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<SEC-DOCUMENT>/in/edgar/work/20000606/0000891836-00-000421/0000891836-00-000421.txt : 20000919
<SEC-HEADER>0000891836-00-000421.hdr.sgml : 20000919
ACCESSION NUMBER:		0000891836-00-000421
CONFORMED SUBMISSION TYPE:	SC 13D
PUBLIC DOCUMENT COUNT:		10
FILED AS OF DATE:		20000606

SUBJECT COMPANY:	

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MEDQUIST INC
		CENTRAL INDEX KEY:			0000884497
		STANDARD INDUSTRIAL CLASSIFICATION:	 [7374
]		IRS NUMBER:				222531298
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			1231
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		SC 13D
			SEC ACT:		
			SEC FILE NUMBER:	005-42936
			FILM NUMBER:		650155
</FILING-VALUES>

			BUSINESS ADDRESS:	
				STREET 1:		FIVE GREENTREE CENTRE STE 311
				STREET 2:		STATE HIGHWAY 73 N
				CITY:			MARLTON
				STATE:			NJ
				ZIP:			08053
				BUSINESS PHONE:		6095968877
</BUSINESS-ADDRESS>

				MAIL ADDRESS:	
					STREET 1:		5 GREENTREE CENTRE SUITE 311
					STREET 2:		ATTN BRUCE VAN FOSSEN
					CITY:			MARLTON
					STATE:			NJ
					ZIP:			08053
</MAIL-ADDRESS>
</SUBJECT-COMPANY>

					FILED BY:		

						COMPANY DATA:	
							COMPANY CONFORMED NAME:			KONINKLIJKE PHILIPS ELECTRONICS NV
							CENTRAL INDEX KEY:			0000313216
							STANDARD INDUSTRIAL CLASSIFICATION:	 [3600
]							STATE OF INCORPORATION:			P7
							FISCAL YEAR END:			1231
</COMPANY-DATA>

							FILING VALUES:
								FORM TYPE:		SC 13D
</FILING-VALUES>

								BUSINESS ADDRESS:	
									STREET 1:		REMBRANDT TOWER AMSTELPLEIN 1
									STREET 2:		1096 HA AMSTERDAM
									CITY:			THE NETHERLANDS
</BUSINESS-ADDRESS>

									MAIL ADDRESS:	
										STREET 1:		REMBRANDT TOWER AMSTELPLEIN 1
										STREET 2:		1096 HA AMSTERDAM
										CITY:			THE NETHERLANDS
</MAIL-ADDRESS>

										FORMER COMPANY:	
											FORMER CONFORMED NAME:	PHILIPS ELECTRONICS N V
											DATE OF NAME CHANGE:	19930727
</FORMER-COMPANY>
</FILED-BY>
</SEC-HEADER>
<DOCUMENT>
<TYPE>SC 13D
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>SCHEDULE 13D
<TEXT>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                  SCHEDULE 13D
                    Under the Securities Exchange Act of 1934

                                (Amendment No. )

                                  MedQuist Inc.
- --------------------------------------------------------------------------------
                                (Name of Issuer)


                           Common Stock, No Par Value
- --------------------------------------------------------------------------------
                         (Title of Class of Securities)


                                    584949101
- --------------------------------------------------------------------------------
                                 (CUSIP Number)


                             Stephen M. Kotran, Esq.
                               Sullivan & Cromwell
                                125 Broad Street
                          New York, New York 10004-2498
                                 (212) 558-4000
- --------------------------------------------------------------------------------
            (Name, Address and Telephone Number of Person Authorized
                     to Receive Notices and Communications)


                                  May 22, 2000
- --------------------------------------------------------------------------------
             (Date of Event which Requires Filing of this Statement)

If a filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d- 1(g), check
the following box [ ].


<PAGE>

- --------------------------------------------------------------------------------
CUSIP NO. 584949101
- --------------------------------------------------------------------------------
 1.      NAME OF REPORTING PERSON

         Koninklijke Philips Electronics N.V.

         I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

         222531298
- --------------------------------------------------------------------------------
 2.      CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
                                                                      (a)  [ ]
                                                                      (b)  [X]
- --------------------------------------------------------------------------------
 3.      SEC USE ONLY

- --------------------------------------------------------------------------------
 4.      SOURCE OF FUNDS
         OO
- --------------------------------------------------------------------------------
 5.      CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
         REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E)
                                                                           [  ]
- --------------------------------------------------------------------------------
 6.      CITIZENSHIP OR PLACE OF ORGANIZATION

     The Netherlands
- --------------------------------------------------------------------------------
                  7.     SOLE VOTING POWER
  NUMBER OF              -0-
    SHARES        --------------------------------------------------------------
BENEFICIALLY      8.     SHARED VOTING POWER
  OWNED BY               3,060,733
    EACH          --------------------------------------------------------------
 REPORTING        9.     SOLE DISPOSITIVE POWER
   PERSON                -0-
    WITH          --------------------------------------------------------------
                  10.    SHARED DISPOSITIVE POWER
                         3,060,733
- --------------------------------------------------------------------------------
11.      AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
         PERSON
         3,060,733
- --------------------------------------------------------------------------------
12.      CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
         CERTAIN SHARES
                                                                           [  ]
- --------------------------------------------------------------------------------
13.      PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

         8.2%
- --------------------------------------------------------------------------------
14.      TYPE OF REPORTING PERSON
     CO

- --------------------------------------------------------------------------------


                                       -2-

<PAGE>


Item 1.  Security and Issuer.
         -------------------

         The class of equity securities to which this Statement relates is the
common stock, no par value (the "Shares"), of MedQuist Inc., a New Jersey
corporation (the "Issuer"), whose principal executive offices are located at
Five Greentree Centre, Suite 311, Marlton, New Jersey 08053.

Item 2.  Identity and Background.
         -----------------------

         (a)-(c); (f). This Statement is being filed by Koninklijke Philips
Electronics N.V.("Royal Philips"), a corporation incorporated under the laws of
the Netherlands. Royal Philips has its principal executive offices at Rembrandt
Tower, Amstelplein 1, 1096 HA Amsterdam, the Netherlands. Royal Philips has
manufacturing and sales organizations in over 60 countries. It delivers
products, systems and services in the fields of lighting, consumer electronics
and communications, domestic appliances and personal care, components,
semiconductors, medical systems and information technology.

         Attached as Schedule I hereto and incorporated by reference herein is a
list of the directors and executive officers of Royal Philips. Schedule I sets
forth each of such persons' name, citizenship, business address, present
principal occupation or employment, and the name, principal business and address
of the corporation or other organization in which such employment is conducted.

         (d)-(e). During the last five years, neither Royal Philips, nor, to the
best of its knowledge, any person listed in Schedule I has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.

Item 3.  Source and Amount of Funds or Other Consideration.
         -------------------------------------------------

         Royal Philips estimates that the total amount of funds required to
purchase 1,149,759 Shares (as contemplated

                                       -3-


<PAGE>



by the Shareholder Agreements and described in Items 4 and 5 herein) will be
$58,637,709.

         Royal Philips presently intends to finance the purchase with its cash
position and cash flow from existing businesses.

Item 4.  Purpose of the Transaction.
         --------------------------

         Purpose: Pursuant to the terms of a Tender Offer Agreement, dated as of
May 22, 2000, between Royal Philips and the Issuer (the "Tender Offer
Agreement"), on June 1, 2000, Royal Philips commenced a tender offer (the
"Offer") for 22,250,327 Shares, which constitutes approximately 57% of the fully
diluted Shares. In connection with the execution and delivery of the Tender
Offer Agreement, Royal Philips also entered into separate Shareholder
Agreements, each dated May 22, 2000, with seven members of the Issuer's senior
management (each a "Shareholder Agreement" and, collectively, the "Shareholder
Agreements"), pursuant to which, if Royal Philips purchases Shares pursuant to
the terms and conditions of the Offer, it will, promptly after expiration of the
Offer, purchase an additional 1,149,759 Shares in the aggregate from the
shareholders who are parties to the Shareholder Agreements.

         After the completion of the purchase of Shares pursuant to the Offer
and pursuant to the terms of the Shareholder Agreements, Royal Philips will own
approximately 60% of the fully diluted Shares, and the Issuer will be a direct
majority-owned subsidiary of Royal Philips.

         Plans for the Issuer: As of the date hereof and except as otherwise
described in this Item 4, Royal Philips does not have any plans or proposals
with respect to the Issuer that relate to, or would result in:

         (a) The acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;

         (b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;

         (c) A sale or transfer of a material amount of assets of the Issuer or
of any of its subsidiaries;



                                       -4-


<PAGE>


         (d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;

         (e) Any material change in the present capitalization or dividend
policy of the Issuer;

         (f) Any other material change in the Issuer's business or corporate
structure;

         (g) Changes in the Issuer's charter or by-laws or other actions which
may impede the acquisition of control of the Issuer by any person;

         (h) Causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;

         (i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); or

         (j) Any action similar to any of those enumerated above.

         Royal Philips expects after acquiring 60% of the fully diluted Shares
upon the successful completion of the Offer and the purchases contemplated by
the Shareholder Agreements to evaluate and review the Issuer and its business,
assets, corporate structure, capitalization, operations, properties, policies,
management and personnel with a view towards determining how to optimally
realize any potential benefits which arise from the relationship of the
operations of the Issuer with those of other business units of Royal Philips and
its affiliates. Accordingly, Royal Philips reserves the right to change its
plans and intentions at any time, as it deems appropriate and, subject to the
terms and conditions of the Governance Agreement, dated as of May 22, 2000,
between Royal Philips and the Issuer (the "Governance Agreement"), such changes
could include, among other things, restructuring the Issuer through changes in
the Issuer's business, corporate structure, certificate of incorporation,
by-laws, capitalization or management or could involve consolidating

                                       -5-


<PAGE>



and streamlining certain operations and reorganizing other businesses and
operations.

         Royal Philips also intends to evaluate and review its investment in the
Issuer on an ongoing basis. In particular, although Royal Philips has no present
intention to acquire any Shares other than the 22,250,327 Shares to be acquired
pursuant to the Offer and the 1,149,759 Shares to be acquired pursuant to the
Shareholder Agreements, and has no present intention to dispose of any of such
Shares once acquired, Royal Philips may, subject to the terms of the Governance
Agreement, acquire additional Shares or may dispose of Shares on the Nasdaq
Stock Market, in privately negotiated transactions or otherwise. Any such
transactions may be effected at any time and from time to time, and may be made
upon such terms and at such prices as Royal Philips shall determine.

         Assuming the Tender Offer Condition (as such term is defined in the
Tender Offer Agreement), has been satisfied and Royal Philips purchases Shares
validly tendered and not withdrawn pursuant to the terms and conditions of the
Offer, Royal Philips intends, subject to Rule 14f-1 of the Exchange Act, to
promptly exercise its rights under the Governance Agreement to obtain majority
representation on, and control of, the Issuer's board of directors. Under the
Governance Agreement, the Issuer has agreed that it will take any and all action
necessary so that, promptly following Royal Philips' purchase of Shares pursuant
to the terms and conditions of the Offer, the board of directors will consist of
eleven directors, six of which will be designated by Royal Philips. Royal
Philips presently intends to select those designees included in Schedule I to
Issuer's Solicitation/Recommendation Statement on Schedule 14D-9, which was
filed with the Securities and Exchange Commission on June 1, 2000.

Item 5.  Interest in Securities of Issuer.
         --------------------------------

         As of the date hereof, as explained in more detail below, Royal Philips
beneficially owns 3,060,733 Shares, which constitutes approximately 8.2% of the
outstanding Shares on a fully diluted basis and has shared voting and/or
dispositive power over such Shares.

         The following is a summary of certain provisions of the Shareholder
Agreements. The following summary is not a complete description of the terms and
conditions of such agreements and is qualified in its entirety by reference to

                                       -6-


<PAGE>


the full text of each of the Shareholder Agreements which are attached hereto as
Exhibits 2, 3, 4, 5, 6, 7 and 8 hereto and are incorporated herein by reference.
Capitalized terms not otherwise defined below have the respective meanings set
forth in the Shareholder Agreements.

     THE SHAREHOLDER AGREEMENTS.

         Royal Philips has entered into the Shareholder Agreements with the
following members of Issuer's senior management:

              Name                                    Position
              ----                                    --------

         David A. Cohen                     Chairman and Chief Executive
                                            Officer
         John A. Donohoe, Jr.               President and Chief Operating
                                            Officer
         John R. Emery                      Chief Financial
                                            Officer
         John M. Suender                    General Counsel
         Ronald A. Scarpone                 Senior Vice President of New
                                            Business Development
         Ethan Cohen                        Senior Vice President and
                                            Chief Technology Officer
         John W. Quaintance                 Senior Vice President

         Each Shareholder Agreement provides that if Royal Philips purchases
Shares pursuant to the Offer, then promptly after the Offer expires, Royal
Philips will purchase from the shareholder a party thereto the number of Shares
set forth opposite that individual's name in the following table, at a price per
Share equal to the price per Share to be paid by Royal Philips in the Offer:

                  Name                                   Number of Shares
                  ----                                   ----------------
         David A. Cohen                                       779,530
         John A. Donohoe, Jr.                                 124,224
         John R. Emery                                         46,057
         John M. Suender                                       56,289
         Ronald A. Scarpone                                    74,570
         Ethan Cohen                                           39,489
         John W. Quaintance                                    29,600

         Total                                              1,149,759

         Each Shareholder Agreement also provides that, except with respect to
the 1,149,759 Shares to be sold to Royal Philips pursuant to the terms of the
Shareholder Agreements, until May 22, 2002 (unless the agreement is

                                       -7-


<PAGE>


otherwise terminated in accordance with its terms), the shareholder will not
sell or dispose of (i) any Shares, or any options or warrants to purchase any
Shares, or any securities convertible into, exchangeable for or that represent
the right to receive Shares, owned on the date of the Shareholder Agreement,
(ii) any Shares issued upon the exercise of options or warrants to purchase any
Shares referred to in the preceding clause (i), (iii) any options to purchase
any Shares issued in accordance with the option grant contemplated by such
individual's employment agreement with the Issuer, dated as of May 22, 2000, or
(iv) any Shares issued upon the exercise of the options to purchase Shares
referred to in the preceding clause (iii), in each case, owned directly by the
shareholder a party thereto or with respect to which the shareholder has
beneficial ownership within the rules and regulations of the Securities and
Exchange Commission.

         Each shareholder has further agreed that at any shareholder meeting, or
in any written consent in lieu thereof, such shareholder will vote his Shares
against any action or agreement that would impede, interfere with, delay,
postpone or attempt to discourage the Offer, including, but not limited to:

         (a) any acquisition agreement or other similar agreement related to an
Acquisition Proposal (as such term is defined in the Tender Offer Agreement);

         (b) any change in the Issuer's management or the Issuer's board of
directors, except as otherwise agreed to in writing by Royal Philips; or

         (c) any other material change in the Issuer's corporate structure or
business.

             The Shareholder Agreements will terminate concurrent with the
         earlier of: (a) the termination of the Tender Offer Agreement and (b)
         the occurrence of any of the conditions that result in a revocation of
         the waiver given by such shareholder in his employment agreement with
         the Issuer with respect to certain options held by such shareholder
         that would otherwise vest upon Royal Philips' purchase of Shares
         pursuant to the Offer.

             The following table sets forth, as of the date hereof, the number
         of Shares and options held by each shareholder.

                                       -8-


<PAGE>


Name                                Shares Owned       Options Owned*
- ----                                ------------       -------------

David A. Cohen,                     1,208,826          740,000
John A. Donohoe, Jr.                  109,502          387,392
John R. Emery                             143          115,000
John M. Suender                        18,722          122,000
Ronald A. Scarpone                          0           98,723
Ethan Cohen                            15,337          171,088
John W. Quaintance                          0           74,000

Total                               1,352,530        1,708,203

         None of the persons listed in Schedule I beneficially owns or has a
right to acquire any Shares or has engaged in any transaction in the Shares in
the past 60 days.

Item 6.  Contracts, Arrangements, Understandings
         or Relationships with Respect to
         Securities of the Issuer.
         ---------------------------------------

         Other than as set forth in response to Item 5 and in this Item 6, there
are no contracts, arrangements, understandings or relationships (legal or
otherwise) among Royal Philips or any of the persons set forth in Schedule I
hereto and between such persons and any person with respect to any securities of
the Issuer.

         The following is a summary of certain provisions of each of the Tender
Offer Agreement and the Governance Agreement. This following summary of each of
such agreements is not a complete description of the terms and

- -------------------

* As of the date hereof, the number of Shares issuable upon exercise of options
exercisable within 60 days is as follows: (i) for David A. Cohen, 374,002
Shares; for John A. Donohoe, Jr., 228,392 Shares; for John R. Emery, 45,914
Shares; for John M. Suender, 47,000 Shares; for Ronald A. Scarpone, 90,088
Shares; for Ethan Cohen, 39,489 Shares; and for John W. Quaintance, 29,600
Shares.

                                       -9-

<PAGE>

conditions of such agreements and is qualified in its entirety by reference to
the full text of each of the Tender Offer Agreement and the Governance Agreement
which are attached hereto as Exhibits 1 and 9 hereto and are incorporated herein
by reference. Capitalized terms not otherwise defined below have the respective
meanings set forth in the Tender Offer Agreement and the Governance Agreement.

     THE TENDER OFFER AGREEMENT.

         General. The Tender Offer Agreement provides that Royal Philips will
commence the Offer and that upon the terms and subject to prior satisfaction or
waiver (to the extent permitted to be waived) of the conditions set forth in the
Offer, promptly after expiration of the Offer, Royal Philips will accept for
payment, and pay for, 22,250,327 Shares validly tendered and not withdrawn
pursuant to the Offer that Royal Philips is permitted to accept and pay for
under applicable law. The Tender Offer Agreement provides that Royal Philips has
the right, in its sole discretion, to modify and make certain changes to the
terms and conditions of the Offer.

         Termination of the Tender Offer Agreement. The Tender Offer Agreement
may be terminated at any time before Royal Philips has purchased Shares pursuant
to the Offer:

         (1) by mutual written consent duly authorized by the boards of
directors of Royal Philips and the Issuer;

         (2) by the board of directors of either Royal Philips or the Issuer if:

             (a) such termination of the Offer is not in violation of the terms
         of the Offer or of the Tender Offer Agreement; or

         (3) by the Issuer if:

             (a) Royal Philips has failed to comply in any material respect with
         any of its covenants or agreements contained in the Tender Offer
         Agreement, and which failure has not been cured prior to the earlier
         of:

                (I) five (5) business days following the giving of written
             notice to Royal Philips; or


                                      -10-


<PAGE>

                (II) the business day prior to the date on which the Offer is
             scheduled to expire; or

             (b) the board of directors of the Issuer receives or there is
         publicly announced a bona fide written Acquisition Proposal that was
         unsolicited and did not otherwise result from a breach of the Tender
         Offer Agreement, and the board of directors of the Issuer determines in
         good faith:

                (I) after consultation with an investment banking firm of
             national standing, that such Acquisition Proposal is a Superior
             Proposal; and

                (II) after consultation with outside counsel, that approval,
             acceptance or recommendation of such Acquisition Proposal or tender
             or exchange offer is necessary in order for its directors to comply
             with their respective fiduciary duties, and the Issuer
             substantially concurrently with such termination enters into a
             definitive agreement containing the terms of the Superior Proposal.
             Notwithstanding the above, the Issuer may not terminate the Tender
             Offer Agreement pursuant to this provision, unless the Issuer
             complies with:

                    (A) all the provisions of the Tender Offer Agreement,
                including the applicable notification provisions; and

                    (B) all applicable requirements of the Tender Offer
                Agreement, including the payment of the termination fee prior to
                or concurrently with such termination.

         In addition, the Issuer may not exercise its right to terminate the
Tender Offer Agreement pursuant to this provision until after three (3) days
following Royal Philips' receipt of written notice from the Issuer advising
Royal Philips that the Issuer's board of directors has received a Superior
Proposal (or that a tender or exchange

                                      -11-


<PAGE>


offer with respect to the Shares has been commenced) and that such board of
directors will, subject to any action taken by Royal Philips, cause the Issuer
to accept such proposal (or recommend such tender or exchange offer), and
specifying the material terms and conditions of the proposal and identifying the
person making such proposal (it being understood and agreed that any amendment
to the price or any other material term of the proposal requires an additional
notice and a new three-day period).

         (4) by the board of directors of Royal Philips if:

             (a) the Issuer fails to comply in any material respect with any of
         its covenants or agreements contained in the Tender Offer Agreement,
         and which failure is not cured prior to the earlier of:

                (I) five (5) business days following the giving of written
             notice to the Issuer of such failure; or

                (II) the business day prior to the date on which the Offer is
             then scheduled to expire; or

             (b) the board of directors of the Issuer amends or modifies in a
         manner adverse to Royal Philips its approval or recommendation of the
         Offer, withdraws such recommendation or approves or recommends any
         other Acquisition Proposal, or resolves to do any of the foregoing; or

             (c) if the Issuer or any of the other affiliated or related persons
         or entities described in the Tender Offer Agreement takes any actions
         that would be proscribed by Section 3.2 of the Tender Offer Agreement
         but for the exception therein allowing certain actions to be taken by
         the Issuer's board of directors after consultation with outside counsel
         if necessary to comply with its fiduciary obligations under applicable
         law.

         Effect of Termination. If the Tender Offer Agreement is terminated,
neither Royal Philips nor the Issuer (or any of their respective directors or
officers)


                                      -12-


<PAGE>


will have any liability or further obligation to the other party, except that
each will remain liable for any breach of the Tender Offer Agreement. In
addition, the Tender Offer Agreement's provisions regarding confidentiality,
public statements regarding the transactions contemplated by the agreement and
fees and expenses will survive termination.

         Fees and Expenses. Each of the Issuer and Royal Philips will pay their
respective expenses in connection with the Tender Offer Agreement, except that
the parties have agreed that the Issuer will be required to pay Royal Philips a
termination payment of $44,750,000 if:

             (i) the Offer has remained open for at least twenty (20) business
         days;

             (ii) the Tender Offer Condition has not been satisfied;

             (iii) the Offer is terminated without the purchase of any Shares
         thereunder;

             (iv) at the time the Offer is terminated, any corporation,
         partnership, person, other entity or group (as defined in Section
         13(d)(3) of the Exchange Act) other than Royal Philips or any of its
         subsidiaries or affiliates has publicly announced an intention (whether
         or not conditional) to make a proposal or offer relating to an
         Acquisition Proposal; and

             (v) within fifteen (15) months after the date of such termination,
         the Issuer consummates or enters into an agreement with respect to any
         Acquisition Proposal; in addition, if the Issuer recommends acceptance
         by the shareholders of a third-party tender offer or exchange offer,
         such recommendation will be treated as though an agreement had been
         entered into.

         In addition, the Issuer will also be required to pay Royal Philips a
termination fee if:

             (i) the Issuer fails to comply in any material respect with any of
         its obligations or agreements in the Tender Offer Agreement, which
         failure is not cured after Royal Philips informs the Issuer of such
         failure;

                                      -13-


<PAGE>



             (ii) the Issuer's board of directors amends or modifies in a manner
         adverse to Royal Philips its approval or recommendation of the Offer,
         withdraws such recommendation or approves or recommends any other
         Acquisition Proposal, or resolves to do any of the foregoing; or

             (iii) the Issuer terminates the Tender Offer Agreement in order to
         accept and enter into an agreement relating to a Superior Proposal.

         If the Issuer is obligated to pay Royal Philips a termination fee as
described above, the Issuer will also reimburse Royal Philips' actual
out-of-pocket costs and expenses incurred in connection with the Tender Offer
Agreement and the transactions contemplated thereby up to a maximum of two
million five hundred thousand dollars ($2,500,000). The parties have agreed that
if Goldman, Sachs & Co. or any of its affiliates is entitled to receive a
portion of the termination payment pursuant to the terms of its engagement with
Royal Philips, such payment will not be deemed part of Royal Philips' costs and
expenses.

     THE GOVERNANCE AGREEMENT.

         Effectiveness. The Governance Agreement will become effective at the
time Royal Philips purchases Shares pursuant to the terms and conditions of the
Tender Offer Agreement (the "Governance Agreement Effective Time").

         Termination of the Governance Agreement. The Governance Agreement will
terminate on the first date that Royal Philips is no longer the beneficial owner
of five (5) percent of the Issuer's Voting Stock, although Royal Philips and the
Issuer may terminate the agreement earlier by mutual written consent and except
that the provisions of the agreement relating to the establishment of committees
of the Issuer's board of directors will terminate on the first date that Royal
Philips is the beneficial owner of less than a majority of the outstanding
Voting Stock. As used in the Governance Agreement, the term "Voting Stock" means
shares of the capital stock of the Issuer having the right to vote generally in
any election of directors of the Issuer.

         Purchases of Shares by Royal Philips After the Offer. The Governance
Agreement provides that, until the third anniversary of the Governance Agreement
Effective Time, Royal Philips will not, directly or indirectly, purchase or
otherwise acquire, or propose or offer to

                                      -14-


<PAGE>


purchase or acquire, or otherwise become the beneficial owner, individually or
as a member of a "group" (as defined for purposes of Section 13d of the Exchange
Act), of any Equity Securities, if, immediately after such transaction, Royal
Philips and its Affiliates or Associates (each of which terms have the
respective meanings ascribed to them under the rules promulgated under the
Exchange Act) would, directly or indirectly, beneficially own in excess of 75%
of the then outstanding shares of Voting Stock. As used in the Governance
Agreement, the term "Equity Security" means Voting Stock, securities of the
Issuer convertible into or exchangeable for Voting Stock, and options, rights,
warrants and similar securities issued by the Issuer to purchase Voting Stock.

