10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

Commission file number 0-19941

MEDQUIST INC.

(Exact name of registrant as specified in its charter)

New Jersey	22-2531298
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

9009 Carothers Parkway, Franklin, TN 37067
(Address of principal executive offices)

Registrant’s telephone number, including area code:
(866) 295-4600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, no par value per share	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yeso Noþ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yeso Noþ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein and will not be contained, to the best of registrant’s knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer o	Accelerated Filer þ	Non-Accelerated Filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

     The aggregate market value of the outstanding common stock held by non-affiliates of the registrant as of June 30, 2010, was $90,519,912. Such aggregate market value was computed by reference to the closing price of the common stock as reported on the Global Market of The NASDAQ Stock Market LLC .

     The number of registrant’s shares of common stock, no par value, outstanding as of March 14, 2011 was 37,555,893.

Documents incorporated by reference

     Portions of the definitive Proxy Statement for the 2011 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

MedQuist Inc.
Annual Report on Form 10-K
Table of Contents

	Page
PART I
Item 1. Business		3
Item 1A. Risk Factors		13
Item 1B. Unresolved Staff Comments		21
Item 2. Properties		21
Item 3. Legal Proceedings		21
Item 4. Reserved		22
PART II
Item 5. Market For Registrant’s Common Equity, Related Shareholder Matters And Issuer Purchases Of Equity Securities		23
Item 6. Selected Financial Data		24
Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations		25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		37
Item 8. Financial Statements And Supplementary Data		37
Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure		37
Item 9A. Controls And Procedures		38
Item 9B. Other Information		38
PART III
Item 10. Directors, Executive Officers and Corporate Governance		39
Item 11. Executive Compensation		39
Item 12. Security Ownership of Certain Beneficial Owners and Management		39
Item 13. Certain Relationships and Related Transactions, and Director Independence		39
Item 14. Principal Accountant Fees and Services		39
PART IV
Item 15. Exhibits and Financial Statement Schedules		39
Consent of KPMG LLP
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Chief Executive Officer, pursuant to Section 906
Certification of Chief Financial Officer, pursuant to Section 906
EX-10.42.1
EX-10.42.2
EX-10.42.3
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

PART I

Item 1. Business

Overview

We are a leading provider of integrated clinical documentation solutions for the U.S. healthcare system. Our end-to-end solutions convert physicians’ dictation of patient interactions, or the physician narrative, into a high quality and customized electronic record. These solutions integrate technologies and services for voice capture and transmission, automated speech recognition (ASR), medical transcription and editing, workflow automation, and document management and distribution to deliver a complete managed service for our customers. Our solutions enable hospitals, clinics, and physician practices to improve the quality of clinical data as well as accelerate and automate the documentation process, and we believe our solutions improve physician productivity and satisfaction, enhance revenue cycle performance, and facilitate the adoption and use of electronic health records.

We are the largest provider by revenue of clinical documentation solutions based on the physician narrative in the United States. The majority of lines we process are edited or transcribed by our approximately 5,600 medical transcriptionists (MTs) and medical editors (MEs). For the three months ended December 31, 2010, 76% was processed using ASR technology and 34% was produced offshore. Our size allows us to handle the clinical documentation requirements of many of the largest and most complex healthcare delivery networks in the United States, provides us with economies of scale, and enables us to devote significantly more resources to enhancing our solutions through research and development than most of our competitors.

We serve a large number of hospital and physician practices and the majority of the work is recurring.

We have realized significant increases in both revenue and profitability as the result of the acquisition of Spheris Inc. (Spheris), which we acquired in April 2010 as well as benefits realized from our scalable business model. From 2008 to 2010, our net revenue increased from $326.9 million to $375.2 million.

Our industry

Growth of clinical documentation in the United States

Over the past several decades, our industry has evolved from almost exclusively in-house production to outsourced services and from labor-intensive services to technologically-enabled solutions. The market opportunity for our solutions is driven by overall healthcare utilization and cost containment efforts in the United States. Numerous factors are driving increases in the demand for healthcare services including population growth, longer life expectancy, the increasing prevalence of chronic illnesses, and expanded coverage from healthcare reform. According to a September 2010 report by the U.S. Centers for Medicare and Medicaid Services, spending on healthcare grew from $1.2 trillion in 1998 to $2.3 trillion in 2008, representing a compound annual growth rate of 7.0%. It also projects that healthcare spending will grow to reach $4.2 trillion, or 19.3% of U.S. gross domestic product, by 2018, representing a compound annual growth rate of 6.3%. At the same time, U.S. healthcare providers remain under substantial pressure to reduce costs while maintaining or improving the quality of care.

Accurate and timely clinical documentation has become a critical requirement of the growing U.S. healthcare system. Medicare, Medicaid, and insurance companies demand extensive patient care documentation. The Health Information Technology for Economic and Clinical Health Act (HITECH Act), which was enacted into law on February 17, 2009 as part of the American Recovery and Reinvestment Act of 2009 (ARRA), includes numerous incentives to promote the adoption and meaningful use of electronic health records, or EHRs, across the healthcare industry. Consequently, healthcare providers are increasingly using EHRs to input, store, and manage their clinical data in a digital format. Healthcare providers that use EHRs require accurate, easy-to-use, and cost-effective means to input clinical data that are not disruptive to the physician workflow.

Importance of the physician narrative

3

Physicians generally use one of two methods to capture clinical data in a digital format: dictation and on-screen data entry. Dictation allows a physician to use his or her voice to document patient interactions, which is then converted into a text format or EHR record. On-screen data entry enables a physician to populate templates or drop-down menus in an EHR system, typically with a handheld or other hardware device.

In many hospital settings, dictation is the most popular method for capturing clinical data because of the many advantages it provides over on-screen data entry. From an efficiency standpoint, a physician’s time is typically the most expensive labor component of a clinical documentation process, and reducing the time required for data capture lowers costs. It is generally faster to dictate than enter data on-screen, and dictation frees up the physician to do other tasks in parallel. From a documentation standpoint, dictation allows for a flexible narration of patient interactions. Templates and drop-down menus typically restrict input to a structured format. While dictation can be converted into structured format later, it provides a more flexible method for data capture.

Market opportunity

The need to convert and manage the physician narrative represents a substantial market opportunity. Historically, in-house hospital labor was used to transcribe clinical reports using analog recordings from physicians. Later, healthcare providers began to outsource production to domestic providers and use digital formats. Today, advanced automation technologies, such as ASR and workflow platforms, and low-cost offshore resources are available to drive substantial improvements in productivity and cost.

Market segmentation and trends

While outsourcing provides many benefits, the landscape for outsourced service providers is highly fragmented with varying degrees of technological automation and offshore capabilities amongst providers. Thousands of local and regional providers offer limited services without technology offerings. A small set of national providers offer a combination of technology and services, but have varying degrees of technological sophistication and production capacity. Some vendors also focus more on pure technology, offering ASR software, with partnerships for third-party services, though most of these vendors lack production scale.

Over the last five years, technological automation and a rise in offshore capabilities have substantially decreased the cost of production and have further differentiated outsourcing providers. ASR has been a key technological driver of productivity gains. ASR converts the physician narrative into a text form which is available for editing. The effective use of this technology lowers the cost of production relative to conventional transcription services. Another key driver for cost reductions has been the increased use of offshore infrastructure and resources. Historically, most U.S. healthcare providers that outsourced their production did so to domestic service providers. With the advent of internet-based technologies and improvements in the quality and training of offshore personnel, the clinical documentation industry has seen a shift towards offshore resources to reduce costs. India is by far the most popular destination for outsourcing given relatively low wages and a highly educated English-speaking workforce.

As the industry’s cost of production has declined through increases in technological automation and offshore capabilities, the average market price for medical transcription services has also declined. This has allowed healthcare providers to participate in these economic gains. However, we believe that participants in our industry must expand their technology platforms and offshore capabilities to remain competitive.

Our competitive strengths

Our competitive strengths include:

 n Leader in a large, fragmented market — We are the largest provider by revenue of clinical documentation solutions based on the physician narrative in the United States. Our size enables us to meet the needs of large, sophisticated healthcare customers, provides economies of scale, and enables us to devote significantly more resources to research and development and quality assurance than many other providers.

4

n	Integrated solutions delivered as a complete managed service — We offer fully-integrated end-to-end managed services that capture and convert the physician narrative into a high quality customized electronic record. We integrate technologies and services for voice capture and transmission, ASR, medical transcription and editing, workflow automation, and document management and distribution. The end result is value-added clinical documentation with high accuracy and quick turn-around times.
n	Large and diversified customer base with long-term relationships — We serve a large number of hospital and physician practices and the majority of the work is recurring.
n	Highly-efficient operating model — Over the past two years, we have driven down our cost structure through leveraging our scalable infrastructure, standardizing processes, and increased utilization of ASR. Our use of ASR, which has grown from 39% of our volume in the fourth quarter of 2008 to 76% in the fourth quarter of 2010, has increased our productivity. Additionally, our expanding footprint in India through our relationship with MedQuist Holdings Inc.’s wholly owned subsidiary, CBay Systems and Services, Inc., our principal offshore labor provider has enabled us to increase our offshore production from 28% of our volume to 34% over this same period. The financial impact of these measures has been an improvement in gross margins during this timeframe from 34% to 36%.
n	Proven management team — We have assembled an outstanding senior leadership team with significant industry experience and domain expertise in both domestic and offshore operations. Our management team has delivered substantial results and brings an entrepreneurial spirit with proven experience in managing growth, driving operational improvements, and successfully integrating acquisitions.

Our strategy

Key elements of our strategy include:

n	Expand our customer base and increase existing customer penetration — We intend to grow our customer base by targeting three market segments: large healthcare providers still using in-house services, large healthcare providers currently using competing outsourced alternatives, and small to medium sized hospitals and physician practices. Given our market leadership, strong solution offerings, and low cost structure, we believe we are well positioned to both replace in-house solutions as well as displace competing outsourced alternatives for large healthcare providers. In order to increase penetration within our existing customer base, we intend to continue targeting additional healthcare clinical areas and facilities of our current customers. Additionally, as healthcare providers centralize their purchasing decisions, we believe that our ability to deliver outstanding services for large, complex requirements provides us with increasing access to new sales opportunities within our existing customer base and through existing customer relationships.
n	Continue to develop and enhance our integrated solutions — We seek to differentiate our integrated solutions through sophisticated technology and process improvement. We have approximately 90 employees dedicated to research and development. Over the last year, we launched numerous enhancements, including a front end speech platform for general medicine, additional EHR system integration, and advanced performance monitoring.
n	Enhance profitability through technical and operational expertise — We have made significant improvements in productivity through business process and infrastructure improvements. Notwithstanding reductions in customer pricing, our gross margins have expanded from 32% in the fourth quarter of 2008 to 36% in the fourth quarter of 2010. Our management team has proven its ability to implement continuous process improvements and we intend to further increase offshore production and our use of technological automation, including ASR, to lower costs and enhance our profitability.
n	Facilitate the adoption and promote meaningful use of EHR systems — Our integrated solutions provide a comprehensive, accurate and effective method to incorporate physician narrative into an EHR system. We interface with substantially all of the leading EHR vendors to integrate our clinical documentation solutions and to help our customers realize the full potential of their EHR systems through the use of the physician narrative. In our experience, when EHR is adopted, customers tend to consolidate their purchase decisions, which benefit us as a leading provider of clinical documentation solutions.

5

 n Pursue strategic acquisitions — We believe that there are significant opportunities available to create value through strategic acquisitions. We intend to seek appropriate opportunities to grow our customer base, enhance or expand our solutions, incorporate synergy opportunities, and expand our value proposition to our customers.

Our solutions

Clinical documentation solutions for healthcare providers

We provide enterprise-class solutions for healthcare providers ranging from fully-integrated end-to-end managed services to stand-alone offerings. These solutions represent the large majority of our revenues. Our solutions enable our customers to easily access advanced technologies with confidence that their clinical documentation requirements will be completed accurately and quickly. Our industry-leading solutions integrate voice capture and transmission, ASR, transcription/editing services, workflow management, and document management and distribution capabilities. In addition, we have coding technology and services to complement our clinical documentation offerings which enhance and improve the revenue cycle.

With proprietary and licensed technologies, we enable our customers to efficiently manage their narrative-based documentation through customizable workflows. A typical workflow includes the following steps:

 n Capture — As the first step in a workflow process, users can dictate into one of several input devices, including a variety of handheld dictation devices, Smartphone applications, proprietary handsets, standard telephones, or PC-based dictation stations. Users can also use PC-based speech recognition applications for those who prefer to edit their own files in real-time. By supporting a wide array of capture methods, we provide true choice to our customers to decide which workflow best suits their needs. Users can change as needed from real-time to batch-based workflows to maximize their productivity.

6

n	Manage — Captured voice files are merged with patient information from our customers’ information systems and EHRs where they are loaded into our enterprise platform for processing. The platform balances production resources across both in-house and outsourced personnel, and its web-based management capabilities allow administrators to easily manage workflows from anywhere at any time. We generate draft reports using speech recognition technology which are reviewed by our Medical Editors (MEs). We can also use conventional transcription services from our Medical Transcriptionists (MTs). To maintain high quality and efficiency, our platform automatically matches voice files from various specialties and acuity levels to the MTs or MEs with the appropriate skill sets. It also includes random quality checks to give timely feedback to our personnel. Turn-around time is an important metric for our customers, and so the system optimizes processing to ensure we fulfill our contracted service level agreements, which typically range from one hour to 48 hours. In addition, the platform provides real-time access for our customers to not only see into their work moving through the system, but provides dashboard metrics and reporting to help manage their enterprises.
n	Analyze — Completed reports are routed back to physicians or other healthcare professionals for review, final editing (as required), and authentication. These reports are then available to drive additional value added services, such as coding, data abstraction for analytics, measures reporting, and billing services. We provide customers with sophisticated reporting capabilities and integrated electronic signature solutions to simplify and accelerate the review of their clinical reports. We use Quantify™, our patent-pending natural language processing technology, to convert final reports into structured documentation formats. This technology allows us to scan health records for information needed by the customer to fulfill their regulatory and local reporting requirements. Healthcare entities are required to report the meaningful use of their EHRs by reporting on defined quality measures set down by the government. Using the CAA tool, customers can extract this information for these quality measures to make sure the reporting is complete and reduce the time and expense that associated with a manual abstraction process. It can take as much as 40 minutes to manually abstract a single medical record. CAA technology can dramatically reduce this time and improve the accuracy of the information reported. CAA can also be used, based on a set of rules, to deliver information to the customer for Clinical Documentation Improvement initiatives (CDI). In this case, the tool can tell the customer when a healthcare worker has not documented something needed to support measures reporting and reimbursement. Finally, this technology can also be used to structure documentation in the health record for use in populating EHRs and for data analysis. In this case, the unstructured transcribed text can be structured and parsed into the information that can be populated into the customer’s EHR systems at a discrete level. This allows the vital information located in the narrative part of the physician’s documentation to be used in the EHR to support continuity of medical care and provide again for measures reporting and reimbursement needs.
n	Distribute — After being approved by the physician, electronic records are distributed. We provide a fully featured distribution solution for printing, faxing and electronic distribution to referring physicians. We have developed thousands of interfaces with major, mid-level and proprietary hospital information systems, radiology information systems, health information repositories and EHR systems. Our solution supports HL7 and XML-based formats which further allows us to meet the needs of each individual customer. Throughout the entire workflow, our managed service platform maintains security measures and audit trails in full compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy and security standards and regulations and the protection of the confidentiality of patient information.

In delivering these customized workflows, we offer a variety of software products. These can work either as stand-alone solutions or as integrated solutions with our other managed services. These solutions include:

 n DocQment Enterprise Platform (DEP) — Our core platform provides a powerful and flexible transcription solution that integrates the process of dictation, transcription, speech recognition, editing, and document delivery into a unified clinical information management workflow. We offer the platform typically as a managed service. For those customers that prefer to use their own services, we also offer it on a license basis. Our platform provides a high performance and highly customizable clinical documentation workflow. It integrates with every major hospital system vendor, such as Epic, Cerner, and Meditech, and we developed thousands of interfaces with customer systems.

7

 n SpeechQ — Our front-end speech recognition family of solutions enables physicians to dictate, edit, and sign their reports in real-time. With workflows customized for numerous medical practices, such as radiology and general medicine, SpeechQ offers end-to-end workflows that combine voice commands and dictation. SpeechQ integrates with our enterprise platform in scenarios where a physician prefers to send text to our editors for review. It interfaces with EHRs and other healthcare systems to allow patient demographic information to be automatically populated, updated, and distributed in real-time. Our newest SpeechQ offering, SpeechQDirect can voice-enable customer EHRs to drive greater adoption, which will assist them in realizing incentive funds from the government for that adoption. Healthcare providers can now use their voice in addition to keyboard and mouse to seamlessly interact with their desktop clinical applications, including the dictation of medical narrative and speech-based navigation within 3rd party applications. Using this solution, providers can improve documentation efficiency and avoid the trap of template-based point-and-click systems, augmenting discretely captured data with a narrative of the patient’s story.

 n CodeRunnerCAC — Our web-based workflow and workforce management system manages the entire coding process for our customers. Health records are fed into the system where natural language processing technology scans the information and delivers suggested codes to the hospital coding staff. This allows them to become more accurate, reduce turnaround time and increase productivity. All of these factors contribute to increased revenue and improved cash flow by shortening the revenue cycle and making fewer errors that can result in denials by payors.

 n DocQVoice — Our web-based enterprise digital voice capture and transport solution is deployed at the customer’s location and integrates with both our enterprise platform and legacy dictation systems.

Selling and marketing

We employ approximately 100 personnel in our sales force and account management organization. Our sales force is focused on new customer sales opportunities including both the conversion of customers that are using in-house solutions as well as the displacement of competitive offerings. This sales organization employs consultative sales techniques to deliver customized programs and solutions that respond to the customer’s unique requirements. Our account management organization is responsible for continuity of our current customer relationships and the expansion of those relationships to include additional services, facilities, or work types.

We complement our sales efforts with numerous marketing initiatives, including:

 n attending and sponsoring industry trade shows of national organizations, such as the American Health Information Management Association, Healthcare Information and Management Systems Society, Association for Healthcare Documentation Integrity, Radiological Society of North America, Society for Imaging Informatics in Medicine, and Medical Transcription Industry Alliance;

n	participating in work groups and leadership committees of the industry associations; and
n	advertising in trade journals related to our industry.

Operations

We serve our customers 24 hours a day, seven days a week with our integrated clinical documentation solutions. We use ASR in most of our production, which we complement with skilled, English-speaking MTs and MEs.

Technology

Technology development

We devote substantial resources to research and development to ensure that our solutions meet both current and future customer requirements. As of December 31, 2010, we employed a development staff of approximately 90 employees. Our development staff has expertise in multiple disciplines, including service oriented architectures, web-based clients, high volume transactional databases, data warehouses, web services and integration with third-party systems. We also utilize third party resources for some specific technologies, such as ASR, capture-assisted codes, encoders, databases, portal technologies and reporting. Much of the technology in our integrated solutions is proprietary. Our development personnel follow a rigorous development methodology that ensures repeatable, high quality and timely delivery of solutions.

8

ASR is a key component of our narrative-based solutions, and we license software for a portion of our ASR capabilities. We dual source some components of our ASR technologies.

Technology operations

Our clinical documentation solutions are hosted by us and accessed using high-speed internet connections or private network connections. We have devoted significant resources to producing software applications and managed services to meet the functionality and performance expectations of our customers. We use commercially available hardware and a combination of proprietary and commercially-available licensed software to provide our clinical documentation solutions.

Competition

Because we integrate technologies and services, we compete with companies in a number of different sectors. These competitors include:

n	in-house service departments of healthcare providers, which we believe produce the majority of clinical documentation today based on the physician narrative;
n	national medical transcription service providers, such as Focus Informatics, Inc. (a subsidiary of Nuance Communications, Inc. (Nuance)), Transcend Services, Inc., and Webmedex, Inc.;
n	local or regional medical transcription service organizations;
n	ASR software vendors, such as Nuance and Multimodal Technologies, Inc. (Multimodal), which market ASR as a means to reduce clinical documentation labor; and
n	EHR software vendors which promote their systems as a replacement to narrative-based input by using on-screen templates and drop-down boxes for data entry.

Competition for our integrated clinical documentation solutions is based primarily on the following factors:

n	accuracy and timeliness of documentation produced;
n	capacity to handle large volumes and complex workflows;
n	ability to provide fully-integrated end-to-end solutions;
n	ease of upgrades and ability to add complementary offerings;
n	physician acceptance and productivity;
n	pricing;
n	physician acceptance and productivity;
n	analytics provided to customers;
n	domestic or offshore production capabilities;
n	time to implement for new customers; and
n	financial stability.

9

We believe we compete effectively on all of the above criteria. We provide fully integrated end-to-end managed services that translate the physician narrative into a customized electronic record with high accuracy and low turn-around time. We believe that our production cost structure allows us to offer competitive prices while continuing to invest in the development of new technologies and services. We have the largest production capacity in our industry, which we believe strengthens our operational capabilities and assists us in meeting customer demands for timely implementation of our solutions for new accounts.

Government regulation

The provision of clinical documentation solutions is heavily regulated by federal and state statutes and regulations. We and our healthcare customers must comply with a variety of requirements, including HIPAA and other restrictions regarding privacy, confidentiality, and security of health information.

We have structured our operations to comply with HIPAA and other regulatory and contractual requirements. We have implemented appropriate safeguards related to the access, use, or disclosure of protected health information (PHI), to address the privacy and security of PHI consistent with our regulatory and contractual requirements. We also train our personnel regarding HIPAA and other requirements. We have made and continue to make investments in systems to support customer operations that are regulated by HIPAA and other regulations. Because these standards are subject to interpretation and change, we cannot predict the future impact of HIPAA or other regulations on our business and operations.

HIPAA and HITECH Act

HIPAA establishes a set of national privacy and security standards for protecting the privacy, confidentiality and security of PHI. Under HIPAA, health plans, healthcare clearinghouses, and healthcare providers, together referred to as covered entities for purposes of HIPAA, and their business associates must meet certain standards in order to protect individually identifiable health information. The HITECH Act which was enacted into law on February 17, 2009 as part of the ARRA, enhances and strengthens the HIPAA privacy and security standards and makes certain provisions of HIPAA applicable to business associates of covered entities.

As part of the operation of our business, our customers provide us with certain PHI, and we are considered to be a business associate of most of our customers for purposes of HIPAA. The provisions of HIPAA require our customers to have agreements in place with us whereby we are required to appropriately safeguard the PHI we create or receive on their behalf. As a business associate, we also have statutory and regulatory obligations under HIPAA. We are bound by our business associate agreements to use and disclose PHI in a manner consistent with HIPAA in providing services to those covered entities.

We and our customers are also subject to HIPAA security regulations that require the implementation of certain administrative, physical and technical safeguards to ensure the confidentiality, integrity and availability of electronic protected health information (EPHI). We are required by regulation and contract to protect the security of EPHI that we create, receive, maintain or transmit for our customers consistent with these regulations. These requirements include implementing administrative, physical and technical safeguards that reasonably and appropriately protect the confidentiality, integrity and availability of such EPHI. To comply with our regulatory and contractual obligations, we may have to reorganize processes and invest in new technologies. On February 17, 2010, we became directly subject to HIPAA’s criminal and civil penalties for any breaches of our privacy and security obligations.

Other restrictions regarding privacy, confidentiality, and security of health information

In addition to HIPAA, numerous other state and federal laws govern the collection, dissemination, use, access to, confidentiality and security of PHI. In addition, Congress and some states are considering new laws and regulations that further protect the privacy and security of medical records or medical information. In many cases, these state laws are not preempted by the HIPAA privacy and security standards.

Intellectual property

We rely on a combination of copyright, patent, trademark, trade secret and other intellectual property laws, nondisclosure agreements, license agreements, contractual provisions and other measures to protect our proprietary rights. We have a number of registered

10

trademarks in the United States and abroad, including MedQuist^® and SpeechQ^®. We have common law rights over a number of unregistered trademarks. We also own a limited number of United States and foreign patents and patent applications that relate to our products, processes and technologies.

We dual source some components of our ASR technologies.

We license speech recognition and processing software from Nuance, pursuant to a licensing agreement entered into in November 2009. Under our agreement with Nuance, we pay a licensing fee based upon a per line charge for each transcribed line of text processed using the software licensed from Nuance. Our licensing agreement with Nuance expires in June 2015. Thereafter, upon written notice to Nuance, we have the right to renew the licensing agreement for two successive periods of five years each on the same terms (except pricing) and conditions of the licensing agreement then in effect.

Nuance granted us co-ownership rights to and interests in its SpeechQ product in exchange for a fixed sum, pursuant to a supply agreement entered into in November 2009. The supply agreement also provides that we receive, in exchange for periodic fees, the exclusive right in the United States, Canada and certain Caribbean islands to sell, service and deliver SpeechQ. Our supply agreement with Nuance expires in June 2015. Upon written notice to Nuance, we have the right to renew the agreement for two successive terms of five years each on the same terms (except pricing) and conditions of the agreement then in effect.

We also license the speech recognition and processing software used for SpeechQ from Nuance, under a separate licensing agreement entered into in November 2009. Under this agreement, we pay a licensing fee based on total number of individual users or named-user licenses per customer order. This agreement expires in June 2015. Thereafter, upon written notice to Nuance, we have the right to renew the licensing agreement for two successive periods of five years each on the same terms (except pricing) and conditions of the licensing agreement then in effect.

We also license speech recognition and processing software from Multimodal. Our principal license agreement with Multimodal was entered into in March 2010. Under that licensing agreement, we pay Multimodal a monthly fee in exchange for a fixed number of minutes of recording. Each minute of recording that exceeds the fixed number is charged at a specified rate per minute. Our agreement with Multimodal expires in April 2013. Thereafter, the agreement automatically renews and is extended for up to seven additional successive one-year periods, unless we notify Multimodal in writing of our election not to extend at least sixty days prior to the last day of the term. We are in discussions with Multimodal regarding an amendment to the license agreement that would modify the structure of the term of the agreement. As part of that modified structure, we would have the ability to use the software licensed under the agreement through April 2021. In the event of a change of control that results in a direct competitor of Multimodal having, directly or indirectly, a 50% or greater ownership interest in us, or 50% or more of the voting control of us, or in the event we, through any acquisition of a direct competitor of Multimodal, begin selling or licensing a software product other than Multimodal’s that is directly competitive with such technology, Multimodal shall have the right to terminate its agreement with us.

Employees

As of December 31, 2010, we had approximately 6,500 employees in the United States. Most of our employees are MTs and MEs involved in the production and quality assurance of clinical documentation.

We believe we have good relationships with our employees. Our employees are not subject to collective bargaining agreements or union representation.

Corporate developments

Recapitalization transactions

On October 14, 2010, we incurred $85.0 million of indebtedness through the issuance of 13% senior subordinated notes due 2016, or the Senior Subordinated Notes, under a note purchase agreement, or the Note Purchase Agreement, and incurred $200.0 million of indebtedness under a term loan, or the Term Loan, under a $225.0 million credit facility, or the Senior Secured

11

Credit Facility. MedQuist Holdings Inc. (MedQuist Holdings) is a guarantor of both the Senior Subordinated Notes and the Senior Secured Credit Facility. We used the proceeds to repay $80.0 million of indebtedness under its prior credit facility, or the Acquisition Credit Facility, to repay $13.6 million of indebtedness under a subordinated promissory note, or the Acquisition Subordinated Promissory Notes, each issued in connection with the Spheris Acquisition, and to pay a $176.5 million special dividend to our stockholders. MedQuist Holdings received $122.6 million of this special dividend.

Majority Owner

On August 6, 2008, MedQuist Holdings, formerly CBaySystems Holdings Limited (CBaySystems Holdings), a company that is now publicly traded on The NASDAQ Global Market with a portfolio of investments in medical transcription, which includes a company that competes in the medical transcription market, healthcare technology, and healthcare financial services, acquired a large interest in us from Koninklijke Philips Electronics N.V. (Philips).

MedQuist Holdings — U.S. initial public offering

On January 27, 2011, MedQuist Holdings changed its name from CBaySystems Holdings Limited to MedQuist Holdings Inc. and re-domiciled from a British Virgin Islands company to a Delaware corporation and authorized 300 million shares of common stock par value at $0.10 per share and 25 million shares of preferred stock at $0.10 par value per share. In connection with MedQuist Holdings’ re-domiciliation, MedQuist Holdings adjusted the number of its shares outstanding through a reverse share split pursuant to which every 4.5 shares of its common stock outstanding prior to its re-domiciliation was converted into one share of MedQuist Holdings common stock upon its re-domiciliation. MedQuist Holdings’ re-domiciliation and reverse share split resulted in no change to its common stockholders’ relative ownership interests in MedQuist Holdings.

In February 2011, MedQuist Holdings completed its U.S. initial public offering of common stock selling 3.0 million of its shares of common stock and 1.5 million shares of its common stock owned by selling shareholders at an offer price of $8.00 per share, resulting in gross proceeds to MedQuist Holdings of $24.0 million and net proceeds to MedQuist Holdings after underwriting fees of $22.3 million. MedQuist Holdings’ common stock is listed on The NASDAQ Global Market under the symbol “MEDH.”

Private Exchange

Certain of our noncontrolling stockholders entered into an exchange agreement, or the Exchange Agreement, with MedQuist Holdings, whereby MedQuist Holdings issued 4.8 million shares of MedQuist Holdings’ common stock in exchange for their 4.8 million shares of MedQuist Inc. common stock. We refer to this transaction as the Private Exchange. The Private Exchange was completed on February 11, 2011 and increased MedQuist Holdings’ ownership in us from 69.5% to 82.2%.

Registered Exchange Offer

In addition to the Private Exchange referred to above, in February 2011, MedQuist Holdings commenced its public exchange offer, or Registered Exchange Offer, to those of our noncontrolling stockholders who did not participate in the Private Exchange to exchange shares of MedQuist Holdings’ common stock for shares of MedQuist Inc. common stock. The Registered Exchange Offer expired on March 11, 2011. MedQuist Holdings accepted for, and consummated the exchange of, all MedQuist Inc. shares of common stock that were validly tendered in the Registered Exchange Offer. As a result of the Registered Exchange Offer, MedQuist Holdings increased its ownership interest in us from 82.2% to approximately 97%.

Sale of A-Life Investment

During the three months ended December 31, 2010, we sold our approximately 32% interest in A-Life Medical, Inc., or A-Life, an equity method investment. The consideration to us for the sale of our A-Life investment was $23.6 million, of which $19.5 million was paid to us in cash and $4.1 million was paid into escrow, to be released in March 2012, subject to the satisfaction of indemnification obligations under the related merger agreement.

Available Information

     All periodic and current reports, registration statements, and other filings that we are required to file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or

12

furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act), are available free of charge from the SEC’s website (www.sec.gov) or public reference room at 100 F Street N.E., Washington, DC 20549 (1-800-SEC-0330) or through our website at www.medquist.com. Such documents are available as soon as reasonably practicable after electronic filing of the material with the SEC. Copies of these reports (excluding exhibits) may also be obtained free of charge, upon written request to: Investor Relations, MedQuist Inc., 9009 Carothers Parkway Franklin, TN 37067. The website addresses included in this report are for identification purposes. The information contained therein or connected thereto are not intended to be incorporated into this report.

Item 1A. Risk Factors

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, the industry in which we operate and other matters, as well as management’s beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as “projects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or “may,” variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of the Exchange Act. Our forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include:

• each of the factors discussed in this Item 1A, Risk Factors as well as risks discussed elsewhere in this report;

• each of the matters discussed in Item 3, Legal Proceedings;

• our ability to recruit and retain qualified MTs, MEs and other employees;

• changes in law, including, without limitation, the impact HIPAA will have on our business;

• the impact of our new services and products on the demand for our existing services and products;

Risks related to our business

We compete with many others in the market for clinical documentation solutions which may result in lower prices for our services, reduced operating margins and an inability to maintain or increase our market share.

     We compete with other outsourced clinical documentation solutions companies in a highly fragmented market that includes national, regional and local service providers, as well as service providers with global operations. These companies have services that are similar to ours, and certain of these companies have substantially larger or have significantly greater financial resources than we do. We also compete with the in-house medical transcription staffs of our customers and potential customers. There can be no assurance that we will be able to compete effectively against our competitors or timely implement new products and services. Many of our competitors attempt to differentiate themselves by offering lower priced alternatives to our outsourced medical transcription services and customers could elect to utilize less comprehensive solutions than the ones we offer due to the lower costs of those competitive products. Some competition may even be willing to accept less profitable business in order to grow revenue. Increased competition and cost pressures affecting the healthcare markets in general may result in lower prices for our services, reduced operating margins and the inability to maintain or increase our market share.

Our business is dependent upon the continued demand for transcription services. If EHR companies produce alternatives to medical transcription that reduce the need for transcription, the demand for our solutions could be reduced.

13

     EHR companies’ solutions for the collection of clinical data typically require physicians to directly enter and organize patient information through “point-and-click” templates which attempt to reduce or eliminate the need for transcription. A second alternative to conventional transcription involves a physician dictating a record of patient encounters and receiving a speech-recognized draft of their dictation, which the physician can self-edit. There is significant uncertainty and risk as to the demand for, and market acceptance of, these solutions for the creation of electronic clinical documentation. In the event that these and other solutions are successful and gain wide acceptance, the demand for our solutions could be reduced and our business, financial condition and results of operations could be adversely affected.

Our growth is dependent on the willingness of new customers to outsource and adopt our technology platforms.

     We plan to grow, in part, by capitalizing on perceived market opportunities to provide our services to new customers. These new customers must be willing to outsource functions which may otherwise have been performed within their organizations, adopt new technologies and incur the time and expense needed to integrate those technologies into their existing systems. For example, the up-front cost and time involved in changing medical transcription providers or in converting from an in-house medical transcription department to an outsourced provider may be significant. Many customers may prefer to remain with their current provider or keep their transcription in-house rather than invest the time and resources required for the implementation of a new system. Also, as the maintenance of accurate medical records is a critical element of a healthcare provider’s ability to deliver quality care to its patients and to receive proper and timely reimbursement for the services it renders, potential customers may be reluctant to outsource or change providers of such an important function.

Our success will depend on our ability to support existing technologies as well as to adopt and integrate new technology into our workflow platforms.

     Our ability to remain competitive in the clinical documentation industry is based, in part, on our ability to develop, utilize and support technology in the services and solutions that we provide to our customers. As our customers advance technologically, we must be able to effectively integrate our solutions with their systems and provide advanced data collection technology. We also may need to develop technologies to provide service systems comparable to those of our competitors as they develop new technology. If we are unable to effectively develop and integrate new technologies, we may not be able to compete effectively with our competitors. In addition, if the cost of developing and integrating new technologies is high, we may not realize our expected return on investment.

Technology innovations in the markets that we serve may create alternatives to our products and result in reduced sales.

     Technology innovations to which our current and potential customers might have access could reduce or eliminate their need for our products. A new or other disruptive technology that reduces or eliminates the use of one or more of our products could negatively impact the sale of these products. Our failure to develop, introduce or enhance products able to compete with new technologies in a timely manner could have an adverse effect on our business, results of operation and financial condition.

Many of our customer contracts are terminable at will by our customers, and our ability to sustain and grow profitable operations is dependent upon the ability to retain customers.

     Many of our contracts can be terminated at will by our customers. If a significant number of our customers were to cancel or materially change their commitments with us, we could have significantly decreased revenue, which would harm our business, operating results and financial condition. We must, therefore, engage in continual operational support and sales efforts to maintain revenue stability and future growth with these customers. If a significant number of our customers terminate or fail to renew their contracts with us, our business could be negatively impacted if additional business is not obtained to replace the business which was lost.

     Customer retention is largely dependent on providing quality service at competitive prices. Customer retention may be impacted by events outside of our control, such as changes in customer ownership, management, financial condition and competitors’ sales efforts. If we experience a higher than expected rate of customer attrition the resulting loss of business could adversely affect results of operations and financial condition.

14

Our indebtedness could adversely affect our ability to raise additional capital to fund our operations and limit our ability to pursue our growth strategy or to react to changes in the economy or our industry, and our debt obligations include restrictive covenants which may restrict our operations or otherwise adversely affect us.

     As of December 31, 2010 we had approximately $285.0 million of indebtedness outstanding, consisting of $200.0 million of Term Loan debt under our Senior Secured Credit Facility and $85.0 million of Senior Subordinated Notes. We may incur additional indebtedness in the future. For each of the years 2011 through 2014, assuming no change in our indebtedness following this offering, we will have scheduled payment obligations of approximately $20.0 million for the principal amount of our indebtedness. Our net interest expense for the year ended December 31, 2010 was $13.4 million. Our variable rate indebtedness bears interest at LIBOR plus 5.50% with a LIBOR floor of 1.75%. Because the LIBOR floor is currently in effect, a 1.25% increase in LIBOR above current LIBOR levels would not increase our effective interest rate. A 1.0% increase in the interest rate above this floor would impact our interest expense by approximately $2.0 million. This indebtedness could have important negative consequences to our business, including:

n	increasing the difficulty of our ability to make payments on our outstanding debt;
n	increasing our vulnerability to general economic and industry conditions because our debt payment obligations may limit our ability to use our cash to respond to or defend against changes in the industry or the economy;
n	requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;
n	limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;
n	limiting our ability to pursue our growth strategy; and
n	placing us at a disadvantage compared to our competitors who are less leveraged and may be better able to use their cash flow to fund competitive responses to changing industry, market or economic conditions.

     In addition, under our debt financing agreements, we must abide by certain financial and other restrictive covenants that, among other things, require us to maintain a minimum consolidated interest coverage ratio, a maximum total leverage ratio and a maximum consolidated senior leverage ratio. Upon a breach of any of the covenants in our debt financing agreements, the lenders could declare us to be in default and could further require any outstanding borrowings to be immediately due and payable, and terminate all commitments to extend further credit.

We are dependent on third party speech recognition software incorporated in certain of our technologies, and the inability to maintain, support or enhance such third party software over time could harm our business.

     We license speech recognition software from third parties, both of which are competitors that we incorporate into several of our key products and solutions. Our ability to continue to sell and support these products and solutions depends on continued support from these licensors. If we were to experience the loss of one of these licenses, the portion of our business that relies on this software would be adversely affected while we transitioned it to the software provided under our other license. If we were to experience the loss of both of these licenses at any one time, our business would be adversely affected until we identify, license and integrate, or develop and integrate equivalent software, which we may be unable to do. There can be no assurance that such third party licensors will continue to invest the appropriate levels of resources in the software to maintain and enhance the capabilities of the software and if such third party licensors do not continue to develop their products, the development of our solutions to meet the requirements of our customers and potential customers could be adversely affected.

15

Our use of open source and third-party software could impose unanticipated conditions or restrictions on our ability to commercialize our solutions.

     We incorporate open source software into our workflow solutions platforms and other software solutions. Open source software is accessible, usable and modifiable by anyone, provided that users and modifiers abide by certain licensing requirements. Under certain conditions, the use of some open source code to create derivative code may obligate us to make the resulting derivative code available to others at no cost. The circumstances under which our use of open source code would compel us to offer derivative code at no cost are subject to varying judicial interpretations, and we cannot guarantee that a court would not require certain of our core technology be made available as open source code. The use of such open source code may also ultimately require us to take remedial action, such as replacing certain code used in our products, paying a royalty to use some open source code, making certain proprietary source code available to others or discontinuing certain products, any of which may divert resources away from our development efforts.

     We may also find that we need to incorporate certain proprietary third-party technologies, including software programs, into our products in the future. Licenses to relevant third-party technologies may not be available to us on commercially reasonable terms, or at all. Therefore, we could face delays in product releases until equivalent technology can be identified, licensed or developed and integrated into our current products. Such delays could materially adversely affect our business, operating results and financial condition.

If we fail to comply with contractual obligations and applicable laws and regulations governing the handling of patient identifiable medical information, we could suffer material losses or be adversely affected by exposure to material penalties and liabilities.

     As part of the operation of our business, our customers provide us with certain patient identifiable medical information. Although many regulatory and governmental requirements do not directly apply to our operations, we and our hospital and other healthcare provider customers must comply with a variety of requirements related to the handling of patient information, including laws and regulations protecting the privacy, confidentiality and security of protected health information, or PHI. Most of our customers are covered entities under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and, in many of our relationships, we function as a business associate. The provisions of HIPAA require our customers to have business associate agreements with us under which we are required to appropriately safeguard the PHI we create or receive on their behalf. Further, we and our customers are required to comply with HIPAA security regulations that require us and them to implement certain administrative, physical and technical safeguards to ensure the confidentiality, integrity and availability of electronic PHI, or EPHI. We are required by regulation and contract to protect the security of EPHI that we create, receive, maintain or transmit for our customers consistent with these regulations. To comply with our regulatory and contractual obligations, we may have to reorganize processes and invest in new technologies. We also are required to train personnel regarding HIPAA requirements. If we, or any of our MTs, MEs or subcontractors, are unable to maintain the privacy, confidentiality and security of the PHI that is entrusted to us, we and/or our customers could be subject to civil and criminal fines and sanctions and we could be found to have breached our contracts with our customers.

     We are bound by business associate agreements with covered entities that require us to use and disclose PHI in a manner consistent with HIPAA in providing services to those covered entities. The HITECH Act, which was enacted into law on February 17, 2009 as part of the American Recovery and Reinvestment Act of 2009, or ARRA, enhances and strengthens the HIPAA privacy and security standards and makes certain provisions applicable to “business associates” of covered entities. As of February 17, 2010, some provisions of HIPAA apply directly to us. In addition, the HITECH Act creates new security breach notification requirements. The direct applicability of the new HIPAA Privacy and Security provisions will require us to incur additional costs and may restrict our business operations. In addition, these new provisions will result in additional regulations and guidance issued by the United States Department of Health and Human Services and will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our customers.

     As of February 17, 2010, we are directly subject to HIPAA’s criminal and civil penalties for breaches of our privacy and security obligations.

16

Security and privacy breaches in our systems may damage customer relations and inhibit our growth.

     The uninterrupted operation of our hosted solutions and the confidentiality and security of third-party information is critical to our business. Any failures or perceived failures in our security and privacy measures could have a material adverse effect on our financial position and results of operations. If we are unable to protect, or our customers perceive that we are unable to protect, the security and privacy of our electronic information, our growth could be materially adversely affected. A security or privacy breach may:

n	cause our customers to lose confidence in our solutions;
n	harm our reputation;
n	expose us to liability; and
n	increase our expenses from potential remediation costs.

     While we believe that we use proven applications designed for data security and integrity to process electronic transactions, there can be no assurance that our use of these applications will be sufficient to address changing market conditions or the security and privacy concerns of existing and potential customers.

Our business depends on the reliable and secure operation of our computer hardware, software, Internet applications and data centers.

     A substantial portion of our business involves the transfer of large amounts of data to and from our workflow platforms. These workflow platforms, and their underlying technologies, are designed to operate and to be accessible by our customers 24 hours a day, seven days a week. Network and information systems, the Internet and other technologies are critical to our business activities. We have periodically experienced short term outages with our workflow platforms that have not significantly disrupted our business. However, a long term outage could adversely affect our ability to provide service to our customers.

     We also perform data center and/or hosting services for certain customers, including the storage of critical patient and administrative data. Failure of public power and backup generators, impairment of telecommunications lines, a “concerted denial of service cyber attack,” damage (environmental, accidental, intentional or pandemic) to the buildings, the equipment inside the buildings housing our data centers, the customer data contained therein and/or the personnel trained to operate such facilities could cause a disruption in operations and negatively impact customers who depend on us for data center and system support services. Any interruption in operations at our data centers and/or customer support facilities could damage our reputation, cause us to lose existing clients, hurt our ability to obtain new customers, result in revenue loss, create potential liabilities for our customers and us and increase insurance and other operating costs.

