Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14(a)-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to ss.240.14a-12
MedQuist Inc.
(Name of Registrant as Specified In Its Charter)
Costa Brava Partnership III L.P.
Roark, Rearden & Hamot, LLC
Roark, Rearden & Hamot Capital Management, LLC
Seth W. Hamot
Andrew R. Siegel
Douglas M. Gleason
Douglas E. Linton
Alok Mohan
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identifying the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
Costa Brava Partnership III L.P.
c/o Roark, Rearden & Hamot Capital Management, LLC
420 Boylston Street
Boston, Massachusetts 02116
October __, 2007
To Our Fellow MedQuist Stockholders:
Costa Brava Partnership III L.P. is the holder of approximately 5.2% of
the outstanding common stock of MedQuist Inc. (Pink Sheets:"MEDQ.PK") (the
"Company" or "MedQuist"), owning 1,938,821 shares. We are extremely concerned
with the present direction of the Company and what we believe is a lack of
independence on the Board of Directors. During the past few years the Company
has struggled to cope with numerous problems associated with allegedly unlawful
customer billing practices that were disclosed in 2003, including paying costly
financial accommodations to customers, ongoing governmental investigations,
civil lawsuits, restated financial statements, delisting from the Nasdaq Stock
Market and the inability until recently to file periodic reports with the
Securities and Exchange Commission ("SEC"). These problems occurred under the
supervision of a Board of Directors selected under a "governance agreement" with
the Company's majority stockholder, Konin Klijke Philips Electronics N.V.
("Philips").
Now, the Company is at a critical stage in its history. In July 2007,
the Company announced that it had retained an investment banker to assist the
Company to evaluate strategic alternatives. This announcement was an immediate
response to an announcement by Philips that it considered its ownership in the
Company as a non-core holding and that it may consider possible transactions or
other changes in its ownership stake in MedQuist. In connection with the
selection and implementation of any such strategic alternatives, the interests
of Philips may conflict with those of the remaining stockholders, which strongly
indicates the need for a fully independent board of directors to oversee this
critical stage in the Company's development.
We believe that other stockholders share our dissatisfaction with the
present state of affairs and ask that you vote for directors who are not
nominees of Philips or the present Board, but rather truly independent directors
dedicated to representing the interests of ALL MedQuist stockholders. As the
majority stockholder, Philips has the ability to cause the election of all
members of the Board. However, in light of Philips' announced intentions to
treat the Company as a non-core holding and the potential for conflicts of
interest between Philips and the minority stockholders, we believe that it is in
the interests of all parties to have a fully independent Board overseeing the
business of the Company at this time. We believe it is important to send a
strong message that the Company's public stockholders want director
representatives that are not beholden to Philips and the current Board.
Costa Brava has nominated five (5) candidates for election to the Board
of Directors who have no prior affiliation with the Philips: Seth W. Hamot,
Andrew R. Siegel, Douglas M. Gleason, Douglas E. Linton and Alok Mohan (the
"Costa Brava Nominees"). We believe that each of the Costa Brava Nominees is
highly qualified to serve as a director of the Company and each has the business
experience and desire to move MedQuist forward in the right direction. The Costa
Brava Nominees are truly independent, by which we mean:
o They meet the Company's independence criteria;
o They have no prior affiliations with Philips; and
o They are not materially dependent on Philips or the current Board for
election to the Board.
The Board of Directors' disappointing performance and its long running
failure to call for a meeting of shareholders since 2003 compels us to believe
that change is crucial. Our Company's public stockholders demand representation
by board members truly independent of Philips to assure fair treatment of all
stockholders and the accountability of the Company's executives. The Company
requires new voices on the Board of Directors - voices that will allow MedQuist
to move beyond the problems of the last few years. With stronger accountability,
we believe the Company will be better suited to operate in ways that maximize
stockholder value and improve financial results.
Please read this letter and our proxy statement carefully. In it, we
make our case for the election of directors truly independent of Philips and
senior management and who are committed to providing a voice for ALL
stockholders. We have done our part in bringing you an alternative slate of
nominees. The rest is up to you. If you think that it is time for the Board of
Directors to be accountable to all stockholders, we urge you to send this
message to Philips and the Company by voting for a much needed change by
signing, dating and returning the enclosed BLUE proxy card today.
Thank you,
Seth W. Hamot
President, Roark, Rearden & Hamot, LLC,
the general partner of Costa Brava
Partnership III L.P.
Whether or not you plan to attend the Annual Meeting, we urge you to
vote for the election of the five independent Costa Brava Nominees by signing,
dating and returning the enclosed BLUE proxy card in the postage-paid envelope
today. We urge you not to sign or return any proxy card sent to you by the Board
of Directors of MedQuist. If you have previously signed a proxy card sent to you
by the Board of Directors of MedQuist, you can revoke that proxy and vote for
the five independent Costa Brava Nominees by signing, dating and returning the
enclosed BLUE proxy card in the enclosed postage-paid envelope.
Remember, if you hold your MedQuist shares with a brokerage firm or
bank, only they can exercise voting rights with respect to your shares, and only
upon receipt of your specific instructions. Accordingly, it is critical that you
promptly contact the person responsible for your account and give instructions
to vote the BLUE proxy card for the election of the independent candidates
nominated by us.
If you have any questions or require any assistance in executing or
delivering your proxy, please call our proxy solicitor,
[________________________________].
2007 ANNUAL MEETING OF STOCKHOLDERS
OF
MEDQUIST INC.
_________________
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED OCTOBER __, 2007
PROXY STATEMENT
OF
COSTA BRAVA PARTNERSHIP III L.P.
ROARK, REARDEN & HAMOT, LLC
ROARK, REARDEN & HAMOT CAPITAL MANAGEMENT, LLC
SETH W. HAMOT
ANDREW R. SIEGEL
DOUGLAS M. GLEASON
DOUGLAS E. LINTON
ALOK MOHAN
We are sending you this Proxy Statement and the accompanying BLUE proxy
card because we are soliciting proxies from the stockholders of MedQuist Inc.