         Notwithstanding the foregoing restriction, after the first anniversary
of the Governance Agreement Effective Time and until the third anniversary,
Royal Philips or any of its Affiliates or Associates may acquire all, but not
less than all, of the Equity Securities of the Issuer which are not then
beneficially owned by Royal Philips or one or more of its Affiliates or
Associates. However, any transaction or series of related transactions during
that time period in which Royal Philips would acquire all of the Equity
Securities it does not then own is subject to the receipt of the approval of the
Supervisory Committee of the Issuer's board of directors.

         Transfer of Shares After the Offer. Royal Philips has agreed that,
until the first anniversary of the Governance Agreement Effective Time, it will
not, and will not permit any of its subsidiaries to, directly or indirectly,
sell, transfer or otherwise dispose of any Equity Securities beneficially owned,
directly or indirectly, by Royal Philips or its subsidiaries except to Royal
Philips or to any subsidiary of Royal Philips. Notwithstanding the foregoing,
the terms of the Governance Agreement permit Royal Philips to sell, transfer or
assign Equity Securities, or permit any of its subsidiaries which beneficially
own Equity Securities to sell, transfer or assign such Equity Securities, so
long as after giving effect to any such sales, transfers or assignments of
Equity Securities, Royal Philips and its subsidiaries beneficially own at least
60% of the then outstanding shares of Voting Stock.

         After the first anniversary of the Governance Agreement Effective Time
and until the third anniversary of the Governance Agreement Effective Time,
Royal Philips may

                                      -15-


<PAGE>


sell or dispose of any Equity Securities to any person, but may not enter into
or consummate any transaction (or series of related transactions) involving the
sale or transfer of Equity Securities that would result in (i) any person other
than Royal Philips or any Affiliate or Associate of Royal Philips beneficially
owning in excess of 10% of the outstanding Voting Stock (a "Third Party
Purchaser") and (ii) Royal Philips and its Affiliates and Associates
beneficially owning less than a majority of the then outstanding Voting Stock,
unless:

             (i) the Third-Party Purchaser contemporaneously offers to acquire,
         or acquires, on the same terms and conditions as are applicable to
         Royal Philips, its Affiliates or Associates, 100% of the Voting Stock
         beneficially owned by persons or entities other than Royal Philips, its
         Affiliates or Associates; or

             (ii) the Third-Party Purchaser offers to purchase, on the same
         terms and conditions as are applicable to Royal Philips, its Affiliates
         or Associates, pursuant to a tender or exchange offer made in
         accordance with applicable law, including Section 14(d)(1) and
         Regulation 14D of the Exchange Act, all or a specified percentage of
         the then outstanding shares of Voting Stock (and Royal Philips has
         agreed that it and its Affiliates or Associates will not sell to the
         Third Party Purchaser any shares of Voting Stock other than pursuant to
         such tender or exchange offer).

         After the third anniversary of the Governance Agreement Effective Time,
Royal Philips may sell or dispose of any Equity Securities to any person without
limitation.

         The Issuer's Board of Directors. The Governance Agreement provides that
the Issuer will take any and all action necessary so that, promptly following
the Governance Agreement Effective Time, the board of directors will consist of
eleven (11) directors. These eleven directors will be comprised of the following
individuals:

             (i) one director will be the Chief Executive Officer of the Issuer
         and one director will be another officer of the Issuer designated by
         the Chief Executive Officer of the Issuer (together, the "Management
         Directors");

                                      -16-


<PAGE>



             (ii) six (6) directors would be designated by Royal Philips (the
         "Purchaser Directors"); and

             (iii) three (3) directors would be "Independent Directors" (as
         defined below).

         After the Governance Agreement Effective Time, the board of directors
will have the power to increase or decrease the size of the board in its
discretion so long as (x) there are at least two (2) Management Directors and
three (3) Independent Directors, and (y) the relative percentage of Management
Directors, Independent Directors and Purchaser Directors is maintained, in all
material respects, as in effect immediately prior to any such increase or
decrease. As used in the Governance Agreement, the term "Independent Director"
means a director of the Issuer (i) who is not and has never been an officer or
employee of the Issuer, any Affiliate or Associate of the Issuer, or an entity
that derived 5% or more of its revenues or earnings in its most recent fiscal
year from transactions involving the Issuer or any Affiliate or Associate of the
Issuer, (ii) who is not and has never been an officer, employee or director of
Royal Philips, any Affiliate or Associate of Royal Philips, or an entity that
derived more than 5% of its revenues or earnings in its most recent fiscal year
from transactions involving Royal Philips or any Affiliate or Associate of Royal
Philips and (iii) who was nominated for such position by the Nominating
Committee in accordance with the terms of the Governance Agreement. The initial
Independent Directors will be John H. Underwood, Richard H. Stowe and A. Fred
Ruttenberg.

         In addition, as set forth in the following table, the number of
directors Royal Philips is permitted to designate or nominate under the terms of
the Governance Agreement is based on its beneficial ownership of Voting Stock:

Beneficial Ownership of Voting Stock        Number of Directors
- ------------------------------------        -------------------

More than 50%                                    6
More than 36%                                    4
More than 27%                                    3
More than 18%                                    2
5% or more                                       1
Less than 5%                                     0

         If Royal Philips has the right to designate fewer than six (6)
directors, the Nominating Committee of the


                                      -17-


<PAGE>


Issuer's board of directors will nominate that number of additional Independent
Directors as is necessary to constitute the entire board of directors.

         Royal Philips will have the right to designate any replacement for a
Purchaser Director at the termination of such director's term or upon such
director's death, resignation, retirement, disqualification, removal from office
or other cause, and the Chief Executive Officer of the Issuer will have the
right to designate any replacement for a Management Director at the termination
of such director's term or upon such director's death, resignation, retirement,
disqualification, removal from office or other cause.

         Committees of the Issuer's Board of Directors. The Governance Agreement
provides that the board of directors will establish the following three (3)
committees, with the following responsibilities:

             (i) a Nominating Committee, responsible, among other things, for
         the nomination, subject to the terms of the Governance Agreement, of
         the Independent Directors and consisting solely of two (2) Independent
         Directors, one Purchaser Director and one Management Director as
         selected by the board of directors from time to time;

             (ii) a Compensation Committee, responsible, among other things, for
         the adoption, amendment and administration of all employee benefit
         plans and arrangements and the compensation of all officers of the
         Issuer, and consisting of two (2) Independent Directors and two (2)
         Purchaser Directors as selected by the Nominating Committee and Royal
         Philips, respectively, from time to time;

             (iii) a Supervisory Committee, consisting of at least three (3)
         Independent Directors selected by a majority of the Independent
         Directors, responsible, among other things, for:

                (a) the general oversight, administration, amendment and
             enforcement, on behalf of the Issuer, of (1) those provisions of
             the Tender Offer Agreement that survive Royal Philips' purchase of
             Shares pursuant to the Offer, (2) the Governance Agreement and

                                      -18-


<PAGE>


             (3) the License Agreement, dated as of May 22, 2000, between
             Philips Speech Processing and the Issuer; and

                (b) the entry into, general oversight, administration, amendment
             and enforcement, on behalf of the Issuer, of any other agreements
             or arrangements between the Issuer or any of its subsidiaries, on
             the one hand, and Royal Philips and any of its subsidiaries on the
             other hand, which would be required pursuant to Regulation S-K
             promulgated by the SEC to be disclosed in a registration statement
             filed under the Securities Act of 1933, as amended, or in a proxy
             statement or other report filed under the Exchange Act.

         The board of directors may establish such other committees as it may
have determined in its discretion so long as those other committees did not
conflict with, supersede or duplicate the duties or responsibilities of the
Nominating Committee, the Compensation Committee or the Supervisory Committee.

Item 7.  Material to be Filed as Exhibits

         Exhibit           Description
         -------           -----------

            1              Tender Offer Agreement, dated as of May
                           22, 2000, between Royal Philips and the
                           Issuer.

            2              Shareholder Agreement, dated as of May
                           22, 2000, between Royal Philips and John
                           M. Suender.

            3              Shareholder Agreement, dated as of May
                           22, 2000, between Royal Philips and
                           David A. Cohen.

            4              Shareholder Agreement, dated as of May
                           22, 2000, between Royal Philips and John
                           A. Donohoe, Jr.

            5              Shareholder Agreement, dated as of May
                           22, 2000, between Royal Philips and John
                           R. Emery.



                                      -19-


<PAGE>


            6              Shareholder Agreement, dated as of May
                           22, 2000, between Royal Philips and
                           Ethan Cohen.

            7              Shareholder Agreement, dated as of May
                           22, 2000, between Royal Philips and
                           Ronald A. Scarpone.

            8              Shareholder Agreement, dated as of May
                           22, 2000, between Royal Philips and John
                           W. Quaintance.

            9              Governance Agreement, dated as of May
                           22, 2000, between Royal Philips and the
                           Issuer.


                                      -20-


<PAGE>



                                   SIGNATURES
                                   ----------

         After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

Date: June 6, 2000



                                    KONINKLIJKE PHILIPS ELECTRONICS N.V.


                                    By:    /s/  JAN H.M. HOMMEN
                                        ---------------------------------------
                                    Name:  Jan H. M. Hommen
                                    Title: Executive Vice President and
                                           Chief Financial Officer

                                    By:    /s/  ADRI BAAN
                                        ---------------------------------------
                                    Name:  Adri Baan
                                    Title: Executive Vice President




                                      -21-


<PAGE>



                                                                      SCHEDULE I

                    INFORMATION CONCERNING THE DIRECTORS AND
                       EXECUTIVE OFFICERS OF ROYAL PHILIPS

The following tables set forth the name, citizenship, business address and
present principal occupation of each director and executive officer of Royal
Philips.

               DIRECTORS AND EXECUTIVE OFFICERS OF ROYAL PHILIPS*



            NAME                                        PRESENT PRINCIPAL
                                                          OCCUPATION OR
                                                           EMPLOYMENT

  Cor Boonstra                         President, Chairman of the Board of
                                       Management and the Group Management
                                       Committee of Royal Philips Electronics.
                                       Currently, Member of the Supervisory
                                       Boards of Sara Lee DE N.V., Hunter
                                       Douglas International N.V.,
                                       NBM/Amstelland N.V., Ahold N.V.,
                                       Technical University Eindhoven. Member of
                                       the Board of Directors of The Seagram
                                       Company Ltd.

  Jan H.M. Hommen                      Executive Vice-President, Member of the
                                       Board of Management and the Group
                                       Management Committee and Chief Financial
                                       Officer of Royal Philips Electronics.


- ----------------------
*Each person has a business address at Rembrandt Tower, Amstelplein 1, 1096 HA
Amsterdam, the Netherlands and is a citizen of the Netherlands, unless a
different address and/or citizenship is indicated under his or her name.

                                      -22-


<PAGE>


  Adri Baan                            Executive Vice-President, Member of the
                                       Board of Management and the Group
                                       Management Committee and President/CEO of
                                       the Consumer Electronics Division of
                                       Royal Philips Electronics.

  Arthur P.M. van der Poel             Executive Vice-President, Member of the
                                       Board of Management, Member of the Group
                                       Management Committee and President/CEO of
                                       the Semiconductor Division of Royal
                                       Philips Electronics.

  John W. Whybrow                      Executive Vice-President, Member of
  United Kingdom                       Member of the Board of Management, Member
                                       of the Group Management Committee and
                                       President/CEO of the Lighting Division of
                                       Royal Philips Electronics.

  Gerard J. Kleisterlee                Executive Vice-President, Member of the
                                       Board of Management, Member of the Group
                                       Management Committee and President/CEO of
                                       the Components Division of Royal Philips
                                       Electronics.

  Ad H.A. Veenhof                      Senior Vice-President, Member of the
                                       Group Management Committee, President/CEO
                                       of the Domestic Appliances and Personal
                                       Care Division of Royal Philips
                                       Electronics.




                                      -23-


<PAGE>




  Hans M. Barella                      Senior Vice-President, Member of the
                                       Group Management Committee of Royal
                                       Philips Electronics. President/CEO of the
                                       Medical Systems Division of Royal Philips
                                       Electronics.

  Jan P. Oosterveld                    Senior Vice-President, Member of the
                                       Group Management Committee responsible
                                       for strategy and regions of Royal Philips
                                       Electronics.

  Arie Westerlaken                     Senior Vice-President, Member of the
                                       Group Management Committee, General
                                       Secretary, Chief Legal Officer and
                                       Secretary to the Board of Management of
                                       Royal Philips Electronics.

  Ad Huijser                           Senior Vice-President, Member of the
                                       Group Management Committee and CEO of
                                       Philips Research of Royal Philips
                                       Electronics.

  Tjerk Hooghiemstra                   Senior Vice-President and Member of the
                                       Group Management Committee responsible
                                       for Corporate Human Resources Management
                                       of Royal Philips Electronics.

  Guy Demuynck                         Senior Vice-President, Member of the
                                       Group Management Committee and CEO of
                                       Consumer Electronics Mainstream of Royal
                                       Philips Electronics.



                                      -24-


<PAGE>


  L.C. van Wachem                      Retired. Member of the Supervisory Board
                                       of Royal Philips Electronics since 1993.
                                       Chairman of the Supervisory Board of
                                       Royal Dutch Petroleum Company; Member of
                                       the Supervisory Boards of Akzo Nobel,
                                       BMW, and member of the Board of Directors
                                       of IBM, ATCO and Zurich Insurance.

  W. de Kleuver                        Retired. Member of the Supervisory Board
                                       of Royal Philips Electronics since 1998.

  W. Hilger Germany                    Retired. Member of the Supervisory Board
                                       of Royal Philips Electronics since 1990.

  L. Schweitzer                        Member of the Supervisory Board of Royal
  34 Quai du Point du Jour             Philips Electronics since 1997.
  BP 103 92109                         Chairman and Chief Executive Officer of
  Boulogne                             Renault; Member of the Boards of
  Bilancourt                           Pechiney, Banque Nationale de Paris,
  Cedex, France                        Electricite de France.

  Sir Richard Greenbury                Member of the Supervisory Board of Royal
  United Kingdom                       Philips Electronics since 1998. Former
                                       Chairman and CEO of Marks & Spencer and
                                       former non-executive member of the Board
                                       of Directors of Lloyds TSB, British Gas,
                                       ICI and Zeneca.

                                      -25-


<PAGE>



  J.M. Hessels                         Member of the Supervisory Board of Royal
                                       Philips Electronics since 1999. Chief
                                       Executive Officer of Vendex KBB. Member
                                       of the Supervisory Boards of Achmea,
                                       Amsterdam Exchanges, Barnes & Noble.com,
                                       Laurus, Schiphol Group and Royal Vopak.

  K. van Miert                         Member of the Supervisory Board of Royal
                                       Philips Electronics since 2000. Chairman
                                       - Rector of Nijenrode University.




                                      -26-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>TENDER OFFER AGREEMENT
<TEXT>


                             TENDER OFFER AGREEMENT


         TENDER OFFER AGREEMENT (hereinafter called this "Agreement"), dated as
of May 22, 2000 between, MedQuist Inc., a New Jersey corporation (the
"Company"), and Koninklijke Philips Electronics N.V., a corporation organized
under the laws of the Netherlands ("Purchaser").


                                    RECITALS

         WHEREAS, the Boards of Directors of Purchaser and the Company each has
determined that it is in the best interests of their respective shareholders for
Purchaser to acquire Shares (as defined herein) of the Company upon the terms
and subject to the conditions set forth herein;

         WHEREAS, to induce the Company to enter in the Agreement, the Company
has requested, and Purchaser has agreed, to enter into a Governance Agreement
(as defined in Section 1.1(b)) and a License Agreement (as defined in Section
2.1(c)), each to become effective at the time Purchaser pays for Shares (as
defined in Section 1.1(a)) pursuant to the terms of the Offer (as defined in
Section 1.1(a)); and

         WHEREAS, the Company and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.

         NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein the
parties hereto hereby agree as follows:

                                   ARTICLE I

                                The Tender Offer

         1.1. Tender Offer. (a) Provided that this Agreement shall not have been
terminated in accordance with Article IV hereof and none of the events set forth
in Annex A hereto shall have occurred or be existing, within seven business days
of the date hereof, Purchaser will commence a tender offer (the "Offer") for
22,250,327 shares of common stock, no par value, of the Company (the "Shares"),
at a price of $51.00 per Share in cash, net to the seller, subject to the
conditions set forth in Annex A hereto. Subject to the terms and conditions of
the Offer, Purchaser will promptly accept for payment and pay for all Shares
validly tendered and not withdrawn that it is obligated to purchase thereunder.
The Company's Board of Directors shall recommend acceptance of the Offer to its
shareholders in a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to be filed with the Securities and Exchange Commission (the
"SEC") upon commencement of the Offer; provided, however, that if the Company's
Board of Directors determines in good faith, after consultation with its


<PAGE>

outside counsel, that it is necessary to amend or withdraw its recommendation in
order for its directors to comply with their respective fiduciary duties, such
amendment or withdrawal shall not constitute a breach of this Agreement. The
initial expiration date of the Offer shall be the date twenty (20) business days
from and including the date (the "Commencement Date") the Offer Documents (as
defined in Section 1.1(c) below) are first filed with the Securities and
Exchange Commission. Purchaser expressly reserves the right, in its sole
discretion, to waive, set forth or change any term and condition of the Offer;
provided, that, unless previously approved by the Company in writing, no
provision may be set forth or changed which: (i) increases or, except as set
forth in the next succeeding sentence, decreases the Tender Offer Condition (as
defined in Annex A hereto); (ii) decreases the price per Share to be paid in the
Offer; (iii) changes the form of consideration payable in the Offer (other than
by adding consideration); (iv) imposes conditions to the Offer in addition to
those set forth in Annex A hereto; or (v) amends or modifies any term or
condition of the Offer in a manner adverse to the holders of Shares. Without the
prior written consent of the Company, Purchaser shall not extend the expiration
date of the Offer beyond the initial expiration date of the Offer; provided,
that, if on the initially scheduled expiration date of the Offer (or any
subsequent expiration date) any of the conditions to the Offer have not been
satisfied, Purchaser may in its sole discretion extend from time to time the
Offer for up to and including an additional twenty (20) business days in the
aggregate after the initial expiration date of the Offer, and may in its sole
discretion, in connection with any such extension, amend the terms of the Offer,
but only to reduce the Tender Offer Condition to any number of Shares greater
than 20,300,320 Shares (the "Reduced Tender Offer Condition"); it being
understood that if Purchaser shall accept for payment any Shares validly
tendered and not withdrawn pursuant to the Offer, it shall accept for payment
all such Shares up to the Tender Offer Condition. The Offer shall further
provide that Shares (including Shares issued pursuant to any of the Company's
employee or director benefit plans (including the Stock Plans)) may be tendered
utilizing a notice of guaranteed delivery, which shall require delivery of the
Shares to the depository within three business days (or such longer period as
may be permitted under applicable law and agreed to by Purchase and the Company)
following acceptance for payment by Purchaser.

         (b) The Company hereby represents, warrants and agrees (as applicable)
that: (i) the Board of Directors of the Company at a meeting duly called and
held on May 21, 2000, has unanimously (A) determined that this Agreement and the
transactions contemplated hereby are in the best interests of the holders of
Shares, (B) approved and adopted this Agreement and the transactions
contemplated hereby and (C) resolved to recommend in the Schedule 14D-9 that the
holders of Shares accept the Offer and tender their Shares to Purchaser
thereunder; (ii) the Board of Directors of the Company has taken all action
necessary to render Section 14A:10A-4 of the New Jersey Business Corporation Act
("NJBCA") inapplicable to the Offer; (iii) the Schedule 14D-9 as initially filed
with the SEC will set forth the information contained in this Section 1.1(b)(i)
and (ii); and (iv) UBS Warburg LLC (the "Financial Advisor") has delivered to
the Board of Directors of the Company its oral opinion (which opinion shall be
confirmed in writing) to the effect that, as of the date of this Agreement, the
$51.00 per Share in

                                      -2-
<PAGE>

cash to be received in the Offer (or pursuant to the Shareholder Agreements (as
defined in Section 2.1)) by holders of Shares (other than Purchaser and its
affiliates) is fair, from a financial point of view, to such holders. The
Company has been authorized by the Financial Advisor to permit the inclusion of
a copy of such opinion (and a reference thereto in form and substance
satisfactory to the Financial Advisor) in the Schedule 14D-9. Subject to the
terms and conditions of this Agreement, the Company hereby consents to the
inclusion in the Offer Documents of the recommendations of the Board of
Directors of the Company described herein. The Company shall promptly take all
actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder in order to fulfill its obligations under the Governance Agreement,
dated as of the date hereof, between the Company and Purchaser (the "Governance
Agreement"), relating to appointment of Purchaser's designees to the Company's
Board of Directors and shall provide for inclusion in Purchaser's Schedule TO to
be filed with the SEC contemporaneously with the commencement of the Offer such
information with respect to the Company and its officers and directors as is
required under such Section and Rule in order to fulfil its obligations
thereunder.

         (c) Purchaser agrees, as to the Offer to Purchase and related Letter of
Transmittal (which together constitute the "Offer Documents") and the Company
agrees, as to the Schedule 14D-9, that such documents shall, in all material
respects, comply as to form with the requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and the rules and regulations
thereunder and other applicable laws. Purchaser represents and warrants to the
Company as to the Offer Documents, and the Company represents and warrants to
Purchaser as to the Schedule 14D-9, that on the date filed with the SEC and on
the date first published, sent or given to the Company's shareholders, the Offer
Documents and the Schedule 14D-9, as applicable, shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that (i)
Purchaser makes no representation with respect to information supplied by the
Company for inclusion in the Offer Documents, and (ii) the Company makes no
representation with respect to information supplied by Purchaser for inclusion
in the Schedule 14D-9. The Company and its counsel, as to the Offer Documents
(or any amendment thereto) and Purchaser and its counsel, as to the Schedule
14D-9 (or any amendment thereto), shall be given a reasonable opportunity to
review such documents prior to their being filed with the SEC.

         (d) In connection with the Offer, the Company will instruct its
Transfer Agent to furnish promptly to Purchaser a list, as of a recent date, of
the record holders of Shares and their addresses, as well as mailing labels
containing the names and addresses of all record holders of Shares and lists of
security positions of Shares held in stock depositories. The Company will
furnish Purchaser with such additional information (including, but not limited
to, updated lists of holders of Shares and their addresses, mailing labels and
lists of security positions) and such other customary

                                      -3-
<PAGE>

assistance as Purchaser or its agents may reasonably request in communicating
the Offer to the record and beneficial holders of Shares.

                                   ARTICLE II

                         Representations and Warranties

         2.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser that except as set forth in the
corresponding section of the disclosure letter delivered by the Company to
Purchaser, dated the date hereof (the "Company Disclosure Letter"):

         (a) Corporate Organization and Qualification. Each of the Company and
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
in good standing as a foreign corporation in each jurisdiction where the
properties owned, leased or operated, or the business conducted, by it require
such qualification, except for such failure to so qualify or be in such good
standing, which, when taken together with all other such failures, is not
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), business or results of operations of the Company and its
subsidiaries taken as a whole (other than any effect arising out of (i) general
economic conditions or (ii) economic conditions generally affecting the medical
services industry) (a "Company Material Adverse Effect"). Each of the Company
and its subsidiaries has the requisite corporate power and authority to carry on
its respective business as they are now being conducted. A complete and correct
copy of the Company's Certificate and By-Laws, each as amended to date is
available on The Electronic Data Gathering, Analysis and Retrieval system of the
SEC ("EDGAR"). The Company's Amended and Restated Certificate of Incorporation,
as amended (the Certificate") and By-Laws as so filed on EDGAR as of the date
hereof are in full force and effect.

         (b) Authorized Capital. The authorized capital stock of the Company
consists of 60,000,000 Shares, of which 35,452,704 Shares were outstanding on
May 19, 2000, and 12,111,975 shares of Preferred Stock, no par value (the
"Preferred Shares"), none of which were outstanding on May 22, 2000. All of the
outstanding Shares have been duly authorized and are validly issued, fully paid
and nonassessable. The Company has no Shares or Preferred Shares reserved for
issuance, except that, as of May 19, 2000, there were 3,547,439 Shares reserved
for issuance pursuant to the outstanding options issued under the MedQuist Inc.
Incentive Stock Option Plan for Officers and Key Employees (the "Option Plan"),
the MedQuist Inc. 1996 Employee Stock Purchase Plan and the MedQuist Inc. Board
Deferred Stock Plan, the 1992 MRC Plan, the MedQuist Inc. 1998 Stock Option
Plan, the MedQuist Inc. Non-Employee Director Plan, and the MRC Special Director
Plan (collectively, the "Stock Plans"). The Company has provided Purchaser a
correct and complete list of each outstanding option to purchase Shares under
the Stock Plans (each a "Company Option"), including the holder, date of grant,
exercise price, number of Shares subject thereto and expiration date. Each of
the outstanding

                                      -4-
<PAGE>

shares of capital stock of each of the Company's subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and owned, either
directly or indirectly, by the Company free and clear of all liens, pledges,
security interests, claims or other encumbrances. Except as set forth above,
there are no preemptive rights nor any outstanding subscriptions, options,
warrants, rights, convertible securities or other agreements or commitments to
which the Company or any of its Subsidiaries is a party of any character
relating to the issued or unissued capital stock or other securities of the
Company or any of its subsidiaries. Section 2.1(b) sets forth a true and
complete list of each Person in which the Company owns, directly or indirectly
any equity, membership, partnership, limited liability, voting or similar
interest, and the percentage ownership of such Person; no such ownership will
require a filing by Purchaser under the HSR Act. The purchase by Purchaser of
the Shares pursuant to the Offer will not create or trigger any obligation of
the Company to issue, transfer or sell any Shares pursuant to any Benefit Plan
(as defined in Section 3.1(d)).

