Document:

2007-3 (Class C)

  	
  Exhibit 4.10

  

Paragraph
13

Elections
and Variables

to the ISDA Credit Support Annex

dated as of June 28, 2007

between

	
  ABN AMRO BANK N.V. (“Party A”)

  	
   

  	
  GE CAPITAL CREDIT CARD MASTER NOTE TRUST

  
	
   

  	
   

  	
  (“Party B”)

  

 

Paragraph
13.  Elections and Variables

(a)           Security Interest for “Obligations”.

(i)            The term “Obligations” as used
in this Annex includes no “additional obligations” within the meaning of
Paragraph 12.

 (b)          Credit Support Obligations.

(i)            Delivery Amount, Return Amount and
Credit Support Amount.  “Delivery Amount” has the
meaning specified in Paragraph 3(a) except that (I) the words “upon a demand
made by the Secured Party on or promptly following a Valuation Date” shall be
deleted and replaced by the words “not later than the close of business on each
Valuation Date”, (II) by deleting in its entirety the sentence beginning “Unless
otherwise specified in Paragraph 13” and ending “(ii) the Value as of that
Valuation Date of all Posted Credit Support held by the Secured Party.” shall
be deleted in its entirety and replaced with the following:

The “Delivery Amount” applicable to the
Pledgor for any Valuation Date will equal the greatest of

(1)           the amount by which (a) the S&P Credit Support Amount for such
Valuation Date exceeds (b) the S&P Value as of such Valuation Date of all
Posted Credit Support held by the Secured Party,

(2)           the amount by which (a) the Fitch Credit Support Amount for such Valuation
Date exceeds (b) the Fitch Value as of such Valuation Date of all Posted Credit
Support held by the Secured Party

(3)           the amount by which (a) the Moody’s First Trigger Credit Support Amount for
such Valuation Date exceeds (b) the Moody’s First Trigger Value as of such
Valuation Date of all Posted Credit Support held by the Secured Party, and

(4)           the amount by which (a) the Moody’s Second Trigger Credit Support Amount
for such Valuation Date exceeds (b) the Moody’s Second Trigger Value as of such
Valuation Date of all Posted Credit Support held by the Secured Party.”; and

If, on any Valuation Date, the
Delivery Amount equals or exceeds the Pledgor’s Minimum Transfer Amount, the
Pledgor will transfer to the Secured Party sufficient Eligible Credit Support
to ensure that, immediately following such transfer, the Delivery Amount shall
be zero.

“Return Amount” has the meaning specified in Paragraph 3(b) except
that (I) the sentence beginning “Unless otherwise specified in Paragraph 13”
and ending “(ii) the Credit Support Amount.” shall be deleted in its entirety
and replaced by the following:

The “Return Amount”
applicable to the Secured Party for any Valuation Date will equal the least of

(1)           the amount by which (a) the S&P Value as of such Valuation Date of all
Posted Credit Support held by the Secured Party exceeds (b) the S&P Credit
Support Amount for such Valuation Date,

(1)           the amount by which (a) the Fitch Value as of such Valuation Date of all
Posted Credit Support held by the Secured Party exceeds (b) the Fitch Credit
Support Amount for such Valuation Date,

 (2)          the amount by which (a) the Moody’s First Trigger Value as of such
Valuation Date of all Posted Credit Support held by the Secured Party exceeds
(b) the Moody’s First Trigger Credit Support Amount for such Valuation Date,
and

(3)           the amount by which (a) the Moody’s Second Trigger Value as of such
Valuation Date of all Posted Credit Support held by the Secured Party exceeds
(b) the Moody’s Second Trigger Credit Support Amount for such Valuation Date.

In no event shall the Transferee be
required to transfer any Posted Credit Support under Paragraph 3(b) if,
immediately following such transfer, the Delivery Amount would be greater than
zero.

“Credit Support Amount” shall not apply. 
For purposes of calculating any Delivery Amount or Return Amount for any
Valuation Date, reference shall be made to the S&P Credit Support Amount,
the Fitch Credit Support Amount, the Moody’s First Trigger Credit Support
Amount, or the Moody’s Second Trigger Credit Support Amount, in each case for
such Valuation Date, as provided in Paragraphs 13(b)(i)(A) and 13(b)(i)(B),
above.

(ii)           Eligible Collateral.  The following terms will qualify as “Eligible Collateral”
for the party specified:

	
  Collateral (all denominated in USD)

  	
   

  	
  S&P Approved 

  Ratings 

  Downgrade/

  Fitch 

  Valuation 

  Percentage

  	
   

  	
  S&P 

  Required 

  Ratings 

  Downgrade 

  Valuation 

  Percentage

  	
   

  	
  Moody’s First

  Trigger 

  Valuation 

  Percentage

  	
   

  	
  Moody’s 

  Second 

  Trigger 

  Valuation 

  Percentage

  	
   

  
	
  (A)

  	
  Cash

  	
   

  	
  100

  	
  %

  	
  80

  	
  %

  	
  100

  	
  %

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (B)

  	
  Fixed-Rate Negotiable
  debt obligations issued by the U.S. Treasury Department having a remaining
  maturity on such date of not more than one year

  	
   

  	
  98.5

  	
  %

  	
  78.8

  	
  %

  	
  100

  	
  %

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (C)

  	
  Fixed-Rate Negotiable
  debt obligations issued by the U.S. Treasury Department having a remaining
  maturity on such date of more than one year but not more than ten years

  	
   

  	
  89.9

  	
  %

  	
  71.9

  	
  %

  	
  100

  	
  %

  	
  94

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (D)

  	
  Fixed-Rate
  Negotiable debt obligations issued by the U.S. Treasury Department having a
  remaining maturity on such date of more than ten years

  	
   

  	
  83.9

  	
  %

  	
  67.1

  	
  %

  	
  100

  	
  %

  	
  88

  	
  %

  

 

 2
 

Eligible Collateral continued:

(1)  “Negotiable debt obligations” has the meaning
specified  in the 2003 Collateral Asset
Definitions.

(2)  Restriction
on US-STRIPS, US-TIPS. 
Both parties agree that any US Treasury Strips (US-STRIPS) or US
Treasury Inflation Protected Issues (US-TIPS) or similar securities
representing a segment of the full payment obligation of a standard Treasury
shall not be deemed Eligible Collateral and therefore must not be posted by
either party.  US-STRIPS and US TIPS
shall have the meaning as defined in the 2003 ISDA Collateral Asset Definitions
or as amended therein.

(iii)          Thresholds.

(A)      “Independent Amount”
means with respect to Party A:  US$0,
unless otherwise specified in a Confirmation.

(B)       “Threshold” means
with respect to Party A:  US$0 in the
event that (I) Party A fails to assign all of its rights and obligations under
the Agreement or enter into any other Qualifying Substitute Arrangement on or
before the thirtieth (30) day after the date of a Fitch Downgrade (as described
in Part 1(o) of the Schedule) continues to exist, (II) 10 Local Business Days
after an S&P
Approved Ratings Downgrade has occurred and Party A has not entered into any
other Qualifying Substitute Arrangements, (III) 10 Local Business Days after an S&P Required Ratings
Downgrade has occurred or (IV) no Relevant Entity has the Moody’s First Trigger
Required Ratings and either (i) no Relevant Entity has had the Moody’s First
Trigger Required Ratings since this Annex was executed or (ii) at least 30
Local Business days have elapsed since the last time a Relevant Entity had the
Moody’s First Trigger Required Ratings; otherwise, the Threshold shall be
infinite.  With respect to party B:  infinity.

(C)       “Minimum Transfer Amount”
means with respect to Party A and Party B: 
US$50,000; provided however, that if Party A is a Defaulting Party at
the time, “Minimum Transfer Amount” shall be
Zero.

(D)      Rounding.  The Delivery
Amount will be rounded up to the nearest integral multiple of US$10,000 and the
Return Amount will be rounded down to the nearest integral multiple of
US$10,000.

(c)           Valuation and Timing.

(i)            “Valuation Agent”
means Party A, provided, however, that if Party A is a Defaulting Party at the
time, “Valuation Agent” shall mean Party B.

(ii)           “Valuation Date”
means:  (A) in relation to either party
each Wednesday of the relevant calendar week 
(or if such day is not a General Business Day then the immediately following
General Business Day), and (B) any General Business Day designated by Party B
which, in the reasonable judgment of Party B, would result in a Delivery Amount
or Return Amount.  For the purpose of the
foregoing, a General Business Day shall be a General Business Day in New York.

(iii)          “Valuation Time”
means, the close of business in the Relevant Market on the day which is one
General Business Day in the Relevant Market first preceding  the Valuation Date or date of calculation, as
applicable; provided that the calculations of Value and Exposure will be made
as of approximately the same time on the same date.

For the purposes
of this provision, “Relevant Market”
means (a) with respect to the calculation of Value, the principal market in
which the relevant Eligible Credit Support is traded; and (b) with respect to
the calculation of Exposure, the principal market for the relevant Transaction;
each as determined by the Valuation Agent, subject to Paragraph 5, or as otherwise
agreed between the parties.

 3
 

(iv)          “Notification Time”
means 11:00 a.m., on a General Business Day in New York.

(d)           Conditions Precedent and Secured
Party’s Rights and Remedies. 
The following Termination Event(s) will be a “Specified Condition”
for the party specified (that party being the Affected Party if the Termination
Event occurs with respect to that party):

	
  

  	
   

  	
  Party A

  
	
   

  	
   

  	
   

  
	
  Additional
  Termination Event(s): (If any)

  	
   

  	
  [X]

  

 

(e)           Substitution.

(i)            “Substitution Date”
has the meaning specified in Paragraph 4(d)(ii).

(ii)           Consent. 
Inapplicable.

(f)            Dispute Resolution.

(i)            “Resolution Time”
means 1:00 p.m., on the New York General Business Day following the date on
which the notice is given that gives rise to a dispute under Paragraph 5.