("MedQuist" or the "Company") to be used at the Company's 2007 Annual Meeting of
Stockholders, to be held at[___________________________________], on
[_______________________] at [____] a.m., Eastern Standard time, including any
adjournments, postponements or continuations thereof (the "Annual Meeting"). We
are seeking your support for the following:
1. To elect the nominees of Costa Brava Partnership III L.P. ("Costa
Brava"), Seth W. Hamot, Andrew R. Siegel, Douglas M. Gleason, Douglas
E. Linton and Alok Mohan (each a "Costa Brava Nominee" and,
collectively, the "Costa Brava Nominees"), to the Board of Directors of
the Company, to serve until the next annual meeting or until their
respective successors have been duly elected and qualified. WE
RECOMMEND A VOTE FOR THE COSTA BRAVA NOMINEES ON THE ENCLOSED BLUE
PROXY CARD. WE URGE YOU NOT TO VOTE FOR ANY NOMINEES OF MEDQUIST'S
BOARD OF DIRECTORS AND NOT TO EXECUTE ANY PROXY CARD EXCEPT A BLUE
PROXY CARD.
2. To vote upon a proposal authorizing the Company, if any of the Costa
Brava Nominees are elected to the Board of Directors, to reimburse the
costs and expenses of Costa Brava and the Costa Brava Nominees in
undertaking this solicitation and related litigation described herein.
WE RECOMMEND A VOTE FOR THIS PROPOSAL.
3. To consider and act upon such other matters as may properly come before
the meeting or any adjournments, postponements or continuations
thereof.
As of [________], 2007, the approximate date on which this Proxy
Statement and the BLUE proxy card are being mailed to the Company's
stockholders, the Costa Brava Nominees were the beneficial owners of 1,940,821
shares of common stock, no par value of MedQuist (the "Common Stock"), which
represents approximately 5.2% of the outstanding Common Stock, as disclosed in
the Company's filing on 10-K on August 30, 2007.
MedQuist has announced that the record date for determining those
stockholders who will be entitled to vote at the Annual Meeting is
[____________]. MedQuist's principal executive offices are located at 1000
Bishops Gate Blvd., Suite 300, Mount Laurel, NJ 08054-4632.
1
THIS SOLICITATION IS BEING MADE BY COSTA BRAVA, ROARK, REARDEN & HAMOT,
LLC, ROARK, REARDEN & HAMOT CAPITAL MANAGEMENT, LLC AND THE COSTA BRAVA NOMINEES
AND NOT ON BEHALF OF MEDQUIST OR ITS BOARD OF DIRECTORS.
Any proxy granted pursuant to this solicitation may be revoked by the
person granting the proxy at any time before it is voted at the Annual Meeting.
Proxies may be revoked by (i) delivering a written notice of revocation bearing
a later date than the proxy, (ii) duly executing and delivering a later dated
written proxy relating to the same shares or (iii) attending the Annual Meeting
and voting in person (although attendance at the Annual Meeting will not in and
of itself constitute a revocation of a proxy). To be effective, any written
notice of revocation or subsequent BLUE proxy should be mailed or delivered to,
and received by, [____________________________________________________________]
or MedQuist's corporate secretary before the taking of votes at the Annual
Meeting. If you hold your shares through a bank, broker or other nominee holder,
only they can revoke your proxy on your behalf.
Attending the Annual Meeting
[As disclosed in the Company's Proxy Statement filed with the SEC on
_________, 2007, [____________]
Background for Our Solicitation
Costa Brava made its initial investment in the Company in June 2007. On
July 30, 2007, Costa Brava announced an offer to purchase up to 1,390,000 shares
of Common Stock at a purchase price of $12.25 per share pursuant to an offer
which expired on August 24, 2007. Costa Brava purchased 1,390,000 shares of
Common Stock that were tendered pursuant to the offer and is currently the owner
of approximately 1,938,821 shares or 5.2% of the Company's Common Stock.
As a significant holder of the Company's Common Stock, we are
dissatisfied with the troubled state of affairs at the Company and the Company's
apparent reactions to Philips' announcement that it no longer deems its
investment in the Company as a core holding. We believe that there is no clearer
indication of lack of independence by the current Board of Directors than
reacting to the whims of one stockholder. We believe that a renewed sense of
independence is needed on the Board of Directors, and that the Costa Brava
Nominees are highly qualified to take on this task. If elected to the Board of
Directors of the Company, the Costa Brava Nominees will be aligned with your
interests as a stockholder and will represent ALL stockholders.
Allegations of Improper Billing Practices and Resulting Problems
In November 2003, one of MedQuist's employees raised allegations that
MedQuist had engaged in improper billing practices ("Billing Practices"). In
response, MedQuist's board of directors undertook an independent review of these
allegations and engaged the law firm of Debevoise and Plimpton LLP, who in turn
retained PricewaterhouseCoopers LLP, to assist in the review ("Review"). On
March 16, 2004, MedQuist announced that it had delayed the filing of its 2003
annual report on Form 10-K pending completion of the Review. Subsequently, on
March 25, 2004, MedQuist filed a Form 8-K detailing its determination that the
Review would not be completed by the March 30, 2004 filing deadline for its 2003
Form 10-K. As a result of its noncompliance with the SEC's periodic disclosure
requirements, MedQuist's common stock was delisted from the NASDAQ National
Market on June 16, 2004.
MedQuist did not file any periodic reports with the SEC for periods
after September 30, 2003 until July 5, 2007, when it filed its 2005 Form 10-K,
which included a restatement of previously issued financial statements.
MedQuist has not held a meeting of stockholders since 2003, in
violation of New Jersey State law and the Company's By-Laws, further
demonstrating the lack of care and independence by the members of the Board of
Directors.