Recent and proposed legislation and possible negative publicity may impede our ability to utilize offshore production capabilities.

     Certain state laws that have recently been enacted and bills introduced in recent sessions of the U.S. Congress seek to restrict the transmission of personally identifiable information regarding a U.S. resident to any foreign affiliate, subcontractor or unaffiliated third party without adequate privacy protections or without providing notice of the transmission and an opportunity to opt out. Some of the proposals would require patient consent. If enacted, these proposed laws would impose liability on healthcare businesses arising from the improper sharing or other misuse of personally identifiable information. Some proposals would create a private civil cause of action that would allow an injured party to recover damages sustained as a result of a violation of the new law. A number of states have also considered, or are in the process of considering, prohibitions or limitations on the disclosure of medical or other information to individuals or entities located outside of the U.S. Further, as a result of concerns regarding the possible misuse of personally identifiable information, some of our customers have contractually limited our ability to use MTs and MEs located outside of the U.S. The effect of these proposals would be to limit our ability to utilize our lower-cost offshore production facilities for affected customers, which could adversely affect our operating margins.

17

Any change in legislation, regulation or market practices in the United States affecting healthcare or healthcare insurance may materially adversely affect our business and results of operations.

     Over the past twenty years the U.S. healthcare industry has experienced a variety of regulatory and market driven changes to how it is operated and funded. Further changes, whether by government policy shift, insurance company changes or otherwise, may happen, and any such changes may adversely affect the U.S. healthcare information and services market. As business process outsourcing and “off-shoring” have grown in recent years, concerns have also grown about the impact of these phenomena on jobs in the United States. These concerns could drive government policy in a way which is disadvantageous to us. Further, if government regulation or market practices leads to fewer individuals seeking medical treatment, we could experience a decline in our processed volumes.

Our business, financial condition and results of operations could be adversely affected by the political and economic conditions in India.

     A significant portion of our operations are performed in India through our arrangements with MedQuist Holdings’ wholly-owned subsidiary, CBay Systems & Services, Inc. Multiple factors relating to our Indian operations could have a material adverse effect on our business, financial condition and results of operations. These factors include:

n	changes in political, regulatory, legal or economic conditions;
n	governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments;
n	civil disturbances, including terrorism or war;
n	political instability;
n	public health emergencies;
n	changes in employment practices and labor standards;
n	local business and cultural factors that differ from our customary standards and practices; and
n	changes in tax laws.

     In addition, the Indian economy may differ favorably or unfavorably from other economies in several respects, including the growth rate of GDP, the rate of inflation, resource self-sufficiency and balance of payments position. The Indian government has traditionally exercised and continues to exercise a significant influence over many aspects of the Indian economy. Further actions or changes in policy, including taxation, of the Indian central government or the respective Indian state governments could have a significant effect on the Indian economy, which could adversely affect private sector companies, market conditions and the success of our operations.

We are highly dependent on certain key personnel and the loss of any or all of these key personnel may have an adverse impact upon future performance.

     Our operations and future success are dependent upon the existence and expertise in this sector of certain key personnel. The loss of services of any of these individuals for any reason or our inability to attract suitable replacements would have a material adverse effect on the financial condition of our business and operations.

We have grown, and may continue to grow, through acquisitions, which could dilute existing stockholders and could involve substantial integration risks.

     As part of our business strategy, we have in the past acquired, and expect to continue to acquire, other businesses and technologies. We may issue equity securities for future acquisitions, which would dilute existing stockholders, perhaps significantly depending on the terms of the acquisition. We may also incur additional debt in connection with future acquisitions, which may place

18

additional restrictions on the ability to operate the business. Furthermore, prior acquisitions have required substantial integration and management efforts. Acquisitions involve a number of risks, including:

n	difficulty in integrating the operations and personnel of the acquired businesses, including different and complex accounting and financial reporting systems;
n	potential disruption of ongoing business and distraction of management;
n	potential difficulty in successfully implementing, upgrading and deploying in a timely and effective manner new operational information systems and upgrades of finance and accounting systems;
n	difficulty in incorporating acquired technology and rights into products and technology;
n	unanticipated expenses and delays in completing acquired development projects and technology integration;
n	management of geographically remote offices and operations;
n	impairment of relationships with partners and customers;
n	customers delaying purchases or seeking concessions pending resolution of integration between existing and newly acquired services or technology platforms;
n	entering markets or types of businesses in which management has limited experience; and
n	potential loss of customers or key employees of the acquired company.

     As a result of these and other risks, we may not realize anticipated benefits from acquisitions. Any failure to achieve these benefits or failure to successfully integrate acquired businesses and technologies could materially and adversely affect our business and results of operations.

Our ability to use our net operating loss carryforwards may be limited.

     As of December 31, 2010, we had approximately $78 million of federal net operating loss, or NOL, carryforwards to offset future taxable income, which will begin to expire in 2026 if not utilized, and approximately $216 million of state NOLs. Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, imposes limitations on a company’s ability to use NOL carryforwards if such company experiences a more-than-50-percent ownership change, or an ownership shift, over a three-year testing period. We believe that, as a result of the initial public offering or as a result of future issuances of capital stock related to our principal shareholder, MedQuist Holdings, it is possible that such an ownership change may occur. If we experience an ownership change, our ability to use our United States federal and state NOL carryforwards in any future periods may be restricted. If we are limited in our ability to use our NOL carryforwards, we will pay more taxes than if we were able to utilize such NOL carryforwards fully. As a result, any inability to use our NOL carryforwards could adversely affect our financial condition and results of operations.

Our largest stockholder will exercise significant control over our company.

     Following the Registered Exchange Offer, MedQuist Holdings owns approximately 97% of our outstanding common stock. MedQuist Holdings has the ability to cause the election of all of the members of our board of directors, the appointment of new management and the approval of actions requiring the approval of our shareholders, including amendments to our certificate of incorporation and mergers or sales of substantially all of our assets. The directors elected by MedQuist Holdings will be able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and declare dividends. The interests of MedQuist Holdings could conflict with our interests and the interests of our other shareholders.

19

Our ability to expand our business and properly service our customers depends on our ability to effectively manage our domestic production capacity and our only offshore transcription labor partner (CBay Systems & Services, Inc.), including our ability to recruit, train and retain qualified MTs and MEs and maintain high standards of quality service in our operations, which we may not be able to do.

     Our success depends, in part, upon our ability to effectively manage our domestic production capacity including our ability to attract and retain qualified MTs and MEs who can provide accurate medical transcription. There is currently a shortage of qualified MTs and MEs in the U.S., and an increasing need for more real-time turnaround of transcribed reports has created industry-wide demand for quality MTs and MEs. As a result, competition for skilled MTs and MEs is intense. We have active programs in place to attract domestic MTs and MEs. We must also effectively manage our only current offshore transcription labor partner, CBay Systems & Services, Inc. However, this strategy may not alleviate any issues caused by the shortage. Because medical transcription is a skilled position in which experience is valuable, we require that our MTs and MEs have substantial experience or receive substantial training before being hired. Competition may force us to increase the compensation and benefits paid to our MTs and MEs, which could reduce our operating margins and profitability. In addition, failure to recruit and retain qualified MTs and MEs may have an adverse effect on our ability to service our customers, manage our production capacity and maintain our high standards of quality service. An inability to hire and retain a sufficient number of qualified MTs and MEs in the U.S. could have a negative impact on our ability to grow.

Shares of our common stock will be subject to different risks as a result of the Registered Exchange Offer.

     As a result of the completion of the Registered Exchange Offer, an active, liquid trading market for our common stock no longer exists and shares of our common stock may be subject to delisting from NASDAQ, which may adversely affect the liquidity and value of shares our common stock for an indefinite period of time. If our common stock is delisted from NASDAQ, then equity research coverage of our common stock may be discontinued. In addition, we may deregister under the Exchange Act.

     Section 14A:10A of the New Jersey Business Corporation Act, or the NJBCA, prohibits certain business combinations involving New Jersey corporations and an interested stockholder. An “interested stockholder” is defined generally as a stockholder who is the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding stock of the corporation. The NJBCA prohibits business combinations subject to the NJBCA for a period of five years after the date the interested stockholder acquired its stock, unless the transaction was approved by the corporation’s board of directors prior to the time the interested stockholder acquired its shares. After the five year period expires, the prohibition on business combinations with an interested stockholder continues unless: (i) the business combination is approved by the board of directors of the target corporation; (ii) the business combination is approved by a vote of two-thirds of the voting stock not owned by the interested stockholder; or (iii) the stockholders of the corporation receive a price in accordance with a fair price formula set forth in the NJBCA.

     In August 2008, MedQuist Holdings, through its subsidiary, CBay Inc., a Delaware corporation, acquired over 10% of the outstanding shares of MedQuist, Inc. from Royal Philips Electronics. Our board of directors of did not approve future business combinations with MedQuist Inc. or CBay Inc. prior to that acquisition for purposes of the provisions of NJBCA Section 14A:10A.

     MedQuist Holdings may be able to utilize a short-form back-end merger through Section 267 of the Delaware General Corporation Law, or the DGCL. Under Section 267 of the DGCL, if (i) at least 90% of the outstanding shares of each class of stock of a corporation is owned by an entity, (ii) one of the entities is a Delaware corporation and (ii) the entity that is not a Delaware corporation is an entity of a state, the laws of which do not forbid such merger, the entity having such stock ownership may either merge the entity into itself and assume all of its obligations, or merge itself into the other entity.

     In addition, Section 267 of the DGCL would permit MedQuist Holdings to merge us into MedQuist Holdings or CBay Inc. without our shareholder approval if such merger is not forbidden by the laws of New Jersey. Section 14A:10-7(4) of the NJBCA governs short-form mergers involving a New Jersey corporation. This provision allows a non-New Jersey corporation owning at least 90% of the outstanding shares of each class and series of a New Jersey corporation to merge the other corporation into itself, or merge itself into any subsidiary corporation, without approval of the shareholders of either corporation, though the board of the parent corporation must approve a plan of merger. However, the New Jersey courts have not interpreted Section 14A: 10-7(4) in the context of Section 14A:10A.

     In connection with the proposed settlement of the Shareholder Litigation described in Item 3. Legal proceedings, MedQuist Holdings has agreed with plaintiffs that MedQuist Holdings will conduct a short-form merger under the NJBCA to acquire the remaining shares of our common stock that MedQuist Holdings does not currently own at the same exchange ratio applicable under the Registered Exchange Offer. The settlement of the Shareholder Litigation is conditioned upon, among other things, execution of a final Stipulation of Settlement, notice to all class members, a fairness hearing and final approval of the settlement by the court. The proposed settlement in this matter will be a class settlement that will require notice to all class members, an opportunity to object and a fairness hearing to review the terms of the settlement. There is a risk that a shareholder could object to the settlement and the court could ultimately approve the settlement, approve it in part and disapprove it in part, or disapprove the settlement altogether.

20

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease 34 facilities in the U.S. and India representing approximately 677,550 square feet including our administrative headquarters for our United States operations, which is located in an approximately 48,000 square foot facility in Franklin, Tennessee and our sales, administrative and research and development office, which is located in an approximately 19,500 square foot facility in Norcross, Georgia.

Item 3. Legal proceedings

We have been involved in a number of legal matters, including customer and stockholder issues and regulatory investigations. Substantially all of these legal matters have been resolved. As of December 31, 2010, one legal matter remains open related to our billing practices. The SEC is pursuing civil litigation against our former chief financial officer, whose employment with us ended with in July 2004. Pursuant to our by-laws, we have been providing indemnification for the legal fees of this individual. In February 2011, we entered into a settlement agreement with our former chief financial officer and such settlement agreement is dependent on the individual settling with the SEC.

Shareholder Litigation

     On February 8, 2011 and February 10, 2011, plaintiffs Victor N. Metallo and Joseph F. Lawrence, respectively, filed purported shareholder class action complaints in the Superior Court of New Jersey, Burlington County (Chancery Division) (the Shareholder Litigation). In their complaints, the plaintiffs purported to be shareholders of MedQuist Inc. and sought to represent a class of our minority shareholders in pursuit of claims against us, the members of our board of directors and MedQuist Holdings.

     Plaintiffs alleged that the defendants breached certain fiduciary duties they owed to minority shareholders of MedQuist Inc. in connection with the structuring and disclosure of the Registered Exchange Offer. Among other things, the plaintiffs alleged that (a) the Registered Exchange Offer is procedurally and financially unfair, (b) the January 21, 2011 and February 16, 2011 Schedules 14D-9 that we filed with the SEC and the February 3, 2011 Prospectus that MedQuist Holdings filed with the SEC are materially misleading and incomplete, and (c) the Registered Exchange Offer was structured by the defendants in order to circumvent the provisions of the New Jersey Shareholders’ Protection Act. Plaintiffs sought, among other things, preliminary and permanent injunctive relief enjoining consummation of the Registered Exchange Offer, unspecified damages, pre- and post-judgment interest and attorneys’ fees and costs. The two Plaintiff actions were consolidated on February 22, 2011 under the caption In Re: MedQuist Inc. Shareholder Litigation, Docket Number C-018-11.

     On March 4, 2011, the parties entered into a memorandum of understanding (the MOU) that outlined the material terms of the Shareholder Litigation. Under the terms of the MOU, we agreed to extend the expiration of the Registered Exchange Offer until 5:00 p.m., New York City time, on Friday, March 11, 2011 and further agreed that if, as a result of the Registered Exchange Offer, MedQuist Holdings obtained ownership of at least 90% of the outstanding common stock of MedQuist Inc., MedQuist Holdings will conduct a short-form merger under applicable law to acquire the remaining shares of MedQuist Inc. common stock that MedQuist Holdings does not currently own at the same exchange ratio applicable under the Registered Exchange Offer. We agreed to make certain supplemental disclosures concerning the Registered Exchange Offer, which were contained in an amendment to Schedule 14D-9 that we filed with the SEC on March 7, 2011. The settlement of the Shareholder Litigation is conditioned upon, among other things, execution of a Stipulation of Settlement, notice to all class members, a fairness hearing and final approval of the settlement by the court.

From time to time, we are involved in legal proceedings or regulatory investigations arising in the ordinary course of our business. We are not currently a party to any material legal proceedings that we believe would likely have a material adverse effect on our financial condition, results of operations or cash flows.

21

Item 4. Removed and Reserved

22

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities

     Our common stock began trading on the Global Market of The NASDAQ Stock Market LLC under the ticker symbol “MEDQ” effective on July 17, 2008. Prior to that, our common stock traded on the Pink Sheets under the symbol “MEDQ.PK”. Set forth below are the high and low closing bid quotations for those periods our stock was traded on the Pink Sheets (as reported by the Pink Sheets LLC) and the high and low sales prices for those periods our stock was quoted on NASDAQ (as reported by NASDAQ) for each quarter of 2008, 2009, 2010 and the first quarter through March 14, 2011. The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily reflect the prices for actual transactions.

	High		Low
2008
First Quarter	$	10.75	$	8.05
Second Quarter	$	9.50	$	6.60
Third Quarter	$	8.00	$	4.35
Fourth Quarter	$	4.97	$	1.92
2009
First Quarter	$	2.75	$	0.87
Second Quarter	$	6.88	$	2.12
Third Quarter	$	9.32	$	5.04
Fourth Quarter	$	7.89	$	5.74
2010
First Quarter	$	9.00	$	6.61
Second Quarter	$	9.77	$	7.46
Third Quarter	$	8.76	$	7.31
Fourth Quarter	$	12.04	$	8.14
2011
First Quarter (through March 14, 2011)	$	10.04	$	8.19

Holders

     On March 14, 2011, the closing price of our common stock (as reported by NASDAQ) was $8.73 and we had 438 shareholders of record.

Dividends

     In October 2010, we announced a special dividend of $4.70 per share of our common stock which was paid on October 14, 2010. This dividend resulted in the use of $176.5 million of cash. On September 2, 2009, we announced a dividend of $1.33 per share of our common stock which was paid on September 15, 2009 to shareholders of record as of the close of business on September 9, 2009. This resulted in the use of approximately $49.9 million of cash. On July 14, 2008, we announced a dividend of $2.75 per share of our common stock which was paid on August 4, 2008 to shareholders of record as of the close of business on July 25, 2008. This resulted in the use of approximately $103.3 million of cash. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and other factors that our board of directors may deem relevant.

23

Item 6. Selected Financial Data

	For the Year Ended December 31,
	2010			2009			2008			2007			2006
	($ in thousands, except per share data)
Statement of Operations Data:
Net revenues	$	375,240	(7)	$	307,200		$	326,853		$	340,342		$	358,091	(1)
Net income (loss)	$	31,051	(2)(3)(4)	$	23,291	(2)(3)(4)	$	(68,795	)(2)(4)(5)	$	(15,206	)(2)(4)	$	(16,942	)(2)(4)
Net income (loss) per share — Basic	$	0.83		$	0.62		$	(1.83	)	$	(0.41	)	$	(0.45	)
Net income (loss) per share — Diluted	$	0.83		$	0.62		$	(1.83	)	$	(0.41	)	$	(0.45	)

	As of December 31,
	2010			2009			2008			2007		2006
Balance Sheet Data:
Total assets	$	323,918	(7)	$	174,661		$	202,205	(5)	$	417,772	$	441,139
Total non-current liabilities	$	272,508	(7)	$	5,088		$	2,832		$	17,294	$	18,492
Total shareholder’s (deficit) equity	$	(30,601	)(6)	$	114,748	(6)	$	140,352	(6)	$	314,644	$	327,519

(1)	Reflects a reduction in net revenues of $10,402 in 2006, related to accommodation offers made to certain of our customers.
(2)	In 2010, 2009, 2008, 2007, and 2006, we recorded a charge, net of insurance recoveries, of $3,603, $14,843, $19,738, $6,083, and $13,001, respectively, for costs associated with our review of certain of our historical line billings, our review of past allegations of improper billing practices, as well as legal fees, settlement costs and other costs associated with these matters.
(3)	In 2010 and 2009, we recorded charges of $7,007 and $1,263, respectively, related to the Spheris acquisition and related integration charges.
(4)	In 2010, 2009, 2008, 2007 and 2006, we recorded restructuring charges of $2,829, $2,727, $2,055, $2,756 and $3,422, respectively.
(5)	In 2008, we recorded a goodwill impairment charge of $82,233 and recognized a deferred tax benefit of $18,470 primarily related to the reversal of deferred tax liabilities associated with indefinite life intangible assets.
(6)	In 2010, 2009 and 2008, we paid cash dividends of $4.70, $1.33 and $2.75 per share, respectively, of our common stock which resulted in the use of approximately $176,513, $49,949 and $103,279, respectively, of cash.
(7)	In April 2010, we acquired Spheris for $112.4 million, financed principally through debt.

24

Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

     You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations and intentions set forth in the “Cautionary Statement Regarding Forward-Looking Statements,” which can be found in Item 1A, Risk Factors. Our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” section and elsewhere in this report.

Executive Overview

Overview

     We are a leading provider of integrated clinical documentation solutions for the U.S. healthcare system. Our end-to-end solutions convert physicians’ dictation of patient interactions, or the physician narrative, into a high quality and customized electronic record. These solutions integrate technologies and services for voice capture and transmission, ASR, medical transcription and editing, workflow automation, and document management and distribution to deliver a complete managed service for our customers. Our solutions enable hospitals, clinics, and physician practices to improve the quality of clinical data as well as accelerate and automate the documentation process, and we believe our solutions improve physician productivity and satisfaction, enhance revenue cycle performance, and facilitate the adoption and use of electronic health records.

Key factors affecting our performance

     In 2010, we completed the acquisition of Spheris which materially impacted our financial results. In addition our results have also been impacted by volume changes and pricing impacts as we move to ASR and offshore production, as well as operating improvements and selling, general and administrative expense savings leveraging from our scalable platform. These are discussed below.

     Volume and pricing trends

     The vast majority of our revenue is generated by providing clinical documentation services to our customers. Medical transcription and medical editing by our MTs and MEs, respectively, accounted for 89.5% of our net revenues in 2010. Product sales and related maintenance contracts and other made up the balance of our net revenues. Our customers are generally charged a rate per character multiplied by the number of characters that we process. Our transcription volume had been declining prior to 2008, and we have been able to reverse this trend through the Spheris acquisition, new accounts and additional work types from existing customers and decreasing our losses of existing customers. We have reduced losses of our customers primarily by improving our quality and improving our account management efforts.

     We base our pricing on various factors, principally market forces, the extent to which we can utilize our offshore production facilities, the extent to which customers utilize the ASR technology available in our solutions, the scope of services provided, and turn-around times requested by a particular customer. We work with our customers to evaluate how different solutions affect pricing and to determine what for them is an optimal mix of service level and price. Higher utilization of offshore production and ASR leads to lower costs for us, which permits us to offer better pricing to our customers while at the same time contributing to margin growth. We have successfully migrated a significant portion of our volume offshore and we will continue these efforts.

     As technological advances and increased use of offshore resources have driven down industry costs, the average price per character has also declined as healthcare providers have sought to participate in the economic gains. We intend to monitor and adjust our pricing accordingly to remain competitive as these industry trends continue.

25

     Operating improvements

     We have executed significant operational improvements since 2008. Cost of revenues on a per unit basis has declined due to the increased percentage of volume produced offshore and the increased utilization of ASR technology. Our use of ASR technology has increased from 47% to 76% over the eight quarters ended December 31, 2010. We have increased our offshore production as a percentage of our volume from 11% to 34% for the same period. As we continue to increase the use of ASR technology and move volume offshore, we expect to continue to reduce costs.

     Some of our contracts specify lower prices for work performed offshore or using speech recognition technology. Therefore, our operating income will not increase by the full amount of the savings we realize. Additionally, management has been reducing support staff headcount as we shift volumes to India in order to further reduce operating costs.

     Selling, general and administrative expense savings

     We have made significant reductions in selling, general and administrative expenses since 2008. Such expenses were 14.5% of net revenues in 2008 compared to 9.9% of net revenues for 2010. These savings were achieved primarily through headcount reductions and aggressive efforts to reduce other administrative expenses.

     In connection with the Spheris acquisition we have identified potential specific savings in the sales and marketing and general and administrative areas. We also expect to consolidate facilities in 2011. We anticipate that these savings will be implemented throughout 2011.

     Significant developments in the clinical documentation industry:

     Although we remain one of the leading providers of medical transcription services in the U.S., we experience competition from many other providers at the local, regional and national level. The medical transcription industry remains highly fragmented, with hundreds of small companies in the U.S. performing medical transcription services.

     We believe the outsourced portion of the medical transcription services market will increase due in part to the majority of healthcare providers seeking the following:

• Reductions in overhead and other administrative costs;

• Improvements in the quality and delivery speed of transcribed medical reports;

• Access to leading technologies, such as speech recognition technology, without development and investment risk;

• Implementation and management of a medical transcription system tailored to the providers’ specific requirements;

• Access to skilled MTs and MEs;

• Solutions for compliance with governmental and industry mandated privacy and security requirements; and

• Product offerings that interface with EHR initiatives.

     We evaluate our operating results based upon the following factors:

• Production volumes;

• adjusted EBITA (Adjusted earnings before interest, depreciation, amortization taxes, and other items)

• Net cash provided by operating activities.

26

     Our goal is to execute our strategy to yield growth in net revenues, operating income, and net cash flow.

     Network and information systems, the Internet and other technologies are critical to our business activities. Substantially all of our transcription services are dependent upon the use of network and information systems, including the use of our DEP and our license to use speech recognition secured from a third party. If information systems including the Internet or our DEP are disrupted, we could face a significant disruption of services provided to our customers. We have periodically experienced short term outages with our DEP, which have not significantly disrupted our business and we have a disaster recovery program in place for our information systems and our DEP.

Critical Accounting Policies, Judgments and Estimates

     Management’s Discussion and Analysis (MD&A) is based in part upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. (GAAP). We believe there are several accounting policies that are critical to understanding our historical and future performance, as these policies affect the reported amounts of revenues and other significant areas that involve management’s judgments and estimates. These critical accounting policies and estimates have been discussed with our audit committee.

     The preparation of our consolidated financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, expenses and related disclosure of contingent liabilities. On an ongoing basis, we evaluate these estimates and judgments. We base these estimates on historical experience and on various other assumptions that are believed to be reasonable at such time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other independent sources. Actual results may ultimately differ from these estimates. A critical accounting estimate must meet two criteria: (1) it requires assumptions about highly uncertain matters, and (2) there would be a material effect on the financial statements from either using a different, although reasonable, amount within the range of the estimate in the current period or from reasonably likely period-to-period changes in the estimate. While there are a number of accounting policies, methods and estimates affecting our consolidated financial statements as addressed in Note 2 to our consolidated financial statements, areas that are particularly significant and critical include:

     Valuation of Long-Lived and Other Intangible Assets and Goodwill: In connection with acquisitions, we allocate portions of the purchase price to tangible and intangible assets, consisting primarily of acquired technologies, and customer relationships, with the remainder allocated to goodwill. We assess the realizability of goodwill and intangible assets with indefinite useful lives at least annually, or sooner if events or changes in circumstances indicate that the carrying amount may not be recoverable. We have determined that the reporting unit level is our sole operating segment.

     We review our long-lived assets, including amortizable intangibles, for impairment when events indicate that their carrying amount may not be recoverable. When we determine that one or more impairment indicators are present for an asset, we compare the carrying amount of the asset to net future undiscounted cash flows that the asset is expected to generate. If the carrying amount of the asset is greater than the net future undiscounted cash flows that the asset is expected to generate, we then compare the fair value to the book value of the asset. If the fair value is less than the book value, we recognize an impairment loss. The impairment loss is the excess of the carrying amount of the asset over its fair value.

     Some of the events that we consider as impairment indicators for our long-lived assets, including goodwill, are:

• our net book value compared to our fair value;

• significant adverse economic and industry trends;

• significant decrease in the market value of the asset;

• the extent that we use an asset or changes in the manner that we use it;

• significant changes to the asset since we acquired it; and

• other changes in circumstances that potentially indicate all or a portion of the company will be sold.

27

     Deferred income taxes. Deferred tax assets represent future tax benefits that we expect to be able to apply against future taxable income or that will result in future net operating losses that we can carry forward to use against future taxable earnings. Our ability to utilize the deferred tax assets is dependent upon our ability to generate future taxable income. To the extent that we believe it is more likely than not that all or a portion of the deferred tax asset will not be utilized, we record a valuation allowance against that asset. In making that determination we consider all positive and negative evidence and give stronger consideration to evidence that is objective in nature.

     Commitments and contingencies. We routinely evaluate claims and other potential litigation to determine if a liability should be recorded in the event it is probable that we will incur a loss and can estimate the amount of such loss.

     Revenue recognition. We recognize clinical documentation services revenues when there is persuasive evidence that an arrangement exists, the price is fixed or determinable, services have been rendered and collectability is reasonably assured. These services are recorded using contracted rates and are net of estimates for customer credits. Historically, our estimates have been adequate. If actual results are higher or lower than our estimates, we would have to adjust our estimates and financial statements in future periods.

     Accounts receivable and allowance for doubtful accounts. Accounts receivable are recorded at the invoiced amount and do not bear interest. The carrying value of accounts receivable approximates fair value. The allowance for doubtful accounts is our best estimate of potential losses resulting from the inability of our customers to make required payments due. This allowance is used to state trade receivables at estimated net realizable value.

     We estimate uncollectible amounts based upon our historical write-off experience, current customer receivable balances, aging of customer receivable balances, the customer’s financial condition and current economic conditions. Historically, our estimates have been adequate to provide for our accounts receivable exposure.

     Customer Accommodation Program. In response to customers’ concerns regarding historical billing matters, we established a plan to offer financial accommodations to certain of our customers during 2005 and 2006 and recorded the related liability. In 2008 we reached an agreement on customer litigation resolving all claims by the named parties. Since then we have not made additional offers.

     We are unable to predict how many customers, if any, may accept the outstanding accommodation offers on the terms proposed by us, nor are we able to predict the timing of the acceptance (or rejection) of any outstanding accommodation offers. Until any offers are accepted, we may withdraw or modify the terms of the accommodation program or any outstanding offers at any time. In addition, we are unable to predict how many future offers, if made, will be accepted on the terms proposed by us. We regularly evaluate whether to proceed with, modify or withdraw the accommodation program or any outstanding offers.

Basis of Presentation

     Net revenues

     We derive revenues primarily from providing clinical documentation services to integrated delivery networks, academic centers, group practices and community hospital. Our customers are generally charged a rate times the volume of work that we transcribe or edit. In the clinical documentation workflow, we provide, in addition to medical transcription technology and services, maintenance services, digital dictation, speech recognition and electronic signature services.

     Net revenues from customers in the U.S. were $368.9 million, $301.1 million, and $321.0 million for the years ended December 31, 2010, 2009 and 2008, respectively. Net revenues from customers outside the U.S. were $6.3 million, $6.1 million, and $5.8 million for the years ended December 31, 2010, 2009, and 2008, respectively.

     Cost of revenues

     Cost of revenues includes compensation of our U.S. based employee MTs and MEs and our subcontractor MTs and MEs, other production costs (primarily related to operational and production management, quality assurance, quality control and customer and field service personnel), and telecommunication and facility costs. Cost of revenues also includes the direct cost of technology products sold to customers. MT and ME costs are directly related to medical transcription and medical editing, respectively, revenues and are based on lines transcribed or edited multiplied by a specific rate.

28

     Selling, general and administrative (SG&A)

     Our SG&A expenses include marketing and sales costs, accounting costs, information technology costs, professional fees, corporate facility costs, corporate payroll and benefits expenses.

     Research and development (R&D)

     Our R&D expenses consist primarily of personnel and related costs, including salaries and employee benefits for software engineers and consulting fees paid to independent consultants who provide software engineering services to us. Our R&D efforts have been devoted to new products and services offerings and increases in features and functionality of our existing products and services.

     Depreciation and amortization

     Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, which range from two to seven years for furniture, equipment and software, and the lesser of the lease term or estimated useful life for leasehold improvements. Intangible assets are being amortized using the straight-line method over their estimated useful lives which range from three to 20 years.

     Cost of legal proceedings and settlements

     Cost of legal proceedings and settlements includes settlement of claims, ongoing litigation, and associated legal and other professional fees incurred.

Consolidated Results of Operations

     The following tables set forth our consolidated results of operations for the periods indicated below:

29

Comparison of Years Ended December 31, 2010 and 2009

	Years Ended December 31,
	2010						2009									Change in
				% of Net						% of Net						% of Net
($ in thousands)	Amount			Revenues			Amount			Revenues			$ Change			Revenues
Net revenues	$	375,240			100.0	%	$	307,200			100.0	%	$	68,040			—
Operating costs and expenses:
Cost of revenues		249,571			66.5	%		206,265			67.1	%		43,306			(0.6	%)
Selling, general and administrative		37,070			9.9	%		33,441			10.9	%		3,629			(1.0	%)
Research and development		12,813			3.4	%		9,604			3.1	%		3,209			0.3	%
Depreciation and amortization		21,989			5.9	%		15,672			5.1	%		6,317			0.8	%
Cost of legal proceedings and settlements		3,603			1.0	%		14,843			4.8	%		(11,240	)		(3.8	%)
Acquisition and integration related charges		7,007			1.9	%		1,263			0.4	%		5,744			1.5	%
Restructuring charges		2,829			0.8	%		2,727			0.9	%		102			(0.1	%)
Total operating costs and expenses		334,882			89.2	%		283,815			92.4	%		51,067			(3.2	%)
Operating income		40,358			10.8	%		23,385			7.6	%		16,973			3.2	%
Gain on sale of investment		9,911			2.6	%		—			—			9,911			2.6	%
Equity in income of affiliated company		693			0.2	%		2,015			0.7	%		(1,322	)		(0.5	%)
Loss on extinguishment of debt		(5,811	)		(1.5	%)		—			—			(5,811	)		(1.5	%)
Interest expense, net		(13,429	)		(3.6	%)		(134	)		0.0	%		(13,295	)		(3.6	%)
Income before income taxes		31,722			8.5	%		25,266			8.2	%		6,456			0.3	%
Income tax provision		671			0.2	%		1,975			0.6	%		(1,304	)		(0.4	%)
Net income	$	31,051			8.3	%	$	23,291			7.6	%	$	7,760			0.7	%

Net revenues

     Net revenues recorded for the year ended December 31, 2010 were $375.2 million, an increase of $68.0 million or 22.2% when compared to the prior year net revenue amount of $307.2 million. The Spheris acquisition contributed $88.1 million in incremental revenue in 2010, which was partially offset by a decrease in legacy maintenance services revenues from $22.3 million in 2009 to $17.7 million in 2010. Current year net revenues were also unfavorably impacted by effects of lower average pricing realized for our transcription services.

Cost of revenues

     As a percentage of net revenues, cost of revenues decreased to 66.5% for the year ended December 31, 2010 compared to 67.1% in 2009 primarily due to increased utilization of offshore resources, increased utilization of automated speech recognition technologies, and other operating cost reduction initiatives. The increase in total cost versus the prior year period was primarily due to direct incremental costs associated with the Spheris acquisition as well as a nonrecurring $1.2 million credit during 2009 related to medical claim costs.

Selling, general and administrative

     SG&A expenses as a percentage of net revenues, improved to 9.9% of net revenues in 2010 compared with 10.9% for the 2009, due to synergies and other cost reduction initiatives.

30

Research and development

     R&D expenses as a percentage of net revenues were 3.4% for the year ended December 31, 2010 compared with 3.1% for the same period in 2009. This increase was attributable to costs associated with the historical Spheris research and development activities partially offset by synergies realized.

Depreciation and amortization

     Depreciation and amortization expense as a percentage of net revenues was 5.9% for the year ended December 31, 2010 compared with 5.1% for the same period in 2009. The increase was primarily due to the amortization of acquired intangible assets associated with the Spheris acquisition.

Cost of legal proceedings and settlements

     In 2010 we settled the Kaiser litigation which resulted in us recording a charge of $0.9 million. Costs in 2009 related to the Anthurium settlement of $5.9 million, related legal fees of $3.8 million and other legal fees of $1.2 million.

	2010		2009
Legal and professional fees	$	2,693	$	8,593
Settlements		910		6,250
Total	$	3,603	$	14,843

Restructuring charges

     For the years ended December 31, 2010 and 2009, we recorded restructuring charges of $2.8 million and $2.7 million for employee severance obligations. We expect that restructuring activities will continue in 2011 as management identifies opportunities for synergies related to the Spheris acquisition, including the elimination of redundant functions and locations.

Gain on sale of investment

     In October 2010, we sold our investment in A-Life and recognized a pre-tax gain of $9.9 million.

Loss on extinguishment of debt

     In October 2010, we refinanced our credit facilities and incurred $5.8 million in debt extinguishment costs.

Interest expense, net

     Interest expense, net increased $13.3 million to $13.4 million for the year ended December 31, 2010 compared with $0.1 million for the year ended December 31, 2009. The increase was due to the debt incurred in connection with the Spheris acquisition and the refinancing in October 2010, which increased our debt to $285 million.

Income tax provision

     Income taxes were $0.7 million in 2010 and $2.0 million in 2009. The effective tax rates were 2.1% and 7.8% for years ended 2010 and 2009. The decrease in the 2010 effective tax rate from prior year is due primarily to the reduction of the valuation allowance associated with foreign source NOL’s based on management’s assessment of future earnings available to utilize these deferred tax assets, along with the reduction in various tax reserves related to settlements in certain state jurisdictions and the reduction in the deferred tax liability related to the sale of our investment in A-Life, offset by an increase in the tax reserve for various uncertain tax positions taken in 2010. The low effective tax rate relative to statutory rates for the two years is primarily due to the release of valuation allowances established against net operating losses in past years that were used to offset current earnings. The 2010 tax expense includes an increase in the deferred tax liabilities associated with indefinite life intangible assets related to goodwill.

31

Comparison of Years Ended December 31, 2009 and 2008

	Years Ended December 31,
	2009						2008
																Change in
				% of Net						% of Net						% of Net
($ in thousands)	Amount			Revenues			Amount			Revenues			$ Change			Revenues
Net revenues	$	307,200			100.0	%	$	326,853			100.0	%	$	(19,653	)		—
Operating costs and expenses:
Cost of revenues		206,265			67.1	%		230,375			70.5	%		(24,110	)		(3.4	%)
Selling, general and administrative		33,441			10.9	%		47,520			14.5	%		(14,079	)		(3.6	%)
Research and development		9,604			3.1	%		15,848			4.8	%		(6,244	)		(1.7	%)
Depreciation and amortization		15,672			5.1	%		17,504			5.4	%		(1,832	)		(0.3	%)
Cost of legal proceedings and settlements		14,843			4.8	%		19,738			6.0	%		(4,895	)		(1.2	%)
Acquisition and integration related charges		1,263			0.4	%		—			—			1,263			0.4	%
Goodwill impairment charge		—			—			82,233			25.2	%		(82,233	)		(25.2	%)
Restructuring charges		2,727			0.9	%		2,055			0.6	%		672			0.3	%
Total operating costs and expenses		283,815			92.4	%		415,273			127.1	%		(131,458	)		(34.7	%)
Operating income (loss)		23,385			7.6	%		(88,420	)		(27.1	%)		111,805			34.7	%
Equity in income of affiliated company		2,015			0.7	%		236			0.1	%		1,779			0.6	%
Other income		—			—			438			0.1	%		(438	)		(0.1	%)
Interest income (expense), net		(134	)		0.0	%		2,438			0.7	%		(2,572	)		(0.7	%)
Income (loss) before income taxes		25,266			8.2	%		(85,308	)		(26.1	%)		110,574			34.3	%
Income tax provision (benefit)		1,975			0.6	%		(16,513	)		(5.1	%)		18,488			5.7	%
Net income (loss)	$	23,291			7.6	%	$	(68,795	)		(21.0	%)	$	92,086			28.6	%

Net revenues

     Net revenues recorded for the year ended December 31, 2009 were $307.2 million, a decline of $19.7 million or 6.0% when compared to the prior year net revenue amount of $326.9 million. The revenue decline was primarily due to:

• lower prices for our transcription service related revenues, net of revenues realized from higher year over year transcription volume;

• declining product and legacy maintenance revenues totaling $6.8 million largely related to customers not renewing maintenance contracts for legacy systems.

     Pricing for our transcription services remains under pressure as many customers seek to reduce their costs by using more offshore labor and increasing productivity with expanded use of speech recognition.

Cost of revenues

     Cost of revenues as a percentage of net revenues improved to 67.1% in 2009, compared to 70.5% in 2008. The improvement was attributable to the following:

• staffing reductions that reduced costs by $7.6 million resulting from restructuring actions taken by management to align our operating costs to better compete in a lower price environment for our services;

• a $13.5 million reduction in medical transcription costs related to our increased use of speech recognition technology, and our increased use of offshore labor to supplement our domestic workforce capacity;

• lower product costs of $1.5 million as a result of lower product and maintenance related sales and services;

• other reductions of $0.3 million, net; and

• a $1.2 million reversal of an accrual due to the lapsing of the statute of limitations.

32

Selling, general and administrative

     SG&A expenses in total as a percentage of net revenues were 10.9% for the year ended December 31, 2009 compared with 14.5% for in the year 2008. This improvement was the result of company-wide cost reduction initiatives that included a $3.7 million decrease in compensation costs due to reductions in workforce and a $6.6 million decrease in legal and other professional fees. The remaining cost savings covered employee stock option related expenses of $0.8 million, a reduction in employee retention costs resulting from the change in control of our majority shareholder of $0.5 million, lower advertising and marketing costs of $0.6 million, lower rent expenses of $0.4 million, reduced bad debt expense of $0.4 million, lower travel and entertainment of $0.3 million, and a decrease in all other SG&A categories of $0.8 million.

Research and development

     R&D expenses as a percentage of net revenues were 3.1% for the year ended December 31, 2009 compared with 4.8% for the same period in 2008. This improvement was attributable to reduced compensation expense of $3.3 million; a decrease in consulting expense of $1.1 million; an increase in the amount capitalized for software development of $0.6 million; a decrease of $0.4 million in stock option compensation as a result of immediate vesting of previously unvested stock options due to the change in control of our majority shareholder; a decrease in retention bonus for certain key employees during the change in control of $0.4 million; and a decrease in all other R&D expenses of $0.4 million.

Depreciation and amortization

     Depreciation and amortization expense as a percentage of net revenues was 5.1% for the year ended December 31, 2009 compared with 5.4% for the same period in 2008. The higher expenses in 2009 were the result of software capitalization in 2009 and 2008.

Cost of legal proceedings and settlements

     The 2009 settlements related to the Anthurium litigation and reseller arbitration. For the year ended December 31, 2008, legal and professional fees were $12.3 million and settlement costs were $7.4 million. The settlement was for the Department of Justice investigation related to our historical billing practices.

	2009		2008
Legal and professional fees	$	8,593	$	12,313
Settlements		6,250		7,425
Total	$	14,843	$	19,738

Goodwill impairment charge

     In 2008 we recorded a goodwill impairment charge of $82.2 million. In 2009 the fair value substantially exceeded carrying value.

Restructuring charges

     For the year ended December 31, 2009, restructuring charges included $2.4 million for employee related severance obligations and $0.3 million for non-cancelable leases related to the closure or consolidation of offices. For the year ended December 31, 2008, we had a restructuring charge of $2.1 million for employee severance obligations.

Interest income (expense), net

     Interest income (expense), net decreased $2.6 million, or 105.5%, to ($0.1) million for the year ended December 31, 2009 compared with $2.4 million for the year ended December 31, 2008. This decrease was due to the amortization of deferred financing costs and lower interest rates in the 2009 period as compared to 2008, and lower average cash balance in the 2009 period ($37.3 million) as compared to 2008 ($110.5 million).

33

Income tax provision (benefit)

     The effective income tax rate for the year ended December 31, 2009 was 7.8% compared with an effective income tax benefit rate of 19.4% for the year ended December 31, 2008. The 2009 tax expense includes an increase in the deferred tax liabilities associated with indefinite life intangible assets related to goodwill and an increase in the deferred tax liability associated with our investment in A-Life. After consideration of all evidence, both positive and negative, management concluded again in 2009, that it was more likely than not that a significant portion of the domestic deferred income tax assets would not be realized. In addition, various adjustments were recorded for the year ended December 31, 2009 including the reduction of the foreign valuation allowance and various adjustments related to state tax exposures.

Liquidity and Capital Resources

     Our principal sources of liquidity include cash generated from operations, available cash on hand, and availability under our Senior Secured Credit Facility, as described below.

     Available cash at December 31, 2010 was $41.3 million compared to $25.2 million at December 31, 2009. During 2010, we received $100.0 million in cash inflow from our Acquisition Credit Facility which was utilized to fund the Spheris acquisition. In October 2010 we refinanced our debt and we received $285.0 million in cash inflow which was used to pay off $93.6 million in debt, and pay a dividend of $4.70 per share ($176.5 million). Additionally, several other items impacted cash flows for the year ended December 31, 2010, resulting in a net increase of $16.0 million, including:

• addition of cash flows provided by Spheris operations;

• cash used to pay financing costs associated with the Acquisition Credit Facility (as defined below);

• cash payments related to debt

• acquisition-related charges associated with the Spheris acquisition;

• cash received from the sale of A-Life

• restructuring payments; and

• other working capital changes.

     We believe our existing cash, cash equivalents, cash to be generated from operations and available borrowings under our revolving credit facility will be sufficient to finance our operations for the next twelve months. However, if we fail to generate adequate cash flows from operations in the future, due to an unexpected decline in our net revenues, or due to increased cash expenditures in excess of the net revenues generated, then our cash balances may not be sufficient to fund our continuing operations without obtaining additional debt or equity. There are no assurances that sufficient funding from external sources will be available to us on acceptable terms, if at all.