(ii)           Value.  For the purpose of Paragraphs 5(i)(C) and
5(ii), the Value of Posted Credit Support will be calculated as follows:  the
sum of (i) (x) the arithmetic mean of the closing bid prices quoted on the
relevant date of three nationally recognized principal market makers (which may
include an affiliate of Party A) for such security chosen by the Valuation
Agent multiplied by the applicable Valuation Percentage or (y) if no quotations
are available from such principal market makers on the relevant date, the
arithmetic mean of the closing bid prices on the next preceding date multiplied
by the applicable Valuation Percentage plus (ii) the accrued interest on such
security (except to the extent Transferred to a party pursuant to any
applicable provision of this Agreement or included in the applicable price
referred to in (i) of this clause) as of such date.

(iii)          Alternative.  The provisions of Paragraph 5 will apply.

(g)           Holding and Using Posted Collateral.

(i)            Eligibility to Hold Posted
Collateral; Custodians.  Party
B and its Custodian will be entitled to hold Posted Collateral pursuant to
Paragraph 6(b) in the Swap Collateral Account (as defined in the Indenture),
provided that any such Custodian shall have a minimum short-term unsecured, unsubordinated debt
rating of “A-1” from S&P: 
Initially, the Custodian
for Party B is Indenture Trustee.  The
Indenture Trustee shall replace itself with another Custodian within 60 day
after its failure to satisfy the ratings set forth in the previous sentence.

(ii)           Use of Posted Collateral.
The provisions of Paragraph 6(c)(i) will not apply to Posted  Collateral.

(h)           Distribution and Interest Amount.

(i)            Interest Rate.  The “Interest Rate” will be
the actual interest rate earned on Posted Collateral in the form of Cash that
is held by Party B or its Custodian.

(ii)           “Transfer of Interest Amount.”  The Transfer of the Interest Amount will be
made on the Third New York Business Day of each calendar month; provided
however that the obligation of Party B to Transfer any Interest Amount to Party
A shall be limited to the extent that Party B has earned and received such
funds and such funds are available to Party B.

 4
 

(iii)          Alternative
to Interest Amount.  The provisions of Paragraph 6(d)(ii) will
apply.

(iv)          The definition of Posted Collateral shall be amended by inserting the
words “received by the Secured Party and” after “Interest Amount or portion
thereof”.

(i)            Additional
Representation(s). Not Applicable.

(j)            ISDA
Master Agreement Protocol

The terms of Annex 14 of the ISDA 2002 Master Agreement Protocol as
published by ISDA on July 15, 2003 (the “Protocol”) are incorporated by
reference into this Agreement, and shall be construed in accordance with
Section 6 of the Protocol.

(k)           Demands and Notices.

All demands, specifications and notices
to Party A under this Annex will be made to:

As set forth in the Schedule.

All demands, specifications and notices to
Party B under this Annex will be made to:

Bank of New York

Attn: Primary administrator, Cal Guillaume

Fax: 212-635-6338

email: CGuillaume@bankofny.com

Any demand,
specification or notice may be made by telephone (“Telephone Notice”) between employees of each party if such
Telephone Notice is confirmed by a subsequent written instruction (which may be
delivered via facsimile or email) by the close of business on the same day that
such Telephone Notice is given.

(l)            Addresses
for Transfers.

With
respect to Party A:  To be provided by
written instructions.

With
respect to Party B:

The Bank of New York

Attn:
Primary administrator, Cal Guillaume

Fax: 212-635-6338

email: CGuillaume@bankofny.com

(m)          Other
Provisions.

(i)    One
Way CSA.  Agreement as to Single Secured Party and
Single Pledgor.  Party A and Party B
agree that, notwithstanding anything to the contrary in the recital to this
Annex, Paragraph 1(b) or Paragraph 2 or the definitions in Paragraph 12, (a)
the term “Secured Party” as used in this Annex means only Party B, (b) the term
Pledgor” as used  in this Annex means
only Party A, (c) only Party A makes the pledge and grant in Paragraph 2, the
acknowledgement in the final sentence of Paragraph 8(a) and the representations
in Paragraph 9.  Party A and Party B
further agree that, notwithstanding anything to the contrary in the recital to
this Annex or Paragraph 7, this Annex will constitute a Credit Support Document
only with respect to Party A, and the Events of Default in Paragraph 7 will
only apply to Party A

 5
 

(ii)   Governing
Law.  The terms and conditions of this  Annex shall be governed and construed in
accordance with the laws of the State of New York and to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York  City.

(iii) 2002 ISDA Master Agreement:  As the parties have agreed to
utilize an Agreement in the form of the 2002 Master Agreement published by the
International Swaps and Derivatives Association (“ISDA”) and ISDA has indicated
that certain modifications are appropriate when using this Annex with said 2002
Master Agreement, the parties hereby agree that, notwithstanding anything
herein or in the Agreement to the contrary, Paragraph 5(i)(b) and the
definition of “Exposure” in Paragraph 12, each as set forth above in this
Annex, shall be deemed amended and restated, for all purposes, as described
below:

(i)            References
throughout this Annex to “Swap Transactions” are deleted.

(ii)           The terms of Paragraph 5(i)(B) of this Annex
are amended and restated in their entirety as follows:

“(B)         calculating the Exposure for the Transactions
in dispute by seeking four actual quotations at mid-market from third parties
for purposes of calculating the relevant Close-out Amount, and taking the
arithmetic average of those obtained; provided that if four quotations are not
available for a particular Transaction, then fewer than four quotations may be
used for that Transaction, and if no quotations are available for a particular
Transaction, then the Valuation Agent’s original calculations will be used for
the Transaction absent manifest error; and”

(iii)          The definition of “Exposure” in Paragraph 12
of the Annex is hereby amended and restated to read in its entirety as follows:

“‘Exposure’ means for any Valuation Date or other date for which Exposure
is calculated and subject to Paragraph 5 in the case of a dispute, the amount,
if any, that would be payable to a party that is the Secured Party by the other
party (expressed as a positive number) or by a party that is the Secured Party
to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(1) of this Agreement if all Transactions were being terminated as of
the relevant Valuation Time, on the basis that (i) that party is not the
Affected Party and (ii) U.S. Dollars is the Termination Currency; provided that
the Close-out Amount will be determined by the Valuation Agent on behalf of
that party using its estimates at mid-market of the amounts that would be paid
for transactions providing the economic equivalent of (x) the material terms of
the Transactions, including the payments and deliveries by the parties under
Section 2(a)(i) in respect of the Transactions that would, but for the
occurrence of the relevant Early Termination Date, have been required after
that date (assuming satisfaction of the conditions precedent in Section
2(a)(iii)); and (y) the option rights of the parties in respect of the
Transactions, provided that, solely for the purpose of this definition, it
shall be assumed that Part 5(s) is deleted.”

(iv)          Set-off.  The terms “Set-off” shall have the meaning
set forth in Section 6(f) of the Agreement.

(iv)          Calculation
of Value.  Paragraph 4(c) is hereby amended by deleting
the word “Value” and inserting in lieu thereof “S&P/Fitch Value, Moody’s
First Trigger Value, Moody’s Second Trigger Value”.  Paragraph 4(d)(ii) is hereby amended by (A)
deleting the words “a Value” and inserting in lieu thereof “an S&P/Fitch
Value, Moody’s First Trigger Value, and Moody’s Second Trigger Value” and (B)
deleting the words “the Value” and inserting in lieu thereof “S&P/Fitch Value,
Moody’s First Trigger Value, and Moody’s Second Trigger Value”.  Paragraph 5 (flush language) 

 6
 

is hereby amended by deleting the word “Value” and inserting in lieu
thereof “S&P/Fitch Value, Moody’s First Trigger Value, or Moody’s Second
Trigger Value”.  Paragraph 5(i) (flush
language) is hereby amended by deleting the word “Value” and inserting in lieu
thereof “S&P/Fitch Value, Moody’s First Trigger Value, and Moody’s Second
Trigger Value”.  Paragraph 5(i)(C) is
hereby amended by deleting the word “the Value, if” and inserting in lieu
thereof “any one or more of the S&P/Fitch Value, Moody’s First Trigger
Value, or Moody’s Second Trigger Value, as may be”.  Paragraph 5(ii) is hereby amended by (1)
deleting the first instance of the words “the Value” and inserting in lieu
thereof “any one or more of the S&P/Fitch Value, Moody’s First Trigger
Value, or Moody’s Second Trigger Value” and (2) deleting the second instance of
the words “the Value” and inserting in lieu thereof “such disputed
S&P/Fitch Value, Moody’s First Trigger Value, or Moody’s Second Trigger
Value”.  Each of 

Paragraph 8(b)(iv)(B) and Paragraph 11(a) is hereby amended by deleting the
word “Value” and inserting in lieu thereof “least of the S&P/Fitch Value,
Moody’s First Trigger Value, and Moody’s Second Trigger Value”.

(v)           Expenses.  Notwithstanding
anything to the contrary in Paragraph 10, the Pledgor will be responsible for,
and will reimburse the Secured Party for, all transfer and other taxes and
other costs involved in any Transfer and maintenance of Eligible Collateral.

(vi)          Withholding.  Paragraph 6(d)(ii) is hereby amended by
inserting immediately after “the Interest Amount” in the fourth line
thereof  the words “less any applicable
withholding taxes.”

(vii)         Additional Definitions.  As used in this Annex:

 “Moody’s First Trigger Event”  means that no Relevant Entity has credit ratings from Moody’s
at least equal to the Moody’s First Trigger Ratings Threshold.

“Moody’s First Trigger Credit
Support Amount”  means,
for any Valuation Date, the excess, if any, of

(I)            (A)          for any Valuation Date on which (I) a Moody’s First Trigger Event
has occurred and has been continuing (x) for at least 30 Local Business Days or
(y) since this Annex was executed and (II) it is not the case that a
Moody’s Second Trigger Event has occurred and been continuing for at least 30
Local Business Days, the greater of (a) zero and (b) sum of (i) the Secured Party’s Transaction Exposure for
such Valuation Date and (ii) the aggregate of the Moody’s First Trigger Further
Collateral Amounts for all Transactions;] or

(B)           for
any other Valuation Date, zero,
over

(II)           the Threshold for Party
A such Valuation Date.

“Moody’s
First Trigger Further Collateral Amount” means for any Transaction
and Valuation Date the product of the applicable Moody’s First Trigger Factor
set forth in Table 1 and the Notional Amount for such Transaction for the
Calculation Period which includes such Valuation Date.