2
MedQuist reported in its 2006 Form 10-K that it has had material
weaknesses in its internal control over financial reporting and cannot provide
assurance that additional material weaknesses will not be identified in the
future. MedQuist's failure to effectively maintain its internal control over
financial reporting could result in material misstatements in its financial
statements which could require it to restate financial statements, cause it to
fail to meet its reporting obligations, cause investors to lose confidence in
its reported financial information or have a negative affect on its stock price.
MedQuist also reported in its fiscal 2006 Form 10-K that it is subject
to formal investigations by the SEC and the U.S. Department of Justice ("DOJ")
and the U.S. Department of Labor ("DOL").
A number of lawsuits have been filed against MedQuist, as well as
certain of its past and current officers and/or directors and current majority
shareholder, relating to, among other things, allegations of violations of the
federal securities laws and various common laws based on allegedly unlawful
billing and payroll practices.
In order to settle issues related to the Billing Practices with
customers, MedQuist's Board authorized MedQuist's management to make cash
accommodations of more than $66 million and credit accommodation offers in the
aggregate of $9.2 million with such customers.
In July 2007, Philips announced that it is reviewing all of its options
with respect to its ownership interest in MedQuist following a determination by
Philips that it views its ownership interest in MedQuist to be a non-core
holding. In connection with such review, Philips may consider possible
transactions or other changes in its ownership interest.
In July 2007 in direct reaction to Philips' statements, MedQuist
engaged Bear, Stearns & Co. Inc. as its financial advisor to review its
strategic alternatives.
In connection with the selection and implementation of any such
strategic alternatives, which are clearly in reaction to Philips' whims, the
interests of Philips may conflict with those of the other stockholders, which
strongly indicates the need for an independent board of directors to oversee
this critical stage in the Company's development.
A Board of Directors that Lacks True Independence
The composition of MedQuist's board of directors is governed in part by
the terms of a Governance Agreement dated May 22, 2000 that MedQuist entered
into with Philips ("Governance Agreement") in connection with the completion of
Philips' tender offer for a majority of MedQuist's common stock. Under the terms
of the Governance Agreement, MedQuist agreed to take any and all action
necessary so that its board of directors consists of 11 persons, including:
o two directors representing management, consisting of MedQuist's Chief
Executive Officer and one additional officer designated by its Chief
Executive Officer ("Management Directors");
o six Philips Directors; and
o three directors nominated by the Nominating Committee of MedQuist's
board of directors to serve as Independent Directors.
Notwithstanding the preceding, MedQuist's board of directors has the
discretionary authority under the Governance Agreement to increase or decrease
the size of its board of directors, provided that:
o there are at least two Management Directors and three Independent
Directors; and
o the relative percentage of Management Directors, Independent Directors
and Philips Directors is maintained.
3
Notwithstanding the preceding, the composition of MedQuist's current
board of directors is as follows:
o three Independent Directors (Messrs. Simmons, Stowe and Underwood); and
o four Philips Directors (Messrs. Revetti, Rusckowski, Sebasky and
Weisenhoff).
We believe that other stockholders share our dissatisfaction with the
present state of affairs and ask that you vote for directors who are not
nominees of Philips or the present Board, truly independent directors dedicated
to representing the interests of ALL MedQuist stockholders. As the majority
stockholder, Philips has the ability to cause the election of all members of the
Board. However, in light of Philips' announced intentions to treat the Company
as a non-core holding and the potential for conflicts of interest between
Philips on the one hand, and MedQuist and the other stockholders on the other
hand, we believe that it is in the interests of all parties to have a fully
independent Board overseeing the business of the Company at this time.
It is important for you to send a message to Philips and the Board that
it is time for a fully independent Board to oversee the affairs of the Company
during this critical time in its history.
Recent Events
On October 9, 2007, Costa Brava filed a lawsuit against the Company in
the Superior Court of New Jersey demanding that the Company hold the annual
meeting. In violation of New Jersey law and the Company's By-Laws, the Board of
Directors has not directed a meeting of stockholders since 2003.
On October 10, 2007, Judge Ronald E. Bookbinder signed an Order that
MedQuist must appear before the Court on November 16th, 2007, to show cause why
judgment should not be entered for Costa Brava ordering that i) MedQuist hold
its annual shareholder's meeting on or before December, 15, 2007, or another
reasonably proximal date of the Court's choosing; and ii) all seats on the Board
must be elected by shareholders at such annual meeting; and iii) MedQuist must
provide written notice of the time, place and purpose of the meeting not less
than 10 nor more than 60 days before the date of the meeting, either personally
or by mail, to each shareholder of record entitled to vote at the meeting; and
iv) Costa Brava be awarded attorneys fees and costs; and v) Costa Brava be
granted such other and further relief as the Court deems appropriate.
On October 11, 2007, Costa Brava delivered a letter to MedQuist
recommending that the Nominating Committee of its Board of Directors consider
the highly-qualified slate of Seth W. Hamot, Andrew R. Siegel, Douglas M.
Gleason, Douglas E. Linton and Alok Mohan as nominees for election to the Board
of Directors at the Annual Meeting by the holders of Common Stock. The Notice
also provided that in the event that the Nominating and Corporate Governance
Committee determined not to nominate the Costa Brava Nominees for election as
directors, Costa Brava intended to submit the Costa Brava Nominees for election
to the Board of Directors at the Annual Meeting.
In submitting five nominees to the Company on October 11, 2007, each of
who we believe is highly qualified and truly independent to serve as a director
of the Company, Costa Brava hoped that the Company and Philips would recognize
the benefits of a voice for all stockholders on the Board of Directors. We
believe that all five of these candidates are highly qualified professionals,
possessing the specific skills and experiences needed to lead our Company.
While Costa Brava hopes that Philips and the Company's Board will be
receptive to Costa Brava's nominees, Costa Brava has decided that in order to
protect its interests as a stockholder in MedQuist it needs to be prepared to
move forward with its own slate of directors.
