Document:

Exhibit
10.27

CONFIDENTIAL PORTIONS OF THIS
DOCUMENT

HAVE BEEN REDACTED AND FILED SEPARATELY

WITH THE
SECURITIES AND EXCHANGE COMMISSION

OEM
SUPPLY AGREEMENT

THIS OEM SUPPLY AGREEMENT (the “Agreement”) is made
and entered into as of the 23rd day of September, 2004 (the “Effective Date”),
by and between Philips Austria GmbH, PHILIPS SPEECH PROCESSING, a Republic of
Austria corporation (hereinafter “PSP”), and MEDQUIST INC., a New Jersey, USA
corporation (hereinafter “MedQuist”)

RECITALS

WHEREAS, PSP is engaged in creating, developing, or
marketing certain computer programs and software collectively, the “Programs”)
which Programs may incorporate certain third party software products (the
Programs and such third party software products being referred to collectively
in this Agreement as the “Software”); and

WHEREAS, MedQuist desires to acquire from PSP the
right and license to offer for sale, sell, deliver and service, and to
authorize others to offer for sale, sell, deliver, and service, the Products
(as defined in Section 1.4 of this Agreement), and to incorporate the Software
into its own products, within the territory identified in Schedule A to this
Agreement (the Territory”), in accordance with the terms and conditions set
forth in this Agreement;

NOW, THEREFORE, in consideration of foregoing and the
mutual promises and covenants contained herein, and for other good and valuable
consideration, the receipt, adequacy, and sufficiency of all of which are
hereby acknowledged, PSP and MedQuist hereby agree as follows:

1.             Definitions.

1.1.          “Amendment
No 2” means that certain amendment titled “Amendment No 2 to Licensing
Agreement” between PSP and MedQuist dated as of December 10, 2002 References in
Amendment No 2 to indefinite dates which references use terms such as “upon
delivery of the Philips in house solution” and “[the time] the product is
commercially usable,” shall mean “June 25, 2004.”

1.2.          “Documentation”
means user manuals, training materials, product descriptions, product
specifications technical manuals, license agreements, supporting materials, and
like information related to the Products, which Documentation may be
distributed in print, electronic, video, or other formats

1.3.          “End
User” means the means final retail purchasers or licensees at the clinical
sites where the Products are installed.

 

 

1.4.          “Products”
means, individually or collectively as appropriate, the Software,
Documentation, developed products and hardware, supplies accessories, and other
commodities related to any of the foregoing, provided or to be provided by PSP
pursuant to this Agreement, as described in Schedule B attached to this
Agreement, as modified from time to time.

1.5.          “Affiliate”
means any person or entity controlling. controlling, by, or under common
control with, a party to this Agreement.

1.6.          Trademarks”
means, the wordmark PHILIPS in its characteristic typeface and colors.

2.             Grant of License.

2.1.          Subject
to the terms of this Agreement, PSP hereby grants to MedQuist, and MedQuist
hereby accepts from PSP, an exclusive and non-transferable license to offer for
sale, sell, deliver and service the Products, and to authorize others to offer
for sale, sell, deliver, and service the Products, directly and through one or
more tiers of distributors, dealers, and resellers (collectively, the “Dealers”),
within the Territory  set forth on
Schedule A to this Agreement, during the Term of this Agreement, provided that
the license granted under this Section may become a non-exclusive license during
the Term of this Agreement pursuant to the terms of Section 2.2 below.

2.2.          This
Agreement does not grant MedQuist any area, market, territorial, development,
or other rights except as set forth in this Agreement.  PSP reserves all rights related to the
Products that PSP does not expressly grant MedQuist in this Agreement.  Outside MedQuist’s Territory, PSP may offer
for sale, sell, deliver, and service the Products and may authorize others to
offer for sale, sell, deliver, and service the Products, without providing any
rights or compensation to MedQuist. 
Inside MedQuist’s Territory, PSP and any Affiliate (i) may not offer for
sale sell, deliver or service the Products, or (ii) authorize others to offer
for sale, sell, deliver, or service the Products, but if PSP elects to change
the license from exclusive to non-exclusive pursuant to Section 2.2.1, this
sentence becomes null and void.

2.2.1.       During
the Initial Term of this Agreement, MedQuist will meet the sales forecasts set
forth on Schedule D to this Agreement, PSP and MedQuist will review the status
of MedQuist’s compliance with such forecasts annually, with the first review
being for results for the period June 1, 2004 through June 30 2005, the second
being for the period July 1, 2005 through June 30, 2006, and the third being
for the period July 1, 2006 through June 30, 2007.  If MedQuist fails to meet such sales
forecast, PSP may convert the license granted in Section 2.1 above from
exclusive to non-exclusive by delivering within thirty (30) days’ after the end
of the applicable review period, written notice of PSP’s intent to do so.

2.2.2.       If
PSP elects to convert the license to a non-exclusive license due to MedQuist’s
failure to meet the sales forecasts set forth in Section 2.2.1 of this Agreement,
PSP will: (i) pay MedQuist, as liquidated damages for such loss of exclusivity
and not as a penalty, an early termination fee equal to [***] for each month
remaining in the Initial Term after the date PSP terminates such Territorial
exclusivity within ten (10) days after MedQuist’s demand for such
reimbursement.  The amount of such
reimbursement will be reduced by the cumulative

 ***  Confidential material which has been omitted
and filed separately with the Securities and Exchange Commission

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amounts of any discounts earned by MedQuist
as described in Table 2 of Schedule C. 
MedQuist’s right to this termination payment is PSP’s only obligation
and MedQuist’s sole and exclusive remedy for any claim it may have against PSP
relating to the conversion of the license from exclusive to non-exclusive.

2.2.3.       On
the conversion of the license to a non exclusive license, if any, all
provisions of this Agreement shall remain in effect (i) except as otherwise set
forth in this Section 2.2, and (ii) except for PSP’s Development Services set
forth in Section 7 of this Agreement.

2.3.          MedQuist
is authorized to appoint Dealers within the Territory defined in Schedule A to
offer for sale, sell, deliver and service the Products at its discretion and
without approval from PSP On PSP’s request, MedQuist will give PSP written
notice of the identity of any Dealer that MedQuist has appointed.

3.             Initial Term and Renewal.

3.1.          Initial
Term.  This Agreement will be deemed
to have commenced on June 1, 2004, and will continue in effect through June 30,
2007, subject to earlier termination as set forth in this Agreement (the “Initial
Term”).

3.2.          Renewal.  Subject to Philips’ right to terminate below,
this Agreement will automatically renew for two (2) additional three (3) year
terms (each such renewal term being referred to in this Agreement as a “Renewal
Term,” and the Initial Term, together with the Renewal Terms, if any, being
referred to collectively in this Agreement as the “Term”), provided that
MedQuist is, at the end of the Initial Term or the first Renewal Term, in
compliance with the agreement.  If PSP
decides to discontinue all business relating to the Products in the Territory,
PSP may terminate this Agreement by providing MedQuist 6 months prior written
notice of such termination.  If PSP
terminates the Agreement due to the discontinuation of its business relating to
the Products, PSP agrees to negotiate in good faith with MedQuist the terms and
conditions under which it would provide training and access to the source code
of the Products that would be reasonably necessary for MedQuist to continue
development and support the installed base of Products in the Territory.  Otherwise, this Agreement will automatically
expire at the end of the second Renewal Term.

3.2.1.       If
at the time of each such renewal, MedQuist has met all its forecasts as
mentioned in Schedule D to the Territory, then such exclusivity will continue
throughout the applicable Renewal Term, provided: (i) MedQuist’s annual sales
forecast is at least (15%) higher than its actual sales for the
immediately-preceding twelve (12) month period as measured for the 12 months
per each end of June 30,; and (ii) MedQuist meets such sales forecast.

3.2.2.       If
at the time of each such renewal MedQuist does not have exclusive rights to the
Territory, then MedQuist will not have exclusivity for the applicable Renewal
Term.  In such event, pricing will be at
the lower of Schedule C or pricing that is equivalent to the pricing PSP offers
other OEM, Dealer, Distributor, or like reseller conducting business in the
Territory and doing similar volumes of business.

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4.             Fees.