         (c) Corporate Authority. The Company has the requisite corporate power
and authority and has taken all corporate action necessary in order to execute
and deliver this Agreement, the Governance Agreement and the Licensing
Agreement, dated the date hereof between the Company and Licensor Affiliate (as
defined below) (the "License Agreement") and to consummate the transactions
contemplated hereby and thereby. Each of this Agreement, the Governance
Agreement and the License Agreement is a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, subject,
in each case, to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.

         (d) Governmental Filings; No Violations. (i) Other than the filings
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act") and the Exchange Act (the "Regulatory Filings"), no notices, reports
or other filings are required to be made by the Company with, nor are any
consents, registrations, approvals, permits or authorizations required to be
obtained by the Company from, any governmental or regulatory authority, agency,
commission or other entity, domestic or foreign ("Governmental Entity"), in
connection with the execution and delivery of any of this Agreement, the
Governance Agreement and the License Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby.

              (ii) The execution and delivery of each of this Agreement, the
Governance Agreement and the License Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated by each of this
Agreement, the Governance Agreement and the License Agreement will not,
constitute or result in (i) a breach or violation of, or a default under, the
Certificate or By-Laws of the Company or the comparable governing instruments of
any of its subsidiaries, (ii) a breach or violation of, a default under or the
triggering of any material payment or other material obligations pursuant to,
any of the Company's existing Benefit Plans or any grant or

                                      -5-
<PAGE>

award made under any of the foregoing, (iii) a breach or violation of, or a
default under, the acceleration of or the creation of a lien, pledge, security
interest or other encumbrance on assets (with or without the giving of notice or
the lapse of time) pursuant to, any provision of any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation ("Contracts") of the
Company or any of its subsidiaries or any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or non-governmental permit or
license to which the Company or any of its subsidiaries is subject or (iv) any
change in the rights or obligations of any party under any of the Contracts,
except, in the case of clauses (iii) or (iv) above, for such breaches,
violations, defaults, accelerations or changes that are not reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect or
that could not prevent, materially delay or materially burden the transactions
contemplated by this Agreement. The Company will use its commercially reasonable
efforts to identify and obtain each consent under any Contract (or series of
related Contracts with related parties) to which the Company is a party that
involves either the payment by the Company and its subsidiaries or receipt by
the Company and its subsidiaries of more than $1,000,000 annually, or is
otherwise material to the operation of the Company and its subsidiaries taken as
a whole.

         (e) Company Reports; Financial Statements. Each registration statement,
schedule, report, proxy statement or information statement prepared by it since
December 31, 1999 (the "Audit Date"), including, without limitation, (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 and
(ii) the Company's Quarterly Reports on Form 10-Q for the period ended March 31,
2000, each in the form (including exhibits and any amendments thereto) filed
with the SEC (collectively, the "Company Reports") is available on Edgar. As of
their respective dates, the Company Reports did not, and any Company Reports
filed with the SEC subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Each of the consolidated
balance sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents in all material
respects the consolidated financial position of the Company and its subsidiaries
as of its date and each of the consolidated statements of income, cash flows and
changes in shareholders' equity included in or incorporated by reference into
the Company Reports (including any related notes and schedules) fairly presents
in all material respects the results of operations, cash flows and changes in
shareholders' equity, as the case may be, of the Company and its subsidiaries
for the periods set forth therein (subject, in the case of unaudited statements,
to normal year-end audit adjustments which will not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
may be noted therein.

         (f) Absence of Certain Changes. Except as disclosed in the Company
Reports filed with the SEC prior to the date hereof, since December 31, 1999,
the Company and its subsidiaries have conducted their respective businesses only
in, and

                                      -6-
<PAGE>

have not engaged in any material transaction other than according to, the
ordinary and usual course of such businesses and there has not been (i) any
Company Material Adverse Effect or any event or occurrence or combination of the
foregoing which is reasonably likely to result in a Company Material Adverse
Effect; (ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of the Company; (iii) any change
by the Company in accounting principles, practices or methods except as required
by applicable law or GAAP; (iv) any damage, destruction or other casualty loss
with respect to any material asset or property owned, leased or otherwise used
by the Company or any of its subsidiaries, whether or not covered by insurance,
which is reasonably likely to have a Company Material Adverse Effect; (v) any
amendment of any of the Compensation and Benefit Plans other than in the
ordinary course of business consistent with past practice; (vi) any granting by
the Company or any of its subsidiaries to any executive officer of the Company
or any of its subsidiaries of any increase in compensation, except for increases
in the ordinary course of business consistent with past practice; and (vii) any
granting by the Company or any of its subsidiaries to any such executive officer
any increase in severance or termination pay.

         (g) Litigation and Liabilities. Except as disclosed in the Company
Reports filed with the SEC prior to the date hereof, there are no civil,
criminal, administrative or investigative actions, suits, claims, hearings or
proceedings pending or, to the knowledge of the Company, threatened against the
Company or any of its subsidiaries, other than those that are not reasonably
likely, individually or in the aggregate, to have a Company Material Adverse
Effect. Except for those liabilities and obligations that are fully reflected or
reserved against on the consolidated balance sheet of the Company included in
its Annual Report on Form 10-K for the year ended December 31, 1999, and for
obligations and liabilities incurred in the ordinary course of business
consistent with past practice since the Audit Date, neither the Company nor any
of its subsidiaries has incurred any obligation or liabilities of any nature
whatsoever, whether absolute, accrued, contingent, known, unknown or otherwise,
and whether or not required to be disclosed on a balance sheet prepared in
accordance with GAAP, or any other facts or circumstance of which the Company
has knowledge that could reasonably result in any claims against, or obligations
or liabilities of, the Company or any of its Affiliates, except for those that
are not reasonably likely, individually or in the aggregate, to have a Company
Material Adverse Effect or prevent, materially delay or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement. As used in this Agreement, the term "knowledge" or any similar
formulation of knowledge, including "known by it", when used with respect to the
Company, shall mean the actual knowledge (after a reasonable investigation) of
the persons set forth on Schedule 2.1(g) of the Company Disclosure Letter.

         (h) Employee Benefits.

              (i) The Company Reports accurately describe all bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee

                                      -7-
<PAGE>

stock ownership, stock bonus, stock purchase, restricted stock and stock option
plans, all employment or severance contracts, other material employee benefit
plans and any applicable "change of control" or similar provisions in any plan,
contract or arrangement which cover employees or former employees of the Company
and its subsidiaries (the "Compensation and Benefit Plans"). The Compensation
and Benefit Plans and all other benefit plans, contracts or arrangements
(regardless of whether they are funded or unfunded or foreign or domestic)
covering employees or former employees of the Company and its subsidiaries (the
"Employees"), including, but not limited to, "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") are listed on Schedule 2.1(h) of the Company Disclosure
Letter. True and complete copies of all Compensation and Benefit Plans and such
other benefit plans, contracts or arrangements, including, but not limited to,
any trust instruments and/or insurance contracts, if any, forming a part of any
such plans and agreements, and all amendments thereto have been made available
to Purchaser.

              (ii) All employee benefit plans, other than "multiemployer plans"
within the meaning of Sections 3(37) or 4001(a)(3) of ERISA, covering Employees
(the "Plans"), to the extent subject to ERISA, are in substantial compliance
with ERISA. Each Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), has received a favorable determination letter from the Internal
Revenue Service, and the Company is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. There is no
material pending or, to the knowledge of the Company, threatened litigation
relating to the Plans. Neither the Company nor any Subsidiary has engaged in a
transaction with respect to any Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject the Company or any of
its Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code
or Section 502(i) of ERISA in an amount which is reasonably likely, individually
or in the aggregate, to have a Company Material Adverse Effect.

              (iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any Subsidiary with respect
to any ongoing, frozen or terminated "single-employer plan", within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single-employer plan of any entity which is considered one employer
with the Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). The Company and the Subsidiaries have not incurred and do
not expect to incur any withdrawal liability with respect to a multiemployer
plan under Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate). No notice of a "reportable event", within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any Pension Plan or by
any ERISA Affiliate within the 12-month period ending on the date hereof.

                                      -8-
<PAGE>

              (iv) All contributions required to be made under the terms of any
Plan have been timely made or have been reflected on the Balance Sheet. Neither
any Pension Plan nor any single-employer plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its
Subsidiaries has provided, or is required to provide, security to any Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.

              (v) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Plan, and there has
been no material change in the financial condition of such Plan since the last
day of the most recent Plan Year. The withdrawal liability of the Company and
the Subsidiaries under each Benefit Plan which is a multiemployer plan to which
the Company, the Subsidiaries or an ERISA Affiliate has contributed during the
preceding 12 months, determined as if a "complete withdrawal", within the
meaning of Section 4203 of ERISA, had occurred as of the date hereof, does not
exceed $100,000.

              (vi) Neither the Company nor the Subsidiaries have any obligations
for retiree health and life benefits under any Plan, except as required under
part 6 of Title I of ERISA. The Company or its subsidiaries may amend or
terminate any such Plan at any time without incurring any liability thereunder.

              (vii) The consummation of the transactions contemplated by this
Agreement will not (x) entitle any employees of the Company or any subsidiaries
to severance pay, (y) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Compensation and Benefit Plans or (z) result
in any payments under any of the Compensation and Benefit Plans which would not
be deductible under Section 162(m) or Section 280G of the Code.

              (viii) All Compensation and Benefit Plans covering foreign
Employees comply in all material respects with applicable local law. The Company
and the Subsidiaries have no material unfunded liabilities with respect to any
Pension Plan which covers foreign Employees.

         (i) Brokers and Finders. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein, except that the Company has employed
the Financial Advisor, the


                                      -9-
<PAGE>

arrangements with which have been disclosed in writing to Purchaser prior to the
date hereof.

         (j) Takeover Statutes. No "fair price", "moratorium", "control share
acquisition", "interested stockholder" or other similar antitakeover statute,
regulation or provision contained in the NJBCA (including, without limitation,
Section 14A:10A-4 of the NJBCA) or the Company's Certificate or Bylaws (each a
"Takeover Statute") is or, following Purchaser's purchase of Shares pursuant to
the Offer, will be, applicable to the Company, the Shares, the Offer or any
transactions contemplated by this Agreement, the Governance Agreement, the
License Agreement or the agreements set forth in Schedule A-3 hereto
(collectively, the "Shareholder Agreements"). Without limiting the generality of
the foregoing, the Board of Directors of the Company has taken all action under
the NJBCA so that neither Purchaser nor any affiliate of Purchaser will be
prohibited from, or require any subsequent approval or consent in connection
with, entering into or consummating a "business combination" with the Company
(after purchase of the Shares hereunder pursuant to the Offer) as an "interested
stockholder" (in each case, as such terms are defined in Section 14A:10A-4 of
the NJBCA) as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.

         (k) Environmental Matters. Except as disclosed in the Company Reports
filed with the SEC prior to the date hereof and except for such matters that are
not reasonably likely, individually or in the aggregate, to have a Company
Material Adverse Effect, to the knowledge of the Company, (i) the Company and
its subsidiaries have complied with all applicable Environmental Laws; (ii) the
properties presently or formerly owned or operated by the Company or its
subsidiaries (the "Properties") do not contain any Hazardous Substance (as
hereinafter defined) other than as permitted under applicable Environmental Law;
(iii) neither the Company nor any of its subsidiaries has received any notices,
demand letters or request for information from any Governmental Entity or any
third party that the Company may be in violation of, or liable under, any
Environmental Law and none of the Company, its subsidiaries or the Properties
are subject to any court order, administrative order, decree or indemnity to any
third party relating to any Environmental Law and (iv) no Hazardous Substance
has been disposed of, transferred, released or transported from any of the
Properties during the time such Property was owned or operated by the Company or
one of its subsidiaries, in a manner that could result in liability under
applicable Environmental Law.

         As used herein, "Environmental Law" means any law, regulation, order,
decree, common law, opinion or agency requirement relating to the protection of
the environment or human health and safety and "Hazardous Substance" means any
substance in any concentration that is listed, classified or regulated pursuant
to any Environmental Law including petroleum products, asbestos, lead products
and polychlorinated biphenyls.

                                      -10-
<PAGE>

         (l) Taxes. The Company and its subsidiaries (i) have prepared in good
faith and duly and timely filed (taking into account any extension of time
within which to file) all Tax Returns (as defined below) required to be filed by
any of them and all such filed Tax Returns are complete and accurate in all
material respects; (ii) have paid all Taxes (as defined below) that are required
to be paid or that have been withheld from amounts owing to any employee,
creditor or third party and are due and payable, except with respect to matters
contested in good faith; and (iii) have not waived any statute of limitations
with respect to Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency. As of the date hereof, no audits, examinations,
investigations or other proceedings against the Company or any of its
subsidiaries in respect of Taxes or Tax matters are pending, and no such audits,
examinations, investigations or proceedings are, to the knowledge of the Company
or any subsidiary, threatened. No material issues have been raised by any
Governmental Entity concerning the Tax liability of the Company or any of its
subsidiaries. The Company has made available to Purchaser true and correct
copies of the United States federal income Tax Returns filed by the Company and
each of its subsidiaries for all Taxable years ending on or before December 31,
1998. The Company (or, to the extent applicable, its relevant subsidiary) has
paid all Taxes shown as due on the Tax Returns mentioned in clause (i) of the
first sentence of this paragraph, and the Company has made adequate provision or
set up an adequate accrual or reserve for the payment of all other material
Taxes owing by the Company and its subsidiaries (which provision, accrual or
reserve is reflected in the Company Reports).

         As used in this Agreement, (i) the term "Tax" (including, with
correlative meaning, the terms "Taxes" and "Taxable") includes all federal,
state, local and foreign income, profits, franchise, gross receipts,
environmental, customs duty, capital stock, severance, stamp, payroll, sales,
employment, unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts and any interest in respect of such penalties and
additions, and (ii) the term "Tax Return" includes all returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Governmental Entity relating
to Taxes.

         (m) Compliance with Laws. The Company and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities (the "Company Permits") required in order to own their
respective assets and to conduct their respective businesses as currently
conducted, except where the failure to hold such Company Permits is not
reasonably likely, individually or in the aggregate with all other such
failures, to have a Company Material Adverse Effect. The Company and its
subsidiaries are in compliance with the terms of the Company Permits and the
operations of the Company (including, without limitation, the obtaining of any
Company Permits) and its subsidiaries have been conducted in compliance with all
applicable laws, ordinances, regulations, rules, judgments, orders, injunctions,
decrees, arbitration awards, agency requirements, writs, franchises, variances,
exemptions, approvals, licenses or

                                      -11-
<PAGE>

permits ("Laws") of any Governmental Entity, except where the failure to comply
or the violation is not reasonably likely, individually or in the aggregate with
all other such failures, to have a Company Material Adverse Effect. Except as
set forth in the Company Reports filed prior to the date hereof, no change is
required in the Company's or any of its subsidiaries' processes, properties or
procedures in connection with any Laws, except for such changes that are not
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect.

         (n) Material Contracts. Except as identified in the Company Reports,
neither the Company nor any of its subsidiaries is party to, nor is the Company
or any of its subsidiaries (or their respective assets) bound by, any Contract
that, individually or in the aggregate, is material to the Company and its
subsidiaries taken as a whole. Except as identified in the Company Reports,
there are no (i) Contracts between the Company or any subsidiary, on the one
hand, and any current or former director, officer, employee or 5% or greater
shareholder of the Company or any of their affiliates or family members, on the
other hand, or (ii) Contracts to which the Company or any of its subsidiaries is
a party which contain any provision or covenant that purport to limit in any
respect the ability of the Company or any of its subsidiaries or affiliates to
(A) sell any products or services of or to another person, (B) engage in any
line of business, (C) compete with or to obtain products or services from any
person or (D) receive or purchase products or services from any person. All
Contracts to which the Company or any of the subsidiaries is a party or by which
any of their respective assets is bound, and any Contract between third parties
that has been assigned to the Company or any of its subsidiaries, have been
legally assigned, if applicable, and to the knowledge of the Company, are valid
and binding, in full force and effect in accordance with their terms and
enforceable against the parties (or, if applicable, assignees) thereto in
accordance with their respective terms (subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles), except for such failures to be so assigned, valid and binding, in
full force and effect or enforceable that are not reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect.
There is not under any such Contract any existing default, or event, which after
notice or lapse of time, or both, would constitute a default, by the Company or
any of its subsidiaries, or to the Company's knowledge, any other party, except
to the extent any such defaults or events are not reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect.

         (o) Labor Relations. There is no work stoppage involving the Company or
any of its subsidiaries pending or, to the knowledge of the Company, threatened
and neither the Company nor any of its subsidiaries is involved in, or to the
knowledge of the Company, threatened with, or affected by any labor dispute,
arbitration, lawsuit or administrative proceeding that is reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect.
Except as disclosed in the Company Reports, none of the employees of the Company
or of any of its subsidiaries is represented by any labor union or any
collective bargaining organization and, no labor

                                      -12-
<PAGE>

union has publicly announced that it is attempting to organize employees of the
Company or any of its subsidiaries. There is no pending charge or complaint
against the Company or any of its subsidiaries by the National Labor Relations
Board or any comparable state agency.

         (p) Intellectual Property.

              (i) The Company and its subsidiaries own (free and clear of any
and all liens, pledges, security interests, claims or other encumbrances), or
are licensed or otherwise possess sufficient legally enforceable rights to use
as currently used by the Company, all patents, trademarks, trade names, service
marks, brand marks, brand names, copyrights, and any applications therefor,
technology, know-how, computer software programs or applications, databases,
industrial designs and tangible or intangible proprietary information or
materials that are currently used (or, with respect to trademarks, trade names,
brand marks, brand names and service marks, have been used within the last five
years) in its and its subsidiaries' businesses (collectively, "Intellectual
Property Rights"), except for any such failures to own, be licensed or possess
that are not reasonably likely, individually or in the aggregate, to have a
Company Material Adverse Effect.

              (ii) Except as disclosed in the Company Reports filed prior to the
date hereof, and except for such matters that are not reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect, (x)
the use of the Intellectual Property Rights by the Company or its subsidiaries
does not conflict with, infringe upon, violate or interfere with or constitute a
misappropriation of any right, title, interest or goodwill, including, without
limitation, any intellectual property right, patent, trademark, trade name,
service mark, brand mark, brand name, copyright, technology, know-how, computer
software program or application, database or industrial design of any other
Person and (y) there have been no claims made and neither the Company nor any of
its subsidiaries has received notice of any claim or otherwise knows that any
Intellectual Property Right is invalid, conflicts with the asserted right of any
other Person, or has not been used or enforced or has failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any Intellectual Property Right of the Company or any of its
subsidiaries.

         (q) Insurance. All material fire and casualty, general liability,
directors' and officers' and errors and omissions policies maintained by the
Company or any of its subsidiaries are with reputable insurance carriers and
provide insurance coverage customary and adequate for the operation of their
respective businesses, except for any such failures to maintain insurance
policies that are not reasonably likely to, individually or in the aggregate,
have a Company Material Adverse Effect. The Company and its subsidiaries have
given notice to insurance carriers of all material claims that may be covered
and the Company and its subsidiaries have not received, with respect to any such
claims, any refusal of coverage or any notice that a defense will be afforded
with reservation of rights or any notice of cancellation or any other indication

                                      -13-
<PAGE>

that any insurance policy is no longer in full force and effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.

         2.2. Representations and Warranties of Purchaser. Purchaser represents
and warrants to the Company that:

         (a) Corporate Organization and Qualification. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of The Netherlands and is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted by it, require such qualification except for such failure to so
qualify or to be in such good standing, which, when taken together with all
other such failures, is not reasonably likely to prevent, materially delay or
materially burden the transactions contemplated by this Agreement, the
Governance Agreement or the License Agreement.

         (b) Corporate Authority. Purchaser has the requisite corporate power
and authority and has taken all corporate action necessary in order to execute
and deliver each of this Agreement and the Governance Agreement and to
consummate the transactions contemplated hereby and thereby. This Agreement is a
valid and binding agreement of Purchaser enforceable against Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles. The
affiliate of Purchaser that is the signatory to the License Agreement (the
"Licensor Affiliate") has the requisite corporate power and authority and has
taken all corporate action necessary in order to execute and deliver the License
Agreement and to consummate the transactions contemplated thereby. The License
Agreement is a valid and binding agreement of Licensor Affiliate enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.

         (c) Governmental Filings; No Violations. (i) Other than the Regulatory
Filings, no notices, reports or other filings are required to be made by
Purchaser with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Purchaser from, any Governmental
Entity in connection with the execution and delivery of either of this Agreement
or the Governance Agreement by Purchaser or the execution and delivery of the
License Agreement by the Licensor Affiliate and the consummation of the
transactions contemplated hereby and thereby by Purchaser and Licensor
Affiliate, the failure to make or obtain any or all of which is reasonably
likely to prevent, materially delay or materially burden the transactions
contemplated by this Agreement.

              (ii) The execution and delivery of each of this Agreement and the
Governance Agreement by Purchaser and the License Agreement by Licensor
Affiliate do not, and the consummation of the transactions contemplated hereby
and

                                      -14-
<PAGE>

thereby by Purchaser will not, constitute or result in (i) a breach or violation
of, or a default under, the Articles of Incorporation of Purchaser or the
Articles of Incorporation of Licensor Affiliate or (ii) a breach or violation
of, a default under, the acceleration of or the creation of a lien, pledge,
security interest or other encumbrance on assets (with or without the giving of
notice or the lapse of time) pursuant to, any provision of any Contract of
Purchaser or Licensor Affiliate, as applicable, or any law, ordinance, rule or
regulation or judgment, decree, order, award or governmental or non-governmental
permit or license to which Purchaser or Licensor Affiliate, as applicable, is
subject, except, in the case of clause (ii) above, for such breaches,
violations, defaults or accelerations that, alone or in the aggregate, are not
reasonably likely to prevent or materially delay the transactions contemplated
by this Agreement.

         (d) Funds. Purchaser has and will have upon acceptance for purchase of
the Shares pursuant to the Offer the funds necessary to consummate the Offer.

         (e) Brokers and Finders. Neither Purchaser nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein, except that the Company has employed
Goldman, Sachs & Co. as its financial advisor in connection with the
transactions contemplated by this Agreement.

                                   ARTICLE III

                                    Covenants

         3.1. Interim Operations of the Company. The Company covenants and
agrees that, prior to the earlier of the purchase of the Shares pursuant to the
Offer or the termination of this Agreement in accordance with its terms (unless
Purchaser shall otherwise agree in writing and except as otherwise expressly
contemplated by this Agreement):

              (a) the business of the Company and its subsidiaries shall be
         conducted only in the ordinary and usual course and, to the extent
         consistent therewith, each of the Company and its subsidiaries shall
         use its commercially reasonable best efforts to preserve its business
         organization intact and maintain its existing relations with customers,
         suppliers, employees, creditors and business associates;

              (b) the Company shall not (i) sell or pledge or agree to sell or
         pledge any stock owned by it in any of its subsidiaries; (ii) amend its
         Certificate or By-Laws; (iii) split, combine or reclassify the
         outstanding Shares; or (iv) declare, set aside or pay any dividend
         payable in cash, stock or property with respect to the Shares;

              (c) neither the Company nor any of its subsidiaries shall (i)
         issue, sell, pledge, dispose of or encumber any additional shares of,
         or securities convertible or exchangeable for, or options, warrants,
         calls, commitments or rights of any

                                      -15-
<PAGE>

          kind to acquire, any shares of its capital stock of any class of the
          Company or its subsidiaries or any other property or assets (other
          than, in the case of the Company, (x) Shares issuable pursuant to
          options outstanding on the date hereof under the Stock Plans and (y)
          options to be granted pursuant to the terms of Section 3.12 hereof);
          (ii) transfer, lease, license, guarantee, sell, mortgage, pledge,
          dispose of or encumber any assets or incur or modify any indebtedness
          or other liability other than in the ordinary and usual course of
          business; (iii) acquire directly or indirectly by redemption or
          otherwise any shares of the capital stock of the Company; (iv) make or
          authorize capital expenditures other than in the ordinary and usual
          course of business and in amounts not exceeding those contemplated by
          the Company's current capital expenditure budget provided to
          Purchaser; or (v) make or authorize any acquisition of, or investment
          in, assets or stock of any other person or entity other than the
          acquisition of, or investment in, any entity listed on Schedule 3.1(c)
          of the Company Disclosure Schedule involving amounts not in excess of
          $10,000,000 individually or $25,000,000 in the aggregate;

              (d) other than the Employment Agreements, neither the Company nor
         any of its subsidiaries shall grant any severance or termination pay
         to, or enter into any employment or severance agreement with, any
         director or officer of the Company or such subsidiaries; and, other
         than the options to be granted pursuant to the terms of Section 3.12
         hereof, neither the Company nor any of its subsidiaries shall
         establish, adopt, enter into, make any new grants or awards under or
         amend, any collective bargaining, bonus, profit sharing, thrift,
         compensation, stock option, restricted stock, pension, retirement,
         employee stock ownership, deferred compensation, employment,
         termination, severance or other plan, agreement, trust, fund, policy or
         arrangement for the benefit of any directors, officers or employees
         (the "Benefit Plans");

              (e) neither the Company nor any of its subsidiaries shall (i)
         settle or compromise any claims or litigation (including any claims for
         Taxes made by a Governmental Entity) in excess of $1,000,000, (ii)
         modify, amend or terminate any of its material Contracts or waive,
         release or assign any material rights or claims, (iii) cancel or
         forgive any indebtedness owed to the Company or any of its subsidiaries
         by any officer or director of the Company or by any of its
         subsidiaries, or (iv) cancel or forgive any other indebtedness owed to
         the Company or any of its subsidiaries other than in the ordinary and
         usual course of business;

              (f) neither the Company nor any of its subsidiaries shall make any
         Tax Election for a Tax Return or permit any insurance policy naming it
         as a beneficiary or a loss payable payee to be canceled or terminated
         without notice to Purchaser, in each case except in the ordinary and
         usual course of business;


                                      -16-
<PAGE>

              (g) neither the Company nor any of its subsidiaries shall waive,
         release or fail to use commercially reasonable efforts to enforce any
         of its rights under any confidentiality agreement, standstill agreement
         or any similar agreement to which it is a party, unless the Board of
         Directors of the Company determines in good faith, after consultation
         with its outside counsel, that it is necessary to do so in order for
         its directors to comply with their respective fiduciary duties;

              (h) neither the Company nor any of its subsidiaries shall enter
         into any material contract or agreement;

              (i) neither the Company nor any of its subsidiaries shall, except
         as specifically permitted in Section 3.2, take or fail to take any
         action that is reasonably likely to result in any failure of the Offer,
         or is reasonably likely to make any representation or warranty of the
         Company contained herein inaccurate if qualified by "Company Material
         Adverse Effect" or inaccurate in any material respect if not so
         qualified at, or as of any time prior to, Purchaser's purchase of
         Shares pursuant to the Offer; and

              (j) neither the Company nor any of its subsidiaries will authorize
         or enter into an agreement to do any of the foregoing.