“Moody’s First Trigger Value”
means, on any date and with respect to any Eligible Collateral other than Cash,
the bid price obtained by the Valuation Agent multiplied by the Moody’s First
Trigger Valuation Percentage for such Eligible Collateral set forth in
Paragraph 13(b)(ii).

 “Moody’s
Second Trigger Event”  means that no
Relevant Entity has credit ratings from Moody’s at least equal to the Moody’s
Second Trigger Ratings Threshold.

 7
 

“Moody’s Second Trigger Credit
Support Amount”
means, for any Valuation Date, the excess, if any, of

(I)            (A)          for
any Valuation Date on which it is the case that a Moody’s Second Trigger Event
has occurred and been continuing
for at least 30 Local Business Days, the sum, for each Transaction to
which this Annex relates, of an amount equal to the following:

(1)           if such Transaction is not a
Transaction-Specific Hedge,

the greater of
(a) zero, (b) the aggregate amount of the Next Payments (each
determined based on the rates prevailing on such Valuation Date) for all Next
Payment Dates and (c)
sum of (i) the Secured Party’s Transaction Exposure for such Valuation Date and
(ii) the aggregate of the Moody’s Second Trigger Further Collateral Amounts for
allTransactions or

(2)           if such Transaction is a
Transaction-Specific Hedge,

the greater of
(a) zero, (b) the aggregate amount of the Next Payments (each
determined based on the rates prevailing on such Valuation Date) for all Next
Payment Dates and (c)
sum of (i) the Secured Party’s Transaction Exposure for such Valuation Date and
(ii) the aggregate of the Moody’s Second Trigger TSH Further Collateral Amounts
for all Transactions or

(B)           for
any other Valuation Date, zero, over

(II)           the Threshold for Party
A for such Valuation Date.

“Moody’s Second
Trigger Further Collateral Amount” means for any Transaction and
Valuation Date the product of the applicable Moody’s Second Trigger Factor set
forth in the third column of Table 1and
the Notional Amount for such Transaction for the Calculation Period which
includes such Valuation Date.

“Moody’s
Second Trigger TSH Further Collateral Amount” means for any
Transaction and Valuation Date the product of the applicable Moody’s Second
Trigger Factor set forth in the fourth
column of Table 1and the Notional Amount for such Transaction for the
Calculation Period which includes such Valuation Date.

 “Moody’s Second Trigger Value”
means, on any date and with respect to any Eligible Collateral other than Cash,
the bid price obtained by the Valuation Agent multiplied by the Moody’s Second
Trigger Valuation Percentage for such Eligible Collateral set forth in
Paragraph 13(b)(ii).

“Next Payment”
means, in respect of each Next Payment Date, the greater of (i) the amount of any
payments due to be made by Party A under Section 2(a) on such Next Payment Date
less any payments due to be made by Party B under Section 2(a) on such Next
Payment Date (in each case, after giving effect to any applicable netting under
Section 2(c)) and (ii) zero.

“Next Payment Date” means each date on
which the next scheduled payment under any Transaction is due to be paid.

“Pricing Sources”
means the sources of financial information commonly known as Bloomberg, Bridge
Information Services, Data Resources Inc., Interactive Data Services,
International 

 8
 

Securities Market Association, Merrill Lynch
Securities Pricing Service, Muller Data Corporation, Reuters, Wood Gundy, Trepp
Pricing, JJ Kenny, S&P and Telerate.

“Fitch Credit Support Amount”
means, for any Valuation Date, the
excess, if any, of

(I)            (A)          for any Valuation Date a Fitch Downgrade, has occurred and been continuing for at least 30
days, an amount equal to the sum, for each Transaction to which this Annex relates, of the sum of (1) 100.0%
of the Secured Party’s Transaction Exposure for such Valuation Date and (2) the
product of the Volatility Buffer for such Transaction and the Notional Amount
of such Transaction for the Calculation Period of such Transaction which
includes such Valuation Date, or

(B)           for any other Valuation
Date, zero, over

(II)           the Threshold for Party
A for such Valuation Date.

“Fitch Value” means, on any date and with
respect to any Eligible Collateral, the product of (A) the bid price (or the
face amount with respect to Cash) obtained by the Valuation Agent for such
Eligible Collateral and (B) the Fitch Valuation Percentage for such Eligible Collateral set
forth in paragraph 13(b)(ii).

“S&P Credit Support Amount”
means, (a) if an S&P
Approved Ratings Downgrade has occurred and has continued for 10 Local Business
Days, for any Valuation Date, the
Secured Party’s Exposure; (b) if an S&P Required Ratings Downgrade
has occurred and has continued for 10 Local Business Days:  an amount equal to 125% of the Secured Party’s
Exposure or (c) for any other date: zero.

“S&P Value”
means, on any date and with respect to any Eligible Collateral, the product of
(A) the bid price (or the face amount with respect to Cash) obtained by the
Valuation Agent for such Eligible Collateral and (B) in the event an S&P Approved
Ratings Downgrade or an S&P Required Ratings Downgrade has been continuing for 10 Local Business days,
the S&P Approved Ratings Downgrade/Fitch Valuation Percentage or the S&P
Required Ratings Downgrade Valuation Percentage, respectively, for such Eligible Collateral
set forth in paragraph 13(b)(ii).

“Transaction Exposure”
means, for any Transaction, Exposure determined as if such Transaction were the
only Transaction between the Secured Party and the Pledgor.

“Transaction-Specific Hedge” means
any Transaction that is an interest rate cap, interest rate floor or interest
rate swaption, or an interest rate swap in respect of which (x) the notional
amount is “balance guaranteed” or (y) the notional amount for any Calculation
Period otherwise is not a specific dollar amount that is fixed at the inception
of the Transaction.

“Value”
shall mean, in respect of any date, the related S&P Value, Fitch Value, the
related Moody’s First Trigger Value, and the related Moody’s Second Trigger
Value.

“Volatility Buffer”
means, for any Transaction, the related percentage set forth in the following
table.

 9
 

Fitch
Volatility Buffer:

	
  The higher of the Fitch 

  credit rating of (i) 

  Party A and (ii) the 

  Credit Support 

  	
   

  	
  Remaining Weighted Average Maturity 

  	
   

  
	
  Provider of Party A, if 

  	
   

  	
  (years)

  	
   

  
	
  applicable

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  
	
  At least “AA-”

  	
   

  	
  0.8

  	
  %

  	
  1.7

  	
  %

  	
  2.5

  	
  %

  	
  3.3

  	
  %

  	
  4.0

  	
  %

  	
  4.7

  	
  %

  	
  5.3

  	
  %

  	
  5.9

  	
  %

  
	
  “A+/A”

  	
   

  	
  0.6

  	
  %

  	
  1.2

  	
  %

  	
  1.8

  	
  %

  	
  2.3

  	
  %

  	
  2.8

  	
  %

  	
  3.3

  	
  %

  	
  3.8

  	
  %

  	
  4.2

  	
  %

  
	
  “A-/BBB+” or
  lower

  	
   

  	
  0.5

  	
  %

  	
  1.0

  	
  %

  	
  1.6

  	
  %

  	
  2.0

  	
  %

  	
  2.5

  	
  %

  	
  2.9

  	
  %

  	
  3.3

  	
  %

  	
  3.6

  	
  %

  

 

	
  The higher of the Fitch 

  credit rating of (i) 

  Party A and (ii) the 

  	
   

  	
  Remaining Weighted Average Maturity 

  	
   

  
	
  Credit Support 

  	
   

  	
  (years)

  	
   

  
	
  Provider of Party A, if 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Greater than or 

  	
   

  
	
  applicable

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  	
  12

  	
   

  	
  13

  	
   

  	
  14

  	
   

  	
  equal to 15

  	
   

  
	
  At least “AA-”

  	
   

  	
  6.5

  	
  %

  	
  7.0

  	
  %

  	
  7.5

  	
  %

  	
  8.0

  	
  %

  	
  8.5

  	
  %

  	
  9.0

  	
  %

  	
  9.5

  	
  %

  
	
  “A+/A”

  	
   

  	
  4.6

  	
  %

  	
  5.0

  	
  %

  	
  5.3

  	
  %

  	
  5.7

  	
  %

  	
  6.0

  	
  %

  	
  6.4

  	
  %

  	
  6.7

  	
  %

  
	
  “A-/BBB+” or
  lower

  	
   

  	
  4.0

  	
  %

  	
  4.3

  	
  %

  	
  4.7

  	
  %

  	
  5.0

  	
  %

  	
  5.3

  	
  %

  	
  5.6

  	
  %

  	
  5.9

  	
  %

  

 

 10
 

Table 1

	
  Remaining

  Weighted Average Life 

  of Hedge in Years

  	
   

  	
  Moody’s 

  First Trigger 

  Factor

  	
   

  	
  Moody’s Second Trigger 

  Factor for Interest Rate 

  Swaps with Fixed Notional 

  Amounts

  	
   

  	
  Moody’s Second Trigger 

  Factor for Transaction

  Specific Hedges

  	
   

  
	
  1 or less

  	
   

  	
  0.25

  	
  %

  	
  0.60

  	
  %

  	
  0.75

  	
  %

  
	
  More than 1 but
  not more than 2

  	
   

  	
  0.50

  	
  %

  	
  1.20

  	
  %

  	
  1.50

  	
  %

  
	
  More than 2 but
  not more than 3

  	
   

  	
  0.70

  	
  %

  	
  1.70

  	
  %

  	
  2.20

  	
  %

  
	
  More than 3 but
  not more than 4

  	
   

  	
  1.00

  	
  %

  	
  2.30

  	
  %

  	
  2.90

  	
  %

  
	
  More than 4 but
  not more than 5

  	
   

  	
  1.20

  	
  %

  	
  2.80

  	
  %

  	
  3.60

  	
  %

  
	
  More than 5 but
  not more than 6

  	
   

  	
  1.40

  	
  %

  	
  3.30

  	
  %

  	
  4.20

  	
  %

  
	
  More than 6 but
  not more than 7

  	
   

  	
  1.60

  	
  %

  	
  3.80

  	
  %

  	
  4.80

  	
  %

  
	
  More than 7 but
  not more than 8

  	
   