4.1.          Development
Fee. In consideration of PSP’s Development, Maintenance and Support
Services for the first version of the Products, MedQuist will pay PSP a
development fee in the amount of [***] (the “Development Fee”), as follows: (1)
50% on the date PSP delivers a duly-executed original of this Agreement to
MedQuist, (ii) 25% on or by September 24, 2004; and (iii) the balance on or by
December 20, 2004.

4.2.          License
Fee.  MedQuist will pay PSP sums owed
for the License Fees set forth on Schedule C to this Agreement on a calendar
monthly basis, within thirty (30) days of the end of each such month.

4.3.          Software
Maintenance Fee.

4.3.1.       MedQuist
will use reasonable commercial efforts to sell its End Users a software
maintenance agreement (an “SMA”).  Such
SMA will provide that the subscribing End User will obtain, directly from PSP
or from PSP through MedQuist, as MedQuist deems appropriate:

4.3.1.1.    Software
Releases.  As used in this Agreement, “Software
Release” means a change PSP makes to the basic design, structure, or
functionality of the Software.  Software
Releases are typically numbered sequentially (e.g., Release 4.x, Release
6.x).  Such Software Releases will be
subject to the charge set forth in Section 11.5 of this agreement.

4.3.1.2.    Patch
Releases.  As used in this Agreement, “Patch
Release” means a change PSP makes to a Software Release, which is an internal
change designed to correct minor anomalies or defects in the Software
(colloquially referred to as “bugs”), or otherwise to provide minor
improvements to performance without changing the Software’s basic design,
structure, or functionality.  Patch
Releases are typically numbered to signify modifications to a version of
Software Release (e g, Version 4.1.05, Version 4.1.06).

4.3.1.3.    Point
Releases.  As used in this Agreement, “Point
Release” means a modification or enhancement (colloquially referred to as an “upgrade”)
to a Software Release that (i) enables the Software Release to perform new or
different functions (ii) increase the capability of the Software, or (iii)
enables the Software to function on new or different hardware or in a new or
different software environment without changing its basic design, structure or
functionality.  Point Releases are
typically numbered as versions of a Software Release (e.g., Version 4.1,
Version 4.2, etc.).

4.3.1.4.    Technical
Support to resolve technical issues that are more practicably resolved by PSP
than by MedQuist.

4.3.2.       SMA
contracts MedQuist sells will begin at the end of PSP’s Warranty Period (as set
forth in Section 8.1 of this Agreement) and will be renewable on an annual
basis.  In the event that MedQuist allows
an End User to terminate or cancel an SMA before the end of the term of such
SMA, MedQuist will provide notice of such termination to PSP, and PSP will

***  Confidential
material which has been omitted and filed separately with the Securities and
Exchange Commission

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refund to MedQuist the pro-rata portion of
fees paid to PSP for such SMA within thirty (30) days after MedQuist provides
such notice.

4.3.3.       For
each SMA contract that MedQuist sells, it will pay PSP the following sums
within 30 days after conclusion of such Contracts.

4.3.3.1.    For
sums owed for the period beginning with the Effective Date of this Agreement
through June 30, 2006 [***] of the License Fee set forth on Schedule C to this
Agreement.

4.3.3.2.    For
sums owed for the period beginning July 1, 2006, through the remainder of the
Initial Term and all Renewal Terms of this Agreement [***] of the License Fee
Set forth on Schedule C to this Agreement.

4.3.4.       All
sums owed set forth in Section 4.3.3 of this Agreement: (i) will be
calculated based on the License Fee and without regard to any discounts
available to MedQuist; and (ii) will be amortized on a straight-line basis for
each month over the term of the SMA.

5.             Order Placement.

5.1.          PSP
will provide MedQuist with the Products as described in this Agreement,
including without limitation the accompanying Schedules.

5.2.          PSP
will deliver to MedQuist a “gold master” of the then-current version of the
Software (i) within seven (7) days after the execution and delivery of this
Agreement by both parties to this Agreement, and (ii) promptly on the
commercial availability of each Software Release.  Software MedQuist distributes under this
Agreement will be copies of the gold master PSP most recently furnished to
MedQuist pursuant to this Agreement.  PSP
will have no obligation under this Agreement to provide to MedQuist any
Software source code.

6.             Payment.

6.1.          MedQuist
will pay such sums owed free and clear of, and without offset or deduction for,
any and all state and local use, sales, property, and similar taxes, levied or
assessed on or in respect of such payments (other than any tax measured by or
attributable to MedQuist’s gross or net income), as and when the same are due.

6.2.          By
thirty (30) days after the end of each calendar month, MedQuist will furnish to
PSP a written statement showing, in such detail as PSP may reasonably request,
the quantities of Software actually licensed, and the quantities of Products
actually sold and delivered, during the immediately-preceding month.

6.3.          MedQuist
will, throughout the term of this Agreement and for one (1) year following the
expiration or termination of this Agreement, maintain a full and accurate
record of the number of copies of the Software sublicensed in such detail as may
enable PSP to verify the amount of license fees due under this Agreement.  So as to permit verification, MedQuist will
permit PSP to examine such records on reasonable advance written notice, during
normal business hours at MedQuist’s offices at reasonable intervals no more
frequently than two (2)

 ***  Confidential material which has been omitted
and filed separately with the Securities and Exchange Commission.

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times per calendar year.  PSP will beat all costs and expenses for such
an examination, except in those cases in which the examining accountant ascertains
a discrepancy of more than five percent (5%) during the audited period to the
disadvantage of PSP between payments actually made and payments due, in which event
MedQuist will reimburse PSP all reasonable costs and expenses for such audit.

6.4.          PSP
reserves the right to charge an interest rate of the lesser of eight percent
(8%) per annum the maximum amount permitted by applicable law on past-due sums
MedQuist owes under this Agreement.  In
the event of non payment by MedQuist, PSP will have the right to suspend or terminate
MedQuist’s license granted pursuant to this Agreement, and terminate this Agreement
after having provided MedQuist at least 30 days written notice to cure the
past-due sum.

7.             Development Services.

7.1.          Provided
that MedQuist meets its sales forecast for each six (6) month period beginning
with the period ended June 30, 2005, PSP will use commercially reasonable efforts
to perform the following development services and provide the product support set
forth in this Section 7 (collectively, the “Development Services”):

7.1.1.       PSP
will use commercially reasonable efforts to continue to upgrade version 1 of
the Products, including without limitation the integration of the Products to
all PACS, RIS, and HIS vendors MedQuist designates.  MedQuist and PSP will work together to
mutually agree on which integrations with which PACS, RIS, and HIS vendors will
be developed on a quarterly basis.  MedQuist will provide all technical and
contact information needed to implement such integrations.  PSP will strive to develop as many
integrations as possible with a goal of 4 per quarter.  PSP and MedQuist understand that it is in
their mutual best interest to do more integrations per quarter if resources
allow.

7.1.2.       Integration
shall be defined as follows:

7.1.2.1.    1)
Interfacing with the other application (exchange of standard HL7-like
information via XML) or

7.1.2.2.    2)
Desktop integration, where the front end modules of SpeechQ and the integrating
application (PACS, RIS, and HIS) interact with each other: which definition
specifically includes the login function from the interfacing application to
the product or vice versa and the capability for the end-user to control the
product to directly create, show, and work on a certain report.

7.1.3.       PSP
will provide one (1) individual (the “Support Technician”) to support MedQuist
and its Dealers in the Territory with End User implementation and other service
requirements, for the period June 25, 2004, through June 30, 2005.  MedQuist will pay the return air fare of such
Support Technician to such Support Technician’s from Support Technician’s
resident location in the Territory point of departure, plus such Support
Technician’s work-related travel expenses in the Territory and cost of living
expenses in the United States, including without limitation the cost of such
Support Technician’s apartment.  PSP will
be responsible for

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all other costs of such Support Technician
not enumerated in this Section 7.1.3, including such Support Technician’s wage
and benefit costs.

7.1.4.       PSP
will use commercially reasonable efforts to release an additional Software Release
of the Products.  PSP and MedQuist will
work together to determine the requirements and specifications of such Software
Release.

