TRANSCRIPTION SERVICES AGREEMENT

Exhibit 10.1

Portions of this exhibit were omitted and filed separately with the Secretary of the Commission pursuant to an application for confidential treatment filed with the Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. Such portions are marked by a series of asterisks.

TRANSCRIPTION SERVICES AGREEMENT

     THIS TRANSCRIPTION SERVICES AGREEMENT (this “Agreement”) dated April 3, 2009 is entered into by and between MEDQUIST TRANSCRIPTIONS, LTD. (the “Company”) and CBAY SYSTEMS & SERVICES, INC. (the “Supplier”). This Agreement shall be effective upon the date of mutual execution by the parties below (the “Effective Date”).

BACKGROUND

     WHEREAS, Supplier provides medical transcription and editing services, and Company wishes to obtain medical transcription and editing services from Supplier on the terms set forth herein in order to meet obligations to the Company’s customers pursuant to agreements between the Company and such customers.

     NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained and intending to be legally bound hereby, the parties hereby agree as follows:

ARTICLE I
DEFINITIONS

     Section 1.1. Definitions . In this Agreement, and in the Exhibits to this Agreement, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below:

     “ Account Effective Date ” shall mean the date on which any Client Facility begins to receive Services from Supplier hereunder.

     “ Administrative Safeguards ” are administrative actions, policies and procedures to manage the selection, development, implementation and maintenance of security measures to protect EPHI and to manage the conduct of Supplier’s workforce in relation to the production of that information as defined in 45 CFR §164.304.

     “ Affiliate ” means any individual or entity directly or indirectly controlling, controlled by or under common control with, a party to this Agreement. For purposes of this Agreement, the direct or indirect ownership of over fifty percent (50%) of the outstanding voting securities of an entity, or the right to receive over fifty percent (50%) of the profits or earnings of an entity, shall be deemed to constitute control.

     “ Business Day Equivalent ” means average daily volume for a given week, with a week defined as six (6) business days (each weekday equals one business day, each weekend day equals one-half of a business day, and each US holiday equals one-half business day).

     “ Customer Contractual Service Level Agreement ” means the Turn Around Time, Quality Assurance levels, customer profile requirements, service level definitions, and any other service commitments Company provides to Company customers.

     “ Client Facility ” means a Company customer on the DEP which represents an organization that originates dictation and work types.

     “ Commencement Date ” means the date that is the earlier of the first (1 ^st ) of the month or the sixteenth (16 ^th ) of the month following the Effective Date.

     “ Confidential Information ” means all non-public information of a confidential or proprietary nature (whether or not specifically labeled or identified as “confidential”), in any form or medium, that relates to the business, products, financial condition, services or research or development of either of the parties to this Agreement and each of its Affiliates, suppliers, distributors, customers, independent contractors or other business relations, including all trade secrets, know-how, compilations of data and analyses, techniques, systems, formulae, recipes, research, records, reports, manuals, documentation, models, data and data bases relating thereto; inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information. Notwithstanding the foregoing, Confidential Information does not include any information that: (i) is or becomes generally available to the public other than as a result of an unauthorized disclosure by one of the parties hereto; or (ii) was within the receiving party’s possession or becomes available to the receiving party, in either case, on a non-confidential basis from a source other than the furnishing party, provided that such source is not bound by a confidentiality agreement with the furnishing party or otherwise prohibited from transmitting the information to the receiving party. Confidential Information of the Company shall include, without limitation, the Company Content (as defined in Section 6.1 herein).

     “ Effective Date ” shall be the date first set forth above.

     “ EPHI ” means “Electronic Protected Health Information” as that term is defined by 45 CFR §164.513.

     “ Force Majeure Event ” means any cause beyond the reasonable control of the non-performing party to this Agreement including, without limitation, acts of God or public enemy, fires, floods, storms, tornadoes, earthquakes, riots, strikes, blackouts, telephone outage, acts of terrorism, war or war operations, restraints of government, delays by suppliers and/or manufacturers, governmental acts, staff unavailability due to illness or airline flight delay or other causes which cannot with reasonable diligence be controlled or prevented by the non-performing party.