  	
  1.80

  	
  %

  	
  4.30

  	
  %

  	
  5.40

  	
  %

  
	
  More than 8 but
  not more than 9

  	
   

  	
  2.00

  	
  %

  	
  4.80

  	
  %

  	
  6.00

  	
  %

  
	
  More than 9 but
  not more than 10

  	
   

  	
  2.20

  	
  %

  	
  5.30

  	
  %

  	
  6.60

  	
  %

  
	
  More than 10 but
  not more than 11

  	
   

  	
  2.30

  	
  %

  	
  5.60

  	
  %

  	
  7.00

  	
  %

  
	
  More than 11 but
  not more than 12

  	
   

  	
  2.50

  	
  %

  	
  6.00

  	
  %

  	
  7.50

  	
  %

  
	
  More than 12 but
  not more than 13

  	
   

  	
  2.70

  	
  %

  	
  6.40

  	
  %

  	
  8.00

  	
  %

  
	
  More than 13 but
  not more than 14

  	
   

  	
  2.80

  	
  %

  	
  6.80

  	
  %

  	
  8.50

  	
  %

  
	
  More than 14 but
  not more than 15

  	
   

  	
  3.00

  	
  %

  	
  7.20

  	
  %

  	
  9.00

  	
  %

  
	
  More than 15 but
  not more than 16

  	
   

  	
  3.20

  	
  %

  	
  7.60

  	
  %

  	
  9.50

  	
  %

  
	
  More than 16 but
  not more than 17

  	
   

  	
  3.30

  	
  %

  	
  7.90

  	
  %

  	
  9.90

  	
  %

  
	
  More than 17 but
  not more than 18

  	
   

  	
  3.50

  	
  %

  	
  8.30

  	
  %

  	
  10.40

  	
  %

  
	
  More than 18 but
  not more than 19

  	
   

  	
  3.60

  	
  %

  	
  8.60

  	
  %

  	
  10.80

  	
  %

  
	
  More than 19 but
  not more than 20

  	
   

  	
  3.70

  	
  %

  	
  9.00

  	
  %

  	
  11.00

  	
  %

  
	
  More than 20 but
  not more than 21

  	
   

  	
  3.90

  	
  %

  	
  9.00

  	
  %

  	
  11.00

  	
  %

  
	
  More than 21

  	
   

  	
  4.00

  	
  %

  	
  9.00

  	
  %

  	
  11.00

  	
  %

  

 

 11
 

IN WITNESS WHEREOF the parties
have executed this Credit Support Annex as of the date hereof.

 

	
  ABN AMRO BANK N.V.

  	
   

  	
  GE CAPITAL CREDIT CARD
  MASTER 

  
	
   

  	
   

  	
  NOTE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Frederick P. Engler 

  	
   

  	
   

  	
  By: 

  	
  /s/ Kristine K.
  Gullo 

  	
   

  
	
   

  	
  Name: Frederick P.
  Engler 

  	
   

  	
   

  	
  Name: Kristine K. Gullo 

  
	
   

  	
  Title: Regional
  Manager Documentation 

  	
   

  	
   

  	
  Title: Vice President 

  
	
   

  	
  North America 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Date: 6/28/07

  
	
   

  	
  Date: 6/28/07

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Christopher Fain 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Christopher
  Fain 

  	
   

  	
   

  
	
   

  	
  Title: Vice
  President 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date: 6/28/07 

  	
   

  	
   

  
								

 

 12EXHIBIT 10.1

SEPARATION
AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release (“Agreement”)
is hereby entered into by Frank W. Lavelle (“LAVELLE”) and MedQuist Inc.,
together with its parents, subsidiaries, divisions, affiliates, related
companies, predecessors and successors (“MEDQUIST”).

1.             Departure Date. 
LAVELLE’s employment with MEDQUIST ended effective May 14, 2007 (the “Departure
Date”).  As of the Departure Date, all
titles, duties, responsibilities and authority assigned to LAVELLE as an
officer of MEDQUIST ended.

2.             Termination of Employment Agreement/Survival of
Certain Provisions.  As of the
Departure Date, LAVELLE understands and agrees that the February 24, 2005
Employment Agreement between LAVELLE and MEDQUIST, as amended February 12, 2007
(collectively, the “Employment Agreement”), was terminated, except as may
otherwise be provided for in the Employment Agreement or as may be required by
operation of law.  Without limiting the
foregoing, LAVELLE understands and agrees that the covenants and enforcement
provisions of Section 4 of the Employment Agreement shall remain in effect in
accordance with their terms.  Again
without limiting the foregoing, LAVELLE and MEDQUIST additionally agree that
the provisions of Section 6(e) of the Employment Agreement shall remain in
effect in accordance with their terms, and the terms of any applicable
insurance policy.  True and correct
copies of the Employment Agreement documents are attached hereto as Exhibits A
and B.

3.             No Future MedQuist Employment.  LAVELLE understands and agrees that: (a) he
has no intention of applying for and will not apply for or otherwise seek
reemployment or reinstatement with MEDQUIST; and (b) MEDQUIST has no obligation
to reinstate, rehire, reemploy or hire LAVELLE at any time in the future.

4.             Consideration. 
In consideration for LAVELLE entering into this Agreement and fully
abiding by its terms,
and assuming LAVELLE has not revoked the Agreement as described in Paragraph 18
below, MEDQUIST agrees to provide LAVELLE with the following consideration:

(a)           Separation Benefit. 
The separation benefits set forth in Section 5(b)  of the Employment Agreement;

(i)            With
respect to such benefits, the parties agree that for purposes of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), separation
benefits paid pursuant to Paragraph 4(a) above, (x) to the extent of payments
made from the date of separation of LAVELLE’S employment through March 14th of
the calendar year following such separation, are intended to constitute
separate payments for purposes of Section l.409A-2(b)(2) of the Treasury
Regulations and thus payable pursuant to the “short-term deferral” rule set
forth in Section 1.409A-1(b)(4) of the Treasury Regulations; and (y) to the
extent such payments are made following said March 14th, they are intended to
constitute separate payments for purposes of Section 1.409A-2(b)(2) of the
Treasury Regulations made upon a separation from service and payable pursuant
to Section l.409A—1(b)(9)(iii) of the Treasury Regulations, to the maximum
extent permitted by said provision.  The
parties agree that 

    
 

 

all amounts payable
pursuant to Section 5(b)(l) of the employment
agreement that are to be paid prior to the date which is six months after the date of separation of
LAVELLE’S employment are amounts that meet the requirements of clause (x)
above.  If the parties determine that
payments (other than those described in clause (x) and (y) of the initial
sentence of this Paragraph 4(a)(i)) hereunder fail to satisfy the distribution
requirement of Section 409A(a)(2)(A) of the Code, the payment of such benefit
shall be delayed to the minimum extent necessary so that such payments are not
subject to the provisions of Section 409A(a)(l) of the Code.

(ii)           The parties additionally agree that the reimbursement for
costs incurred in obtaining outplacement services pursuant to Section 5(b)(2)  of the Employment Agreement shall only be for costs
incurred during the limited period described in Section 1.409A-1(b)(9)(v)(E) of
the Treasury Regulations and be paid in accordance with such regulation.

(b)           Response to Inquiries.  MEDQUIST agrees that, in response to any
inquiries regarding LAVELLE’s departure, it will only provide the information
set forth in MEDQUIST’s May 14, 2007 press release regarding LAVELLE’s
departure from MEDQUIST, a true and correct copy of which is attached hereto as
Exhibit C.  LAVELLE shall direct any
inquiries to Donna Jack at (856) 206-4905
or djack@medquist.com.

5.             No Other Compensation or Benefits Owing.  LAVELLE understands and agrees that, except
as otherwise provided for in this Agreement and as may be required by the
Employment Agreement, LAVELLE is not and will not be due any other compensation
or benefits from MEDQUIST.

6.             Release by LAVELLE.  In consideration of the compensation,
benefits and agreements provided for pursuant to this Agreement and the
Employment Agreement, the sufficiency of which is hereby acknowledged, LAVELLE,
for himself and for any person who may claim by or through him, releases and
forever discharges MEDQUIST, and its past, present and future parents,
subsidiaries, divisions, affiliates, related companies, predecessors,
successors, officers, directors, attorneys, agents, and employees (the “Releasees”),
from any and all claims or causes of action that LAVELLE had, has or may have,
relating to LAVELLE’S employment with and/or separation from MEDQUIST, up until
the date of this Agreement, including, but not limited to, any claims arising
under Title VII of the Civil Rights Act of 1964, as amended, Section 1981 of
the Civil Rights Act of 1866, as amended, the Civil Rights Act of 1991, as
amended, the Family and Medical Leave Act, the Age Discrimination in Employment
Act, as amended by the Older Workers Benefit Protection Act of 1990 (“ADEA”),
the Americans with Disabilities Act, the Employee Retirement Income Security
Act (“ERISA); claims under any other federal, state or local statute,
regulation or ordinance; claims for discrimination or harassment of any kind,
breach of contract or public policy, wrongful or retaliatory discharge,
defamation or other personal or business injury of any kind; claims for breach
of any agreement between LAVELLE and MEDQUIST or for any compensation or
benefits provided for pursuant to any such agreement; and any and all other
claims to any form of legal or equitable relief or damages; any other claims
for compensation or benefits; or any claims for attorneys’ fees or costs.

 2
 

 

7.             Exclusion for Certain Claims.  LAVELLE and MEDQUIST understand and agree
that the release in Paragraph 6 shall not apply to any claims, including any
claims under ADEA, arising after the effective date of this Agreement, nor
shall anything herein prevent any party from instituting any action to enforce
the terms of this Agreement.

8.             Exclusion of Filing EEOC Charges/Waiver of Individual
Recovery.  LAVELLE and MEDQUIST
understand and agree that nothing in this Agreement shall prevent LAVELLE from
filing a charge with the Equal Employment Opportunity Commission (“EEOC”), or
from participating in any EEOC investigation or proceeding; provided, however,
that LAVELLE waives any and all rights to recover any individual
damages or relief in connection with any
EEOC investigation or proceeding.