4
Participants in Solicitation of Proxies
The following persons are or may be deemed to be participants in the
solicitation by Costa Brava with respect to the Annual Meeting, as the term
"participant" is defined in the proxy rules promulgated by the SEC (each, a
"Participant" and collectively, the "Participants"): Costa Brava Partnership III
L.P., Roark, Rearden & Hamot, LLC, its general partner, Roark, Rearden & Hamot
Capital Management, LLC, its investment manager, and each of the Costa Brava
Nominees, namely Seth W. Hamot, Andrew R. Siegel, Douglas M. Gleason, Douglas E.
Linton and Alok Mohan.
The principal business of Costa Brava Partnership III L.P., a Delaware
limited partnership, is to make investments in, buy, sell, hold, pledge and
assign securities. Mr. Seth W. Hamot is the president of Roark, Rearden & Hamot,
LLC, which is the general partner of Costa Brava. Roark, Rearden & Hamot Capital
Management, LLC is the investment manager to Costa Brava. Information regarding
the Costa Brava Nominees may be found below under "Election of Directors - The
Costa Brava Nominees." The business addresses and ownership of MedQuist
securities with respect to each of the Participants is provided in Exhibit A
hereto.
Except as set forth in this Proxy Statement, none of the Participants
(i) is, or was within the past year, a party to any contract, arrangement or
understanding with any persons with respect to any securities of MedQuist,
including, but not limited to joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantee of profit, division of losses or
profits, or the giving or withholding of proxies, or (ii) has any arrangement or
understanding with any person (A) with respect to any future employment by
MedQuist or its affiliates or (B) with respect to any future transactions to
which MedQuist or any of its affiliates may be a party.
Proposal One - Election of Directors
MedQuist's Board of Directors is currently composed of seven (7)
directors. Each director is elected to hold office until the Company's next
annual meeting of stockholders or until such person is succeeded by another
qualified director who has been duly elected. MedQuist's Amended and Restated
Bylaws provide that the number of directors which shall constitute the whole
Board of Directors shall be not less than five (5) nor more than fifteen (15),
the exact number to be determined by resolution of the Board.
At the Annual Meeting, the owners of MedQuist's Common Stock will elect
five (5) directors (or such greater number as shall be designated by the Board)
to serve on the Board of Directors of MedQuist until the next annual meeting of
stockholders or until he or she is succeeded by another qualified director who
has been elected. The five (5) nominees for director receiving a plurality of
"FOR" votes by holders of Common Stock, present at the Annual Meeting in person
or by proxy, will be elected as directors.
We are seeking your support for the election of five (5) independent
candidates who Costa Brava has nominated for election as directors at the Annual
Meeting and believes are highly qualified to serve on the Company's Board: Seth
W. Hamot, Andrew R. Siegel, Douglas M. Gleason, Douglas E. Linton and Alok
Mohan. Each of the Costa Brava Nominees believes that change is needed today at
MedQuist. If, for any reason, more than five (5) Directors are to be elected at
the Meeting, Costa Brava may nominate additional persons (each, an Additional
Nominee) such that Costa Brava will nominate a slate of persons sufficient to
constitute the number of members of the Board that are entitled to be elected to
the Board of Directors by the holders of Common Stock.
We strongly recommend a vote FOR each of the Costa Brava Nominees:
---
Seth W. Hamot
Andrew R. Siegel
Douglas M. Gleason
Douglas E. Linton
Alok Mohan
5
Costa Brava believes that its nominees have extensive experience in
private and public investment, corporate governance and business management. If
elected to the Company's Board of Directors, the Costa Brava Nominees will work
to represent the interests of all stockholders.
The Costa Brava Nominees
Each Costa Brava Nominee has consented in writing to being named as a
nominee for election as a director in the proxy materials to be used in
connection with the Annual Meeting and, if elected, has consented to serving as
a director. We are unaware of any reason why any Costa Brava Nominee, if
elected, would be unable to serve as a director. If for any reason any Costa
Brava Nominee is unable or declines to serve, the BLUE proxy cards solicited by
Costa Brava will be voted for any substitute nominee who shall be designated by
Costa Brava to fill the vacancy.
Each Costa Brava Nominee has furnished Costa Brava with information
concerning his principal occupation for the preceding five-year period, business
addresses and other matters. None of the Costa Brava Nominees has ever served as
an officer, director or employee of MedQuist.
Except as disclosed in this Proxy Statement, (a) there are no
arrangements or understandings between any Costa Brava Nominee and any other
person pursuant to which such Costa Brava Nominee was selected as a nominee to
serve as a director of MedQuist or with respect to any future employment by
MedQuist or any future transactions to which MedQuist or any of its affiliates
will or may be a party and (b) no Costa Brava Nominee shall receive any form of
compensation for serving in the capacity of director of the Company, other than
the compensation currently in place for outside directors of MedQuist, all
subject to required approvals and applicable law.
Seth W. Hamot
Mr. Seth W. Hamot, age 46, has been the Managing Member of Roark,
Rearden & Hamot Capital Management, LLC (RRHCM) and the owner of its corporate
predecessor Roark, Rearden & Hamot, Inc. since 1997. RRHCM is the investment
manager to Costa Brava (Costa Brava), an investment fund. Mr. Hamot is also the
President of Roark, Rearden & Hamot, LLC, the general partner of Costa Brava.
Prior to 1997, Mr. Hamot was one of the partners of the Actionvest entities. Mr.
Hamot is presently the Chairman of the Board of Bradley Pharmaceuticals Inc.
(NYSE: BDY) and serves as a member of that company's audit committee and Mr.
Hamot is also presently a director of CCA Industries Inc (AMEX: CAW) and Telos
Corporation (OTC: TLSRP). Mr. Hamot graduated with a degree in Economics from
Princeton University.