     “ HIPAA ” means the Health Insurance Portability and Accountability Act of 1996.

     “ Laws ” means all applicable federal, municipal, state, local or foreign statutes or laws, and shall be deemed also to refer to all rules and regulations promulgated thereunder, by any applicable regulatory authority or otherwise, unless context requires otherwise. Any reference to a particular law or regulation will be interpreted to include any revision of or successor to such statute, law, rule or regulation regardless of how it is numbered or classified.

     “ Line ” shall mean *****.

     “ PHI ” means Protected Health Information as defined in 45 CFR §164.501.

     “ Technical Safeguards ” means the technology and the policy and procedures for its use that protect EPHI and control access to it as defined in 45 CFR §164.304.

ARTICLE II
SERVICES

     Section 2.1 Services . Supplier shall provide medical transcription and editing services to the Company as set forth in this Agreement (the “Services”) beginning on the Commencement Date as defined herein. For the purpose of providing the Services, voice and/or data files will be securely imported into the Company’s DocQment Enterprise Platform (DEP) for processing by Supplier. The Company shall provide Supplier with access to the DEP at no additional cost. All Services performed for Company under this Agreement shall be performed solely within the DEP and no voice files, data files or reports shall be moved outside of the DEP environment or maintained, saved, extracted or otherwise retained by Supplier or any individuals or entities who assist Supplier in fulfilling its obligations under this Agreement in the absence of obtaining the prior written authorization of Company. Supplier shall take all reasonable precautions to ensure that all individuals or entities that assist Supplier in fulfilling its obligations under this Agreement are aware of the aforementioned requirement. Company will make a test site available within the DEP as necessary for Supplier to provide secure training to Supplier-employed or Supplier-engaged medical transcriptionists and editors. Supplier shall provide Services and customer service support twenty-four (24) hours a day, seven (7) days a week. Supplier shall comply with the Customer Contractual Service Level Agreements, which will be specific to each Client Facility implementation, and the Service Level Definitions identified in Exhibit 6 to this Agreement. Supplier shall provide Services for all work types and respective Customer Contractual Service Level Agreements, as assigned by Company.

     Section 2.2 Order Form . Within fifteen (15) days of the Effective Date of this Agreement, and not less than once per quarter thereafter, Company shall propose to Supplier the projected volume in hours of dictation per Business Day Equivalent by issuing an Order Form to Supplier in the form attached hereto as Exhibit 5 . Such order will include the current volume run rate plus any additional volume. The parties must negotiate in good faith and use commercially reasonable efforts to mutually execute the Order Form within fifteen (15) days of its issuance by Company. Company must offer Supplier not less than eighty percent (80%) of all volume projections mutually agreed upon in an executed Order Form. Company’s volume commitment to Supplier may be delayed, suspended, or reduced by Company at Company’s sole discretion should Supplier be in breach of this Agreement or should Supplier’s performance of Services fail to meet the standards defined herein.

     Section 2.3 Turnaround Time Requirements . Supplier shall deliver transcribed or edited medical reports within the turnaround time stipulated by Company at the time of Supplier’s receipt of the relevant voice or data file seven (7) days per week, three hundred sixty-five (365) days per year (the “TAT Requirement”). The TAT Requirement will be calculated at the Client Facility level. *****.

     Section 2.4 Quality Assurance .

     a) Services shall be performed by Supplier in accordance with Company’s quality assurance guidelines (“QA Program”) attached hereto as Exhibit 2 and Exhibit 3 (as updated by the Company in its sole discretion from time to time).

     b) Supplier may route up to ***** percent ***** of transcribed and edited reports for a Client Facility in any billing period after the Implementation Period as defined in Section 2.5(b) below without penalty (“QA Threshold”). *****.

     c) After the Implementation Period, Supplier shall audit and provide to the Company (and the Company reserves the right in its sole discretion to independently review the audit) a report within ten (10) days of the close of each billing period detailing Supplier’s compliance with Company’s QA Program. *****.