Prior to the Corporate Refinancing in October 2010

     In connection with the Spheris acquisition, in April 2010, we and certain of our subsidiaries entered into a credit agreement, or the Acquisition Credit Facility, with General Electric Capital Corporation, CapitalSource Bank, and Fifth Third Bank. The Acquisition Credit Facility provided for up to $100.0 million in senior secured credit facilities, consisting of a $50.0 million term loan, and a revolving credit facility of up to $50.0 million. The credit facilities were secured by a first priority lien on substantially all of the property of the borrowers. Borrowings under the revolving credit facility were able to be made from time to time, subject to availability under such facility, until the fourth anniversary of the closing date. Amounts borrowed under the Acquisition Credit Facility bore interest at a rate we selected equal to the Base Rate or the Eurodollar Rate (each as defined in the Acquisition Credit Facility agreement) plus a margin. The Acquisition Credit Facility was repaid in full on October 14, 2010.

     In connection with the Spheris acquisition, we also issued a promissory note, or the Acquisition Subordinated Promissory Note, to Spheris. The Acquisition Promissory Note was to mature in five years from the date of the Spheris acquisition. The Acquisition Subordinated Promissory Note had a principal amount of $17.5 million with provisions for prepayment at discounted amounts, ranging from 77.5% of the principal if paid within six months, 87.5% from six to nine months, 97.5% from nine to twelve months, 102.0% between the first and second year, 101.0% between the second and third

34

year and 100.0% thereafter. The Acquisition Subordinated Promissory Note bore interest at 8.0% for the first six months. The Acquisition Subordinated Promissory Note was repaid at 77.5% of the face amount on October 14, 2010 in connection with our October 2010 refinancing described below.

Subsequent to the Corporate Refinancing in October 2010

     In October 2010, we, MedQuist Transcriptions, Ltd., our wholly owned subsidiary, and MedQuist Holdings, as co-borrowers and guarantors, entered into the Senior Secured Credit Facility, with General Electric Capital Corporation, as administrative agent, and the parties thereto, consisting of (i) a $200.0 million term loan and (ii) a $25.0 million revolving credit facility. The Senior Secured Credit Facility is secured by a first priority lien on substantially all existing and after-acquired property of the borrowers and the guarantors. The term loan is repayable in equal quarterly installments of $5.0 million commencing on the first fiscal quarter after the closing date, with the balance payable 5 years from the closing date. The term loan interest rate is LIBOR plus 5.50% with a LIBOR floor of 1.75% and is payable monthly. We may structure borrowing using the prime rate in the United States or as Eurodollar loans based upon LIBOR . Currently, the LIBOR floor is in effect. We may prepay the term loan without significant penalties. Mandatory prepayments are required when we generate excess cash flows as defined under the Senior Secured Credit Facility. Under the Senior Secured Credit Facility, we are required to maintain (i) a minimum consolidated interest coverage ratio, initially, of 2.75x and increasing over the term of the facility to 4.00x, (ii) a maximum total leverage ratio, initially of 4.00x and declining over the term of the facility to 1.50x and (iii) a maximum consolidated senior leverage ratio, initially of 3.00x and declining over the term of the facility to 1.00x. At December 31, 2010 the interest rate on the term loan was 7.25%.

     In addition to the Senior Secured Credit Facility, in September 2010, we, as issuer, MedQuist Transcriptions, Ltd. and MedQuist Holdings as co-issuers and guarantors, and certain of our other subsidiaries, as guarantors, entered into a Note Purchase Agreement, or the Senior Subordinated Notes, for the issuance of $85.0 million aggregate principal amount of 13% Senior Subordinated Notes due 2016 to BlackRock Kelso Capital Corporation, PennantPark Investment Corporation, Citibank, N.A., and THL Credit, Inc. Interest on the notes is payable in quarterly installments at the issuers’ option at either (i) 13% in cash or (ii) 12% in cash plus 2% in the form of additional senior subordinated notes.

     Closing and funding of the Senior Secured Credit Facility and the Senior Subordinated Notes occurred on October 14, 2010.

     Proceeds from the Senior Secured Credit Facility and the Senior Subordinated Notes were used to repay the Acquisition Credit Facility in full, to pay the Acquisition Subordinated Promissory Note in full and to pay a $176.5 million special dividend to our shareholders.

Operating activities

     Cash flow provided by operating activities was $34.0 million for the year ended December 31, 2010 and $44.5 million for the same period in 2009. In 2008 cash used for operating activities was $8.8 million. Net income was $31.1 million in 2010 and $23.3 million in 2009 and a net loss of $68.8 million in 2008. The significant non-cash adjustments to reconcile net income to cash provided by operating activities include $22.0 million, $15.7 million, and $17.5 million of depreciation and amortization in 2010, 2009, and 2008, respectively; $5.8 million non-cash loss on debt extinguishment in 2010, gain on sale and equity in income of affiliated company (A-Life) of $10.6 million and $2.0 million in 2010 and 2009, respectively; non-cash interest expense of $4.1 million in 2010, and a non-cash impairment charge of $82.2 million in 2008. Deferred taxes were a benefit of $0.2 million in 2010, a charge of $1.9 million in 2009 and a benefit of $17.1 million in 2008.

     Working capital changes that impacted cash flow from operations in 2010 included (a) $11.4 million higher accounts receivable balance due to the timing of collections, (b) $5.1 million lower accrued compensation balance due to a change in timing of payroll payments, and (c) $3.0 million reduction in accrued expenses including a $4.6 million payment to a related party under the acquisition, $2.0 million settlement of Kaiser litigation, additional expenditures related to the acquisition, offset by an increase in interest accrued of $5.6 million.

35

Investing activities

     Cash used in investing activities was $90.2 million and $8.4 million in 2010 and 2009, respectively. In 2010 $98.7 million of cash was used for the Spheris acquisition, $11.0 million for capital spending and capitalized software offset by $19.5 million in proceeds related to the sale of our investment in A-Life. During 2009 we spent $7.5 million for capital spending and capitalized software and $0.9 million as an additional investment in A-Life. In 2008 investments of $9.2 million were made for property and equipment and capitalized software.

Financing activities

     Cash provided by financing activities in 2010 included $385.0 million in borrowings, offset by $113.6 million in debt repayments, a use of $176.5 million for dividends, and $21.6 million used for debt issuance costs. In 2009, cash used in financing activities were principally due to $49.9 million of dividends paid. In 2008 we paid a dividend of $103.3 million.

Off-Balance Sheet Arrangements

     We are not involved in any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors except as follows. In 2010 we sold our investment in A-Life and the amounts held in escrow through April 2012, $4.1 million, have not been recorded on our balance sheet.

Quantitative and qualitative disclosures about market risk

     Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates. We do not hold or issue financial instruments for trading purposes.

Contractual Obligations

     The following table summarizes our obligations to make future payments under current contracts as of December 31, 2010 (in thousands):

	Payment Due By Period
			Less
			than						After
	Total		1 Year		1-3 Years		3-5 Years		5 Years
Operating Lease Obligations	$	19,023	$	4,947	$	9,345	$	3,586	$	1,145
Purchase Obligations(1)		21,311		8,567		11,820		924		—
Severance and Other Guaranteed Payment Obligations		3,944		3,207		471		266		—
Long Term Debt including current maturities		285,000		20,000		40,000		140,000		85,000
Total Contractual Obligations	$	329,278	$	36,721	$	61,636	$	144,776	$	86,145

(1) Purchase obligations are for ASR agreements ($12,150), telecommunication contracts ($8,636), software development ($275) and other recurring purchase obligations ($250).

     We have agreements with certain of our named executive officers that provide for severance payments to the employee in the event the employee is terminated without cause. The maximum cash exposure under these agreements was approximately $2.5 million as of December 31, 2010.

36

Recent Accounting Pronouncements

     In September 2009, the Financial Accounting Standards Board ratified two consensuses affecting revenue recognition:

     The first consensus, Revenue Recognition—Multiple-Element Arrangements, sets forth requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. One of those current requirements is that there be objective and reliable evidence of the standalone selling price of the undelivered items, which must be supported by either vendor-specific objective evidence (VSOE) or third-party evidence (TPE).

     This consensus eliminates the requirement that all undelivered elements have VSOE or TPE before an entity can recognize the portion of an overall arrangement fee that is attributable to items that already have been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. The overall arrangement fee will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. Application of the “residual method” of allocating an overall arrangement fee between delivered and undelivered elements will no longer be permitted.

     The second consensus, Software-Revenue Recognition addresses the accounting for transaction involving software to exclude from its scope tangible products that contain both software and non-software and not-software components that function together to deliver a products functionality.

     The Consensuses are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The standards were adopted in the first quarter of 2011 and did not have a material impact on our results of operations or our financial position.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates. We do not hold or issue financial instruments for trading purposes.

Interest rate sensitivity

     We earn interest income from our balances of cash and cash equivalents. This interest income is subject to market risk related to changes in interest rates, which affects primarily our investment portfolio. We invest in instruments that meet high credit quality standards, as specified in our investment policy.

     The Term Loan of our Senior Secured Credit Facility bears interest at LIBOR plus 5.50% with a LIBOR floor of 1.75%. Our interest expense associated with this loan will increase if LIBOR increases. Because the LIBOR floor is currently in effect, a 1.25% increase in LIBOR above current LIBOR levels would not increase our effective interest rate. A 1% increase in LIBOR would result in an approximate $2.0 million annual increase in our interest expense.

     In January 2011, as required under our Credit Agreement, we entered into Interest Rate Cap Contracts (for $60.0 million notional amounts which will amortize over time) to provide coverage for fluctuation in interest rates.

Item 8. Financial Statements And Supplementary Data

     Our consolidated financial statements and supplementary data required by this item are attached to this report beginning on page F-1.

Item 9. Changes in And Disagreements With Accountants On Accounting And Financial Disclosure

     None.

37

Item 9A. Controls And Procedures

(a) Evaluation of Disclosure Controls and Procedures

     Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report, December 31, 2010. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that, our disclosure controls and procedures were effective as of December 31, 2010.

(b) Management’s Report on Internal Control over Financial Reporting as of December 31, 2010

     Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

• provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

• provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with existing policies or procedures may deteriorate.

     In accordance with the internal control reporting requirements of the SEC, management completed an assessment of the adequacy of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth in Internal Control — Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As a result of this assessment and based on the criteria in the COSO framework, management has concluded that, as of December 31, 2010, our internal control over financial reporting was effective. Our independent registered public accounting firm has issued an audit report on the effectiveness of our internal control over financial reporting as of December 31, 2010. This report is included on page F-2 of our consolidated financial statements included as part of this Annual Report on Form 10-K.

(c) Changes in Internal Control Over Financial Reporting

     There have been no changes in internal control over financial reporting for the quarter ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

     None.

38

PART III

Item 10. Directors, Executive Officers and Corporate Governance

     The information called for by this item is incorporated by reference to the portions of our definitive proxy statement entitled, “Election of Directors,” “Governance of the Company,” “Report of the Audit Committee” and “Section 16 (a) Beneficial Ownership Reporting Compliance.”

Item 11. Executive Compensation

     The information called for by this item is incorporated by reference to the portions of our definitive proxy statement entitled “Compensation Discussion and Analysis,” “Report of the Compensation Committee,” and “Compensation of our Named Executive Officers.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     The information called for by this item is incorporated by reference to the portions of our definitive proxy statement entitled “Stock Ownership of Our Directors, Executive Officers and 5% Beneficial Owners,” “Compensation of Directors,” “Securities Authorized For Issuance Under Equity Compensation Plans” and “Compensation of our Named Executive Officers.”

Item 13. Certain Relationships and Related Transactions, and Director Independence

     The information called for by this item is incorporated by reference to the portion of our definitive proxy statement entitled “Certain Relationships and Related Transactions.”

Item 14. Principal Accountant Fees and Services

     The information called for by this item is incorporated by reference to the portion of our definitive proxy statement entitled “Fees Paid to Independent Registered Public Accounting Firm.”

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Documents filed as part of this report:

     (1) Financial Statements. The consolidated financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements on page F-1.

     (2) Financial Statement Schedules. All financial statement schedules have been omitted here because they are not applicable, not required, or the information is shown in the consolidated financial statements or notes thereto.

     (3) Exhibits. See (b) below.

(b) Exhibits:

No.	Description
3.1(1)	Certificate of Incorporation of MedQuist Inc. (as amended)
3.2(6)	Second Amended and Restated By-Laws, as amended, of MedQuist Inc.
4.1(1)	Specimen Stock Certificate
10.1*(1)	1992 Stock Option Plan of MedQuist Inc., as amended
10.2*(1)	Nonstatutory Stock Option Plan for Non-Employee Directors of MedQuist Inc.

39

No.	Description
10.3*(1)	MedQuist Inc. 2002 Stock Option Plan
10.4*(1)	Form of Award Agreement under the MedQuist Inc. 2002 Stock Option Plan
10.5*(1)	1996 Employee Stock Purchase Plan
10.6*(1)	MedQuist Inc. Executive Deferred Compensation Plan
10.7*(1)	Letter Agreement, dated as of April 21, 2005, between MedQuist Inc. and Michael Clark
10.8*(1)	Letter Agreement, dated as of April 21, 2005, between MedQuist Inc. and Mark Sullivan
10.10*(1)	Letter Agreement, dated as of November 10, 2006, by and between MedQuist Inc. and James Brennan
10.11(1)	Licensing Agreement, dated as of May 22, 2000, between MedQuist Inc. and Philips Speech Processing GmbH
10.11.1(1)	Amendment No. 1 to Licensing Agreement, dated as of January 1, 2002, between MedQuist Inc. and Philips Speech Processing GmbH
10.11.2#(1)	Amendment No. 2 to Licensing Agreement, dated as of December 10, 2002, between MedQuist Inc. and Philips Speech Processing GmbH
10.11.3#(1)	Amendment No. 3 to Licensing Agreement, dated as of August 10, 2003, between MedQuist Inc. and Philips Speech Processing GmbH
10.11.4#(1)	Amendment No. 4 to Licensing Agreement, dated as of September 1, 2004, between MedQuist Inc. and Philips Speech Processing GmbH
10.11.5#(1)	Amendment No. 5 to Licensing Agreement, dated as of December 30, 2005, between MedQuist Transcriptions, Ltd. and Philips Speech Recognition Systems GmbH f/k/a Philips Speech Processing GmbH
10.11.6#(1)	Amendment No. 6 to Licensing Agreement, dated as of February 13, 2007, between MedQuist Inc. and Philips Speech Recognition Systems GmbH f/k/a Philips Speech Processing GmbH
10.11.7(17)	Amendment No. 7 to Licensing Agreement, dated as of November 10, 2009, between MedQuist Inc. and Nuance Communications, Inc. as the successor-in-interest to Philips Speech Recognition Systems GmbH
10.12##(17)	Third Amended and Restated OEM Supply Agreement dated November 10, 2009, between MedQuist Inc. and Nuance Communications, Inc. as the successor-in-interest to Philips Speech Recognition Systems GmbH
10.13*(1)	MedQuist Inc. Board of Directors Deferred Compensation Plan
10.14*(2)	Form of Management Indemnification Agreement by and between MedQuist Inc. and Certain Officers
10.14.1*(7)	First Amendment to the Form of Management Indemnification Agreement by and between MedQuist Inc. and Certain Officers
10.15*(4)	Indemnification Agreement, dated as of February 21, 2008 between MedQuist Inc. and Warren Pinckert
10.16*(8)	Employment Agreement by and between Peter Masanotti and MedQuist Inc., dated September 3, 2008
10.17#(9)	Transcription Services Agreement by and between MedQuist Transcriptions, Ltd. and CBay Systems & Services, Inc. dated April 3, 2009

40

No.	Description
10.18*(10)	Indemnification Agreement dated November 21, 2008 between MedQuist Inc. and Peter Masanotti
10.19*(11)	Amended and Restated Stock Option Agreement by and between Peter Masanotti and MedQuist Inc., dated March 2, 2009
10.21*(12)	Employment Agreement by and between Dominick Golio and MedQuist Inc. dated April 9, 2009
10.22*(9)	Employment Agreement by and between Kevin Piltz and MedQuist Inc. dated May 18, 2009
10.23(9)	Settlement and License Agreement by and between Anthurium Solutions, Inc. and MedQuist Inc. dated June 19, 2009
10.24*(13)	MedQuist Inc. Long-Term Incentive Plan adopted on August 27, 2009
10.25(13)	Credit Agreement by and among MedQuist Inc. and its subsidiaries, and Wells Fargo Foothill, LLC as the arranger and administrative agent and lender dated August 31, 2009
10.26(14)	Services Agreement by and between MedQuist Inc. and CBay Inc. dated September 19, 2009
10.27##(17)	Licensing Agreement by and between Nuance Communications, Inc. and MedQuist Inc. dated November 10, 2009
10.28(15)	Transcription Services Subcontracting Agreement by and between MedQuist Inc. and CBay Systems & Services, Inc. dated March 31, 2009
10.29(19)	Credit Agreement dated as April 22, 2010 among MedQuist Transcriptions, Ltd. as Borrower, MedQuist Inc. as Holdings, the Lenders and L/C Issuers party thereto, and General Electric Capital Corporation as Administrative Agent and Collateral Agent, CapitalSource Bank as Syndication Agent, and Fifth Third Bank as Documentation Agent.
10.30(20)	MedQuist Transcriptions, Ltd. Subordinated Promissory Note dated April 22, 2010
10.31##(20)	Sales & Services Agreement dated March 9, 2010 between MedQuist, Inc. and CBay Systems & Services, Inc.
10.32(21)	Employment Agreement between Anthony D. James and MedQuist, Inc. for the position of Co-Chief Operating Officer dated June 24, 2010
10.33##(24)	Amendment No. 1 to the Sales and Services Agreement, dated July 26, 2010 between MedQuist, Inc. and CBay Systems & Services, Inc.
10.34##(24)	Amendment No. 1 to the Subcontracting Agreement dated July 26, 2010, between MedQuist, Inc. and CBay Systems & Services, Inc.
10.35(22)	Settlement Agreement and Release dated August 12, 2010 between MedQuist Inc. and Kaiser Foundation Health Plan, Inc.

41

No.	Description
10.36(24)	First Amendment to Norcross, Georgia Office Lease Agreement dated as of March 1, 2009
10.37(24)	Second Amendment to Norcross, Georgia Office Lease Agreement dated as of August 1, 2009
10.38(23)	Senior Subordinated Note Purchase Agreement, dated September 30, 2010, between CBay Inc., CBay, the Company, MedQuist Transcriptions, Ltd., Blackrock Kelso Capital Corporation, PennantPark Investment Corporation, Citibank, N.A. and THL Credit, Inc. as Purchasers.
10.39(23)	Credit Agreement, dated October 1, 2010, between CBay Inc., the Company and MedQuist Transcriptions, Ltd., CBay, the lenders and L/C issuers, General Electric Capital Corporation, as administrative agent and collateral agent
10.40(25)	Appointed Anthony D. James as Chief Financial Officer of MedQuist Inc., dated November 22, 2010
10.41(26)	Licensing Agreement of Trade Name, dated as of Nov. 23, 2010, between MedQuist Inc. and CBaySystems Holdings Limited
10.42.1	Office Lease, dated June 2006, between Ford Motor Land Development Corporation and Spheris Operations Inc.
10.42.2	Amendment to Office Lease Agreement, dated March 27, 2009, between Carothers Office Acquisition LLC and Spheris Operations, Inc.
10.42.3	Assignment, Assumption and Agreement to Relinquish Office Space and Amendment to Office Lease Agreement, dated April 22, 2010 between Carothers Office Acquisition LLC and MedQuist Transcriptions, Ltd.
10.43(24)	First Amendment to Lease Agreement, dated March 1, 2009, by and between Atlanta Lakeside Real Estate, L.P. and MedQuist Transcriptions, Ltd.
10.44(24)	Second Amendment to Lease Agreement, effective August 1, 2009, by and between Atlanta Lakeside Real Estate, L.P. and MedQuist Transcriptions, Ltd.
21(1)	Subsidiaries of MedQuist Inc.
23	Consent of KPMG LLP
24	Power of Attorney (included on the signature page hereto)
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Management contract or compensatory plan or arrangement.

42

#	Portions of this Exhibit were omitted and filed separately with the Secretary of the SEC pursuant to an order for confidential treatment from SEC.
##	Portions of this Exhibit were omitted and filed separately with the Secretary of the SEC pursuant to a request for confidential treatment that has been filed with the SEC.
(1)	Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2005 filed on July 5, 2007
(2)	Incorporated by reference to our Current Report on Form 8-K filed on August 28, 2007
(3)	Incorporated by reference to our Current Report on Form 8-K filed on September 25, 2007
(4)	Incorporated by reference to our Current Report on Form 8-K filed on February 22, 2008
(5)	Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2007 filed on March 17, 2008
(6)	Incorporated by reference to our Current Report on Form 8-K filed on July 15, 2008
(7)	Incorporated by reference to our Current Report on Form 8-K filed on August 25, 2008
(8)	Incorporated by reference to our Current Report on Form 8-K filed on September 9, 2008
(9)	Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 filed on July 30, 2009
(10)	Incorporated by reference to our Current Report on Form 8-K filed on November 28, 2008
(11)	Incorporated by reference to our Current Report on Form 8-K filed on March 6, 2009
(12)	Incorporated by reference to our Current Report on Form 8-K filed with the SEC on April 15, 2009
(13)	Incorporated by reference to our Quarterly Report on Form 10-Q filed on November 9, 2009
(14)	Incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 24, 2009
(15)	Incorporated by reference to our Current Report on Form 8-K filed on April 6, 2009
(16)	Incorporated by reference to our Current Report on Form 8-K filed on February 4, 2010
(17)	Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2009 filed on March 12, 2010
(18)	Incorporated by reference to our Current Report on Form 8-K filed on April 21, 2010
(19)	Incorporated by reference to our Current Report on Form 8-K filed on April 28, 2010
(20)	Incorporated by reference to our Quarterly Report on Form 10-Q filed on May 10, 2010
(21)	Incorporated by reference to our Current Report on Form 8-K filed on June 30, 2010
(22)	Incorporated by reference to our Current Report on Form 8-K filed on August 18, 2010
(23)	Incorporated by reference to our Current Report on Form 8-K filed on October 6, 2010
(24)	Incorporated by reference to our Quarterly Report on Form 8-Q filed on November 9, 2010
(25)	Incorporated by reference to our Current Report on Form 8-K filed on November 29, 2010
(26)	Incorporated by reference to our Current Report on Form 8-K filed on December 1, 2010

43

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MedQuist Inc.
By:	/s/ PETER MASANOTTI
	Peter Masanotti
	President and Chief Executive Officer

Date: March 16, 2011

     Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

     Each person, in so signing also makes, constitutes, and appoints Peter Masanotti and Anthony James, and each of them acting alone, as his or her true and lawful attorneys-in-fact, with full power of substitution, in his or her name, place, and stead, to execute and cause to be filed with the SEC any or all amendments to this report.

Signature	Capacity	Date
/s/ PETER MASANOTTI Peter Masanotti	President and Chief Executive Officer (Principal Executive Officer)	March 16. 2011
/s/ ANTHONY JAMES Anthony James	Chief Financial Officer (Principal Financial Officer)	March 16. 2011
/s/ JAMES BRENNAN James Brennan	Principal Accounting Officer	March 16. 2011
/s/ ROBERT AQUILINA Robert Aquilina	Non-Executive Chairman of the Board of Directors	March 16. 2011
/s/ FRANK BAKER Frank Baker	Director	March 16. 2011
/s/ PETER E. BERGER Peter E. Berger	Director	March 16. 2011
/s/ JOHN F. JASTREM John F. Jastrem	Director	March 16. 2011
/s/ COLIN J. O’BRIEN Colin J. O’Brien	Director	March 16. 2011
/s/ WARREN E. PINCKERT, II Warren E. Pinckert II	Director	March 16. 2011
/s/ MICHAEL SEEDMAN Michael Seedman	Director	March 16. 2011
/s/ ANDREW E. VOGEL Andrew E. Vogel	Director	March 16. 2011

44

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	F-2
Report of Independent Registered Public Accounting Firm	F-3
Consolidated Statements of Operations — Years ended December 31, 2010, 2009 and 2008
Consolidated Balance Sheets — As of December 31, 2010 and 2009	F-5
Consolidated Statements of Cash Flows — Years ended December 31, 2010, 2009 and 2008	F-6
Consolidated Statements of Shareholders’ (Deficit) Equity and Other Comprehensive Income (Loss) — Years ended December 31, 2010, 2009 and 2008	F-7
Notes to Consolidated Financial Statements	F-8

F-1

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

The Board of Directors and Shareholders of MedQuist Inc.:

We have audited MedQuist Inc.’s internal control over financial reporting as of December 31, 2010 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). MedQuist Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting as of December 31, 2010. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, MedQuist Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of MedQuist Inc. and subsidiaries as of December 31, 2010 and 2009 and the related consolidated statements of operations, shareholders’ (deficit) equity and other comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010, and our report dated March 16, 2011 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Philadelphia, Pennsylvania
March 16, 2011

F-2

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of MedQuist Inc.:

We have audited the accompanying consolidated balance sheets of MedQuist Inc. and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of operations, shareholders’ (deficit) equity and other comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MedQuist Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), MedQuist Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 16, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Philadelphia, Pennsylvania
March 16, 2011

F-3

MedQuist Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share amounts)

	Years Ended December 31 ,
	2010			2009			2008
Net revenues	$	375,240		$	307,200		$	326,853
Operating costs and expenses:
Cost of revenues		249,571			206,265			230,375
Selling, general and administrative		37,070			33,441			47,520
Research and development		12,813			9,604			15,848
Depreciation and amortization		21,989			15,672			17,504
Cost of legal proceedings and settlements		3,603			14,843			19,738
Acquistion and integration related charges		7,007			1,263			—
Goodwill impairment charge		—			—			82,233
Restructuring charges		2,829			2,727			2,055
Total operating costs and expenses		334,882			283,815			415,273
Operating income (loss)		40,358			23,385			(88,420	)
Gain on sale of investment		9,911			—			—
Equity in income of affiliated company		693			2,015			236
Other income		—			—			438
Loss on extinguishment of debt		(5,811	)		—			—
Interest income (expense), net		(13,429	)		(134	)		2,438
Income (loss) before income taxes		31,722			25,266			(85,308	)
Income tax provision (benefit)		671			1,975			(16,513	)
Net income (loss)	$	31,051		$	23,291		$	(68,795	)
Net income (loss) per share:
Basic	$	0.83		$	0.62		$	(1.83	)
Diluted	$	0.83		$	0.62		$	(1.83	)
Weighted average shares outstanding:
Basic		37,556			37,556			37,549
Diluted		37,556			37,556			37,549

The accompanying notes are an integral part of these consolidated financial statements.

F-4

MedQuist Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands)

	December 31,			December 31,
	2010			2009
Assets
Current assets:
Cash and cash equivalents	$	41,265		$	25,216
Accounts receivable, net of allowance of $3,142 and $3,159, respectively		76,155			43,627
Income tax receivable		—			772
Other current assets		9,780			4,940
Total current assets		127,200			74,555
Property and equipment, net		14,135			11,772
Goodwill		88,982			40,813
Other intangible assets, net		79,860			36,307
Deferred income taxes		3,000			1,396
Other assets		10,741			9,818
Total assets	$	323,918		$	174,661
Liabilities and Shareholders’ (Deficit) Equity
Current liabilities:
Current portion of long term debt	$	20,000		$	—
Accounts payable		6,785			8,687
Accrued expenses		27,106			21,490
Accrued compensation		11,136			12,432
Current portion of lease obligations		758			—
Related party payable		5,386			1,362
Deferred revenue		10,840			10,854
Total current liabilities		82,011			54,825
Long term debt		265,000			—
Deferred income taxes		6,066			3,240
Other non-current liabilities		1,442			1,848
Commitments and contingencies (Note 10)
Shareholders’ (deficit) equity:
Common stock — no par value; authorized 60,000 shares; 37,556 and 37,556 shares issued and outstanding, respectively		238,042			237,848
Accumulated deficit		(271,316	)		(125,854	)
Accumulated other comprehensive income		2,673			2,754
Total shareholders’ (deficit) equity		(30,601	)		114,748
Total liabilities and shareholders’ (deficit) equity	$	323,918		$	174,661

The accompanying notes are an integral part of these consolidated financial statements.

F-5

MedQuist Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

	Years ended December 31,
	2010			2009			2008
Operating activities:
Net income (loss)	$	31,051		$	23,291		$	(68,795	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization		21,989			15,672			17,504
Loss on extinguishment of debt		5,811			—			—
Gain on sale and equity in income of affiliated company		(10,604	)		(2,015	)		(236	)
Goodwill impairment charge		—			—			82,233
Deferred income taxes		(189	)		1,857			(17,091	)
Stock option expense		194			193			1,427
Non-cash interest expense		4,132			—			—
Provision for doubtful accounts		1,326			2,306			3,073
Loss on disposal of property and equipment		5			133			571
Changes in operating assets and liabilities:
Accounts receivable		(11,421	)		4,529			(5,781	)
Income tax receivable		769			(616	)		661
Other current assets		(815	)		3,391			(154	)
Other non-current assets		(326	)		25			134
Accounts payable		760			1,038			(5,557	)
Accrued expenses		(3,014	)		(1,198	)		(12,701	)
Accrued compensation		(5,126	)		1,192			(3,559	)
Deferred revenue		(91	)		(4,939	)		(272	)
Other non-current liabilities		(493	)		(307	)		(211	)
Net cash provided by (used in) operating activities		33,958			44,552			(8,754	)
Investing activities:
Purchase of property and equipment		(5,824	)		(4,932	)		(6,574	)
Proceeds from sale of investments		—			—			692
Capitalized software		(5,208	)		(2,582	)		(3,411	)
Proceeds from sale of invest in affiliated company		19,469			—			—
Investment in affiliated company		—			(852	)		—
Acquisitions, net of cash acquired		(98,661	)		—			—
Net cash used in investing activities		(90,224	)		(8,366	)		(9,293	)
Financing activities:
Net borrowings		385,000			—			—
Repayment of debt		(113,570	)		—			—
Dividends paid		(176,513	)		(49,949	)		(103,279	)
Debt issuance costs		(21,607	)		(1,201	)		—
Payments on lease obligations		(1,097	)		—			68
Net cash provided by (used in) financing activities		72,213			(51,150	)		(103,211	)
Effect of exchange rate changes		102			262			(406	)
Net increase (decrease) in cash and cash equivalents		16,049			(14,702	)		(121,664	)
Cash and cash equivalents — beginning of period		25,216			39,918			161,582
Cash and cash equivalents — end of period	$	41,265		$	25,216		$	39,918
Supplemental cash flow information:
Cash paid for interest	$	9,297		$	—		$	—
Cash paid for income taxes	$	290		$	234		$	210
Accommodation payments paid with credits	$	—		$	103		$	740
Non-cash debt incurred in connection with the Spheris acquisition	$	13,570		$	—		$	—
Assets acquired using debt	$	1,152		$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

F-6

MedQuist Inc. and Subsidiaries

Consolidated Statements of Shareholders’ (Deficit) Equity and Other Comprehensive Income (Loss)

Years ended December 31, 2010, 2009 and 2008

(In thousands)

									Accumulated
						Retained			Other			Total
	Common Stock					Earnings			Comprehensive			Shareholders’
	Shares		Amount			(Deficit)			Income			(Deficit) Equity
Balance, January 1, 2008		37,544	$	236,412		$	72,876		$	5,356		$	314,644
Comprehensive loss:
Net loss		—		—			(68,795	)		—			(68,795	)
Foreign currency translation adjustments		—		—			—			(3,713	)		(3,713	)
Total comprehensive loss													(72,508	)
Stock-based compensation expense		—		1,427			—			—			1,427
Cash dividend		—		—			(103,279	)		—			(103,279	)
Exercise of stock options		12		68			—			—			68
Balance, December 31, 2008		37,556	$	237,907		$	(99,198	)	$	1,643		$	140,352
Comprehensive income:
Net income		—		—			23,291			—			23,291
Foreign currency translation adjustments		—		—			2			1,111			1,113
Total comprehensive income													24,404
Stock-based compensation expense		—		193			—			—			193
Cash dividend		—		—			(49,949	)		—			(49,949	)
Dilution of affiliated company		—		(252	)		—			—			(252	)
Balance, December 31, 2009		37,556	$	237,848		$	(125,854	)	$	2,754		$	114,748
Comprehensive income:
Net income		—		—			31,051			—			31,051
Foreign currency translation adjustments		—		—						(81	)		(81	)
Total comprehensive income													30,970
Stock-based compensation expense		—		194			—			—			194
Cash dividend		—		—			(176,513	)		—			(176,513	)
Balance, December 31, 2010		37,556	$	238,042		$	(271,316	)	$	2,673		$	(30,601	)

The accompanying notes are an integral part of these consolidated financial statements.

F-7

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements

1. Description of the Business and Recent Developments

     We are a leading provider of integrated clinical documentation solutions for the U.S. healthcare system. Our end-to-end solutions convert physicians’ dictation of patient interactions, or the physician narrative, into a high quality and customized electronic record. These solutions integrate technologies and services for voice capture and transmission, automated speech recognition (ASR), medical transcription and editing, workflow automation, and document management and distribution to deliver a complete managed service for our customers. Our solutions enable hospitals, clinics, and physician practices to improve the quality of clinical data as well as accelerate and automate the documentation process, and we believe our solutions improve physician productivity and satisfaction, enhance revenue cycle performance, and facilitate the adoption and use of electronic health records.

Majority Owner

     On August 6, 2008, MedQuist Holdings Inc. (MedQuist Holdings), formerly CBaySystems Holdings Limited (CBaySystems Holdings), a company that is now publicly traded on The NASDAQ market with a portfolio of investments in medical transcription, which includes a company that competes in the medical transcription market, healthcare technology, and healthcare financial services, acquired a large interest in us from Koninklijke Philips Electronics N.V. (Philips).

     The Company’s consolidated financial statements do not include any components of purchase accounting, which was recorded at the MedQuist Holdings reporting level, and are presented on the historical basis of accounting.

     We paid cash dividends of $4.70 per share in 2010 and $1.33 per share in 2009.

Recent developments of Our Majority Owner

U.S. initial public offering

     On January 27, 2011, it changed its name from CBaySystems Holdings Limited to MedQuist Holdings Inc. and re-domiciled from a British Virgin Islands company to a Delaware corporation and authorized 300 million shares of common stock par value at $0.10 per share and 25 million shares of preferred stock at $0.10 par value per share. In connection with MedQuist Holdings’ re-domiciliation, MedQuist Holdings adjusted the number of its shares outstanding through a reverse share split pursuant to which every 4.5 shares of its common stock outstanding prior to its re-domiciliation was converted into one share of MedQuist Holdings’ common stock upon its re-domiciliation.

     In February 2011, MedQuist Holdings completed its U.S. initial public offering of common stock selling 3.0 million of its shares of common stock and 1.5 million shares of its common stock owned by selling shareholders at an offer price of $8.00 per share, resulting in gross proceeds to MedQuist Holdings of $24.0 million and net proceeds to MedQuist Holdings after underwriting fees of $22.3 million. MedQuist Holdings’ common stock is listed on The NASDAQ Global Market under the symbol “MEDH.”

Private Exchange

     Certain of our noncontrolling stockholders entered into an exchange agreement with MedQuist Holdings, whereby MedQuist Holdings issued 4.8 million shares of its common stock in exchange for 4.8 million shares of MedQuist Inc. common stock. This transaction is referred to as the Private Exchange. The Private Exchange was completed on February 11, 2011 and increased MedQuist Holdings’ ownership in MedQuist Inc. from 69.5% to 82.2%.

Registered Exchange Offer

In addition to the Private Exchange referred to above, in February 2011, MedQuist Holdings commenced its public exchange offer, or Registered Exchange Offer, to those of our noncontrolling stockholders who did not participate in the Private Exchange to exchange shares of MedQuist Holdings’ common stock for shares of MedQuist Inc. common stock. The Registered Exchange Offer expired on March 11, 2011. MedQuist Holdings accepted for, and consummated the exchange of, all MedQuist Inc. shares of common stock that were validly tendered in the Registered Exchange Offer. As a result of the Registered Exchange Offer, MedQuist Holdings increased its ownership interest in us from 82.2% to approximately 97%.

2. Significant Accounting Policies

     Principles of Consolidation

     Our consolidated financial statements include the accounts of MedQuist Inc. and its subsidiary companies. All intercompany balances and transactions have been eliminated in consolidation.

F-8

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

Use of Estimates and Assumptions in the Preparation of Consolidated Financial Statements

     The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in our consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, valuation of long-lived and intangible assets and goodwill, valuation allowances for receivables and deferred income taxes, revenue recognition, stock-based compensation and commitments and contingencies. Actual results could differ from those estimates.

     Revenue Recognition

     The majority of our revenues are derived from providing medical transcription and editing services. Revenues for medical transcription and editing services are recognized when the services are rendered. These services are based on contracted rates. The remainder of our revenues is derived from the sale of voice-capture and document management products including software, hardware and implementation, training and maintenance service related to these legacy products.

     We recognize software-related revenues using the residual method when vendor-specific objective evidence (VSOE) of fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more delivered elements. We allocate revenues to each undelivered element based on its respective fair value determined by the price charged when that element is sold separately or, for elements not yet sold separately, the price established by management if it is probable that the price will not change before the element is sold separately. We defer revenues for the undelivered elements including maintenance which is recognized over the contract period. Provided that the arrangement does not involve significant production, modification, or customization of the software, revenues are recognized when all of the following four criteria have been met: persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable.

     Sales Taxes

     We present taxes assessed by a governmental authority including sales, use, value added and excise taxes on a net basis and therefore the presentation of these taxes is excluded from our revenues and is included in accrued expenses in the accompanying consolidated balance sheets until such amounts are remitted to the taxing authorities.

     Litigation and Settlement Costs

     From time to time, we are involved in litigation, claims, contingencies and other legal matters. We record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of the loss can be reasonably estimated. We expense legal costs, including those legal costs expected to be incurred in connection with a loss contingency, as incurred.

     Restructuring Costs

     A liability for restructuring costs associated with an exit or disposal activity is recognized and measured initially at fair value when the liability is incurred. We record a liability for severance costs when the obligation is attributable to employee service already rendered, the employees’ rights to those benefits accumulate or vest, payment of the compensation is probable and the amount can be reasonably estimated. We record a liability for future, non-cancellable operating lease costs when we vacate a facility.

     Our estimates of future liabilities may change, requiring us to record additional restructuring charges or reduce the amount of liabilities recorded. At the end of each reporting period, we evaluate the remaining accrued restructuring charges to ensure their adequacy, that no excess accruals are retained and the utilization of the provisions are for their intended purposes in accordance with developed exit plans.

     We periodically evaluate currently available information and adjust our accrued restructuring reserve as necessary. Changes in estimates are accounted for as restructuring costs or credits in the period identified.

     Research and Development Costs

     Research and development costs are expensed as incurred.

F-9

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

     Income Taxes

     Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, using statutory tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in our statements of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. Management considers various sources of future taxable income including projected book earnings, the reversal of deferred tax liabilities, and prudent and feasible tax planning strategies in determining the need for a valuation allowance.

     Stock-Based Compensation

     We estimate the fair value of stock options on the date of grant using an option pricing model. We use the Black-Scholes option pricing model to determine the fair value of our options. The determination of the fair value of stock based awards using an option pricing model is affected by a number of assumptions including expected volatility of the common stock over the expected term, the expected term, the risk free interest rate during the expected term and the expected dividends to be paid. The value of the portion of the award that is ultimately expected to vest is recognized as compensation expense over the requisite service periods.

     As of December 31, 2010, total unamortized stock-based compensation cost related to non-vested stock options, net of expected forfeitures, was $145 which is expected to be recognized over a weighted-average period of 1 year.

     We did not grant any stock options for years ended December 31, 2010 or 2009. In accordance with the terms of our Chief Executive Officer’s option agreement, in December 2010, the Compensation Committee approved an adjustment to the exercise price of our Chief Executive Officer’s options to account for the payment of extraordinary dividends in 2010 and 2009 to our shareholder’s.

     Net Income (Loss) per Share

     Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during each period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding, as adjusted for the dilutive effect of common stock equivalents, which consist only of stock options, using the treasury stock method.

     The table below reflects basic and diluted net income (loss) per share for the years ended December 31:

	2010		2009		2008
Net income (loss)	$	31,051	$	23,291	$	(68,795	)
Weighted average shares outstanding:
Basic		37,556		37,556		37,549
Effect of dilutive stock		—		—		—
Diluted		37,556		37,556		37,549
Net income (loss) per share:
Basic	$	0.83	$	0.62	$	(1.83	)
Diluted	$	0.83	$	0.62	$	(1.83	)

     The computation of diluted net income (loss) per share does not assume conversion, exercise or issuance of shares that would have an anti-dilutive effect on diluted net loss per share. During 2008 we had a net loss. As a result, any assumed conversions would result in reducing the net loss per share and, therefore, are not included in the calculation. Shares having an anti-dilutive effect on net loss per share and, therefore, excluded from the calculation of diluted net loss per share, totaled 1,501 for the year ended December 31, 2008. For the years ended December 31. 2010, and 2009, 692, and 1,208 options, respectively, were excluded from the computation of diluted earnings per share as the options exercise price was greater than the average market price of the common stock during the respective period.

     Advertising Costs

     Advertising costs are expensed as incurred and for the years ended December 31, 2010, 2009 and 2008 were $918, $613 and $1,256, respectively.

F-10

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

     Cash and Cash Equivalents

     We consider all highly liquid instruments with original maturities of three months or less to be cash equivalents. Our cash management and investment policies dictate that cash equivalents be limited to investment grade, highly liquid securities. We place our temporary cash investments with high-credit rated, quality financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Consequently, our cash equivalents are subject to potential credit risk. As of December 31, 2010 and 2009, cash equivalents consisted of money market investments. The carrying value of cash and cash equivalents approximates fair value.

     Accounts Receivable and Allowance for Doubtful Accounts

     Accounts receivable are recorded at the invoiced amount and do not bear interest. The carrying value of accounts receivable approximates fair value. The allowance for doubtful accounts is our best estimate for losses inherent in our accounts receivable portfolio.

     We estimate uncollectible amounts based upon our historical write-off experience, current customer receivable balances, age of customer receivable balances, the customer’s financial condition and current economic conditions. Historically, these estimates have been adequate to cover our accounts receivable exposure. We change the allowance if circumstances or economic conditions change.

     Product revenues for sales to end-user customers and resellers are recognized upon passage of title if all other revenue recognition criteria have been met. End-user customers generally do not have a right of return. We provide certain of our resellers and distributors with limited rights of return of our products. We reduce revenues for rights to return our products based upon our historical experience and have included an estimate of such credits in our allowance for doubtful accounts.

     Property and Equipment

     Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets which range from two to seven years for furniture, equipment and software, and the lesser of the lease term or estimated useful life for leasehold improvements. Repairs and maintenance costs are charged to expense as incurred while additions and betterments are capitalized. Gains or losses on disposals are charged to operations. Upon retirement, sale or other disposition, the related cost and accumulated depreciation are eliminated from the accounts and any gain or loss is included in operations.

     Valuation of Long-Lived and Other Intangible Assets and Goodwill.

     In connection with acquisitions, we allocate portions of the purchase price to tangible and intangible assets, consisting primarily of acquired technologies, and customer relationships, agreements, with the remainder allocated to goodwill. We assess the realizability of goodwill and intangible assets with indefinite useful lives at least annually, or sooner if events or changes in circumstances indicate that the carrying amount may not be recoverable. We have determined that the reporting unit level is our sole operating segment.

     Software Development Costs

     Software costs incurred in creating a computer software product are charged to expense when incurred as research and development until technical feasibility has been established. Technical feasibility is established upon completion of a detail program design or, in its absence, completion of a working model. The time between attaining technological feasibility and completion of software development has been short.