         3.2. Acquisition Proposals. The Company agrees that neither the Company
nor any of its subsidiaries nor any of the respective officers and directors of
the Company or its subsidiaries shall, and that it shall direct and use its best
efforts to cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by the
Company or any of its subsidiaries) not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to shareholders of the
Company) with respect to a merger, consolidation, share exchange or similar
transaction involving, or any purchase of all or 15% or more of the assets or
the equity securities of, the Company or any of its subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal")
(it being understood that the initial press release relating to this Agreement
and the transactions contemplated hereby shall not be deemed an initiation,
solicitation or encouragement of an Acquisition Proposal.) The Company further
agrees that neither it nor any of its subsidiaries nor any of the officers and
directors of it or its subsidiaries, shall, and that it shall direct and use its
best efforts to cause its employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its subsidiaries) not to, directly or indirectly, engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent the Company or its Board of Directors from (A) complying with Rules
14d-9 and 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal; (B) providing information in response to a request therefor by a
Person who has made an

                                      -17-
<PAGE>

unsolicited bona fide written Acquisition Proposal if the Board of Directors
obtains from the Person so requesting such information an executed
confidentiality agreement containing material terms no more favorable to a
third-party than those contained in the Confidentiality Agreement (as defined in
Section 3.4); (C) engaging in any negotiations or discussions with any Person
who has made an unsolicited bona fide written Acquisition Proposal; or (D)
recommending such an Acquisition Proposal to the shareholders of the Company, if
and only to the extent that, in each such case referred to in clause (B), (C) or
(D) above, the Board of Directors of the Company determines (i) in good faith,
after consultation with outside counsel, that such action is necessary in order
for its directors to comply with their respective fiduciary duties under
applicable law, (ii) in good faith, that such Acquisition Proposal, if accepted,
is reasonably likely to be consummated, taking into account appropriate legal,
financial and regulatory aspects of the proposal and the Person making the
proposal and (iii) in good faith, after consultation with an investment banking
firm of national standing, that such Acquisition Proposal is reasonably likely,
if consummated, to result in a transaction more favorable to the Company's
shareholders from a financial point of view than the transaction contemplated by
this Agreement (any such more favorable Acquisition Proposal being referred to
in this Agreement as a "Superior Proposal"). The Company will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing. The
Company will take the necessary steps to inform the individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 3.2. The Company will notify Purchaser immediately if any such inquiries
or proposals are received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated or continued with
the Company or any of its representatives. The Company will further identify the
offeror and furnish to Purchaser a copy of any such inquiry or proposal, if it
is in writing, or shall inform Purchaser of the material terms of any such
inquiry or proposal, if it is oral, and shall promptly advise Purchaser of any
material development relating to such inquiry or proposal. The Company also will
promptly request each person which has heretofore executed a confidentiality
agreement in connection with its consideration of acquiring the Company to
return all confidential information heretofore furnished to such person by or on
behalf of the Company.

         3.3. Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and Purchaser shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
with respect to the Offer and the transactions contemplated by this Agreement,
the License Agreement, the Governance Agreement and the Shareholder Agreements;
and (b) use all reasonable efforts to promptly take, or cause to be taken, all
other action and do, or cause to be done, all other things necessary, proper or
appropriate under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, the License
Agreement, the Governance Agreement and the Shareholder Agreements as soon as
practicable; provided, however, that nothing in this Section 3.3 shall require,
or be construed to require, Purchaser to proffer to, or agree to, sell or hold
separate and agree to sell, before or after the purchase of Shares pursuant to
the Offer, any assets, businesses,

                                      -18-
<PAGE>

or interest in any assets or businesses of Purchaser, the Company or any of
their respective affiliates (or to consent to any sale, or agreement to sell, by
the Company of any of its assets or businesses) or to agree to any material
changes or restriction in the operations of any such assets or businesses.
Subject to applicable laws relating to the exchange of information, Purchaser
and the Company shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to
Purchaser or the Company, as the case may be, and any of their respective
subsidiaries, that appear in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Offer and the other transactions contemplated by this Agreement, the License
Agreement, the Governance Agreement and the Shareholder Agreements. In
exercising the foregoing right, each of the Company and Purchaser shall act
reasonably and as promptly as practicable.

         3.4. Access. Upon reasonable prior notice, the Company shall (and shall
cause each of its subsidiaries to) afford Purchaser's officers, employees,
counsel, accountants and other authorized representatives ("Representatives")
access, during normal business hours throughout the period prior to the purchase
of the Shares pursuant to the Offer, to its properties, books, Contracts and
records and, during such period, the Company shall (and shall cause each of its
subsidiaries to) furnish promptly to Purchaser all information concerning its
business, properties and personnel as Purchaser or its Representatives may
reasonably request, provided that no investigation pursuant to this Section 3.4
shall affect or be deemed to modify any representation or warranty made by the
Company and provided, further, that the foregoing shall not require the Company
to permit any inspection, or to disclose any information, which in the
reasonable judgment of the Company would result in the disclosure of any trade
secrets of third parties or violate any obligation of the Company with respect
to confidentiality if the Company shall have used commercially reasonable
efforts to obtain the consent of such third party to such inspection or
disclosure. All requests for information made pursuant to this Section 3.4 shall
be directed to an executive officer of the Company or such person as may be
designated by any such officer. Purchaser will not, and will cause its
Representatives not to, use any information obtained pursuant to this Section
3.4 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement and will hold such information subject to the
Confidentiality Agreement dated April 17, 2000 (the "Confidentiality
Agreement"), which the parties confirm shall remain in full force and effect in
accordance with its terms.

         3.5. Notification of Certain Matters. Upon the Company having knowledge
thereof, the Company shall give prompt notice to Purchaser of: (a) any notice
of, or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by the Company or any of
its subsidiaries subsequent to the date of this Agreement and prior to the
purchase of the Shares pursuant to the Offer, under any material Contract to
which the Company or any of its subsidiaries is a party or is subject; (b) any
Company Material Adverse Effect or any occurrence or event which is reasonably
likely to result in a Company Material Adverse Effect; and (c) the occurrence or
non-occurrence of any fact or event which is reasonably likely (A) to

                                      -19-
<PAGE>

cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof until the
time Shares are purchased pursuant to the terms of the Offer or (B) to cause any
covenant, condition or agreement under this Agreement not to be complied with or
satisfied in any material respect. Each of the Company and Purchaser shall give
prompt notice to the other party of any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement.

         3.6. Publicity. Any press release or written public communication with
respect to this Agreement and the transactions contemplated hereby shall not be
issued or published unless approved by each of Purchaser and the Company, such
approval not to be unreasonably withheld or delayed; provided, however, that
each of Purchaser and the Company may make disclosures required by applicable
Law or any securities exchange whether domestic or foreign) so long as the other
shall be given a reasonable opportunity to comment thereon.

         3.7. Benefits. Purchaser agrees that, during the period commencing on
the date Shares are purchased pursuant to the Offer and ending on the first
anniversary thereof, the employees of the Company will continue to be provided
with employee benefit plans which in the aggregate are substantially comparable
to those currently provided by the Company to such employees, provided that
employees covered by collective bargaining agreements need not be provided such
benefits. Without limiting the generality of the foregoing, Purchaser will cause
the Company to honor without modification all employee (or former employee)
benefit obligations, including severance obligations, accrued as of the time
Purchaser purchases Shares pursuant to the term of the Offer (it being
understood that any severance obligations provided to an employee pursuant to an
employment agreement between the Company and such employee shall supersede any
other severance obligations to which the employee would otherwise be entitled).

         3.8. Indemnification; Directors' and Officers' Insurance. (a) From and
after the date on which Shares are purchased pursuant to the Offer, Purchaser
agrees that it will cause the Company to indemnify and hold harmless each
present and former director and officer of the Company, determined as of such
date (the "Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the date on which Shares are purchased pursuant to the Offer,
whether asserted or claimed prior to, at or after such date, to the fullest
extent that the Company would have been permitted under New Jersey law and its
Certificate or By-Laws in effect on the date hereof to indemnify such person
(and Purchaser shall also advance expenses as incurred to the fullest extent
permitted under applicable law provided the person to whom

                                      -20-
<PAGE>

expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification).

         (b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of Section 3.8, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify the Company thereof, but the
failure to so notify shall not relieve the Company of any liability it may have
to such Indemnified Party except to the extent such failure prejudices the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the date on which Shares are
purchased pursuant to the Offer), (i) the Company shall have the right to assume
and control the defense thereof and the Company shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if the Company elects not to assume such
defense or counsel for the Indemnified Parties advises in writing that there are
issues which raise conflicts of interest between the Company and the Indemnified
Parties, the Indemnified Parties may retain counsel (which counsel shall be
reasonably satisfactory to the Company), and the Company shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that the
Company shall be obligated pursuant to this paragraph (b) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction, (ii) the
Indemnified Parties will cooperate in the defense of any such matter and (iii)
the Company shall not be liable for any settlement effected without its prior
written consent; and provided further that the Company shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.

         (c) After Purchaser's purchase of Shares pursuant to the Offer,
Purchaser shall cause the Company to maintain the Company's existing officers'
and directors' liability insurance ("D&O Insurance") for a period of six years
after the purchase of Shares pursuant to the Offer so long as the annual premium
therefor is not in excess of 200% of the last annual premium paid prior to the
date hereof (the "Current Premium"); provided, however, that (x) Purchaser may
substitute therefor policies (which may be "tail" policies) containing terms
with respect to coverage and amount no less favorable in any material respect to
such directors and officers, and (y) if the existing D&O Insurance expires, is
terminated or canceled during such six-year period, Purchaser will use its
commercially reasonable best efforts to obtain as much D&O Insurance as can be
obtained for the remainder of such period for a premium not in excess (on an
annualized basis) of 200% of the Current Premium.

         3.9. Takeover Statute. If any "fair price", "moratorium", "control
share acquisition", "interested stockholder" or other form of antitakeover
statute or regulation shall become applicable to the Offer or any of the
transactions contemplated by this Agreement, the License Agreement, the
Governance Agreement or the Shareholder

                                      -21-
<PAGE>

Agreements, the Company and the Board of Directors of the Company shall, to the
fullest extent permitted by applicable law, subject to their fiduciary duties,
(a) grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby, and so that Purchaser (or its affiliates)
would not be prevented or prohibited from effectuating a business combination
with the Company after the purchase of the Shares pursuant to the Offer, and (b)
otherwise act to eliminate or minimize the effects of such statute or regulation
on the transactions contemplated hereby.

         3.10. Options held by Company Employees. Prior to the time Purchaser
accepts for purchase Shares pursuant to the terms of the Offer, the Company
shall use its commercially reasonable efforts to secure from all employees of
the Company on the date of this Agreement that hold Company Options waivers
providing that such options shall not accelerate, vest or otherwise become
exercisable as a result of Purchaser's purchase of Shares pursuant to the Offer.

         3.11. Other Agreements. Purchaser shall not, for so long as this
Agreement is in effect, terminate or repudiate (i) any Shareholder Agreement
(ii) the Governance Agreement, or (iii) the License Agreement.

         3.12. Option Grant. Notwithstanding any other provision of this
Agreement, the Company shall be permitted to grant options under the Option Plan
to purchase 2,000,000 Shares, such options to vest 20% per year on the first,
second, third, fourth and fifth anniversary date of the date on which Purchaser
accepts for payment Shares pursuant to the terms of the Offer; the Company and
Purchaser agree that fifty (50) percent of such options shall have an exercise
price of $51.00 per Share and fifty (50) percent of such options shall have an
exercise price of $70.00 per Share. All of the option grants provided for in
this Section 3.12 shall be awarded (a) subject to the approval of the
Compensation Committee of the Company's Board of Directors and (b) to such
persons and in such individual amounts as the Chief Executive Officer of the
Company on the date of this Agreement and Purchaser shall mutually agree;
provided, however, that if the Chief Executive Officer of the Company on the
date of this Agreement ceases to be an officer of the Company, the Compensation
Committee and the Purchaser shall mutually determine the individual grants.


                                   ARTICLE IV

                                   Termination

         4.1. Termination by Mutual Consent. This Agreement may be terminated by
the mutual consent of Purchaser and the Company, by action of their respective
Boards of Directors.

                                      -22-
<PAGE>

         4.2. Termination by either Purchaser or the Company. This Agreement may
be terminated by action of the Board of Directors of either Purchaser or the
Company if Purchaser shall have terminated the Offer without purchasing any
Shares pursuant thereto; provided, in the case of termination of this Agreement
by Purchaser, such termination of the Offer is not in violation of the terms of
the Offer or this Agreement.

         4.3. Termination by Purchaser. This Agreement may be terminated by
Purchaser at any time prior to the time Purchaser purchases Shares pursuant to
the Offer by action of the Board of Directors of Purchaser, if (x) the Company
shall have failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or performed by the
Company, and which failure shall not have been cured prior to the earlier of (A)
5 business days following the giving of written notice to the Company of such
failure or (B) the business day prior to the date on which the Offer is then
scheduled to expire, (y) the Board of Directors of the Company shall have
amended or modified in a manner adverse to Purchaser its approval or
recommendation of the Offer, shall have withdrawn such recommendation or shall
have, approved or recommended any other Acquisition Proposal, or shall have
resolved to do any of the foregoing, or (z) if the Company or any of the other
persons or entities described in Section 3.2 shall take any actions that would
be proscribed by Section 3.2 but for the exception therein allowing certain
actions to be taken by the Company's Board of Directors after consultation with
outside counsel if necessary to comply with its fiduciary obligations under
applicable law.

         4.4. Termination by the Company. This Agreement may be terminated by
the Company at any time prior to the time Purchaser purchases Shares pursuant to
the Offer by action of the Board of Directors of the Company, (x) if Purchaser
(i) shall have failed to comply in any material respect with any of the
covenants or agreements contained in this Agreement to be complied with or
performed by Purchaser, and which failure shall not have been cured prior to the
earlier of (A) 5 business days following the giving of written notice to
Purchaser of such failure or (B) the business day prior to the date on which the
Offer is then scheduled to expire or (ii) shall have failed to commence the
Offer within the time required in Section 1.1 or (y) if the Board of Directors
of the Company receives or there is publicly announced a bona fide written
Acquisition Proposal (which Acquisition Proposal was unsolicited and did not
otherwise result from a breach of Section 3.2) and the Board of Directors of the
Company determines in good faith (i) after consultation with an investment
banking firm of national standing, that such Acquisition Proposal is a Superior
Proposal and (ii) after consultation with outside counsel, that approval,
acceptance or recommendation of such Acquisition Proposal or tender or exchange
offer is necessary in order for its directors to comply with their respective
fiduciary duties, and the Company shall substantially concurrently with such
termination enter into a definitive agreement containing the terms of a Superior
Proposal; provided, however, that the Company shall not terminate this Agreement
pursuant to this Section 4.4(y), and any purported termination pursuant to this
Section 4.4(y) shall be void and of no force or effect, unless the Company shall
have complied with (i) all the

                                      -23-
<PAGE>

provisions of Section 3.2 and the notification provisions in this Section 4.4,
(ii) the following proviso, and (iii) all applicable requirements of Section
4.5, including the payment of the termination fee described in Section 4.5(b)
prior to or concurrently with such termination; and provided further, however,
that the Company shall not exercise its right to terminate this Agreement
pursuant to this Section 4.4(y) until after three days following Purchaser's
receipt of written notice (a "Notice of Superior Proposal") from the Company
advising Purchaser that the Company's Board of Directors has received a Superior
Proposal (or that a tender or exchange offer with respect to the Shares has been
commenced) and that such Board of Directors will, subject to any action taken by
Purchaser pursuant to this sentence, cause the Company to accept such Superior
Proposal (or recommend such tender or exchange offer), and specifying the
material terms and conditions of the Superior Proposal and identifying the
person making such Superior Proposal (it being understood and agreed that any
amendment to the price or any other material term of a Superior Proposal shall
require an additional Notice of Superior Proposal and a new three day period).

         4.5. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement pursuant to this Article IV, no party hereto (or
any of its directors or officers) shall have any liability or further obligation
to any other party to this Agreement, except as provided in Section 4.5(b) and
Section 5.2 below and except that nothing herein will relieve any party from
liability for any breach of this Agreement.

         (b) If (i) the Offer shall have remained open for a minimum of at least
20 business days, (ii) the Tender Offer Condition shall not have been satisfied
and the Offer is terminated without the purchase of any Shares thereunder, and
(iii)(x) at the time the Offer is terminated, any corporation, partnership,
person, other entity or group (as defined in Section 13(d)(3) of the Exchange
Act) other than Purchaser or any of its subsidiaries or affiliates
(collectively, a "Person") shall have publicly announced an intention (whether
or not conditional) to make a proposal or offer relating to an Acquisition
Proposal and (y) within fifteen (15) months after the date of such termination,
the Company shall consummate or enter into an agreement with respect to any
Acquisition Proposal (it being understood that in the event the Board of
Directors of the Company recommends the acceptance by the shareholders of the
Company of a third-party tender offer or exchange offer, such recommendation
shall be treated as though an agreement had been entered into), then the Company
shall at the time such Acquisition Proposal is consummated, entered into or
recommended (as applicable), (I) pay Purchaser a fee of $44,750,000 (the
"Termination Fee") and (II) reimburse Purchaser's actual out-of-pocket costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby up to a maximum of two million five hundred thousand dollars
($2,500,000) (it being understood that if Goldman, Sachs & Co. or any of its
affiliates is entitled to receive a portion of the Termination Fee pursuant to
the terms of its engagement with Purchaser, such fee to be paid to Goldman,
Sachs & Co. or its affiliates shall not be deemed part of Purchaser's costs and
expenses), which amounts shall be payable in same day funds. In addition, if (A)
the Purchaser shall have terminated this Agreement pursuant to Section 4.3(x) or
(y), or (B) the Company shall

                                      -24-
<PAGE>

have terminated the Agreement pursuant to Section 4.4(y) hereof, then the
Company shall promptly, but in no event later than two days after the date of
such termination, (I) pay Purchaser the Termination Fee and (II) reimburse
Purchaser's actual out-of-pocket costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby up to a maximum of two
million five hundred thousand dollars ($2,500,000) (it being understood that if
Goldman, Sachs & Co. or any of its affiliates is entitled to receive a portion
of the Termination Fee pursuant to the terms of its engagement with Purchaser,
such fee to be paid to Goldman, Sachs & Co. or its affiliates shall not be
deemed part of Purchaser's costs and expenses), which amounts shall be payable
in same day funds. The Company acknowledges that the agreements contained in
this Section 4.5(b) are an integral part of the transactions contemplated in
this Agreement, and that, without these agreements, Purchaser would not enter
into this Agreement; accordingly, if the Company fails to promptly pay the
amount due pursuant to this Section 4.5(b), and, in order to obtain such
payment, Purchaser commences a suit which results in a judgment against the
Company for the fee set forth in this paragraph (b), the Company shall pay to
Purchaser its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the prime rate of
Citibank N.A. on the date such payment was required to be made.

                                   ARTICLE V

                            Miscellaneous and General

         5.1. Payment of Expenses. Whether or not the purchase of the Shares
pursuant to the Offer shall be consummated, except as provided in Section 4.5
hereof, each party hereto shall pay its own expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the Offer.

         5.2. Survival. The covenants and agreements of Purchaser contained in
Sections 3.7 and 5.1 shall survive the purchase of the Shares pursuant to the
Offer. The covenants and agreements of the Company and Purchaser contained in
Sections 3.4, 3.6, 4.5 and this Article V shall survive the termination of this
Agreement. All other representations, warranties, agreements and covenants in
this Agreement shall not survive the consummation of the purchase of the Shares
pursuant to the Offer or the termination of this Agreement.

         5.3. Modification or Amendment. Subject to the applicable provisions of
the NJGCA, at any time prior to the purchase of the Shares pursuant to the
Offer, the parties hereto may modify or amend this Agreement only by written
agreement executed and delivered by duly authorized officers of the respective
parties. After the date on which Purchaser's designees become members of the
Board of Directors of the Company, this Agreement shall not be amended in any
manner materially adverse to the Company or any third-party beneficiary as
provided by Section 5.7(b) hereof without the written consent of the members of
the Supervisory Committee (as defined in the Shareholder Agreement).

                                      -25-
<PAGE>

         5.4. Counterparts; Facsimile. For the convenience of the parties
hereto, this Agreement may be executed in any number of counterparts including
by facsimile, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.

         5.5. Governing Law

         (a) GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL
BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties hereby irrevocably
submit to the jurisdiction of the Federal courts of the United States of America
located in the State of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement, and of the documents referred
to in this Agreement, and in respect of the transactions contemplated hereby,
and hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 5.6 or in such other
manner as may be permitted by law shall be valid and sufficient service thereof.

         (b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 5.5.

                                      -27-
<PAGE>


         5.6. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:

         if to Purchaser:
         ---------------

         Koninklijke Philips Electronics N.V.,
         Rembrandt Tower,
         Amstelplein 1,
         1096 HA Amsterdam,
         The Netherlands.
         Attention:    General Secretary
         fax:  (011) 31-20-597-7150
         (with a copy to Stephen M. Kotran, Esq.,
         Sullivan & Cromwell
         125 Broad Street
         New York, NY  10004
         fax: (212) 558-3588)

          if to the Company:
          -----------------

          MedQuist Inc.,
          Five Greentree Centre, Suite 311,
          Marlton, NJ, 08053.
          Attention:  Chief Executive Officer;
                      and Senior Vice President and General Counsel
          fax:  (856) 596-3351
          (with a copy to James Epstein, Esq.,
          Pepper Hamilton LLP
          3000 Two Logan Square
          Philadelphia, PA  19103-2799
          fax:  (215) 981-4750)

or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.

         5.7. Entire Agreement, etc. (a) This Agreement (including the
Disclosure Letter, any exhibits or Annexes hereto and the Confidentiality
Agreement referred to herein) (i) constitutes the entire agreement, and
supersedes all other prior agreements, understandings, representations and
warranties both written and oral, among the parties, with respect to the subject
matter hereof, and (ii) shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns, and (iii) shall not
be assignable by operation of law or otherwise and, except to set forth in
subsection (b) below, is not intended to create any obligations to, or rights in
respect of, any persons other than the parties hereto; provided, however, that
Purchaser may assign,

                                      -27-
<PAGE>

in its sole discretion, any or all of its rights, interests and obligations
hereunder to any direct or indirect wholly-owned subsidiary of Purchaser (it
being understood that no such assignment shall relieve Purchaser of its
obligations hereunder).

         (b) It is expressly agreed that all of the persons (and their
successors and assigns) who are beneficiaries of Section 3.8 (whether as
individuals or members of a class or group) shall be entitled to enforce such
Sections against Purchaser and such Section shall be binding on all successors
and assigns of Purchaser. In addition, Section 3.7 hereof shall be enforceable
on behalf of the Company and the benefited employees by the Supervisory
Committee.

         5.8. Definition of "Subsidiary". When a reference is made in this
Agreement to a subsidiary of a party, the word "subsidiary" means any
corporation or other organization whether incorporated or unincorporated of
which at least a majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its subsidiaries, or by such party and
one or more of its subsidiaries.

         5.9. Captions. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.


                                      -28-
<PAGE>


         IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto on the date first
hereinabove written.


