Document:

Exhibit 10.39

 

INDEMNIFICATION
AGREEMENT

This
Indemnification Agreement (“Agreement”), dated July 3, 2007, is entered into by
and between MedQuist Inc. (the “Company”), and John H. Underwood (“Indemnitee”).

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

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

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

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

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

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

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

1.             Indemnification.

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

 

 

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

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

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

2.             Advancement of Expenses; Notice; Indemnification
Procedure.

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

 

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

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

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

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

 

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

3.             Additional Indemnification
Rights; Nonexclusivity.

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

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

(c)           Continuing Right.  All agreements and obligations of the Company
included herein shall continue during the period Indemnitee is a director,
officer, employee or other agent of the Company and shall continue thereafter
as long as Indemnitee is subject to any possible claim, action, suit,
proceeding or any arbitration or other alternative dispute resolution
mechanism, whether civil, criminal, administrative or investigative, by reason
of the fact that Indemnitee was serving in the capacity referred to
herein.  For the avoidance of doubt, such
agreements and obligations shall apply to any period prior to the date of this
Agreement on the same basis as to periods from and after such date.

4.             Partial Indemnification.  If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
the expenses, judgments, fines or

 

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penalties actually or
reasonably incurred by him or her in the investigation, defense, appeal or
settlement of any civil or criminal action, suit or proceeding, but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such expenses, judgments, fines or penalties to
which Indemnitee is entitled.

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

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

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

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

(a)           Claims Initiated by Indemnitee.  To indemnify or advance expenses to
Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
14A:3-5 of the New Jersey Business Corporation Act, but such indemnification or
advancement

 

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of expenses may be
provided by the Company in specific cases if the Board of Directors has
approved the initiation or bringing of such suit; or

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

15.           Consent To Jurisdiction.  The Company and Indemnitee each hereby irrevocably
consent to the jurisdiction of the courts of the State of New Jersey for all
purposes in connection with any

 

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action or proceeding
which arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be brought only in the state courts of
the State of New Jersey.

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

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

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

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

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

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

[signatures on following
page]

 

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[signature page —
Indemnification Agreement]

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

COMPANY:

 

	
  MEDQUIST INC.

  
	
   

  
	
  By:

  	
  /s/ Howard S. Hoffmann

  	
   

  
	
   

  	
  Howard S.
  Hoffmann

  
	
   

  	
  Chief Executive
  Officer & President

  
	
   

  
	
  Address for service:

  
	
   

  
	
  MedQuist Inc.

  
	
  Attn: General Counsel

  
	
  1000 Bishops Gate Blvd., Suite 300

  
	
  Mt. Laurel, NJ 08054

  
	
   

  
	
  AGREED TO AND ACCEPTED:

  
	
   

  
	
  INDEMNITEE:

  
	
   

  
	
  JOHN H. UNDERWOOD

  
	
   

  
	
  /s/ John H. Underwood

  	
   

  
	
  Signature

  
	
   

  
	
   

  
	
  Address for service:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

 

 

 9Exhibit
10.40

INDEMNIFICATION
AGREEMENT

This
Indemnification Agreement (“Agreement”), dated July 3, 2007, is entered into by
and between MedQuist Inc. (the “Company”), and Richard H. Stowe (“Indemnitee”).

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

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

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

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

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

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

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

1.             Indemnification.

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

 

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

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

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

2.             Advancement of Expenses; Notice; Indemnification
Procedure.

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

 2
 

 

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

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

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

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

 3
 

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

3.             Additional Indemnification
Rights; Nonexclusivity.

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

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

(c)           Continuing Right.  All agreements and obligations of the Company
included herein shall continue during the period Indemnitee is a director,
officer, employee or other agent of the Company and shall continue thereafter
as long as Indemnitee is subject to any possible claim, action, suit,
proceeding or any arbitration or other alternative dispute resolution
mechanism, whether civil, criminal, administrative or investigative, by reason
of the fact that Indemnitee was serving in the capacity referred to
herein.  For the avoidance of doubt, such
agreements and obligations shall apply to any period prior to the date of this
Agreement on the same basis as to periods from and after such date.

4.             Partial Indemnification.  If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
the expenses, judgments, fines or 

 4
 

penalties actually or
reasonably incurred by him or her in the investigation, defense, appeal or
settlement of any civil or criminal action, suit or proceeding, but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such expenses, judgments, fines or penalties to
which Indemnitee is entitled.

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

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

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

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

(a)           Claims Initiated by Indemnitee.  To indemnify or advance expenses to
Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
14A:3-5 of the New Jersey Business Corporation Act, but such indemnification or
advancement 

 5
 

of expenses may be provided
by the Company in specific cases if the Board of Directors has approved the
initiation or bringing of such suit; or

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

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

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

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

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

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

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

 

 6
 

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

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

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

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

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

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

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

15.           Consent To Jurisdiction.  The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of New
Jersey for all purposes in connection with any 

 7
 

action or proceeding
which arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be brought only in the state courts of
the State of New Jersey.

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

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

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

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

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

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

[signatures on
following page]

 8
 

 

[signature page —
Indemnification Agreement]

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

COMPANY:

MEDQUIST
INC.

	
  By:

  	
  /s/ Howard S. Hoffmann

  	
   

  
	
   

  	
  Howard S. Hoffmann

  	
   

  
	
   

  	
  Chief Executive Officer & President

  	
   

  

 

Address for service:

MedQuist Inc.

Attn: General Counsel

1000 Bishops Gate Blvd., Suite 300

Mt. Laurel, NJ 08054

 

AGREED TO AND ACCEPTED:

INDEMNITEE:

RICHARD
H. STOWE

	
  /s/ Richard H. Stowe

  	
   

  
	
  Signature

  	
   

  

 

Address for service:

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

 9

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