traded securities of MedQuist between and including March 29, 2000 and June 14, 2004,
inclusive. Excluded from the Settlement Class are Defendants and their Related Parties. Also
excluded from the Settlement Class are those Persons who timely and validly requested exclusion
from the Settlement Class pursuant to the Notice of Pendency and Proposed Settlement of Class
Action.

     6. With respect to the Settlement Class, this Court finds for the purposes of effectuating
this settlement that: (a) the Members of the Settlement Class are so numerous that joinder of all
Settlement Class Members in the Litigation is impracticable; (b) there are questions of law and
fact common to the Settlement Class which predominate over any individual questions; (c) the claims
of the Lead Plaintiff

-2-

 

are typical of the claims of the Settlement Class; (d) the Lead Plaintiff and Lead Counsel have
fairly and adequately represented and protected the interests of all of the Settlement Class
Members; and (e) a class action is superior to other available methods for the fair and efficient
adjudication of the controversy, considering: (i) the interests of the Members of the Settlement
Class in individually controlling the prosecution of the separate actions; (ii) the extent and
nature of any litigation concerning the controversy already commenced by Members of the Settlement
Class; (iii) the desirability or undesirability of continuing the litigation of these claims in
this particular forum; and (iv) the difficulties likely to be encountered in the management of the
Litigation.

     7. Upon the Effective Date, the Lead Plaintiff and each of the Settlement Class Members
shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever
released, relinquished and discharged all Released Claims against the Released Persons, whether or
not such Settlement Class Member executes and delivers a Proof of Claim and Release form.

     8. Upon the Effective Date hereof, each of the Released Persons shall be deemed to have,
and by operation of this Judgment shall have, fully, finally, and forever released, relinquished
and discharged the Lead Plaintiff, each and all of the Settlement Class Members, and Lead Counsel
from all claims (including Unknown Claims), arising out of, relating to, or in connection with the
institution, prosecution, assertion, settlement or resolution of the Litigation or the Released
Claims.

-3-

 

     9. The distribution of the Notice of Pendency and Proposed Settlement of Class Action and
the publication of the Summary Notice as provided for in the Order Preliminarily Approving
Settlement and Providing for Notice constituted the best notice practicable under the
circumstances, including individual notice to all Members of the Settlement Class who could be
identified through reasonable effort. Said notice provided the best notice practicable under the
circumstances of those proceedings and of the matters set forth therein, including the proposed
settlement set forth in the Stipulation, to all Persons entitled to such notice, and said notice
fully satisfied the requirements of Federal Rule of Civil Procedure 23, the requirements of due
process, and any other applicable law.

     10. Any plan of allocation submitted by Lead Counsel or any order entered regarding the
attorneys’ fee and expense application shall in no way disturb or affect this Final Judgment and
shall be considered separate from this Final Judgment.

     11. Neither the Stipulation nor the settlement contained therein, nor any act performed or
document executed pursuant to or in furtherance of the Stipulation or the settlement: (a) is or
may be deemed to be or may be used as an admission of, or evidence of, the validity of any Released
Claim, or of any wrongdoing or liability of the Defendants; or (b) is or may be deemed to be or
may be used as an admission of, or evidence of, any fault or omission of any of the Defendants in
any civil, criminal or administrative proceeding in any court, administrative agency or other
tribunal. Defendants may file the Stipulation and/or the Judgment in any other action that may

-4-

 

be brought against them in order to support a defense or counterclaim based on principles of res
judicata, collateral estoppel, release, good faith settlement, judgment bar or reduction or any
other theory of claim preclusion or issue preclusion or similar defense or counterclaim.

     12. Without affecting the finality of this Judgment in any way, this Court hereby retains
continuing jurisdiction over: (a) implementation of this settlement and any award or distribution
of the Settlement Fund, including interest earned thereon; (b) disposition of the Settlement Fund;
(c) hearing and determining applications for attorneys’ fees and expenses in the Litigation; and
(d) all parties hereto for the purpose of construing, enforcing and administering the Stipulation.

     13. The Court finds that during the course of the Litigation, the Settling Parties and their
respective counsel at all times complied with the requirements of Federal Rule of Civil Procedure
11.

     14. In the event that the settlement does not become effective in accordance with the terms
of the Stipulation or the Effective Date does not occur, or in the event that the Settlement Fund,
or any portion thereof, is returned to the Defendants, then

-5-

 

this Judgment shall be rendered null and void to the extent provided by and in accordance with the
Stipulation and shall be vacated and, in such event, all orders entered and releases delivered in
connection herewith shall be null and void to the extent provided by and in accordance with the
Stipulation.