     d) The Company reserves the right to perform focused QA audits which will include ***** transcribed or edited reports *****. In the event Supplier’s accuracy rate in the sample from the focused QA audit is determined to be less than ***** percent ***** according to the QA Program, the Company reserves the right to take corrective action. Additionally, Supplier shall promptly correct any errors or omissions identified by the Company in the sample at no cost.

     e) Company may, in its sole discretion, route specific dictators, work types, or entire Client Facilities to Company’s QA resources should the Company identify and validate QA issues deemed to pose a risk to customer satisfaction or patient care. Such volume will be subject to the QA Credit. Such routing may be discontinued once issue resolution by Supplier has been confirmed by Company and/or Company’s Customer in writing. Supplier reserves the right to appeal any QA Credits assessed as a result of routing directed by Company under its sole discretion under this paragraph 2.4(e). The remedies identified in this Section 2.4(e) are in addition to the remedies described in Section 2.2 and Section 7.3 herein.

     f) The parties acknowledge that certain Client Facilities mandate in the DEP Client Profile that specific work, worktypes, or reports be routed to Company or Client QA resources. If applicable, such work, worktypes or reports routed to QA resources shall not be factored in calculating the QA Threshold or Supplier’s accuracy rating in calculating QA Invoice Reductions.

     Section 2.5 New Account Implementation Process .

     a) Account Orientation Period . The first fifteen (15) days after the first day Supplier begins to transcribe or edit limited volume of live dictated reports of a new Client Facility shall be deemed the “Account Orientation Period.” During the Account Orientation Period, Supplier may accept as much or as little volume as it is able to reasonably handle without penalty. Company shall route one-hundred percent (100%) of the transcribed or edited reports to the Company’s QA resources for full review and feedback utilizing DEP QASAR (Company’s QA Scoring and Reporting tool).

     b) Implementation Period . The Implementation Period is defined as a forty-five (45) day period beginning the first day that Supplier transcribes or edits a live dictated report following the Account Orientation Period.

     i) Turnaround Time Performance within Implementation Period. Within fifteen (15) days of onset of the Implementation Period, Supplier shall deliver transcribed or edited reports with an absolute compliance level no less than Company’s historical compliance level, based on Company’s absolute TAT compliance for the month prior to the Account Orientation Period for the respective Client Facility. Failure to meet such

compliance level, from day sixteen (16) through day forty-five (45) of the Implementation Period, at the Client Facility Level, shall result in

     a. a ***** percent ***** reduction in the applicable billing for each ***** percent ***** absolute TAT compliance is below Company’s historical compliance level but no more then ***** percentage points below the Company’s historical compliance level;

     b. a ***** percent ***** reduction in applicable billing for each ***** percent ***** absolute TAT compliance is more than ***** percentage points below the Company’s historical compliance level but not more than ***** percentage points below the Company’s historical compliance level; and

     c. a ***** percent ***** reduction in applicable billing for each ***** percent ***** absolute TAT compliance is more than ***** percentage points below the Company’s historical compliance level.

     ii) Quality Assurance within Implementation Period. During the first seven (7) days of the Implementation Period, Company shall route one-hundred percent (100%) of the transcribed or edited reports to the Company’s QA resources for full review and feedback utilizing DEP QASAR (Company’s QA Scoring and Reporting tool). Supplier shall provide report quality (text and demographics) equal to or greater than ***** on all transcribed and edited reports intended to be routed directly to Customer beginning day one (1) of the Implementation Period. Beginning on day eight (8) of the Implementation Period and continuing for the remainder of the Implementation Period, Supplier may submit transcribed and edited reports to Company’s QA resources for assistance in completion as needed without subjection to QA Credits defined in Section 2.4(b) above.

ARTICLE III
FEES

     Section 3.1 The price(s) to be paid by the Company for Services provided by the Supplier hereunder shall be as follows:

The parties agree that the pricing will be reviewed on each anniversary of the Agreement and, upon such review, the parties agree to enter into good faith negotiations to revise the pricing, if warranted due to significant changes in market conditions.

     a) Competitive Pricing . The prices, terms, and conditions under this Agreement must be equal to or better than those offered to any other customer of Supplier. To the extent that

Supplier is not in compliance with this Section 3.1(a), Supplier must refund to Company the difference between the then-current pricing under this Agreement and the lower, competitive price in violation of this Section 3.1(a). Within thirty (30) days of the Company’s determination that Supplier is not in compliance, Supplier agrees that it will (i) provide the Company with the more favorable prices, terms, and conditions and (ii) amend this Agreement to reflect the change in pricing. The provisions of this clause are limited to instances of other contracts providing for reasonably similar volumes and revenues and characters taken in the aggregate and not taken on a prospective basis only.