9.             Disclosure of Any Material Information.  As of the date LAVELLE signs this Agreement,
LAVELLE represents and
warrants that he has disclosed to MEDQUIST any information in his possession concerning any conduct involving MEDQUIST that he
has any reason to believe may be unlawful, violates any MEDQUIST policy or
would otherwise reflect poorly on MEDQUIST in any respect.

10.           Duty
to Cooperate.  LAVELLE understands
and agrees that he shall
cooperate fully with MEDQUIST regarding any matter, including, but not limited
to, any litigation, investigation, governmental proceeding or internal MEDQUIST
review, which relates to any matter in which LAVELLE was involved or concerning
which MEDQUIST reasonably determines LAVELLE may have responsive or relevant
information.  LAVELLE further understands
and agrees that such cooperation includes, but is not limited to, full
disclosure of all relevant information; truthfully testifying and/or answering
questions; and making himself reasonably available for interviews, depositions
or court appearances in connection with any such litigation, investigation,
proceeding or internal MEDQUIST review. 
LAVELLE understands and agrees that he shall render any such cooperation
in a timely manner and at such
times and places as may be
mutually agreeable to LAVELLE and MEDQUIST. 
Upon submission of appropriate documentation, MEDQUIST shall reimburse
LAVELLE for reasonable travel, lodging, meals, and telecommunications expenses incurred by LAVELLE in
connection with his compliance
with this Paragraph.  Except as may be
prohibited by operation of law, LAVELLE understands and agrees that he shall immediately notify MEDQUIST if he is
contacted for an interview or receives a subpoena or request for information in
any matter related to or concerning his employment with MEDQUIST.  LAVELLE further understands and agrees that he will not initiate any
communication or respond to any inquiry with a member of the press regarding
his employment with MEDQUIST, and will refer any such inquiry to MEDQUIST.

11.           Return of Property.  LAVELLE represents and warrants that as of the date he signs
this Agreement he has returned all property of MEDQUIST, regardless of the type
or medium (i.e., hard or flash drive, computer disk, CD-ROM, DVD-ROM) upon
which it is maintained, including, but not limited to, all customer lists,
vendor lists, business plans and strategies,
financial data or reports, memoranda, correspondence, software, contract terms,
compensation and commission
plans, and any other documents
pertaining to the business of MEDQUIST, or its customers or vendors, as well as
any credit cards, keys,
identification cards, and any other documents, writings and materials that LAVELLE came to possess or
otherwise acquired as a result of and/or in connection with LAVELLE’s
employment with MEDQUIST.  

 3
 

 

Should LAVELLE later find any MEDQUIST property in LAVELLE’s possession,
LAVELLE agrees to immediately return it. 
LAVELLE further agrees
not to maintain any copies of said property or make any copies of said property available to any
third party.

12.           Non-Disparagement. 
The parties agree not to engage in any form of conduct or to make any
statements or representations that disparage or otherwise impair the
reputation, goodwill or commercial interests of LAVELLE or MEDQUIST; provided,
however, that nothing in this Paragraph shall prohibit LAVELLE from lawfully
responding to any inquiry in connection with a government investigation or
proceeding, or in response to a lawfully-issued subpoena that is served upon
LAVELLE, requiring him to give testimony.

13.           Remedies for Breach.  LAVELLE understands and agrees that a breach
of this Agreement or any provision of the Employment Agreement that survives
its expiration will result in immediate and irreparable injury to MEDQUIST.  LAVELLE, therefore, agrees that, in addition
to any remedy MEDQUIST may have under the Agreement, the Employment Agreement,
or applicable law, MEDQUIST shall be entitled to a forfeiture of any amounts
still due and owing to LAVELLE under the terms of this Agreement or the
Employment Agreement.  Nothing herein
shall be construed as prohibiting MEDQUIST from pursuing any other remedies for
any breach.

14.           Non-Admission by MedQuist.  LAVELLE understands and agrees
that this Agreement shall
not be deemed or construed as an
admission of liability by MEDQUIST for any purpose.  Specifically,
but without limiting the foregoing, LAVELLE understands and agrees that this Agreement shall not constitute an admission that any action by MEDQUIST relating
to LAVELLE was in any way wrongful or unlawful.  LAVELLE further agrees that nothing contained in this Agreement can be used by
LAVELLE, or any other individual in any way
as precedent for future dealings
with MEDQUIST, or any of its officers, directors, attorneys, agents or
employees.

15.           General.

(a)           Severability.  If any provision of this Agreement is found by a court of competent
jurisdiction to be unenforceable, in whole or in part, then that provision will be eliminated, modified or
restricted in whatever manner is necessary to make the remaining provisions enforceable
to the maximum extent allowable by law.

(b)           Successors. 
This Agreement shall be binding upon, enforceable by, and inure to the
benefit of LAVELLE, MEDQUIST and each Releasee, and LAVELLE’s and MEDQUIST’s
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees, and to any successor or assign of
each Releasee, but neither this Agreement, nor any rights, payments, or
obligations arising hereunder may be assigned, pledged, transferred, or
hypothecated by LAVELLE or MEDQUIST.

(c)           Controlling Law and Venue. 
This Agreement shall be construed and enforced under the laws of and
before the courts of the State of New Jersey.  Any action relating to this Agreement
or the Employment Agreement shall be brought in state court in Burlington
County, New Jersey, or in Federal Court for the District of New Jersey.

 4
 

 

(d)           Waiver.  No claim or right arising out of a
breach or default under this Agreement can
be discharged by a waiver of that claim or right unless the waiver is in writing signed by the party hereto to be bound by such
waiver.  A waiver by any party hereto of a breach or default by another party of any provision of this Agreement shall not be deemed
a waiver of future compliance therewith and such
provision shall remain in full force
and effect.

(e)           Notices.  All
notices, requests, demands and other communications regarding this Agreement
shall be in writing and delivered in person or sent by Registered or Certified
U.S.  Mail, Postage Prepaid, Return
Receipt Requested, and properly addressed as follows:

 

	
  

  	
  To MEDQUIST:

  	
  MedQuist Inc.

  
	
   

  	
   

  	
  1000 Bishops
  Gate Boulevard

  
	
   

  	
   

  	
  Suite 300

  
	
   

  	
   

  	
  Mt. Laurel, NJ
  08054-4632

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  To LAVELLE:

  	
  Frank W. Lavelle

  
	
   

  	
   

  	
  4 Iddings
  Lane

  
	
   

  	
   

  	
  Newtown Square, PA 19073

  

 

16.           Entire Agreement/Amendment.  The parties hereto agree that this Agreement
and those provisions of the Employment Agreement that survive its expiration
constitutes the entire agreement between LAVELLE and MEDQUIST, and that neither
may be modified except by written document, signed by the parties hereto.

17.           Knowing and Voluntary Action.  LAVELLE acknowledges that he received this
Agreement on May 14, 2007 and has consulted an attorney before signing
this Agreement.  LAVELLE further
represents and warrants that he has read this Agreement, has been given a
period of at least twenty one (21) days to consider the Agreement; understands
its meaning and application; and is signing of his own free will with the
intent of being bound by it.  If LAVELLE
elects to sign this Agreement prior to the expiration of twenty one (21) days,
he has done so voluntarily and knowingly.

18.           Revocation of Agreement.  LAVELLE further acknowledges that he may
revoke this Agreement at any time within a period of seven (7) days following
the date he signs the Agreement.  Notice
of revocation shall be made in writing, sent via Registered or Certified
U.S.  Mail, Postage Prepaid, Return
Receipt Requested and properly addressed to MEDQUIST in accordance with
Paragraph 15 above.  Such revocation must
be received by MEDQUIST by the close of business of the first day following the
end of the seven-day revocation period. 
This Agreement shall not become effective until after the time period
for revocation has expired.

THIS SPACE LEFT
INTENTIONALLY BLANK

 5
 

 

IN WITNESS
WHEREOF, the parties have executed and agreed to this Agreement
consisting of six (6)  pages.

	
   

  	
  FRANK W. LAVELLE

  
	
   

  	
   

  
	
   

  	
  /s/ Frank W.
  Lavelle

  
	
   

  	
  Date: June 17,
  2007

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEDQUIST INC.

  
	
   

  	
   

  
	
   

  	
  By: Howard
  Hoffmann

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date: June 28,
  2007

  

 

 6

EXHIBIT A

February 24, 2005

Via Overnight Mail

Frank Lavelle

4 Iddings Lane

Newtown Square, PA 19073

Dear Frank:

On behalf of MedQuist Inc. (the “Company”),
this letter describes the terms of your new employment as the Company’s
President, which must commence on a date mutually agreed to in writing by you
and the Company (the “Employment Commencement Date”).  For purposes of this Agreement, you are
referred to as the “Employee.” 
Other capitalized terms used in this Agreement have the meanings defined
in Section 7, below.

1.             Term.  The Company shall employ Employee hereunder
for a three-year (3) year term commencing on the Employment Commencement Date
hereof (the “Term”), which Term will be automatically extended for
additional one (1) year periods beginning on the third anniversary of the
Employment Commencement Date and upon each subsequent anniversary thereof
unless:  (a) either party provides the
other party with at least ninety (90) days’ prior written notice of its
intention not to renew this Agreement; (b) Employee resigns prior to the
expiration of the Term upon at least thirty (30) days’ prior written notice;
(c) Company terminates Employee’s employment without Cause upon at least thirty
(30) days’ prior written notice; or (d) the Employee’s employment is terminated
by the Company for Cause.

2.             Responsibilities/Reporting.  Employee shall devote his full time and
attention to the duties and responsibilities of the Company’s President and
shall report to the Interim Chief Executive Officer.  Subject to the approval of the Company’s
Board of Directors (the “Board”), Employee shall become the Company’s
Chief Executive Officer.  If and when the
Board acts to appoint Employee as Chief Executive Officer, Employee shall,
thereafter, report to the Board.  In the
event of such appointment as Chief Executive Officer, Employee shall continue
to be subject to the terms of this Agreement. 
Notwithstanding the preceding provisions of this subsection, Employee
shall not be prohibited from serving on corporate, industry, civic, or
charitable boards or committees, so long as such activities do not interfere
with the performance of Employee’s responsibilities as an employee of the
Company in accordance with this Agreement or violate Section 4 of this
Agreement; provided, however, that if Employee wishes to join any such boards
or committees after the Employment Commencement Date, Employee shall provide
the Board with advance written notice and Board approval, which shall not be
unreasonably withheld, shall be required prior to Employee joining any such
board or committee.