Andrew R. Siegel
Mr. Andrew R. Siegel, age 38, has been a Senior Vice President of RRHCM
since 2005. Prior to joining RRHCM, Mr. Siegel was employed by DebtTraders Ltd
and Deutsche Bank Securities. Mr. Siegel is currently a director of TechTeam
Global Inc. (NASDAQ: TEAM) and serves as a member of that company's audit
committee. Mr. Siegel is also a director of Telos Corporation (OTC: TLSRP). Mr.
Siegel graduated with a degree in International Relations from American
University and received a masters degree in Business from the University of
Maryland.
Douglas M. Gleason
Mr. Douglas M. Gleason, age 46, has been a Principal of RRHCM since
2005. Prior thereto, Mr. Gleason was a managing director of Legg Mason Walker
Wood Incorporated from 1999 to 2005. Mr. Gleason graduated with a degree in
English and American Literature from Columbia University and received a law
degree from Harvard Law School.
6
Douglas E. Linton
Mr. Douglas E. Linton, age 59, has been self employed as the Managing
Member of DEL International, LLC ("DEL"), a provider of consulting services,
since 2002. Since November 2005, Mr. Linton has provided consulting services
through DEL to clients of ValueCentric, LLC, a data management and performance
analytics company providing on-demand services to the pharmaceutical industry,
and has also acted as an advisor through DEL to ValueCentric, LLC. In his work
for clients of ValueCentric, LLC, Mr. Linton provides consulting services to
branded pharmaceutical manufacturers on Fee-for-Service strategies and the use
of wholesaler sales and inventory data. From August 2005 through December 2005,
Mr. Linton was the President of ValueCentric Consulting Group, where he managed
consulting projects for the partnership's clients and provided consulting
services through DEL.
From 2001 through July 2005, Mr. Linton was also a Vice President and
part-time employee of Cardinal Health, a provider of pharmaceutical services.
Mr. Linton's primary responsibilities at Cardinal Health included developing
Fee-for-Service programs for smaller branded pharmaceutical manufacturers. Mr.
Linton was previously the senior purchasing executive at Cardinal Health during
the 1980s and early 1990s, where he played a key role in developing
sophisticated purchasing programs and systems. Prior to returning to Cardinal
Health in 2001, Mr. Linton developed similar programs and systems for two
regional drug wholesalers. Mr. Linton has been a director of Bradley
Pharmaceuticals, Inc. since 2006. Mr. Linton graduated with a degree in
Economics with honors from the College of Wooster (Ohio) and holds an MBA from
Carnegie-Mellon University.
Alok Mohan
Mr. Alok Mohan, age 58, has been retired since 2001. Since 2003, Mr.
Mohan has served as the Non-executive Chairman of the board of Directors of
Rainmaker Systems, Inc., (NASDAQ: RMKR) a leading provider of
business-to-business sales and marketing services. Mr. Mohan has been a director
of Rainmaker Systems, Inc. since 1996. Additionally, Mr. Mohan serves as
Non-executive Chairman of the Board of Directors of TechTeam Global Inc.
(NASDAQ: TEAM). Mr. Mohan as been a director of TechTeam since 2006. In
addition, Mr. Mohan serves on the Board of Directors of Crystal Graphics, Inc.,
a provider of compelling and easy to use 3D graphics software and Shea
Development Corporation.
Common Stock Ownership / Option Transactions of the Participants
As of the record date, the Participants collectively reported
beneficial ownership of 1,940,821 shares of Common Stock, or approximately 5.2%
of the outstanding Common Stock of MedQuist. The beneficial ownership of each
Costa Brava Nominee and each other Participant in this proxy solicitation is set
forth as of [__________], 2007 in Exhibit A hereto. For information regarding
all MedQuist securities purchased or sold by the Participants in the last two
years, including the purchase and sale of certain call and put options by Costa
Brava, see Exhibit B attached hereto.
Additional Information Regarding the Costa Brava Nominees
Except as set forth in this Proxy Statement, (i) no Costa Brava Nominee
has any family relationships with any executive officer or director of MedQuist
or each other, (ii) no Costa Brava Nominee is in any legal proceedings in which
he is adverse to MedQuist, (iii) no Costa Brava Nominee has a material interest
adverse to MedQuist, (iv) there have been no transactions between any of the
Costa Brava Nominees or their immediate families and MedQuist or any of its
subsidiaries since the beginning of MedQuist's last fiscal year and (v) no Costa
Brava Nominee has been indebted to MedQuist or any of its subsidiaries since the
beginning of MedQuist's last fiscal year.
7
PROPOSAL TWO - REQUEST FOR REIMBURSEMENT OF
SOLICITATION EXPENSES
Resolved: To authorize the Company, if any of the Costa Brava Nominees are
elected to the Board of Directors, to reimburse the costs and expenses of Costa
Brava and the Costa Brava Nominees in undertaking this solicitation and related
litigation described herein.
Supporting Statement from Costa Brava
We believe that the current Board of Directors has failed to best
represent the interests of ALL stockholders of the Company and cannot be
expected to do so in the future. In nominating Seth W. Hamot, Andrew R. Siegel,
Douglas M. Gleason, Douglas E. Linton and Alok Mohan as nominees for election by
the holders of Common Stock, we believe we have brought our fellow stockholders
five highly qualified, independent individuals with both the business experience
and desire to move our Company forward in the right direction. If elected to the
Board of Directors, the Costa Brava Nominees will provide a voice for ALL
stockholders. The Costa Brava Nominees have no interest in MedQuist other than
their ownership of Common Stock, and their interests are completely aligned with
yours.
Costa Brava and the Costa Brava Nominees have incurred significant fees
and expenses in undertaking this solicitation, as well as related litigation
that we described herein under "Recent Events." These costs are described below
in the section entitled "Solicitation." We respectfully request that you
authorize the Company, if any of the Costa Brava Nominees are elected to the
Board of Directors, to reimburse the costs and expenses of Costa Brava and the
Costa Brava Nominees in undertaking this solicitation, as well as related
litigation described under "Recent Events."