                                     KONINKLIJKE PHILIPS ELECTRONICS N.V.

                                     By:  /s/ A. Baan
                                        -------------------------------
                                        Name:  A. Baan
                                        Title: Executive Vice President
                                               Royal Philips Electronics

                                     By:  /s/ J.H.M. Hommen
                                        -------------------------------
                                        Name:  J.H.M. Hommen
                                        Title: Executive Vice President
                                               Royal Philips Electronics


                                    MEDQUIST INC.


                                    By: /s/ David A. Cohen
                                       -------------------------------
                                       Name:   David A. Cohen
                                       Title:  Chairman and Chief Executive
                                               Officer
<PAGE>



                                                                         Annex A


         Certain Conditions of the Offer. Capitalized terms used but not defined
herein shall have the respective meanings assigned to such terms in the Tender
Offer Agreement of which this Annex A is a part. Notwithstanding any other
provision of the Offer and provided that Purchaser shall not be obligated to
accept for payment any Shares until expiration of all applicable waiting periods
under the HSR Act, Purchaser shall not be required to accept for payment or pay
for, or may delay the acceptance for payment of or payment for, any tendered
Shares, or may, in its sole discretion, terminate or amend the Offer as to any
Shares not then paid for if less than 22,250,327 Shares (the "Tender Offer
Condition") shall have been properly and validly tendered pursuant to the Offer
and not withdrawn prior to the expiration of the Offer, or, if on or after May
22, 2000, and at or before the time of payment for any of such Shares (whether
or not any Shares have theretofore been accepted for payment), any of the
following events shall occur:

         (a) the Company shall have breached or failed to perform in any
     material respect any of its obligations, covenants or agreements under the
     Tender Offer Agreement or any representation or warranty of the Company set
     forth in the Tender Offer Agreement which is qualified by "Company Material
     Adverse Effect" shall have been inaccurate or incomplete as so qualified
     when made or thereafter shall become inaccurate or incomplete as so
     qualified, or any representation or warranty of the Company set forth in
     the Tender Offer Agreement which is not qualified by "Company Material
     Adverse Effect" shall have been inaccurate or incomplete in any material
     respect when made or thereafter shall become inaccurate or incomplete in
     any material respect;

         (b) there shall be instituted or pending any action, litigation,
     proceeding, investigation or other application (hereinafter, an "Action")
     before any court or other Governmental Entity by any Governmental Entity or
     by any other person, domestic or foreign (it being understood that, with
     respect to any Action by any person other than a Governmental Entity, this
     clause (b) shall only apply to bona fide Actions that are reasonably likely
     to be successful on the merits): (i) challenging the acquisition by
     Purchaser of Shares, seeking to restrain or prohibit the consummation of
     the transactions contemplated by the Offer or seeking to obtain any
     material damages in connection with the transactions contemplated by the
     Offer; (ii) seeking to prohibit, or impose any material limitations on,
     Purchaser's ownership or operation of all or any portion of their or the
     Company's business or assets (including the business or assets of their
     respective affiliates and subsidiaries), or to compel Purchaser to dispose
     of or hold separate all or any portion of Purchaser's or the Company's
     business or assets (including the business or assets of their respective
     affiliates and subsidiaries) as a result of the transactions contemplated
     by the Offer; (iii) seeking to make the acceptance for payment, purchase
     of, or payment for, some or all of the Shares illegal or render Purchaser
     unable to, or result in a delay (other than an immaterial delay) in, or
     restrict (other than immaterially), the ability of Purchaser

                                      -1-
<PAGE>

     to accept for payment, purchase or pay for some or all of the Shares; (iv)
     seeking to impose material limitations on the ability of Purchaser
     effectively to acquire or hold or to exercise full rights of ownership of
     the Shares including, without limitation, the right to vote the Shares
     purchased by them on an equal basis with all other Shares on all matters
     properly presented to the shareholders; or (v) that, in any event, in the
     reasonable judgment of Purchaser, is reasonably likely to have a Company
     Material Adverse Effect or have a material adverse effect on the value of
     the Shares to Purchaser or the benefits expected to be derived by Purchaser
     as a result of consummation of the transactions contemplated by the Offer;

         (c) any statute, rule, regulation, order or injunction shall be
     enacted, promulgated, entered, enforced or deemed applicable to the Offer,
     or any other action shall have been taken, proposed or threatened, by any
     court or other Governmental Entity other than the application to the Offer
     of waiting periods under the HSR Act, that could, directly or indirectly,
     be reasonably expected to result in any of the effects of, or have any of
     the consequences sought to be obtained or achieved in, any Action referred
     to in clauses (i) through (v) of paragraph (b) above;

         (d) there shall have occurred a Company Material Adverse Effect or any
     occurrence or event shall have occurred that is reasonably likely to result
     in a Company Material Adverse Effect;

         (e) the Board of Directors of the Company (or a special committee
     thereof) shall have amended or modified in a manner adverse to Purchaser,
     its approval or recommendation of the Offer, shall have withdrawn such
     recommendation or shall have approved or recommended any other Acquisition
     Proposal, or shall have resolved to do any of the foregoing;

         (f) the Tender Offer Agreement shall have been terminated by the
     Company or Purchaser in accordance with its terms or Purchaser shall have
     reached an agreement or understanding in writing with the Company providing
     for termination;

         (g) any of the employment agreements set forth on Schedule A-1 hereto
     (the "Employment Agreements") shall have been terminated or repudiated by
     the employee a party thereto, except as may result from the death or
     disability of such employee;

         (h) the Company shall have terminated or repudiated the License
     Agreement;

         (i) any of the Shareholder Agreements set forth on Schedule A-3 hereto
     shall have terminated or repudiated by the employee a party thereto; or

                                      -2-
<PAGE>

         (j) the Company shall have terminated or repudiated the Governance
     Agreement;

which, in the good faith reasonable judgment of Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Purchaser
other than a material breach of this Agreement) giving rise to any such
conditions, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment of or payment for Shares.

         The foregoing conditions are for the sole benefit of Purchaser and may
be asserted by Purchaser regardless of the circumstances (including any action
or inaction by Purchaser other than a material breach of this Agreement) giving
rise to such condition or may be waived by Purchaser, in its sole discretion, by
express and specific action to that effect, in whole or in part at any time and
from time to time.


                                      -3-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>SHAREHOLDER AGREEMENT, JOHN M. SUENDER
<TEXT>


                              SHAREHOLDER AGREEMENT

         AGREEMENT,  dated  as of  May  22,  2000  between  Koninklijke  Philips
Electronics  N.V., a  corporation  organized  under the laws of The  Netherlands
("Purchaser")  and the beneficial  owner  ("Shareholder")  of Shares of MedQuist
Inc., a New Jersey corporation (the "Company").

         WHEREAS,  in order to induce  Purchaser  to enter into the Tender Offer
Agreement,  dated as of the date hereof,  with the Company  (the  "Tender  Offer
Agreement"), Purchaser has requested Shareholder, and Shareholder has agreed, to
enter into this Agreement and an employment agreement with the Company, dated of
even date  herewith,  to become  effective upon  Purchaser's  payment for Shares
pursuant to the terms of the Offer (the "Employment Agreement");

         WHEREAS,  to  induce  the  Company  to  enter  into  the  Tender  Offer
Agreement,  the Company has requested, and Purchaser has agreed, to enter into a
Governance  Agreement and a License  Agreement,  each to become  effective  upon
Purchaser's payment for Shares pursuant to the terms of the Offer;

         WHEREAS,   Shareholder   and   Purchaser   desire   to   make   certain
representations,  warranties,  covenants and agreements in connection  with this
Agreement; and

         WHEREAS,  capitalized  terms used herein but not defined  herein  shall
have  the  respective  meanings  ascribed  to such  terms  in the  Tender  Offer
Agreement.

         NOW,  THEREFORE,   in  consideration  of  the  premises,   and  of  the
representations,  warranties,  covenants  and  agreements  contained  herein the
parties hereto hereby agree as follows:

                                   ARTICLE I

                        RESTRICTION ON TRANSFER; PURCHASE
                        AND SALE OF SHAREHOLDER'S SHARES

         SECTION 1.1 Restrictions on Transfer.

         (a) Shareholder  hereby agrees that,  except as contemplated by Section
1.1(b) and Section 1.3 hereof (and  provided  that nothing  herein shall prevent
Shareholder from exercising any option for Shares held by  Shareholder),  during
the period beginning on the date hereof and continuing to and including the date
two years after the date hereof, the


<PAGE>

undersigned will not offer, sell,  contract to sell, tender for sale, enter into
a  repurchase  contract  with  respect to, lend,  pledge,  assign,  hypothecate,
encumber,  dispose of, grant any right (including without limitation, any put or
call  option) to purchase,  make any short sale or otherwise  dispose of (i) any
Shares,  or any options or warrants to purchase  any Shares,  or any  securities
convertible  into,  exchangeable  for or that  represent  the  right to  receive
Shares,  owned on the date hereof,  (ii) any Shares  issued upon the exercise of
options or warrants to purchase any Shares  referred to in the preceding  clause
(i),  (iii) any options to purchase  any Shares  issued in  accordance  with the
option grant contemplated by the Employment  Agreement or (iv) any Shares issued
upon the exercise of the options to purchase Shares referred to in the preceding
clause (iii), in each case, owned directly by the undersigned or with respect to
which the undersigned has beneficial  ownership within the rules and regulations
of the SEC  (collectively  the  "Shareholder's  Shares").  Without  limiting the
generality of the foregoing,  it is expressly agreed that Shareholder  shall not
engage in any derivative,  hedging,  swap or other transaction which is designed
to or which  reasonably  could be  expected  to lead to or  result  in a sale or
disposition of, or reduction of economic risk with respect to, the Shareholder's
Shares  even if such  Shares  would be  disposed  of by  someone  other than the
Shareholder.

         (b) Notwithstanding the foregoing  restrictions contained in subsection
(a) above,  Shareholder  may (x) transfer any of  Shareholder's  Shares (i) as a
bona fide gift or gifts,  provided that the donee or donees  thereof agree to be
bound in writing by the restrictions set forth herein, (ii) to any trust for the
direct or indirect  benefit of the  Shareholder  or the immediate  family of the
Shareholder,  provided  that the  trustee  of the  trust  agrees  to be bound in
writing by the restrictions set forth herein, and provided further that any such
transfer  shall not  involve a  disposition  for value,  or (iii) with the prior
written consent of Purchaser or (y) take any of the actions that would otherwise
be  prohibited  by  subsection  (a) above with  respect to or in respect of zero
Shares  (which  number  of  Shares  includes,  and is not in  addition  to,  the
Purchased  Shares (as defined in Section 1.3)).  For purposes of this Agreement,
"immediate  family" shall mean any relationship by blood,  marriage or adoption,
not more remote than first cousin.

         SECTION 1.2 Voting.

         Shareholder  hereby agrees that,  during the time this  Agreement is in
effect, at any meeting of the shareholders of the Company, however called, or in
any  written  consent in lieu

                                      -2-
<PAGE>

thereof, Shareholder shall, or shall cause the record holder(s) of Shareholder's
Shares to (i) vote  Shareholder's  Shares  against any action or agreement  that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Tender
Offer  Agreement;  and (ii) vote  Shareholder's  Shares  against  any  action or
agreement  that would  impede,  interfere  with,  delay,  postpone or attempt to
discourage  the  Offer,  including,  but not  limited  to:  (A) any  acquisition
agreement or other similar agreement related to an Acquisition Proposal, (B) any
change in the  Company's  management or the Company  Board,  except as otherwise
agreed  to in  writing  by  Purchaser  or (C) any other  material  change in the
Company's corporate structure or business.

         SECTION 1.3  Purchase and Sale of Shares by  Purchaser.  Subject to the
terms of this Agreement,  promptly following  expiration of the Offer (and in no
event later than five (5) business days thereafter), and provided that Purchaser
shall have accepted for payment and paid for Shares pursuant to the terms of the
Offer,  Shareholder  shall sell to Purchaser,  and Purchaser shall purchase from
Shareholder,  56,289  Shares  (the  "Purchased  Shares") at a price equal to the
price to be paid per Share in the Offer (the aggregate amount to be paid for the
Shares being the "Purchase Price"). The closing of the transaction  constituting
the sale and purchase of the Shares shall take place at such location,  time and
date as Purchaser and Shareholder  shall mutually agree (the "Closing").  At the
Closing,  (i) Purchaser  shall pay Shareholder the Purchase Price in immediately
available funds by wire transfer to a bank account designated by Shareholder and
(ii) Shareholder  shall deliver to Purchaser (A)  certificates  representing the
Purchased  Shares,  duly endorsed in blank for transfer or  accompanied  by duly
executed blank stock powers  together will all necessary  stock transfer  stamps
affixed  thereto,  and such  instruments  as shall  reasonably  be  required  by
Purchaser to transfer to Purchaser all right,  title and interest in the Shares,
free and clear of any liens or  encumbrances  and (B) such other  documents  and
instruments as may be reasonably requested by Purchaser.

         SECTION  1.4  Expiration.  Except as  provided  in Section  5.12,  this
Agreement  and  all  of  Shareholder's  obligations  hereunder  shall  terminate
concurrent with the earlier of (a) the termination of the Tender Offer Agreement
in accordance  with its terms and (b) the  occurrence  of any of the  conditions
that  result in a  revocation  of the Waiver (as such term is defined in Section
5(b) of the Employment Agreement).

                                      -3-
<PAGE>

                                   ARTICLE II

                REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

         SECTION 2.1 Valid  Title;  Absence of Liens.  Shareholder  is the sole,
true, lawful and beneficial owner of Shareholder's Shares.  Shareholder owns the
Purchased  Shares  free and clear of any liens or  encumbrances  of any kind and
there is no restriction on Shareholder's  ability, power or right to transfer or
dispose  of  the  Purchased   Shares.   Upon  delivery  of  the  certificate  or
certificates  for the Purchased  Shares at the Closing,  Purchaser  will acquire
valid title to the Purchased  Shares free and clear of any encumbrances or liens
of any kind other than restrictions imposed by applicable securities laws.

         SECTION 2.2 Authority; Enforceability;
Noncontravention.

         (a)  Shareholder  has the  requisite  power and authority to enter into
this  Agreement  and  to  consummate  the  transactions   contemplated  by  this
Agreement.  The execution and delivery of this Agreement by Shareholder  and the
consummation by Shareholder of the  transactions  contemplated by this Agreement
have been duly authorized by all necessary action  (including any  consultation,
approval or other action by or with any other  person).  This Agreement has been
duly executed and delivered by Shareholder  and  constitutes a valid and binding
obligation of Shareholder,  enforceable  against  Shareholder in accordance with
its   terms,   subject   to   bankruptcy,   insolvency,   fraudulent   transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.

         (b) The execution and delivery of this  Agreement by  Shareholder  does
not, and the  consummation  by Shareholder of the  transactions  contemplated by
this  Agreement  and  compliance  by  Shareholder  with the  provisions  of this
Agreement  will not,  conflict  with or result in any  violation  of, or default
(with or  without  notice  or lapse of time,  or both)  under,  or result in the
creation  of any  lien or  encumbrance  upon the  Purchased  Shares  under,  any
provision  of  applicable  law  or  regulation  or of any  agreement,  judgment,
injunction,  order,  decree,  or other  instrument  binding on  Shareholder.  No
consent,  approval,  order or authorization of, or registration,  declaration or
filing with or exemption by any Federal, state or local government or any court,
administrative  or  regulatory  agency  or  commission  or  other   governmental
authority  or agency,  domestic  or foreign,  is required by or with  respect to
Shareholder  in connection  with

                                      -4-
<PAGE>

the execution and delivery of this Agreement by Shareholder or the  consummation
by Shareholder of the  transactions  contemplated by this Agreement,  except for
applicable  requirements,  if any, of (a) Sections 13 and 16 of the Exchange Act
and the rules and regulations thereunder and (b) the HSR Act.

         SECTION  2.3  Total  Shares.  Schedule  2.3 sets  forth  (i) a true and
accurate number of the number of Shares  beneficially owned by Shareholder as of
the date  hereof,  and  (ii) a true and  complete  list of all  options  held by
Shareholder as of the date hereof and the number,  exercise price,  vesting date
and expiration date of each option.

         SECTION 2.4 Proxy.  Shareholder  represents  that any proxy  heretofore
given with respect to the Shareholder's Shares is not irrevocable.

                                  ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER


         SECTION 3.1 Corporate  Power and Authority;  Enforceability.  Purchaser
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Purchaser and the consummation of the transactions
contemplated  by this  Agreement  have been  duly  authorized  by all  necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and  delivered by Purchaser and  constitutes  a valid and binding  obligation of
Purchaser,  enforceable against Purchaser in accordance with its terms,  subject
to bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

         SECTION 3.2 Investment  Intent;  Financing.  Purchaser is acquiring the
Purchased Shares for its own account for investment purposes only and not with a
view to, or for sale or resale  in  connection  with,  any  public  distribution
thereof or with any present  intention  of selling,  distributing  or  otherwise
disposing of the Purchased Shares.  Purchaser is an "accredited investor" within
the meaning of Regulation D of the Securities  Act.  Purchaser has and will have
at the Closing the funds necessary to pay the Purchase Price.

                                      -5-
<PAGE>

                                   ARTICLE IV

                            COVENANTS OF SHAREHOLDER

         SECTION 4.1 Covenants of  Shareholder.  For so long as the Agreement is
in effect, Shareholder agrees as follows:

         (a) Shareholder  shall not, except as contemplated by the terms of this
Agreement,  knowingly  take any action that would in any way restrict,  limit or
interfere with the performance of its  obligations  hereunder or the purchase of
the Purchased Shares.

         (b)  Shareholder  will not, except as contemplated by the terms of this
Agreement,  (a)  knowingly  take,  agree or commit to take any action that would
make any representation or warranty of Shareholder  hereunder  inaccurate in any
respect  as of any  time  prior  to the  termination  of this  Agreement  or (b)
knowingly  omit,  or agree or commit to omit,  to take any action  necessary  to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION 5.1 Expenses.  All costs and expenses  incurred by any party in
connection with this Agreement shall be paid by the party incurring such cost or
expense (it being understood that  Shareholder's  costs and expenses incurred in
connection with this Agreement may be paid for by the Company).

         SECTION 5.2 Specific  Performance.  Shareholder agrees that irreparable
damage  would occur in the event that any of the  provisions  of this  Agreement
were not performed in accordance  with their  specific  terms or were  otherwise
breached.  It is  accordingly  agreed  that  Purchaser  shall be  entitled to an
injunction or injunctions  to prevent  breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Federal courts of
the United States of America  located in the State of New Jersey,  this being in
addition to any other remedy to which they are entitled at law or in equity.

         SECTION 5.3 Notices. All notices,  requests,  claims, demands and other
communications  hereunder  shall be in  writing  and  shall be  deemed  given if
delivered  personally or sent by overnight courier (providing proof of delivery)
or by telecopy  (with copies by  overnight  courier) to Purchaser at its

                                      -6-
<PAGE>

address set forth in the Tender Offer  Agreement or  Shareholder  at the address
for the Company set forth in the Tender Offer Agreement or to such other address
as such party may have  furnished to the other  parties in writing in accordance
herewith.

         SECTION 5.4  Amendments.  This Agreement may not be modified,  amended,
altered or  supplemented,  except upon the  execution  and delivery of a written
agreement executed by the parties hereto.

         SECTION 5.5 Successors  and Assigns.  Neither this Agreement nor any of
the rights,  interests or obligations  hereunder shall be assigned by any of the
parties  without the prior  written  consent of the other  parties,  except that
Purchaser  may  assign,  in its  sole  discretion,  any  or  all of its  rights,
interests  and  obligations  hereunder  to any direct or  indirect  wholly-owned
subsidiary  of Purchaser  (it being  understood  that no such  assignment  shall
relieve  Purchaser  of its  obligations  hereunder).  Subject  to the  preceding
sentence,  this Agreement  will be binding upon,  inure to the benefit of and be
enforceable  by,  the  parties  and their  respective  successors  and  assigns.
Shareholder  agrees  that this  Agreement  and the  obligations  of  Shareholder
hereunder  shall  attach to  Shareholder's  Shares and shall be binding upon and
inure to the  benefit  of any  person  or entity  to which  legal or  beneficial
ownership of such Shares shall pass,  whether by operation of law or  otherwise,
including Shareholder's heirs, guardians, administrators or successors.

         SECTION 5.6 (a)  Governing  Law and Venue;  Waiver of Jury Trial.  THIS
AGREEMENT  SHALL  BE  DEEMED  TO BE  MADE  IN  AND  IN  ALL  RESPECTS  SHALL  BE
INTERPRETED,  CONSTRUED  AND GOVERNED BY AND IN  ACCORDANCE  WITH THE LAW OF THE
STATE OF NEW JERSEY  APPLICABLE  TO CONTRACTS  WHOLLY MADE AND PERFORMED IN SUCH
STATE. The parties hereby  irrevocably submit to the jurisdiction of the Federal
courts of the United States of America located in the State of New Jersey solely
in respect of the  interpretation  and  enforcement  of the  provisions  of this
Agreement and of the documents  referred to in this  Agreement and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to assert,
as a  defense  in any  action,  suit or  proceeding  for the  interpretation  or
enforcement  hereof or of any such document,  that it is not subject  thereto or
that such action,  suit or proceeding may not be brought or is not  maintainable
in said  courts or that the venue  thereof may not be  appropriate  or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto  irrevocably agree that

                                      -7-
<PAGE>

all  claims  with  respect  to such  action  or  proceeding  shall be heard  and
determined in such a New Jersey Federal court. The parties hereby consent to and
grant  such court  jurisdiction  over the  person of such  parties  and over the
subject matter of such dispute and agree that mailing of process or other papers
in  connection  with any such  action or  proceeding  in the manner  provided in
Section 5.3 or in such other  manner as may be  permitted  by law shall be valid
and sufficient service thereof.

         (b) EACH PARTY  ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY  WHICH MAY
ARISE  UNDER THIS  AGREEMENT  IS LIKELY TO  INVOLVE  COMPLICATED  AND  DIFFICULT
ISSUES,  AND THEREFORE EACH SUCH PARTY HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
WAIVES  ANY  RIGHT  SUCH  PARTY  MAY HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY
LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE  TRANSACTIONS  CONTEMPLATED BY THIS  AGREEMENT.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES  THAT (i) NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE  FOREGOING  WAIVER,  (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS  WAIVER  VOLUNTARILY,  AND (iv) EACH PARTY HAS BEEN  INDUCED TO ENTER
INTO  THIS   AGREEMENT   BY,  AMONG  OTHER  THINGS,   THE  MUTUAL   WAIVERS  AND
CERTIFICATIONS IN THIS SECTION 5.6.

         SECTION 5.7 Counterparts;  Effectiveness.  This Agreement may be signed
(including by facsimile) in any number of  counterparts,  each of which shall be
an original,  with the same effect as if the signatures  thereto and hereto were
upon the same instrument.  This Agreement shall become effective when each party
hereto  shall  have  received  counterparts  hereof  signed  by all of the other
parties hereto.

         SECTION  5.8  Stop  Transfer   Restriction.   In  furtherance  of  this
Agreement,  Shareholder  hereby  authorizes  Purchaser's  counsel  to notify the
Company's transfer agent that there is a stop transfer  restriction with respect
to all of  Shareholder's  Shares (and that this  Agreement  places limits on the
voting and transfer of such shares).

         SECTION  5.9  Entire  Agreement;  No  Third-Party  Beneficiaries.  This
Agreement  (i)  constitutes  the  entire  agreement  and  supersedes  all  prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.

                                      -8-
<PAGE>

         SECTION 5.10  Shareholder  Capacity.  By executing and delivering  this
Agreement,  Shareholder  makes  no  agreement  or  understanding  herein  in his
capacity  as a  director  or officer of the  Company  or any  subsidiary  of the
Company.  Shareholder  signs solely in his capacity as the  beneficial  owner of
Shareholder's  Shares and nothing herein shall limit or affect any actions taken
by  Shareholder  in his capacity as an officer or director of the Company or any
subsidiary of the Company.

         SECTION  5.11  Severability.  If any  term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect.  Upon such determination that any
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall  negotiate in good faith to modify this Agreement so as to
effect  the  original  intent  of the  parties  as  closely  as  possible  in an
acceptable  manner  to the end that the  transactions  contemplated  hereby  are
fulfilled to the fullest extent possible.

         SECTION 5.12 Survival.  Sections 1.4 (Expiration),  5.1 (Expenses), 5.2
(Specific  Performance),  5.3  (Notices),  5.5  (Successors  and  Assigns),  5.6
(Governing  Law), 5.9 (Entire  Agreement;  No Third-Party  Beneficiaries),  5.11
(Severability) and this Section 5.12 shall survive expiration of this Agreement.
All other representations, warranties, agreement and covenants in this Agreement
shall not survive the termination of this Agreement.

                                      -9-

<PAGE>


         The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

                                   KONINKLIJKE PHILIPS ELECTRONICS N.V.

                                   By: /s/ A. Baan
                                      ---------------------------------
                                      Name:  A. Baan
                                      Title: Executive Vice President
                                             Royal Philips Electronics


                                   By: /s/ J.H.M. Hommen
                                      ---------------------------------
                                      Name:  J.H.M. Hommen
                                      Title: Executive Vice President
                                             Royal Philips Electronics



                                   By:  /s/ John Suender
                                      --------------------------------
                                      Name:  John Suender
                                      Title: SVP

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>SHAREHOLDER AGREEMENT, DAVID A. COHEN
<TEXT>


                              SHAREHOLDER AGREEMENT

         AGREEMENT,  dated  as of  May  22,  2000  between  Koninklijke  Philips
Electronics  N.V., a  corporation  organized  under the laws of The  Netherlands
("Purchaser")  and the beneficial  owner  ("Shareholder")  of Shares of MedQuist
Inc., a New Jersey corporation (the "Company").