 

3.                                      Consideration.

a.             Compensation.  As consideration for all services rendered by
Employee to the Company and for the Covenants contained herein, Employee will
be entitled to:

(1)           base
salary at a minimum annual rate of $500,000, subject to review and adjustment
annually during the Term;

(2)           signing
bonus of $46,000 payable within thirty (30) days of the Employment Commencement
Date;

(3)           participate
in MedQuist’s Management Bonus Plan. 
Employee’s annual target bonus in this plan will be 50% of Employee’s
annual base salary.  The annual target
bonus is the amount that the Employee shall be eligible to receive if the
Company and Employee attain the pre-established bonus plan target
objectives.  Each year, 75% of the annual
target bonus will be based upon achievement of financial objectives proposed by
Company management and approved by the Board (hereinafter “Annual Financial
Objectives”); and (b) 25% of the annual target bonus will be based upon
achievement of specific strategic and tactical initiatives proposed by Company
management and approved by the Board (hereinafter “Annual Strategic
Initiatives”).  The actual annual
bonus award may be higher or lower than the annual target bonus amount based
upon achievement of the objectives by Employee and the Company.  Management Bonus Plan target objectives shall
be developed on or before February 28th of each year of the Management Bonus
Plan.  For 2005, payment of the annual
target bonus in the amount of $250,000 is guaranteed;

(4)           receive
an annual discretionary bonus of up to 50% of base salary which shall be
payable at the discretion of the Compensation Committee of the Board;

(5)           participate
in the same employee benefit plans available generally to other full-time
employees of the Company, subject to the terms of those plans (as the same may
be modified, amended or terminated from time to time) (benefits information
package enclosed);

(6)           vacation
in accordance with the Company’s policies; provided that Employee shall be
entitled to a minimum of four (4) weeks of vacation annually;

(7)           a
car allowance of $1,500 per month;

(8)           reimbursement
of business expenses in accordance with Company policy;

(9)           reimbursement
of up to $7,500 in legal fees associated with the review and negotiation of
this Agreement; and

(10)         if
Employee’s employment is terminated by the Company without Cause, Employee
terminates for Good Reason or due to Disability, or the Company does not renew
the Term in accordance with Section 1, the severance pay and benefits
described below in Section 5.

 2
 

 

b.                                     Long
Term Incentives.

(1)           Annual
Option Grant.  Employee shall be
eligible for annual grants of non-qualified stock options (“Annual Option
Grant”) to purchase Company common stock, no par value (“Common Stock”)
pursuant to the Company’s Stock Option Plan adopted May 29, 2002 or any
successor option plan adopted by the Company and approved by shareholders (the
“Option Plan”).  The Annual Option
Grant shall have a target value, based on an accepted option pricing
methodology chosen by the Company, of 100% of Employee’s base salary for the
year in which such Annual Option Grant is made, subject to the following:

(A)          Employee
shall be eligible for 75% of the Annual Option Grant upon achievement of the Annual
Financial Objectives and an additional 25% of the Annual Option Grant upon
achievement of Annual Strategic Initiatives. 
The Annual Option Grant shall be made in accordance with the terms of
the Option Plan within thirty (30) days after the Company has determined that
the objectives and initiatives have been met; provided that, with respect to
any year, the Company shall make such determination not later than the end of
the first calendar quarter following such year.

(B)           Fifty
percent (50%) of the options subject to the Annual Option Grant shall have an
exercise price equal to fair market value of the Common Stock on the date of
grant; 25% of such options shall have an exercise price equal to 125% of fair
market value of the Common Stock on the date of grant; and 25% of such options
shall have an exercise price of 150% of fair market value of the Common Stock
on the date of grant.

(C)           If
the Employee is not eligible for the entire target grant with respect to any
year, the preceding exercise prices shall be applied proportionally to that
portion of the Annual Option Grant that is made.

(D)          Each
Annual Option Grant shall vest in equal 20% installments on each of the first
five (5) anniversaries of the applicable grant date, subject to Employee’s
continued employment with the Company.

(E)           Each
Annual Option Grant shall be subject to the terms and conditions of the Option
Plan and the Stock Option Agreement that will be issued if and when the grant
becomes effective.

(2)           Restricted
Stock In Lieu of Annual Option Grant. 
In lieu of one or more of the Annual Option Grants provided for in the
preceding subsection (1), the Board may issue shares of Common Stock that are
subject to restrictions and a risk of forfeiture (“Restricted Stock Grant”);
provided that any such grant shall be pursuant to a plan approved by the
Company’s shareholders (a “Restricted Stock Plan”).  If the Board determines to grant a Restricted
Stock Grant, the value of any such grant shall equal the value of the Annual
Option Grant, which shall based on an accepted option pricing methodology
chosen by the Company, to which Employee is otherwise entitled.  Any Restricted Stock Grant shall be subject
to the vesting schedule specified in Section 3.b.(1)D.

(3)           Cash
in Lieu of Annual Option Grant or Restricted Stock Grant.  If Employee has earned all of part of the
Annual Option Grant pursuant to Section 3.b.(1)(A),

 3
 

 

but the Board chooses not to grant the Annual Option Grant (or
Restricted Stock Grant in lieu thereof) in any year during the Term because:  (A) the Company is not current in its
reporting obligations under the Securities and Exchange Act of 1934; (B) the
Form S-8 Registration Statement for the Option Plan or a Restricted Stock Plan
does not comply with the requirement of the Securities and Exchange Commission;
and/or (C) there are not a sufficient number of shares available under the
Option Plan or a Restricted Stock Plan, then within 30 days after the later of
(x) the close of such year or (y) the date on which the Board determines the degree
to which the Annual Strategic Initiatives and Annual Financial Objectives have
been satisfied, the Employee shall be entitled to a cash payment of $250,000,
or portion thereof, based on the achievement of the Annual Strategic
Initiatives and Annual Financial Objectives to which the Annual Option Grant is
subject.

(4)           Restricted
Stock Signing Bonus.  Within a
reasonable period of time following the date that the Company again becomes
current in its reporting obligations under the Securities and Exchange Act of
1934, Employee will be granted 35,000 shares of restricted Common Stock (the “Restricted
Stock”).  The Restricted Stock shall
vest and thereafter not be subject to forfeiture as follows: 40% on the second
anniversary of Employee’s Employment Commencement Date; 20% on each anniversary
thereafter.  The grant of Restricted
Stock pursuant to this subsection shall be pursuant to a Restricted Stock
Plan.  If there is not a Restricted Stock
Plan, Employee will be granted non-qualified options to purchase 100,000 shares
of Common Stock pursuant to the Option Plan. 
Such stock options shall be subject to the same vesting schedule to
which the Restricted Stock would have been subject if granted.  The Restricted Stock shall be subject to an
award agreement with terms and conditions not inconsistent with the provisions
set forth herein, as well as such other terms and conditions to which grants of
restricted stock are customarily subject. 
Any grant of Restricted Stock will be made at fair market value on the date
of grant.  If such Restricted Stock or
stock option grant is not made by December 31, 2005, Employee shall receive a
cash payment of $250,000, less applicable withholding, in January 2006.

(5)           In
the event of a Change in Control, Employee shall be fully vested in any
restricted stock and stock options issued pursuant to this Section 3.

4.                                      Covenants.

a.                                      Non-Solicitation.  While employed by the Company and for the
eighteen (18) month period following the cessation of that employment for any
reason  (and without regard to whether
such cessation was initiated by Employee or the Company), Employee will not do
any of the following without the prior written consent of the Company:

(1)           solicit,
entice or induce, either directly or indirectly, any person, firm or
corporation who or which is a client or customer of the Company or any of its
subsidiaries to become a client or customer of any other person, firm or
corporation that is in the same Business as the Company;

(2)           influence
or attempt to influence, either directly or indirectly, any customer of the
Company or its subsidiaries to terminate or modify any written or

 4
 

 

oral agreement or course of dealing with the Company or its
subsidiaries (except in Employee’s capacity as an employee of the Company); or

(3)           influence
or attempt to influence, either directly or indirectly, any person to terminate
or modify any employment, consulting, agency, distributorship, licensing or
other similar relationship or arrangement with the Company or its subsidiaries
(except in Employee’s capacity as an employee of the Company).

b.                                     Non-Disclosure.  Employee shall not use for Employee’s
personal benefit, or disclose, communicate or divulge to, or use for the direct
or indirect benefit of any person, firm, association or company other than
Company, any “Confidential Information,” which term shall mean any
information regarding the business methods, business policies, policies,
procedures, techniques, research or development projects or results, historical
or projected financial information, budgets, trade secrets, or other knowledge
or processes of, or developed by, Company or any other confidential information
relating to or dealing with the business operations of Company, made known to
Employee or learned or acquired by Employee while in the employ of Company, but
Confidential Information shall not include information otherwise lawfully known
generally by or readily accessible to the general public.  The foregoing provisions of this subsection shall
apply during and after the period when the Employee is an employee of the
Company and shall be in addition to (and not a limitation of) any legally
applicable protections of Company interest in confidential information, trade
secrets, and the like.  At the
termination of Employee’s employment with Company, Employee shall return to the
Company all copies of Confidential Information in any medium, including
computer tapes and other forms of data storage.

c.                                      Non-Competition.  While employed by the Company and for the
eighteen (18) month period following the cessation of that employment for any
reason (and without regard to whether such cessation was initiated by Employee
or the Company), Employee shall not directly or indirectly engage in (as a
principal, shareholder, partner, director, officer, agent, employee, consultant
or otherwise) or be financially interested in any business which is involved in
business activities which are the same as or in direct competition with
business activities carried on by the Company, or being definitively planned by
the Company at the time of termination of Employee’s employment.  Nothing contained in this subsection shall
prevent Employee from holding for investment up to three percent (3%) of any
class of equity securities of a company whose securities are publicly traded on
a national securities exchange or in a national market system.

d.                                     Intellectual
Property & Company Creations.