WE RECOMMEND A VOTE FOR PROPOSAL 2.
---
Other Matters
As of the date of this Proxy Statement, we are not aware of any matter
that will be presented for consideration at the Annual Meeting. Should other
matters properly come before the Annual Meeting, the enclosed BLUE proxy card,
when duly executed, will give the proxies named therein discretionary authority
to vote on all such matters and on all matters incident to the conduct of the
Annual Meeting. Such discretionary authority will include the ability to vote
shares on any proposal to adjourn the Annual Meeting. The proxies named on the
accompanying BLUE proxy cards will not use such discretionary authority to vote
the proxies for matters for which the Participants are aware a reasonable time
before the Annual Meeting.
Additional Information
MedQuist's definitive proxy statement relating to the Annual Meeting is
required to set forth information regarding (i) the beneficial ownership of
securities of MedQuist by (A) any person known to MedQuist to beneficially own
5% or more of any class of voting securities of MedQuist; (B) each current Board
director and executive officer of MedQuist; and (C) all directors and executive
officers of MedQuist as a group; and (ii) MedQuist's directors and management,
including information relating to management compensation.
Deadline for Submitting Stockholder Proposals for the 2007 Annual Meeting
Stockholder proposals to be included in the Company's proxy statement
for the 2007 Annual meeting of Stockholders must be received by the Company at
its executive offices at MedQuist Inc., 1000 Bishops Gate Blvd., Suite 300,
Mount Laurel, NJ 08054-4632 by no later than __________, 2007. Nominations for
director or other business proposals to be introduced at the 2007 Annual Meeting
of Stockholders must be submitted in writing to the Secretary of the Company at
its principal executive offices. A notice of intention to introduce a nomination
or to propose an item of business at the 2007 Annual Meeting of Stockholders
must be received by the Company not later than __________, 2007.
8
Voting Procedures
According to the transfer agent of MedQuist, as of the record date,
MedQuist had [____________] outstanding shares of Common Stock.
You may vote FOR ALL of the Costa Brava Nominees, you may withhold
authority for all, or you may withhold authority for any individual Costa Brava
Nominee.
The proxy holders identified in the BLUE proxy card accompanying this
Proxy Statement will vote the accompanying proxy card in the manner directed by
the signing stockholder. If no direction is made, shares represented by the
accompanying proxy card will be voted FOR the election of the Costa Brava
Nominees as directors of MedQuist. With respect to other matters that may
properly come before the Annual Meeting, or at any postponement or adjournment
thereof, the proxy holders identified in the accompanying BLUE proxy card will
vote shares represented by the BLUE proxy card in accordance with the proxies'
discretion. To the extent that other matters properly come before the Annual
Meeting that do not fall within the proxies' voting discretion, the named
proxies may not vote the shares represented by the accompanying BLUE proxy card
on such matters. To the extent that approval of such matters requires the
affirmative vote of the holders of a majority of the shares of stock entitled to
vote thereon that are present at the Annual Meeting, the effect of shares not
voted would be the same as a vote against the proposal.
REMEMBER, YOUR LATEST DATED PROXY IS THE ONLY ONE WHICH COUNTS, so
return the BLUE proxy card accompanying this Proxy Statement even if you
delivered a prior proxy to MedQuist. We urge you NOT to vote any proxy card sent
to you by the Board of Directors of MedQuist.
If you are the beneficial owner of shares held through a broker or
other nominee, your broker or nominee should provide you with information
regarding the methods by which you can direct your broker or nominee to vote
your shares. Your broker or nominee might send you, for example, a voting
instruction card to be completed, signed, dated and returned to your broker or
nominee by a date in advance of the meeting, and/or information on how to
communicate your voting instructions to your broker or nominee by telephone or
over the Internet.
We encourage you to sign and return the BLUE proxy card even if you
plan to attend the Annual Meeting. In this way, your shares will be voted if you
are unable to attend the Annual Meeting. If you received more than one BLUE
proxy card, it is a likely indication that your shares are held in multiple
accounts. Please sign and return all BLUE proxy cards to ensure that all of your
shares are voted.
Quorum Requirement
Shares are counted as present at the Annual Meeting if the stockholder
either:
o is present and votes in person at the Annual Meeting; or
o has properly submitted a proxy card.
According to MedQuist's publicly available by-laws, a majority of the
outstanding shares of the record date must be present at the meeting (either in
person or by proxy) in order to hold the Annual Meeting and conduct business.
This is called a "quorum."
Consequences of Not Returning Your Proxy
If your shares are held in your name, you must return your proxy (or
attend the Annual Meeting in person) in order to vote on the proposals.
9
If you are the beneficial owner of shares held though a broker or other
nominee, we encourage you to provide instructions to your brokerage firm or
nominee to vote your shares for the Costa Brava Nominees. This ensures that your
shares will be voted at the Annual Meeting.
Rule 452 of the New York Stock Exchange permits a broker member to vote
on certain routine, uncontested matters without specific instructions from the
beneficial owners so long as the broker has transmitted proxy material to the
beneficial owner at least 15 days prior to the annual meeting of stockholders.
It is our view to the extent that we distribute material to the brokers for
forwarding on to beneficial owners, the election of directors becomes a
contested item and therefore the brokers will not issue a "routine" vote on
behalf of the beneficial owners that have not instructed the brokers as to how
they wish to vote on the election of directors. If a beneficial owner wishes to
vote, they must provide the broker with specific instruction to vote.
Effect of Abstentions
Abstentions are counted as shares that are present and entitled to vote
for the purposes of determining the presence of a quorum and as votes AGAINST
for purposes of determining the approval of any matter submitted to the
stockholders for a vote.