     Software costs for internal use software incurred in the preliminary project stage are expensed as incurred. Capitalization of costs begins when the preliminary project stage is completed and management, with the relevant authority, authorizes and commits funding of the project and it is probable that the project will be completed and the software will be used to perform the function intended. Capitalization ceases no later than the point at which the project is substantially complete and ready for its intended use.

     Long-Lived and Other Intangible Assets

     Long-lived assets, including property and equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. To determine the recoverability of long-lived assets, the estimated future undiscounted cash flows expected to be generated by an asset is compared to the carrying value of the asset. If the carrying value of the long-lived asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized in the amount by which the carrying value of the asset exceeds its fair value. Annually we evaluate the reasonableness of the useful lives of these assets.

F-11

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

     Intangible assets include certain assets (primarily customer lists) obtained from business acquisitions and are being amortized using the straight-line method over their estimated useful lives which range from three to 20 years.

     Foreign Currency

     Our operating subsidiaries in the United Kingdom and Canada use the local currency as their functional currency. We translate the assets and liabilities of those entities into U.S. dollars using the month-end exchange rate. We translate revenues and expenses using the average exchange rates prevailing during the reporting period. The resulting translation adjustments are recorded in accumulated other comprehensive income within shareholders’ equity. Gains and losses from foreign currency transactions are included as a component of selling, general and administrative expenses in the accompanying consolidated statements of operations, and were not material for the years ended December 31, 2010, 2009 and 2008, respectively.

     Business Enterprise Segments

     We operate in one reportable operating segment which is clinical documentation technology and services.

     Concentration of Risk, Geographic Data and Enterprise-wide Disclosures

     No single customer accounted for more than 10% of our net revenues in any period. There is no single geographic area of significant concentration other than the United States.

     The following table summarizes the net revenues by the categories of our products and services as a percentage of our total net revenues.

	2010			2009			2008
Medical transcription		89.5	%		85.7	%		84.9	%
Other		10.5	%		14.3	%		15.1	%
Total		100.0	%		100.0	%		100.0	%

     Other includes product, maintenance, medical coding, application service provider and other miscellaneous revenues.

     Fair Value of Financial Instruments

     Cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and debt are reflected in the accompanying consolidated balance sheets at carrying values which approximate fair value.

     Comprehensive Income (Loss)

     Comprehensive income (loss) is comprised of Net income (loss) and Other comprehensive income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustments. Other comprehensive income (loss) and comprehensive income (loss) are displayed separately in the Consolidated Statements of Shareholders’ (Deficit) Equity and Other Comprehensive Income (Loss).

     Acquisition and Integration related charges

     We expense costs incurred for acquisitions and related integration activities in the period incurred. This includes legal, investment banking, accounting, tax and other consulting, as well as any internal costs.

     Recent Accounting Pronouncements

     In September 2009, the Financial Accounting Standards Board ratified two consensuses affecting revenue recognition:

     The first consensus, Revenue Recognition—Multiple-Element Arrangements, sets forth requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. One of those current requirements is that there be objective and reliable evidence of the standalone selling price of the undelivered items, which must be supported by either vendor-specific objective evidence (VSOE) or third-party evidence (TPE).

     This consensus eliminates the requirement that all undelivered elements have VSOE or TPE before an entity can recognize the portion of an overall arrangement fee that is attributable to items that already have been delivered. In the absence of VSOE or TPE of

F-12

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. The overall arrangement fee will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. Application of the “residual method” of allocating an overall arrangement fee between delivered and undelivered elements will no longer be permitted.

     The second consensus, Software-Revenue Recognition addresses the accounting for transactions involving software to exclude from its scope tangible products that contain both software and non-software and not-software components that function together to deliver a products functionality.

     The consensuses are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The standards were adopted in the first quarter of 2011 and will not have a material impact on our results of operations or our financial position.

3. Acquisition of Spheris Assets in the United States

     On April 22, 2010, we and our majority shareholder, MedQuist Holdings, completed the acquisition of substantially all of the assets of Spheris and certain of its affiliates, pursuant to the terms of a Stock and Asset Purchase Agreement. This acquisition provided substantial incremental volume growth and also provided opportunities for operating efficiencies and operating margin expansion. See Note 9, Accrued Expenses for further discussion of our 2010 restructuring plan approved by management to realize some of these savings. The acquisition was funded from the proceeds of credit facilities entered into in connection with the acquisition.

     The following unaudited pro forma summary presents the consolidated information of the Company as if the business combination had occurred at the beginning of each period.

	Pro Forma Year Ended
	December 31,
	2010		2009
Net revenues	$	418,611	$	463,796
Net income	$	35,594	$	24,369
Net income per share (Basic)	$	0.95	$	0.65
Net income per share (Diluted)	$	0.95	$	0.65

     These amounts have been calculated after applying our accounting policies and adjusting the results of Spheris to reflect the additional amortization of intangibles that would have been charged assuming the fair value adjustments to intangible assets had been applied from the beginning of the annual period being reported on, and the additional interest expense assuming the acquisition related debt had been incurred at the beginning of the period being reported on and including the related tax effects. The acquired business contributed net revenues of $88.1 million for the period April 22, 2010 to December 31, 2010.

     The following table summarizes the consideration transferred by us to acquire the domestic assets of Spheris, and the amounts of identified assets acquired and liabilities assumed at the acquisition date.

Cash consideration paid	$	98,834
Fair value of unsecured Subordinated Promissory Note		13,570
Total consideration transferred	$	112,404
Recognized amounts of identifiable assets acquired and liabilities assumed:
Fair value of Spheris net assets acquired
Working capital	$	7,373
Property, plant and equipment		6,626
Developed technology (included in intangibles)		11,390
Customer relationships (included in intangibles)		37,210
Trademarks and trade names (included in intangibles)		1,640
Goodwill		48,165
Identifiable assets acquired and liabilities assumed	$	112,404

F-13

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

The related amortization period is shown below:

	Amortization
	Period
Developed technology	9 years
Customer relationships	8 years
Trademarks and trade names	4 years
Goodwill	indefinite

     The amounts and lives of the identified intangibles other than goodwill were valued at fair value. The analysis included a combination of the cost approach and an income approach. We used discount rates from 15% to 17%. The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to occur after the Spheris acquisition. The goodwill and intangible assets are deductible for tax purposes. We have performed a review of Spheris’s accounting policies and procedures. As a result of that review, we did not identify any differences between the accounting policies and procedures of the two companies that, when conformed, would have a material impact on the future operating results.

     Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. This is an exit price concept for the valuation of the asset or liability. In addition, market participants are assumed to be unrelated buyers and sellers in the principal or the most advantageous market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. Many of these fair value measurements can be highly subjective and it is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

4. Debt

     Debt consisted of the following:

	December 31,
	2010
Senior Secured Credit Facility consisting of:
Term loan	$	200,000
Revolving credit facility		—
Senior Subordinated Notes		85,000
		285,000
Less current portion		(20,000	)
Long term debt	$	265,000

     There was no debt outstanding at December 31, 2009.

     On October 1, 2010, we entered into a senior secured credit facility (the Senior Secured Credit Facility), with certain lenders and General Electric Capital Corporation, as Administrative Agent. The Senior Secured Credit Facility contains a number of significant covenants and consists of $225.0 million in senior secured credit facilities comprised of:

F-14

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

• a $200.0 million term loan, advanced in one drawing on October 14, 2010 (the Closing Date), with a term of five years, repayable in equal quarterly installments of $5.0 million, commencing on the first day of the first fiscal quarter beginning after the Closing Date, with the balance payable at maturity; and

• a $25.0 million revolving credit facility under which borrowings may be made from time to time during the period from the Closing Date until the fifth anniversary of the Closing Date. The revolving facility includes a $5.0 million letter of credit sub-facility and a $5.0 million swing line loan sub-facility.

     The borrowings under the Senior Secured Credit Facility bear interest at a rate equal to an applicable margin plus, at the co-borrowers’ option, either (a) a base rate determined by reference to the highest of (1) the rate last quoted by the Wall Street Journal as the “Prime Rate” in the United States, (2) the federal funds rate plus 1/2 of 1% and (3) the LIBOR rate for a one-month interest period plus 1.00% or (b) the higher of (1) a LIBOR rate determined by reference to the costs of funds for deposits in the currency of such borrowing for the interest period relevant to such borrowing adjusted for certain additional costs and (2) 1.75%. The applicable margin is 4.50% with respect to base rate borrowings and 5.50% with respect to LIBOR borrowings. At December 31, 2010 the borrowings had an interest rate of 7.25%.

     The loans are secured by substantially all of our assets and are guaranteed by MedQuist Holdings. The agreements contain customary covenants, including reporting and notification and acquisitions. The financial covenants are calculated on a consolidated basis for MedQuist Holdings. and its subsidiaries (including us), and include a Senior Leverage Ratio, Total Leverage Ratio, and an Interest Coverage Ratio. As of December 31, 2010 we believe we were in compliance. The loans have customary cross default provisions.

     In addition to the Senior Secured Credit Facility we issued $85.0 million aggregate principal amount of 13% Senior Subordinated Notes due 2016 (the Senior Subordinated Notes), pursuant to a purchase agreement. Interest on the notes is payable in quarterly installments at the issuers’ option at either (i) 13% in cash or (ii) 12% in cash payment plus 2% in the form of additional senior subordinated notes. The Senior Subordinated Notes are non-callable for two years after the closing date after which they are redeemable at 105.0% declining ratably until four years after the closing date. The Senior Subordinated Notes contain a number of significant covenants that, among other things, restrict our ability to dispose of assets, repay other indebtedness, incur additional indebtedness, pay dividends, prepay subordinated indebtedness, incur liens, make capital expenditures, investments or acquisitions, engage in mergers of consolidations, engage in certain types of transactions with affiliates and otherwise restrict our activities.

     Proceeds from the Senior Secured Credit Facility and the Senior Subordinated Notes were used to repay $80.0 million of our indebtedness under the GE Credit Agreement, as defined below, plus interest, to repay $13.6 million of our indebtedness under the Subordinated Promissory Note, as defined below, plus interest, and to pay a $176.5 million special cash dividend to our shareholders.

     We incurred $15.5 million of costs in connection with the financing, and there were remaining unamortized costs from the prior financing. In connection with the refinancing, we evaluated whether the prior facilities had been modified or extinguished. We recorded an extinguishment loss of $5.8 million. At December 31, 2010, we had remaining deferred costs of $10.2 million recorded in other noncurrent assets and $3.1 million recorded in other current assets.

     In connection with the Spheris acquisition in April 2010, MedQuist Transcriptions, Ltd., a subsidiary of MedQuist Inc. (MedQuist Transcriptions), and certain other subsidiaries of MedQuist Inc. (collectively, the Loan Parties) entered into a credit agreement (the GE Credit Agreement) with General Electric Capital Corporation, CapitalSource Bank, and Fifth Third Bank. The GE Credit Agreement provided for up to $100.0 million in senior secured credit facilities, consisting of a $50.0 million term loan, and a revolving credit facility of up to $50.0 million. The credit facilities were secured by a first priority lien on substantially all of the property of the Loan Parties. Amounts borrowed under the GE Credit Agreement incurred interest at a rate selected by MedQuist Transcriptions equal to the Base Rate or the Eurodollar Rate (each as defined in the GE Credit Agreement) plus a margin, all as more fully set forth in the GE Credit Agreement. We incurred $6.1 million in costs in connection with the GE Credit Agreement of which $4.8 million had not been amortized by the time of the refinance in October 2010.

     When we entered into the GE Credit Agreement, we terminated the five-year $25.0 million revolving credit agreement with Wells Fargo Foothill, LLC (the Wells Credit Agreement) that we entered into on August 31, 2009. We never borrowed under the Wells

F-15

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

Credit Agreement. In 2010, we wrote off deferred financing fees of $1.1 million and incurred termination fees of $0.6 million in connection with the termination of this facility. Such costs are included in interest expense in the accompanying consolidated statements of operations.

     In connection with the Spheris acquisition, we entered into a subordinated promissory note with Spheris (the Spheris Subordinated Promissory Note). The loan was scheduled to mature in five years from the date of the acquisition. The face amount of the Spheris Subordinated Promissory Note totaled $17.5 million with provisions for prepayment at discounted amounts, ranging from 77.5% of the principal if paid within six months, 87.5% from six to nine months, 97.5% from nine to twelve months, 102.0% by year two, 101.0% by year three and 100.0% thereafter. For purposes of the purchase price allocation, the note was discounted at 77.5% of the principal ($13.6 million). This note was a non-cash transaction. The fair value of the note was determined through the use of a Monte Carlo model which is Level 3 in the Fair Value hierarchy based upon significant unobservable inputs. The Subordinated Promissory Note was paid in full as noted above.

     The Spheris Subordinated Promissory Note had stated interest rates of 8.0% for the first six months, 9.0% from six to nine months, and 12.5% thereafter of which 2.5% may be paid by increasing the principal amount. Payments of interest are made semi-annually on each six month anniversary of the acquisition. For financial statement purposes the interest has been calculated using the average interest rates over the term of the Subordinated Promissory Note. As discussed above, we paid off all amounts outstanding, at 77.5% of the face value, plus accrued interest under the Subordinated Promissory Note thus extinguishing the note.

     The aggregate maturities of long-term obligations are as follows:

2011	$	20,000
2012	$	20,000
2013	$	20,000
2014	$	20,000
2015	$	120,000
2016	$	85,000
	$	285,000

     In January 2011 we made an optional prepayment of $20.0 million in addition to the $5.0 million due under the Senior Secured Credit Facility.

5. Allowance for Doubtful Accounts

	Balance at		Charges to		Doubtful			Balance at
	Beginning		Revenues and		Accounts			End of
	of Period		and Expenses		Written Off			Period
December 31, 2008	$	4,359		3,073		(2,630	)	$	4,802
December 31, 2009	$	4,802		2,306		(3,949	)	$	3,159
December 31, 2010	$	3,159		1,326		(1,343	)	$	3,142

     Substantially all of the charges relate to revenues.

6. Property and Equipment

     Property and equipment consisted of the following as of December 31:

	2010			2009
Computer equipment	$	37,729		$	32,404
Communication equipment		5,914			5,447
Software		20,994			18,743
Furniture and office equipment		1,674			1,357
Leasehold improvements		5,368			2,703
Total property and equipment		71,679			60,654
Less: accumulated depreciation		(57,544	)		(48,882	)
Property and equipment, net	$	14,135		$	11,772

     Depreciation expense was $10.1 million in 2010, $9.5 million in 2009 and $12.0 million in 2008.

F-16

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

7. Goodwill and Other Intangible Assets

Goodwill

     The changes in the carrying amount of goodwill for the year ended December 31, 2010 and 2009 are as follows:

	2010			2009
Balance as of January 1,
Goodwill	$	123,046		$	122,778
Accumulated impairment losses		(82,233	)		(82,233	)
		40,813			40,545
Goodwill from Spheris acquisition		48,165
Foreign currency adjustments		4			268
Balance at December 31,
Goodwill		171,215			123,046
Accumulated impairment losses		(82,233	)		(82,233	)
Goodwill at December 31,	$	88,982		$	40,813

     We tested goodwill for impairment during the fourth quarter of 2010 and 2009 and determined that the fair value of the reporting unit substantially exceeded the carrying value based upon our market capitalization. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, perpetual growth rates, the amount and timing of expected future cash flows, as well as relevant comparable company earnings multiples for the market-based approach. The cash flows employed in the discounted cash flow analyses were based on our internal business model for 2010 and, for years beyond 2010 the growth rates we used were an estimate of the future growth in the industry in which we participate. The discount rates used in the discounted cash flow analyses are intended to reflect the risks inherent in the future cash flows of the reporting unit and are based on an estimated cost of capital, which we determined based on our estimated cost of capital relative to our capital structure. In addition, the market-based approach utilizes comparable company public trading values, research analyst estimates and, where available, values observed in private market transactions. In 2008, our analysis indicated that the reporting unit fair value was below our book value. The test for impairment of goodwill is a two-step process:

• First, we compare the carrying amount of our reporting unit, which is the book value of our entire company, to the fair value of our reporting unit. If the carrying amount of our reporting unit exceeds its fair value, we have to perform the second step of the process. If not, no further testing is needed. In the fourth quarter of 2008 we determined that the carrying amount of our reporting unit exceeded the fair value and accordingly performed the second step in the analysis.

F-17

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

• If the second part of the analysis is required, we allocate the fair value of our reporting unit to all assets and liabilities as if the reporting unit had been acquired in a business combination at the date of the impairment test. We then compare the implied fair value of our reporting unit’s goodwill to its carrying amount. If the carrying amount of our goodwill exceeds its implied fair value, we recognize an impairment loss in an amount equal to that excess. In the fourth quarter of 2008, the carrying value of goodwill exceeded its implied fair value and accordingly we recorded a non-cash, pre-tax impairment charge of $82.2 million.

Other Intangible Assets

     Some of the events that we consider as impairment indicators for our long-lived assets are:

• our net book value compared to our fair value;

• significant adverse economic and industry trends;

• significant decrease in the market value of the asset;

• the extent that we use an asset or changes in the manner that we use it;

• significant changes to the asset since we acquired it; and

• other changes in circumstances that potentially indicate all or a portion of the company will be sold.

     During 2010, 2009 and 2008 we reviewed the carrying value of our long lived assets other than goodwill and determined that the carrying amounts of such assets was less than the undiscounted cash flows and accordingly no impairment charge was recorded.

     As of December 31, other intangible asset balances were:

	2010
			Accumulated			Net book
	Cost		Amortization			Value
Customer lists	$	114,525	$	(54,780	)	$	59,745
Trademarks and trade names		1,640		(283	)		1,357
Internal use software		15,839		(7,598	)		8,241
Acquired technology		11,390		(873	)		10,517
Total	$	143,394	$	(63,534	)	$	79,860

	2009
			Accumulated			Net book
	Cost		Amortization			Value
Customer lists	$	77,277	$	(46,836	)	$	30,441
Internal use software		10,625		(4,759	)		5,866
Total	$	87,902	$	(51,595	)	$	36,307

F-18

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

     The estimated useful life and the weighted average remaining lives of the intangible assets as of December 31, 2010 were as follows:

	Estimated	Weighted Average
	Useful Life	Remaining Lives
Customer lists	10-20 years	8 years
Trademarks and trade names	4 years	3 years
Capitalized software	3 years	2 years

Estimated annual amortization expense for intangible assets is as follows:

2011	$	14,780
2012		12,713
2013		10,447
2014		9,268
2015		8,768
Thereafter		23,884
Total	$	79,860

     Amortization of intangible assets was $11.9 million in 2010, $6.2 million in 2009 and $5.6 million in 2008.

8. Contractual Obligations

     Leases

     Minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease, including any periods of free rent and landlord incentives. Rental expense for operating leases for the years ended December 31, 2010, 2009 and 2008 was $3,645, $2,991 and $3,201, respectively. Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2010 were:

	Total
2011	$	4,947
2012		4,848
2013		4,497
2014		2,464
2015 and thereafter		2,267
Total minimum lease payments	$	19,023

     Other Contractual Obligations

     The following summarizes our other contractual obligations as of December 31, 2010:

					Severance and Other
	Total		Purchase		Obligations
2011	$	11,774	$	8,567	$	3,207
2012		8,248		8,013		235
2013		4,042		3,807		235
2014		1,170		924		246
2015 and thereafter		21		—		21
Total	$	25,255	$	21,311	$	3,944

     Purchase obligations represent telecommunication contracts, software development and other recurring purchase obligations.

F-19

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

     We have agreements with certain of our executive officers that provide for severance payments to the employee in the event the employee is terminated without cause. The maximum cash exposure under these agreements was approximately $2.5 million at December 31, 2010.

9. Accrued Expenses

     Accrued expenses consisted of the following as of December 31:

	2010		2009
Customer Accommodations	$	10,387	$	11,635
Accrued Interest		5,593		—
Restructure		2,214		2,063
Other (No item exceeds 5% of current liabilities)		8,912		7,792
Total accrued expenses	$	27,106	$	21,490

     In November 2003, one of our employees raised allegations that we had engaged in improper billing practices. In response, our board of directors undertook an independent review of these allegations (Review). In response to our customers’ concern over the public disclosure of certain findings from the Review, we took action in the fourth quarter of 2005 to avoid unnecessary litigation, which preserved and solidified our customer business relationships by offering a financial accommodation to certain of our customers

     In connection with our decision to offer financial accommodations to certain of our customers (Accommodation Customers), we analyzed our historical billing information and the available report-level data (Management’s Billing Assessment) to develop individualized accommodation offers to be made to Accommodation Customers (Accommodation Analysis). Based on the Accommodation Analysis, our board of directors authorized management to make cash or credit accommodation offers to

     Accommodation Customers. By accepting our accommodation offer, the customer agreed, among other things, to release us from any and all claims and liability regarding the billing related issues.

     We are unable to predict how many customers, if any, may accept the outstanding accommodation offers on the terms proposed by us, nor are we able to predict the timing of the acceptance (or rejection) of any outstanding accommodation offers. Until any offers are accepted, we may withdraw or modify the terms of the accommodation program or any outstanding offers at any time. In addition, we are unable to predict how many future offers, if made, will be accepted on the terms proposed by us. We regularly evaluate whether to proceed with, modify or withdraw the accommodation program or any outstanding offers.

     The following is a summary of the financial statement activity related to the customer accommodation.

	2010			2009
Beginning balance	$	11,635		$	12,055
Payments and other adjustments		(1,248	)		(317	)
Credits		—			(103	)
Ending balance	$	10,387		$	11,635

10. Commitments and Contingencies

Kaiser Litigation

     On June 6, 2008, plaintiffs Kaiser Foundation Health Plan, Inc. and affiliates (collectively, Kaiser) filed suit against us in the Superior Court of the State of California related to our billing practices.

F-20

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

          In July 2010, the parties reached a settlement of the litigation whereby we made a payment of $2.0 million to resolve all of Kaiser’s claims. Neither we, nor Kaiser, admitted to any liability or wrongdoing in connection with the settlement. Of this amount, $1.1 million was included in accrued expenses at December 31, 2009 and we expensed an additional $0.9 million during 2010.

Kahn Putative Class Action

          In 2008, one of our shareholders filed a shareholder putative class action lawsuit against us, Koninklijke Philips Electronics N.V. (Philips), our former majority shareholder and four of our former non-independent directors. We are no longer a defendant in this matter, but we are monitoring the matter since it involves claims against our former directors.

Reseller Arbitration Demand

     On October 1, 2007, we received from counsel to nine current and former resellers of our products (Claimants), a copy of an arbitration demand filed by the Claimants, initiating an arbitration proceeding.

     On March 31, 2010, the parties entered into a Settlement Agreement and Release pursuant to which we paid the Claimants $500 on April 1, 2010 to resolve all claims. Under the Settlement Agreement and Release, (i) the parties exchanged mutual releases, (ii) the arbitration and related state court litigation were dismissed with prejudice and (iii) we did not admit to any liability or wrongdoing. We accrued the entire amount of this settlement as of December 31, 2009.

Shareholder Litigation

     On February 8, 2011 and February 10, 2011, plaintiffs Victor N. Metallo and Joseph F. Lawrence, respectively, filed purported shareholder class action complaints in the Superior Court of New Jersey, Burlington County (Chancery Division) (the Shareholder Litigation). In their complaints, the plaintiffs purported to be shareholders of MedQuist Inc. and sought to represent a class of our minority shareholders in pursuit of claims against us, the members of our board of directors and MedQuist Holdings.

     Plaintiffs alleged that the defendants breached certain fiduciary duties they owed to minority shareholders of MedQuist Inc. in connection with the structuring and disclosure of the Registered Exchange Offer. Among other things, the plaintiffs alleged that (a) the Registered Exchange Offer is procedurally and financially unfair, (b) the January 21, 2011 and February 16, 2011 Schedules 14D-9 that we filed with the SEC and the February 3, 2011 Prospectus that MedQuist Holdings filed with the SEC are materially misleading and incomplete, and (c) the Registered Exchange Offer was structured by the defendants in order to circumvent the provisions of the New Jersey Shareholders’ Protection Act. Plaintiffs sought, among other things, preliminary and permanent injunctive relief enjoining consummation of the Registered Exchange Offer, unspecified damages, pre- and post-judgment interest and attorneys’ fees and costs. The two Plaintiff actions were consolidated on February 22, 2011 under the caption In Re: MedQuist Inc. Shareholder Litigation, Docket Number C-018-11.

     On March 4, 2011, the parties entered into a memorandum of understanding (the MOU) that outlined the material terms of the Shareholder Litigation. Under the terms of the MOU, we agreed to extend the expiration of the Registered Exchange Offer until 5:00 p.m., New York City time, on Friday, March 11, 2011 and further agreed that if, as a result of the Registered Exchange Offer, MedQuist Holdings obtained ownership of at least 90% of the outstanding common stock of MedQuist Inc., MedQuist Holdings will conduct a short-form merger under applicable law to acquire the remaining shares of MedQuist Inc. common stock that MedQuist Holdings does not currently own at the same exchange ratio applicable under the Registered Exchange Offer. We agreed to make certain supplemental disclosures concerning the Registered Exchange Offer, which were contained in an amendment to Schedule 14D-9 that we filed with the SEC on March 7, 2011. The settlement of the Shareholder Litigation is conditioned upon, among other things, execution of a Stipulation of Settlement, notice to all class members, a fairness hearing and final approval of the settlement by the court.

F-21

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

SEC Investigation of Former Officer

     With respect to our historical billing practices, the SEC is pursuing civil litigation against our former chief financial officer, whose employment with us ended in July 2004. Pursuant to our bylaws, we have been providing indemnification for the legal fees for our former chief financial officer. In February 2011, we entered into a settlement agreement with our former chief financial officer and such settlement agreement is dependent on the individual settling with the SEC. In February 2010, one of our current employees, who was our former Controller but who does not currently serve in a senior management or financial reporting oversight role, reached a settlement agreement with the SEC in connection with the civil litigation that the SEC had brought against him in connection with our historical billing practices.

11. Stock Option Plans

     Our stock option plans provide for the granting of options to purchase shares of common stock to eligible employees (including officers) as well as to our non-employee directors. Options may be issued with the exercise prices equal to the fair market value of the common stock on the date of grant or at a price determined by a committee of our board of directors. Stock options vest and are exercisable over periods determined by the committee, generally five years, and expire no more than 10 years after the grant.

     Information with respect to our common stock options is as follows:

				Weighted		Weighted Average
	Shares			Average		Remaining		Aggregate
	Subject to			Exercise		Contractual		Intrinsic
	Options			Price		Life in Years		Value
Outstanding, January 1, 2008		2,359		$	31.08
Granted		296		$	11.20
Exercised		(12	)	$	2.71
Forfeited		(827	)	$	29.10
Outstanding, December 31, 2008		1,816		$	23.34
Granted		—		$	—
Exercised		—		$	—
Forfeited		(553	)	$	22.57
Outstanding, December 31, 2009		1,263		$	24.47		3.3	$	—
Granted		—		$	—
Exercised		—		$	—
Forfeited		(261	)	$	44.84
Outstanding, December 31, 2010		1,002		$	17.39		3.0	$	1,902
Exercisable, December 31, 2010		903		$	19.05		2.5	$	1,268
Options vested and expected to vest as of December 31, 2010		1,002		$	17.39		3.0	$	1,902

          The computation of diluted net income (loss) per share does not assume conversion, exercise or issuance of shares that would have an anti-dilutive effect on diluted net income (loss) per share. For the years ended December 31. 2010, and 2009, 692 and 1,262 options, respectively, were excluded from the computation of diluted earnings per share as the options exercise price was greater than the average market price of the common stock during the respective period. During 2008 we had a net loss. As a result, any assumed conversions would result in reducing the net loss per share and, therefore, are not included in the calculation. Shares having an anti-dilutive effect on net loss per share and, therefore, excluded from the calculation of diluted net loss per share, totaled 1,501 for the year ended December 31, 2008.

     The aggregate intrinsic value is calculated using the difference between the closing stock price on the last trading day of 2010 and the option exercise price, multiplied by the number of in-the-money options. As of December 31, 2010, 296 options were in the money.

     There were no options granted or exercised in 2010 or 2009. There were 296 options granted and 12 options exercised in 2008. In the first quarter of 2009, we modified the options previously granted in the third quarter of 2008 to our Chief Executive Officer. The grant price was increased from $4.85 per share to $8.25 per share by a committee of our Board of Directors. There was no incremental cost of the modification. We estimated fair value for the modified option grant as of the date of the modification by applying the Black-Scholes option pricing valuation model. The application of this model involves assumptions that are judgmental and sensitive in the determination of compensation expense. The key assumptions used in determining the fair value of the options modified in the

F-22

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

first quarter of 2009 were:

Expected term (years)	5.92
Expected volatility	54.5	%
Dividend yield	0	%
Expected risk free interest rate	3.25	%

Significant assumptions required to estimate the fair value of stock options include the following:

• Expected term: The SEC Staff Accounting Bulletin No. 107 “Simplified” method has been used to determine a weighted average expected term of options granted.

• Expected volatility: We have estimated expected volatility based on the historical stock price volatility of a group of similar publicly traded companies. We believe that our historical volatility is not indicative of future volatility.

     The weighted average grant date fair value of options modified in the first quarter of 2009 was $1.97 per share.

     In the fourth quarter of 2010, in accordance with the terms of the option, the Compensation Committee approved an adjustment to the exercise price of the Chief Executive Officer’s option from $8.25 per share to $2.22 per share to account for the payment of an extraordinary dividend of $1.33 per share in September 2009 and $4.70 per share in October 2010 to our shareholders. There was no incremental cost of the adjustment.

     The weighted average grant date fair value of options modified in the fourth quarter of 2010 was $7.28 per share.

     A summary of outstanding and exercisable options as of December 31, 2010 is as follows:

	Options Outstanding						Options Exercisable
			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
Range of	Number		Contractual Life		Exercise		Number		Exercise
Exercise Prices	of Shares		(in years)		Price		of Shares		Price
$2.22-$10.00		296		7.8	$	2.22		197	$	2.22
$10.01-$20.00		222		1.6	$	17.16		222	$	17.16
$20.01-$30.00		452		0.8	$	26.29		452	$	26.29
$30.01-$40.00		29		0.0	$	32.36		29	$	32.36
$40.01-$70.00		3		0.1	$	44.21		3	$	44.21
		1,002		3.0	$	17.39		903	$	19.05

     No options were granted or exercised in 2010 or 2009. There were 12 options exercised in 2008.

     The total fair value of shares vested during 2010 and 2009 was $193 and $193, respectively. The change in ownership which occurred on August 6, 2008 was a change in control as defined in the employment agreements for certain option holders. This resulted in the immediate vesting of previously unvested stock options. All previously unamortized stock option compensation expense related to such stock options was recognized as of August 6, 2008 resulting in a charge of approximately $1,060. Also recorded in 2008 was stock option compensation expense of $367, not related to the change in control.

     As of December 31, 2010, there were 994 additional options available for grant under our stock option plans.

     For the years ended December 31, 2010, 2009 and 2008, $194, $193 and $937, respectively, was included as selling, general and administrative expenses and $0, $0 and $402 was included in research and development expenses in the accompanying consolidated statements of operations related specifically to these options granted to certain executive officers.

     On August 27, 2009, our board of directors, upon the recommendation of its compensation committee, approved the MedQuist Inc. Long-Term Incentive Plan. The Incentive Plan is designed to encourage and reward the creation of long-term equity value by certain members of our senior management team. The executives and key employees will be selected by the Compensation Committee

F-23

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

and will be eligible to participate in the Incentive Plan. During the third quarter of 2010, the Compensation Committee awarded grants under the Long Term Incentive Plan. In December 2010, the Compensation Committee approved the terms and conditions of the plan. As of December 2010 no amounts have been recorded as compensation expense under the Long Term Incentive Plan as the amounts were not material.

12. Income Taxes

     The sources of income (loss) before income taxes and the income tax provision (benefit) for the years ended December 31, 2010, 2009 and 2008 are as follows:

	2010			2009			2008
Income (loss) before income taxes:
Domestic	$	30,278		$	24,314		$	(83,876	)
Foreign		1,444			952			(1,432	)
Income (loss) before income taxes	$	31,722		$	25,266		$	(85,308	)
Current income tax provision:
Federal	$	(12	)	$	(660	)	$	107
State and local		296			131			216
Foreign		576			647			255
Current income tax provision		860			118			578
Deferred income tax provision (benefit):
Federal		858			1,724			(15,694	)
State and local		630			235			(2,379	)
Foreign		(1,677	)		(102	)		982
Deferred income tax provision (benefit)		(189	)		1,857			(17,091	)
Income tax provision (benefit)	$	671		$	1,975		$	(16,513	)

     The reconciliation of the statutory federal income tax rate to our effective income tax rate is as follows:

	2010			2009			2008
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax effect		1.7			0.9			3.9
Valuation allowance		(35.9	)		(29.8	)		(10.4	)
Goodwill impairment		—			—			(7.6	)
Impact of foreign operations		2.5			3.2			(0.4	)
Adjustments to tax reserves		(1.3	)		(0.3	)		0.2
Permanent differences		0.1			(0.9	)		(0.3	)
Other		—			(0.3	)		(1.0	)
Effective income tax rate		2.1	%		7.8	%		19.4	%

     Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities as of December 31, 2010, 2009 and 2008 were as follows:

F-24

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

	2010			2009			2008
Deferred tax assets:
Foreign net operating loss carry forwards	$	1,659		$	1,957		$	1,892
Domestic net operating loss carry forwards		38,336			48,397			47,694
Accounts receivable		1,227			1,226			1,859
Property and equipment		2,093			2,020			1,563
Intangibles		11,308			12,784			20,976
Employee compensation and benefit plans		2,823			1,555			1,149
Deferred compensation		—			—			168
Customer accommodation		3,470			4,515			4,668
Accruals and reserves		2,250			2,805			3,613
Other		5,107			2,554			2,129
Total gross deferred tax assets		68,273			77,813			85,711
Less: Valuation allowance		(63,268	)		(74,641	)		(81,785	)
Total deferred tax assets		5,005			3,172			3,926
Deferred tax liabilities:
Intangibles		(5,731	)		(3,925	)		(2,907	)
Other		(1,189	)		(1,095	)		(1,265	)
Total deferred tax liabilities		(6,920	)		(5,020	)		(4,172	)
Net deferred tax liability	$	(1,915	)	$	(1,848	)	$	(246	)

     As of December 31, 2010, we had federal net operating loss carry forwards of approximately $78 million which will begin to expire in 2026 and 2028.

     As of December 31, 2010 and 2009, we had state net operating loss (NOL) carry forwards of approximately $216 million and $225 million, respectively, which will expire between 2011 and 2029. In addition, we have foreign NOL carry forwards of approximately $10 million, which do not expire. Utilization of the NOL carry forwards will be subject to an annual limitation in future years as a result of the change in ownership as defined by Section 382 of the Internal Revenue Code and similar state provisions. We performed an analysis on the annual limitation as a result of the ownership change that occurred in 2008. As a result of this analysis, the annual limitation in future years would not prevent us from using the federal NOL carry forwards before their respective expiration periods.

     During 2010, we reduced a portion of our valuation allowance against our deferred tax assets generated in foreign tax jurisdictions based on management’s assessment of future earnings available to utilize these deferred tax assets. As a result of the release of the valuation allowance, we recognized a foreign deferred tax benefit of $1,310.

     After consideration of all evidence, both positive and negative, management concluded that it was more likely than not that a majority of the domestic deferred tax assets would not be realized. As of December 31, 2010, this valuation allowance has been decreased from $73.3 million to $63.3 million. Although management currently believes that a valuation allowance is required at December 31, 2010, it is at least reasonably possible that this belief could change in the near term, resulting in the release of all or a substantial portion of the valuation allowance.

     Domestic net deferred tax assets were recognized to the extent that objective positive evidence existed with respect to their future utilization. The objective positive evidence included the potential to carry back any losses generated by the deferred tax assets in the future as well as income expected to be recognized due to the reversal of deferred tax liabilities as of December 31, 2010. In analyzing deferred tax liabilities as a source for potential income for purposes of recognizing deferred tax assets, the deferred tax liabilities related to excess book basis in goodwill over tax basis in goodwill were considered a source of future income for benefiting deferred tax assets with indefinite lives only due to the indefinite life and uncertainty of reversal of these liabilities during the same period as the non-indefinite life deferred tax assets.

F-25

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

      Our consolidated income tax expense for the years ended December 31, 2010 and December 31, 2009 consists principally of an increase in deferred tax liabilities related to goodwill amortization deductions for income tax purposes during the applicable year as well as state and foreign income taxes. Our consolidated income tax benefit for the year ended December 31, 2008 consists primarily of the reversal of $18.5 million of deferred tax liabilities associated with indefinite life intangible assets related to goodwill which was impaired in 2008, offset by state and foreign income tax expense.

     We provide reserves for income taxes in accordance with the guidance contained in ASC 740 for uncertainty in taxes. ASC 740 prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return and utilizes a two-step approach for evaluating uncertain tax positions. Step one, Recognition, requires a company to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. Step two, Measurement, is based on the largest amount of benefit, which is more likely than not to be realized on settlement with the taxing authority.

     The total amount of unrecognized tax benefits as of December 31, 2010 was $4,657 which includes $116 of accrued interest related to unrecognized income tax benefits which we recognize as a component of the provision for income taxes. Of the $4,657 unrecognized tax benefits, $4,152 relates to tax positions which if recognized would impact the effective tax rate, not considering the impact of any valuation allowance. Of the $4,152, $3,503 is attributable to uncertain tax positions with respect to certain deferred tax assets which if recognized would currently be offset by a full valuation allowance due to the fact that at the current time it is more likely than not that these assets would not be recognized due to a lack of sufficient projected income in the future.

     We file income tax returns in the U.S. federal jurisdiction, all U.S. states which require income tax returns, and foreign jurisdictions. Due to the nature of our operations, no state or foreign jurisdiction is individually significant. With limited exceptions we are no longer subject to examination by U.S. federal or states jurisdictions for years prior to 2007. The Internal Revenue Service concluded its federal tax audit for years 2003 through 2006 with no material adjustments. We are no longer subject to examination by the UK federal jurisdiction for years prior to 2008. We do have various state tax audits and appeals in process at any given time.

     The following is a roll-forward of the changes in our unrecognized tax benefits:

Total unrecognized tax benefits as of January 1, 2010	$	4,831
Gross amount of decreases in unrecognized tax benefits as a result of tax positions taken during the prior period		(2	)
Gross amount of increases in unrecognized tax benefits as a result of tax positions taken during the prior period		—
Gross amount of increases in unrecognized tax benefits as a result of tax positions taken during the current period		575
Amount of decreases in the unrecognized tax benefits relating to settlements with taxing authorities		(826	)
Reduction to unrecognized tax benefits as a result of a lapse of applicable statute of limitations		(38	)
Total unrecognized tax benefits as of December 31, 2010	$	4,540
Total unrecognized tax benefits that would impact the effective tax rate if recognized	$	4,152
Total amount of interest and penalties recognized in the accompanying consolidated statement of operations for the year ended December 31, 2010	$	(239	)
Total amount of interest and penalties recognized in the accompanying consolidated balance sheet as of December 31, 2010	$	116

     We anticipate decreases in unrecognized tax benefits of approximately $118 related to state statutes of limitations expiring during 2011. Our unrecognized tax benefits are expected to change in 2011. However, we do not anticipate any significant increases or decreases within the next twelve months.

F-26

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

13. Employee Benefit Plans

  401(k) Plan

     We maintain a tax-qualified retirement plan named the MedQuist 401(k) Plan (401(k) Plan) that provides eligible employees with an opportunity to save for retirement on a tax advantaged basis. Our 401(k) Plan allows eligible employees to contribute up to 25% of their annual eligible compensation on a pre-tax basis, subject to applicable Internal Revenue Code limits. Elective deferral contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participant’s directives. Employee elective deferrals are 100% vested at all times. Our 401(k) Plan provides that we may make a discretionary matching contribution to the participants in the 401(k) Plan. We did not match the employee contributions for the years ended December 31, 2010, 2009 and 2008.

14. Related-Party Transactions

     MedQuist Holdings had an approximately 69.5% ownership interest in us at December 31, 2010.

     We have an agreement with a wholly-owned subsidiary of MedQuist Holdings, CBay Systems & Services, Inc. (CBay Services), under which we outsource medical transcription services. We incurred expenses of $34,038, $6,798 and $283 for the years ended December 31, 2010, 2009 and 2008. All medical transcription expenses were recorded in Cost of revenues in the accompanying consolidated statements of operations. We recorded other expense of $541 in 2010 recorded in research and development.

     We also have a subcontracting agreement (Subcontracting Agreement) with CBay Services, pursuant to which CBay Services subcontracts medical transcription, editing and related services to us. For the years ended December 31, 2010, 2009 and 2008, we recorded revenue of $2,292, $1,483, and $0, respectively.

     We have a Management Services Agreement with CBay Inc, pursuant to which certain senior executives and directors of CBay Inc. provide certain advisory and consulting services. The Management Services Agreement provides that, in consideration of the management services rendered by CBay Inc. to us since July 1, 2009 we pay CBay Inc. a quarterly services fee equal to $350, payable in arrears. For the years ended December 31, 2010 and 2009, and 2008, we incurred $1.4 million, $1.4 million, and $0 in services expenses with CBay Inc. All Management Services Agreement costs incurred have been recorded as selling, general and administrative expenses in the accompanying consolidated statements of operations.

     The Related party payable of $5.4 million and $1.4 million at December 31, 2010 and 2009, respectively, primarily represent amounts payable to MedQuist Holdings for transcription and other services provided. We paid MedQuist Holdings $4.6 million for a related party liability assumed in the Spheris acquisition. MedQuist Holdings provided guarantees related to our Senior Secured Credit Facility.

     As of December 31, 2010 and 2009, Accounts receivable in the accompanying consolidated balance sheets included $753 and $710, respectively, for amounts due from MedQuist Holdings.

     On May 4, 2010 we recorded a $1.5 million success-based transaction fee, which was included in acquisition related charges, to SAC Private Capital Group, LLC (SAC) for work performed on the Spheris acquisition. SAC owns a majority interest in MedQuist Holdings.

     Prior to August 6, 2008, Koninklijke Philips Electronics N.V. (Philips) had approximately a 69.5% ownership interest in us. There were no amounts due to or from Philips on our balance sheets at December 31, 2010 or 2009. Prior to August 6, 2008 we incurred $4,479 in expenses to Philips, which were recorded primarily in cost of revenues.

15. Cost of Legal Proceedings and Settlements

     For the years ended December 31, 2010, 2009 and 2008, we recorded charges of $3,603, $14,843 and $19,738, respectively, for costs associated with legal proceedings and settlements. The following is a summary of the amounts recorded in the accompanying consolidated statements of operations:

F-27

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

	2010		2009		2008
Legal fees	$	2,693	$	8,593	$	12,313
Settlements		910		6,250		7,425
Total	$	3,603	$	14,843	$	19,738

The amounts included in settlements for 2010 represent an additional charge of $0.9 related to our settlement with Kaiser Foundation Health Plan, Inc., and affiliates. The amounts included in settlements for 2009 represent the settlement of a patent litigation matter. The 2008 amount of $7,425 was for the settlements of all claims related to the consolidated medical transcriptionists putative class action and the Department of Justice (DOJ) investigation.

16. Restructuring Charges

2010 Restructuring Plan

     Management’s ongoing cost reduction initiatives, including process improvement, combined with the acquisition of Spheris, resulted in a restructuring plan involving staff reductions and other actions designed to maximize operating efficiencies. The affected employees are entitled to receive severance benefits under existing established severance policies. The employees affected were primarily in the operations and administrative functions. Management approved the initial actions under the plan during 2010.

Beginning balance	$	—
Charge		3,460
Cash paid		(1,421	)
Ending balance	$	2,039

     The Company expects that restructuring activities may continue in 2011 as management identifies opportunities for synergies resulting from the acquisition of Spheris including the elimination of redundant functions and locations.