(1)           Ownership.  All right, title and interest in and to any
and all ideas, inventions, designs, technologies, formulas, methods, processes,
development techniques, discoveries, computer programs or instructions (whether
in source code, object code, or any other form), computer hardware, algorithms,
plans, customer lists, memoranda, tests, research, designs, specifications,
models, data, diagrams, flow charts, techniques (whether reduced to written
form or otherwise), patents, patent applications, formats, test results,
marketing and business ideas, trademarks, trade secrets, service marks, trade
dress, logos, trade names, fictitious names, brand names, corporate names,
original works of authorship, copyrights, copyrightable

 5
 

 

works, mask works, computer software, all other similar intangible
personal property, and all improvements, derivative works, know-how, data,
rights and claims related to the foregoing that have been or are conceived,
developed or created in whole or in part by the Employee (a) at any time and at
any place that relates directly or indirectly to the business of the Company,
as then operated, operated in the past or under consideration or development or
(b) as a result of tasks assigned to Employee by the Company (collectively, “Company
Creations”), shall be and become and remain the sole and exclusive property
of the Company and shall be considered “works made for hire” as that term is
defined pursuant to applicable statutes and law.

(2)           Assignment.  To the extent that any of the Company
Creations may not by law be considered a work made for hire, or to the extent
that, notwithstanding the foregoing, Employee retains any interest in or to the
Company Creations, Employee hereby irrevocably assigns and transfers to the
Company any and all right, title, or interest that Employee has or may have,
either now or in the future, in and to the Company Creations, and any derivatives
thereof, without the necessity of further consideration.  Employee shall promptly and fully disclose
all Company Creations to the Company and shall have no claim for additional
compensation for Company Creations.  The
Company shall be entitled to obtain and hold in its own name all copyrights,
patents, trade secrets, trademarks, and service marks with respect to such
Company Creations.

(3)           Disclosure
& Cooperation.  Employee shall
keep and maintain adequate and current written records of all Company Creations
and their development by Employee (solely or jointly with others), which
records shall be available at all times to and remain the sole property of the
Company.  Employee shall communicate
promptly and disclose to the Company, in such form as the Company may
reasonably request, all information, details and data pertaining to any Company
Creations.  Employee further agrees to
execute and deliver to the Company or its designee(s) any and all formal
transfers and assignments and other documents and to provide any further
cooperation or assistance reasonably required by the Company to perfect,
maintain or otherwise protect its rights in the Company Creations.  Employee hereby designates and appoints the
Company or its designee as Employee’s agent and attorney-in-fact to execute on
Employee’s behalf any assignments or other documents deemed necessary by the
Company to perfect, maintain or otherwise protect the Company’s rights in any
Company Creations.

e.                                      Acknowledgments.  Employee acknowledges that the Covenants are
reasonable and necessary to protect the Company’s legitimate business
interests, its relationships with its customers, its trade secrets and other
confidential or proprietary information. 
Employee further acknowledges that the duration and scope of the
Covenants are reasonable given the nature of this Agreement and the position
Employee holds or will hold within the Company. 
Employee further acknowledges that the Covenants are included herein to
induce the Company to enter into this Agreement and that the Company would not
have entered into this Agreement or otherwise employed or continued to employ
the Employee in the absence of the Covenants. 
Finally, Employee also acknowledges that any breach, willful or
otherwise, of the Covenants will cause continuing and irreparable injury to the
Company for which monetary damages, alone, will not be an adequate remedy.

 6
 

 

f.                                        Enforcement.

(1)                                 If
any court determines that the Covenants, or any part thereof, is unenforceable
because of the duration or scope of such provision, that court will have the
power to modify such provision and, in its modified form, such provision will
then be enforceable.

A.            The
parties acknowledge that significant damages will be caused by a breach of any
of the Covenants, but that such damages will be difficult to quantify.  Therefore, the parties agree that the Company
shall have the right to enforce Section 4 by injunction, specific performance
or other equitable relief, without prejudice to any other rights and remedies
that the Company may have for a breach, or threatened breach, of the Covenants.

(2)                                 In
addition to the remedies specified in Section 4.f.(1)A and any other
relief awarded by any court, if Employee breaches any of the Covenants:

A.            Employee
will be required to account for and pay over to the Company all compensation,
profits, monies, accruals, increments or other benefits derived or received by
Employee as a result of any such breach; and

B.            the
Company will be entitled to injunctive or other equitable relief to prevent
further breaches of the Covenants by Employee.

(3)                                 If
Employee breaches Section 4, then the duration of the restriction
therein contained will be extended for a period equal to the period that
Employee was in breach of such restriction.

5.                                      Termination.

a.                                      Except
as specified in Sections 5.b. and 5.c., upon termination of employment,
including termination due to Employee’s death, Employee will be entitled to the
payment of accrued and unpaid salary through the date of such termination.  All salary, commissions and benefits will
cease at the time of such termination, subject to the terms of any benefit
plans then in force or enforceable under applicable law and applicable to
Employee, and the Company will have no further liability or obligation hereunder
by reason of such termination.

b.                                     If
Employee’s employment does not automatically renew, is terminated by the
Company without Cause, if Employee terminates for Good Reason in accordance
with Sections 7.f. or if Employee terminates due to Disability, Employee
will be entitled to the following:

(1)           monthly
payments for a period of 18 months following the termination date in an amount
equal to the quotient obtained by dividing (x) the sum of (A) 1.5 times the
base salary paid in the 12-month period preceding the termination date and (B)
the total cash bonus paid pursuant to Sections 3.a.(3) and (4) in the
12-month period preceding the termination date by (y) 18; provided if
Employee’s employment is terminated by the Company without Cause prior to the
first anniversary of the Employment Commencement Date, such amount shall not be
less than $1,000,000 payable over the 18-month period.

 7
 

 

(2)           reimbursement
for costs incurred in obtaining outplacement services, at a cost not to exceed
$100,000, subject to provision of documentation reasonably satisfactory to the
Company.

(3)           medical
coverage following the date of termination until the earlier to occur of the
expiration of 18 months or the date on which Employee is eligible for coverage
under a plan maintained by a new employer or a plan maintained by his spouse’s
employer, at the level in effect at the date of his termination (or generally
comparable coverage) for himself and, where applicable, his spouse and
dependents, as the same may be changed by the Company from time to time for
employees generally, as if the Employee had continued in employment during such
period; provided, in any case, that the COBRA health care continuation coverage
period under section 4980B of the Internal Revenue Code of 1986, as amended, shall
run concurrently with the foregoing period.

(4)           immediate
vesting in any restricted stock and stock options issued pursuant to Section
3.

c.                                      In
the case of termination due to Employee’s Disability, any severance benefits
payable pursuant to this Section 5 will be offset by any long-term disability
benefits to which Employee is entitled under the Company’s long-term disability
plan.

d.                                     Notwithstanding
the preceding provisions of this Section 5, no amount will be paid or
benefit provided under this Section 5 unless and until (x) Employee
executes and delivers a general release of claims against the Company and its
subsidiaries in a form prescribed by the Company, and (y) such release becomes
irrevocable.  Any severance pay or
benefits provided under this Section 5 will be in lieu of, not in addition to,
any other severance arrangement maintained by the Company.

6.                                      Miscellaneous.

a.             Arbitration.  Except a controversy or claim arising out or
relating to Section 4 of this Agreement, any controversy or claim arising
out of or relating to this Agreement or the breach of any covenant or agreement
contained herein, shall be commenced by filing a notice (the “Notice”) for
arbitration with the American Arbitration Association (“AAA”), with a copy to
the other party hereto.  Such controversy
or claim shall be decided by arbitration in Philadelphia, Pennsylvania, in
accordance with the Employment Arbitration Rules of the AAA then
obtaining.  The decision and the award of
damages rendered by the Arbitrator shall be final and binding and judgment may
be entered upon it in any court having jurisdiction thereof.

b.             Other
Agreements.  Employee represents and
warrants to the Company that there are no restrictions, agreements or
understandings whatsoever to which he is a party that would prevent or make
unlawful his execution of this Agreement, that would be inconsistent or in
conflict with this Agreement or Employee’s obligations hereunder, or that would
otherwise prevent, limit or impair the performance by Employee of his duties to
the Company.

c.             Entire
Agreement; Amendment.  This Agreement
contains the entire agreement and understanding of the parties hereto relating
to the subject matter hereof, and

 8
 

 

merges and supersedes all prior and contemporaneous discussions,
agreements and understandings of every nature relating to the employment of
Employee by the Company.  This Agreement
may not be changed or modified, except by an agreement in writing signed by
each of the parties hereto.

d.             Waiver.  Any waiver of any term or condition hereof
will not operate as a waiver of any other term or condition of this
Agreement.  Any failure to enforce any
provision hereof will not operate as a waiver of such provision or of any other
provision of this Agreement.

e.             Indemnification.  Employee shall be indemnified for acts
performed in good faith as an officer, director or employee of the Company in
the manner provided in the Company’s charter and by-laws, and shall be covered
by director and officer liability insurance coverage for such acts to the same
extent that any such coverage is provided to the Company’s executive officers.

f.              Governing
Law.  This Agreement shall be
governed by, and enforced in accordance with, the laws of the State of New
Jersey without regard to the application of the principles of conflicts of
laws.

g.             Severability.  Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been herein contained.

h.             Wage
Claims.  The parties intend that all
obligations to pay compensation to Employee be obligations solely of the
Company.  Therefore, intending to be
bound by this provision, Employee hereby waives any right to claim payment of
amounts owed to him, now or in the future, from directors or officers of the
Company in the event of the Company’s insolvency.

i.              Successors
and Assigns.  This Agreement is
binding on the Company’s successors and assigns.

j.              Section
Headings.  The section headings in
this Agreement are for convenience only; they form no part of this Agreement
and will not affect its interpretation.

k.             Counterparts.  This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
together will constitute but one and the same instrument.