Required Vote
Each share of Common Stock is entitled to one vote. In the election of
directors, each stockholder has the right to vote the number of shares owned by
such stockholder for as many persons as there are directors to be elected by
holders of Common Stock. Stockholders do not have the right to cumulate votes.
Assuming a quorum is present, the five (5) nominees receiving a
plurality of "FOR" votes by holders of Common Stock, present at the Annual
Meeting in person or by proxy, will be elected as directors and a majority of
votes properly cast upon Proposal 2 shall decide this proposal.
Solicitation
These proxies are being solicited by Costa Brava and the Costa Brava
Nominees. Copies of solicitation material will be furnished without charge to
banks, brokerage houses, fiduciaries and custodians holding in their name shares
of Common Stock beneficially owned by others to forward to such beneficial
owners. As part of the solicitation, the Participants may communicate with
stockholders of MedQuist by mail, courier services, Internet, advertising,
telephone, facsimile or in person. Other than as disclosed in this Proxy
Statement, Costa Brava and the Costa Brava Nominees will receive no additional
compensation for their solicitation efforts. In addition, Costa Brava has
retained [_______________________]("________________")] to solicit proxies, and
Costa Brava will pay a fee for those services, which is estimated to be up to
$[________]. [_________] anticipates that it will use approximately [__] persons
in its solicitation efforts.
Costa Brava will initially bear the entire cost of this solicitation.
Although no precise estimate can be made at the present time, we currently
estimate that the total expenditures relating to this proxy solicitation
incurred by Costa Brava and the Costa Brava Nominees will be approximately
$[________], of which approximately $[________] has been spent to date,
including $[________] relating to litigation in which Costa Brava is a party as
described under "Recent Events." In Proposal 2 of this Proxy Statement, Costa
Brava is seeking approval of the Company's stockholders to authorize the
Company, if any of the Costa Brava Nominees are elected to the Board of
Directors, to reimburse all expenses of Costa Brava and the Costa Brava Nominees
incurred in connection with the nomination of the Costa Brava Nominees and this
solicitation.
Additional Information
The information concerning MedQuist contained in this Proxy Statement
has been taken from, or is based upon, publicly available information. Although
we do not have any information that would indicate that any information
10
contained in this Proxy Statement concerning MedQuist is inaccurate or
incomplete, we do not take responsibility for the accuracy or completeness of
such information. With respect to each of the Costa Brava Nominees, any
representation contained herein relating to the immediate family of such Costa
Brava Nominee is made only to the extent of his knowledge.
MedQuist files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information that the Company files with the SEC at the SEC's
public reference room at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. These SEC filings are also available to the public from
commercial document retrieval services and at the Internet website maintained by
the SEC at www.sec.gov.
Costa Brava has filed a Schedule 13D with the SEC, concerning the
matters described herein, which may be accessed from the SEC's website free of
charge.
October __, 2007
11
Exhibit A
INFORMATION ABOUT THE PARTICIPANTS
IN THIS SOLICITATION OF PROXIES
Number of Shares Number of Shares
of Common Stock of Common Stock Percent of Class
Name and Business Directly Beneficially Beneficially
(or Personal) Address Owned(1) Owned Owned(2)
- -------------------------------- ----------------- ----------------- -----------------
Costa Brava Partnership III L.P. 1,938,821 1,938,821 5.2%
420 Boylston Street
Boston, MA 02116
Roark, Rearden & Hamot, LLC(3) 0 1,938,821 5.2%
420 Boylston Street
Boston, MA 02116
Roark, Rearden & Hamot 0 0 --
Capital Management, LLC(4)
420 Boylston Street
Boston, MA 02116
Seth W. Hamot 0 1,938,821(5) 5.2%
420 Boylston Street
Boston, MA 02116
Andrew R. Siegel 2,000 2,000 Less than 1%
237 Park Avenue - Suite 900
New York, NY 10017
Douglas M. Gleason 0 0 --
420 Boylston Street
Boston, MA 02116
Douglas E. Linton 0 0 --
4009 St. Charles Drive
Birmingham, Alabama 35242
Alok Mohan 0 0 --
85 Pasatiempo Drive
Santa Cruz, CA 95060
___________________________
(1) Except as otherwise indicated, all shares are held with sole voting and
disposition rights.
(2) The percentage of ownership is based upon 37,483,723 issued and outstanding
shares of Common Stock as reported by MedQuist in its filing on Form 10-K
with the SEC on August 30, 2007.
(3) Roark, Rearden & Hamot, LLC ("RRH") is the general partner of Costa Brava
Partnership III L.P.
12
(4) Roark, Rearden & Hamot Capital Management, LLC is the investment manager to
Costa Brava Partnership III L.P.
(5) Mr. Hamot, as the President of Roark, Rearden & Hamot, LLC, the general
partner of Costa Brava, may control its voting and investment decisions and
thus may be deemed to have beneficial ownership of the 1,938,821 shares
held by Costa Brava.