7.1.5.       PSP
will use commercially reasonable efforts to release a minimum of two (2)
Service Releases per year.  As used in
this agreement, “Service Release” means a Software Release or Point
Release.  MedQuist acknowledges that PSP
can support only two Software Releases at the same time, which Software
Releases will be the current release and its next most previous release.

7.1.6.       PSP
will use commercially reasonable efforts to release a Point Release of the of
the Radiology product during 2004.  PSP
will also make efforts to release a Version 2 of the Software during calendar
year 2004.  If Version 2 is not completed
in 2004, then PSP and MedQuist will review and agree on the amount of extra
costs to be incurred in 2005, and will agree on an arrangement for sharing
costs, before PSP makes any expenditures. 
All sums MedQuist incurs related to such arrangement will be added to
the liquidated damages calculation as described in Article 2.2.2.

7.1.7.       Based
on requirement needs and market demand for the Product, PSP and MedQuist will
work together to determine the development path for future versions of the
Radiology Product in 2005, however, if the Parties cannot agree, PSP will make
the final determination, which determination will be based on reasonable analysis
of the needs, market demands, and other such factors.

7.1.8.       PSP
will use commercially reasonable efforts to release the Software for End Users
in the medical fields of:  [***] provided
however, PSP and MedQuist may agree to change the order of the additional
modalities set forth in clauses (i) through (iii) of this Section 7.1.6.

7.2.          If
any of the Development Services set forth in Section 7.1 of this Agreement are
delayed by more than thirty (30) days, except where MedQuist requests such delay
or such delay is due solely to MedQuist’s inaction, the exclusivity of MedQuist’s
rights in the Territory, as set forth in Section 2.2 et seq. of this Agreement, will be extended by the amount of
such delay.  The obligations of PSP
described above are PSP’s only obligations and MedQuist’s sole and exclusive
remedy for any such delay.

8.             Limited Warranty.

8.1.          PSP
warrants that, for a period of ninety (90) days after the delivery date (the “Warranty
Period”), the Software will perform in all material respects in accordance with
the Documentation accompanying the Software. 
If any copy of the Software is found not to perform materially in
accordance with the Documentation, PSP will correct such error or malfunction
or (at PSP’s sole option) replace such Software free of charge as soon as is
reasonably practicable, provided that: (i) the Software has been used in
accordance with instructions for use; (ii) no alteration, modification or
addition has been made to the Software without PSP’s prior written

 ***  Confidential material which has been omitted
and filed separately with the Securities and Exchange Commission

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consent; and (iii) PSP has been promptly
notified of the alleged non-conformity within the Warranty Period specified.

8.2.          MedQuist
will send each claim of MedQuist under this warranty to PSP in accordance with
the notice provisions of this Agreement. 
Each such claim will state generally the nature of the alleged
non-conformity.  If PSP determines in its
sole discretion to repair the Software (or such portion of it as is giving rise
to the non-conformity), MedQuist will afford PSP a reasonable time in which to
do so.  Any Software so repaired or
replaced will be warranted for such period of time as is remaining in the
original Warranty Period.

8.3.          This
Limited Warranty is subject to the terms of Section 12 below.  This Limited Warranty is PSP’s only
obligations and the exclusive remedy of MedQuist and the End User with respect
to the Products, and PSP’s entire liability and only warranty with respect to
the Products.  PSP will have no
responsibility whatsoever with respect to the Products if the failure is due to
accident, abuse, or misapplication on the part of MedQuist or the End User.

8.4.          MedQuist
may offer any warranty that PSP makes hereunder to any End Users provided that
warranty claims by MedQuist’s End Users will be made solely against MedQuist
and not PSP. The warranties contained in this Agreement are solely for the
benefit of MedQuist.

9.             Notification of Upgrades and
Updates.

9.1.          PSP
will notify MedQuist of any revisions and updates to the Software that affect
its operation, performance, or cost.

9.2.          MedQuist
will apply any revisions or updates to the Software as soon as reasonably
practicable after receipt of notification from PSP.

10.           MedQuist’s Representations and
Undertakings.  MedQuist represents
and undertakes with PSP that:

10.1.        It
will use commercially reasonable efforts to promote, market, and sell the
Products during the term of this Agreement;

10.2.        It
has the resources, facilities, and financial ability to market, distribute and
provide first line customer support for the Product and fulfill all of its
obligations under this Agreement;

10.3.        It
will, in all correspondence and other dealings related directly or indirectly to
the Products, clearly indicate that it is acting as MedQuist and not as the
author or developer of the Products;

10.4.        It
will not incur any liability on behalf of PSP, pledge or purport to pledge PSP’s
credit, or purport to act as an agent of PSP or make any contract binding on
PSP;

10.5.        It
will not alter, obscure, remove, conceal, or otherwise interfere with any
eye-readable or machine-readable marking on the Products or packaging that
refers to PSP as author

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or developer of the Products, or that otherwise
refers to PSP’s copyright or other intellectual property rights in the
Products;

10.6.        It
will permit PSP or any independent third party PSP retains to enter MedQuist’s
premises at a time MedQuist agrees to for the purpose of reviewing records
related to this Agreement (including, without limitation, verifying the number
of Software sublicenses granted by or through MedQuist and obtaining
information concerning any Product complaints);

10.7.        It
will not modify, amend, make copies, add to, or in any way alter any Product
supplied to it under this Agreement without PSP’s prior written consent, or
disassemble, decompile, or reverse engineer the Software; provided, however,
that MedQuist may make copies of the Documentation solely for purposes of using
the Documentation in connection with its sublicensing and sales efforts
hereunder;

10.8.        Third
party software, as defined in Schedule E to this Agreement (the “Third Party Software”),
that is distributed with the Programs will not be used in conjunction with any
other programs or software whatsoever;

10.9.        It
will obtain and maintain at its sole risk, cost, and expense, all governmental
approvals requited for or applicable to its distribution and other activities
contemplated by this Agreement, and will be responsible at its sole risk, cost,
and expense for complying with all applicable governmental statutes,
regulations, and ordinances (collectively, the “Laws”) related to such activities;

10.10.      It
will, before the delivery of the Products to an End User, ensure that such End
User enters into a software license agreement with MedQuist that will accompany
each copy of the Software in substantially the form set forth on Schedule F to
this Agreement (the “End User License Agreement”).

11.           PSP’s Obligations.  PSP covenants, warrants, and agrees that it:

11.1.        Has
the necessary approvals and licenses to grant to MedQuist the right to use,
sublicense and distribute the Software in accordance with the terms of this
Agreement.

11.2.        Has
the resources, facilities, and financial ability to develop and provide second
line support for the Products and to fulfill all of its obligations under this
Agreement.

11.3.        Will
provide initial 2 days of training in the use of the Products to technical staff
of MedQuist at no additional charge, at the place agreed on by both parties.  PSP and MedQuist will mutually limit the
number of personnel participating in training sessions.  On MedQuist’s request, PSP will provide a
similar training program for all upgrades to the Software.  Each first technical training for a new
version will be done free of charge; for any subsequent training, PSP and
MedQuist will agree on a reasonable price.

11.4.        Will
at all times during the Term of this Agreement and where applicable, following
termination hereof, observe and perform the terms and conditions set out in
this Agreement.

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11.5.        Will provide Software
Releases at an upgrade charge for End Users.  The parties acknowledge and agree that the
amount of such upgrade charge cannot be determined as of the Effective Date of
this Agreement, as such charge will ultimately be based on the features and
functionality of that specific Software Release.  As such, the pricing for any Software Release
will be determined by MedQuist based on relative market conditions at the time.
 MedQuist will pay PSP [***] of the
amount actually received from the End User.

12.           Exclusion Of Warranties.  EXCEPT AS EXPRESSLY SET FORTH IN SECTION 8 OF
THIS AGREEMENT, PSP MAKES NO WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, WHATSOEVER,
AS TO THE PRODUCTS AND THE DOCUMENTATION. 
PSP EXPRESSLY DISCLAIMS, ANY AND ALL WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSES, ACCURACY, SATISFACTORY QUALITY, NON-INFRINGEMENT, COURSE
OF DEALING, OR COURSE OF PERFORMANCE.