     Section 3.2 Company’s Automated Speech Recognition (“ASR”) application is the DEP’s workflow technology that routes qualifying dictation through the Company’s voice recognition engine and delivers the original audio file, along with the ASR recognized text file, to Supplier’s transcriptionist/editor. Type B Services (as applicable above) will be utilized for qualifying reports where: (a) the individual practitioners performing the dictation and work type are eligible for and enabled on the ASR application; and (b) the recognized text has been presented to the Supplier for editing.

     Section 3.3 Supplier assumes responsibility for all excise, sales, use and similar taxes, export or import duties and shipment, and delivery or installation fees. When applicable, and upon mutual consent between both parties, the Supplier may invoice such items as separate line items to the Company. An invoice will be generated by Supplier and payment is due within thirty (30) calendar days after the Company’s receipt of the invoice and any other contractual reporting obligations of Supplier due during the applicable billing period.

     Section 3.4 In the event that any invoiced amount is disputed by the Company or any TAT Invoice Reductions, QA Invoice Reductions, or QA Credits are applicable, the Company shall deliver written notice of such disputed amount to Supplier within thirty (30) calendar days after the date the invoice is due. Upon receipt of written notice of a billing dispute or any invoice reductions or credits, Supplier and Company shall promptly exchange any backup or other information reasonably necessary to support the correctness of any disputed amount. The parties shall thereafter have thirty (30) calendar days (“Invoice Review Period”) in which to examine such information, and to the extent such information substantiates payment, reductions or credits in the applicable invoice, such will be applied promptly. Thereafter, if Supplier and the Company are unable to reach an agreement as to any remaining disputed amount, Supplier and the Company shall immediately enter into good faith negotiations to resolve any remaining dispute. In the event the parties are unable to resolve such dispute within fifteen (15) calendar days after the end of the Invoice Review Period, the dispute shall be settled pursuant to the provisions of Section 11.3(b) of this Agreement.

     Section 3.5 Operational Excellence . In the event Supplier meets all service level metrics including TAT Requirements, QA Threshold, and at least ***** percent ***** accuracy under the QA Program for all volume of reports transcribed and edited during a billing period, Supplier shall be entitled to an additional ***** for the applicable billing period (“Operational Excellence Fee”). Supplier shall not be entitled to an Operation Excellence Fee if Supplier is in breach of this Agreement.

     Section 3.6 Company shall provide initial technical and DEP training to Supplier at no cost at a venue within the United States or via online training to be determined by the Company; provided, however , that Supplier shall be responsible for all travel, lodging and related expenses incidental to such training. Any subsequent training shall be provided by the Company at rates specified by the Company. Supplier shall provide the Company with any necessary training and technical support relative to Supplier’s business or operations to the extent such is agreed to by and between the parties, provided,

however , that the Company shall be responsible for all travel, lodging and related expenses incidental to such training.

ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 4.1 Supplier represents and warrants that it is fully authorized to enter into this Agreement and that its entry into this Agreement does not violate any contractual obligation it owes to a third party. Supplier further represents and warrants that all Services will be performed in a professional and workmanlike manner consistent with the highest industry standards.

     Section 4.2 Supplier shall provide any operational, technical, production and quality assurance support to reasonably meet the sales and operations requirements of the Company. However, should any such request on the part of Company require travel by individuals or entities who assist Supplier in fulfilling its obligations under this Agreement from their home station, Company shall be responsible for all such travel, lodging and related expenses of these individuals or entities to the extent such expenses are submitted and approved by Company prior to the expense being incurred by Supplier.