2009 Restructuring Plan

     During the third and fourth quarters of 2009, as a result of management’s continued planned process improvement and technology development investments we committed to an exit and disposal plan which includes projected employee severance for planned reduction in headcount. Because of plan development in late 2009 and execution of the plan over multiple quarters in 2009 and 2010, not all personnel affected by the plan know of the plan or its impact. The plan includes costs of $2.5 million for employee severance and $0.3 million for vacating operating leases. The table below reflects the financial statement activity related to the 2009 restructuring plan and is included in accrued expenses in the accompanying consolidated balance sheets:

	For the twelve months ended
	December 31,
	2010			2009
Beginning balance	$	2,064		$	—
Charge (reversal)		(631	)		2,810
Cash paid		(1,258	)		(746	)
Ending balance	$	175		$	2,064

     We expect the remaining balance to be paid in 2011.

17. Investment in A-Life Medical, Inc. (A-Life)

     We previously had an investment of $8,864 in A-Life, a privately held entity which provides advanced natural language processing technology for the medical industry that was recorded under the equity method of accounting. In October 2010 we sold our shares in A-Life for cash consideration of $23.6 million, of which $4.1 million will be held in escrow until March 2012. We recorded a pretax gain of $9.9 million. For the year ended December 31, 2009, our investment increased by $2,015 related to our share

F-28

MedQuist Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)

of A-Life’s net income, primarily related to a gain resulting from an acquisition, additional cash investments in A-Life of $852 offset by $255 for a dilution, which was recorded in shareholders’ equity in our consolidated balance sheet. Our investment in A-Life had been recorded in Other assets in the accompanying consolidated balance sheets. We will record the remaining gain, if any, in 2012 when escrow is released.

18. Quarterly Data (unaudited)

	1st		2nd			3rd		4th
	Quarter		Quarter			Quarter		Quarter
2010
Net revenues	$	73,981	$	97,528	(4)	$	102,933	$	100,798
Cost of revenues	$	49,833	$	67,090		$	68,427	$	64,221
Net income	$	7,344	$	880	(3)	$	8,971	$	13,856	(5)
Net income per share:
Basic	$	0.20	$	0.02		$	0.24	$	0.37
Diluted	$	0.20	$	0.02		$	0.24	$	0.37
Weighted average shares outstanding:
Basic		37,556		37,556			37,556		37,556
Diluted		37,556		37,556			37,556		37,590
2009
Net revenues	$	78,944	$	77,471		$	76,836	$	73,949
Cost of revenues	$	53,868	$	51,357		$	52,768	$	48,272
Net income	$	6,854	$	836	(1)	$	9,704	$	5,897	(2)
Net income per share:
Basic	$	0.18	$	0.02		$	0.26	$	0.16
Diluted	$	0.18	$	0.02		$	0.26	$	0.16
Weighted average shares outstanding:
Basic		37,556		37,556			37,556		37,556
Diluted		37,556		37,556			37,560		37,556

(1)	Includes $5,750 recorded in cost of legal proceedings and settlements, related to the settlement of all claims related a patent litigation settlement.
(2)	Includes $500 recorded in cost of legal proceedings and settlements, related to the settlement of all claims related to a reseller arbitration settlement.
(3)	Includes $4.8 million of acquisition and related integration charges, and $1.1 million in cost of legal proceedings and settlements.
(4)	Includes the results of operations of Spheris from the date of acquisition in April 2010.
(5)	In October 2010, we recorded a pre-tax gain of $9.9 million on the sale of our investment in A-Life and we recorded a loss on extinguishment of debt of $5.8 million.

F-29

EXHIBIT INDEX

No.	Description
23	Consent of KPMG LLP
24	Power of Attorney (included on the signature page hereto)
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

# Portions of this Exhibit were omitted and filed separately with the Secretary of the SEC pursuant to a request for confidential treatment that has been filed with the SEC.

EX-10.42.1

Exhibit 10.42.1

OFFICE LEASE

BETWEEN

FORD MOTOR LAND DEVELOPMENT CORPORATION, LANDLORD

AND

SPHERIS OPERATIONS INC., TENANT

TABLE OF CONTENTS

Section 1:	Basic Definitions and Provisions
	a.	Premises
	b.	Term
	c.	Permitted Use
	d.	Occupancy Limitation
	e.	Base Rent
	f.	Rent Payment Address
	g.	Security Deposit
	h.	Business Hours
	i.	Electrical Service
	j.	After Hours HVAC Rate
	k.	Parking
	1.	Construction Fee
	m.	Notice Addresses
	n.	Broker
Section 2.	Leased Premises
	a.	Premises
	b.	Rentable Square Foot Determination and Tenant’s Proportionate Share
	c.	Common Areas
	d.	Building
Section 3:	Term
	a.	Commencement and Expiration Dates
	b.	Possession Date
	c.	Notice of Completion of Tenant Improvements
	d.	Substantial Completion
	e.	Early Occupancy
	f.	Right to Occupy
	g.	Commencement Agreement
Section 4:	Use
	a.	Permitted Use
	b.	Prohibited Uses
	c.	Prohibited Equipment in Premises
Section 5:	Rent
	a.	Payment Obligations
	b.	Base Rent
	c.	Additional Rent

Section 6:	Security Deposit
	a.	Amount of Deposit
	b.	Application of Deposit
	c.	Refund of Deposit
	d.	Letter of Credit Option
Section 7:	Services by Landlord
	a.	Base Services
	b.	Landlord’s Maintenance
	c.	No Abatement
	d.	Tenant’s Obligation to Report Defects
	e.	Limitation on Landlord’s Liability
Section 8:	Tenant’s Acceptance and Maintenance of Premises
	a.	Acceptance of Premises
	b.	Move-in Obligations
	c.	Tenant’s Maintenance
	d.	Alterations to Premises
	e.	Restoration of Premises
	f.	Landlord’s Performance of Tenant’s Obligations
	g.	Construction Liens
	h.	Communications Compliance
Section 9:	Property of Tenant
	a.	Property Taxes
	b.	Removal
Section 10:	Signs
Section 11:	Access to Premises
	a.	Tenant’s Access
	b.	Landlord’s Access
	c.	Emergency Access
Section 12:	Tenant’s Compliance
	a.	Laws
	b.	Rules and Regulations
Section 13:	ADA Compliance
	a.	Tenant’s Compliance
	b.	Landlord’s Compliance

	c.	ADA Notices
Section 14:	Insurance Requirements
	a.	Indemnification
	b.	Tenant’s Insurance
	c.	Tenant’s Property Insurance
	d.	Certificates of Insurance
	e.	Mutual Waiver of Subrogation
Section 15:	Indemnity
	a.	Indemnity
	b.	Defense Obligation
Section 16:	Quiet Enjoyment
Section 17:	Subordination; Attornment; Non-Disturbance; and Estoppel Certificate
	a.	Subordination and Attornment
	b.	Non-Disturbance
	c.	Estoppel Certificates
	d.	Attorney in Fact
	e.	Modifications Requested by Lender
Section 18:	Assignment — Sublease
	a.	Landlord Consent
	b.	Definition of Assignment
	c.	Permitted Assignments/Subleases
	d.	Notice to Landlord
	e.	Prohibited Assignments/Sublease
	f.	Limitation on Rights of Assignee/Sublessee
	g.	Tenant Not Released
	h.	Landlord’s Right to Collect Sublease Rents Upon Tenant Default
	i.	Excess Rents
	j.	Landlord’s Fees
	k.	Unauthorized Assignment or Sublease
Section 19:	Damages to Premises
	a.	Landlord’s Restoration Obligations
	b.	Termination of Lease by Landlord
	c.	Termination of Lease by Tenant
	d.	Tenant’s Restoration Obligations
	e.	Rent Abatement
	f.	Waiver of Claims

Section 20:	Eminent Domain
	a.	Effect on Lease
	b.	Right to Condemnation Award
Section 21:	Environmental Compliance
	a.	Hazardous Material
	b.	Hazardous Material Laws
	c.	Indemnity
	d.	Tenant’s Covenants
	e.	Inspections by Landlord
	f.	Property
	g.	Tenant’s Liability after Termination of Lease
Section 22:	Default
	a.	Tenant’s Default
	b.	Landlord’s Remedies
	c.	Landlord’s Expenses
	d.	Remedies Cumulative
	e.	No Accord and Satisfaction
	f.	No Reinstatement
	g.	Summary Ejectment
	h.	Surrender
Section 23:	Multiple Defaults
	a.	Loss of Option Rights
	b.	Increased Security Deposit
	c.	Effect on Notice Rights and Cure Periods
Section 24:	Bankruptcy
	a.	Trustee’s Rights
	b.	Adequate Assurance
	c.	Assumption of Lease Obligations
Section 25:	Notices
	a.	Addresses
	b.	Form; Delivery; Receipt
	c.	Address Changes
	d.	Notice by Legal Counsel
Section 26:	Holding Over
Section 27:	Intentionally Deleted

Section 28:	Broker’s Commissions
	a.	Broker
	b.	Landlord’s Obligation
	c.	Indemnity
Section 29:	Miscellaneous
	a.	No Agency
	b.	Force Majeure
	c.	Building Standard Improvements
	d.	Limitation on Damages
	e.	Satisfaction of Judgments Against Landlord
	f.	Interest
	g.	Legal Costs
	h.	Sale of Premises or Building
	i.	Time of the Essence
	j.	Transfer of Security Deposit
	k.	Tender of Premises
	l.	Tenant’s Financial Statements
	m.	Recordation
	n.	Partial Invalidity
	o.	Binding Effect
	p.	Entire Agreement
	q.	Good Standing
	r.	Terminology
	s.	Headings
	t.	Choice of Law
	u.	Effective Date
	v.	Designation of Representatives
	w.	Execution
	x.	No Light, Air or View Easement
	y.	Landlord’s Right to Grant Easements
	z.	No Waiver
Section 30:	Special Conditions
	a.	Renewal Option
	b.	Right of First Offer
	c.	Personal Property
	d.	Approval by Industrial Development Board of Williamson County, Tennessee
Section 31:	Addendum and Exhibits
	a.	Addendum
	b.	Exhibit A — Premises

c.	Exhibit A-l — Workletter
d.	Exhibit B — Rules & Regulations
e.	Exhibit C — Commencement Agreement
f.	Exhibit D — Janitorial Services
g.	Exhibit E — License Agreement
h.	Exhibit F — Bill of Sale
i.	Exhibit G — Work Letter

State of Tennessee       :

County of Williamson :

OFFICE LEASE

     THIS LEASE (“Lease”), made this ____ day of June, 2006, by and between FORD MOTOR LAND DEVELOPMENT CORPORATION, a Delaware corporation (“Landlord”) and SPHERIS OPERATIONS INC., a Tennessee corporation, (“Tenant”), provides as follows:

     1. BASIC DEFINITIONS AND PROVISIONS. The following basic definitions and provisions apply to this Lease:

a	Premises
		Rentable Square Feet:	70,209
		Tenant’s Proportionate Share:	14.25%
		Building/Floors:	Floor 1 (20,969 rsf), Floor 2 (23,606 rsf) and Floor 3 (23,876 rsf), in Building C and a portion of the existing Data Center (1,758 RSF) on Floor 1 in Building A* of the Office Complex
		Street Address:	9009 Carothers Parkway
		City/County:	Franklin, Williamson
		State/Zip Code:	Tennessee 37067
*   The portion of floor 1 in building A that is included in the Premises is cross-hatched on the Exhibit A-3 attached hereto. Said space is sometimes referenced to herein as the “Data Center”
b	Term.
		FLOOR 2 AND FLOOR 3 of Building C and DATA CENTER in Building A:
		Number of Months:	120
		Est. Commencement Date:	October 15, 2006
		Est. Expiration Date:	October 31, 2016
		Extension Term:	(2) 60-month Extension Terms

1

		FLOOR 1 of Building C:
		Number of Months :	Up to 120 months, but no less than 108 months (depending on when the Commencement Date for such space occurs)
		Commencement Date:	A date selected by Tenant upon written notice to Landlord, provided that such Commencement Date may be no later than the first day of the thirteenth (13th) month after the actual Commencement Date for Floor 2 and Floor 3
		Est. Expiration Date:	October 31, 2016
		Extension Terms:	(2) 60-month Extension Terms
c.	Permitted Use		(i) Medical transcription technology and services, office and administrative functions, shipping and receiving, and/or (ii) general office use.
d	Occupancy Limitation:		No more than 5 persons per one thousand (1,000) rentable square feet.

     e. Base Rent. The minimum base rent for the Term is payable in monthly installments on or before the 1st day of each month during the Lease Term in accordance with the following Base Rent Schedule:

     Floor 1*, Floor 2 and Floor 3, Building C and Data Center, Building A:

MONTHS	ANNUAL BASE RENT/RSF		MONTHLY RENT
Months 1-6	$	0.00	$	0.00
Months 7-12	$	19.50	$	80,015.00	**
Months 13-24	$	20.00	$	117,015.00
Months 25-36	$	20.50	$	119,940.38
Months 37-48	$	21.00	$	122,865.75
Months 49-60	$	21.50	$	125,791.13
Months 61-72	$	22.00	$	128,716.50
Months 73-84	$	22.50	$	131,641.88
Months 85-96	$	23.00	$	134,567.25
Months 97-108	$	23.50	$	137,492.63
Months 109-120	$	24.00	$	140,418.00

* Base Rent for Floor 1 (when the same commences) shall be at the then escalated Base Rent rate for the remainder of the Leased Premises; provided, however, that Tenant shall pay no Base Rent with respect to

2

	Floor 1 until the earlier of (a) the date that is six (6) months after the Commencement Date for Floor 1, or (b) the first day of the thirteenth (13th) month of the Term.
**	This rental amount for months 7-12 does not include any rent with respect to Floor 1. Accordingly, this rental amount shall increase with respect to any month (during months 7 through 12, inclusive) in which Base Rent is required to be paid with respect to Floor 1, the amount of such increase to be equal to $34,074.63 (prorated for any partial month).
	Extension Term Base Rent: The Fair Market Rental Value, as determined in Section 30 a, for each Extension Term.

f. Rent Payment Address. FORD MOTOR LAND DEVELOPMENT CORPORATION
Dept. 186-01 PO Box
67000 Detroit, MI
48267-0186

g.	Security Deposit.	Months	Balance
		1-12	$	500,000
		13-24	$	400,000
		25-36	$	300,000
		37-48	$	200,000
		49-60	$	100,000

Tenant shall provide Landlord a cash security deposit, or equivalent letter of credit per the terms of Letter of Credit Option in 6.(d) below, (the “Security Deposit”) in an amount equal Five Hundred Thousand Dollars ($500,000) within fifteen (15) days of Lease execution. This Security Deposit shall be reduced by One Hundred Thousand Dollars ($100,000.00) per year of Term until Landlord retains One Hundred Thousand Dollars ($100,000.00) to be held until the expiration of the sixtieth (60^th) month of Term at which time, provided Tenant is not in Default, Landlord shall waive Tenant’s obligation and return to Tenant any held Security Deposit. In the event at any time during the Term Tenant provides audited financial statements demonstrating shareholder equity, in accordance with generally accepted accounting principles, in excess of One Hundred Million Dollars ($100,000,000.00), Landlord shall waive any requirement for the Security Deposit and return to Tenant any held Security Deposit within thirty (30) days. Upon any such waiver of Tenant’s obligation to maintain a Security Deposit, all terms and provisions of Article 6 hereof shall thereafter be null and void.

h. Business Hours. 7:00 A.M. to 6:00 P.M. on Business Days and 8:00 A.M. to 1:00 P.M. on Saturdays. The term “Business Day” shall mean Monday through Friday, but excludes the following holidays or the days on which the holidays are designated for observance: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

3

i.	Electrical Service.	No more than 4 watts per usable square foot for convenience outlets and lighting.
j.	After Hours HVAC Rate.	$35.00 per hour, per floor, with a minimum of two (2) hours per occurrence.
k.	Parking.	Unreserved; not to exceed 5 spaces per 1,000 rentable square feet.
1.	Construction Fee.	Not Applicable
m.	Notice Addresses.
	LANDLORD:	FORD MOTOR LAND DEVELOPMENT CORPORATION 330 Town Center Drive, Suite 1100 Dearborn, MI 48126 Phone: 313-323-3100 Facsimile: 313-390-7488
	with a copy to:	Ford Motor Company Office of the General Counsel 330 Town Center Drive, Suite 1100 Dearborn, MI 48126 Attn: Real Estate Counsel Phone #: 313-323-3000 Facsimile #: 313-390-7488
	TENANT:	SPHERIS OPERATIONS INC. 720 Cool Springs Blvd., Suite 200 Franklin, TN 37067 Attn: Chief Administrative Officer Phone: 615-261-1500 Facsimile #:615-261-1792
	with a copy to:	Bass Berry & Sims, PLC 2700 AmSouth Center 315 Deaderick St. Nashville, TN 37238-3001 Attn: D. Mark Sheets, Esq. Phone: 615-742-6258 Facsimile #: 615-742-2758

4

n.	Broker.	CB Richard Ellis 150 4th Avenue North, Suite 2110 Nashville, TN 37219 Attn: Ms. Janet Sterchi Phone: (615) 248-1118 Facsimile # (615) 255-4610
o.	Buildings	Building A and Building C of the Office Complex as depicted and labeled as Building A and “Building C” on the site plan attached hereto as Exhibit A-l (the “Site Plan”)
p.	Office Complex	The land described on Exhibit A-2 attached hereto, together with all buildings (consisting of Buildings A, B, C and D, as shown on the Site Plan and consisting of 492,807 rentable square feet in the aggregate) and other improvements located thereon.

     2. LEASED PREMISES.

     a. Premises. Landlord leases to Tenant and Tenant leases from Landlord the Premises identified in Section 1a and as more particularly shown on Exhibit A, attached hereto. All of the perimeter walls of the Premises, any balconies, terraces or roofs adjacent to the Premises (including any installations on said walls, balconies, terraces and roofs), and any space in and/or adjacent to the Premises used for shafts, stairways, stacks, pipes, conduits, ducts, mail chutes, conveyors, pneumatic tubes, electric or other utilities, fans or other facilities (but excluding such facilities that are reasonably intended to be occupied by Tenant for the Permitted Use) of the Building and the use thereof, as well as access thereto through the Premises (upon reasonable prior notice and at and for such times as shall not unreasonably interfere with Tenant’s business) for the purpose of such use and the operation, improvement, replacement, addition, repair, maintenance, or decoration thereof, are expressly reserved to Landlord.

     b. Rentable Square Foot Determination and Tenant’s Proportionate Share. The parties acknowledge that all square foot measurements are approximate and agree that the square footage figures in Section la shall be conclusive for all purposes with respect to this Lease. The term “Tenant’s Proportionate Share” shall mean the percentage figure specified in Item 1a. Tenant’s Proportionate Share has been computed on the basis of the rentable square feet area of the Premises divided by the total rentable square feet of Buildings A, B, C and D of the Office Complex (the “Office Complex Buildings”). In the event the final design of any of the Office Complex Buildings (including any new buildings that may hereafter be constructed within the Office Complex) is hereafter modified such that the rentable area of the Premises or the Office Complex Buildings (including any new buildings that may hereafter be constructed within the Office Complex) differs from the square footage set forth herein or in the event any new buildings are constructed within the Office Complex, Landlord shall recalculate the rental square foot determination and Tenant’s Proportionate Share based upon such modification or change for the remainder of the Term and shall notify Tenant of such recomputed rentable square foot determination and Tenant’s Proportionate Share.

5

     c. Common Areas. Tenant shall have non-exclusive access to (and use of) the common areas of the Building and the Office Complex. The common areas generally include space that is not included in portions of the building set aside for leasing to tenants or reserved for Landlord’s exclusive use, including parking areas, driveways, building signs, landscaping, paving, sidewalks, hallways, stairways, elevators, common entrances, lobbies, restrooms and other similar public areas and access ways including such automobile parking lot facilities in the Building and/or the Office Complex as Landlord may designate from time to time (“Common Areas”), provided that Landlord shall have the right to eliminate, substitute and/or rearrange such areas which may theretofore have been so designated as Landlord deems appropriate in its discretion; provided, however, that in no event may Landlord take any such action that would permanently reduce the available parking in the vicinity of the Building or permanently impair Tenant’s ingress and egress to and from the Building. Landlord has the exclusive right to (i) designate the Common Areas, (ii) change the designation of any Common Area and otherwise modify the Common Areas, and (iii) permit special use of the Common Areas, including temporary exclusive use for special occasions; provided, however, that in no event may Landlord take any such action that would permanently reduce the available parking in the vicinity of the Building or permanently impair Tenant’s ingress and egress to and from the Building. Tenant shall not unreasonably interfere with the rights of others to use the Common Areas. All use of the Common Areas shall be subject to the rules and regulations described in Section 12(b) hereof. Any temporary reduction of the available parking in the vicinity of the Building or any temporary impairment of the ingress and egress to and from the Building shall (x) occur only during cases of emergency or as reasonably necessary in connection with any repairs, alterations or construction by Landlord, and (y) be accomplished in such a manner to allow minimal interference with Tenant’s access to, and parking on, the Common Areas to the extent practicable in light of the then-current situation.

     d. Building. The term “Building” shall mean the buildings designated in Item 1o and the land and other real property in the parcel more particularly described on Exhibit “A” hereto, and all other improvements on or appurtenances to said parcel. Landlord reserves the right to make such changes, alterations, additions, improvements, repairs or replacements in or to the Building (including the Premises) and the fixtures and equipment thereof, as well as in the street entrances, halls, passages, elevators, escalators and stairways and other parts of the Building, and to erect, maintain, and use pipes, ducts and conduits in and through the Premises, all as it may reasonably deem necessary or desirable; provided, however, that (a) there be no unreasonable obstruction of the means of access to the Premises or unreasonable interference with the use of the Premises, and (b) in no event shall Landlord take any such action that would permanently reduce available parking.

     3. TERM.

     a. Commencement and Expiration Dates. Section lb sets forth the Commencement Date for Floor 1, the Estimated (Est.) Commencement Date for Floor 2 and Floor 3 in Building C and the Data Center in Building A and the Estimated (Est.) Expiration Date. Notwithstanding the listing of such dates, Landlord and Tenant hereby agree that (i) the actual Commencement Date with respect to Floor 2 and Floor 3 in Building C and the Data Center in Building A shall be adjusted to be the date of substantial completion (as defined below) of the Work (as defined below), (ii) the Commencement Date with respect to Floor 1 shall be the date specified in

6

Tenant’s notice described in Section 1b above, but not later than September 1, 2007, and (iii) the actual Expiration Date with respect to the entire Leased Premises shall be the date that is one hundred twenty (120) months after the actual Commencement Date with respect to Floor 2 and Floor 3 in Building C and the Data Center in Building A; provided, however, that if such Expiration Date is a date other than the last day of a month, then the Expiration Date shall be extended to the last day of such month. The Lease Term or “Term” shall commence on the actual Commencement Date for Floor 2 and Floor 3 in Building C and the Data Center in Building A and shall expire on the actual Expiration Date described above, unless extended for one of more of the Extension Terms described in Section lb above.

     b. Possession Date. Landlord anticipates that the Tenant Improvements (as defined in the Workletter) will be substantially complete on or before Estimated Commencement Date for Floor 2 and Floor 3 in Building C and the Data Center in Building A. With the exception of Tenant Delays, in the event the Improvements are not substantially completed by December 31, 2006, Tenant, at its option, may terminate this Lease by providing notice of such termination to Landlord. For purposes of this Lease, the Improvements shall be deemed to be substantially complete in accordance with Paragraph 3d.

     c. Notice of Completion of Tenant Improvements. Landlord shall advise Tenant of the anticipated date of substantial completion at least forty-five (45) days prior thereto.

     d. Substantial Completion. For purposes of this Lease the terms “substantial completion”, “substantially complete” and terms of similar import shall mean that the first business day following a weekend after the date that (1) the work has been completed in accordance with the Workletter except for minor insubstantial details (“punch list items”) which do not affect the use and occupancy of the space to which they relate (which punch list items shall be completed by Landlord as soon as possible thereafter), (2) Landlord certifies to Tenant in writing that such work has been so completed in accordance with the requirements set forth in the Workletter, and (3) a temporary certificate of occupancy or certificate of occupancy has been issued for the space and delivered to Tenant.

     e. Early Occupancy.

(i) Landlord shall permit Tenant and its agents to enter the Premises from and after the date that is forty-five (45) days prior to the anticipated Commencement Date (as set forth in the notice described in Section 3c above), at the same time that Landlord’s contractors are working in the space, in order that Tenant may install phone systems, cabling, furniture, fixtures and equipment or perform other work through its own contractors approved in advance (not to be unreasonably withheld) in writing by Landlord. The foregoing license to enter prior to the Commencement Date is conditioned upon Tenant’s workers and mechanics working in harmony and not interfering with the labor employed by Landlord, Landlord’s mechanics or contractors or with any other tenants or their contractors. Such license is further conditioned upon Tenant complying with all the insurance requirements contained in the Lease, together with worker’s compensation insurance, and certificates of such insurance being furnished to Landlord prior to entry upon the Premises. If any time such

7

entry shall cause disharmony or interference to other contractors or labor, to include strikes or other work stoppages, this license may be immediately suspended by Landlord upon notice to Tenant until such time as Landlord receives reasonably satisfactory assurances that such disharmony or interference shall cease. Such entry shall be deemed to be under all of the terms, covenants, provisions, and conditions of the Lease except as to the covenant to pay Rent. Landlord shall not be liable in any way for any injury, loss or damage which may occur to any of Tenant’s personal property, including, but not limited to, decorations, phone systems, cabling, furniture, fixtures, equipment or installations so made prior to the Commencement Date, the same being solely at Tenant’s risk. In addition, Tenant agrees (i) any such entry by Tenant shall be at Tenant’s sole risk, (ii) Tenant, together with its employees, agents and independent contractors will be subject to and will work under the direction of Landlord’s contractor, and (iii) Tenant and its agents and contractors agree to comply with all applicable laws, regulations, permits and other approvals required to perform its work during the early entry on the Premises.

(ii)

At Tenant’s option upon written notice to Landlord, at any time after the execution of this Lease, Tenant may elect to occupy and use Floor 1 as interim space. Tenant’s use and occupancy of such space shall be upon the same terms and conditions as are set forth in this Lease, except that no Base Rent or Additional Rent shall be due or payable with respect thereto. Tenant’s use and occupancy of Floor 1 shall not constitute or be deemed to be the Commencement Date with respect to Floor 1 and shall not constitute the commencement of the Lease Term; provided, however, that said Commencement Date for Floor 1 shall automatically be deemed to have occurred if Tenant shall fail to vacate and surrender its interim possession of Floor 1 by the date that is thirty (30) days after the actual Commencement Date for Floor 2 and Floor 3.

     f. Right to Occupy. Tenant shall not occupy the Premises until Tenant has complied with all of the following requirements to the extent applicable under the terms of this Lease: (i) delivery of all certificates of insurance, (ii) payment of Security Deposit, if a Security Deposit is indicated in Section 1 g, , and (iii) if Tenant is an entity, receipt of a good standing certificate from the State where it was organized and a certificate of authority to do business in the State in which the Premises are located (if different); provided, however, that the requirement set forth in clause (iii) above shall not be a requirement for Tenant’s possession of the Premises pursuant to Sections 3(b) or 3(e) above. Tenant’s failure to comply with these (or any other conditions precedent to occupancy under the terms of this Lease) shall not delay the Commencement Date.

     g. Commencement Agreement. The actual Commencement Date for Floor 2 and Floor 3 of Building C, the Commencement Date for Floor 1 of Building C and Data Center, Building A, Term, and Expiration Date shall be set forth in a Commencement Agreement similar to Exhibit C, attached hereto, to be prepared by Landlord and executed by the parties.

8

     4. USE.

     a. Permitted Use. The Premises may be used only for Tenant’s Permitted Use as defined in Section 1c and in accordance with the Occupancy Limitation as set forth in Section 1d.

     b. Prohibited Uses. Tenant shall not use the Premises:

(i)	In violation of the restrictive covenants described in Section 9.10 of that certain Declaration of Protective Covenants and Owners Association for Cool Springs East Side dated October 4, 1994, of record in Book 1235, page 725, Register’s Office for Williamson County, Tennessee (the “Protective Covenants”), a copy of which has been provided by Landlord to Tenant, or in violation of the rules and regulations described in Section 12b hereof;
(ii)	In any manner that constitutes a nuisance or trespass, or will in any way violate any law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted or promulgated,
(iii)	In any manner that will adversely affect or interfere with any services required to be furnished by Landlord to Tenant, or to any other tenants or occupants of the Building or with the proper and economical rendition of any such service.
(iv)	In any manner that will in any way obstruct or interfere with the rights of other tenants of the Building or injure them, or use or allow the Premises to be used for any unlawful purpose, or commit or suffer to be committed any waste in, on or about the Premises;
(v)	In any manner which increases any insurance premiums, or makes such insurance unavailable to Landlord on the Building; provided that, in the event of an increase in Landlord’s insurance premiums which results from Tenant’s use of the Premises, Landlord may elect to permit the use and charge Tenant for the increase in premiums, and Tenant’s failure to pay Landlord, on demand, the amount of such increase shall be an event of default (in any action or proceeding wherein Landlord and Tenant are parties, a schedule or “make up” of rates applicable to the Building issued by the Tennessee Insurance Bureau, or other similar body fixing such fire insurance rates, shall be conclusive evidence of the facts therein stated and the several items and charges in the fire insurance rates therein);
(vi)	In any manner that creates unusual demands for electricity, heating or air conditioning (except as permitted by Section 4(c) below); or
(vii)	For any purpose except the Permitted Use, unless consented to by Landlord in writing.

9

(viii) That shall cause or permit the use, generation, storage or disposal in or about the Premises or the Building of any substances, materials or wastes subject to regulation under Federal, State or local laws from time to time in effect concerning hazardous, toxic or radioactive materials (excluding the storage and use of normal cleaning supplies and office supplies customarily used for the Permitted Use, all of which shall be permitted without Landlord’s consent so long as such items are stored and used in compliance with applicable environmental laws), unless Tenant shall have received Landlord’s prior written consent, which Landlord may withhold or at any time revoke in its sole discretion.

     c. Prohibited Equipment in Premises. Tenant shall not install any equipment in the Premises that places unusual demands on the electrical, heating or air conditioning systems (“High Demand Equipment”) without Landlord’s prior written consent. No such consent will be given if Landlord determines, in its opinion, that such equipment may not be safely used in the Premises or that electrical service is not adequate to support the equipment. Landlord’s consent may be conditioned, without limitation, upon separate metering of the High Demand Equipment and Tenant’s payment of all engineering, equipment, installation, maintenance, removal and restoration costs and utility charges associated with the High Demand Equipment and the separate meter. If High Demand Equipment used in the Premises by Tenant affect the temperature otherwise maintained by the heating and air conditioning system, Landlord shall have the right to install supplemental air conditioning units in the Premises with the cost of engineering, installation, operation and maintenance of the units to be paid by Tenant. All costs and expenses relating to High Demand Equipment and Landlord’s administrative costs (such as reading meters and calculating invoices) shall be Additional Rent, payable by Tenant upon demand. Notwithstanding the above, the Tenant shall be permitted to install High Demand Equipment in the Data Center in Building A, subject to Landlord’s review and approval, which shall not be unreasonably withheld.

     5. RENT.

     a. Payment Obligations. Tenant shall pay Base Rent and Additional Rent (collectively, “Rent”) on or before the first day of each calendar month during the Term, as follows:

(i)	Rent payments shall be sent to the Rent Payment Address set forth in Section 1f.
(ii)	Rent shall be paid without previous demand or notice and without set off or deduction. Tenant’s obligation to pay Rent under this Lease is completely separate and independent from any of Landlord’s obligations under this Lease.
(iii)	If the Term commences on a day other than the first day of a calendar month, then Rent for such month shall be (i) prorated for the period between the Commencement Date and the last day of the month in which

10

	the Commencement Date falls, and (ii) due and payable on the Commencement Date.
(iv)	For each Rent payment Landlord receives after the fifth (5th) day of the month, Landlord shall be entitled to a late charge in the amount of five percent (5%) of all delinquent amounts.
(v)	If Landlord presents Tenant’s check to any bank and Tenant has insufficient funds to pay for such check, then Landlord shall be entitled to all default remedies provided under the terms of this Lease and the maximum lawful bad check fee or five percent (5%) of the amount of such check, whichever amount is less.

     b. Base Rent. Tenant shall pay Base Rent as set forth in Section 1e.

     c. Additional Rent In addition to Base Rent, Tenant shall pay as rent all sums and charges due and payable by Tenant under this Lease (“Additional Rent”), including, but not limited to, the following:

(i)

Tenant’s Proportionate Share of the increase in Landlord’s Operating Expenses as set forth in the Addendum; and

(ii)

Any sales or use tax imposed on rents collected by Landlord or any tax on rents in lieu of ad valorem taxes on the Building, even though laws imposing such taxes attempt to require Landlord to pay the same; provided, however, if any such sales or use tax are imposed on Landlord and Landlord is prohibited by applicable law from collecting the amount of such tax from Tenant as Additional Rent, then Landlord and Tenant shall amend this Lease in order to increase the Base Rent by an amount sufficient to cover Tenant’s obligation with respect to such taxes; provided, however, that if such an amendment shall not be effective to avoid such tax, then Landlord, upon sixty (60) days prior notice to Tenant, may terminate this Lease.

     6. SECURITY DEPOSIT.

     a. Amount of Deposit. Until such time as Tenant’s obligation to maintain a Security Deposit is waived pursuant to Section 1g above, Tenant shall deposit with Landlord a Security Deposit in the amount set forth in Section 1g, which sum Landlord shall retain as security for the performance by Tenant of each of its obligations hereunder. Landlord shall not be required to keep the Security Deposit separate from its general accounts.

11

     b. Application of Deposit. If Tenant at any time fails to perform any of its obligations under this Lease, including its Rent or other payment obligations, its restoration obligations, or its insurance and indemnity obligations, then Landlord may, at its option, apply the Security Deposit (or any portion) to cure Tenant’s default or to pay for damages caused by Tenant’s default. If the Lease has been terminated, then Landlord may apply the Security Deposit (or any portion) against the damages incurred as a consequence of Tenant’s breach. The application of the Security Deposit shall not limit Landlord’s remedies for default under the terms of this Lease. If Landlord depletes the Security Deposit, in whole or in part, prior to the Expiration Date or any termination of this Lease, then Tenant shall restore immediately the amount so used by Landlord.

     c. Refund of Deposit. Except to the extent that (i) Landlord uses the Security Deposit to cure a default of Tenant, to pay damages for Tenant’s breach of the Lease, or to restore the Premises to the condition to which Tenant is required to leave the Premises upon the expiration or any termination of the Lease, and (ii) such amounts are not replenished by Tenant, then Landlord shall, within sixty (60) days after the Expiration Date or any termination of this Lease, refund to Tenant the Security Deposit. Tenant may not credit the Security Deposit against any month’s Rent. Upon any reduction of the required Security Deposit amount, as set forth in Section 1(g), Landlord shall, within thirty (30) days after any such reduction, refund to Tenant that portion of the Security Deposit as is necessary to reduce the Security Deposit to the required amount.

     d. Letter of Credit Option.

(i)

At Tenant’s election, in lieu of the Security Deposit in the amounts indicated in Item lg for years 1-5 (i.e. through the fifth anniversary of the actual Commencement Date for Floor 2 and Floor 3), Tenant at any time simultaneously with, or following the execution of this Lease, shall deliver to Landlord an irrevocable letter of credit payable in Dearborn, Michigan running in favor of Landlord issued by a bank under the supervision of the State of Michigan or a National Banking Association, in the amounts indicated in lg. The letter of credit shall be irrevocable for the term thereof and shall provide that it is automatically renewed for successive 1- year periods without any action whatsoever on the part of Landlord; provided that the issuing bank shall have the right not to renew said letter of credit on written notice to Landlord not less than 60 days prior to the expiration of the then current term thereof (it being understood, however, that the privilege of the issuing bank not to renew said letter of credit shall not, in any event, diminish the obligation of Tenant to maintain such irrevocable letter of credit (or a Security Deposit) with Landlord through the expiration of the fifth (5th) year of the term hereof.

(ii)

The form and terms of the letter of credit (and the bank issuing the same) shall be reasonably acceptable to Landlord and shall provide, among other things, in effect that:

(A) Landlord or its managing agent shall have the right to draw down an amount up to the face amount of the letter of credit upon the

12

	presentation to the issuing bank of Landlord’s statement that such amount is due to Landlord under the terms and conditions of this Lease, it being understood that if Landlord or its managing agent be a corporation, partnership or other entity, then such statement shall be signed by an officer (if a corporation), a general partner (if a partnership), or any authorized party (if another entity).
(B)	The letter of credit will be honored by the issuing bank without inquiry as to the accuracy thereof and regardless of whether the Tenant disputes the content of such statement.
(C)	In the event of a transfer of Landlord’s interest in the Building of which the Premises are a part, Landlord shall have the right to transfer the letter of credit to the transferee and thereupon the Landlord shall, without any further agreement between the parties, be released by Tenant from all liability therefor, and it is agreed that the provisions hereof shall apply to every transfer or assignment of said letter of credit to a new Landlord.

(iii)	If, as a result of any such application of all or any part of such security, the amount so available under the letter of credit shall, when aggregated with any cash Security Deposit then held by Landlord, be less than the amounts indicated in Section lg, Tenant shall forthwith provide Landlord with additional letter(s) of credit (or shall increase the cash Security Deposit) in an amount equal to the deficiency.
(iv)	Tenant further covenants that it will not assign or encumber said letter of credit or any part thereof and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance.
(v)	Without limiting the generality of the foregoing, if the letter of credit expires earlier than the end of the fifth year of the term of this Lease, or the issuing bank notifies Landlord that it shall not renew the letter of credit, Landlord will accept a renewal thereof or substitute letter of credit (such renewal or substitute letter of credit to be in effect not later than 30 days prior to the expiration thereof), irrevocable and automatically renewable as provided above upon the same terms as the expiring letter of credit or such other terms as may be reasonably acceptable to Landlord. However, (A) if the letter of credit is not timely renewed or a substitute letter of credit (or cash Security Deposit) is not timely received, or (B) if Tenant fails to maintain the letter of credit (or cash Security Deposit) in the amount and terms set forth in this Section, Tenant, at least 30 days prior to the expiration of the letter of credit, or immediately upon its failure to comply with each and every term of this Section, must deposit with Landlord cash security in the amounts required by, and to be held subject to and in accordance with, all of the terms and conditions set forth in Section 6 hereof, failing which the Landlord may present such letter of

13

credit to the bank in accordance with the terms of this Section, and the entire sum secured thereby shall be paid to Landlord, to be held by Landlord as provided in this Section.

     e. Obligation Upon Transfer by Landlord. In the event of a transfer of Landlord’s interest in the Building of which the Premises are a part, Landlord shall transfer the letter of credit and/or any Security Deposit to the transferee, shall obtain such transferee’s agreement to assume Landlord’s obligations under this Lease with respect to such letter of credit and Security Deposit and thereupon the Landlord shall, without any further agreement between the parties, be released by Tenant from all liability therefor, and it is agreed that the provisions hereof shall apply to every transfer of the Building to a new Landlord.

     f. Letter of Credit Proceeds. In the event Landlord draws upon any letter of credit posted hereunder, the proceeds of such letter of credit shall be applied by Landlord for any purpose described in Section 6b above (to the same extent that the Security Deposit may be used for such purposes), with any remaining proceeds being held by Landlord as a Security Deposit under Section 6a above.

     g. Replacement Security. At any time during the term hereof, Tenant may replace any Security Deposit and/or letter(s) of credit posted hereunder with new letter(s) of credit, a cash Security Deposit or a combination thereof (“Replacement Security”) so long as (i) any letters of credit comply with the requirements of Section 6d above, and (ii) the aggregate amount of all letters of credit, plus the amount of any cash Security Deposit, held by Landlord equals the amount of Security Deposit required by Section lg hereof. Upon the delivery of any Replacement Security to Landlord, Landlord shall release and deliver to Tenant the Security Deposit and/or letters of credit that are being replaced.

     7. SERVICES BY LANDLORD.

     a. Base Services. Provided that Tenant is not then in default beyond applicable periods of notice and cure, Landlord shall cause to be furnished to the Building, or as applicable, the Premises, in common with other tenants the following services:

(i)

Water (if available from city mains) for drinking, lavatory and toilet purposes and interior sprinkler systems.

(ii)

Electricity (if available from the utility supplier) for the building standard fluorescent lighting and for the operation of general office machines, such as electric typewriters, desk top computers, dictating equipment, adding machines and calculators, and general service non production type office copy machines; provided that Landlord shall have no obligation to provide more than the amount of power for convenience outlets and lighting as set forth in Section li. Landlord will provide emergency back-up power throughout the second floor and in the Tenant’s IS/Communications room as long at it remains on the second floor. The existing electrical systems are designed to provide approximately 3 watts/ft of 120 volt AC power to each floor area. Lighting is supplied separate via the 277 volt AC system.

14

	Each floor has a bulk lighting and power capacity of approximately 10 watts/ft based on the existing bus risers and the emergency distribution on the second floor. This is independent of the heating and cooling systems serving these areas. Additional bulk capacity is available at the main switchboard but would require new devices and/or reconfigurations to access as well as feeder distribution to points of utilization. Exact capacity would require verification of total building existing load verses service size. Electrical power is provided by TVA through Middle Tennessee Electric Co-op. The building is connected to two substations by means of an automatic transfer switch. In the event of loss of power from the primary substation, the switch automatically transfers to the secondary substation within approximately 3 seconds. The existing building generators provide emergency power to all life safety lighting and security needs, as well as emergency back up power to the elevators and to the 2nd floor of each individual building including all electrical circuits, lighting and HVAC. The Data Center will be separately metered for electricity at Tenant’s sole cost, subject to review and approval of plans and specifications by Landlord, which shall not be unreasonably withheld.
(iii)	Operatorless elevator service.
(iv)	Building standard fluorescent lighting fixtures; Tenant shall service, replace and maintain at its own expense any incandescent fixtures, table lamps, or lighting other than the building standard fluorescent light, and any dimmers or lighting controls other than controls for the building standard fluorescent lighting.
(v)	Heating and air conditioning for the reasonably comfortable use and occupancy of the Premises during Business Hours as set forth in Section 1h; provided that, heating and cooling conforming to any governmental regulation prescribing limitations thereon shall be deemed to comply with this service. As a component of the HVAC system, an automatic damper system operates in the event that a rooftop unit for Floors 1-5 should fail. If failure occurs, the air supply from the lower level unit is re-routed to supply air to the floor in question.
(vi)	After Business Hours, weekend and holiday heating and air conditioning at the After Hours HVAC rate set forth in Section 1j, with such charges subject to commercially reasonable annual increases (consistent with any increase in Landlord’s actual utility costs) as reasonably determined by Landlord.
(vii)	Janitorial services five (5) days a week (excluding National and State holidays) after Business Hours, described in Exhibit D attached hereto.
(viii)	Non-exclusive use of the unreserved parking spaces of the Building, not to exceed the Parking specified in Section 1k, for use by Tenant’s employees

15

	and visitors in common with the other tenants and their employees and visitors.
(ix)	Interior security guard services for the Building to monitor the parking lot and other Common Areas as well as the interior of the Building. Additional security services shall be provided to Tenant at Tenant’s cost. Tenant shall have access to the Premises 24 hours/day, 7 days a week. Ingress and egress is currently accessed by a card key system.
(x)	Fiber optic communication cabling to the Building is provided by Bellsouth. The Building is served as a RAC (Remote Access Circuit) off the ring. Landlord offers Tenant the right to install fiber according to Tenant’s needs, subject to approval by Bellsouth. Landlord makes no representations as to the current status of cabling within the Premises.
(xi)	Landlord will maintain or cause to maintain a fitness facility within the Office Complex. Landlord will also provide or cause to be provided onsite food service within the Office Complex with minimum operating hours of 7:30 AM to 2:00 PM., Monday through Friday. Landlord shall provide 24/7 vending machine and banking (ATM) services within the Office Complex.
(xii)	Tenant shall be permitted to use the Conference Rooms located in the lower level of Building C, on a first come, first served basis, upon one (1) day prior written notice. Rental for each Conference Room shall be at the rate specified below, and shall be subject to the terms of this Lease. Tenant will be allowed to use the Conference Rooms up to five (5) times per year at no charge; any subsequent use of the Conference Rooms will be at the rate of $25 per occurrence. Tenant will be responsible for leaving the Conference Rooms in clean condition.

     b. Landlord’s Maintenance. Landlord shall maintain and make all repairs and replacements to the Building (including Building fixtures and equipment), Common Areas and Building Standard Improvements in the Premises, all in a manner consistent with the maintenance of Class A office space, except for repairs and replacements that Tenant must make under Section 8. Landlord’s maintenance shall include the roof, foundation, exterior walls, interior structural walls, all structural components, and all Building systems, such as mechanical, electrical, HVAC and plumbing. Repairs or replacements shall be made within a reasonable time (depending on the nature of the repair or replacement needed) after receiving notice from Tenant or Landlord having actual knowledge of the need for a repair or replacement.

     c. No Abatement. Except as provided below, there shall be no abatement or reduction of Rent by reason of any of the foregoing services not being continuously provided to Tenant. Landlord shall have the right to shut down the Building systems (including electricity and HVAC systems) to the extent reasonably necessary for required maintenance and safety inspections, and in cases of emergency; provided, however, that Landlord shall use commercially reasonable efforts to cause any such shutdown of services to occur at such times, and in such manner, so as to provide minimal interference with Tenant’s business operations, and

16

shall consult with Tenant as to how to achieve such result (unless, in case of emergency, consultation with Tenant is not practical). In the event of any failure or interruption of the services described above that continues for more than 72 consecutive hours, Tenant shall be entitled to an equitable abatement of Rent for each day that such failure or interruption continues if such failure or interruption materially and adversely affects Tenant’s ability to operate its business within the Premises.

     d. Tenant’s Obligation to Report Defects. Tenant shall promptly report to Landlord any defective condition in or about the Premises known to Tenant.

     e. Limitation on Landlord’s Liability. Landlord shall not be liable to Tenant for any damage caused to Tenant and its property due to the Building or any part or appurtenance thereof being improperly constructed or being or becoming out of repair, or arising from the leaking of gas, water, sewer or steam pipes, or from problems with electrical service.