13.           Limited Liability.  IN NO EVENT WILL EITHER PARTY OR ANY OF ITS
AFFILIATES, SUBSIDIARIES, OR LICENSORS BE LIABLE FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, EXEMPLARY, CONSEQUENTIAL, MULTIPLIED, ENHANCED, OR PUNITIVE
DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF REVENUE, PROFITS, OR GOODWILL,
BUSINESS INTERRUPTION, OR LOST IN CONNECTION WITH THIS AGREEMENT OR THE
PRODUCT, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT (INCLUDING
NEGLIGENCE), STRICT PRODUCT LIABILITY, OR OTHERWISE, EVEN IF SUCH PARTY, ITS
AFFILIATES, ITS SUBSIDIARIES, OR ITS LICENSORS HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES AND EVEN IF ANY LIMITED REMEDY SPECIFIED IN THIS AGREEMENT IS
DEEMED TO HAVE FAILED ITS ESSENTIAL PURPOSE. 
SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY
FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES, SO THIS LIMITATION MAY NOT APPLY IN
THOSE JURISDICTIONS.  IF ANY CLAIM IS
MADE AGAINST A PARTY, INCLUDING WITHOUT LIMITATION CLAIMS AS A RESULT OF THE
SUBSTANTIAL NON-CONFORMANCE OF THE SOFTWARE TO THE DOCUMENTATION OR OTHERWISE,
THE PARTY’S TOTAL LIABILITY FOR DAMAGES WILL BE LIMITED, IN THE AGGREGATE, TO
ITS ACTUAL DIRECT DAMAGES, AND IN ANY EVENT WILL NOT EXCEED THE TOTAL OF ALL
AMOUNTS MEDQUIST IS OBLIGATED TO PAY PSP UNDER THIS AGREEMENT.  SOME JURISDICTIONS MAY NOT ALLOW LIMITATIONS
OF LIABILITY FOR CERTAIN TYPES OF DAMAGE OR CERTAIN CLAIMS, SO SUCH LIMITATION
MAY NOT APPLY IN SUCH JURISDICTION.

14.           Intellectual Property
Indemnification.  PSP will indemnify,
defend, and hold harmless MedQuist, and MedQuist’s directors, officers,
shareholders, employees, agents, and attorneys, and MedQuist’s affiliates and
their directors, officers, shareholders, partners, members, employees, agents,
and attorneys, and the End Users, and the successor, and assigns of any or all
of them, from all third-party Claims for infringement, misappropriation or
violation of copyrights, trademarks, trade secrets, or other proprietary rights
associated with any portion of the Product, or any other material delivered
under this Agreement; provided that: (i) MedQuist promptly notifies PSP in writing
of the Claim; (ii) PSP has sole control of the defense and all related
settlement negotiations with respect to the Claim; provided however, that
MedQuist has

***  Confidential
material which has been omitted and filed separately with the Securities and
Exchange Commission

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the right, but not the
obligation, to participate in the defense of any such Claim through counsel of
its own choosing (at MedQuist’s sole expense), which right will not detract
from PSP’s sole right to control such defense; and (iii) MedQuist cooperates
fully to the extent reasonably necessary, and executes all documents reasonably
necessary for the defense of such Claim. “Claim” will mean all loss, losses,
liabilities, damage, damages, claims, taxes, and all related costs and expenses;
including, without limitation, reasonable attorneys’ fees and costs of
investigation, litigation, settlement, judgment, interest, and penalties.  If MedQuist provides PSP with notice of a
Claim, MedQuist may withhold any further payments due to PSP pursuant to this
Agreement, and deposit the same in an interest-bearing escrow account with a
commercial bank.  On the resolution of
any claim, the amounts in escrow, including accrued interest thereon, will be
distributed to PSP after deductions of amounts PSP is required to pay MedQuist
under this Section 14.  If MedQuist’s or
its End Users’ use of any portion of the Product or any other material
delivered under this Agreement is enjoined in an action by reason of a Claim of
infringement, violation or misappropriation of any third party’s patents,
copyrights, trademarks, trade secrets or other proprietary rights, or MedQuist
reasonably believes that it will be so enjoined, then PSP will, at its sole,
option and expense, in addition to its other obligations in this Section 14:
(i) procure for MedQuist and its End Users the right to continue using the
Product or any portion thereof; (ii) replace the same with software of
equivalent functions and efficiency that is not subject to an action described
in this section; or (iii) modify the applicable Software so that there is no
longer any infringement or breach, provided that such modification does not
adversely affect the functional capabilities of the Product as set out in this
Agreement.  If neither (i), (ii), or
(iii) may be accomplished despite PSP’s reasonably diligent efforts, MedQuist
may terminate this Agreement with regard to the portion of the Product that is
alleged to infringe, violate, or misappropriate a third party’s rights.  PSP will have no liability respecting any
claim of infringement or breach as aforesaid to the extent such claim is based
on the combination, operation, or use of the Software with other equipment,
software, apparatus, devices, or things not supplied by PSP or in a manner not substantially
consistent with PSP’s specifications and instructions.  This Section 14 states the entire liability
of PSP for any type of infringement or breach whatsoever of intellectual
property rights of third parties related to the manufacture, sale, operation,
or use of the Product.

15.           Product Ownership.  PSP is the sole owner of the Products and all
derivatives, modifications, enhancements, corrections, additions, and
extensions of end to the Products. 
MedQuist acknowledges that the Software (other than the third-party
software) (such Software, excluding any third-party software, being referred to
in this Agreement as the “PSP Software”) is a valuable trade secret of
PSP.  PSP will be the sole and exclusive
owner of the PSP Software, and MedQuist agrees to do nothing inconsistent with
such ownership.

16.           Legal Compliance.

16.1.        MedQuist may not
download or otherwise export or re-export the Software or any underlying
information or technology except in full compliance with all United States and
other applicable laws and regulations. 
In particular, but without limitation, none of the Software or
underlying information or technology may be downloaded or otherwise exported or
re-exported: (i) into (or to a national or resident of) Cuba, Iran, Iraq,
Libya, North Korea, Syria, or Sudan; or (ii) to anyone on the U.S. Treasury
Department’s list of Specially Designated Nationals or the US Commerce
Department’s Table of Deny Orders.

 11
 

 

 

16.2.        In accordance with
the Federal Center for Devices and Radiological Health regulations, in order to
permit tracing in the event of recall, MedQuist will retain distribution
records for the Products for a period of five (5) years from the date of
termination or expiration of this Agreement.

16.3.        MedQuist is aware of
and will advise its End Users to comply with Section 112B(b) of the Social
Security Act (42 U.S.C. 1320a-7b) (the “Act”) when seeking reimbursement from
any governmental entity for products supplied under this Agreement.  Specifically, MedQuist acknowledges that the
Act may require proper disclosure of any discounts, rebates, credits,
reimbursements, and other programs PSP or MedQuist provide in connection with
delivery of the Products.

16.4.        MedQuist will not
ship, transfer, or export any of the Products, or any derivative thereof,
directly or indirectly, into any country except as permitted by the U.S. Export
Administration Act and the regulations thereunder, or use any of the Products
for any purpose prohibited by the U.S. Export Administration Act.

17.           Intellectual Property Rights.

17.1.        Any and all of PSP’s
and its Affiliate’s copyright, trademark, trade secret, and other proprietary
rights subsisting in or used in connection with the Products (whether or not
patentable or registered under copyright, trademark, trade secret or similar
legislation, or subject to analogous protection) are and will remain the
property of PSP its Affiliate and its licensors.

17.2.        Such copyright,
trademark, trade secrets, and other rights belonging to PSP and its Affiliate
may only be used by MedQuist with the consent of PSP and its Affiliate as
granted pursuant to, and during the Term of, this Agreement.

17.3.        MedQuist will, at as
own expense, defend, indemnify and hold harmless PSP and its Affiliate from and
against any damages, cost, loss, liability, expenses or claims (including
reasonable legal fees) arising out of (i) MedQuist’s unauthorized use of the
Product or any part thereof, or (ii) MedQuist’s willful or negligent acts.