 9
 

 

7.                                      Definitions.  Capitalized terms used herein will have the
meanings below defined:

a.             “Business”
means electronic transcription services and other health information management
solutions services businesses in which the Company or its subsidiaries are
engaged anywhere within the United States.

b.             “Cause”
means the occurrence of any of the following: 
(1) Employee’s willful failure or refusal to perform (other than
due to illness or Disability) his employment duties or to follow the lawful
directives of his superiors or the Board, but only after written notice and a
period of time to correct or otherwise remedy such conduct or failure within a
time period specified by the Board, which shall not exceed 30 days; (2) willful
misconduct or gross negligence by Employee in the course of employment; (3) conduct
of Employee involving any type of fraud, embezzlement, or theft in the course
of employment; (4) a conviction of or the entry of a plea of guilty or nolo
contendere to a felony or to a crime involving moral turpitude or any other
crime that otherwise could reasonably be expected to have a material adverse
effect on the operations, condition or reputation of the Company, (5) a
material breach by Employee of any agreement with or fiduciary duty owed to the
Company; or (6) alcohol abuse or use of controlled drugs other than in
accordance with a physician’s prescription.

c.             “Change
of Control” shall be deemed to have occurred if any person, entity, or any
group of persons or entities acting in concert, other than Koninklijke Philips
Electronics N.V., acquires more than 50% of the outstanding voting stock of the
Company.

d.             “Covenants”
means the covenants set forth in Section 5 of this Agreement.

e.             “Disability”
means the Employee’s entitlement to benefits under the Company’s long-term
disability plan.

f.              “Good
Reason” means (1) a reduction in Employee’s annual base salary below $500,000
without Employee’s consent, (2) requiring Employee to be based more than
twenty-five (25) miles from the Company’s current office location as of the
Employment Commencement Date, unless closer to the Employee’s residence, (3)
the Board’s failure to appoint Employee to Chief Executive Officer upon the
later of (x) thirty (30) days following the departure of the current Interim
Chief Executive Officer or (y) the second anniversary of the Employee
Commencement Date, or (4) substantial and material diminution of duties;
provided that in each case written notice of Employee’s termination for Good
Reason must be delivered to the Company within 30 days after the occurrence of
any such event with such notice specifying one or more specific reason(s) in
this Section 7.f in order for Employee’s termination with Good Reason to
be effective hereunder.

 10
 

 

To acknowledge your agreement to and acceptance of the
terms and conditions of this Agreement, please sign below in the space provided
within five (5) days of the date of this Agreement and return a singed copy to
my attention.  If the Agreement is not
signed and returned within (5) days, the terms and conditions of this Agreement
will be deemed withdrawn.

	
  

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  MEDQUIST INC.

  
	
   

  	
   

  
	
  

  	
  By:

  	
  /s/ Howard Hoffmann

  
	
   

  	
   

  	
  Howard Hoffmann

  
	
   

  	
   

  	
  Chief Executive
  Officer

  

 

Accepted and Agreed:

	
  /s/ Frank Lavelle

  	
   

  
	
  Frank Lavelle

  

 

 11

 

Exhibit B

 

 

Corporate Offices

1000 Bishops Gate Blvd, Suite 300

Mount
Laurel, NJ 08054-4632

February 12, 2007

Via
Facsimile and Overnight Mail

Frank W. Lavelle

President

MedQuist, Inc.

1000 Bishops Gate Blvd. Suite 300

Mt.
Laurel, NJ 08054

Re:                               Amendment
No. 1 to Employment Agreement

Dear
Frank:

This letter (the “Amendment”) describes the amendment
to letter agreement of employment between you and MedQuist Inc. (the “Company”)
dated February 24, 2005 (the “Employment Agreement”). Capitalized terms not
otherwise defined in this Amendment shall have the meanings given to them in
the Agreement. The purposes of the amendment are to (i) revise the date on
which the Company’s obligation to provide you with severance pay and benefits
if Board does not appoint you as the Chief Executive Officer, to June 30, 2007
and (ii) to establish the exact severance pay and benefits to which you will be
entitled if the Board does not appoint you as Chief Executive Officer of the
Company by June 30, 2007.

In consideration of the mutual agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, it is mutually agreed
and covenanted by and between the parties to this Amendment, as follows:

A.                                   The
following Section 3.a.(11) shall be added to the Agreement:

“(11)       upon
Employee’s election, if the Board fails to appoint Employee to Chief Executive
Officer by June 30, 2007 and Employee resigns as a result thereof, severance
payment in the amount of $1,000,000 payable in 18 monthly installments of
$55,555.56 commencing on July 31, 2007 and the severance benefits described
below in Sections 5.b.(2) to 5.b.(4). If Employee is not appointed Chief
Executive Officer by June 30, 2007, Employee must provide the Company’s Board
of Directors and General Counsel with written notice by July 30, 2007 of
Employee’s resignation in order for the Company’s severance payment and
benefits obligations of this Section 3.a.(11) to apply.”

B.                                     Section
7.f. Agreement shall be deleted in its entirety and replaced with the
following:

“f.           
“Good Reason” means (1) a reduction in Employee’s annual base salary below
$500,000 without Employee’s consent, (2) requiring Employee to be based more
than twenty-five (25) miles from the Company’s current office location as of
the Employment Commencement Date, unless closer to the Employee’s residence, or
(3) substantial and material diminution of duties; provided that in each case
written notice of Employee’s termination for Good Reason must be delivered to
the Company within 30 days after the occurrence of any such event with such
notice specifying one or more specific reason(s) in this Section 7.f in order
for Employee’s termination with Good Reason to be effective hereunder.”

C.                                     Counterparts. 
This Amendment may be executed in multiple counterparts, each of which will be
deemed to be an original and all of which together will constitute but one and
the same instrument.

D.                                    Except
as modified by this Amendment, the Agreement shall remain in full force and
effect unmodified. To the extent the terms of the Agreement are inconsistent
with the terms of this Amendment, the terms of this Amendment shall control.

To
acknowledge your agreement to and acceptance of the terms and conditions of
this Agreement, please sign below in the space provided.

	
  

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  MEDQUIST INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen H. Rusckowski

  	
   

  
	
   

  	
   

  	
  Stephen H. Rusckowski

  
	
   

  	
   

  	
  Chairman of the Board of Directors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Underwood

  	
   

  
	
   

  	
   

  	
  John Underwood

  
	
   

  	
   

  	
  Chairman of the Compensation Committee of the Board
  of

  
	
   

  	
   

  	
  Directors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Howard S. Hoffmann

  	
   

  
	
   

  	
   

  	
  Howard S. Hoffmann, Chief Executive Officer

  

 

READ, UNDERSTOOD AND AGREED TO BY:

	
  /s/ Frank W. Lavelle

  	
   

  
	
  Frank W.
  Lavelle, President

  
	
   

  
	
  Date: February
  16, 2007

  

 

 

EXHIBIT C

 

MedQuist Investor Relations

PRESS
RELEASES

MedQuist (ticker. 
MEDQ, exchange: Other OTC) News Release — May 14, 2007

MedQuist Announces that President, COO Will Be Leaving
the Company

Howard Hoffmann, CEO, will assume President’s
Responsibilities.

with Other Senior Executives Sharing the COO’S Duties

MT. LAUREL, N.J.—(BUSINESS WIRE)-.May 14,
2007—MedQuist today announced that Frank Lavelle, its current President. and
Linda Reino, the company’s Chief Operating Officer, will be resigning to pursue
other opportunities.  Howard Hoffmann,
who has served as CEO for nearly three years. will take over the
responsibilities of President.  Mark Ivie, the company’s Chief Technology Officer, and
Michael Clark.  Senior Vice
President of Operations, will together assume the former Chief Operating
Officer’s responsibilities, which in large measure they had shared prior to the
establishment of the COO position.

MedQuist CEO Hoffmann stated that, “Frank has served
as President of the company for more than two years. during a period of
extraordinary change within the company and our Industry as a whole.  We’ve responded well to these changes. and
Frank has certainly played an important role in that.  We appreciate all he has done.” In speaking
of Ms. Reino, Hoffmann said, “Linda has also been here during a number of key
recent changes in operations.  We
appreciate her contributions on that front and wish her well.”

Consistent with its ongoing efforts to streamline and
enhance operational performance, the company has no current plans to fill,
either position.

About MedQuist

MedQuist, a member of the Phillips Group of Companies,
is a leading provider of electronic medical transcription, health information
and document management products and services. 
MedQuist provides document workflow management, digital dictation.
speech recognition, mobile dictation devices, Web-based transcription,
electronic signature, medical coding products and outsourcing services.

Disclosure Regarding Forward-Looking Statements:

Some of the statements In this Press Release
constitute “forward-looking statements within the meaning of the US. Private
Securities Litigation Reform Act of 1995. 
These statements are not historical facts but rather are based on the
Company’s current expectations, estimates and projections regarding the Company’s
business, operations and other factors relating thereto.  Words such as “may,” “will,” “could,” “would,”
“should,” “anticipate,” “predict,” “potential,” “continue,” “expects,” “intends,”
“plans,” “projects,” “believes,” “estimates” and similar expressions are used
to identify these forward-looking statements. 
The forward-looking statements contained in this Press Release include,
without limitation, statements about the Company’s results of operations,
financial condition, ongoing legal proceedings and government investigations,
and accommodation programs.  These
Statements are only predictions and as such 

 1
 

 

are not guarantees of future performance and involve
risks, uncertainties and assumptions that are difficult to predict.  Forward-looking statements are based upon
assumptions as to future events that may not prove to be accurate.  Actual outcomes and results may differ
materially from what is expressed or forecast in these forward-looking
statements.  As a result, these
statements speak only as of the date they were made, and the Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new Information, future events or otherwise.  Actual outcomes and results may differ from
the forward-looking statements for many reasons, including any direct or
indirect Impact of the matters disclosed in the Form 8-K filed by the Company
on May 11.2007 on the Company’s operating results or financial condition; any
continuation of pricing pressures and declining billing rates; difficulties
relating to the Implementation of management changes throughout the Company and
the outcome of pending and future legal and regulatory proceedings and
investigations, including costs and expenses related thereto.

Web site: http://www.medquist.com

	
  CONTACT:

  	
  Craig Martin

  
	
   

  	
  Feinstein Kean
  Healthcare

  
	
   

  	
  Phone:
  617.761.6729

  
	
   

  	
  Email:
  craig.martin@fkhealth.com

  
	
   

  	
   

  
	
  SOURCE:

  	
  MedQuist Inc.

  

 

 2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}]]