         WHEREAS,  in order to induce  Purchaser  to enter into the Tender Offer
Agreement,  dated as of the date hereof,  with the Company  (the  "Tender  Offer
Agreement"), Purchaser has requested Shareholder, and Shareholder has agreed, to
enter into this Agreement and an employment agreement with the Company, dated of
even date  herewith,  to become  effective upon  Purchaser's  payment for Shares
pursuant to the terms of the Offer (the "Employment Agreement");

         WHEREAS,  to  induce  the  Company  to  enter  into  the  Tender  Offer
Agreement,  the Company has requested, and Purchaser has agreed, to enter into a
Governance  Agreement and a License  Agreement,  each to become  effective  upon
Purchaser's payment for Shares pursuant to the terms of the Offer;

         WHEREAS,   Shareholder   and   Purchaser   desire   to   make   certain
representations,  warranties,  covenants and agreements in connection  with this
Agreement; and

         WHEREAS,  capitalized  terms used herein but not defined  herein  shall
have  the  respective  meanings  ascribed  to such  terms  in the  Tender  Offer
Agreement.

         NOW,  THEREFORE,   in  consideration  of  the  premises,   and  of  the
representations,  warranties,  covenants  and  agreements  contained  herein the
parties hereto hereby agree as follows:

                                   ARTICLE I

                        RESTRICTION ON TRANSFER; PURCHASE
                        AND SALE OF SHAREHOLDER'S SHARES

         SECTION 1.1 Restrictions on Transfer.

         (a) Shareholder  hereby agrees that,  except as contemplated by Section
1.1(b) and Section 1.3 hereof (and  provided  that nothing  herein shall prevent
Shareholder from exercising any option for Shares held by  Shareholder),  during
the period beginning on the date hereof and continuing to and including the date
two years after the date hereof, the


<PAGE>

undersigned will not offer, sell,  contract to sell, tender for sale, enter into
a  repurchase  contract  with  respect to, lend,  pledge,  assign,  hypothecate,
encumber,  dispose of, grant any right (including without limitation, any put or
call  option) to purchase,  make any short sale or otherwise  dispose of (i) any
Shares,  or any options or warrants to purchase  any Shares,  or any  securities
convertible  into,  exchangeable  for or that  represent  the  right to  receive
Shares,  owned on the date hereof,  (ii) any Shares  issued upon the exercise of
options or warrants to purchase any Shares  referred to in the preceding  clause
(i),  (iii) any options to purchase  any Shares  issued in  accordance  with the
option grant contemplated by the Employment  Agreement or (iv) any Shares issued
upon the exercise of the options to purchase Shares referred to in the preceding
clause (iii), in each case, owned directly by the undersigned or with respect to
which the undersigned has beneficial  ownership within the rules and regulations
of the SEC  (collectively  the  "Shareholder's  Shares").  Without  limiting the
generality of the foregoing,  it is expressly agreed that Shareholder  shall not
engage in any derivative,  hedging,  swap or other transaction which is designed
to or which  reasonably  could be  expected  to lead to or  result  in a sale or
disposition of, or reduction of economic risk with respect to, the Shareholder's
Shares  even if such  Shares  would be  disposed  of by  someone  other than the
Shareholder.

         (b) Notwithstanding the foregoing  restrictions contained in subsection
(a) above,  Shareholder  may (x) transfer any of  Shareholder's  Shares (i) as a
bona fide gift or gifts,  provided that the donee or donees  thereof agree to be
bound in writing by the restrictions set forth herein, (ii) to any trust for the
direct or indirect  benefit of the  Shareholder  or the immediate  family of the
Shareholder,  provided  that the  trustee  of the  trust  agrees  to be bound in
writing by the restrictions set forth herein, and provided further that any such
transfer  shall not  involve a  disposition  for value,  or (iii) with the prior
written consent of Purchaser or (y) take any of the actions that would otherwise
be  prohibited  by  subsection  (a) above with  respect to or in respect of zero
Shares  (which  number  of  Shares  includes,  and is not in  addition  to,  the
Purchased  Shares (as defined in Section 1.3)).  For purposes of this Agreement,
"immediate  family" shall mean any relationship by blood,  marriage or adoption,
not more remote than first cousin.

         SECTION 1.2 Voting.

         Shareholder  hereby agrees that,  during the time this  Agreement is in
effect, at any meeting of the shareholders of the Company, however called, or in
any  written  consent in lieu

                                      -2-
<PAGE>

thereof, Shareholder shall, or shall cause the record holder(s) of Shareholder's
Shares to (i) vote  Shareholder's  Shares  against any action or agreement  that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Tender
Offer  Agreement;  and (ii) vote  Shareholder's  Shares  against  any  action or
agreement  that would  impede,  interfere  with,  delay,  postpone or attempt to
discourage  the  Offer,  including,  but not  limited  to:  (A) any  acquisition
agreement or other similar agreement related to an Acquisition Proposal, (B) any
change in the  Company's  management or the Company  Board,  except as otherwise
agreed  to in  writing  by  Purchaser  or (C) any other  material  change in the
Company's corporate structure or business.

         SECTION 1.3  Purchase and Sale of Shares by  Purchaser.  Subject to the
terms of this Agreement,  promptly following  expiration of the Offer (and in no
event later than five (5) business days thereafter), and provided that Purchaser
shall have accepted for payment and paid for Shares pursuant to the terms of the
Offer,  Shareholder  shall sell to Purchaser,  and Purchaser shall purchase from
Shareholder,  779,530  Shares (the  "Purchased  Shares") at a price equal to the
price to be paid per Share in the Offer (the aggregate amount to be paid for the
Shares being the "Purchase Price"). The closing of the transaction  constituting
the sale and purchase of the Shares shall take place at such location,  time and
date as Purchaser and Shareholder  shall mutually agree (the "Closing").  At the
Closing,  (i) Purchaser  shall pay Shareholder the Purchase Price in immediately
available funds by wire transfer to a bank account designated by Shareholder and
(ii) Shareholder  shall deliver to Purchaser (A)  certificates  representing the
Purchased  Shares,  duly endorsed in blank for transfer or  accompanied  by duly
executed blank stock powers  together will all necessary  stock transfer  stamps
affixed  thereto,  and such  instruments  as shall  reasonably  be  required  by
Purchaser to transfer to Purchaser all right,  title and interest in the Shares,
free and clear of any liens or  encumbrances  and (B) such other  documents  and
instruments as may be reasonably requested by Purchaser.

         SECTION  1.4  Expiration.  Except as  provided  in Section  5.12,  this
Agreement  and  all  of  Shareholder's  obligations  hereunder  shall  terminate
concurrent with the earlier of (a) the termination of the Tender Offer Agreement
in accordance  with its terms and (b) the  occurrence  of any of the  conditions
that  result in a  revocation  of the Waiver (as such term is defined in Section
5(b) of the Employment Agreement).

                                      -3-
<PAGE>

                                   ARTICLE II

                REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

         SECTION 2.1 Valid  Title;  Absence of Liens.  Shareholder  is the sole,
true, lawful and beneficial owner of Shareholder's Shares.  Shareholder owns the
Purchased  Shares  free and clear of any liens or  encumbrances  of any kind and
there is no restriction on Shareholder's  ability, power or right to transfer or
dispose  of  the  Purchased   Shares.   Upon  delivery  of  the  certificate  or
certificates  for the Purchased  Shares at the Closing,  Purchaser  will acquire
valid title to the Purchased  Shares free and clear of any encumbrances or liens
of any kind other than restrictions imposed by applicable securities laws.

         SECTION 2.2 Authority; Enforceability;
Noncontravention.

         (a)  Shareholder  has the  requisite  power and authority to enter into
this  Agreement  and  to  consummate  the  transactions   contemplated  by  this
Agreement.  The execution and delivery of this Agreement by Shareholder  and the
consummation by Shareholder of the  transactions  contemplated by this Agreement
have been duly authorized by all necessary action  (including any  consultation,
approval or other action by or with any other  person).  This Agreement has been
duly executed and delivered by Shareholder  and  constitutes a valid and binding
obligation of Shareholder,  enforceable  against  Shareholder in accordance with
its   terms,   subject   to   bankruptcy,   insolvency,   fraudulent   transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.

         (b) The execution and delivery of this  Agreement by  Shareholder  does
not, and the  consummation  by Shareholder of the  transactions  contemplated by
this  Agreement  and  compliance  by  Shareholder  with the  provisions  of this
Agreement  will not,  conflict  with or result in any  violation  of, or default
(with or  without  notice  or lapse of time,  or both)  under,  or result in the
creation  of any  lien or  encumbrance  upon the  Purchased  Shares  under,  any
provision  of  applicable  law  or  regulation  or of any  agreement,  judgment,
injunction,  order,  decree,  or other  instrument  binding on  Shareholder.  No
consent,  approval,  order or authorization of, or registration,  declaration or
filing with or exemption by any Federal, state or local government or any court,
administrative  or  regulatory  agency  or  commission  or  other   governmental
authority  or agency,  domestic  or foreign,  is required by or with  respect to
Shareholder  in connection  with

                                      -4-
<PAGE>

the execution and delivery of this Agreement by Shareholder or the  consummation
by Shareholder of the  transactions  contemplated by this Agreement,  except for
applicable  requirements,  if any, of (a) Sections 13 and 16 of the Exchange Act
and the rules and regulations thereunder and (b) the HSR Act.

         SECTION  2.3  Total  Shares.  Schedule  2.3 sets  forth  (i) a true and
accurate number of the number of Shares  beneficially owned by Shareholder as of
the date  hereof,  and  (ii) a true and  complete  list of all  options  held by
Shareholder as of the date hereof and the number,  exercise price,  vesting date
and expiration date of each option.

         SECTION 2.4 Proxy.  Shareholder  represents  that any proxy  heretofore
given with respect to the Shareholder's Shares is not irrevocable.

                                  ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER


         SECTION 3.1 Corporate  Power and Authority;  Enforceability.  Purchaser
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Purchaser and the consummation of the transactions
contemplated  by this  Agreement  have been  duly  authorized  by all  necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and  delivered by Purchaser and  constitutes  a valid and binding  obligation of
Purchaser,  enforceable against Purchaser in accordance with its terms,  subject
to bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

         SECTION 3.2 Investment  Intent;  Financing.  Purchaser is acquiring the
Purchased Shares for its own account for investment purposes only and not with a
view to, or for sale or resale  in  connection  with,  any  public  distribution
thereof or with any present  intention  of selling,  distributing  or  otherwise
disposing of the Purchased Shares.  Purchaser is an "accredited investor" within
the meaning of Regulation D of the Securities  Act.  Purchaser has and will have
at the Closing the funds necessary to pay the Purchase Price.

                                      -5-
<PAGE>

                                   ARTICLE IV

                            COVENANTS OF SHAREHOLDER

         SECTION 4.1 Covenants of  Shareholder.  For so long as the Agreement is
in effect, Shareholder agrees as follows:

         (a) Shareholder  shall not, except as contemplated by the terms of this
Agreement,  knowingly  take any action that would in any way restrict,  limit or
interfere with the performance of its  obligations  hereunder or the purchase of
the Purchased Shares.

         (b)  Shareholder  will not, except as contemplated by the terms of this
Agreement,  (a)  knowingly  take,  agree or commit to take any action that would
make any representation or warranty of Shareholder  hereunder  inaccurate in any
respect  as of any  time  prior  to the  termination  of this  Agreement  or (b)
knowingly  omit,  or agree or commit to omit,  to take any action  necessary  to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION 5.1 Expenses.  All costs and expenses  incurred by any party in
connection with this Agreement shall be paid by the party incurring such cost or
expense (it being understood that  Shareholder's  costs and expenses incurred in
connection with this Agreement may be paid for by the Company).

         SECTION 5.2 Specific  Performance.  Shareholder agrees that irreparable
damage  would occur in the event that any of the  provisions  of this  Agreement
were not performed in accordance  with their  specific  terms or were  otherwise
breached.  It is  accordingly  agreed  that  Purchaser  shall be  entitled to an
injunction or injunctions  to prevent  breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Federal courts of
the United States of America  located in the State of New Jersey,  this being in
addition to any other remedy to which they are entitled at law or in equity.

         SECTION 5.3 Notices. All notices,  requests,  claims, demands and other
communications  hereunder  shall be in  writing  and  shall be  deemed  given if
delivered  personally or sent by overnight courier (providing proof of delivery)
or by telecopy  (with copies by  overnight  courier) to Purchaser at its

                                      -6-
<PAGE>

address set forth in the Tender Offer  Agreement or  Shareholder  at the address
for the Company set forth in the Tender Offer Agreement or to such other address
as such party may have  furnished to the other  parties in writing in accordance
herewith.

         SECTION 5.4  Amendments.  This Agreement may not be modified,  amended,
altered or  supplemented,  except upon the  execution  and delivery of a written
agreement executed by the parties hereto.

         SECTION 5.5 Successors  and Assigns.  Neither this Agreement nor any of
the rights,  interests or obligations  hereunder shall be assigned by any of the
parties  without the prior  written  consent of the other  parties,  except that
Purchaser  may  assign,  in its  sole  discretion,  any  or  all of its  rights,
interests  and  obligations  hereunder  to any direct or  indirect  wholly-owned
subsidiary  of Purchaser  (it being  understood  that no such  assignment  shall
relieve  Purchaser  of its  obligations  hereunder).  Subject  to the  preceding
sentence,  this Agreement  will be binding upon,  inure to the benefit of and be
enforceable  by,  the  parties  and their  respective  successors  and  assigns.
Shareholder  agrees  that this  Agreement  and the  obligations  of  Shareholder
hereunder  shall  attach to  Shareholder's  Shares and shall be binding upon and
inure to the  benefit  of any  person  or entity  to which  legal or  beneficial
ownership of such Shares shall pass,  whether by operation of law or  otherwise,
including Shareholder's heirs, guardians, administrators or successors.

         SECTION 5.6 (a)  Governing  Law and Venue;  Waiver of Jury Trial.  THIS
AGREEMENT  SHALL  BE  DEEMED  TO BE  MADE  IN  AND  IN  ALL  RESPECTS  SHALL  BE
INTERPRETED,  CONSTRUED  AND GOVERNED BY AND IN  ACCORDANCE  WITH THE LAW OF THE
STATE OF NEW JERSEY  APPLICABLE  TO CONTRACTS  WHOLLY MADE AND PERFORMED IN SUCH
STATE. The parties hereby  irrevocably submit to the jurisdiction of the Federal
courts of the United States of America located in the State of New Jersey solely
in respect of the  interpretation  and  enforcement  of the  provisions  of this
Agreement and of the documents  referred to in this  Agreement and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to assert,
as a  defense  in any  action,  suit or  proceeding  for the  interpretation  or
enforcement  hereof or of any such document,  that it is not subject  thereto or
that such action,  suit or proceeding may not be brought or is not  maintainable
in said  courts or that the venue  thereof may not be  appropriate  or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto  irrevocably agree that

                                      -7-
<PAGE>

all  claims  with  respect  to such  action  or  proceeding  shall be heard  and
determined in such a New Jersey Federal court. The parties hereby consent to and
grant  such court  jurisdiction  over the  person of such  parties  and over the
subject matter of such dispute and agree that mailing of process or other papers
in  connection  with any such  action or  proceeding  in the manner  provided in
Section 5.3 or in such other  manner as may be  permitted  by law shall be valid
and sufficient service thereof.

         (b) EACH PARTY  ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY  WHICH MAY
ARISE  UNDER THIS  AGREEMENT  IS LIKELY TO  INVOLVE  COMPLICATED  AND  DIFFICULT
ISSUES,  AND THEREFORE EACH SUCH PARTY HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
WAIVES  ANY  RIGHT  SUCH  PARTY  MAY HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY
LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE  TRANSACTIONS  CONTEMPLATED BY THIS  AGREEMENT.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES  THAT (i) NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE  FOREGOING  WAIVER,  (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS  WAIVER  VOLUNTARILY,  AND (iv) EACH PARTY HAS BEEN  INDUCED TO ENTER
INTO  THIS   AGREEMENT   BY,  AMONG  OTHER  THINGS,   THE  MUTUAL   WAIVERS  AND
CERTIFICATIONS IN THIS SECTION 5.6.

         SECTION 5.7 Counterparts;  Effectiveness.  This Agreement may be signed
(including by facsimile) in any number of  counterparts,  each of which shall be
an original,  with the same effect as if the signatures  thereto and hereto were
upon the same instrument.  This Agreement shall become effective when each party
hereto  shall  have  received  counterparts  hereof  signed  by all of the other
parties hereto.

         SECTION  5.8  Stop  Transfer   Restriction.   In  furtherance  of  this
Agreement,  Shareholder  hereby  authorizes  Purchaser's  counsel  to notify the
Company's transfer agent that there is a stop transfer  restriction with respect
to all of  Shareholder's  Shares (and that this  Agreement  places limits on the
voting and transfer of such shares).

         SECTION  5.9  Entire  Agreement;  No  Third-Party  Beneficiaries.  This
Agreement  (i)  constitutes  the  entire  agreement  and  supersedes  all  prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.

                                      -8-
<PAGE>

         SECTION 5.10  Shareholder  Capacity.  By executing and delivering  this
Agreement,  Shareholder  makes  no  agreement  or  understanding  herein  in his
capacity  as a  director  or officer of the  Company  or any  subsidiary  of the
Company.  Shareholder  signs solely in his capacity as the  beneficial  owner of
Shareholder's  Shares and nothing herein shall limit or affect any actions taken
by  Shareholder  in his capacity as an officer or director of the Company or any
subsidiary of the Company.

         SECTION  5.11  Severability.  If any  term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect.  Upon such determination that any
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall  negotiate in good faith to modify this Agreement so as to
effect  the  original  intent  of the  parties  as  closely  as  possible  in an
acceptable  manner  to the end that the  transactions  contemplated  hereby  are
fulfilled to the fullest extent possible.

         SECTION 5.12 Survival.  Sections 1.4 (Expiration),  5.1 (Expenses), 5.2
(Specific  Performance),  5.3  (Notices),  5.5  (Successors  and  Assigns),  5.6
(Governing  Law), 5.9 (Entire  Agreement;  No Third-Party  Beneficiaries),  5.11
(Severability) and this Section 5.12 shall survive expiration of this Agreement.
All other representations, warranties, agreement and covenants in this Agreement
shall not survive the termination of this Agreement.


                                      -9-
<PAGE>


         The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

                                   KONINKLIJKE PHILIPS ELECTRONICS N.V.

                                   By: /s/ A. Baan
                                      ---------------------------------
                                      Name:  A. Baan
                                      Title: Executive Vice President
                                             Royal Philips Electronics


                                   By: /s/ J.H.M. Hommen
                                      ---------------------------------
                                      Name:  J.H.M. Hommen
                                      Title: Executive Vice President
                                             Royal Philips Electronics



                                   By:  /s/ David A. Cohen
                                      --------------------------------
                                   Name:  David A. Cohen
                                   Title: CEO

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>SHAREHOLDER AGREEMENT, JOHN A. DONOHOE, JR.
<TEXT>


                              SHAREHOLDER AGREEMENT

         AGREEMENT,  dated  as of  May  22,  2000  between  Koninklijke  Philips
Electronics  N.V., a  corporation  organized  under the laws of The  Netherlands
("Purchaser")  and the beneficial  owner  ("Shareholder")  of Shares of MedQuist
Inc., a New Jersey corporation (the "Company").

         WHEREAS,  in order to induce  Purchaser  to enter into the Tender Offer
Agreement,  dated as of the date hereof,  with the Company  (the  "Tender  Offer
Agreement"), Purchaser has requested Shareholder, and Shareholder has agreed, to
enter into this Agreement and an employment agreement with the Company, dated of
even date  herewith,  to become  effective upon  Purchaser's  payment for Shares
pursuant to the terms of the Offer (the "Employment Agreement");

         WHEREAS,  to  induce  the  Company  to  enter  into  the  Tender  Offer
Agreement,  the Company has requested, and Purchaser has agreed, to enter into a
Governance  Agreement and a License  Agreement,  each to become  effective  upon
Purchaser's payment for Shares pursuant to the terms of the Offer;

         WHEREAS,   Shareholder   and   Purchaser   desire   to   make   certain
representations,  warranties,  covenants and agreements in connection  with this
Agreement; and

         WHEREAS,  capitalized  terms used herein but not defined  herein  shall
have  the  respective  meanings  ascribed  to such  terms  in the  Tender  Offer
Agreement.

         NOW,  THEREFORE,   in  consideration  of  the  premises,   and  of  the
representations,  warranties,  covenants  and  agreements  contained  herein the
parties hereto hereby agree as follows:

                                   ARTICLE I

                        RESTRICTION ON TRANSFER; PURCHASE
                        AND SALE OF SHAREHOLDER'S SHARES

         SECTION 1.1 Restrictions on Transfer.

         (a) Shareholder  hereby agrees that,  except as contemplated by Section
1.1(b) and Section 1.3 hereof (and  provided  that nothing  herein shall prevent
Shareholder from exercising any option for Shares held by  Shareholder),  during
the period beginning on the date hereof and continuing to and including the date
two years after the date hereof, the


<PAGE>

undersigned will not offer, sell,  contract to sell, tender for sale, enter into
a  repurchase  contract  with  respect to, lend,  pledge,  assign,  hypothecate,
encumber,  dispose of, grant any right (including without limitation, any put or
call  option) to purchase,  make any short sale or otherwise  dispose of (i) any
Shares,  or any options or warrants to purchase  any Shares,  or any  securities
convertible  into,  exchangeable  for or that  represent  the  right to  receive
Shares,  owned on the date hereof,  (ii) any Shares  issued upon the exercise of
options or warrants to purchase any Shares  referred to in the preceding  clause
(i),  (iii) any options to purchase  any Shares  issued in  accordance  with the
option grant contemplated by the Employment  Agreement or (iv) any Shares issued
upon the exercise of the options to purchase Shares referred to in the preceding
clause (iii), in each case, owned directly by the undersigned or with respect to
which the undersigned has beneficial  ownership within the rules and regulations
of the SEC  (collectively  the  "Shareholder's  Shares").  Without  limiting the
generality of the foregoing,  it is expressly agreed that Shareholder  shall not
engage in any derivative,  hedging,  swap or other transaction which is designed
to or which  reasonably  could be  expected  to lead to or  result  in a sale or
disposition of, or reduction of economic risk with respect to, the Shareholder's
Shares  even if such  Shares  would be  disposed  of by  someone  other than the
Shareholder.

         (b) Notwithstanding the foregoing  restrictions contained in subsection
(a) above,  Shareholder  may (x) transfer any of  Shareholder's  Shares (i) as a
bona fide gift or gifts,  provided that the donee or donees  thereof agree to be
bound in writing by the restrictions set forth herein, (ii) to any trust for the
direct or indirect  benefit of the  Shareholder  or the immediate  family of the
Shareholder,  provided  that the  trustee  of the  trust  agrees  to be bound in
writing by the restrictions set forth herein, and provided further that any such
transfer  shall not  involve a  disposition  for value,  or (iii) with the prior
written consent of Purchaser or (y) take any of the actions that would otherwise
be  prohibited  by  subsection  (a) above with  respect to or in respect of zero
Shares  (which  number  of  Shares  includes,  and is not in  addition  to,  the
Purchased  Shares (as defined in Section 1.3)).  For purposes of this Agreement,
"immediate  family" shall mean any relationship by blood,  marriage or adoption,
not more remote than first cousin.

         SECTION 1.2 Voting.

         Shareholder  hereby agrees that,  during the time this  Agreement is in
effect, at any meeting of the shareholders of the Company, however called, or in
any  written  consent in lieu

                                      -2-
<PAGE>

thereof, Shareholder shall, or shall cause the record holder(s) of Shareholder's
Shares to (i) vote  Shareholder's  Shares  against any action or agreement  that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Tender
Offer  Agreement;  and (ii) vote  Shareholder's  Shares  against  any  action or
agreement  that would  impede,  interfere  with,  delay,  postpone or attempt to
discourage  the  Offer,  including,  but not  limited  to:  (A) any  acquisition
agreement or other similar agreement related to an Acquisition Proposal, (B) any
change in the  Company's  management or the Company  Board,  except as otherwise
agreed  to in  writing  by  Purchaser  or (C) any other  material  change in the
Company's corporate structure or business.

         SECTION 1.3  Purchase and Sale of Shares by  Purchaser.  Subject to the
terms of this Agreement,  promptly following  expiration of the Offer (and in no
event later than five (5) business days thereafter), and provided that Purchaser
shall have accepted for payment and paid for Shares pursuant to the terms of the
Offer,  Shareholder  shall sell to Purchaser,  and Purchaser shall purchase from
Shareholder,  124,224  Shares (the  "Purchased  Shares") at a price equal to the
price to be paid per Share in the Offer (the aggregate amount to be paid for the
Shares being the "Purchase Price"). The closing of the transaction  constituting
the sale and purchase of the Shares shall take place at such location,  time and
date as Purchaser and Shareholder  shall mutually agree (the "Closing").  At the
Closing,  (i) Purchaser  shall pay Shareholder the Purchase Price in immediately
available funds by wire transfer to a bank account designated by Shareholder and
(ii) Shareholder  shall deliver to Purchaser (A)  certificates  representing the
Purchased  Shares,  duly endorsed in blank for transfer or  accompanied  by duly
executed blank stock powers  together will all necessary  stock transfer  stamps
affixed  thereto,  and such  instruments  as shall  reasonably  be  required  by
Purchaser to transfer to Purchaser all right,  title and interest in the Shares,
free and clear of any liens or  encumbrances  and (B) such other  documents  and
instruments as may be reasonably requested by Purchaser.