17.4.        PSP and its Affiliate
grants MedQuist a limited, nonexclusive right to use PSP’s and its Affiliate’s
trademarks and trade names (the “Marks”) in connection with the advertising,
marketing and sale of the Products.  MedQuist will not make or permit alterations
or removal of tags, labels, or identifying marks placed by PSP and its
Affiliate on or within the Products.  MedQuist will not use PSP’s and its Affiliate
s trade names or abbreviations (with the exception of a logo or mark or graphic
design PSP and its Affiliate provide which indicates MedQuist is an authorized value-added
reseller of PSP) in MedQuist’s corporate title or name, or in any manner that
may result in confusion as to separate and distinct identities of PSP with its
Affiliate and MedQuist.  MedQuist agrees
that it has no right, title, or interest in or to the Marks except the limited
right of use set forth in this Agreement.  MedQuist will not use any Mark in any way
except as PSP and its Affiliate may authorize.  MedQuist will submit to PSP and its Affiliate
representative samples of all labels, advertising, promotional and marketing
materials and other items that use or bear any Mark for PSP’s and its Affiliate’s
approval prior to publication or distribution.  MedQuist will use the Marks only in the forms
PSP and its Affiliate designate, will 

 12
 

 

 

not alter or modify any Mark, and will include an appropriate trademark
notice (® or TM) with each use of any Mark. 
Under no circumstances will MedQuist remove or cover the logo, insignia,
serial numbers or lettering that may be on the Products at the time of delivery.
 On expiration or termination of this
Agreement, the license granted under this Section 17.4 will automatically
terminate and MedQuist will immediately cease and desist all use of the Marks
licensed under this Agreement.

17.5.        MedQuist intends to
market the Products described in this Agreement under the trademark “SpeechQTM”
and certain trademarks trade names, service marks, logotypes, and other
commercial symbols related thereto (collectively, the “SpeechQ Marks”).  PSP further acknowledges and agree that (i)
there is substantial and valuable goodwill in the SpeechQ Marks; (ii) as
between PSP and any of its affiliates on the one hand, and MedQuist and any of
its affiliates on the other, MedQuist owns all rights to the SpeechQ Marks and
all goodwill related to them; (iii) neither PSP nor any of its affiliates will
contest MedQuist’s ownership of the SpeechQ Marks, or the validity of the
SpeechQ Marks, at any time during or after the Term of this Agreement; and (iv)
neither PSP nor any of its affiliates will misappropriate the SpeechQ Marks,
infringe on MedQuist’s rights in the SpeechQ Marks, or use the SpeechQ Marks
without MedQuist’s prior written consent, at any time during or after the Term
of this Agreement.

17.6.        Any advertising,
publicity, release or other disclosure of information concerning this Agreement
should be released only after receiving a prior written approval by both
parties except as required by law.

18.           Confidential Information.  Each party to this Agreement has imparted and
may from time to time impart to the other certain confidential information
related to the performance of this Agreement and the Products or the marketing
or support thereof (including specifications therefor), and each party may
otherwise obtain confidential information concerning the business and affairs
of the other pursuant to this Agreement. 
Each party hereby agrees that it will use such confidential information solely
for the purposes of this Agreement and that it will not disclose, whether
directly or indirectly, to any third party such information other than as
required to carry out the purposes of this Agreement.  In the event of and prior to such disclosure,
the disclosing party will obtain from such third parties duly binding agreements
to maintain in confidence the information to be disclosed to the same extent at
least as such party is so bound hereunder.  The foregoing provision will not prevent the
disclosure or use by a party of any information which is or hereafter, through
no fault of such party becomes public knowledge or to the extent permitted by
law, provided that each party has a reasonable opportunity to prevent or limit
such disclosure.  MedQuist will return to
PSP all confidential information received pursuant to this Agreement or
otherwise in its possession or control on termination of this Agreement, or
forthwith on the request of PSP.

19.           Remedies On Breach.  Each party acknowledges that the unauthorized
use or disclosure of any confidential information will cause irreparable harm
to the other for which damages will be an inadequate remedy, and the each party
hereby agrees that, in additional to all other remedies available to it at law
and in equity, it will have the right to obtain injunctive relief.

 13
 

 

 

20.           Termination.

20.1.        Either party may terminate
this Agreement on written notice to the other if any of the following events occur:

20.1.1.     If any proceeding in
bankruptcy, receivership, liquidation or insolvency is commenced against the
other party or its property, and the same is not dismissed within ninety (90) days;
or

20.1.2.     If the other party makes
any assignment for the benefit of its creditors, becomes insolvent, commits any
act of bankruptcy, ceases to do business as a going concern, or seeks any
arrangement or compromise with its creditors under any statute or otherwise.

20.2.        PSP may terminate
this Agreement on written notice to MedQuist if any of the following events
occur:

20.2.1.     In the event that a
material breach by MedQuist remains uncured for more than thirty (30) days
following PSP’s delivery of written notice to MedQuist specifying the nature of
the breach; or

20.2.2.     If MedQuist assigns this
Agreement without PSP’s consent or if MedQuist undergoes a change of control, whether
by means of a sale or issuance of shares or otherwise and the control changes
to a third party doing business in the dictation market or in the speech
recognition market.

20.3.        MedQuist may
terminate this Agreement on written notice to PSP in the event that a material
breach by PSP remains uncured for more than thirty (30) days following MedQuist’s
delivery of written notice to PSP specifying the nature of the breach.

21.           Obligations On Termination.  On the expiration or termination of this
Agreement:

21.1.        PSP will be under no
obligation to refund to MedQuist any licensing fees paid pursuant to this
Agreement so long as PSP has fulfilled all of its obligations under this
Agreement related to such licensing fees, including, without limitation, delivery
of the Software license and fulfilling the warranty obligations for such
Software license;

21.2.        PSP will continue to
perform its support obligations to MedQuist for the duration of all service
agreements between MedQuist and the End Users entered into before such
expiration or termination, where support fees have been paid to PSP;

21.3.        Any End User licenses
granted before the expiration or termination of this Agreement will continue to
survive after the effective date of termination provided that MedQuist has paid
all amounts owing hereunder; and

21.4.        MedQuist will return
or destroy (as PSP instructs), no later than fourteen (14) days after the
effective date of termination, all Products and any and all copies made of such
Products in its possession or control.  MedQuist will furnish PSP with a certificate,
stating that the same has been done, except with respect to such material as is
necessary to enable MedQuist

 14
 

 

 

to continue to support the Products beyond the date of expiration or
termination where PSP permits or requires MedQuist to do so.

22.           Miscellaneous.

22.1.        Force Majeure.  The term “Force Majeure” will be defined as
an act of God, severe weather conditions, strikes, war, terror or other
violence, law or proclamation, demand, or requirement of any governmental
agency, or any other similar act or condition whatsoever, beyond the reasonable
control of the parties to this Agreement.  If the performance of this Agreement by either
party or any obligation under this Agreement is prevented, restricted, or
interfered with by reason of a Force Majeure event, the party whose performance
is so affected, on giving prompt notice to the other party, will be excused
from such performance to the extent of such Force Majeure event provided,
however that the party so affected will take all reasonable steps to avoid or
remove such causes of nonperformance and will continue performance tinder this
Agreement with dispatch whenever such causes are removed.

22.2.        Relationship of
MedQuist to PSP.  Neither party is an
agent, employee, fiduciary, partner, or representative of the other, and has no
authority or power to bind or contract in the name of or to create any
liability against the other in any way for any purpose.  It is understood that MedQuist is an
independent contractor with rights confirmed by this Agreement to market,
distribute, and support the Product on its own accord and responsibility in the
Territory.

22.3.        Waiver.  Failure or neglect by either party to enforce
at any time any of the provisions of this Agreement will not be construed nor
will be deemed to be a waiver of either party’s rights under tins Agreement nor
in any way affect the validity of the whole or any part of tins Agreement nor
prejudice either party’s rights to take subsequent action.

22.4.        Agreement.  This Agreement, including the Schedules
attached to this Agreement, states the completed agreement between the parties
concerning this subject and supersedes earlier oral and written communications
between the patties concerning this subject.  No addition amendment to, or modification of
this Agreement will be effective unless it is in writing and signed by both
parties.  This Agreement takes precedence
over and supersedes any previous agreements between the parties regarding the
subject matter hereof, even if such agreements are still in effect as of the
Effective Date hereof.