     8. TENANT’S ACCEPTANCE AND MAINTENANCE OF PREMISES.

     a. Acceptance of Premises. Subject to the terms of the attached Workletter, if any, Tenant’s occupancy of the Premises is Tenant’s representation to Landlord that (i) Tenant has examined and inspected the Premises, (ii) finds the Premises to be as represented by Landlord and satisfactory for Tenant’s intended use, and (iii) constitutes Tenant’s acceptance of the Premises “as is”. Landlord makes no representation or warranty as to the condition of the Premises except as may be specifically set forth in the Workletter or in this Lease. In no event shall the foregoing provision be construed as a waiver of any of Landlord’s repair obligations under Section 7b or any of Landlord’s obligations under the Workletter

     b. Move-In Obligations. Tenant shall schedule its move-in with the Landlord’s Property Manager. Unless otherwise approved by Landlord’s Property Manager, move in shall not take place during Business Hours. During Tenant’s move-in, a representative of Tenant must be on-site with Tenant’s moving company to insure proper treatment of the Building and the Premises. Elevators, entrances, hallways and other Common Areas must remain in use for the general public during business hours. Any specialized use of elevators or other Common Areas must be coordinated with Landlord’s Property Manager. Tenant must properly dispose of all packing material and refuse in accordance with the Rules and Regulations described in Section 12b. Subject to Section 14e, any damage or destruction to the Building or the Premises due to moving will be the sole responsibility of Tenant.

     c. Tenant’s Maintenance. Tenant shall: (i) keep the Premises and fixtures (excluding those items that Landlord is obligated to repair pursuant to Section 7b) in the same or better condition as it existed on the Commencement Date; (ii) make repairs and replacements to the Premises or Building needed because of Tenant’s misuse or negligence (subject, however, to Section 14e); (iii) repair and replace Non-Standard Improvements, including any special equipment or decorative treatments, installed by or at Tenant’s request that serve the Premises (unless the Lease is ended because of casualty loss or condemnation); and (iv) not commit waste.

     d. Alterations to Premises. Tenant shall make no structural or interior alterations to the Premises. If Tenant requests such alterations and such alterations are structural in nature, then Tenant shall provide Landlord with a complete set of construction drawings. If Landlord

17

consents to the alterations, then the Landlord shall determine the actual cost of the work to be done. Tenant may then either agree to pay Landlord to have the work done or withdraw its request for alterations; provided, however, that at Tenant’s request, Landlord shall not unreasonably withhold its consent to allowing Tenant and/or Tenant’s contractors to perform such work. All such alterations are subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Subject to the terms of this paragraph, and notwithstanding any provision of this Lease to the contrary, Landlord agrees to allow Tenant to construct (i) a data center within the Premises and to install equipment (which may include generator, condensers, UPS, etc.) in the Building and around the land surrounding the Building necessary to facilitate the operation of Tenant’s data center, and (ii) an opening in the curtain wall of Floor 1 of Building C, to install two (2) four foot doors within such opening, to improve the outside area for delivery access and to install other improvements (which may include a large dumpster) to the Building and the land surrounding the Building necessary to facilitate the operation of Tenant’s Fulfillment Center. All such alterations shall be performed by Tenant’s contractors (which shall be subject to Landlord’s approval, not to be unreasonably withheld), at Tenant’s sole cost and expense.

     Notwithstanding the above paragraph, Tenant shall have the right to make nonstructural and nonsystems related alterations (“Tenant Alterations”) up to a value of $15,000.00 per occurrence (not to exceed $60,000 during any 12-month period) without Landlord’s prior written consent (which consent shall not be unreasonably withheld), provided Tenant shall provide notice to Landlord of its intent to make the Tenant Alterations. Such notice shall include a copy of plans and specifications (if such alterations are of a character that would reasonably require plans and specifications) and copies of all permits, if required by the appropriate municipality, and any contracts for such Tenant Alterations. All Tenant Alterations shall be performed by contractors approved by Landlord which approval shall not be unreasonably withheld, and in accordance with all applicable laws and the rules and regulations described in Section 12b.

     e. Restoration of Premises. At the expiration or earlier termination of this Lease, Tenant shall (i) deliver each and every part of the Premises in the same or better repair and condition as it existed at the Commencement Date, ordinary wear and tear and damage by casualty excepted, and (ii) restore the Premises at Tenant’s sole expense to the same condition as existed at the Commencement Date, ordinary wear and tear and damage by casualty excepted. If Tenant has required or installed Non-Standard Improvements, such improvements shall be removed as part of Tenant’s restoration obligation unless, at the time such Non-Standard Improvements were installed, Landlord informed Tenant in writing that (x) removal of such improvements would not be required, or (y) Landlord would require Tenant to leave such improvements in the Premises. Tenant shall repair any damage caused by the removal of any Non-Standard Improvements. ‘“Non-Standard Improvements” means such items as (i) High Demand Equipment and separate meters, (ii) all wiring and cabling from the point of origin to the termination point, (iii) raised floors for computer or communications systems, (iv) telephone equipment, security systems, and UPS systems, (v) equipment racks, (vi) alterations installed by or at the request of Tenant after the Commencement Date, and (vii) any other improvements that are not part of the Building Standard Improvements.

     f. Landlord’s Performance of Tenant’s Obligations. If Tenant does not perform its maintenance or restoration obligations in a timely manner, commencing the same within five (5) days after receipt of notice from Landlord specifying the work needed, and thereafter diligently

18

and continuously pursuing the work until completion, then Landlord shall have the right, but not the obligation, to perform such work. Any amounts expended by Landlord on such maintenance or restoration shall be Additional Rent to be paid by Tenant to Landlord within thirty (30) days after demand.

     g. Construction Liens. Tenant shall have no power to do any act or make any contract that may create or be the foundation of any lien, mortgage or other encumbrance upon the reversionary or other estate of Landlord, or any interest of Landlord in the Premises. NO CONSTRUCTION LIENS OR OTHER LIENS FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED TO THE PREMISES SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO THE PREMISES OR THE BUILDING. Tenant shall keep the Premises and the Building free from any liens arising out of any work performed, materials furnished, or obligations incurred by or on behalf of Tenant. Should any lien or claim of lien be filed against the Premises or the Building by reason of any act or omission of Tenant or any of Tenant’s agents, employees, contractors or representatives, then Tenant shall cause the same to be canceled and discharged of record by bond or otherwise within twenty (20) days after Tenant receives notice of the filing thereof. Should Tenant fail to discharge the lien within twenty (20) days, then Landlord may discharge the lien. The amount paid by Landlord to discharge the lien (whether directly or by bond), plus all administrative and legal costs incurred by Landlord, shall be Additional Rent payable on demand. The remedies provided herein shall be in addition to all other remedies available to Landlord under this Lease or otherwise.

     h. Communications Compliance. Tenant acknowledges and agrees that any and all telephone and telecommunication services desired by Tenant shall be ordered and utilized at the sole expense of Tenant. Unless Landlord requests otherwise or consents in writing, all of Tenant’s telecommunications equipment shall be located and remain solely in the Premises in accordance with reasonable rules and regulations adopted by Landlord from time to time, and shall be subject to the restrictive covenants set forth in the Protective Covenants, which requires the prior written approval by the Owners Association for any communication equipment installed outside the Building. Landlord agrees to cooperate with Tenant in seeking such approval. Landlord shall not have any responsibility for the maintenance of Tenant’s telecommunications equipment, including wiring; nor for any wiring or other infrastructure to which Tenant’s telecommunications equipment may be connected. Tenant agrees that, to the extent any telecommunications service is interrupted, curtailed or discontinued, Landlord shall have no obligation or liability with respect thereto. Landlord shall have the right, upon reasonable prior oral or written notice to Tenant, to interrupt or turn off telecommunications facilities in the event of emergency or as necessary in connection with repairs to the Building or installation of telecommunications equipment for other tenants of the Building; provided, however. Landlord shall use commercially reasonable efforts to cause any such interruption to occur at such time, and in such manner, so as to provide minimal interference with Tenant’s business operations and shall consult with Tenant as to how to achieve such result (unless in case of emergency, consultation with Tenant is not practical). Tenant may utilize the services of any telephone or telecommunications provider that it may elect, but Tenant shall be responsible for any cost associated with the installation of any new lines to or within the Building. Tenant shall be permitted to install and implement its own wireless network within the Premises so long as such wireless system does not interfere with the wireless systems(s) used by other tenants in the Building, but shall not be permitted to install antennae and satellite receiver dishes to the exterior of the Building, without Landlord’s prior written consent, which consent shall not be

19

unreasonably withheld; provided, however, that Tenant shall be permitted to install a satellite dish on the exterior of the Building upon Tenant’s execution of the License Agreement attached hereto as Exhibit F. Landlord shall use good faith efforts to restrict other tenants from using wireless services or other devices that would block Tenant’s use of its own wireless service. At Landlord’s option, Tenant may be required to remove any and all telecommunications equipment (including wireless equipment) installed in the Premises or elsewhere in or on the Building by or on behalf of Tenant, including wiring, or other facilities for telecommunications transmittal prior to the expiration or termination of the Lease and at Tenant’s sole cost. Installation of any approved satellite dishes shall be subject to Landlord’s standard license agreement in Exhibit F attached hereto.

     9. PROPERTY OF TENANT.

     a. Property Taxes. Tenant shall pay when due all taxes levied or assessed upon Tenant’s equipment, fixtures, furniture, leasehold improvements and personal property located in the Premises.

     b. Removal. Provided Tenant is not in default, Tenant may remove all fixtures and equipment which it has placed in the Premises; provided, however, Tenant must repair all damages caused by such removal. If Tenant does not remove its property from the Premises upon the expiration or earlier termination (for whatever cause) of this Lease, such property shall be deemed abandoned by Tenant, at the option of Landlord, and Landlord may dispose of the same in whatever manner Landlord may elect without any liability to Tenant.

     10. SIGNS. Tenant may not erect, install or display any sign or advertising material upon the exterior of the Building or Premises (including any exterior doors, walls or windows) without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole discretion. Door and directory signage shall be provided and installed by the Landlord in accordance with building standards at Landlord’s expense, unless otherwise provided in the Workletter attached as Exhibit A-1. In the event exterior monument signs become available to tenants in the Building, Tenant shall be entitled to its prorata share of space on such monument signs, to be installed at Tenant’s expense, and subject to Landlord’s then existing sign criteria established for the Building and all laws, regulations and covenants and restrictions affecting the Building.

20

     11. ACCESS TO PREMISES.

     a. Tenant’s Access. Tenant, its agents, employees, invitees, and guests, shall have access to the Premises and reasonable ingress and egress to common and public areas of the Building twenty-four hours a day, seven days a week; provided, however, Landlord by reasonable regulation may control such access for the comfort, convenience, safety and protection of all tenants in the Building, or as needed for making repairs and alterations. Tenant shall be responsible for providing access to the Premises to its agents, employees, invitees and guests after business hours and on weekends and holidays, but in no event shall Tenant’s use of and access to the Premises during non-business hours compromise the security of the Building. Tenant may relocate its Fulfillment Center operation to the Premises for shipping and receiving computer equipment and shall utilize double doors located on the ground floor of Building C on the Building B side.

     b. Landlord’s Access. Landlord shall have the right, at all reasonable times and upon reasonable oral notice, either itself or through its authorized agents, to enter the Premises (i) to make repairs, alterations or changes as Landlord deems necessary, (ii) to inspect the Premises, mechanical systems and electrical devices, and (iii) to show the Premises to prospective mortgagees and purchasers. However, no access shall be permitted to Data Center without a representative of Tenant, except in an emergency. Tenant shall reasonably cooperate with Landlord to arrange for a representative to be present to carry out (i), (ii) and (iii) above. Within one hundred eighty (180) days prior to the Expiration Date, Landlord shall have the right, either itself or through its authorized agents, to enter the Premises at all reasonable times, and upon reasonable prior notice, to show prospective tenants.

     c. Emergency Access. Landlord shall have the right to enter the Premises at any time without notice in the event of an emergency.

     12. TENANT’S COMPLIANCE.

     a. Laws. Tenant shall comply with all applicable laws, ordinances and regulations affecting the Premises, whether now existing or hereafter enacted (“Laws”). Notwithstanding the foregoing, Tenant shall have no obligations to make structural alterations to the Premises unless and until (i) such structural alterations are required solely as a result of Tenant’s particular use of the Premises (as opposed to office use in general), (ii) Tenant has received written demand to make such structural alterations from an applicable governmental authority having jurisdiction and ability to enforce such demand, and (iii) Tenant, if it so desires, shall have had the opportunity to appeal and/or contest any such requirement.

     b. Rules and Regulations. Tenant shall comply with the Rules and Regulations attached as Exhibit B. The Rules and Regulations may be reasonably modified from time to time by Landlord, effective as of the date that is 15 days after notice of such modification is delivered to Tenant, provided such rules are uniformly applicable to all tenants in the Building. Any conflict between this Lease and the Rules and Regulations shall be governed by the terms of this Lease.

21

     13. ADA COMPLIANCE.

     a. Tenant’s Compliance. Tenant, at Tenant’s sole expense, shall comply with all laws, rules, orders, ordinances, directions, regulations and requirements of federal, state, county and municipal authorities now in force, which shall impose any duty upon Landlord or Tenant with respect to the use or occupation of the Premises or alteration of the Premises to accommodate persons with special needs, including using all reasonable efforts to comply with The Americans With Disabilities Act (the “ADA”). Notwithstanding the foregoing, Tenant shall have no obligations to make structural alterations to the Premises unless and until (i) such structural alterations are required solely as a result of Tenant’s particular use of the Premises (as opposed to office use in general), (ii) Tenant has received written demand to make such structural alterations from an applicable governmental authority having jurisdiction and ability to enforce such demand, and (iii) Tenant, if it so desires, shall have had the opportunity to appeal and/or contest any such requirement.

     b. Landlord’s Compliance. Landlord represents that, to the best of Landlord’s knowledge, the Building and the Common Areas are in compliance with the ADA. Landlord, at Landlord’s sole expense, shall use all reasonable efforts to meet the requirements of the ADA as it applies to the Common Areas and restrooms of the Building; but Landlord shall have no responsibility for ADA compliance with respect to the Premises (unless the applicable requirement relates to general office use and is not required solely as a result of Tenant’s particular use of the Premises). Landlord shall not be required to make changes to the Common Areas or restrooms of the Building to comply with ADA standards adopted after construction of the Building unless specifically required to do so by law.

     c. ADA Notices. If Tenant receives any notices alleging a violation of ADA relating to any portion of the Building or Premises (including any governmental or regulatory actions or investigations regarding non-compliance with ADA), then Tenant shall notify Landlord in writing within ten (10) days of such notice and provide Landlord with copies of any such notice. If Landlord receives any notices alleging a violation of ADA relating to any portion of the Building or Premises (including any governmental or regulatory actions or investigations regarding non-compliance with ADA), then Landlord shall notify Tenant in writing within ten (10) days of such notice and provide Tenant with copies of any such notice.

     14. INSURANCE REQUIREMENTS.

     a. Indemnity. Tenant shall indemnify and save harmless Landlord and its parent, subsidiaries and affiliates and their respective officers, directors and employees, agents and assigns (herein called “Indemnitees”) from and against all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, charges, subrogations and expenses, including without limitation, fees and expenses of legal counsel asserted against the Indemnitees, or any of them, by reason of actual or alleged (i) injury or death to persons (including without limitation, employees of one or more of the Indemnitees or of Tenant and employees of its contractors, subcontractors, vendors or agents), (ii) damage to the property of any person or legal entity (including without limitation, the property of one or more of the Indemnitees and the property of its contractors, subcontractors, vendors, agents or employees), as a result of or arising out of use of the Premises by Tenant, or its contractors, subcontractors, vendors, agents and/or employees.

22

However, the foregoing agreement to indemnify and hold the Indemnitees harmless shall not be applicable to the extent that such liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, charges, subrogations and expenses are caused by the sole negligence or intentional misconduct of the Indemnitees. The provisions of this paragraph (a) of Section 14 shall survive the termination of this Lease with respect to any damage, injury or death occurring prior to such termination.

     b. Landlord Indemnity. Landlord shall indemnify and save harmless Tenant and its parent, subsidiaries and affiliates and their respective officers, directors and employees, agents and assigns (herein called “Tenant Indemnitees”) from and against all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, charges, subrogations and expenses, including without limitation, fees and expenses of legal counsel asserted against the Tenant Indemnitees, or any of them, by reason of actual or alleged (i) injury or death to persons (including without limitation, employees of one or more of the Tenant Indemnitees or of Tenant and employees of its contractors, subcontractors, vendors or agents), (ii) damage to the property of any person or legal entity (including without limitation, the property of one or more of the Tenant Indemnitees and the property of its contractors, subcontractors, vendors, agents or employees), as a result of or arising out of Landlord’s obligations under the Lease with respect to the Premises or the Common Areas (or its contractors, subcontractors, vendors, agents and/or employees). However, the foregoing agreement to indemnify and hold the Tenant Indemnitees harmless shall not be applicable to the extent that such liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, charges, subrogations and expenses are caused by the sole negligence or intentional misconduct of the Tenant Indemnitees. The provisions of this paragraph (b) of Section 14 shall survive the termination of this Lease with respect to any damage, injury or death occurring prior to such termination.

     c. Tenant’s Insurance. At its sole cost and expense, Tenant shall procure and maintain continuously throughout the term of this Lease from such companies as are reasonably acceptable to Landlord and listed in the most current “Best’s Insurance Guide” as possessing a minimum policy holders rating of “A-” (Excellent) and a financial category no lower than “VI” ($25,000,000 to $50,000,000 of adjusted policy holders surplus). The following insurance shall cover Tenant’s activities under this Lease whether such activities be by itself or by any subcontractor or by anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable:

(i)	Workers’ Compensation Insurance with statutory limits or a State Certificate of self-insurance and Employer’s Liability coverage with limits of not less than $1,000,000 per occurrence.
(ii)	Occurrence type Commercial General Liability Insurance, including but not limited to blanket contractual liability coverage, for bodily injury including death, personal injury, and property damage with limits of not less than $1,000,000 combined single limit per occurrence.
(iii)	Automobile Liability insurance covering all owned, hired and non-owned vehicles with limits of not less than $1,000,000 combined single limit per occurrence.

23

(iv) Umbrella Liability Insurance in excess of the above coverage with limits of not less than $5,000,000.

     From time to time, Tenant shall increase the limits of such policy to such higher limits as Landlord shall reasonably require, but in no event greater than the insurance coverage customarily carried by companies and businesses similar to Tenant in the Nashville, Tennessee area. With the exception of Workers’ Compensation, each insurance policy listed above, and any excess or umbrella policy carried by Tenant with additional limits than those specified above, must name Landlord as an additional insured under the policy(s). All insurance policies of the Tenant shall be endorsed to state that the policy will be primary, and will not be excess to or contributory with, any self-insurance or insurance policies carried by Landlord. The insurance policies shall specifically include the liability assumed hereunder by Tenant. The insurance policy shall provide that the policy may not be canceled without thirty (30) days’ prior written notice to Landlord. Tenant shall furnish to Landlord an acceptable certificate of insurance evidencing the coverage required herein on or before the Commencement Date, and thereafter at least thirty (30) days before the expiration dates of the expiring policy. The furnishing of acceptable evidence of required coverage should not relieve Tenant from any liability or obligation for which it is otherwise responsible to Landlord.

     In the event Tenant hereafter performs any alterations to the Premises, Tenant shall require that its subcontractors procure and/or maintain insurance coverage at the limits described above. Tenant shall indemnify and be fully responsible for any cost to Landlord resulting from said subcontractor’s failure to procure and/or maintain said insurance.

     d. Tenant’s Property Insurance. Tenant shall also carry the equivalent of ISO Special Form Property Insurance on Tenant’s Property for full replacement value and with coinsurance waived. For purposes of this provision, “Tenant’s Property” shall mean Tenant’s personal property and fixtures, and any Non-Standard Improvements to the Premises. Tenant shall neither have, nor make, any claim against Landlord for any loss or damage to the Tenant’s Property, unless such damage is due to the failure of Landlord to satisfy its maintenance obligation under Section 7b above.

     e. Certificates of Insurance. Prior to taking possession of the Premises, and annually thereafter, Tenant shall deliver to Landlord certificates or other evidence of insurance satisfactory to Landlord. All such policies shall be non assessable and shall contain language to the extent obtainable that: (i) any loss shall be payable notwithstanding any act or negligence of Landlord or Tenant that might otherwise result in forfeiture of the insurance, (ii) that the policies are primary and non contributing with any insurance that Landlord may carry, and (iii) that the policies cannot be canceled, non-renewed, or coverage reduced except after thirty (30) days’ prior notice to Landlord. If Tenant fails to provide Landlord with such certificates or other evidence of insurance coverage, Landlord may obtain such coverage and the cost of such coverage shall be Additional Rent payable by Tenant upon demand.

     f. Mutual Waiver of Subrogation. Notwithstanding anything set forth in this Lease to the contrary, Landlord and Tenant each hereby waive any and all rights of recovery against the other and its parent, subsidiaries and affiliates, and their respective officers, directors, stockholders, agents, and employees, relating to losses, injuries or damage of any nature whatsoever to property or person for which such other party is insured or is required to be

24

insured by the terms of this Lease or for which such party would be insured if such party had procured ISO Special Form Property Insurance on such party’s property. This mutual subrogation waiver will preclude the assignment of any insurance claim by way of subrogation to any insurer. Landlord and Tenant agree to give immediately to each appropriate insurer written notice, if required, of the terms of these mutual waivers, and if necessary, have said insurance policies properly endorsed to prevent the invalidation of the insurance coverages by reason of these waivers, if required by the respective insurance policies. Landlord and Tenant each shall indemnify the other against any loss or expense, including but not limited to reasonable attorney’s fees, resulting from the failure to obtain such insurance subrogation waiver.

     15. INDEMNITY. Subject to the insurance requirements, releases and mutual waivers of subrogation set forth in this Lease, Tenant agrees as follows:

     a. Tenant’s Indemnity. Tenant shall indemnify and hold Landlord harmless from and against any and all claims, damages, losses, liabilities, lawsuits, costs and expenses (including attorneys’ fees at all tribunal levels) arising out of or related to (i) any activity, work, or other thing done, permitted or suffered by Tenant in or about the Premises, (ii) any breach or default by Tenant in the performance of any of its obligations under this Lease, or (iii) any act or neglect of Tenant, or any officer, agent, employee, contractor, servant, invitee or guest of Tenant.

     b. Defense Obligation. If any such action is brought against Landlord with respect to any event for which Tenant has agreed to indemnify Landlord pursuant to Section 15a above, then Tenant, upon notice from Landlord, shall defend the same through counsel reasonably acceptable to Landlord. The provisions of this Section shall survive the termination of this Lease.

     16. QUIET ENJOYMENT. Tenant shall have quiet enjoyment and possession of the Premises provided Tenant promptly and fully complies with all of its obligations under this Lease. No action of Landlord or other tenants working in other space in the Building, or in repairing or restoring the Premises shall be deemed a breach of this covenant, nor shall such action give to Tenant any right to modify this Lease either as to term, rent payables or other obligations to be performed. Landlord represents and warrants that it is the fee simple owner of the Office Complex.

     17. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE; AND ESTOPPEL CERTIFICATE.

     a. Subordination and Attornment. Tenant agrees to execute within fifteen (15) days after request to do so from Landlord or its mortgagee an agreement:

(i)	Making this Lease superior or subordinate to the interests of the mortgagee;
(ii)	Agreeing to attorn to the mortgagee;

25

(iii)	Giving the mortgagee notice of, and a reasonable opportunity (which shall in no event be less than thirty (30) days after notice thereof is delivered to mortgagee) to cure any Landlord default and agreeing to accept such cure if effected by the mortgagee;
(iv)	Permitting the mortgagee (or other purchaser at any foreclosure sale), and its successors and assigns, on acquiring Landlord’s interest in the Premises and the Lease, to become substitute Landlord hereunder, with liability only for such Landlord obligations as accrue after Landlord’s interest is so acquired;
(v)	Agreeing to attorn to any successor Landlord; and
(vi)	Containing such other agreements and covenants on Tenant’s part as Landlord’s mortgagee may reasonably request.

     b. Non-Disturbance. Tenant’s obligation to subordinate its interests or attorn to any mortgagee is conditioned upon the mortgagee’s agreement not to disturb Tenant’s possession and quiet enjoyment of the Premises under this Lease so long as Tenant is in compliance with the terms of the Lease. Landlord represents and warrants that there are no mortgages or deeds of trust currently encumbering the Office Complex or the land on which the Office Complex is located.

     c. Estoppel Certificates. Tenant agrees to execute within ten (10) Business Days after request, and as often as requested, estoppel certificates confirming any factual matter requested by Landlord which is true and is within Tenant’s knowledge regarding this Lease, and the Premises, including but not limited to: (i) the date of occupancy, (ii) Expiration Date; (iii) the amount of Rent due and date to which Rent is paid, (iii) whether Tenant has any defense or offsets to the enforcement of this Lease or the Rent payable, (iv) any default or breach by Landlord, and (v) whether this Lease, together with any modifications or amendments, is in full force and effect. Tenant shall attach to such estoppel certificate copies of any modifications or amendments to the Lease. If Tenant fails to deliver the certificate within ten (10) Business Days of Landlord’s request, Landlord and any lender, prospective lender, investor or purchaser may conclusively presume and rely that, except as otherwise represented by Landlord such facts contained therein are true. In such event, Tenant is estopped from denying the truth of such facts.

     d. Attorney in Fact. [Intentionally Deleted].

     e. Modifications Requested by Lender. If, as a condition of approving this Lease, Landlord’s mortgagee shall request reasonable modifications of this Lease, Tenant shall not unreasonably withhold or delay its agreement to such modifications, provided that such modifications do not increase the obligations or materially and adversely affect the rights of Tenant under this Lease.

26

     18. ASSIGNMENT — SUBLEASE.

     a. Landlord Consent. Tenant may not assign or encumber this Lease or its interest in the Premises arising under this Lease, and may not sublet all or any part of the Premises without first obtaining the written consent of Landlord, which consent shall not be withheld unreasonably. Factors which Landlord may consider in deciding whether to consent to an assignment or sublease include (without limitation), (i) the creditworthiness of the assignee or sublessee, (ii) the proposed use of the Premises, (iii) whether there is other vacant space in the Building, (iv) whether the assignee or sublessee will vacate other space owned by Landlord, (v) whether Landlord is negotiating with the proposed sublessee or assignee for a lease of other space owned by Landlord, and (vi) any renovations to the Premises or special services required by the assignee or sublessee. Landlord will not consent to an assignment or sublease that might result in a use that conflicts with the rights of any existing tenant. One consent shall not be the basis for any further consent.

     b. Definition of Assignment. For the purpose of this Section 18, the word “assignment” shall be defined and deemed to include the following: (i) if Tenant is a partnership, the withdrawal or change, whether voluntary, involuntary or by operation of law, of partners owning thirty percent (30%) or more of the partnership, or the dissolution of the partnership; (ii) if Tenant consists of more than one person, an assignment, whether voluntary, involuntary, or by operation of law, by one person to one of the other persons that is a Tenant; (iii) if Tenant is a corporation, any dissolution or reorganization of Tenant, or the sale or other transfer of a controlling percentage (hereafter defined) of capital stock of Tenant other than to an affiliate or subsidiary or the sale of fifty one percent (51%) in value of the assets of Tenant; (iv) if Tenant is a limited liability company, the change of members whose interest in the company is fifty percent (50%) or more. The phrase “controlling percentage” means the ownership of, and the right to vote, stock possessing at least fifty one percent (51%) of the total combined voting power of all classes of Tenant’s capital stock issued, outstanding and entitled to vote for the election of directors, or such lesser percentage as is required to provide actual control over the affairs of the corporation; except that, if the Tenant is a publicly traded company, public trades or sales of the Tenant’s stock on a national stock exchange shall not be considered an assignment hereunder even if the aggregate of the trades of sales exceeds fifty percent (50%) of the capital stock of the company.

     c. Permitted Assignments/Subleases. Notwithstanding the foregoing, Tenant may assign this Lease or sublease part or all of the Premises without Landlord’s consent to: (i) any corporation, limited liability company, or partnership that controls, is controlled by, or is under common control with, Tenant; or (ii) any corporation or limited liability company resulting from the merger or consolidation with Tenant or to any entity that acquires all of Tenant’s assets as a going concern of the business that is being conducted on the Premises; provided however, the assignor remains liable under the Lease and the assignee or sublessee is a bona fide entity and assumes the obligations of Tenant and continues the same Permitted Use as provided under Section 4.

     d. Notice to Landlord. Landlord must be given prior written notice of every assignment or subletting, and failure to do so shall be a default hereunder.

27

     e. Prohibited Assignments/Subleases. In no event shall this Lease be assignable by operation of any law (except as permitted by Section 18c), and Tenant’s rights hereunder may not become, and shall not be listed by Tenant as an asset under any bankruptcy, insolvency or reorganization proceedings. Acceptance of Rent by Landlord after any non permitted assignment or sublease shall not constitute approval thereof by Landlord.

     f. Limitation on Rights of Assignee/Sublessee. Any assignment or sublease for which Landlord’s consent is required shall not include the right to exercise any options to renew the Lease Term, expand the Premises, or similar options, unless specifically provided for in the consent.

     g. Tenant Not Released. No assignment or sublease shall release Tenant of any of its obligations under this Lease.

     h. Landlord’s Right to Collect Sublease Rents upon Tenant Default. If the Premises (or any portion) is sublet and Tenant defaults under its obligations to Landlord, then Landlord is authorized, at its option, to collect all sublease rents directly from the Sublessee. Tenant hereby assigns the right to collect the sublease rents to Landlord in the event of Tenant default. The collection of sublease rents by Landlord shall not relieve Tenant of its obligations under this Lease, nor shall it create a contractual relationship between Sublessee and Landlord or give Sublessee any greater estate or right to the Premises than contained in its Sublease.

     i. Excess Rents. If Tenant assigns this Lease or subleases all or part of the Premises at a rental rate that exceeds the rentals paid to Landlord, then 50% of any such excess (less costs of subleasing, including commissions, marketing expenses, improvement allowances and Landlord Fees) shall be paid over to Landlord by Tenant.

     j. Landlord’s Fees. Tenant shall pay Landlord all costs, not to exceed $2,500, together with an administrative fee of $500.00 per assignment or sublease transaction for which consent is required.

     k. Unauthorized Assignment or Sublease. Any unauthorized assignment or sublease shall constitute a default under the terms of this Lease. In addition to its other remedies for such default, Landlord may elect to increase Base Rent to 125% of the Base Rent reserved under the terms of this Lease.

     19. DAMAGES TO PREMISES.

     a. Landlord’s Restoration Obligations. If the Building or Premises are damaged by fire or other casualty (“Casualty”), then Landlord shall repair and restore the Premises to substantially the same condition of the Premises immediately prior to such Casualty, subject to the following terms and conditions:

(i)	[Intentionally Deleted]
(ii)	[Intentionally Deleted]

28

(iii) Landlord shall have no obligation to repair and restore Tenant’s trade fixtures, decorations, signs, contents, or any Non-Standard Improvements to the Premises.

     b. Termination of Lease by Landlord. Landlord shall have the option of terminating the Lease if: (i) the Premises is rendered wholly untenantable; (ii) [intentionally deleted]; (iii) [intentionally deleted]; (iv) the Premises is damaged in whole or in part during the last two years of the Term; or (v) the Building containing the Premises is damaged (whether or not the Premises is damaged) to an extent of fifty percent (50%) or more of the fair market value thereof. If Landlord elects to terminate this Lease, then it shall give notice of the cancellation to Tenant within sixty (60) days after the date of the Casualty. Tenant shall vacate and surrender the Premises to Landlord within thirty (30) days after receipt of the notice of termination.

     c. Termination of Lease by Tenant. Tenant shall have the option of terminating the Lease if: (i) the Premises is damaged in whole or in part during the last two years of the Term, (ii) the damage to the Premises cannot reasonably be repaired and restored within one hundred eighty (180) days; or (iii) Landlord has failed to substantially restore the damaged Building or Premises within one hundred eighty (180) days of the Casualty, as extended by force majeure. If Landlord is delayed by force majeure, then Landlord must provide Tenant with notice of the delays within fifteen (15) days of the force majeure event stating the reason for the delays and a good faith estimate of the length of the delays.

     d. Rent Abatement. If Premises is rendered wholly untenantable by the Casualty, then the Rent payable by Tenant shall be fully abated. If the Premises is only partially damaged, then Rent and other charges shall be abated proportionately to the portion of the Premises rendered untenantable. The abatement shall be from the date of the Casualty until the Premises have been substantially repaired and restored, or until Tenant’s business operations are restored in the entire Premises, whichever shall first occur. However, if the Casualty is caused by the negligence or other wrongful conduct of Tenant or of Tenant’s subtenants, licensees, contractors, or invitees, or their respective agents or employees, there shall be no abatement of Rent.

     e. Waiver of Claims. The rights of Tenant under this Article 19 shall constitute Tenant’s exclusive remedies against Landlord in the event of a Casualty. Tenant hereby waives all claims against Landlord for any compensation or damage for loss of use of the whole or any part of the Premises and/or for any inconvenience or annoyance occasioned by any Casualty and any resulting damage, destruction, repair, or restoration.

     20. EMINENT DOMAIN.

     a. Effect on Lease. If all of the Premises (or a portion thereof such that Tenant cannot continue use of the remainder) are taken under the power of eminent domain (or by conveyance in lieu thereof), then this Lease shall terminate as of the date possession is taken by the condemnor, and Rent shall be adjusted between Landlord and Tenant as of such date. If only a portion of the Premises is taken and Tenant can continue use of the remainder, then this Lease will not terminate, but Rent shall abate in a just and proportionate amount to the loss of use occasioned by the taking.

29

     b. Right to Condemnation Award. Landlord shall be entitled to receive and retain the entire condemnation award for the taking of the Building and Premises. Tenant shall have no right or claim against Landlord for any part of any award received by Landlord for the taking. Tenant shall have no right or claim for any alleged value of the unexpired portion of this Lease or its leasehold estate. Tenant, however, shall not be prevented from making a claim against the condemning party (but not against Landlord) for any moving expenses or for costs of removal, relocation, business interruption expense, loss of profits, or taking of Tenant’s personal property (other than its leasehold estate) to which Tenant may be entitled; provided that any such award shall not reduce the amount of the award otherwise payable to Landlord for the taking of the Building and Premises.

     21. ENVIRONMENTAL COMPLIANCE.

     a. Hazardous Material. “Hazardous Material” shall mean any of the following: asbestos or any substance containing more than 0.1 percent asbestos and deemed hazardous under any Hazardous Material Law (defined below); the group of organic compounds known as polychlorinated biphenyls; flammable explosives; radioactive materials; chemicals known to cause cancer or reproductive toxicity; pollutants, effluents, contaminants, emissions or related materials and any items included in the definition of hazardous or toxic wastes, materials or substances under the Hazardous Material Laws; and any mixture of a Hazardous Material (regardless of concentration) with other materials.

     b. Hazardous Material Laws. “Hazardous Material Laws” shall mean any law relating to environmental conditions and industrial hygiene, including, without limitation, the Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U. S. C. 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), 42 U. S. C. 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Hazardous Materials Transportation Act, 49 U. S. C. 1801, et seq., the Federal Water Pollution Control Act, 33 U. S. C. 1251 et seq., the Clean Air Act, 42 U. S. C. 7401 et seq., the Clean Water Act, 33 U. S. C. 7401, et seq., the Toxic Substances Control Act, 15 U. S. C. 2601 et seq., the Safe Drinking Water Act, 42 U. S. C. 300f et seq., and all similar federal, state and local environmental statutes, ordinances and the regulations, orders, decrees now or hereafter promulgated thereunder.

     c. Indemnity. Tenant shall and hereby does agree to pay, protect, defend, indemnify and hold Landlord harmless from and against any and all loss, damages, expenses, fees, claims, costs and liabilities (including, but not limited to, attorneys’ fees and costs of litigation) arising out of or in any manner related to the generation, storage, use, treatment or disposal of Hazardous Materials or violation of Hazardous Materials Laws at the Premises and the Common Area by Tenant or its agents, employees or contractors. Landlord shall and hereby does agree to pay, protect, defend, indemnify and hold Tenant harmless from and against any and all loss, damages, expenses, fees, claims, costs and liabilities (including, but not limited to attorney’s fees and cost of litigation) arising out of or in any manner related to the generation, storage, use, treatment or disposal of Hazardous Materials or violation of Hazardous Materials Laws at the Premises by Landlord or its agents, employees or contractors.

30

     d. Tenant’s Covenants. Tenant covenants and agrees that (a) it will not violate any Hazardous Materials Laws (b) no activity shall be undertaken on the Premises or the Common Area which would cause: (i) the Premises or the Common Area to become a hazardous waste treatment, storage or disposal facility within the meaning of, or otherwise bring the Premises or the Common Area within the ambit of, any Hazardous Material Law, (ii) a release or threatened release of Hazardous Material from the Premises or the Common Area within the meaning of, or otherwise bring the Premises or the Common Area within the ambit of, any Hazardous Material Law, or (iii) the discharge of Hazardous Material into any watercourse, body of surface or subsurface water or wetland, or into the atmosphere of any Hazardous Material which would require a permit under any Hazardous Material Law; (c) no activity shall be undertaken with respect to the Premises or the Common Area which would cause a violation or support a claim under any Hazardous Material Law; (d) no underground storage tanks or underground deposits will be located on the Premises or the Common Area. The foregoing shall not prohibit the proper use and storage by Tenant of normal cleaning supplies and office supplies customarily used for the Permitted Use, all of which shall be permitted so long as such items are stored and used in compliance with Hazardous Materials Laws.

     e. Inspections by Landlord. Landlord and its engineers, technicians, and consultants (collectively the “Auditors”) may, from time to time as Landlord deems appropriate, conduct periodic tests and examinations (“Audits”) of the Premises to confirm and monitor Tenant’s compliance with this Section 21. Such Audits shall be conducted in such a manner as to minimize the interference with Tenant’s Permitted Use; however in all cases, the Audits shall be of such nature and scope as shall be reasonably required by then existing technology to confirm Tenant’s compliance with this Section 21. Tenant shall fully cooperate with Landlord and its Auditors in the conduct of such Audits. The cost of such Audits shall be paid by Landlord unless an Audit shall disclose a material failure of Tenant to comply with this Section 21, in which case, the cost of such Audit, and the cost of all subsequent Audits made during the Term and within thirty (30) days thereafter (not to exceed two (2) such Audits per calendar year), shall be paid for on demand by Tenant.

     f. Property. For the purposes of this Section 21, the term ‘“Property” shall include the Premises, Building, all Common Areas, the real estate upon which the Building is located; all personal property (including that owned by Tenant); and the soil, ground water, and surface water of the real estate upon which the Building is located.

     g. Tenant’s Liability After Termination of Lease. The covenants contained in this Section 21 shall survive the expiration or termination of this Lease, and shall continue for so long as Landlord and its successors and assigns may be subject to any expense, liability, charge, penalty, or obligation against which Tenant has agreed to indemnify Landlord under this Section 21.