	 	 	 	 	 	 	 
	DATED:
	 	 	 	 	 	 
	 

	 	 

	 	 

THE HONORABLE JEROME B. SIMANDLE

UNITED STATES DISTRICT JUDGE
	 	 

Submitted by:

LITE DePALMA GREENBERG

& RIVAS, LLC

JOSEPH J. DePALMA

	 	 	 
	 
	 	 
	 

JOSEPH J. DePALMA

	 	 

Two Gateway Center, 12th Floor

Newark, NJ 07102-5003

Telephone: 973/623-3000

973/623-0858 (fax)

Liaison Counsel

LERACH COUGHLIN STOIA GELLER

& ROBBINS LLP

JOY ANN BULL

655 West Broadway, Suite 1900

San Diego, CA 92101-3301

Telephone: 619/231-1058

619/231-7423 (fax)

-6-

 

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

JEFFREY W. LAWRENCE

SHIRLEY H. HUANG

100 Pine Street, Suite 2600

San Francisco, CA 94111

Telephone: 415/288-4545

415/288-4534 (fax)

LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP

SAMUEL H. RUDMAN

DAVID A. ROSENFELD

58 South Service Road, Suite 200

Melville, NY 11747

Telephone: 631/367-7100

631/367-1173 (fax)

Lead Counsel for Plaintiffs

-7-exhibit10_1.htm

     

    
      
        

      

    

    Exhibit
      10.1

     

    
      CREE,
        INC.

      

      FISCAL
        2008

      MANAGEMENT
        INCENTIVE COMPENSATION PLAN

      

       

      The
        following Management Incentive Compensation Plan (the “Plan”) is adopted by
        Cree, Inc. and its consolidated subsidiaries (collectively, the “Company”) for
        its fiscal year ending June 29, 2008 (the “Plan Year”):

       

      1.    Purpose.  The
        purpose of the Plan is to motivate and reward excellent performance, to attract
        and retain outstanding senior management, to create a strong link between
        strategic and corporate operating plans and individual performance, to achieve
        greater corporate performance by focusing on results, and to encourage teamwork
        at the highest levels within the organization.  The Plan rewards
        participants with incentives based on their contributions and the attainment
        of
        specific corporate and individual performance goals.  Incentives may
        be calculated in part based on a performance measurement multiplied by the
        participant’s annual target award level.  Annual target award levels
        vary according to the position.

       

      2.    Eligibility.  The
        senior level managers of the Company who report directly to the Company’s Chief
        Executive Officer (CEO) and other key managers of the Company who have been
        identified by the CEO are eligible to participate in this Plan upon approval
        by
        the Compensation Committee in the case of executive officers, or by the CEO
        in
        all other cases, of such individual’s target award level for the Plan
        Year.  Participation in a predecessor incentive compensation plan does
        not entitle any Company employee to be selected for participation in this
        Plan.  If an eligible participant’s duties and responsibilities
        materially change during the Plan Year, the Compensation Committee in the
        case
        of executive officers or the CEO in all other cases shall have the option
        to
        terminate the participant’s eligibility to participate in the Plan or otherwise
        modify the participant’s goals and/or incentives due to such
        change.

       

      3.    Plan
        Awards:

       

      3.1    Target
        Award Levels.  Annual target award levels are expressed as a
        percentage of base salary and vary by position.  The target award
        level specified for each participant represents the award level for 100%
        achievement of all objectives by that participant.  The actual award
        amount is determined by multiplying the participant’s base salary during the
        award period by various percentages, as provided in Paragraph 3.2
        below.

       

      3.2    Determination
        of
        Awards.  Except as expressly provided otherwise in this Plan,
        each eligible participant’s base salary for all award periods in the Plan Year
        will be determined by reference to the participant’s base salary in effect on
        the last day of the first fiscal quarter of the Plan Year (as provided in
        the
        Company’s human resources management system).  If the participant’s
        base salary changes after the first fiscal quarter of the Plan Year, the
        base
        salary for the award period in which the change occurs will be the weighted
        average base salary for the award period determined by multiplying each base
        salary in effect during that award period by a fraction, the numerator of
        which
        is the number of calendar days in the award period on which such base salary
        was
        in effect and the denominator of which is the number of calendar days in
        the
        award period, and the base salary for all subsequent award periods will be
        the
        new base salary (subject to any further changes).  Awards are
        determined based on performance against goals in two
        categories:  corporate goals, and individual MBO
        goals.  Unless otherwise approved by the Compensation Committee in the
        case of executive officers or by the CEO in all other cases, 60% of a
        participant’s target award level will be allocated to achievement of corporate
        goals and 40% of a participant’s target award level will be allocated to
        achievement of individual MBO goals.  Performance against individual
        MBO goals will be measured quarterly on a scale of 0% to 100% and performance
        against corporate annual goals will be measured annually on a scale of 0%
        to
        150%.  Actual awards will be determined for each participant in
        accordance with the following formulas:

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Quarterly
        Awards:    A x B x C x D

       

      Annual
        Award:         A x B x E x
        F

       

      Where:

      

      
        	
                 

              	
                A
                  equals the base salary for the award
                  period

              

      

      
        	
                 

              	
                
                  B
                    equals the target award level for the participant (expressed
                    as a
                    percentage)

                

              

      

      
        	
                 

              	
                
                  C
                    equals the percentage of the target award level allocated to
                    individual
                    performance goals for the fiscal quarter (e.g., 1⁄4 of
                    40%)

                

              

      

      
        	
                 

              	
                
                  D
                    equals the participant’s aggregate performance measurement against
                    individual goals for the fiscal quarter (expressed as a
                    percentage)

                

              

      

      
        	
                 

              	
                
                  E
                    equals the percentage of the target award level allocated to
                    corporate
                    performance goals for the fiscal year (e.g.,
                    60%)

                

              

      

      
        	
                 

              	
                
                  F
                    equals the performance measurement against corporate goals for
                    the fiscal
                    year (expressed as a
                    percentage)

                

              

      

       

      3.3    Individual
        MBO
        Goals.  At the beginning of each fiscal quarter, the CEO will
        determine the quarterly corporate financial performance goals, if any, to
        be
        included in each participant’s individual objectives and the weight to be
        applied thereto.  At the beginning of each fiscal quarter, each
        participant will develop performance goals specific to such individual or
        to his
        or her business unit’s performance for that fiscal quarter and assign a weight
        to each goal (expressed as a percentage) such that the aggregate weight of
        all
        goals (including the weight of any quarterly corporate financial performance
        goals specified by the CEO) is equal to 100%.  The participant's
        proposed goals and assigned weights will be submitted to the CEO for
        approval.  Meeting an individual goal will yield a performance
        measurement of 100% for that individual goal.  Not meeting an
        individual goal will result in a 0% performance measurement for that goal
        unless
        the CEO in his discretion approves a prorated percentage based on partial
        achievement of the goal.  Performance measurements for individual
        goals will be approved by the CEO and multiplied by the weight assigned to
        that
        goal to arrive at the participant’s aggregate performance measurement against
        individual goals for the fiscal quarter.  Any corresponding awards
        will be paid to eligible participants following approval of the amount by
        the
        CEO.

       

      3.4    Corporate
        Goals.  Performance against corporate goals is measured based on
        the Company meeting or exceeding the revenue, net income, and earnings per
        share
        (EPS) targets for the Plan Year recommended by the CEO and approved by the
        Compensation Committee.  The performance measurement against corporate
        goals will be 0% for the Plan Year unless the minimum established revenue
        target
        and either the minimum net income or the EPS target are met for such award
        period.  After the end of the Plan Year, the Compensation Committee
        will assess the Company’s revenue, net income, and EPS results for the Plan Year
        using competent and reliable information, including but not limited to audited
        financial statements, if available, and will determine in good faith and
        in its
        sole discretion the performance measurement against corporate goals (expressed
        as a percentage) for the Plan Year using a pre-established interpolation
        schedule.  The performance measurement percentage will then be used to
        determine each participant’s annual incentive compensation based on achievement
        of corporate goals.  Any corresponding awards will be paid to eligible
        participants following approval of the amount by the Compensation Committee
        in
        the case of executive officers and by the CEO in all other cases.