13
Exhibit B
TRANSACTIONS WITHIN THE PAST TWO YEARS BY THE PARTICIPANTS
IN THIS SOLICITATION OF PROXIES
The Participants have made the following purchases of MedQuist's
securities in the past two years:
During the past two years, Costa Brava Partnership III L.P. purchased
the following shares of Common Stock of the Company:
Date Shares Price($)
------------------ ------------------ -----------------
6/14/2007 22,000 8.30
6/14/2007 3,500 8.01
6/15/2007 184,350 8.40
6/19/2007 500 8.44
6/20/2007 144 8.51
6/21/2007 5,708 8.47
6/26/2007 3,850 8.93
6/27/2007 7,200 9.17
6/29/2007 490 9.15
7/2/2007 2,100 9.23
7/3/2007 7,359 9.15
7/6/2007 5,977 10.23
7/9/2007 10,300 10.98
7/10/2007 1,200 11.41
7/11/2007 12,000 11.93
7/11/2007 2,000 11.85
7/11/2007 48,800 11.80
7/12/2007 17,000 12.03
7/13/2007 35,000 12.06
7/16/2007 13,100 12.10
7/17/2007 12,000 12.14
7/18/2007 15,000 12.11
7/19/2007 1,001 12.13
7/20/2007 3,500 12.16
7/24/2007 31,300 12.18
7/25/2007 10,000 12.18
7/26/2007 176 11.35
7/27/2007 2,500 11.83
8/28/2007 25,000 9.95
8/31/2007 1,000 9.92
9/6/2007 9,300 9.58
9/7/2007 8,500 10.35
9/10/2007 100 10.56
9/11/2007 900 10.67
9/13/2007 796 10.89
9/14/2007 1,799 11.02
9/17/2007 1,390,000 12.25
9/18/2007 7,500 11.01
9/19/2007 5,500 11.01
9/21/2007 3,171 11.05
9/24/2007 2,500 11.07
9/28/2007 500 11.55
10/1/2007 700 11.78
10/3/2007 10,000 11.51
10/3/2007 13,500 11.83
14
During the past two years, Mr. Siegel made the following purchases of
Common Stock of the Company.
Date Shares Price($)
------------------ ------------------ -----------------
9/27/2007 900 11.17
9/28/2007 1,100 11.48
2,000
15
[Back Cover]
Tell the Board what you think! Your vote is important. No matter how
many shares you own, please give Costa Brava your proxy FOR the election of the
Costa Brava Nominees and Proposal 2 by taking three steps:
o SIGNING the enclosed BLUE proxy card,
o DATING the enclosed BLUE proxy card, and
o MAILING the enclosed BLUE proxy card TODAY in the envelope provided (no
postage is required if mailed in the United States).
If any of your shares are held in the name of a brokerage firm, bank,
nominee or other institution, only it can vote such shares and only upon receipt
of your specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the BLUE proxy
card representing your shares. Costa Brava urges you to confirm in writing your
instructions to Costa Brava in care of [_______________________] at the address
provided below so that Costa Brava will be aware of all instructions given and
can attempt to ensure that such instructions are followed.
If you have any questions, require assistance in voting your shares, or
need additional copies of Costa Brava's proxy materials, please call
[_________________] at the phone numbers listed below.
[_________ LOGO]
(call collect)
or
TOLL-FREE (__)
16
MEDQUIST INC.
2007 ANNUAL MEETING OF STOCKHOLDERS
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED OCTOBER __, 2007
THIS PROXY IS SOLICITED BY COSTA BRAVA PARTNERSHIP III L.P.
AND NOT BY THE BOARD OF DIRECTORS OF MEDQUIST INC.
The undersigned stockholder of MedQuist Inc. (the "Company") hereby
appoints [ ] and [ ] or any of them, acting singly, as proxies and
attorneys-in-fact, each with full power of substitution, for and in the name of
the undersigned, to represent and vote all shares of common stock of the Company
that the undersigned is entitled to vote, either on the undersigned's behalf or
on behalf of any other entity or entities, at the Annual Meeting of Stockholders
which the Company has announced will be held at [_________________________
__________________________________________________________] on [__________
_______________, at [______] a.m., Eastern Standard time, and at any
adjournment(s) and postponement(s) thereof.
The undersigned hereby revokes any and all other proxies heretofore
given to vote or act with respect to the shares of common stock of the Company
held by the undersigned.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE COSTA BRAVA NOMINEES LISTED ON
THE REVERSE SIDE HEREOF, OR IN ACCORDANCE WITH THE PROXIES' DISCRETION TO VOTE
FOR THE ELECTION OF A PERSON TO THE BOARD OF DIRECTORS IF ANY NOMINEE NAMED
HEREIN BECOMES UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, AND VOTED FOR
PROPOSAL 2, AND IN ACCORDANCE WITH THE PROXIES' DISCRETION ON SUCH OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR
POSTPONEMENT(S) THEREOF.
PLEASE RETURN THIS BLUE PROXY CARD,
USING THE ENCLOSED POSTAGE-PAID ENVELOPE
______________________________________________________________________
Proposal One - Election of Directors
Costa Brava recommends a vote FOR the election of Seth W. Hamot, Andrew
R. Siegel, Douglas M. Gleason, Douglas E. Linton and Alok Mohan as members of
the Board of Directors.
TO ELECT MEMBERS OF THE BOARD OF DIRECTORS TO SERVE UNTIL THE NEXT ANNUAL
MEETING OF STOCKHOLDERS OR UNTIL THE ELECTION AND QUALIFICATION OF EACH OF THEIR
SUCCESSORS.
THE COSTA BRAVA NOMINEES ARE:
Seth W. Hamot
Andrew R. Siegel
Douglas M. Gleason
Douglas E. Linton
Alok Mohan
17
FOR ALL WITHHOLD AUTHORITY to FOR ALL EXCEPT
nominees listed above vote for all nominees listed (indicate exceptions
above below)
[ ] [ ] [ ]
(AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S) MAY BE WITHHELD BY STRIKING OUT
THE NAME(S) OF SUCH NOMINEE(S) ABOVE OR BY WRITING THE NOMINEE'S NAME IN THE
SPACE PROVIDED BELOW.)
______________________________________________________
WE RECOMMEND A VOTE FOR PROPOSAL 2.
---
Proposal 2
To vote upon a proposal authorizing the Company, if any of the Costa Brava
Nominees are elected to the Board of Directors, to reimburse the costs and
expenses of Costa Brava and the Costa Brava Nominees in undertaking this
solicitation, including those incurred in connection with the nomination of the
Costa Brava Nominees.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please check this box if you plan to attend the Annual Meeting. [ ]
Dated: _____________________, 2006
_________________________________________
Signature
_________________________________________
Signature if held jointly
Name: ___________________________________
Title: __________________________________
Please sign exactly as your name appears
hereon. When shares are held by two or
more persons, all of them should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the Annual Meeting.
18