22.5.        Assignment.  This Agreement is personal to MedQuist, and therefore,
it may not be assigned by MedQuist whether voluntarily or involuntarily or by
operation of law, in whole or in part to any party without the prior written
consent of PSP, which consent will not be unreasonably withheld.  No such assignment by MedQuist, howsoever
occurring, will relieve either party of its obligations under this Agreement.  Notwithstanding the foregoing, MedQuist may
assign this Agreement to any of its affiliates or to any purchaser of
substantially all of the assets or the business of MedQuist.

22.6.        Notices.  Any notice required or permitted under the
terms of this Agreement or required by Law will, unless otherwise provided, be
in writing and will be delivered in person, sent by registered mail or air mail
as appropriate, properly posted and fully prepaid, in an

 15
 

 

 

envelope properly addressed, or sent by next-day delivery via a courier
that has the ability to track deliveries and confirm receipts to the respective
parties, as follows:

To PSP:                                                      Managing
Director

                              

                              

Triester Strasse 64

1101 Vienna, Austria

To MedQuist:                     MedQuist Inc.

100 Bishops Gate Blvd. #300

Mount Laurel, NJ 08054

Attn Chief Legal Officer

with simultaneous
copy, which will constitute notice, to:

Richard E. Johnson, Esq.

Smith, Gambrell & Russell, LLP

Suite 3100, Promenade II

1230 Peachtree Street, N.E.

Atlanta, Georgia 30309-3592

or to such other address as may from time to time be
designated by written notice hereunder. 
Any such notice will be in the English language and will be considered
to have been given at the time when actually delivered if delivered by hand, on
the next business day following sending by courier or in any other event within
seven (7) days after it was mailed in the manner provided in this Section 22.6.

22.7.        Headings.  The headings of the sections of this Agreement
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.

22.8.        Severability.  In the event that any or any part of the
terms, conditions, or provisions contained in this Agreement are determined by
any competent authority to be invalid, unlawful, or unenforceable to any
extent, such term, condition, or provision will to the extent be severed from
the remaining terms conditions, and provisions, which will continue to be valid
and enforceable to the fullest extent permitted bylaw.

22.9.        Governing Law.
 The parties hereby agree that this
Agreement will be governed by and construed and interpreted in accordance with
the laws of the State of New York and the laws of the United States applicable
in the State of New York.  The parties
agree that the U.N. Convention on Contracts for the International Sale of Goods
does not apply to this Agreement.

22.10.      Dispute Resolution.

22.10.1.   All disputes arising
under this Agreement will be settled, if possible, by good faith negotiation of
the parties, which negotiations will not terminate until the President of
MedQuist and the President of PSP have considered the dispute.

 16
 

 

 

22.10.2.   If such negotiations
fail to resolve any dispute within thirty (30) days after a party has given
written notice of the dispute to the other party or parties, then such dispute
will be resolved, if possible, by a process of mediation agreed on by the
parties (acting reasonably), which mediation will be conducted by a mediator
agreed on by the parties (acting reasonably).  Such mediator will be an individual with
significant experience in and understanding of the software industry.  Such mediation will be held within 30 days
after cessation of negotiations as described in Section 22.10.1 of this
Agreement.

22.10.3.   If the dispute has not
been settled within ten (10) days of the commencement of the mediation described
in Section 22.10.2 of this Agreement, then the dispute will be finally settled
by arbitration and this Agreement specifically excludes the power of the Court
to refuse to stay judicial proceedings.  The arbitration will take place in New York,
New York unless otherwise agreed.  Within
twenty (20) days after the party requesting arbitration has given written
notice of such request to the other party, the parties (acting reasonably) will
jointly appoint a single arbitrator who will be an individual (other than the
mediator selected pursuant to Section 22.10.2 of this Agreement, with
significant experience in and understanding of the software industry.  If the parties are unable to appoint a single
arbitrator within the such twenty (20) day period, then MedQuist will appoint
one arbitrator and PSP will appoint one arbitrator, both such arbitrators to be
appointed within ten (10) days after the end of the aforementioned twenty (20)
day period, with a third arbitrator then being selected by those two arbitrators
(none of these three being the mediator selected pursuant to Section 22.10.2
within five (5) days following their appointment.  Such third arbitrator will alone conduct the
arbitration.  The arbitration will be
final and binding and not subject to appeal and the procedures and substance of
the arbitration will be governed by the U.S. Federal Arbitration Act.  The arbitrator may, in addition to any other remedies,
grant injunctive relief.  The non
prevailing party will pay all costs of the arbitration.

22.11.      No Damages for
Termination or Expiration.  PSP WILL
NOT BE LIABLE TO MEDQUIST FOR DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SOLELY ON ACCOUNT OF PSP’S TERMINATION OR
EXPIRATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS.  MEDQUIST WAIVES ANY RIGHT IT MAY HAVE TO
RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION (OTHER THAN IN THE CASE
OF A TERMINATION OF THIS AGREEMENT BY MEDQUIST FOR CAUSE UNDER SECTION 20.3 OF
THIS AGREEMENT) OR EXPIRATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS
UNDER THE LAW OF ANY TERRITORY, STATE, OR OTHERWISE.  PSP will not be liable to MedQuist on account
of termination (other than in the case of termination of this Agreement by MedQuist
for cause under Section 20.3 of this Agreement) or expiration of this Agreement
in accordance with its terms for reimbursement or damages for the loss of goodwill,
prospective profits, or anticipated income, or on account of any expenditures,
investments, or commitments made by MedQuist, or for any other reason whatsoever,
based on or growing out of such expectation or termination.

22.12.      Authority.  Each of the parties hereby represents that it
has full power and authority to enter into and perform its respective
obligations under this Agreement, and does not know of any contracts,
agreements, promises, or undertaking, that would prevent the full performance and
compliance with this Agreement.

 17
 

 

 

IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement as of the Effective Date.

	
  MEDQUIST:

  	
  PSP:

  
	
   

  	
   

  
	
  MEDQUIST INC.

  	
  PHILIPS AUSTRIA GMBH

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gregory M.
  Sebasky

  	
   

  	
  By:

  	
  /s/ M. Wassnik

  	
   

  
	
   

  	
   

  
	
  Title: President

  	
  Title: Managing Director

  
						

 

 18

 

SCHEDULE A

TERRITORY.

Description of Territory:

MedQuist’s Territory shall be all that area within
North America.

“North America” shall specifically include, without
limitation (i) the United States of America, (ii) the Dominion of Canada, (iii)
those islands m the Caribbean Basin beginning with Bermuda to the north and
extending to Grenada and Barbados in the south, as the borders of such
countries are configured as of the Effective Date of this Agreement.

The United States of America shall expressly include
(i) the following dependent areas of the United States of America American:
Samoa, Baker Island, Guam, Howland Island, Jarvis Island, Johnston Atoll,
Kingman Reef, the Midway Islands, Navassa Island, the Northern Mariana Islands,
Palmyra Atoll, Puerto Rico, the U S Virgin Islands, and Wake Island, (ii) those
areas leased by the United States from separate sovereign nations, including
without limitation Guantanamo Bay, Cuba;

The Dominion of Canada shall expressly include Hans.
Island, in the Kennedy Channel between Ellesmere Island and Greenland, which
area is subject to a border dispute between the Dominion of Canada and the
Kingdom of Denmark.

 

SCHEDULE B

PRODUCTS

Description of Products:

The Products that are the subject of this Agreement
shall include, without limitation:

1.               PSP’s
in-house solution for Radiology products, as set forth in Amendment No., 2,
together with all derivations and future versions thereof; plus

2.               All
multi-user solutions PSP develops that include the core functionality of front-end
speech recognition software for the medical market in North America, which
solutions shall specifically include solutions developed for the [***].

The Products shall specifically exclude software
development kit (“SDK”) products that PSP develops, currently known as
SpeechSDK and SpeechMagic.

 *** 
Confidential material which has been omitted and filed separately with
the Securities and Exchange Commission

 20
 

 

SCHEDULE
C

PRICING

Pricing may be adjusted from time to time based upon
the mutual agreement of the need for such a change by both MedQuist and Philips
Speech Processing.