     22. DEFAULT.

     a. Tenant’s Default. Tenant shall be in default under this Lease if Tenant:

(i) Fails to pay when due any Base Rent, Additional rent, or any other sum of money which Tenant is obligated to pay, as provided in this Lease and

31

	such default continues for more than five (5) days after written notice thereof is delivered by Landlord to Tenant; provided, however, that Landlord shall not be obligated to give Tenant notice of such default more than once in any 12-month period.
(ii)	Breaches any other agreement, covenant or obligation in this Lease and such breach is not remedied within fifteen (15) days after Landlord gives Tenant notice specifying the breach, or if such breach cannot, with due diligence, be cured within fifteen (15) days, Tenant does not commence curing within fifteen (15) days and with reasonable diligence completely cure the breach within a reasonable period of time after the notice;
(iii)	Files any petition or action for relief under any creditor’s law (including bankruptcy, reorganization, or similar action), either in state or federal court, or has such a petition or action filed against it which is not stayed or vacated within sixty (60) days after filing; or
(iv)	Makes any transfer in fraud of creditors as defined in Section 548 of the United States Bankruptcy Code (11 U.S.C. 548, as amended or replaced), has a receiver appointed for its assets (and the appointment is not stayed or vacated within thirty (30) days), or makes an assignment for benefit of creditors.
(ii)	If this Lease or any estate of Tenant hereunder shall be levied upon under any attachment or execution and such attachment or execution is not vacated within thirty (30) days.

     b. Landlord’s Remedies. In the event of a Tenant default (including the expiration of any notice and cure periods set forth above), Landlord at its option may do one or more of the following:

(i)	Terminate this Lease and recover all damages caused by Tenant’s breach, including consequential damages for lost future rent for the remaining Term of this Lease (excluding any Extension Terms that have not yet been exercised);
(ii)	Repossess the Premises, with or without terminating, and relet the Premises at such amount as Landlord deems reasonable; all rent received by Landlord from such reletting shall be applied first to all reasonable costs and expenses incurred by Landlord in connection with such re-letting and then to reduce Tenant’s obligations hereunder, with Tenant being responsible for any deficiency for the remaining Term of this Lease (excluding any Extension Terms that have not yet been exercised);
(iii)	[Intentionally Deleted]
(iv)	Bring action for recovery of all amounts then due from Tenant;

32

(v)	Lock the Premises and deny Tenant access thereto without obtaining any court authorization; or
(vi)	Pursue any other remedy available in law or equity.

     c. Landlord’s Expenses; Attorneys Fees. All reasonable expenses of Landlord in repairing, restoring, or altering the Premises for reletting as general office space, together with leasing fees and all other expenses in seeking and obtaining a new Tenant, shall be charged to and be a liability of Tenant. Landlord’s reasonable attorneys’ fees in pursuing any of the foregoing remedies, or in collecting any Rent or Additional Rent due by Tenant hereunder, shall be paid by Tenant.

     d. Remedies Cumulative. All rights and remedies of Landlord are cumulative, and the exercise of any one shall not be an election excluding Landlord at any other time from exercise of a different or inconsistent remedy. No exercise by Landlord of any right or remedy granted herein shall constitute or effect a termination of this Lease unless Landlord shall so elect by notice delivered to Tenant. The failure of Landlord to exercise its rights in connection with this Lease or any breach or violation of any term, or any subsequent breach of the same or any other term, covenant or condition herein contained shall not be a waiver of such term, covenant or condition or any subsequent breach of the same or any other covenant or condition herein contained.

     e. No Accord and Satisfaction. No acceptance by Landlord of a lesser sum than the Rent, Additional Rent and other sums then due shall be deemed to be other than on account of the earliest installment of such payments due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed as accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such installment or pursue any other remedy provided in this Lease.

     f. No Reinstatement. No payment of money by Tenant to Landlord after the expiration or termination of this Lease shall reinstate or extend the Term, or make ineffective any notice of termination given to Tenant prior to the payment of such money. After the service of notice or the commencement of a suit, or after final judgment granting Landlord possession of the Premises, Landlord may receive and collect any sums due under this Lease, and the payment thereof shall not make ineffective any notice or in any manner affect any pending suit or any judgment previously obtained.

     g. Summary Ejectment. Tenant agrees that in addition to all other rights and remedies Landlord may obtain an order for summary ejectment from any court of competent jurisdiction without prejudice to Landlord’s rights to otherwise collect rents or breach of contract damages from Tenant.

     h. Surrender. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or may, at the option of Landlord, operate as an assignment to it of any or all such subleases or subtenancies.

33

     i. Mitigation. Landlord shall use commercially reasonable efforts to mitigate Tenant’s damages hereunder.

     23. MULTIPLE DEFAULTS.

     a. Loss of Option Rights. Tenant acknowledges that any rights or options of first refusal, or to extend the Term, to expand the size of the Premises, to purchase the Premises or the Building, or other similar rights or options which have been granted to Tenant under this Lease are conditioned upon the prompt and diligent performance of the terms of this Lease by Tenant. Accordingly, should Tenant default under this Lease (beyond applicable periods of notice and cure) on two (2) or more occasions during any consecutive twelve (12) month period, in addition to all other remedies available to Landlord, all such rights and options shall automatically, and without further action on the part of any party, expire and be of no further force and effect.

     b. Increased Security Deposit. Should Tenant default in the payment of Base Rent, Additional Rent, or any other sums payable by Tenant under this Lease on two (2) or more occasions during any twelve (12) month period, regardless of whether Landlord permits such default to be cured, then, in addition to all other remedies otherwise available to Landlord, Tenant shall, within ten (10) days after demand by Landlord, post a Security Deposit in, or increase the existing Security Deposit to a sum equal to three (3) months’ installments of Base Rent. The Security Deposit shall be governed by the terms of this Lease.

     c. Effect on Notice Rights and Cure Periods. Should Tenant default under this Lease on two (2) or more occasions during any consecutive twelve (12) month period, in addition to all other remedies available to Landlord, any notice requirements or cure periods otherwise set forth in this Lease with respect to a default by Tenant shall not apply.

     24. BANKRUPTCY.

     a. Trustee’s Rights. Landlord and Tenant understand that, notwithstanding contrary terms in this Lease, a trustee or debtor in possession under the United States Bankruptcy Code, as amended, (the “Code”) may have certain rights to assume or assign this Lease. This Lease shall not be construed to give the trustee or debtor in possession any rights greater than the minimum rights granted under the Code.

     b. Adequate Assurance. Landlord and Tenant acknowledge that, pursuant to the Code, Landlord is entitled to adequate assurances of future performance of the provisions of this Lease. The parties agree that the term “adequate assurance” shall include at least the following:

(i) In order to assure Landlord that any proposed assignee will have the resources with which to pay all Rent payable pursuant to the provisions of this Lease, any proposed assignee must have, as demonstrated to Landlord’s satisfaction, a net worth (as defined in accordance with generally accepted accounting principles consistently applied) of not less than the net worth of Tenant on the Effective Date (as hereinafter defined), increased by seven percent (7%), compounded annually, for each year

34

from the Effective Date through the date of the proposed assignment. It is understood and agreed that the financial condition and resources of Tenant were a material inducement to Landlord in entering into this Lease.

(ii)

Any proposed assignee must have been engaged in the conduct of business for the five (5) years prior to any such proposed assignment, which business does not violate the Use provisions under Section 4 above, and such proposed assignee shall continue to engage in the Permitted Use under Section 4. It is understood that Landlord’s asset will be substantially impaired if the trustee in bankruptcy or any assignee of this Lease makes any use of the Premises other than the Permitted Use.

     c. Assumption of Lease Obligations. Any proposed assignee of this Lease must assume and agree to be personally bound by the provisions of this Lease.

     25. NOTICES.

     a. Addresses. All notices, demands and requests by Landlord or Tenant shall be sent to the Notice Addresses set forth in Section 1, or to such other address as a party may specify by duly given notice.

     b. Form; Delivery; Receipt. ALL NOTICES, DEMANDS AND REQUESTS WHICH MAY BE GIVEN OR WHICH ARE REQUIRED TO BE GIVEN BY EITHER PARTY TO THE OTHER MUST BE IN WRITING UNLESS OTHERWISE SPECIFIED. Notices, demands or requests shall be deemed to have been properly given for all purposes if (i) delivered against a written receipt of delivery, (ii) mailed by express, registered or certified mail of the United States Postal Service, return receipt requested, postage prepaid, or (iii) delivered to a nationally recognized overnight courier service for next business day delivery to the receiving party’s address as set forth above or (iv) delivered via telecopier or facsimile transmission to the facsimile number listed above, with an original counterpart of such communication sent concurrently as specified in subsection (ii) or (iii) above and with written confirmation of receipt of transmission provided. Each such notice, demand or request shall be deemed to have been received upon the earlier of the actual receipt or refusal by the addressee or three (3) Business Days after deposit thereof at any main or branch United States post office if sent in accordance with subsection (ii) above, and the next Business Day after deposit thereof with the courier if sent pursuant to subsection (iii) above.

     c. Address Changes. The parties shall notify the other of any change in address, which notification must be at least fifteen (15) days in advance of it being effective.

     d. Notice by Legal Counsel. Notices may be given on behalf of any party by such party’s legal counsel.

     26. HOLDING OVER. If Tenant holds over after the Expiration Date or other termination of this Lease, such holding over shall not be a renewal of this Lease but shall create a tenancy at sufferance. Tenant shall continue to be bound by all of the terms and conditions of

35

this Lease, except that during such tenancy at sufferance Tenant shall pay to Landlord (i) Base Rent at the rate equal to one hundred fifty percent (150%) of that provided for as of the expiration or termination date, and (ii) any and all Operating Expenses and other forms of Additional Rent payable under this Lease. The increased Rent during such holding over is intended to compensate Landlord partially for losses, damages and expenses, including frustrating and delaying Landlord’s ability to secure a replacement tenant. If Landlord loses a prospective tenant because Tenant fails to vacate the Premises on the Expiration Date or any termination of the Lease after notice to do so, then Tenant will be liable for such damages as Landlord can prove because of Tenant’s wrongful failure to vacate.

     27. INTENTIONALLY DELETED.

     28. BROKER’S COMMISSIONS.

     a. Broker. Each party represents and warrants to the other that it has not dealt with any real estate broker, finder or other person with respect to this Lease in any manner, except the Broker identified in Section In.

     b. Landlord’s Obligation. Landlord shall pay any commissions or fees that are payable to the Broker with respect to this Lease pursuant to Landlord’s separate agreement with the Broker.

     c. Indemnity. Each party shall indemnify and hold the other party harmless from any and all damages resulting from claims that may be asserted against the other party by any other broker, finder or other person (including, without limitation, any substitute or replacement broker claiming to have been engaged by indemnifying party in the future), claiming to have dealt with the indemnifying party in connection with this Lease or any amendment or extension hereto, or which may result in Tenant leasing other or enlarged space from Landlord. The provisions of this Section shall survive the termination of this Lease.

     29. MISCELLANEOUS.

     a. No Agency. Tenant is not, may not become, and shall never represent itself to be an agent of Landlord, and Tenant acknowledges that Landlord’s title to the Building is paramount, and that it can do nothing to affect or impair Landlord’s title. The relationship between the parties hereto is solely that of landlord and tenant and nothing contained herein shall constitute or be construed as establishing any other relationship between the parties, including, without limitation, the relationship of principal and agent, employer and employee or parties engaged in a partnership or joint venture. Without limiting the foregoing, it is specifically understood that neither party is the agent of the other and neither is in any way empowered to bind the other to use the name of the other in connection with the construction, maintenance or operation of the Premises, except as otherwise specifically provided herein.

     b. Force Majeure. The term “force majeure” means: fire, flood, extreme weather, labor disputes, strike, lock-out, riot, government interference (including regulation, appropriation

36

or rationing), unusual delay in governmental permitting, unusual delay in deliveries or unavailability of materials, unavoidable casualties, act of God, or other causes beyond the Landlord’s (or Tenant’s, if applicable) reasonable control.

     c. Building Standard Improvements. The term “Building Standard Improvements” shall mean the standards for normal construction of general office space within the Building as specified by Landlord, including design and construction standards, electrical load factors, materials, fixtures and finishes.

     d. Limitation on Damages. Notwithstanding any other provisions in this Lease, Landlord shall not be liable to Tenant for any special, consequential, incidental or punitive damages.

     e. Satisfaction of Judgments Against Landlord. If Landlord, or its employees, officers, directors, stockholders or partners are ordered to pay Tenant a money judgment because of Landlord’s default under this Lease, said money judgment may only be enforced against and satisfied out of: (i) Landlord’s interest in the Building in which the Premises are located including the rental income and proceeds from sale; and (ii) any insurance or condemnation proceeds received because of damage or condemnation to, or of, said Building that are available for use by Landlord. No other assets of Landlord or said other parties exculpated by the preceding sentence shall be liable for, or subject to, any such money judgment.

     f. Interest. Should either party fail to pay any amount due to the other party within 30 days of the date such amount is due (whether Base Rent, Additional Rent, or any other payment obligation), then, commencing from the due date, the amount due shall begin accruing interest at the rate of 15% per annum, compounded monthly, or the highest permissible rate under applicable usury law, whichever is less, until paid.

     g. Legal Costs. If as a result of any breach or default in the performance of any of the provisions of this Lease, Landlord uses the services of an attorney in order to secure compliance with such provisions or recover damages therefore, or to terminate this Lease or evict Tenant, Tenant shall reimburse Landlord upon demand for any and all reasonable attorneys’ fees and expenses so incurred by Landlord, provided that if Tenant shall be the prevailing party in any legal action brought by Landlord against Tenant, or in any legal action brought by Tenant to enforce Landlord’s obligations hereunder, Tenant shall be entitled to recover for the fees and expenses of its attorneys in such amount as the court may adjudge reasonable.

     h. Sale of Premises or Building. Landlord may sell the Premises or the Building without affecting the obligations of Tenant hereunder; upon the sale of the Premises or the Building, and upon Landlord’s compliance with Section 29j below, Landlord shall be relieved of all responsibility for the Premises and shall be released from any liability thereafter accruing under this Lease to the extent such responsibility and/or liability is assumed by the applicable transferee.

     i. Time of the Essence. Time is of the essence in the performance of all obligations under the terms of this Lease.

37

     j. Transfer of Security Deposit. If any Security Deposit or prepaid Rent has been paid by Tenant, Landlord shall transfer the Security Deposit and prepaid Rent to Landlord’s successor and upon such transfer, Landlord shall be released from any liability for return of the Security Deposit or prepaid Rent.

     k Tender of Premises. The delivery of a key or other such tender of possession of the Premises to Landlord or to an employee of Landlord shall not operate as a termination of this Lease or a surrender of the Premises unless requested in writing by Landlord.

     l. Tenant’s Financial Statements. Upon request of Landlord, Tenant agrees to furnish to Landlord copies of Tenant’s most recent annual, quarterly and monthly financial statements, audited if available. The financial statements shall be prepared in accordance with generally accepted accounting principles, consistently applied. The financial statements shall include a balance sheet and a statement of profit and loss, and the annual financial statement shall also include a statement of changes in financial position and appropriate explanatory notes. Landlord may deliver the financial statements to any prospective or existing mortgagee or purchaser of the Building, subject, however, to obtaining any necessary confidentiality agreements to the extent such information is not publicly available.

     m. Recordation. This Lease may not be recorded without Landlord’s prior written consent, but Tenant and Landlord agree, upon the request of the other party, to execute a memorandum hereof for recording purposes.

     n. Partial Invalidity. The invalidity of any portion of this Lease shall not invalidate the remaining portions of the Lease.

     o. Binding Effect. This Lease shall be binding upon the respective parties hereto, and upon their heirs, executors, successors and assigns.

     p. Entire Agreement. This Lease supersedes and cancels all prior negotiations between the parties, and no changes shall be effective unless in writing signed by both parties. Tenant acknowledges and agrees that it has not relied upon any statements, representations, agreements or warranties except those expressed in this Lease, and that this Lease contains the entire agreement of the parties hereto with respect to the subject matter hereof. Neither this Lease nor any provision hereof may be changed, waived, discharged or terminated orally. Only an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought shall be binding on that party.

     q. Good Standing. If requested by Landlord, Tenant shall furnish appropriate legal documentation evidencing the valid existence in good standing of Tenant, and the authority of any person signing this Lease to act for the Tenant. If Tenant signs as a corporation, each of the persons executing this Lease on behalf of Tenant does hereby covenant and warrant that Tenant is a duly authorized and existing corporation, that Tenant has and is qualified to do business in the State in which the Premises are located, that the corporation has a full right and authority to enter into this Lease and that each of the persons signing on behalf of the corporation is authorized to do so.

38

     r. Terminology. The singular shall include the plural, and the masculine, feminine or neuter includes the other. If there is more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. The agreements, conditions and provisions herein contained shall, subject to the provisions as to assignment, apply to and bind the heirs, executors, administrators, successors and assigns of the parties hereto. Tenant shall not, without the written consent of Landlord, use the name of the Building for any purpose other than as the address of the business to be conducted by Tenant in the Premises. Landlord reserves the right to change the name of the Building as it deems appropriate from time to time. If any provisions of this Lease shall be determined to be illegal and unenforceable, such determination shall not affect any other provision of this Lease and all such other provisions shall remain in full force and effect.

     s. Headings. Headings of sections are for convenience only and shall not be considered in construing the meaning of the contents of such section.

     t. Choice of Law; Waiver of Jury Trial. This Lease shall be interpreted and enforced in accordance with the laws of the State in which the Premises are located. Landlord and Tenant hereby waive trial by jury in any action, proceeding, or counterclaim brought by Landlord or Tenant against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord to Tenant, the use or occupancy of the Premises by Tenant or any person claiming through or under Tenant, any claim of injury or damage, and any emergency or other statutory remedy; provided, however, the foregoing waiver shall not apply to any action for personal injury or property damage. If Landlord commences any summary or other proceeding for non-payment of rent or the recovery of possession of the Premises, Tenant agrees not to interpose any counterclaim of whatever nature or description in any such proceeding, unless the failure to raise the same would constitute a waiver thereof.

     u. Effective Date. The submission of this Lease to Tenant for review does not constitute a reservation of or option for the Premises, and this Lease shall become effective as a contract only upon the execution and delivery by both Landlord and Tenant. The date of execution shall be entered on the top of the first page of this Lease by Landlord, and shall be the date on which the last party signed the Lease, or as otherwise may be specifically agreed by both parties. Such date, once inserted, shall be established as the final day of ratification by all parties to this Lease, and shall be the date for use throughout this Lease as the “Effective Date”.

     v. Designation of Representative. If more than one person or party shall be Landlord or Tenant, such parties, by appointment by the holders of (i) at least fifty one percent (51%) of the estate of Landlord or Tenant, as the case may be, or (ii) the owners of at least fifty one percent (51%) of the Premises, or of a corporation that owns or controls the Premises, Landlord or Tenant, as the case may be, by Notice to the other, shall designate a single person or party to act as their sole representative to receive or pay the Base Rent and Additional Rent, give or receive Notices, and give consents under this Lease for and on behalf of Landlord or Tenant, as the case may be; in which case payments of the Base Rent and Additional Rent to or by, Notice to or by and consent by such representative shall be deemed to be valid payment to or by, Notice to or by or consent by all of the parties constituting Landlord or Tenant, as the case may be. Such designation may be revoked by Notice given in the same manner as the appointment,

39

by death of the person designated or by judicial determination of incompetency of the person designated, but not otherwise. Until such designation is revoked, payment to, or Notice to or by, or consent by such representative shall be conclusively binding upon all of the parties constituting Landlord or Tenant, as the case may be, and upon their respective heirs, executors, administrators, guardians, successors, and assigns. In the event no such appointment shall be in effect at any time during the term of this Lease, payment and Notice to and consent by any one party who may own an interest in the estate of Landlord or Tenant, as the case may be, shall be deemed payment and Notice to and consent by all of the parties constituting Landlord or Tenant, as the case may be, and upon their respective heirs, executors, administrators, guardians, successors, and assigns.

     w. Execution. This Lease consists of this Lease, the Workletter, the Addendum, Exhibits A, A-l, A-2, A-3, B, C, D, E and F, and all other Exhibits, if any, specified in the Table of Contents, all of which shall constitute a single agreement. Landlord and Tenant have executed this Lease by signing and dating this Lease and Workletter and initialing the first page of this Lease. This Lease may be signed in multiple counterparts which together shall constitute on and the same instrument.

     x. No Light, Air or View Easement. Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to the Building shall in no way affect this Lease or impose any liability on Landlord.

     y. Landlord’s Right to Grant Easements. Landlord shall have the right, without the consent of Tenant, to grant to adjacent land owners, including Landlord, at any time and from time to time during the Term of this Lease, easements and rights of ingress, egress and common use and enjoyment with respect to the roads, walks, unimproved portions of the land on which the Building is located, water, sewage, telephone, gas and electricity lines, and Landlord may at any time and from time to time grant easements, public and private, for such purposes to itself and to others, and relocate any easements now or hereafter affecting the land on which the Building is located; provided, however, that in no event shall Landlord be permitted to take any action permitted by this paragraph if such action would (i) materially adversely and permanently affect Tenant’s ingress and egress to and from the Premises, (ii) materially and permanently reduce the available parking of the Building, or (iii) overburden the Common Areas or the utilities or other portions of the Property.

     z. No Waiver. The waiver by Landlord of any agreement, condition or provision herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other agreement, condition or provision herein contained, nor shall any custom or practice which may grow up between the parties in the administration of the terms hereof be construed to waive or to lessen the right of Landlord to insist upon the performance by Tenant in strict accordance with said terms. The subsequent acceptance of rental hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any agreement, condition or provision of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such rental.

40

     30. SPECIAL CONDITIONS. The following special conditions, if any, shall apply, and where in conflict with earlier provisions in this Lease shall control:

     a. Right of First Offer.

     (1) Provided that Tenant is not in default (beyond applicable periods of notice and cure) under this Lease and subject to existing rights of other tenants of the Building at the time of execution of this Lease. Tenant acknowledges that the fifth floor is currently leased to Cybera, Inc. Tenant shall have a continuous right of first offer (“Right of First Offer”) to lease any space on the fourth (4^th) or fifth (5^th) floors of Building C or the 1,671 RSF adjacent to the Data Center on Floor 1 in Building A, currently occupied by Ford Motor Credit Company (“Expansion Space”) should space become available to rent to a third party (other than Ford Motor Company (“Ford”) or a Ford related party). In such event, Landlord shall notify Tenant and Tenant shall have ten (10) Business Days after receipt of Notice to give Notice to Landlord that it is exercising its right to lease the Expansion Space upon the same terms and conditions offered to the third party, except that the Base Rent shall be equal to the then Fair Market Rental Value (defined in Section 30 b, below), unless Tenant exercises a Right of First Offer during the first 24 months of this Lease, in which event the Base Rent shall be at the same rate per rentable square foot as the then current Base Rent and for a Term equal to the remaining Term.

     (2) Should Tenant not respond pursuant to Section 30 a (1) or respond negatively to Landlord’s notice, then Landlord may lease the Expansion Space to such third party (or Ford or its related party); provided, however, that Tenant’s Right of First Offer shall nevertheless continue until the end of the initial Lease Term or any extension in the event that the third-party lease is not consummated within 180 days after Tenant’s receipt of Landlord’s Notice under Section 30a(l) or in the event the Expansion Space becomes available following the expiration of any third party lease.

     (3) Tenant shall not have any rights under Section 30 a (1) if Tenant does not give Landlord notice strictly according to Section 30 a (1), or if at the time either that Tenant gives Landlord notice under Section 30 a (1) or that the Expansion Space is delivered to Tenant:

(i)	A default by Tenant under this Lease (beyond applicable notice and cure periods) shall have occurred and be continuing; or
(ii)	Spheris Operations Inc. (and/or any assignee or sublessee described in Section 18C) occupies less than 100% of the rentable square feet of the Premises.

     (4) It shall be a condition of Tenant’s right to exercise this option that Tenant is not in default (beyond applicable periods of notice and cure) under this Lease both at the time of Tenant’s exercise of this option and at the time the rent is scheduled to commence on the Expansion Space; and this condition may be waived by Landlord at its sole discretion and may not be used by Tenant as a means to negate the effectiveness of Tenant’s exercise of this option.

41

     (5) The Tenant Improvement Allowance for construction of the Expansion Space shall be determined at the greater of the initial Tenant Improvement Allowance or the Fair Market Rental Value for the Tenant Improvement Allowance; provided, however, that if Tenant exercises a Right of First Offer during the first 24 months of the Lease Term, then the Tenant Improvement Allowance for construction of tenant improvements within the Expansion Space shall instead be equal to the Tenant Improvement Allowance for the Premises (as set forth in the Workletter), times a fraction, the numerator of which is the number of months that are remaining in the Lease Term at the time Tenant exercises such Right of First Offer and the denominator of which shall be 120.

     (6) Tenant shall execute an amendment to the Lease prepared by Landlord, within fifteen (15) days of its submission to Tenant; provided, however, that Landlord agrees not to submit such amendment to Tenant until after the rent for the Expansion Space has been determined pursuant to Section 30(b)(6) below. Such amendment shall memorialize items such as, but not limited to:

(i)	anything affected by the increase in size of the Premises, including, but not limited to, the increased rentable square feet, Base Rent, Tenant’s Percentage Share, and Security Deposit.
(ii)	the date that the Rent for the Expansion Space shall commence which shall be the earlier of:

(a)	one hundred twenty (120) days from Landlord’s receipt of Tenant’s Notice that it has exercised its right of first offer, or
(b)	the Tenant’s occupancy (for purposes other than construction of tenant improvements) of the Expansion Space.

     b. Option to Renew.

     (1) IF:

(a)	Tenant is not in default (beyond applicable periods of notice and cure) under this Lease; and
(b)	Tenant gives and Landlord receives written notice not less than nine (9) months prior to the expiration of the initial (or then extended) Lease Term of the Lease of Tenant’s intention to extend the Term of the Lease (each an “Extended Term”); and
(c)	Spheris Operations Inc. (or an assignee described in Section 18c) is the Tenant and is in occupation of and

42

conducting its business in the whole of the Premises in accordance with the terms of this Lease, Tenant expressly acknowledging and agreeing that this Section 30 b is personal to Tenant (and to its assignees under Section 18c),

     (2) THEN:

     the Term of the Lease shall be extended as to the entire Premises, or at Tenant’s option, a portion of the Premises, on a full floor basis (except for the Data Center in Building A), with a minimum of 2 full floors, upon the expiration of the initial Lease Term, or the then-previous Extension Term, if applicable, for the Extended Terms, as indicated in Section 1b, upon the same terms and conditions as in the Lease except that:

(a)	there shall be no further right to extend the Lease Term (other than as indicated in Section 1 b); and
(b)	Landlord may, at its option, require that Tenant enter into an extension agreement, as prepared by Landlord, to give effect to such Extended Term, and
(c)	the Base Rent shall be at the rental rate as specified in Section 30b (6) below at the time the renewal notice is due.
(d)	For purposes of this Lease, the term “Lease Term” shall be deemed to include, if applicable, any Extended Term(s) unless specifically provided otherwise herein.

     (3) If Tenant fails to give and if Landlord does not receive appropriate notice within the time limit set out herein for extending the Lease Term, then this Section 30 b, shall be null and void and of no further force or effect as to the upcoming Extension Term. If Tenant gives and Landlord receives such appropriate notice within the time limit set out herein for extending the Lease Term, it will execute the documentation submitted by Landlord pursuant to Subsection (2)(b) of this Section 30b within ten (10) Business Days of Tenant’s receipt of each document; provided, however, that Landlord agrees not to submit such documentation to Tenant until such time that the rent is finally determined pursuant to Section 30b(6) below.

     (4) [Intentionally Deleted]

     (5) It shall be a condition of Tenant’s right to exercise the Option to Extend herein that Tenant shall not be in default (beyond applicable periods of notice and cure) under this Lease both at the time of Tenant’s exercise of this option and at the time any extension term is scheduled to commence; and this condition may be waived by Landlord at its sole discretion and may not be used by Tenant as a means to negate the effectiveness of Tenant’s exercise of this option.

     (6) (a) Within sixty (60) days following Tenant’s written notice to Landlord to extend the Lease Term, Landlord shall notify Tenant in writing of the

43

proposed Rent amount to be paid during such Extended Term, which shall be the then Fair Market Rental Value of the Premises. “Fair Market Rental Value” shall be defined as the annual rental (projected from the date of the commencement of the payment of annual rental to which it applies) which Tenant would reasonably expect to pay and Landlord would reasonably expect to receive under leases of space of comparable conditions, on conditions comparable to this Lease, covering premises similar to the Premises in the Franklin, Tennessee area and shall also include a determination of all concessions, tenant improvement allowances and other benefits that Tenant would reasonably expect to receive, and Landlord would reasonably expect to give under such a lease at such rental rate. Tenant shall have sixty (60) days following receipt of Landlord’s notice of determination of the proposed Extended Term Rent, in which to:

(i)	accept such determination; or
(ii)	elect to have such determination made by appraisal as described below; or
(iii)	withdraw its notice of exercise of option to extend.

(b) If Tenant fails to notify Landlord in writing of its election within said sixty (60) day period, Tenant shall be deemed conclusively to have withdrawn its notice of exercise of the option to extend the Lease and the Lease shall terminate on the Expiration Date of the Initial Lease Term, or, if applicable, the previously exercised Extended Term as if such notice was never given. If Tenant elects to have such determination made by appraisal, then:

(i)

Within ten (10) days after Landlord receives Tenant’s notice of its election to have such determination made by appraisal, Landlord and Tenant shall each appoint and employ, at its cost, a real estate appraiser (who shall be licensed in the State of Tennessee and be a member of the American Institute of Real Estate Appraisers [“MAI”] with at least ten (10) years of full-time commercial appraisal and real estate marketing experience in the Franklin, Tennessee area) to appraise and establish the Fair Market Rental Value.

(ii)

Within thirty (30) days after the selection of the two (2) appraisers, the appraisers shall each submit an appraisal of the Fair Market Rental Value. If the appraisers are equal to or less than ten percent (10%) apart in their determination of Fair Market Rental Value, the Fair Market Rental Value shall be the average of the two appraisals. If the appraisers are more than ten percent! (10%) apart in their determination of Fair Market Rental Value, then the two appraisers shall attempt to agree upon and designate a third appraiser meeting the qualifications set forth above within

44

ten (10) days after submittal of the Fair Market Rental Value determination by both appraisers.

(iii) Within thirty (30) days after the selection of the third appraiser, a majority of the appraisers shall agree upon the Fair Market Rental Value. If a majority of the appraisers are unable to agree within the stipulated time, then each appraiser shall render his/her separate appraisal within such time, and the three appraisals shall be averaged in order to establish such rate; provided, however, if the low appraisal and/or the high appraisal are more than ten percent (10%) lower and/or higher than the middle appraisal, the low appraisal and/or high appraisal shall be disregarded. If both the low appraisal and the high appraisal are disregarded, the middle appraisal shall establish the Fair Market Rental Value. After the Fair Market Rental Value has been established, the appraisers shall immediately notify the parties in writing.

(c)

Personal Property. Landlord and Tenant agree that Landlord shall cause to be transferred as of the Commencement Date certain personal property (the “Personal Property”) of Ford Motor Credit Company (“Ford Credit”) located at the Premises, and more particularly described in the Bill of Sale attached hereto as Exhibit F and incorporated herein and made a part of this Lease. Tenant agrees that at the termination of this Lease all of Tenant’s personal property, including the Personal Property shall be removed from the Premises, in accordance with the terms of this Lease.

ADDENDUM AND EXHIBITS. The attached Addendum and Exhibits shall apply, and where in conflict with earlier provisions in this Lease shall control. The attached Addendum and Exhibits are incorporated herein and made a part of this Lease.

a.	Addendum
b.	Exhibit A — Premises (Space Plan to be replaced with Working Drawings, after mutual approval by Landlord and Tenant)
c.	Exhibit A-1 — Site Plan
d.	Exhibit A-2 — Legal Description (Office Complex)
e.	Exhibit A-3 — Data Center Drawing
f.	Exhibit B — Rules and Regulations
g.	Exhibit C — Commencement Letter
h.	Exhibit D — Janitorial Services
i.	Exhibit E — License Agreement
j.	Exhibit F — Bill of Sale
k.	Exhibit G — Workletter

[Signatures on following page]

45

      IN WITNESS WHEREOF, Landlord and Tenant have executed this lease in three (3) originals, all as of the day and year first above written.

TENANT: SPHERIS OPERATIONS INC.
By:	/s/ Gregory T. Stevens
	Printed Name:	Gregory T. Stevens
	Title:	Chief Administrative Officer
	Date:	May 26, 2006
LANDLORD: FORD MOTOR LAND DEVELOPMENT CORPORATION
By:	/s/ Diane L. Morris
	Printed Name:	Diane L. Morris
	Title:	Vice President
	Date:	6-6-06

46

ADDENDUM

     ADDITIONAL RENT OPERATING EXPENSE PASS THROUGHS. For the calendar year commencing on January 1, 2008 and for each calendar year thereafter, Tenant shall pay to Landlord, as Additional Rent, Tenant’s Proportionate Share of any increase in Operating Expenses (as hereinafter defined) incurred by Landlord’s operation or maintenance of the Building dining such calendar year above the Operating Expenses Landlord incurred during the Base Year (as hereinafter defined), but in no event shall the increase be more than 5% in any one calendar year.

     For purposes of calculating Tenant’s Proportionate Share of real and personal property taxes, Landlord shall use the Base Year or the year in which the Building and improvements are completed and are fully assessed, whichever shall be later. Tenant’s Proportionate Share shall be determined pursuant to Section 2b of the Lease.

     For the calendar year commencing on January 1, 2008 and for each calendar year thereafter during the Term, Landlord shall estimate the amount the Operating Expenses shall increase for such calendar year above the Operating Expenses incurred during the Base Year. Landlord shall send to Tenant a written statement of the amount of Tenant’s Proportionate Share of any estimated increase in Operating Expenses and Tenant shall pay to Landlord, monthly or annually, at Landlord’s option, Tenant’s Proportionate Share of such increase in Operating Expenses. Within ninety (90) days after the end of each calendar year or as soon as possible thereafter, Landlord shall send a copy of the Annual Statement to Tenant. Pursuant to the Annual Statement, Tenant shall pay to Landlord Additional Rent as owed or Landlord shall adjust Tenant’s Rent payments if Landlord owes Tenant a credit. After the Expiration Date, Landlord shall send Tenant the final Annual Statement for the Term, and Tenant shall pay to Landlord Additional Rent as owed or if Landlord owes Tenant a credit, then Landlord shall pay Tenant a refund. If there is a decrease in Operating Expenses in any subsequent year below Operating Expenses for the Base Year then no additional rent shall be due on account of Operating Expenses, but Tenant shall not be entitled to any credit, refund or other payment that would reduce the amount of other additional rent or Base Rent owed. If this Lease expires or terminates on a day other than December 31, then Additional Rent shall be prorated on a 365 day calendar year (or 366 if a leap year). All payments or adjustments for Additional Rent shall be made within thirty (30) days after the applicable Annual Statement is sent to Tenant.

     The term “Base Year” shall mean the twelve month period beginning on the January 1, 2007 and ending on December 31, 2007. Landlord shall deliver to Tenant an Annual Statement with respect to the Base Year within 90 days after the end of the Base Year.

     The term “Operating Expenses” shall mean (1) the total actual cost or expense paid or incurred by Landlord which is attributed to or allowable to the operation, maintenance and repair of the Building and Common Areas, including, without limitation, ad valorem real and personal property taxes, the costs incurred for air conditioning; mechanical ventilation; heating; cleaning; rubbish removal; snow removal; general landscaping and maintenance; window washing (interior and exterior, including inside partitions); elevators; escalators; porter and matron service; transportation service, if any; electric current; steam; a management fee of five percent (5%) of Base Rent (as defined in Section 3(b) herein); protection and security service; repairs,

1

maintenance; fire, extended coverage, boiler, sprinkler, apparatus, public liability and property damage insurance (or the allocated cost associated with Landlord’s self-insurance program (not to exceed the amount that would have been payable by Landlord to a third party insurance company for similar coverage)); supplies; wages, salaries, disability benefits, pensions, hospitalization, retirement plans and group insurance respecting service and maintenance employees; uniforms and working clothes for such employees and the cleaning thereof; expenses imposed pursuant to any collective bargaining agreement with respect to such employees; payroll, social security, unemployment and other similar taxes with respect to such employees; sales, use and other similar taxes; water rates, sewer rates; depreciation of all hand tools and other movable equipment and personal property, which is, or should be, capitalized on the books of Landlord and the cost of hand tools and other movable equipment and personal property which need not be so capitalized, as well as cost of maintaining all such hand tools and movable equipment, and any other costs, charges and expenses which, under generally accepted accounting principles and practices, would be regarded as maintenance and operating expenses, and (2) the cost reasonably allocable to the Building of any capital improvements made by Landlord after the Commencement Date that reduce other Operating Expenses or made by Landlord after the date of this Lease that are required under any governmental law or regulation that was not applicable to the Building at the time it was constructed, such cost or allocable portion thereof to be amortized over such reasonable period as Landlord shall determine together with interest on the unamortized balance at such rate as may have been paid by Landlord on funds borrowed for the purpose of constructing such capital improvements. Operating Expenses shall not include depreciation other than depreciation on exterior window draperies provided by Landlord and carpeting in Common Areas; costs of repair and maintenance which are paid for by proceeds of insurance, by other tenants or third parties; advertising, public relations and promotions attributable to Landlord’s efforts to increase or maintain the occupancy rate in the Building; tenants’ improvements, real estate brokers’ commissions, interest and capital items other than those referred to in clause (2) above. If the Building is not at least ninety-five percent (95%) occupied by tenants during all or a portion of any Calendar Year (including the Base Year), Landlord may make appropriate adjustments for such year in the components of Operating Expenses which vary depending upon the occupancy level of the Building, employing generally accepted accounting and management principles. Any such adjustments shall also be deemed expenses paid or incurred by Landlord and included in Operating Expenses for such Calendar Year, as if the Building had been ninety-five percent (95%) occupied and Landlord had actually paid or incurred such expenses, to the end that the actual amounts of such variable components of Operating Expenses be fairly borne by tenants occupying the Building, and provided that no such adjustment shall include any profit to Landlord in connection with such variable cost. The annual statement of Operating Expenses shall be accounted for and reported in accordance with generally accepted accounting principles (the “Annual Statement”).

     Tenant’s Right to Review Annual Statement. Within 90 days following the date of the Annual Statement for the Base Year or any subsequent year, Tenant shall have the right upon request to review Landlord’s books and records pertaining to Operating Expenses and Property Taxes. Such review shall be conducted only during regular business hours at the office where Landlord maintains its books and records with respect to the Operating Expenses and only after Tenant gives Landlord 14 days prior written notice. Tenant shall deliver to Landlord a copy of the results of such audit within 15 days of its receipt by Tenant. No audit shall be conducted at any time Tenant is in default of any of the terms of the Lease. No subtenant shall have any right to

2

conduct an audit and no assignee shall conduct an audit for any period during which such assignee was not in possession of the Premises. The costs of the audit shall be borne by Tenant

3

EXHIBIT A
PREMISES

(Space Plan to be replaced with Working Drawings, after mutual approved by Landlord and Tenant)

4

5

EXHIBIT A-2

LEGAL DESCRIPTION — OFFICE COMPLEX

Being a tract of land known as Lot 5 of the Final Plat of Cool Springs East Subdivision, Section One, Revision One as recorded in Plat Book 22, Page 46, Register’s Office of Williamson County (ROWC), Tennessee, said tract lying in Williamson County in the 8^th District of Franklin, Tennessee. Bounded on the south by Lot 694 and 695 of Final Plat of Cool Springs East Subdivision, Section One, Revision Three (Resubdivision of Lot 4) (Section 35 of Cool Springs East), as recorded in Plat Book 42, page 102, ROWC; bounded on the west by the eastern ROW of Interstate 65 (ROW varies); bounded on the north by Continental Cool Springs East, as recorded in Deed Book 3112, page 646, ROWC, and by Songbird Aviation II, LLC, as recorded in Deed Book 3357, page 103, ROWC; and bounded on the east by the western Right- of-Way (ROW) of Carothers Boulevard (132’ ROW); Said tract being described according to a survey prepared by Robert M. Searson, TRLS #1666, Littlejohn Engineering Associates, dated 3/8/06, Job No. 26032, as follows:

POINT OF BEGINNING being a set point on the southeast corner of the tract being described, said point lying on said western ROW of Carothers Parkway and being N 28 deg. 44’ 57” E 404.42’ from the centerline intersection of said Carothers Parkway and Gillespie Drive; thence leaving said ROW of Carothers Parkway and along the common line of the tract being described and said Lot 694 and 695 with the following: N 66 deg. 31’ 32” W 404.32’ to a set point; thence S 68 deg. 28’ 27” W 193.44’ to a set point; thence N 66 deg. 31’ 32” W 470.27’ to a set point; thence N 21 deg. 31’ 32” W 193.44’ to a set point; thence N 66 deg. 31’ 32” W 609.00’ to a found iron rod lying on said eastern ROW of Interstate 65, said point being the southwest corner of the tract being described; thence leaving said common line and along said ROW of Interstate 65 with the following: N 28 deg. 42’ 16” E 303.32’ to a found iron rod with “Ragan & Smith” cap; thence N 61 deg. 14’ 08” E 282.97’ to a set point; thence N 16 deg 11’ 55” E 199.84’ to a set point; thence N 31 deg. 27’ 43” W 296.95’ to a found iron rod with “Ragan & Smith” cap; thence N 07 deg. 54’ 14” W 36.26’ to a set point, said point being the northwest corner of the tract being described; thence leaving said ROW of Interstate 65 with the following: S 79 deg. 55’ 28” E 1319.73’ to a set point; thence N 89 deg. 18’ 28” E 534.19’ to a point lying on said western ROW of Carothers Parkway, said point being the northeast corner of said tract; thence along said ROW of Carothers Parkway with the following: with a curve to the left having a length of 270.97’, having a radius of 1373.57’, having an interior angle of 11 deg. 18’ 10”, and having a chord bearing and distance of S 08 deg. 16’ 04” W 270.53’ to a set point; thence S 02 deg. 36’ 59” W 200.00’ to a set point; thence with a curve to the right having a length of 895.78’, having a radius of 1172.43’, having an interior angle of 43 deg. 46’ 34”, and having a chord bearing a distance of S 24 deg. 30’ 16” W 874.15’ to a set point; thence S 46 deg. 23’ 33” W 139.09’ to the point of beginning.

Tract contains 2,174,901 square feet or 49.93 acres.

Tax Parcel ID: 053 142.00
Address: 9009 Carothers Parkway, Franklin, Tennessee

6

EXHIBIT A-3

Data Center Space

7

EXHIBIT B
Rules and Regulations

1. No part or the whole of the sidewalks, plaza areas, entrances, passages, courts, elevators, vestibules, stairways, corridors or halls of the Building shall be obstructed or encumbered by tenant or used for any purpose other than ingress and egress to and from the space demised to such tenant.

2. No awnings or other projections shall be attached to the outside walls or windows of the Building. No curtains, blinds, shades, or screens visible from the exterior of the Premises or the Building (other than those to be installed as part of the Workletter) shall be attached to or hung in, or used in connection with, any window or door of the space demised to any tenant. Tenants will not place objects against glass partitions or doors or windows which would be unsightly from any of the corridors of the Building or from the exterior of the Building and will promptly remove any such objects upon notice from Landlord.

3. No sign, advertisement, object, notice, or other lettering shall be exhibited, inscribed, painted, or affixed on any part of the outside of the space demised to any tenant or of the Building. Signs on exterior doors and directory tablets, if any, shall be inscribed, painted, or affixed for each tenant by Landlord at Landlord’s expense, and shall be of a size, color, and style approved by Landlord.

4. No show cases, signs or other articles shall be put in front of or affixed to any part of the exterior of the Building, nor placed in the halls, corridors, vestibules, or other public parts of the Building.

5. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances (including, without limitation, coffee grounds) shall be thrown therein.

6. No tenant shall bring or keep, or permit to be brought or kept, any inflammable, combustible, or explosive fluid, material, chemical, or substance in or about the Building.

7. No tenant shall drill into, or in any way deface, any part of the Building or the space demised to such tenant. No boring, cutting, or stringing of wires shall be permitted, except in the Data Center, Building A, as may be necessary, with Landlord’s prior written approval which shall not be unreasonably withheld.

8. No cooking (with the exception of microwave ovens to heat food) shall be done or permitted in the Building by any tenant. No tenant shall cause or permit any unusual or objectionable fumes, smoke, odors or other discharges to emanate from the space demised to such tenant.

9. Smoking is not permitted in the Building. Smoking is permitted outside of the Building, if any, as designated and redesignated in writing from time to time by Landlord, in its sole, absolute and arbitrary discretion. All smoking materials must be disposed of in ashtrays or other appropriate receptacles provided for that purpose.

8

10. Neither the whole nor any part of the space demised to any tenant shall be used for manufacturing, for the storage of merchandise, or for the sale of merchandise (except that Tenant’s Fulfillment Center may be used for shipping and receiving computers), goods, or property of any kind at auction.

11. No tenant shall make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with other tenants or occupants of the Building or neighboring buildings or premises, whether by the use of any musical instrument, radio, television set, or other audio device, unmusical noise, whistling, singing, or in any other way. Nothing shall be thrown out of any doors, windows, or skylights or down any passageways.

12. No additional locks or bolts of any kind shall be placed upon any of the doors or windows in the space demised to any tenant, nor shall any changes be made in locks or the mechanism thereof, unless written approval from Landlord is granted. Each tenant must, upon the termination of this tenancy, return to Landlord all keys to offices and toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any such keys, such tenant shall pay Landlord the reasonable cost of replacement keys.