         SECTION  1.4  Expiration.  Except as  provided  in Section  5.12,  this
Agreement  and  all  of  Shareholder's  obligations  hereunder  shall  terminate
concurrent with the earlier of (a) the termination of the Tender Offer Agreement
in accordance  with its terms and (b) the  occurrence  of any of the  conditions
that  result in a  revocation  of the Waiver (as such term is defined in Section
5(b) of the Employment Agreement).

                                      -3-
<PAGE>

                                   ARTICLE II

                REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

         SECTION 2.1 Valid  Title;  Absence of Liens.  Shareholder  is the sole,
true, lawful and beneficial owner of Shareholder's Shares.  Shareholder owns the
Purchased  Shares  free and clear of any liens or  encumbrances  of any kind and
there is no restriction on Shareholder's  ability, power or right to transfer or
dispose  of  the  Purchased   Shares.   Upon  delivery  of  the  certificate  or
certificates  for the Purchased  Shares at the Closing,  Purchaser  will acquire
valid title to the Purchased  Shares free and clear of any encumbrances or liens
of any kind other than restrictions imposed by applicable securities laws.

         SECTION 2.2 Authority; Enforceability;
Noncontravention.

         (a)  Shareholder  has the  requisite  power and authority to enter into
this  Agreement  and  to  consummate  the  transactions   contemplated  by  this
Agreement.  The execution and delivery of this Agreement by Shareholder  and the
consummation by Shareholder of the  transactions  contemplated by this Agreement
have been duly authorized by all necessary action  (including any  consultation,
approval or other action by or with any other  person).  This Agreement has been
duly executed and delivered by Shareholder  and  constitutes a valid and binding
obligation of Shareholder,  enforceable  against  Shareholder in accordance with
its   terms,   subject   to   bankruptcy,   insolvency,   fraudulent   transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.

         (b) The execution and delivery of this  Agreement by  Shareholder  does
not, and the  consummation  by Shareholder of the  transactions  contemplated by
this  Agreement  and  compliance  by  Shareholder  with the  provisions  of this
Agreement  will not,  conflict  with or result in any  violation  of, or default
(with or  without  notice  or lapse of time,  or both)  under,  or result in the
creation  of any  lien or  encumbrance  upon the  Purchased  Shares  under,  any
provision  of  applicable  law  or  regulation  or of any  agreement,  judgment,
injunction,  order,  decree,  or other  instrument  binding on  Shareholder.  No
consent,  approval,  order or authorization of, or registration,  declaration or
filing with or exemption by any Federal, state or local government or any court,
administrative  or  regulatory  agency  or  commission  or  other   governmental
authority  or agency,  domestic  or foreign,  is required by or with  respect to
Shareholder  in connection  with

                                      -4-
<PAGE>

the execution and delivery of this Agreement by Shareholder or the  consummation
by Shareholder of the  transactions  contemplated by this Agreement,  except for
applicable  requirements,  if any, of (a) Sections 13 and 16 of the Exchange Act
and the rules and regulations thereunder and (b) the HSR Act.

         SECTION  2.3  Total  Shares.  Schedule  2.3 sets  forth  (i) a true and
accurate number of the number of Shares  beneficially owned by Shareholder as of
the date  hereof,  and  (ii) a true and  complete  list of all  options  held by
Shareholder as of the date hereof and the number,  exercise price,  vesting date
and expiration date of each option.

         SECTION 2.4 Proxy.  Shareholder  represents  that any proxy  heretofore
given with respect to the Shareholder's Shares is not irrevocable.

                                  ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER


         SECTION 3.1 Corporate  Power and Authority;  Enforceability.  Purchaser
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Purchaser and the consummation of the transactions
contemplated  by this  Agreement  have been  duly  authorized  by all  necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and  delivered by Purchaser and  constitutes  a valid and binding  obligation of
Purchaser,  enforceable against Purchaser in accordance with its terms,  subject
to bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

         SECTION 3.2 Investment  Intent;  Financing.  Purchaser is acquiring the
Purchased Shares for its own account for investment purposes only and not with a
view to, or for sale or resale  in  connection  with,  any  public  distribution
thereof or with any present  intention  of selling,  distributing  or  otherwise
disposing of the Purchased Shares.  Purchaser is an "accredited investor" within
the meaning of Regulation D of the Securities  Act.  Purchaser has and will have
at the Closing the funds necessary to pay the Purchase Price.

                                      -5-
<PAGE>

                                   ARTICLE IV

                            COVENANTS OF SHAREHOLDER

         SECTION 4.1 Covenants of  Shareholder.  For so long as the Agreement is
in effect, Shareholder agrees as follows:

         (a) Shareholder  shall not, except as contemplated by the terms of this
Agreement,  knowingly  take any action that would in any way restrict,  limit or
interfere with the performance of its  obligations  hereunder or the purchase of
the Purchased Shares.

         (b)  Shareholder  will not, except as contemplated by the terms of this
Agreement,  (a)  knowingly  take,  agree or commit to take any action that would
make any representation or warranty of Shareholder  hereunder  inaccurate in any
respect  as of any  time  prior  to the  termination  of this  Agreement  or (b)
knowingly  omit,  or agree or commit to omit,  to take any action  necessary  to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION 5.1 Expenses.  All costs and expenses  incurred by any party in
connection with this Agreement shall be paid by the party incurring such cost or
expense (it being understood that  Shareholder's  costs and expenses incurred in
connection with this Agreement may be paid for by the Company).

         SECTION 5.2 Specific  Performance.  Shareholder agrees that irreparable
damage  would occur in the event that any of the  provisions  of this  Agreement
were not performed in accordance  with their  specific  terms or were  otherwise
breached.  It is  accordingly  agreed  that  Purchaser  shall be  entitled to an
injunction or injunctions  to prevent  breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Federal courts of
the United States of America  located in the State of New Jersey,  this being in
addition to any other remedy to which they are entitled at law or in equity.

         SECTION 5.3 Notices. All notices,  requests,  claims, demands and other
communications  hereunder  shall be in  writing  and  shall be  deemed  given if
delivered  personally or sent by overnight courier (providing proof of delivery)
or by telecopy  (with copies by  overnight  courier) to Purchaser at its

                                      -6-
<PAGE>

address set forth in the Tender Offer  Agreement or  Shareholder  at the address
for the Company set forth in the Tender Offer Agreement or to such other address
as such party may have  furnished to the other  parties in writing in accordance
herewith.

         SECTION 5.4  Amendments.  This Agreement may not be modified,  amended,
altered or  supplemented,  except upon the  execution  and delivery of a written
agreement executed by the parties hereto.

         SECTION 5.5 Successors  and Assigns.  Neither this Agreement nor any of
the rights,  interests or obligations  hereunder shall be assigned by any of the
parties  without the prior  written  consent of the other  parties,  except that
Purchaser  may  assign,  in its  sole  discretion,  any  or  all of its  rights,
interests  and  obligations  hereunder  to any direct or  indirect  wholly-owned
subsidiary  of Purchaser  (it being  understood  that no such  assignment  shall
relieve  Purchaser  of its  obligations  hereunder).  Subject  to the  preceding
sentence,  this Agreement  will be binding upon,  inure to the benefit of and be
enforceable  by,  the  parties  and their  respective  successors  and  assigns.
Shareholder  agrees  that this  Agreement  and the  obligations  of  Shareholder
hereunder  shall  attach to  Shareholder's  Shares and shall be binding upon and
inure to the  benefit  of any  person  or entity  to which  legal or  beneficial
ownership of such Shares shall pass,  whether by operation of law or  otherwise,
including Shareholder's heirs, guardians, administrators or successors.

         SECTION 5.6 (a)  Governing  Law and Venue;  Waiver of Jury Trial.  THIS
AGREEMENT  SHALL  BE  DEEMED  TO BE  MADE  IN  AND  IN  ALL  RESPECTS  SHALL  BE
INTERPRETED,  CONSTRUED  AND GOVERNED BY AND IN  ACCORDANCE  WITH THE LAW OF THE
STATE OF NEW JERSEY  APPLICABLE  TO CONTRACTS  WHOLLY MADE AND PERFORMED IN SUCH
STATE. The parties hereby  irrevocably submit to the jurisdiction of the Federal
courts of the United States of America located in the State of New Jersey solely
in respect of the  interpretation  and  enforcement  of the  provisions  of this
Agreement and of the documents  referred to in this  Agreement and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to assert,
as a  defense  in any  action,  suit or  proceeding  for the  interpretation  or
enforcement  hereof or of any such document,  that it is not subject  thereto or
that such action,  suit or proceeding may not be brought or is not  maintainable
in said  courts or that the venue  thereof may not be  appropriate  or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto  irrevocably agree that

                                      -7-
<PAGE>

all  claims  with  respect  to such  action  or  proceeding  shall be heard  and
determined in such a New Jersey Federal court. The parties hereby consent to and
grant  such court  jurisdiction  over the  person of such  parties  and over the
subject matter of such dispute and agree that mailing of process or other papers
in  connection  with any such  action or  proceeding  in the manner  provided in
Section 5.3 or in such other  manner as may be  permitted  by law shall be valid
and sufficient service thereof.

         (b) EACH PARTY  ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY  WHICH MAY
ARISE  UNDER THIS  AGREEMENT  IS LIKELY TO  INVOLVE  COMPLICATED  AND  DIFFICULT
ISSUES,  AND THEREFORE EACH SUCH PARTY HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
WAIVES  ANY  RIGHT  SUCH  PARTY  MAY HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY
LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE  TRANSACTIONS  CONTEMPLATED BY THIS  AGREEMENT.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES  THAT (i) NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE  FOREGOING  WAIVER,  (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS  WAIVER  VOLUNTARILY,  AND (iv) EACH PARTY HAS BEEN  INDUCED TO ENTER
INTO  THIS   AGREEMENT   BY,  AMONG  OTHER  THINGS,   THE  MUTUAL   WAIVERS  AND
CERTIFICATIONS IN THIS SECTION 5.6.

         SECTION 5.7 Counterparts;  Effectiveness.  This Agreement may be signed
(including by facsimile) in any number of  counterparts,  each of which shall be
an original,  with the same effect as if the signatures  thereto and hereto were
upon the same instrument.  This Agreement shall become effective when each party
hereto  shall  have  received  counterparts  hereof  signed  by all of the other
parties hereto.

         SECTION  5.8  Stop  Transfer   Restriction.   In  furtherance  of  this
Agreement,  Shareholder  hereby  authorizes  Purchaser's  counsel  to notify the
Company's transfer agent that there is a stop transfer  restriction with respect
to all of  Shareholder's  Shares (and that this  Agreement  places limits on the
voting and transfer of such shares).

         SECTION  5.9  Entire  Agreement;  No  Third-Party  Beneficiaries.  This
Agreement  (i)  constitutes  the  entire  agreement  and  supersedes  all  prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.

                                      -8-
<PAGE>

         SECTION 5.10  Shareholder  Capacity.  By executing and delivering  this
Agreement,  Shareholder  makes  no  agreement  or  understanding  herein  in his
capacity  as a  director  or officer of the  Company  or any  subsidiary  of the
Company.  Shareholder  signs solely in his capacity as the  beneficial  owner of
Shareholder's  Shares and nothing herein shall limit or affect any actions taken
by  Shareholder  in his capacity as an officer or director of the Company or any
subsidiary of the Company.

         SECTION  5.11  Severability.  If any  term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect.  Upon such determination that any
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall  negotiate in good faith to modify this Agreement so as to
effect  the  original  intent  of the  parties  as  closely  as  possible  in an
acceptable  manner  to the end that the  transactions  contemplated  hereby  are
fulfilled to the fullest extent possible.

         SECTION 5.12 Survival.  Sections 1.4 (Expiration),  5.1 (Expenses), 5.2
(Specific  Performance),  5.3  (Notices),  5.5  (Successors  and  Assigns),  5.6
(Governing  Law), 5.9 (Entire  Agreement;  No Third-Party  Beneficiaries),  5.11
(Severability) and this Section 5.12 shall survive expiration of this Agreement.
All other representations, warranties, agreement and covenants in this Agreement
shall not survive the termination of this Agreement.


                                      -9-
<PAGE>


         The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

                                   KONINKLIJKE PHILIPS ELECTRONICS N.V.

                                   By: /s/ A. Baan
                                      ---------------------------------
                                      Name:  A. Baan
                                      Title: Executive Vice President
                                             Royal Philips Electronics


                                   By: /s/ J.H.M. Hommen
                                      ---------------------------------
                                      Name:  J.H.M. Hommen
                                      Title: Executive Vice President
                                             Royal Philips Electronics



                                   By:  /s/ John A. Donohoe, Jr.
                                      --------------------------------
                                   Name:  John A. Donohoe, Jr.
                                   Title: President

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.5
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>SHAREHOLDER AGREEMENT, JOHN R. EMERY
<TEXT>


                              SHAREHOLDER AGREEMENT

         AGREEMENT,  dated  as of  May  22,  2000  between  Koninklijke  Philips
Electronics  N.V., a  corporation  organized  under the laws of The  Netherlands
("Purchaser")  and the beneficial  owner  ("Shareholder")  of Shares of MedQuist
Inc., a New Jersey corporation (the "Company").

         WHEREAS,  in order to induce  Purchaser  to enter into the Tender Offer
Agreement,  dated as of the date hereof,  with the Company  (the  "Tender  Offer
Agreement"), Purchaser has requested Shareholder, and Shareholder has agreed, to
enter into this Agreement and an employment agreement with the Company, dated of
even date  herewith,  to become  effective upon  Purchaser's  payment for Shares
pursuant to the terms of the Offer (the "Employment Agreement");

         WHEREAS,  to  induce  the  Company  to  enter  into  the  Tender  Offer
Agreement,  the Company has requested, and Purchaser has agreed, to enter into a
Governance  Agreement and a License  Agreement,  each to become  effective  upon
Purchaser's payment for Shares pursuant to the terms of the Offer;

         WHEREAS,   Shareholder   and   Purchaser   desire   to   make   certain
representations,  warranties,  covenants and agreements in connection  with this
Agreement; and

         WHEREAS,  capitalized  terms used herein but not defined  herein  shall
have  the  respective  meanings  ascribed  to such  terms  in the  Tender  Offer
Agreement.

         NOW,  THEREFORE,   in  consideration  of  the  premises,   and  of  the
representations,  warranties,  covenants  and  agreements  contained  herein the
parties hereto hereby agree as follows:

                                   ARTICLE I

                        RESTRICTION ON TRANSFER; PURCHASE
                        AND SALE OF SHAREHOLDER'S SHARES

         SECTION 1.1 Restrictions on Transfer.

         (a) Shareholder  hereby agrees that,  except as contemplated by Section
1.1(b) and Section 1.3 hereof (and  provided  that nothing  herein shall prevent
Shareholder from exercising any option for Shares held by  Shareholder),  during
the period beginning on the date hereof and continuing to and including the date
two years after the date hereof, the


<PAGE>

undersigned will not offer, sell,  contract to sell, tender for sale, enter into
a  repurchase  contract  with  respect to, lend,  pledge,  assign,  hypothecate,
encumber,  dispose of, grant any right (including without limitation, any put or
call  option) to purchase,  make any short sale or otherwise  dispose of (i) any
Shares,  or any options or warrants to purchase  any Shares,  or any  securities
convertible  into,  exchangeable  for or that  represent  the  right to  receive
Shares,  owned on the date hereof,  (ii) any Shares  issued upon the exercise of
options or warrants to purchase any Shares  referred to in the preceding  clause
(i),  (iii) any options to purchase  any Shares  issued in  accordance  with the
option grant contemplated by the Employment  Agreement or (iv) any Shares issued
upon the exercise of the options to purchase Shares referred to in the preceding
clause (iii), in each case, owned directly by the undersigned or with respect to
which the undersigned has beneficial  ownership within the rules and regulations
of the SEC  (collectively  the  "Shareholder's  Shares").  Without  limiting the
generality of the foregoing,  it is expressly agreed that Shareholder  shall not
engage in any derivative,  hedging,  swap or other transaction which is designed
to or which  reasonably  could be  expected  to lead to or  result  in a sale or
disposition of, or reduction of economic risk with respect to, the Shareholder's
Shares  even if such  Shares  would be  disposed  of by  someone  other than the
Shareholder.

         (b) Notwithstanding the foregoing  restrictions contained in subsection
(a) above,  Shareholder  may (x) transfer any of  Shareholder's  Shares (i) as a
bona fide gift or gifts,  provided that the donee or donees  thereof agree to be
bound in writing by the restrictions set forth herein, (ii) to any trust for the
direct or indirect  benefit of the  Shareholder  or the immediate  family of the
Shareholder,  provided  that the  trustee  of the  trust  agrees  to be bound in
writing by the restrictions set forth herein, and provided further that any such
transfer  shall not  involve a  disposition  for value,  or (iii) with the prior
written consent of Purchaser or (y) take any of the actions that would otherwise
be  prohibited  by  subsection  (a) above with  respect to or in respect of zero
Shares  (which  number  of  Shares  includes,  and is not in  addition  to,  the
Purchased  Shares (as defined in Section 1.3)).  For purposes of this Agreement,
"immediate  family" shall mean any relationship by blood,  marriage or adoption,
not more remote than first cousin.

         SECTION 1.2 Voting.

         Shareholder  hereby agrees that,  during the time this  Agreement is in
effect, at any meeting of the shareholders of the Company, however called, or in
any  written  consent in lieu

                                      -2-
<PAGE>

thereof, Shareholder shall, or shall cause the record holder(s) of Shareholder's
Shares to (i) vote  Shareholder's  Shares  against any action or agreement  that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Tender
Offer  Agreement;  and (ii) vote  Shareholder's  Shares  against  any  action or
agreement  that would  impede,  interfere  with,  delay,  postpone or attempt to
discourage  the  Offer,  including,  but not  limited  to:  (A) any  acquisition
agreement or other similar agreement related to an Acquisition Proposal, (B) any
change in the  Company's  management or the Company  Board,  except as otherwise
agreed  to in  writing  by  Purchaser  or (C) any other  material  change in the
Company's corporate structure or business.

         SECTION 1.3  Purchase and Sale of Shares by  Purchaser.  Subject to the
terms of this Agreement,  promptly following  expiration of the Offer (and in no
event later than five (5) business days thereafter), and provided that Purchaser
shall have accepted for payment and paid for Shares pursuant to the terms of the
Offer,  Shareholder  shall sell to Purchaser,  and Purchaser shall purchase from
Shareholder,  46,057  Shares  (the  "Purchased  Shares") at a price equal to the
price to be paid per Share in the Offer (the aggregate amount to be paid for the
Shares being the "Purchase Price"). The closing of the transaction  constituting
the sale and purchase of the Shares shall take place at such location,  time and
date as Purchaser and Shareholder  shall mutually agree (the "Closing").  At the
Closing,  (i) Purchaser  shall pay Shareholder the Purchase Price in immediately
available funds by wire transfer to a bank account designated by Shareholder and
(ii) Shareholder  shall deliver to Purchaser (A)  certificates  representing the
Purchased  Shares,  duly endorsed in blank for transfer or  accompanied  by duly
executed blank stock powers  together will all necessary  stock transfer  stamps
affixed  thereto,  and such  instruments  as shall  reasonably  be  required  by
Purchaser to transfer to Purchaser all right,  title and interest in the Shares,
free and clear of any liens or  encumbrances  and (B) such other  documents  and
instruments as may be reasonably requested by Purchaser.

         SECTION  1.4  Expiration.  Except as  provided  in Section  5.12,  this
Agreement  and  all  of  Shareholder's  obligations  hereunder  shall  terminate
concurrent with the earlier of (a) the termination of the Tender Offer Agreement
in accordance  with its terms and (b) the  occurrence  of any of the  conditions
that  result in a  revocation  of the Waiver (as such term is defined in Section
5(b) of the Employment Agreement).

                                      -3-
<PAGE>

                                   ARTICLE II

                REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

         SECTION 2.1 Valid  Title;  Absence of Liens.  Shareholder  is the sole,
true, lawful and beneficial owner of Shareholder's Shares.  Shareholder owns the
Purchased  Shares  free and clear of any liens or  encumbrances  of any kind and
there is no restriction on Shareholder's  ability, power or right to transfer or
dispose  of  the  Purchased   Shares.   Upon  delivery  of  the  certificate  or
certificates  for the Purchased  Shares at the Closing,  Purchaser  will acquire
valid title to the Purchased  Shares free and clear of any encumbrances or liens
of any kind other than restrictions imposed by applicable securities laws.

         SECTION 2.2 Authority; Enforceability;
Noncontravention.

         (a)  Shareholder  has the  requisite  power and authority to enter into
this  Agreement  and  to  consummate  the  transactions   contemplated  by  this
Agreement.  The execution and delivery of this Agreement by Shareholder  and the
consummation by Shareholder of the  transactions  contemplated by this Agreement
have been duly authorized by all necessary action  (including any  consultation,
approval or other action by or with any other  person).  This Agreement has been
duly executed and delivered by Shareholder  and  constitutes a valid and binding
obligation of Shareholder,  enforceable  against  Shareholder in accordance with
its   terms,   subject   to   bankruptcy,   insolvency,   fraudulent   transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.

         (b) The execution and delivery of this  Agreement by  Shareholder  does
not, and the  consummation  by Shareholder of the  transactions  contemplated by
this  Agreement  and  compliance  by  Shareholder  with the  provisions  of this
Agreement  will not,  conflict  with or result in any  violation  of, or default
(with or  without  notice  or lapse of time,  or both)  under,  or result in the
creation  of any  lien or  encumbrance  upon the  Purchased  Shares  under,  any
provision  of  applicable  law  or  regulation  or of any  agreement,  judgment,
injunction,  order,  decree,  or other  instrument  binding on  Shareholder.  No
consent,  approval,  order or authorization of, or registration,  declaration or
filing with or exemption by any Federal, state or local government or any court,
administrative  or  regulatory  agency  or  commission  or  other   governmental
authority  or agency,  domestic  or foreign,  is required by or with  respect to
Shareholder  in connection  with

                                      -4-
<PAGE>

the execution and delivery of this Agreement by Shareholder or the  consummation
by Shareholder of the  transactions  contemplated by this Agreement,  except for
applicable  requirements,  if any, of (a) Sections 13 and 16 of the Exchange Act
and the rules and regulations thereunder and (b) the HSR Act.

         SECTION  2.3  Total  Shares.  Schedule  2.3 sets  forth  (i) a true and
accurate number of the number of Shares  beneficially owned by Shareholder as of
the date  hereof,  and  (ii) a true and  complete  list of all  options  held by
Shareholder as of the date hereof and the number,  exercise price,  vesting date
and expiration date of each option.

         SECTION 2.4 Proxy.  Shareholder  represents  that any proxy  heretofore
given with respect to the Shareholder's Shares is not irrevocable.

                                  ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER


         SECTION 3.1 Corporate  Power and Authority;  Enforceability.  Purchaser
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Purchaser and the consummation of the transactions
contemplated  by this  Agreement  have been  duly  authorized  by all  necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and  delivered by Purchaser and  constitutes  a valid and binding  obligation of
Purchaser,  enforceable against Purchaser in accordance with its terms,  subject
to bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

         SECTION 3.2 Investment  Intent;  Financing.  Purchaser is acquiring the
Purchased Shares for its own account for investment purposes only and not with a
view to, or for sale or resale  in  connection  with,  any  public  distribution
thereof or with any present  intention  of selling,  distributing  or  otherwise
disposing of the Purchased Shares.  Purchaser is an "accredited investor" within
the meaning of Regulation D of the Securities  Act.  Purchaser has and will have
at the Closing the funds necessary to pay the Purchase Price.

                                      -5-
<PAGE>

                                   ARTICLE IV

                            COVENANTS OF SHAREHOLDER

         SECTION 4.1 Covenants of  Shareholder.  For so long as the Agreement is
in effect, Shareholder agrees as follows:

         (a) Shareholder  shall not, except as contemplated by the terms of this
Agreement,  knowingly  take any action that would in any way restrict,  limit or
interfere with the performance of its  obligations  hereunder or the purchase of
the Purchased Shares.

         (b)  Shareholder  will not, except as contemplated by the terms of this
Agreement,  (a)  knowingly  take,  agree or commit to take any action that would
make any representation or warranty of Shareholder  hereunder  inaccurate in any
respect  as of any  time  prior  to the  termination  of this  Agreement  or (b)
knowingly  omit,  or agree or commit to omit,  to take any action  necessary  to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION 5.1 Expenses.  All costs and expenses  incurred by any party in
connection with this Agreement shall be paid by the party incurring such cost or
expense (it being understood that  Shareholder's  costs and expenses incurred in
connection with this Agreement may be paid for by the Company).

         SECTION 5.2 Specific  Performance.  Shareholder agrees that irreparable
damage  would occur in the event that any of the  provisions  of this  Agreement
were not performed in accordance  with their  specific  terms or were  otherwise
breached.  It is  accordingly  agreed  that  Purchaser  shall be  entitled to an
injunction or injunctions  to prevent  breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Federal courts of
the United States of America  located in the State of New Jersey,  this being in
addition to any other remedy to which they are entitled at law or in equity.