The license fee for the Software (the “License Fee”)
shall be as follows:

TABLE
1

	
  Item

  	
   

  	
  License Fee

  	
   

  
	
  Server

  	
   

  	
  [***]

  	
   

  
	
  Link

  	
   

  	
  [***]

  	
   

  
	
  Report Station
  Workstation Client*

  	
   

  	
  [***]

  	
   

  
	
  Report Station
  Concurrent License*

  	
   

  	
  [***]

  	
   

  
	
  Test Server Package

  	
   

  	
  [***]

  	
   

  

 

* For every transcription user or workstation, a
Report Station needs to be purchased.

Upgrade pricing for Software Releases are subject to
provision 11.5 of this agreement.

For end-customers who have no SMA contracts, PSP and.
MedQuist will agree on a case by case basis on a recommended end-user upgrade
price for patches and point releases, and PSP will get [***] of that price.

Each License Fee set forth above-shall be Subject to
the following reductions:

TABLE
2

	
  Description

  	
   

  	
  Amount of Reduction

  	
   

  
	
  For all
  purchases until MedQuist meets its forecasted purchases for the applicable
  period

  	
   

  	
  [***]

  	
   

  
	
  For all purchases
  after MedQuist meets its forecasted purchases for the applicable period

  	
   

  	
  [***]

  	
   

  
	
  For large orders, as
  determined by PSP and MedQuist

  	
   

  	
  As established by the
  agreement of

  PSP and MedQuist

  	
   

  

 

 *** 
Confidential material which has been omitted and filed separately with
the Securities and Exchange Commission

 21
 

 

 

Notwithstanding anything set forth in Table 2 to the
contrary, once cumulative discounts MedQuist has earned reach [***] then the
only discount available to MedQuist will be a [***] discount available on
purchases that are in excess of MedQuist’s forecast for that year.

 *** 
Confidential material which has been omitted and filed separately with
the Securities and Exchange Commission

 22
 

 

SCHEDULE
D

SALES FORECASTS AND COMMITMENTS

MedQuist’s sales forecasts and commitments (the “Sales
Forecasts and Commitments”) shall be as follows:

1.               For
the period June 1, 2004, through December 31, 2004:  Software purchases and payments in 2004 equal
to [***].  If MedQuist has not granted
software licenses to End Users prior to December 20, 2004, in quantities sufficient
to generate such [***] forecast, then MedQuist will make a bulk purchase and
payment on that date of licenses that are non-refundable but will be available
for granting to End Users in future periods.

2.               For
the period January 1, 2005, through December 31, 2005: Software purchases equal
to [***] which forecast anticipates sales of: 
[***] for the period January 1, 2005, through June 30, 2005; and (ii)
the remainder during the period July 1,2005, through December 31, 2005.

3.               For
the period January 1, 2006, through December 31, 2006:  Software purchases equal to [***] which
forecast anticipates sales of: [***] for the period January 1, 2005, through
June 30, 2005; and (ii) the remainder during the period July 1, 2005, through
December 31, 2005.

4.               For
the period January 1, 2007, through June 30, 2007:  Software purchases equal to [***].

 *** 
Confidential material which has been omitted and filed separately with
the Securities and Exchange Commission

 23
 

 

SCHEDULE
F

END USER LICENSE AGREEMENT

END USER LICENSE AGREEMENT FOR
MEDQUIST ‘Branded’ SOFTWARE

THIS END USER LICENSE AGREEMENT (“EULA”) is between
MEDQUIST, INC. (“MEDQUIST”), having a business address of 5430 Metric Place,
Suite 200, Norcross, Georgia 30092, and CUSTOMER.

1.               Definitions

a.               “Software”
shall mean separate MedQuist ‘branded’
computer programs, (whether or not included within or separately from any data
processing unit), provided now or later by MedQuist, its parent, subsidiaries
affiliates and not otherwise so provided under a separate license agreement,
which can be read and used directly by a machine or device, and shall include
without limitation, data, instructions, and media. ‘Non-branded Software’ shall
mean Software bearing a trademark other than MedQuist’s.

b.              “Documentation”
shall mean the separate MedQuist ‘branded’
operator, user, or installation instruction sets, provided now or later, and in
whatever form, by MedQuist, its parent, subsidiaries, or affiliates and not
otherwise provided wider a separate license agreement.  “Non-branded Documentation” shall mean
Documentation beating a trademark other than MedQuist’s.

2.               LICENSE
OF RIGHTS.

a.               Customer
is granted a non-exclusive, non-assignable, non-transferable, permanent,
revocable license of rights to me seal display each of the Software and
Documentation, whether separately or combined, with others of the Software or
Documentation, only in data processors which are in Customer’s exclusive
possession and designated by Customer for such use in its internal business,
with such Software or Documentation, or such continued Software or
Documentation.

b.              Customer
is granted a non-exclusive, non-assignable, non-transferable, permanent,
revocable license of rights to use the documentation only in direct connection
with such Software or Documentation use and display, internally in its own
business.

3.               Customer
acknowledges that the Software and Documentation, including without limitation
all ideas, procedures, processes, systems, methods of operations, concepts,
principles, discoveries, arid inventions, are the exclusive property of
MedQuist or its licensees and acknowledges their exclusive rights to the
application, manufacture, development, use, display, reproduction,
modification, and the and the transfer of the Software and Documentation and to
all worldwide patent and copyright rights to and in the Software or
Documentation. Customer shall not prepare a derivative work or a compilation
from web Software or Documentation, or modify, combine, or copy the

 24
 

 

 

Software or Documentation in any manner, including
without limitation decompiling or disassembling the Software or Documentation
to any third party, in whole or part, in any font or in any manner, unless
expressly permitted in writing by MedQuist. The sole exception allowed is the
copying of the Software or Documentation when loading the Software or
Documentation within the internal memory of Customers data processor, and when
an essential step in the utilization of the Software or Documentation is
conjunction with such data processor. No other manner of copying is permitted.
Customer shall reproduce and include all copyright notices provided wish the
Software or Documentation all copies, compilations, or derivative works of the
Software or Documentation produced by the Customer, as may be authorized under
this Paragraph 3.

4.               Customer
acknowledges the proprietary rights in the trademarks shown on the Software and
Documentation delivered to the Customer, and Customer shall deal with and treat
such trademarks according to applicable trademark law.

5.               Customer
shall limit access to the Software or Documentation so its authorized
employees. Customer shall advice such employees of the Semis of ibis EULA and
shall take all necessary steps to ensure compliance with the EULA terms, by
such employees.

6.               Customer
shall defend, indemnify, and hold MedQuist harmless from any and all class
actions, losses, damages, (including reasonable legal fees), obligations,
liabilities and (including, without limitation, any of the foregoing arising
out of or imposed in connection with latent or other defects, or under the
doctrine of “strict liability”), arising out of the purchase, lease, possession,
operation, condition, return or use of the Software or Documentation, or by
operation of law, excluding, however, any of the foregoing resulting solely and
directly from the acts of MedQuist.

7.               This
EULA is not assignable by Customer unless permitted in writing by MedQuist and
any attempt at assignment without such permission shall be void. Thin EULA is
assignable in whole or pail by MedQuist without consent of Customer.  Customer agrees to execute all documents and
consents requested by MedQuist to complete any assignment by MedQuist.

8.               Customer
agrees to keep the Software and Documentation at the location(s) of its
designated data processors, as set forth in Paragraph 2 above. Customer agrees
to return the Software or Documentation delivered by MedQuist under this EULA
immediately upon Customer relinquishing possession of any of said data
processors, except to the extent that the Software or Documentation has been
transferred to replacement data processors possessed by Customer or to third
pasties in accordance with Paragraph 7 above.

9.               MedQuist
warrants that it has and conveys good title to the Software. MedQuist warrants
that the Software will perform to the specifications identified within the user
Documentation current at the time of Software sale. Documentation and media
containing Software or Documentation are provided “AS IS” without warranty of
any kind, either expressed or implied. 
MedQuist does not warrant that the functions contained in the Software
or Documentation will meet Customer’s requirements or that the operation of

 25
 

 

 

the Software or Documentation will be uninterrupted or
error free. Should the Documentation prove defective, Customer alone assumes
the entire cost of all necessary corrections.