       

       

       

      
        
          
          

        

        
          -
            2
            -

          
            

          

        

        
          
          

        

      

       

      4.    Other
        Provisions:

       

      4.1    New
        Hires; Newly Eligible Employees; Leave Periods.  Unless otherwise
        provided in the individual’s employment offer letter, if a new hire is eligible
        to participate in the Plan, he or she will commence participation in the
        Plan as
        of the date of hire and his or her base salary for the Plan Year will be
        as
        provided in his or her offer letter (subject to change as otherwise provided
        in
        this Plan); provided that the base salary used for purposes of calculating
        the
        participant’s awards for the first quarter of participation and the annual award
        will reduced proportionately to equate to the base salary applicable to the
        number of calendar days the participant was employed during such award
        periods.  If an existing employee of the Company first becomes
        eligible to participate in the Plan after the start of the Plan Year, he
        or she
        will commence participation in the Plan as of the start date approved by
        the
        Compensation Committee in the case of an executive officer or by the CEO
        in all
        other cases.  The base salary used for purposes of calculating such
        participant’s awards will be determined as otherwise provided in this Plan,
        except that the base salary used for purposes of calculating the participant’s
        awards for the first quarter of participation and the annual award will reduced
        proportionately to equate to the base salary applicable to the number of
        calendar days the participant was eligible to participate in the Plan during
        such award periods.  If a participant is on a leave of absence
        (whether or not such leave is a paid leave of absence), including without
        limitation a short-term or long-term disability leave, for all or part of
        an
        award period, to the extent permitted by applicable law (e.g., the Family
        and
        Medical Leave Act (FMLA) or the Uniformed Services Employment and Reemployment
        Rights Act (USERRA)), the base salary for such award period will be reduced
        proportionately to equate to a base salary applicable to the number of calendar
        days the participant was not on a leave of absence during such award
        period.  For such purposes, excused time off, paid time off (PTO), and
        holidays taken in accordance with the Company’s human resources policies will
        not be considered leaves of absence. If a participant in the Plan remains
        employed by the Company, but after the start of the Plan Year becomes ineligible
        to participate in the Plan, unless otherwise approved by the Compensation
        Committee in the case of an executive officer or by the CEO in all other
        cases,
        the participant will not be eligible for an award for any award period that
        is
        partially completed as of the date he or she becomes ineligible to participate
        in the Plan.

      
         

        4.2    Termination
          of Employment.  Unless otherwise approved by the Compensation
          Committee in the case of an executive officer or by the CEO in any other
          case,
          and except in the case of termination of employment due to the participant’s
          death or disability (meeting the requirements for benefits under the Company’s
          long-term disability plan) or termination of employment after a Change
          In
          Control as provided in this paragraph, the participant must be continuously
          employed by the Company for that part of the award period that the individual
          is
          eligible to participate in the Plan up through and including the date of
          the
          payment in order to have a right to payment, and any participant whose
          employment with the Company terminates prior to the date of payment, with
          or
          without cause, shall forfeit his or her rights to any unpaid
          award.  If the Company terminates a participant’s employment prior to
          the payment date for an award period on account of the participant’s death or
          disability (meeting the requirements for benefits under the Company’s long-term
          disability plan), the participant will be entitled to receive an award
          for any
          award period in which he or she was employed by the Company as otherwise
          determined in accordance with this Plan as if the participant remained
          employed
          through the payment date for the award period.  However, the base
          salary used for purposes of calculating such participant’s award(s) will be
          reduced proportionately to equate to the base salary applicable to the
          number of
          calendar days the participant was employed, and not otherwise on a leave
          of
          absence as provided above, during the award period.  If there is a
          Change In Control, as that term is defined in the Cree, Inc. Equity Compensation
          Plan (“Change In Control”), and a participant’s employment terminates for any
          reason (other than death or disability) subsequent to the Change in Control
          but
          prior to the payment date for an award period, the participant will be
          entitled
          to receive an award for all award periods for the Plan Year as otherwise
          determined in accordance with this Plan as if the participant remained
          employed
          through the payment date for the award period.  The base salary used
          for purposes of calculating such participant’s awards will be determined as
          otherwise provided in this Plan, except that the base salary used for such
          purposes may not be decreased after the Change in Control without the
          Participant’s prior written approval.

      

       

       

       

      
        
          
          

        

        
          -
            3
            -

          
            

          

        

        
          
          

        

      

       

      4.3    Exceptions.  In
        order to ensure that the Company’s best interests are met, the amount of a
        payment on an award otherwise calculated in accordance with this Plan can
        be
        increased, decreased, or eliminated at any time prior to payment, in the
        sole
        discretion of the CEO, except that no change with respect to any award to
        any
        executive officer of the Company shall be made without Compensation Committee
        approval and, so long as the participant is not in breach of his or her
        obligations under his or her Employee Agreement Regarding Confidential
        Information, Intellectual Property, and Noncompetition with the Company,
        payments due as a result of a Change In Control, as otherwise provided in
        the
        Plan, cannot be decreased or eliminated without the prior written approval
        of
        the participant.