     Section 4.3 The Company and Supplier agree that they shall designate operational, sales, and administrative personnel as points of contact, and each Party shall maintain appropriate levels of communication as required to fulfill their obligations under this Agreement.

     Section 4.4 Supplier represents and warrants that no individuals or entities shall assist Supplier in fulfilling Supplier’s obligations and duties under this Agreement unless those individuals or entities: (a) are employees of Supplier, Supplier Affiliates and other entities identified in Exhibit 4 attached hereto (“Covered Entities”), or employees of Covered Entities; (b) if located outside of the United States, perform all services in connection with this Agreement in a secure site and shall not at any time perform Services remotely or outside of the Supplier’s premises or the Covered Entities’ premises designated for performance of Services; (c) will in all cases have executed and as such present to the Company upon Company’s reasonable request such business agreements, HIPAA confidentiality agreements, employee verifications and other similar documentation as may be required by the Company; and (d) perform all services pursuant to this Agreement in full compliance with the terms of Company’s “International Labor Vendor Standards and Safeguards for HIPAA Compliance” (as more fully defined and expressly limited in Section 5.6 herein) and any written modifications of such presented to Supplier during the Term of this Agreement. Supplier further represents and warrants that it shall not subcontract or assign any Services, duties or obligations under this Agreement in the absence of the prior written authorization from Company.

     Section 4.5 Supplier acknowledges and agrees that the Company shall be permitted to use, hire or contract with any number of third party providers in addition to Supplier to perform transcription and editing services for Company similar to the Services contemplated by this Agreement. Supplier and any individuals or entities who assist Supplier in fulfilling its obligations under this Agreement shall not, for the Term of this Agreement (including any extensions of the Agreement) and for a period of one (1) year after this Agreement is terminated or expires, in the absence of obtaining the prior written consent from Company: (a) provide Services directly or indirectly through any of its Affiliates or Covered Entities to any Client Facility or (b) hire personnel, employees, independent contractors, or agents of any other third party providers which Company is under contract with for the provision of transcription and editing services. Nothing in Section 4.5(b) shall limit Supplier’s right to hire personnel, employees, independent contractors, or agents of any other third party providers which Company is under contract

with for the provision of transcription and editing services who responds to a general solicitation for employment not targeted to such person or entity.

ARTICLE V
HIPAA COMPLIANCE

     Section 5.1 Supplier will:

     a) Not use or further disclose any PHI other than as permitted or required by this Agreement or as required by law;

     b) Report to the Company’s Corporate Director of Information Privacy and Security any use or disclosure of the PHI not provided for by this Agreement within forty-eight (48) hours of becoming aware of the unauthorized use or disclosure;

     c) Have procedures in place for mitigating, to the maximum extent practicable, any deleterious effects from the use or disclosure of PHI in a manner contrary to this Agreement;

     d) Ensure that any individuals or entities who assist Supplier in fulfilling its obligations under this Agreement agree, in writing, to substantially the same restrictions and conditions that apply to Supplier with respect to such PHI. Supplier shall obtain reasonable assurances from any such individuals or entities that: (i) the information being disclosed will be held confidentially and used or further disclosed only as required by law, (ii) the individuals or entities will use the appropriate Administrative, Physical and Technical Safeguards to prevent the unauthorized use or disclosure of the PHI and EPHI; and (iii) the individuals or entities will immediately notify Supplier of any instance of a breach of any of the PHI terms set forth herein;

     e) Ensure that all individuals and entities who assist Supplier in fulfilling its obligations under the Agreement are or shall be appropriately informed of the terms of this Agreement and are under a legal obligation, by contract or otherwise, sufficient to enable each individual and entity to fully comply with all provisions of this Agreement. Supplier will ensure that all individuals and entities who assist Supplier in fulfilling its obligations under this Agreement are educated on the Company’s privacy and security policies (as further defined in Section 5.6 herein) and that sanctions are imposed for non-compliance with those policies and procedures. Supplier will also ensure that all individuals and entities who assist Supplier in fulfilling its obligations under the Agreement have signed Protected Health Information Confidentiality Agreements;