13. All removals from the Building, or the carrying in or out of the Building or the space demised to any tenant of any safes, freight, furniture, or bulky matter of any description must take place during such hours and in such manner as Landlord or its agents may determine, from time to time. Landlord reserves the right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of these rules and regulations or the provisions of such tenant’s lease.

14. No tenant shall use or occupy or permit any portion of the space demised to such tenant to be used or occupied as an employment bureau or for the storage, manufacture, or sale of liquor, narcotics or drugs. No tenant shall engage or pay any employees in the Building, except those actually working for such tenant in the Building, nor advertise for laborers giving an address at the Building; provided, however, that tenant may advertise giving an address at the Building for regular full-time or part-time employees retained in the normal course of tenant’s business at the Building.

15. Landlord shall have the right to prohibit any advertising by any tenant which, in Landlord’s reasonable opinion, tends to impair the reputation of the Building or its desirability as a building for its intended uses, and upon notice from Landlord, such tenant shall refrain from or discontinue such advertising.

16. Landlord reserves the right to control and operate the Common Areas in such manner as it deems best for the benefit of the tenants generally, including, without limitation, the right to exclude from the Building, between the hours of 6 P.M. and 7 A.M. on Business Days and at all hours on Saturdays, Sundays and holidays, all persons who do not present a pass to the Building signed by Landlord or other suitable identification satisfactory to Landlord. Landlord will furnish passes to persons for whom any tenant requests such passes.

Each tenant shall be responsible for all persons for whom it requests such passes and shall be liable to Landlord for all acts of such persons.

9

17. Each tenant, before closing and leaving the space demised to such tenant at any time, shall see that all entrance doors to the Premises are locked. Tenant assumes full responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping valuable items locked up and doors locked after Business Hours and at other times the Premises are not in use.

18. Each tenant shall, at its expense, provide artificial light in the space demised to such tenant for Landlord’s agents, contractors, and employees while performing janitorial or other cleaning services and making repairs or alterations in such space.

19. No space demised to any tenant shall be used, or permitted to be used, for lodging or sleeping or for any unlawful purpose.

20. The requirements of tenants will be attended to only upon application at the office of Landlord. Landlord’s employees shall not be required to perform, and shall not be requested by any tenant to perform, any work outside of their regular duties, unless under specific instructions from the office of Landlord.

21. Canvassing, soliciting, and peddling in the Building are prohibited, and each tenant shall cooperate in seeking their prevention.

22. There shall not be used in the Building, either by any tenant or by its agents or contractors, in the delivery or receipt of merchandise, freight, or other matter, any hand trucks or other means of conveyance except those equipped with rubber tires, rubber side guards, and such other safeguards as Landlord may require.

23. No bicycles, vehicles, or animals of any kind shall be brought into or kept about the Building by any tenant, except for animals assisting the disabled.

24. No tenant shall place, or permit to be placed, on any part of the floor or floors of the Building, a load exceeding the floor load per square foot which such floor was designed to carry and which is allowed by law. The floor load capacity is 200 pounds per square foot. The Building core and exterior wall areas have a floor load capacity of approximately 300 pounds per square foot.

25. Landlord reserves the right to specify where in the space demised to any tenant business machines and mechanical equipment shall be placed or maintained in order, in Landlord’s judgment, to absorb and prevent vibration, noise, and annoyance to other tenants of the Building.

26. Landlord reserves the right to place or install vending machines in any of the common areas of the Building.

27. In case of invasion, mob, strike, riot, public excitement, or other commotion, Landlord reserves the right to limit or prevent access to the Building during the continuance of the same by closing the doors or taking other appropriate steps. Landlord will in no case be liable for damages for any error or other action taken with regard to the admission to or exclusion from the Building or any person at any time.

10

28. Landlord reserves the right to exclude or expel from the Building any person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the Building Rules and any Laws.

29. Tenant shall store all its trash and garbage in proper receptacles within its Premises or in other facilities provided for such purpose by Landlord. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with directions issued from time to time by Landlord. Tenant will cooperate with any recycling program of the Building.

30. Tenant will comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.

31. Tenant shall be responsible for the observance of all of the Building Rules by Tenant (including, without limitation, all employees, agents, clients, customers, invitees and guests of Tenant.)

32. Tenant will not park or permit parking by its employees in any areas designated by Landlord for parking by visitors to the Building. Only passenger vehicles may be parked in the parking areas. No overnight or extended term parking or storage of vehicles is permitted without Landlord’s written permission.

33. Landlord is not responsible for any damage, loss or theft to vehicles and the contents thereof during ingress or egress from, moving through, or while parked on the site of the Building.

34. Landlord reserves the right, at any time and from time to time, to rescind, alter, or waive, in whole or in part, any of these Rules and Regulations when it is deemed necessary, desirable, or proper, in Landlord’s reasonable judgment, for its best interests or for the best interests of the tenants.

11

EXHIBIT C
COMMENCEMENT AGREEMENT

     This COMMENCEMENT AGREEMENT (the “Agreement”), made and entered into as of this                   day of                                 , 2006, by and between FORD MOTOR LAND DEVELOPMENT CORPORATION, with its principal office at 330 Town Center Drive, Suite 1100, Dearborn, MI 48126 (“Landlord”) and SPHERIS OPERATIONS INC., a Tennessee corporation, with its principal office at 720 Cool Springs Blvd., Suite 200, Franklin, TN 37067 (“Tenant”);

WITNESSETH:

     WHEREAS, Tenant and Landlord entered into that certain Lease Agreement dated                                          (the “Lease”), for space comprising approximately 70,209 rentable square feet, in the building located at 9009 Carothers Parkway, City of Franklin, County of Williamson, State of Tennessee; and

WHEREAS, the parties desire to establish the Commencement Date and Expiration Date as set forth below,

     NOW, THEREFORE, in consideration of the mutual and reciprocal promises herein contained, Tenant and Landlord hereby agree that said Lease hereinafter described be, and the same is hereby modified in the following particulars:

     1. The term of the Lease by and between Landlord and Tenant actually commenced (with respect to Floor 2 and Floor 3 of Building C and Data Center, Building A of the Leased Premises) on                                          (the “Commencement Date”). The term of the Lease by and between Landlord and Tenant actually commenced (with respect to Floor 1 of the Leased Premises) on                                         . The initial term of said Lease shall terminate on                      (the “Expiration Date”). Section 3, entitled “Term”, and all references to the Commencement Date and Termination Date in the Lease are hereby amended.

     2. The execution of this Agreement shall not constitute the exercise by Tenant of any option it may have to extend the term of the Lease.

     3. The Lease is in full force and effect and is hereby ratified and confirmed.

     4. Except as modified and amended by this Agreement, the Lease shall remain in full force and effect.

12

     IN WITNESS WHEREOF, Landlord and Tenant have caused this Agreement to be duly executed, as of the day and year first above written.

Tenant: SPHERIS OPERATIONS INC., a Tennessee corporation
By:	/s/ Gregory T. Stevens
	Printed Name:  Gregory T. Stevens
	Title:	Chief Administrative Officer
	Date:	May 26, 2006

Landlord: FORD MOTOR LAND DEVELOPMENT CORPORATION
By:	/s/ Diane L. Morris
	Printed Name:  Diane L. Morris
	Title:   Date:	Vice President 6-6-06

13

EXHIBIT D
JANITORIAL SERVICES

• Executive offices, training/conference rooms, reception area, corridors, kitchen area and high traffic areas will be dusted and vacuumed daily.

• Carpet areas will be completely vacuumed weekly.

• Carpet will be spot cleaned daily.

• Tile floors will be spray buffed twice a week and machine scrubbed weekly.

• Trash receptacles will be emptied three times a week, with the exception of executive offices, training/conference rooms, reception area, corridors, and kitchen area which will be emptied daily.

• Recycle bins from a central location will be emptied two times a week or as necessary.

• All executive office furniture and building surfaces will be cleaned daily and dusted weekly.

• In addition to the above, the following cleaning services will be performed for the restrooms and kitchen areas of the Building:

• clean and disinfect all fixtures, drinking fountains and other surfaces daily.

• Refill dispensers daily.

• Furniture and building surfaces will be cleaned daily.

• On a weekly basis, clean and refill floor drains, descale toilets and urinals.

• Quarterly, all air vents and returns will be dusted and cleaned with a damp cloth.

• Annually, carpets will be shampooed and tile floors will be striped and re-finished. High traffic areas will be shampooed quarterly.

Tenant understands that Landlord may substitute for any of the methods or devices set forth in this Exhibit D, other methods or devices, which will achieve substantially the same results.

14

EXHIBIT E

LICENSE AGREEMENT

     THIS LICENSE AGREEMENT (“License”) made this       day of                     , 2006, by and between Ford Motor Land Development Corporation, a Delaware corporation (“Licensor”), and Spheris Operations Inc., a Tennessee corporation (“Licensee”).

RECITALS

     Licensor is the owner of certain real property located at 9009 Carothers Parkway, Franklin, TN 37067 (the “Building”). Licensor and Licensee have entered into a lease dated                                    , 2006 (the “Lease”) for space in the Building more particularly described therein. The parties desire to provide for the use by Licensee of a portion of the roof of the Building as provided below.

TERMS AND CONDITIONS

     1. Licensed Area: For valuable consideration, receipt of which is hereby acknowledged and the covenants and conditions to be observed and performed by Licensee, Licensor hereby grants to Licensee a license and permission to enter upon the area to install and maintain 1 satellite dish not to exceed                 feet in diameter (the “Dish”) on the roof of the Building in a location designated by Licensor (“Licensed Area”). Licensor reserves the right upon reasonable notice to Licensee to require the relocation of all equipment installed by Licensee to another location on the roof of the Building, at Licensor’s cost.

     2. Term: The term of this License shall be coterminous with the Lease.

     3. Use: Licensee shall use the Licensed Area for the installation, operation, use, repair, replacement and maintenance of the Dish (of which the height, appearance and installation procedures must be approved in writing by Licensor which approval shall not be unreasonably withheld or delayed) for Licensee’s sole use and the necessary mechanical and electrical equipment to service said Dish all of which shall comply with all applicable governmental regulations. Licensee may have access to the Licensed Area during normal business hours and at other times by providing Licensor with reasonable prior notice and by reimbursing Licensor for any expenses incurred by Licensor in connection therewith.

     4. Licensee’s Costs: Licensee shall pay all costs of installation, operation, repair and maintenance of the Dish.

     5. Licensee’s Operations: During the term of this License, the Licensed Area and all equipment placed and maintained thereon shall be used by the Licensee for the use specified and for no other use or purpose. Licensee shall not use or permit any other person to use the Licensed Area, or any part thereof, for any purposes tending to injure the reputation thereof or for any improper or offensive use or to constitute a nuisance and Licensee shall at all times conform to and cause all persons using any part of the Licensed Area to comply with all public

15

laws, ordinances and regulations and the covenants and restrictions, from time to time applicable thereto and to all operations thereon.

     Licensee shall require its employees, when using the Licensed Area, to stay within the immediate confines thereof. In addition, in the event a cable television system is operating in the area, Licensee shall at all times during the term of the License conduct its operations so as to ensure that the cable television system shall not be subjected to harmful interference as a result of such operations by Licensee. Upon notification from Licensor of any such interference, Licensee agrees to immediately take the necessary steps to correct such situation, and Licensee’s failure to do so shall be deemed a default under the terms of this License.

     During the term of this License, Licensee shall comply with any standards promulgated by applicable governmental authorities or otherwise reasonably established by Licensor regarding the generation of electromagnetic fields. Should Licensor determine in good faith at any time that the Dish poses a health or safety hazard to occupants of the Building, Licensor may require Licensee to remove the Dish or make other arrangements reasonably satisfactory to Licensor. Any claim or liability resulting from the use of the Dish shall be subject to the insurance and indemnification provisions set forth in this License Agreement.

     6. Removal: Upon the expiration or earlier termination of this License, Licensee shall remove the Dish and all other equipment installed by it and shall repair all damage to the Building directly attributable to the installation or removal of such Dish.

     7. Indemnification; Hold Harmless: Licensee agrees to indemnify, defend (with counsel selected by Licensee) and hold Licensor and its parent, subsidiaries and affiliates and their respective officers, directors, employees and agents harmless from any claims, judgments, damages, penalties, fines, costs, liabilities (including sums paid in settlements of claims) or loss including attorneys’ fees, consultant fees, and expert fees (consultants and experts to be selected by Licensor) which arise dining or after the term of this License, from or in connection with the Dish unless caused as a result of the negligence or willful misconduct of Licensor, its officers, employees or agents. Licensor shall not be liable for any loss, damage or injury of any kind whatsoever to the property of Licensee or the property or person, including death, of any of Licensee’s employees, agents, invitees, contractors, or licensees or of any other person whomsoever caused by any use of the Licensed Area by Licensee, its agents, employees, invitees, contractors or licensees or occasioned by the failure on the part of Licensee to maintain said Licensed Area in safe condition, or by any act or omission of Licensee or of any of Licensee’s employees, agents or invitees, or arising from any other cause whatsoever; and Licensee, as a material part of the consideration of this License, hereby waives on its behalf all claims and demands against Licensor for any such loss, damage or injury suffered by Licensee, its agents, employees, invitees, contractors or licensees provided, however, nothing contained herein shall be deemed to waive any claim arising out of negligence or willful misconduct of Licensor or its agents, officers, employees, or contractors.

     8. Liens: Licensee shall not permit to be enforced against the Licensed Area any mechanics’, materialman’s, contractors’ or other liens arising from, or any claims for damage growing out of, any work of installation, repair or alteration as herein authorized or otherwise arising (except from the actions of Licensor) and Licensee shall pay or cause to be paid all of said liens and claims before any action is brought to enforce the same against Licensor or the

16

Licensed Area; and Licensee agrees to indemnify and hold Licensor and the Licensed Area free and harmless from all liability for any and all such liens and claims and all costs and expenses in connection therewith.

     9. Taxes: Dining the term of this License, Licensor shall pay all taxes attributable to the Building of which the Licensed Area is a part, and Licensee shall pay all taxes attributable to the Dish and other equipment owned and installed by Licensee.

     10. Assignment: This License shall not be assignable in whole or in part, except to permitted assignee of the Lease, and any attempted assignment thereof, without the consent of Licensor, shall immediately terminate this License.

     11. Insurance: Tenant shall insure the Dish with fire and extended coverage and shall pay any increase in Landlord’s general liability coverage which is directly attributable to the Dish. Moreover, should the exercise of Licensee’s rights hereunder result in any increase in Licensor’s insurance rates on the Building of which Licensee was given notice, Licensee shall promptly following demand reimburse Licensor for such additional expenses incurred by Licensor.

     12. Remedies: Should Licensee default in the performance of or breach any covenant or condition on Licensee’s part to be kept and performed under the Lease after notice and expiration of applicable cure periods or under this License (if such default continues for 30 days after written notice thereof is delivered by Landlord to Tenant), then in any such event Licensor may, at its option, without prejudice to any other right or remedy it may have, terminate this License and the Lease by giving Licensee written notice of such termination, and upon such termination all rights of Licensee shall cease and end.

     13. Covenants and Conditions: This License and each and all of the covenants and conditions hereof shall inure to the benefit of and shall bind the successors in interest of Licensor and subject to the restrictions set forth in the above Paragraph entitled “Assignment,” the successors and assigns of Licensee.

     14. Notices: All rents, notices or other communication shall be sent in accordance with the provisions of the Lease regarding notices.

     The parties hereto have executed this License as of the date first above written.

LICENSOR: FORD MOTOR LAND DEVELOPMENT CORPORATION, a Delaware corporation
By:	/s/ Diane L. Morris
	Its: Vice President

17

LICENSEE: SPHERIS OPERATIONS INC., a Tennessee corporation
By:	/s/ P. A. Sudmir
	Its: Chief Administrative Officer

18

EXHIBIT F

[BILL OF SALE]

     FORD MOTOR CREDIT COMPANY, a Delaware corporation (“Seller”), for and in consideration of the sum of One and No/100 Dollars ($1.00), in lawful money, and other good and valuable consideration unto it paid by SPHERIS OPERATIONS INC., a Tennessee corporation (“Purchaser”), the receipt and sufficiency of which are hereby acknowledged by Seller, has granted, bargained, sold, transferred, set over and delivered, and by these presents does grant, bargain, sell, transfer, set over and deliver unto Purchaser, its successors and assigns, all of Seller’s right, title, and interest in and to the items set forth and described on the inventory list attached hereto as Exhibit “A” and by this reference made a part hereof, owned by Seller and located at 9009 Carothers Parkway, Franklin, Tennessee (all of which are together hereinafter referred to as the “Personal Property”).

     And Seller, for itself and its successors and assigns, hereby covenants to and with Purchaser, its successors and assigns, that Seller is the lawful owner of said Personal Property, that Seller has good right to sell the same, that said Personal Property is unencumbered, and that Seller will warrant and defend the Personal Property against the lawful claims and demands of all persons whomsoever.

     The Personal Property is used equipment. The Personal Property is sold to Purchaser “as-is, where is, with all faults”. Seller has not made and does not make any express or implied representations or warranties whatsoever including, without limitation, any representations or warranties regarding the Personal Property’s condition, durability, operation, quality of materials or workmanship, compliance with specifications or applicable law. In no event will Seller be liable for any special, indirect, or consequential damages arising under or in any way connected with the Personal Property, including, but not limited to, those for loss or interruption of use, revenue, or profit.

     IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed under seal this            day of                      , 2006.

“SELLER”: FORD MOTOR CREDIT COMPANY, a Delaware corporation
By:
	Name:
	Title:

19

EXHIBIT “A” TO BILL OF SALE

INVENTORY LIST

[TO BE ATTACHED]

20

EXHIBIT G

WORKLETTER

21

EXHIBIT G

Work Letter

     1. Existing Building. Landlord confirms that the Existing Building has been constructed and/or renovated so that it complies with Applicable Laws and applicable Deed Restrictions. As used herein, the “Existing Building” shall mean Building A and Building C of the Office Complex, including, all base, shell and core improvements, all improvements to the common areas of the Building A and Building C, and all above-ceiling improvements to the Premises including the installed and finished ceiling. As used herein, the term “Applicable Laws” shall mean any and all laws, ordinances and zoning regulations of any federal, state or local governmental authority having jurisdiction with respect to the Premises. As used herein, the term “Deed Restriction” shall mean any and all restrictive covenants, agreements or other encumbrances of record in the Register’s Office for Williamson County, Tennessee, encumbering the Premises, including without limitation the Protective Covenants.

     2. Tenant Improvements. “Tenant Improvements” shall include all work to be done within the Premises including partitioning, interior doors, floor covering and finishes, reflective ceiling, electrical fixtures, electrical outlets and switches, telephone outlets, plumbing fixtures, paint and wall coverings, shelving and other millwork and locations for computer and word processing equipment, and all work related to such items, including the preparation of any plans related thereto, all to be more particularly set forth in the Working Drawings. Landlord will construct the Tenant Improvements in accordance with all Applicable Laws and Deed Restrictions, if any, and in accordance with the Working Drawings, approved by Tenant and Landlord, as defined in Paragraph 4 below. Landlord will provide the Tenant Allowance described in Paragraph 8 below. All Tenant Improvements will be done to the standards and using the materials and finishes set forth in the approved Working Drawings.

     3. Parties’ Responsibilities.

          (a) Landlord’s Responsibilities. Landlord will construct the Tenant Improvements and make any necessary modifications to the Existing Building as may be necessary or appropriate for the Existing Building to comply with this Work Letter. Landlord will be responsible for the review and approval of all plans and construction drawings for the Tenant Improvements as provided in Paragraph 4 below. Upon approval of such plans by both parties, Landlord will be responsible for ensuring that all of the work done to modify, construct, and prepare the Premises shall be done in a good and workmanlike manner in compliance with all Applicable Laws and the approved Working Drawings. Landlord agrees to exercise due diligence in causing the construction and installation of the Tenant Improvements with a proposed occupancy date of October 15, 2006. Landlord will not charge Tenant for any construction management fees or construction supervisory fees.

          (b) Tenant’s Responsibilities. Tenant shall be responsible for the preparation and approval of preliminary space plans and specifications for the Tenant Improvements (“Space Plans”), and Tenant shall be responsible for the preparation and approval of the final

Exhibit G, page 2

construction drawings and specifications for the Tenant Improvements (“Working Drawings”) as described in Paragraph 4 below, for the review and approval of all pricing related to the construction of the Tenant Improvements, and for the payment of any Tenant approved charges in excess of the Tenant Allowance.

          (c) Mutual Cooperation. Landlord and Tenant agree to negotiate in good faith with each other to achieve the approval of the Working Drawings.

     4. Working Drawings

          (a) Prior to Lease execution or within ten (10) days thereafter, but not later than June 1, 2006, Tenant’s architect shall prepare Space Plans for the Premises and, after approval by Tenant, said Space Plans shall be submitted to Landlord for approval, which approval shall not be unreasonably withheld, conditioned, or delayed. If Landlord desires modifications to the Space Plans, Landlord shall notify Tenant in writing within ten (10) days following its receipt thereof, and the parties shall promptly confer to reach agreement on the Space Plans. Landlord and Tenant agree to negotiate in good faith with each other to achieve the approval of the Space Plans. If Landlord fails to notify Tenant of any objections to the Space Plans within the 10-day period, Landlord shall be deemed to have approved said Space Plans.

          (b) Within five (5) weeks after the date Landlord and Tenant agree upon and approve the Space Plans, Tenant shall cause its architect to prepare final Working Drawings, shall review and approve such Working Drawings, and shall submit the same to Landlord for approval, which approval shall not be unreasonably withheld. If Landlord requests modifications to the Working Drawings, Landlord shall notify Tenant in writing within ten (10) days of Landlord’s receipt of said drawings from Tenant. If Tenant objects to any modifications requested by Landlord to the Working Drawings, the parties shall promptly confer to resolve all issues related thereto. If Landlord fails to notify Tenant of any modifications within the ten (10) day period, Landlord shall be deemed to have approved said Working Drawings.

          (c) Once approved by both parties, the Working Drawings shall not be changed without Landlord’s and Tenant’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed provided that Tenant may withhold its consent to any change in the Working Drawings proposed by Landlord if in Tenant’s sole and absolute discretion, such change (i) would materially adversely affect Tenant’s intended use of the Premises, or (ii) materially increase the cost of the Tenant Improvements. If any material change is necessary in the Working Drawings due to requirements of any Applicable Laws, Landlord shall consult with Tenant to develop an approach to meeting any such requirements that are acceptable to Tenant and Landlord.

     5. Bidding the Job.

          (a) Following approval of the Working Drawings by both parties, Landlord will use DWC Construction Company, Inc. (“DWC”), as general contractor to complete the

Exhibit G, page 3

work; provided, however, that Tenant shall have the right to approve the pricing aspects of Landlord’s construction contract with DWC, which approval shall not be unreasonably withheld. DWC shall secure a minimum of three (3) independent bids from subcontractors qualified to handle the various trade work to complete a project of this scope and complexity. Landlord shall approve the subcontractors based on lowest pricing and timing.

     6. [Intentionally deleted.]

     7. Construction.

          (a) Process and Schedule. Landlord shall use its best efforts to cause all necessary permits to be secured within thirty (30) days after the approval by both Landlord and Tenant of the Working Drawings selection of the Contractor, and shall cause the Contractor to promptly commence and to complete construction in accordance with the Working Drawings; provided, however, that Landlord shall not be responsible for any delays beyond its reasonable control for obtaining such permits. Landlord shall supervise the completion of the Tenant Improvements and shall use its best efforts to ensure that the Premises are substantially completed on or before October 15, 2006. All work shall be done in a good and workmanlike manner in accordance with all Applicable Laws and the Working Drawings.

          (b) Landlord agrees to repair and correct any work or materials installed by Landlord or Contractor in the Premises that prove defective as a result of faulty materials, equipment or workmanship and that first appear within one year after the Commencement Date, or provided any materials or work are covered by a warranty until such later time as any applicable warranties provided by a manufacturer or contractor have expired. Notwithstanding the foregoing, Landlord shall not be responsible for the repairs or correction of any defective work or materials installed by Tenant or any contractor other than Contractor (or a subcontractor under the control or working on behalf of Contractor), or any work or materials that prove defective as a result of any act or omission of Tenant or any of Tenant’s employees, agents, invitees, licensees, subtenants, customers, clients or guests.

     8. Payment for Tenant Improvements: Reimbursements.

          (a) Landlord will provide to Tenant an allowance of $2,106,270 ($30.00/RSF) (“Tenant Allowance”) except for costs to be paid pursuant to Section 8 (b), such Tenant Allowance shall be used at Tenant’s discretion, and from time to time upon Tenant’s request for any and all costs associated with necessary modifications to the Existing Building or the construction of the Tenant Improvements and any and all other costs incurred in Tenant’s occupancy of the Premises, including without limitation, the following: (i) costs of labor and materials, (ii) fees and other charges payable to contractors, (iii) fees to governmental authorities for permits, inspections, and certificates of occupancy, (iv) utilities during construction, (v) furniture requested by the Tenant including, at a value of $200.00 per work station, approximately 115 Typical A’s and 45 Typical B’s, to be in good working order and

Exhibit G, page 4

repair, and Tenant will pay (or use Tenant Allowance) to inventory, move and set-up of said furniture (vi) other out-of-pocket costs and expenses incurred by Landlord that are directly related to the preparation of the Working Drawings or the construction of the Tenant Improvements, and (vii) any other item that is permitted to be charged against the Tenant Allowance pursuant to this Section 8.

          (b) Except as provided otherwise herein, the cost of constructing the Tenant Improvements shall be charged against the Tenant Allowance. If the total cost of the Tenant Improvements exceeds the Tenant Allowance, the excess shall be paid by Tenant in accordance with subsection (d) below, provided that Tenant shall not be liable for any excess cost in connection with the Tenant Improvements unless Tenant has approved such excess cost in advance and in writing.

          (c) In the event that Tenant shall request any changes or substitutions to the Tenant Improvements after the Working Drawings have been prepared and the Contractor’s bid for the Tenant Improvements has been accepted, any additional costs which cause the Tenant Improvements to exceed the Tenant Allowance shall be paid by Tenant, provided that Tenant approves such additional costs in writing before the work is done.

          (d) If Tenant is required to pay any costs in excess of the Tenant Allowance, Tenant shall pay fifty percent (50%) of the approved excess costs when approximately fifty percent (50%) of the work is complete (based on actual progress payments made to the Contractor), with the remainder to be paid upon substantial completion of the Tenant Improvements subject to a ten percent (10%) holdback until all punch-list items have been completed.

          (e) If the costs to construct the Tenant improvements are less than the Tenant Allowance, the difference shall be applied to the initial installment(s) of rent and other amounts Tenant is obligated to pay under the Lease.

          (f) As part of the Tenant Allowance and to the extent any portion of the Tenant Allowance remains after substantial completion of the Tenant Improvements, Landlord also agrees to reimburse Tenant for the following:

               (i) Any cost incurred by Tenant for the preparation of the Tenant Improvement Plans; and

               (ii) Actual moving expenses incurred by Tenant in connection with its occupancy of the Building.

          (g) Except as otherwise set forth in this Section 8, any payment required to be made by either part pursuant to the terms of this Section 8 shall be made not less than thirty (30) days after the request for such payment by the other party.

     9. Completion/Punch-List. The Premises shall not be considered substantially complete until (i) the Tenant Improvements have been completed in accordance with the Working Drawings subject only to the completion of a written punch list containing

Exhibit G, page 5

items that will not interfere with Tenant’s use and occupancy of the Premises for Tenant’s permitted use under the Lease, and (ii) a certificate of occupancy and/or a conditional use permit or other such document has been issued for the Premises by the applicable governing authority (“Substantial Completion”). Within thirty (30) days after Substantial Completion, Tenant shall have the right to inspect the Premises and deliver to Landlord a list of punchlist items that Tenant believes fail to comply with the Working Drawings (“Tenant’s Punchlist”). In the event Landlord disagrees with any items on Tenant’s Punchlist, the Contractor and Tenant’s Architect shall review such disputed items and jointly issue a revised punchlist containing those items that Contractor and Tenant’s Architect determine fail to comply with the Working Drawings (“Revised Punchlist”), which Revised Punchlist shall be binding on Landlord and Tenant. Landlord shall promptly make the repairs and renovations required by the Revised Punchlist.

     10. Delay of Commencement Date. Notwithstanding the Commencement Date provided in the Lease, Tenant’s obligation for the payment of monthly installments of Rent thereunder shall not commence until Substantial Completion; provided however, that if Landlord shall be delayed in substantially completing such Tenant Improvements as a result of any of the following, which shall be deemed a “Tenant Delay”:

(a)	Tenant’s failure to return approved Space Plans, Working Drawings and/or cost estimates; or
(b)	Tenant’s request for materials, finishes or installations which are not readily available; or
(c)	Tenant’s changes in the Space Plans or Working Drawings; or
(d)	The non-performance by a person, firm or corporation employed by Tenant and delay of completion of the Tenant Improvements by such person, firm or Corporation; or
(e)	Any other matter which is deemed to be a Tenant Delay pursuant to the terms of the Workletter;

then Tenant shall pay to Landlord one day worth of the monthly Rent for each day of Tenant Delay to the extent that the Tenant Delay causes a delay in the Substantial Completion so long as, with respect to each occurrence of Tenant Delay, Tenant has been provided written notice thereof promptly after such Tenant Delay commences.

     11. Miscellaneous.

          (a) Landlord and the Contractor shall allow Tenant and/or Tenant’s agents access to the Premises at least forty-five (45) days prior to the Substantial Completion of the Premises for the purpose of Tenant and/or Tenant’s agents installing furniture, equipment or fixtures (including Tenant’s data and telephone equipment and related cabling) in the Premises, and for other activities related to Tenant’s preparation for occupying the Premises so long as Tenant and/or Tenant’s agents do not unreasonably interfere with the work to be performed by Landlord or the Contractor in the Building and the Premises.

Exhibit G, page 6

          (b) During the period of construction of the Tenant Improvements and Tenant’s move into the Premises, Tenant and Tenant’s agents shall not be charged, directly or indirectly, for parking, restrooms, HVAC usage, electricity, water, elevator usage, loading dock usage, freight elevator usage, security, or similar services.

          (c) Immediately prior to the delivery of the Premises to Tenant, Landlord shall remove all rubbish and debris therefrom and thoroughly clean the Premises.

Exhibit G, page 7

EX-10.42.2

Exhibit 10.42.2

AMENDMENT TO OFFICE LEASE AGREEMENT

     This AMENDMENT TO OFFICE LEASE AGREEMENT (the “Amendment”) is dated as of the 27^th day of March, 2009, by and between Carothers Office Acquisition LLC, a Delaware limited liability company (“Landlord”) and Spheris Operations, Inc. (“Tenant”).

WITNESSETH:

     WHEREAS, Tenant and Landlord’s predecessor, Ford Motor Land Development Corporation, entered into that certain Lease Agreement dated June 6, 2006 (the “Lease”) with respect to the lease of 70,209 rentable square feet (the “Premises”) on floors 1, 2 and 3 of the Carothers Building (the “Building”), located in office buildings known as Building C and Building A at 9009 Carothers Parkway, City of Franklin, Williamson County, Tennessee 37067; and

     WHEREAS, Landlord and Tenant desire to enter into this Amendment to memorialize the agreement of Landlord and Tenant related to the overtime HVAC rates at the Building; and

     NOW, THEREFORE, for and in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties herewith agree that the Lease shall be amended as follows:

     1. After Hours HVAC. Landlord and Tenant agree that the After Hours HVAC rate set forth in Section 1(j) of the Lease for calculation of the additional HVAC usage by Tenant for the Premises shall be $25.00 per hour, per floor, with a minimum of two (2) hours per occurrence, provided such usage is based on Tenant operating said HVAC in the Premises on a continuous (24 hour per day) basis. If Tenant does not operate in such manner, the original After Hours/HVAC rate of $35.00 per hour shall apply.

     2. Relation to Lease. Capitalized terms not defined in this Amendment shall have the meanings set forth in the Lease. It is mutually agreed that all covenants, conditions and agreements set forth in the Lease (as amended hereby) shall remain binding upon the parties and inure to the benefit of the parties hereto and their respective successors and assigns.

2

     IN WITNESS WHEREOF, the parties have executed this Amendment to Office Lease Agreement as of the year and day set forth above.

LANDLORD: Carothers Office Acquisition LLC
By:	/s/ Michael Winter
	Name:	Michael Winter
	Its:        Vice President

TENANT Spheris Operations, Inc.
By:	/s/ Russell Adkins
	Name:	Russell Adkins
	Its:        Vice President, Legal Affairs

EX-10.42.3

Exhibit 10.42.3

ASSIGNMENT, ASSUMPTION AND
AGREEMENT TO RELINQUISH OFFICE SPACE
AND AMENDMENT TO OFFICE LEASE AGREEMENT

     This ASSIGNMENT, ASSUMPTION AND AGREEMENT TO RELINQUISH OFFICE SPACE AND AMENDMENT TO OFFICE LEASE AGREEMENT (the “Agreement”) is dated the 22nd day of April, 2010, by and between Carothers Office Acquisition LLC, a Delaware limited liability company, successor in Interest to Ford Motor Land Development Corporation, a Delaware corporation (“Landlord”), and MedQuist Transcriptions, Ltd., a New Jersey limited partnership (“Assignee” or “Tenant”).

WITNESSETH:

     WHEREAS, Spheris Operations, Inc., a Tennessee corporation (“Spheris”), and Landlord’s predecessor, Ford Motor Land Development Corporation, entered Into that certain Lease Agreement dated June 8, 2008 (the “Original Lease”) consisting of space on floors 1, 2 and 3 of that certain multi-tenant office building known as “The Carothers Building” (the “Building”), which premises is located in sections of the Building known as “Building C” and “Building A” (the “Leased Premises”) at 9009 Carothers Parkway, City of Franklin, Williamson County, Tennessee 37067; and

     WHEREAS, Landlord and Spheris entered into that certain Amendment to Office Lease Agreement dated March 27, 2009 (the “Amendment”) (the Original Lease and the Amendment are collectively referred to as the “Lease Agreement”; a copy of the Lease Agreement is attached hereto as Exhibit A); and

     WHEREAS, on February 3, 2010, Spheris filed for bankruptcy protection in the United States Bankruptcy Court for the District of Delaware (the “Petition”); and

     WHEREAS, in connection with the Petition, Assignee has agreed to purchase substantially all of the assets of Spheris (the “Acquisition”); and

     WHEREAS, the Acquisition is scheduled to close as of the date of this Agreement; and

     WHEREAS, as a result of the Acquisition, Spheris shall assume the Lease Agreement and assign the Lease Agreement to Assignee, Assignee has agreed to accept assignment of the Lease Agreement conditional upon entering this Agreement with the Landlord which modifies Assignee’s and Landlord’s rights and obligations under the Lease Agreement, such modification being made in part because Assignee desires to utilize less than all of the Leased Premises for its business operations; and

     WHEREAS, Landlord and Assignee have agreed to reduce the size of the Leased Premises and to amend the Lease Agreement to reflect such reduced size of the Leased Premises leased by Tenant, subject to the conditions and agreements provided for herein.

     NOW, THEREFORE, for and in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties herewith covenant and agree as follows:

     1. Assignment and Assumption: Commencement Data and Term.

          (a) In connection with the Acquisition, Spheris will assign, transfer and set over unto Assignee all of Spheris’s right, title and interest in, under and to the Lease Agreement.

          (b) Assignee hereby accepts the foregoing assignment and hereby agrees to perform all of the terms and conditions of the Lease Agreement to be performed on the part of Spheris and assumes all of the liabilities and obligations of Spheris under the Lease Agreement, as amended hereby, arising or accruing on or after the Commencement Date (as defined herein), including, without limitation, liability for the payment of Rent and for the due performance of all the terms, covenants and conditions of the tenant pursuant to the Lease Agreement, as amended hereby.

          (c) This Agreement shall be effective as of the closing of the Acquisition by Assignee (the “Commencement Date”). The Term of the Lease Agreement, other than with respect to the Relinquished Space (as defined herein), which shall expire July 31, 2010, shall expire as currently provided for in the Lease Agreement, or December 31, 2016.

     2. Consent to Assignment Effective as of the Commencement Date, Landlord hereby (a) consents to the assignment effected hereby, and (b) agrees to recognize Assignee as the tenant under the Lease Agreement, as amended herewith.

     3. Agreement to Relinquish Space. On or before July 31, 2010 (the “Downsize Date”), Tenant shall promptly vacate and relinquish the portion of the Leased Premises described as Floor 3 of Building C, consisting of 23,876 rentable square feet (the “Relinquished Space”) to Landlord. Tenant shall continue to pay Rent and any Operating Expenses pursuant to the Lease Agreement until the Downsize Date, pursuant to the Rent Schedule attached hereto as Exhibit B. The Relinquished Space shall be turned over to Landlord on the Downsize Date as if the lease for such space expired or was terminated, and shall be in the condition required by Section 8 of the Lease Agreement and under other applicable provisions of the Lease Agreement.

     4. Amendment to Lease Agreement; Reduction in Size of Leased Premises. As of the Downsize Date, the Leased Premises, shall be decreased by the Relinquished Space (or 23,876 rentable square feet), and the Leased Premises leased by the Tenant under the Lease Agreement, shall be 47,727 rentable square feet, comprised of 21,309 rentable square feet in Building C on the first floor, 24,485 rentable square feet in Building C on the second floor, and 1,933 rentable square feet in Building A on the first floor. Landlord and Tenant agree to verify and document the Tenant’s rentable square feet prior to the Downsize Date. If necessary, the Lease will be further amended to adjust the Tenant’s Proportionate Share percentage, the rent calculations in Exhibit B, or any other such calculations resulting from the mutually agreed upon rentable square feet.

2

     Section 1(a) of the Lease Agreement (Basic Definitions and Provisions) in line 1, shall be amended to delete “70,209 Rentable Square Feet” and add in its place “47,727 Rentable Square Feet.” Additionally, in line 2 of such Section, “Tenant’s Proportionate Share: 14.25%” shall be deleted and replaced with “Tenant’s Proportionate Share: 9.41%.”

     5. Security Deposit. As of the closing date of the Acquisition, Landlord shall refund to Spheris the $200,000 Security Deposit currently held by Landlord pursuant to the Lease Agreement. Within thirty (30) days after said refund by Landlord, Assignee shall provide to Landlord a Letter of Credit in the amount of $200,000 as a Security Deposit in accordance with and as provided in Section 6.d. of the Lease Agreement.

     6. Base Rent; Reduction of Base Rent. As of the Commencement Date, the Base Rent for the Leased Premises (including the Relinquished Space through July 31, 2010) shall be as set forth on Exhibit B attached hereto. The Base Rent shown on Exhibit B for the Relinquished Space through July 31, 2010 does not include any Operating Expenses that may be due on such space. As of the Downsize Date, the Base Rent Schedule contained in Section 1 (e) of the Lease Agreement shall be modified to reflect the decrease in size of the Leased Premises by 23,876 rentable square feet. The revised Base Rent Schedule for Tenant’s lease of the Leased Premises following the Downsize Date is attached hereto as Exhibit B.

     7. Operating Expenses. Tenant shall pay for its Proportionate Share under the Lease of increases in Operating Expenses based upon the Building being 95% occupied and based upon a 2010 Base Year. Tenant will continue to pay any increase in Operating Expenses over the Base Year set forth in the Lease Agreement prior to this Agreement on the Relinquished Space until July 31, 2010.

     8. Commission. Landlord will pay a two percent (2%) commission to CB Richard Ellis, Inc. per the terms of a separate commission agreement.

     9. Relation to Lease. Capitalized terms not defined in this Agreement shall have the meanings set forth in the Lease Agreement. It is mutually agreed that all covenants, conditions and agreements set forth in the Lease Agreement (as amended hereby) shall remain binding upon the parties and inure to the benefit of the parties hereto and their respective successors and assigns.

     10. Waiver of Pre-Assumption Claims under Lease. Landlord hereby irrevocably waives any and all claims arising or related to the period prior to the Commencement Date. Landlord agrees not to bring any action against Tenant related to claims arising before the Commencement Date.

     11. Governing Law. This Agreement shall be governed, construed and enforced under and by the laws of the State of Tennessee.

[Signatures appear on following page]

3

     IN WITNESS WHEREOF, the parties have executed this Assignment, Assumption and Agreement to Relinquish Office Space and Amendment to Office Lease Agreement as of the year and day set forth above.

LANDLORD: Carothers Office Acquisition LLC
By:	/s/ Chris Potavin
	Name:	Chris Potavin
	Its:	Vice President
ASSIGNEE: MedQuist Transcriptions, Ltd.
By:	/s/ Mark R. Sullivan
	Name:	Mark R. Sullivan
	Its:	General Counsel

4

EXHIBIT A

LEASE AGREEMENT

5

EXHIBIT B

Rent Schedule for Floors 1 and 2

BUILDING:	The Carothers Building
LANDLORD:	Carothers Office Acquisition LLC
TENANT:	MedQuist Transcriptions, Ltd.
SUITE:	Floors 1 and 2; Floor 3 until July 31, 2010
RENTABLE
SQUARE FOOTAGE:	47,727 (Floors 1 and 2); 23,876 (Floor 3)
DATE:	April 22nd, 2010

Floors 1 and 2
Date	Gross Rate		Month Rent		Annual Rent
4/20/2010-6/4/2010	1.5 months free rent
6/5/2010-12/31/2010	$	21.00	$	83,522.25	$	570,926.07
1/1/2011-12/31/2011	$	21.50	$	85,510.88	$	1,026,130.50
1/1/2012-12/31/2012	$	22.00	$	87,499.50	$	1,049,994.00
1/1/2013-12/31/2013	$	22.50	$	89,488.13	$	1,073,857.50
1/1/2014-12/31/2014	$	23.00	$	91,478.75	$	1,097,721.00
1/1/2015-12/31/2015	$	23.50	$	93,465.38	$	1,121,584.50
1/1/2016-12/31/2016	$	24.00	$	95,464.00	$	1,145,448.00

Floor 3
Date	Gross Rate		Month Rent		Annual Rent
4/20/2010-7/31/2010	$	21.00	$	41,783.00	$	501,396.00

6

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors of MedQuist Inc.:

We consent to the incorporation by reference in the registration statements (No. 333-86443, No. 333-75005, No. 333-77159, No. 333-69687, No. 333-58113 and No. 333-03974) on Form S-3, (No. 333-51508, No. 333-09541, No. 333-09543, No. 333-66447, No. 333-85743, No. 333-49776, No. 333-65966, No. 333-108700 and No. 333-146516) on Form S-8 and (No. 333-57265 and No. 333-66447) on Form S-4 of MedQuist Inc. of our reports dated March 16, 2011, with respect to the consolidated balance sheets of MedQuist Inc. and subsidiaries as of December 31, 2010 and 2009 and the related consolidated statements of operations, shareholders’ deficit (equity) and other comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010, and the effectiveness of internal control over financial reporting as of December 31, 2010, which reports appear in the December 31, 2010 annual report on Form 10-K of MedQuist Inc.

/s/ KPMG LLP

Philadelphia, Pennsylvania
March 16, 2011

EX-31.1

Exhibit 31.1

I, Peter Masanotti, certify that:

1. I have reviewed this annual report on Form 10-K of MedQuist Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 16. 2011	By:	/s/ Peter Masanotti
		Name:	Peter Masanotti
		Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Anthony James, certify that:

1. I have reviewed this annual report on Form 10-K of MedQuist Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15(f) and 15d—15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 16. 2011	By:	/s/ Anthony James
		Name:	Anthony James
		Title:	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of MedQuist Inc. (the “Company”) on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter Masanotti, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Peter Masanotti
Peter Masanotti

President and Chief Executive Officer

Dated: March 16. 2011

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of MedQuist Inc. (the “Company”) on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony James, Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Anthony James
Anthony James

Chief Financial Officer

Dated: March 16, 2011