       

      4.4    Amendment;
        Termination.  The Company has no obligation to implement this
        Plan for any fiscal year and has the right to amend, modify or terminate
        the
        Plan at any time without prior notice to participants; provided that the
        Company
        may not amend, modify or terminate the Plan in a manner that affects a payment
        that has already become payable hereunder to an eligible employee.

       

      4.5    Earned
        Upon Payment.  Except as provided in Paragraph 4.2 above, no
        award amount shall be considered earned by any participant under the Plan
        until
        it is received by the participant from the Company.

       

      4.6    Change
        In
        Control.  In the event a Change In Control occurs during the Plan
        Year, notwithstanding any language in this Plan to the contrary, each
        participant’s performance measurement against individual MBO goals for any award
        period ending after the effective date of the Change In Control will be 100%
        and
        the performance measurement against corporate goals for the Plan Year will
        be
        the greater of 100% or such performance measurement as is determined in
        accordance with this Plan, regardless of whether such participant is employed
        during or at the end of the applicable award period.

       

      4.7    Priority
        of Written Agreement.  Notwithstanding any language in this Plan
        to the contrary, the terms and conditions of any written agreement between
        the
        Company and a participant regarding payment of one or more awards under this
        Plan (or payment of an amount in lieu of payment of such awards) upon
        termination of employment for any reason or in the event of a Change In Control
        shall supersede and control with respect to payment of such awards to the
        participant under this Plan, provided that the written agreement was approved
        by
        the Compensation Committee if the participant was an executive officer at
        the
        time of execution of the agreement or by the CEO in any other case.

       

      4.8    Non-Transferability.  No
        right or interest of any participant in this Plan is assignable or transferable,
        or subject to any lien, directly, by operation of law, or otherwise, including
        without limitation by execution, levy, garnishment, attachment, pledge, and
        bankruptcy.

       

      4.9    No
        Rights
        to Company Assets.  No Plan participant nor any other person will
        have a right in, nor title to, any assets, funds or property of the Company
        or
        any of its subsidiaries through this Plan.  Any earned incentives will
        be payable from the Company’s general assets.  Nothing contained in
        this Plan constitutes a guarantee by the Company or any of its subsidiaries
        that
        the assets of the Company and its subsidiaries will be sufficient to pay
        any
        earned incentives.

       

       

      

      
        
          
          

        

        
          -
            4
            -

          
            

          

        

        
          
          

        

      

       

      5.    Administration:

       

      5.1    The
        Compensation Committee is the Plan Administrator with respect to all decisions
        under the Plan concerning, affecting or related to the compensation of executive
        officers, and the CEO is the Plan Administrator with respect to all other
        aspects of the Plan.  The Plan Administrators, in their respective
        capacities, have the authority to interpret the Plan, and the Plan
        Administrators’ interpretations, in their respective capacities, shall be final
        and binding on all Plan participants.

       

      5.2    At
        all times,
        this Plan shall be interpreted and operated so that awards payable under
        this
        Plan shall either be exempt from or comply with the provisions of section
        409A
        of the Internal Revenue Code of 1986, as amended (the "Code") and the treasury
        regulations relating thereto so as not to subject any Plan participant to
        the
        payment of interest and/or any tax penalty that may be imposed under section
        409A of the Code with respect to the Plan.

       

      5.3    When
        awarded,
        payments under the Plan will be made as soon as practicable after the end
        of the
        applicable award period, and in any event, payments will be made no later
        than
        the end of the second fiscal quarter following the award period to which
        the
        payments relate.   Notwithstanding the foregoing, if a
        participant is eligible for payment of:  (a) all or part of an annual
        award as a result of his or her death or termination of his or her employment
        on
        account of his or her disability as provided in Paragraph 4.2 above, the
        payment
        will be made no later than the 15th day of
        the third
        month after the later of the end of the Company’s tax year in which such death
        or disability occurs or the end of the participant’s tax year in which such
        death or disability occurs; (b) 100% of a quarterly award as provided in
        Paragraph 4.6 above due to a Change In Control, payment will be made without
        exception on or before the 15th day of third month following the end of the
        award period; and/or (c) 100% or more of an annual award as provided in
        Paragraph 4.6 above due to a Change In Control, payment will be made without
        exception no later than the 15th day of
        the third
        month after the later of the end of the Company’s tax year in which the Change
        In Control occurs or the end of the participant’s tax year in which the Change
        In Control occurs.

       

      5.4    This
        Plan
        shall not be construed to give participants a right of continued employment
        with
        the Company.

       

       

       

       

       

      CGS-B750-3

      
        
          
          

        

        
          -
            5
            -

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