     f) Make available to the Company such information as the Company may require to fulfill the Company’s obligations to provide access to, provide a copy of, and account for disclosures with respect to PHI pursuant to HIPAA and the HIPAA Regulations, including, but not limited to, 45 CFR §164.524 and §164.528;

     g) Make the Company’s PHI available as the Company may require to fulfill the Company’s obligations to amend PHI pursuant to HIPAA and the HIPAA Regulations, including but not limited to 45 CFR §164.526. Supplier shall, as directed by the Company, incorporate any amendments to the Company’s PHI into copies of such PHI maintained by Supplier;

     h) Make available the information required to provide an accounting of disclosures in accordance with 45 CFR §164.528;

     i) Make its internal practices, books, and records relating to the use and disclosure of PHI received from, or created or received by Supplier on behalf of, the Company available to the Secretary of the U.S. Department of Health and Human Services for purposes of determining the Company’s or a Company customer’s compliance with HIPAA;

     j) Upon termination or expiration of the Agreement, or any time during the Term of this Agreement, with respect to PHI that Supplier maintains in any form, recorded on any medium or stored in any storage system, including PHI retained or stored by individuals and entities who assist Supplier in fulfilling its obligations under the Agreement, at the Company’s direction and if feasible, return to the Company or destroy all such PHI. A senior officer of Supplier shall certify in writing to the Company, within thirty (30) days after termination or other expiration of the Agreement, that all PHI has been returned or disposed of as provided above and that Supplier no longer retains any such Protected Health Information in any form;

     k) If return or destruction of PHI is infeasible, notify the Company in writing within thirty (30) days after termination or other expiration of the Agreement. Such notification shall include: (i) a statement that Supplier has determined that it is infeasible to return or destroy the PHI in its possession; and (ii) the specific reasons for such determination. In addition to providing such notification, Supplier shall certify within such thirty (30) day period that it will, and will require individuals and entities who assist Supplier in fulfilling its obligations under the Agreement to, extend any and all protections, limitations and restrictions contained in this Agreement to any PHI retained after termination of the Agreement and to limit any further uses and/or disclosures to those purposes that make the return or destruction of the PHI infeasible;

     l) Implement Administrative, Physical and Technical Safeguards that reasonably and appropriately protect the confidentiality, integrity and availability of EPHI that Supplier creates, receives, maintains or transmits on behalf of the Company;

     m) Report to the Company’s Director of Information Privacy and Security within forty eight (48) hours, any “security incident” of which it becomes aware, as such term is defined in the HIPAA Security Rule;

     n) Ensure that any individuals and entities who assist Supplier in fulfilling its obligations under the Agreement to whom Supplier provides EPHI agree in writing, to implement reasonable and appropriate safeguards to protect EPHI as required herein; and

     o) Upon request, provide to the Company a list of names of any individuals or entities used to outsource Company’s transcription and evidence of written assurances from those individuals or entities (as required in 5.1 (d)) that they will agree to substantially the same restrictions and conditions that apply to Supplier with respect to such PHI.

     Section 5.2 Supplier, in its capacity as Business Associate (as that term is defined in the HIPAA Regulations) to the Company, shall be permitted to use and disclose PHI in a manner that would not violate the requirements of the HIPAA Regulations as follows: (a) for the proper management and administration of Supplier; (b) to carry out the legal responsibilities of Supplier and to fulfill Supplier’s duties and responsibilities under this Agreement including in part disclosure to individuals and entities who assist Supplier in fulfilling its obligations under the Agreement; and (c) to provide data aggregation services relating to the health care operations of the Company.

     Section 5.3 Notwithstanding anything to the contrary set forth herein, the Company may immediately terminate this Agreement, or any specified contracts between the Company and Supplier, if

Supplier has breached a material term of this Article V. The Company may exercise said right to terminate the Agreement by providing Supplier with written notice of its intent to terminate, specifying the material breach of the Agreement that provides the basis for termination. Such termination shall be effective immediately or at such date as specified in the notice.

     Section 5.4 Supplier acknowledges that the Company is not conveying any right or title in the PHI to Supplier.

     Section 5.5 Notwithstanding anything to the contrary set forth herein, Supplier shall indemnify, defend and hold harmless the Company and any of th