10.         MedQuist’s
warranty of Software shall be void and of no effect if: (a) the Software is not
properly stored, installed, or maintained in accordance with MedQuist’s
recommendations or standard industry practice; (b) the Software is not operated
under normal conditions and in accordance with MedQuist’s recommendations or
standard industry practice; (c) the defect has arisen from damages occurring to
the Software subsequent to MedQuist’s delivery or is related to the use of
unauthorized hardware or software; or (d) failure of the Software due to (i)
inadequate electrical power, air-conditioning, or humidity-control, (ii)
accident or disaster, including without limitation, fire, flood water, wind and
lightning, (iii) neglect, including without limitation power transients, abuse
or misuse, and failure of the Customer to follow MedQuist’s published operating
instructions, (iv) unauthorized, modification or repair of Software by persons
other than authorized, representatives of MedQuist, or (v) use of the Software
for purposes other than those for which designed.

11.         MedQuist’s
warranty of Software does not include (a) performing services connected with
relocation of Software or adding or removing interfaces, accessories,
attachments or other devices, (b) repair of damage due to other than normal
wear, (c) electrical work external to the Software, (d) any maintenance of
interfaces, accessories, attachments, or other devices not furnished by
MedQuist, or (e) any issues resulting from an unsupported service.

12.         THE
WARRANTY MADE BY MEDQUIST HEREIN IS EXCLUSIVE AND IS MADE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTY OF MERCHANTABILITY, AND IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, AND ANY WARRANTY ARISING OUT OF ANY COURSE OF DEALING CUSTOM, OR USAGE
OF TRADE.  IN NO EVENT, SHALL MEDQUIST BE
LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OR ECONOMIC
LOSS UNDER ANY LEGAL THEORY ASSERTED, EVEN IF MEDQUIST HAS BEEN ADVISED OF THE
POSSIBILITY THEREOF.

13.         ALL
NON-BRANDED SOFTWARE AND NON-BRANDED DOCUMENTATION ARE PROVIDED HEREUNDER ON AN
“AS IS”.  NON-MEDQUIST MANUFACTURERS OR
SUPPLIERS MAY PROVIDE WARRANTIES FOR THEIR SOFTWARE OR DOCUMENTATION AND ALL
WARRANTY QUESTIONS OR PROBLEMS WITH RESPECT TO SUCH SOFTWARE OR DOCUMENTATION
SHOULD BE ADDRESSED DIRECTLY TO SUCH NON-MEDQUIST MANUFACTURER OR
SUPPLIER.  CUSTOMER EXPRESSLY ASSUMES ALL
LIABILITY FOR ALL AND ANY LOSSES, DAMAGES, AND COSTS (INCLUDING COURT COSTS AND
LEGAL FEES) IN CONNECTION WITH, OR RELATED TO, SUCH NON-BRANDED SOFTWARE OR
NON-BRANDED DOCUMENTATION.  THE ENTIRE
RISK AS OT THE QUALITY OR PERFORMANCE OF SUCH NON-BRANDED

 26
 

 

 

SOFTWARE OR NON-BRANDED DOCUMENTATION IS WITH
CUSTOMER.

14.         LIMITATION
OF REMEDY.

a.               If
any Software is found to be defective within the warranty period, MedQuist’s
only obligation and Customer’s exclusive and sole remedy, as MedQuist may
choose in MedQuist’s sole best judgment, shall be either (a) the repair or
replacement of such defective Software by MedQuist, or (b) the return of such
defective Software to MedQuist and a refund to Customer of its license
fee.  Customer acknowledges and agrees
that MedQuist’s right to refund Customer’s license fee shall not be diminished
or restricted in any way or for any reason. 
The provision of such remedy shall be conditioned upon notification, and
substantiation as may be required by MedQuist, that such Software has been
stored, installed, maintained, and operated in accordance with MedQuist’s
recommendations or standard industry practice. 
Unless other wise directed by MedQuist, all such defective Software
shall be returned to MedQuist’s warehouse, or to such other location as
MedQuist shall select, all at MedQuist’s expense.

b.              Except
for MedQuist’s obligations set out in Section 14 (a) above, MedQuist shall have
no obligation, liability, or responsibility to Customer or any other party with
respect to any claim or cause of action arising in connection with, or related
to this EULA, whether legal or equitable, including, without limitation, any
claim or cause of action in contract or in tort (whether in negligence or in
strict liability).  Customer acknowledges
and agrees MedQuist’s total obligation and liability for any such claim or
cause of action shall be limited to an amount in the aggregate which shall not
exceed the total price paid by Customer for the specific Software or
Documentation which are the subject matter of an directly related to such claim
or cause of action.  Customer expressly
assumes all liability for all and any losses, damages, and costs (including
court costs and legal fees) in excess of such amount.  No claim or causes of action, regardless of
form, may be brought more than one (1) year after such claim or cause of action
arises.

c.               The
purposes of the above stated remedy is to correct any defects or to refund the
license fee paid.  Customer acknowledges
and agrees that such exclusive remedy is an essential term in the bargain
represented by this EULA and that such remedy shall, in view of the consideration
paid to MedQuist, operate as a full satisfaction to Customer for any and all
claims related thereto.  In further view
of the foregoing, Customer acknowledges and agrees that in the event a court of
competent jurisdiction or an arbitration panel rules this exclusive remedy does
not give the Customer the benefit of its bargain or that such exclusive remedy
fails for any reason, then any such ruling with regard to such exclusive remedy
or any such failure of such exclusive remedy, shall not effect or modify in any
way, an limitation or exclusion of warranties, and all such limitations and
exclusions shall continue in full force and effect.

 27
 

 

 

15.         This
Agreement shall be governed by the laws of the state listed in Customer’s
address on the Final Terms of Sale referenced by the Product Sales Agreement
within which this EULA is incorporated. 
Any term or condition prohibited by law shall, to the extent prohibited,
be ineffective without affecting the other terms and conditions.

16.         All
parties acknowledge and agree that in entering into this transaction, they have
not relied upon any representation regarding this EULA, other than those
explicitly set forth herein.  Further,
the parties expressly admit that any term or condition which is, or may be
asserted, as material by any party and which is not expressly stated in this
EULA, shall not be part of this EULA and shall not be binding on any parties
hereto.  Each party waives all defenses,
with regard to any such asserted material, term, or conditions no expressly
stated within this EULA.

17.         If
either party to this EULA is temporarily unable to perform its obligations
because of causes reasonably beyond its control, then no liability to the other
party or right to terminate shall exist for failure of that party to perform
during such period.

18.         MedQuist’s
failure to insist on strict performance of this EULA or to enforce a default
upon the occurrence of any single, repeated or continuing violation of any
particular term or condition hereof shall not be considered and waiver of
MedQuist’s right to insist on strict performance of this EULA or to enforce a
default with respect to the violation of any other term or condition.

19.         No
waiver, change or amendment of any term or condition of this EULA is effective
against MedQuist unless made in writing and signed by an authorized official of
MedQuist.

 28Exhibit 10.28

INDEMNIFICATION
AGREEMENT

This Indemnification Agreement (“Agreement”) is
effective as of July 15, 2005 by and between MedQuist Inc. (the “Company”), and
John Simmons (“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 accept a
position with the Company as a director, officer or in another capacity or
capacities and/or 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 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

 3
 

 

 

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 Indemnity was serving in the capacity referred to herein.

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 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.

 4
 

 

 

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 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

 5
 

 

 

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;

(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

 6
 

 

 

(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 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.

 7
 

 

 

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, CEO

  
	
   

  	
   

  
	
   

  	
  Address for
  service:

  
	
   

  	
   

  
	
   

  	
  MedQuist Inc.

  
	
   

  	
  Attn: General
  Counsel

  
	
   

  	
  1000 Bishops
  Gate Blvd., Suite 300

  
	
   

  	
  Mt. Laurel, NJ
  08054

  
	
   

  	
   

  
	
   

  	
  AGREED TO AND
  ACCEPTED:

  
	
   

  	
   

  
	
   

  	
  INDEMNITEE:

  
	
   

  	
   

  
	
   

  	
  JOHN
  SIMMONS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ John Simmons

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Address for
  service:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
					

 

 9

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