         SECTION 5.3 Notices. All notices,  requests,  claims, demands and other
communications  hereunder  shall be in  writing  and  shall be  deemed  given if
delivered  personally or sent by overnight courier (providing proof of delivery)
or by telecopy  (with copies by  overnight  courier) to Purchaser at its

                                      -6-
<PAGE>

address set forth in the Tender Offer  Agreement or  Shareholder  at the address
for the Company set forth in the Tender Offer Agreement or to such other address
as such party may have  furnished to the other  parties in writing in accordance
herewith.

         SECTION 5.4  Amendments.  This Agreement may not be modified,  amended,
altered or  supplemented,  except upon the  execution  and delivery of a written
agreement executed by the parties hereto.

         SECTION 5.5 Successors  and Assigns.  Neither this Agreement nor any of
the rights,  interests or obligations  hereunder shall be assigned by any of the
parties  without the prior  written  consent of the other  parties,  except that
Purchaser  may  assign,  in its  sole  discretion,  any  or  all of its  rights,
interests  and  obligations  hereunder  to any direct or  indirect  wholly-owned
subsidiary  of Purchaser  (it being  understood  that no such  assignment  shall
relieve  Purchaser  of its  obligations  hereunder).  Subject  to the  preceding
sentence,  this Agreement  will be binding upon,  inure to the benefit of and be
enforceable  by,  the  parties  and their  respective  successors  and  assigns.
Shareholder  agrees  that this  Agreement  and the  obligations  of  Shareholder
hereunder  shall  attach to  Shareholder's  Shares and shall be binding upon and
inure to the  benefit  of any  person  or entity  to which  legal or  beneficial
ownership of such Shares shall pass,  whether by operation of law or  otherwise,
including Shareholder's heirs, guardians, administrators or successors.

         SECTION 5.6 (a)  Governing  Law and Venue;  Waiver of Jury Trial.  THIS
AGREEMENT  SHALL  BE  DEEMED  TO BE  MADE  IN  AND  IN  ALL  RESPECTS  SHALL  BE
INTERPRETED,  CONSTRUED  AND GOVERNED BY AND IN  ACCORDANCE  WITH THE LAW OF THE
STATE OF NEW JERSEY  APPLICABLE  TO CONTRACTS  WHOLLY MADE AND PERFORMED IN SUCH
STATE. The parties hereby  irrevocably submit to the jurisdiction of the Federal
courts of the United States of America located in the State of New Jersey solely
in respect of the  interpretation  and  enforcement  of the  provisions  of this
Agreement and of the documents  referred to in this  Agreement and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to assert,
as a  defense  in any  action,  suit or  proceeding  for the  interpretation  or
enforcement  hereof or of any such document,  that it is not subject  thereto or
that such action,  suit or proceeding may not be brought or is not  maintainable
in said  courts or that the venue  thereof may not be  appropriate  or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto  irrevocably agree that

                                      -7-
<PAGE>

all  claims  with  respect  to such  action  or  proceeding  shall be heard  and
determined in such a New Jersey Federal court. The parties hereby consent to and
grant  such court  jurisdiction  over the  person of such  parties  and over the
subject matter of such dispute and agree that mailing of process or other papers
in  connection  with any such  action or  proceeding  in the manner  provided in
Section 5.3 or in such other  manner as may be  permitted  by law shall be valid
and sufficient service thereof.

         (b) EACH PARTY  ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY  WHICH MAY
ARISE  UNDER THIS  AGREEMENT  IS LIKELY TO  INVOLVE  COMPLICATED  AND  DIFFICULT
ISSUES,  AND THEREFORE EACH SUCH PARTY HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
WAIVES  ANY  RIGHT  SUCH  PARTY  MAY HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY
LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE  TRANSACTIONS  CONTEMPLATED BY THIS  AGREEMENT.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES  THAT (i) NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE  FOREGOING  WAIVER,  (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS  WAIVER  VOLUNTARILY,  AND (iv) EACH PARTY HAS BEEN  INDUCED TO ENTER
INTO  THIS   AGREEMENT   BY,  AMONG  OTHER  THINGS,   THE  MUTUAL   WAIVERS  AND
CERTIFICATIONS IN THIS SECTION 5.6.

         SECTION 5.7 Counterparts;  Effectiveness.  This Agreement may be signed
(including by facsimile) in any number of  counterparts,  each of which shall be
an original,  with the same effect as if the signatures  thereto and hereto were
upon the same instrument.  This Agreement shall become effective when each party
hereto  shall  have  received  counterparts  hereof  signed  by all of the other
parties hereto.

         SECTION  5.8  Stop  Transfer   Restriction.   In  furtherance  of  this
Agreement,  Shareholder  hereby  authorizes  Purchaser's  counsel  to notify the
Company's transfer agent that there is a stop transfer  restriction with respect
to all of  Shareholder's  Shares (and that this  Agreement  places limits on the
voting and transfer of such shares).

         SECTION  5.9  Entire  Agreement;  No  Third-Party  Beneficiaries.  This
Agreement  (i)  constitutes  the  entire  agreement  and  supersedes  all  prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.

                                      -8-
<PAGE>

         SECTION 5.10  Shareholder  Capacity.  By executing and delivering  this
Agreement,  Shareholder  makes  no  agreement  or  understanding  herein  in his
capacity  as a  director  or officer of the  Company  or any  subsidiary  of the
Company.  Shareholder  signs solely in his capacity as the  beneficial  owner of
Shareholder's  Shares and nothing herein shall limit or affect any actions taken
by  Shareholder  in his capacity as an officer or director of the Company or any
subsidiary of the Company.

         SECTION  5.11  Severability.  If any  term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect.  Upon such determination that any
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall  negotiate in good faith to modify this Agreement so as to
effect  the  original  intent  of the  parties  as  closely  as  possible  in an
acceptable  manner  to the end that the  transactions  contemplated  hereby  are
fulfilled to the fullest extent possible.

         SECTION 5.12 Survival.  Sections 1.4 (Expiration),  5.1 (Expenses), 5.2
(Specific  Performance),  5.3  (Notices),  5.5  (Successors  and  Assigns),  5.6
(Governing  Law), 5.9 (Entire  Agreement;  No Third-Party  Beneficiaries),  5.11
(Severability) and this Section 5.12 shall survive expiration of this Agreement.
All other representations, warranties, agreement and covenants in this Agreement
shall not survive the termination of this Agreement.


                                      -9-
<PAGE>


         The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

                                   KONINKLIJKE PHILIPS ELECTRONICS N.V.

                                   By: /s/ A. Baan
                                      ---------------------------------
                                      Name:  A. Baan
                                      Title: Executive Vice President
                                             Royal Philips Electronics


                                   By: /s/ J.H.M. Hommen
                                      ---------------------------------
                                      Name:  J.H.M. Hommen
                                      Title: Executive Vice President
                                             Royal Philips Electronics



                                   By:  /s/ John Emery
                                      --------------------------------
                                   Name:  John Emery
                                   Title: CFO

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.6
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>SHAREHOLDER AGREEMENT, ETHAN COHEN
<TEXT>


                              SHAREHOLDER AGREEMENT

         AGREEMENT,  dated  as of  May  22,  2000  between  Koninklijke  Philips
Electronics  N.V., a  corporation  organized  under the laws of The  Netherlands
("Purchaser")  and the beneficial  owner  ("Shareholder")  of Shares of MedQuist
Inc., a New Jersey corporation (the "Company").

         WHEREAS,  in order to induce  Purchaser  to enter into the Tender Offer
Agreement,  dated as of the date hereof,  with the Company  (the  "Tender  Offer
Agreement"), Purchaser has requested Shareholder, and Shareholder has agreed, to
enter into this Agreement and an employment agreement with the Company, dated of
even date  herewith,  to become  effective upon  Purchaser's  payment for Shares
pursuant to the terms of the Offer (the "Employment Agreement");

         WHEREAS,  to  induce  the  Company  to  enter  into  the  Tender  Offer
Agreement,  the Company has requested, and Purchaser has agreed, to enter into a
Governance  Agreement and a License  Agreement,  each to become  effective  upon
Purchaser's payment for Shares pursuant to the terms of the Offer;

         WHEREAS,   Shareholder   and   Purchaser   desire   to   make   certain
representations,  warranties,  covenants and agreements in connection  with this
Agreement; and

         WHEREAS,  capitalized  terms used herein but not defined  herein  shall
have  the  respective  meanings  ascribed  to such  terms  in the  Tender  Offer
Agreement.

         NOW,  THEREFORE,   in  consideration  of  the  premises,   and  of  the
representations,  warranties,  covenants  and  agreements  contained  herein the
parties hereto hereby agree as follows:

                                   ARTICLE I

                        RESTRICTION ON TRANSFER; PURCHASE
                        AND SALE OF SHAREHOLDER'S SHARES

         SECTION 1.1 Restrictions on Transfer.

         (a) Shareholder  hereby agrees that,  except as contemplated by Section
1.1(b) and Section 1.3 hereof (and  provided  that nothing  herein shall prevent
Shareholder from exercising any option for Shares held by  Shareholder),  during
the period beginning on the date hereof and continuing to and including the date
two years after the date hereof, the


<PAGE>

undersigned will not offer, sell,  contract to sell, tender for sale, enter into
a  repurchase  contract  with  respect to, lend,  pledge,  assign,  hypothecate,
encumber,  dispose of, grant any right (including without limitation, any put or
call  option) to purchase,  make any short sale or otherwise  dispose of (i) any
Shares,  or any options or warrants to purchase  any Shares,  or any  securities
convertible  into,  exchangeable  for or that  represent  the  right to  receive
Shares,  owned on the date hereof,  (ii) any Shares  issued upon the exercise of
options or warrants to purchase any Shares  referred to in the preceding  clause
(i),  (iii) any options to purchase  any Shares  issued in  accordance  with the
option grant contemplated by the Employment  Agreement or (iv) any Shares issued
upon the exercise of the options to purchase Shares referred to in the preceding
clause (iii), in each case, owned directly by the undersigned or with respect to
which the undersigned has beneficial  ownership within the rules and regulations
of the SEC  (collectively  the  "Shareholder's  Shares").  Without  limiting the
generality of the foregoing,  it is expressly agreed that Shareholder  shall not
engage in any derivative,  hedging,  swap or other transaction which is designed
to or which  reasonably  could be  expected  to lead to or  result  in a sale or
disposition of, or reduction of economic risk with respect to, the Shareholder's
Shares  even if such  Shares  would be  disposed  of by  someone  other than the
Shareholder.

         (b) Notwithstanding the foregoing  restrictions contained in subsection
(a) above,  Shareholder  may (x) transfer any of  Shareholder's  Shares (i) as a
bona fide gift or gifts,  provided that the donee or donees  thereof agree to be
bound in writing by the restrictions set forth herein, (ii) to any trust for the
direct or indirect  benefit of the  Shareholder  or the immediate  family of the
Shareholder,  provided  that the  trustee  of the  trust  agrees  to be bound in
writing by the restrictions set forth herein, and provided further that any such
transfer  shall not  involve a  disposition  for value,  or (iii) with the prior
written consent of Purchaser or (y) take any of the actions that would otherwise
be  prohibited  by  subsection  (a) above with  respect to or in respect of zero
Shares  (which  number  of  Shares  includes,  and is not in  addition  to,  the
Purchased  Shares (as defined in Section 1.3)).  For purposes of this Agreement,
"immediate  family" shall mean any relationship by blood,  marriage or adoption,
not more remote than first cousin.

         SECTION 1.2 Voting.

         Shareholder  hereby agrees that,  during the time this  Agreement is in
effect, at any meeting of the shareholders of the Company, however called, or in
any  written  consent in lieu

                                      -2-
<PAGE>

thereof, Shareholder shall, or shall cause the record holder(s) of Shareholder's
Shares to (i) vote  Shareholder's  Shares  against any action or agreement  that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Tender
Offer  Agreement;  and (ii) vote  Shareholder's  Shares  against  any  action or
agreement  that would  impede,  interfere  with,  delay,  postpone or attempt to
discourage  the  Offer,  including,  but not  limited  to:  (A) any  acquisition
agreement or other similar agreement related to an Acquisition Proposal, (B) any
change in the  Company's  management or the Company  Board,  except as otherwise
agreed  to in  writing  by  Purchaser  or (C) any other  material  change in the
Company's corporate structure or business.

         SECTION 1.3  Purchase and Sale of Shares by  Purchaser.  Subject to the
terms of this Agreement,  promptly following  expiration of the Offer (and in no
event later than five (5) business days thereafter), and provided that Purchaser
shall have accepted for payment and paid for Shares pursuant to the terms of the
Offer,  Shareholder  shall sell to Purchaser,  and Purchaser shall purchase from
Shareholder,  39,489  Shares  (the  "Purchased  Shares") at a price equal to the
price to be paid per Share in the Offer (the aggregate amount to be paid for the
Shares being the "Purchase Price"). The closing of the transaction  constituting
the sale and purchase of the Shares shall take place at such location,  time and
date as Purchaser and Shareholder  shall mutually agree (the "Closing").  At the
Closing,  (i) Purchaser  shall pay Shareholder the Purchase Price in immediately
available funds by wire transfer to a bank account designated by Shareholder and
(ii) Shareholder  shall deliver to Purchaser (A)  certificates  representing the
Purchased  Shares,  duly endorsed in blank for transfer or  accompanied  by duly
executed blank stock powers  together will all necessary  stock transfer  stamps
affixed  thereto,  and such  instruments  as shall  reasonably  be  required  by
Purchaser to transfer to Purchaser all right,  title and interest in the Shares,
free and clear of any liens or  encumbrances  and (B) such other  documents  and
instruments as may be reasonably requested by Purchaser.

         SECTION  1.4  Expiration.  Except as  provided  in Section  5.12,  this
Agreement  and  all  of  Shareholder's  obligations  hereunder  shall  terminate
concurrent with the earlier of (a) the termination of the Tender Offer Agreement
in accordance  with its terms and (b) the  occurrence  of any of the  conditions
that  result in a  revocation  of the Waiver (as such term is defined in Section
5(b) of the Employment Agreement).

                                      -3-
<PAGE>

                                   ARTICLE II

                REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

         SECTION 2.1 Valid  Title;  Absence of Liens.  Shareholder  is the sole,
true, lawful and beneficial owner of Shareholder's Shares.  Shareholder owns the
Purchased  Shares  free and clear of any liens or  encumbrances  of any kind and
there is no restriction on Shareholder's  ability, power or right to transfer or
dispose  of  the  Purchased   Shares.   Upon  delivery  of  the  certificate  or
certificates  for the Purchased  Shares at the Closing,  Purchaser  will acquire
valid title to the Purchased  Shares free and clear of any encumbrances or liens
of any kind other than restrictions imposed by applicable securities laws.

         SECTION 2.2 Authority; Enforceability;
Noncontravention.

         (a)  Shareholder  has the  requisite  power and authority to enter into
this  Agreement  and  to  consummate  the  transactions   contemplated  by  this
Agreement.  The execution and delivery of this Agreement by Shareholder  and the
consummation by Shareholder of the  transactions  contemplated by this Agreement
have been duly authorized by all necessary action  (including any  consultation,
approval or other action by or with any other  person).  This Agreement has been
duly executed and delivered by Shareholder  and  constitutes a valid and binding
obligation of Shareholder,  enforceable  against  Shareholder in accordance with
its   terms,   subject   to   bankruptcy,   insolvency,   fraudulent   transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.

         (b) The execution and delivery of this  Agreement by  Shareholder  does
not, and the  consummation  by Shareholder of the  transactions  contemplated by
this  Agreement  and  compliance  by  Shareholder  with the  provisions  of this
Agreement  will not,  conflict  with or result in any  violation  of, or default
(with or  without  notice  or lapse of time,  or both)  under,  or result in the
creation  of any  lien or  encumbrance  upon the  Purchased  Shares  under,  any
provision  of  applicable  law  or  regulation  or of any  agreement,  judgment,
injunction,  order,  decree,  or other  instrument  binding on  Shareholder.  No
consent,  approval,  order or authorization of, or registration,  declaration or
filing with or exemption by any Federal, state or local government or any court,
administrative  or  regulatory  agency  or  commission  or  other   governmental
authority  or agency,  domestic  or foreign,  is required by or with  respect to
Shareholder  in connection  with

                                      -4-
<PAGE>

the execution and delivery of this Agreement by Shareholder or the  consummation
by Shareholder of the  transactions  contemplated by this Agreement,  except for
applicable  requirements,  if any, of (a) Sections 13 and 16 of the Exchange Act
and the rules and regulations thereunder and (b) the HSR Act.

         SECTION  2.3  Total  Shares.  Schedule  2.3 sets  forth  (i) a true and
accurate number of the number of Shares  beneficially owned by Shareholder as of
the date  hereof,  and  (ii) a true and  complete  list of all  options  held by
Shareholder as of the date hereof and the number,  exercise price,  vesting date
and expiration date of each option.

         SECTION 2.4 Proxy.  Shareholder  represents  that any proxy  heretofore
given with respect to the Shareholder's Shares is not irrevocable.

                                  ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER


         SECTION 3.1 Corporate  Power and Authority;  Enforceability.  Purchaser
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Purchaser and the consummation of the transactions
contemplated  by this  Agreement  have been  duly  authorized  by all  necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and  delivered by Purchaser and  constitutes  a valid and binding  obligation of
Purchaser,  enforceable against Purchaser in accordance with its terms,  subject
to bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

         SECTION 3.2 Investment  Intent;  Financing.  Purchaser is acquiring the
Purchased Shares for its own account for investment purposes only and not with a
view to, or for sale or resale  in  connection  with,  any  public  distribution
thereof or with any present  intention  of selling,  distributing  or  otherwise
disposing of the Purchased Shares.  Purchaser is an "accredited investor" within
the meaning of Regulation D of the Securities  Act.  Purchaser has and will have
at the Closing the funds necessary to pay the Purchase Price.

                                      -5-
<PAGE>

                                   ARTICLE IV

                            COVENANTS OF SHAREHOLDER

         SECTION 4.1 Covenants of  Shareholder.  For so long as the Agreement is
in effect, Shareholder agrees as follows:

         (a) Shareholder  shall not, except as contemplated by the terms of this
Agreement,  knowingly  take any action that would in any way restrict,  limit or
interfere with the performance of its  obligations  hereunder or the purchase of
the Purchased Shares.

         (b)  Shareholder  will not, except as contemplated by the terms of this
Agreement,  (a)  knowingly  take,  agree or commit to take any action that would
make any representation or warranty of Shareholder  hereunder  inaccurate in any
respect  as of any  time  prior  to the  termination  of this  Agreement  or (b)
knowingly  omit,  or agree or commit to omit,  to take any action  necessary  to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION 5.1 Expenses.  All costs and expenses  incurred by any party in
connection with this Agreement shall be paid by the party incurring such cost or
expense (it being understood that  Shareholder's  costs and expenses incurred in
connection with this Agreement may be paid for by the Company).

         SECTION 5.2 Specific  Performance.  Shareholder agrees that irreparable
damage  would occur in the event that any of the  provisions  of this  Agreement
were not performed in accordance  with their  specific  terms or were  otherwise
breached.  It is  accordingly  agreed  that  Purchaser  shall be  entitled to an
injunction or injunctions  to prevent  breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Federal courts of
the United States of America  located in the State of New Jersey,  this being in
addition to any other remedy to which they are entitled at law or in equity.

         SECTION 5.3 Notices. All notices,  requests,  claims, demands and other
communications  hereunder  shall be in  writing  and  shall be  deemed  given if
delivered  personally or sent by overnight courier (providing proof of delivery)
or by telecopy  (with copies by  overnight  courier) to Purchaser at its

                                      -6-
<PAGE>

address set forth in the Tender Offer  Agreement or  Shareholder  at the address
for the Company set forth in the Tender Offer Agreement or to such other address
as such party may have  furnished to the other  parties in writing in accordance
herewith.

         SECTION 5.4  Amendments.  This Agreement may not be modified,  amended,
altered or  supplemented,  except upon the  execution  and delivery of a written
agreement executed by the parties hereto.

         SECTION 5.5 Successors  and Assigns.  Neither this Agreement nor any of
the rights,  interests or obligations  hereunder shall be assigned by any of the
parties  without the prior  written  consent of the other  parties,  except that
Purchaser  may  assign,  in its  sole  discretion,  any  or  all of its  rights,
interests  and  obligations  hereunder  to any direct or  indirect  wholly-owned
subsidiary  of Purchaser  (it being  understood  that no such  assignment  shall
relieve  Purchaser  of its  obligations  hereunder).  Subject  to the  preceding
sentence,  this Agreement  will be binding upon,  inure to the benefit of and be
enforceable  by,  the  parties  and their  respective  successors  and  assigns.
Shareholder  agrees  that this  Agreement  and the  obligations  of  Shareholder
hereunder  shall  attach to  Shareholder's  Shares and shall be binding upon and
inure to the  benefit  of any  person  or entity  to which  legal or  beneficial
ownership of such Shares shall pass,  whether by operation of law or  otherwise,
including Shareholder's heirs, guardians, administrators or successors.

         SECTION 5.6 (a)  Governing  Law and Venue;  Waiver of Jury Trial.  THIS
AGREEMENT  SHALL  BE  DEEMED  TO BE  MADE  IN  AND  IN  ALL  RESPECTS  SHALL  BE
INTERPRETED,  CONSTRUED  AND GOVERNED BY AND IN  ACCORDANCE  WITH THE LAW OF THE
STATE OF NEW JERSEY  APPLICABLE  TO CONTRACTS  WHOLLY MADE AND PERFORMED IN SUCH
STATE. The parties hereby  irrevocably submit to the jurisdiction of the Federal
courts of the United States of America located in the State of New Jersey solely
in respect of the  interpretation  and  enforcement  of the  provisions  of this
Agreement and of the documents  referred to in this  Agreement and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to assert,
as a  defense  in any  action,  suit or  proceeding  for the  interpretation  or
enforcement  hereof or of any such document,  that it is not subject  thereto or
that such action,  suit or proceeding may not be brought or is not  maintainable
in said  courts or that the venue  thereof may not be  appropriate  or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto  irrevocably agree that

                                      -7-
<PAGE>

all  claims  with  respect  to such  action  or  proceeding  shall be heard  and
determined in such a New Jersey Federal court. The parties hereby consent to and
grant  such court  jurisdiction  over the  person of such  parties  and over the
subject matter of such dispute and agree that mailing of process or other papers
in  connection  with any such  action or  proceeding  in the manner  provided in
Section 5.3 or in such other  manner as may be  permitted  by law shall be valid
and sufficient service thereof.

         (b) EACH PARTY  ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY  WHICH MAY
ARISE  UNDER THIS  AGREEMENT  IS LIKELY TO  INVOLVE  COMPLICATED  AND  DIFFICULT
ISSUES,  AND THEREFORE EACH SUCH PARTY HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
WAIVES  ANY  RIGHT  SUCH  PARTY  MAY HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY
LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE  TRANSACTIONS  CONTEMPLATED BY THIS  AGREEMENT.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES  THAT (i) NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE  FOREGOING  WAIVER,  (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS  WAIVER  VOLUNTARILY,  AND (iv) EACH PARTY HAS BEEN  INDUCED TO ENTER
INTO  THIS   AGREEMENT   BY,  AMONG  OTHER  THINGS,   THE  MUTUAL   WAIVERS  AND
CERTIFICATIONS IN THIS SECTION 5.6.

         SECTION 5.7 Counterparts;  Effectiveness.  This Agreement may be signed
(including by facsimile) in any number of  counterparts,  each of which shall be
an original,  with the same effect as if the signatures  thereto and hereto were
upon the same instrument.  This Agreement shall become effective when each party
hereto  shall  have  received  counterparts  hereof  signed  by all of the other
parties hereto.

         SECTION  5.8  Stop  Transfer   Restriction.   In  furtherance  of  this
Agreement,  Shareholder  hereby  authorizes  Purchaser's  counsel  to notify the
Company's transfer agent that there is a stop transfer  restriction with respect
to all of  Shareholder's  Shares (and that this  Agreement  places limits on the
voting and transfer of such shares).

         SECTION  5.9  Entire  Agreement;  No  Third-Party  Beneficiaries.  This
Agreement  (i)  constitutes  the  entire  agreement  and  supersedes  all  prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.

                                      -8-
<PAGE>

         SECTION 5.10  Shareholder  Capacity.  By executing and delivering  this
Agreement,  Shareholder  makes  no  agreement  or  understanding  herein  in his
capacity  as a  director  or officer of the  Company  or any  subsidiary  of the
Company.  Shareholder  signs solely in his capacity as the  beneficial  owner of
Shareholder's  Shares and nothing herein shall limit or affect any actions taken
by  Shareholder  in his capacity as an officer or director of the Company or any
subsidiary of the Company.

         SECTION  5.11  Severability.  If any  term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect.  Upon such determination that any
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall  negotiate in good faith to modify this Agreement so as to
effect  the  original  intent  of the  parties  as  closely  as  possible  in an
acceptable  manner  to the end that the  transactions  contemplated  hereby  are
fulfilled to the fullest extent possible.

         SECTION 5.12 Survival.  Sections 1.4 (Expiration),  5.1 (Expenses), 5.2
(Specific  Performance),  5.3  (Notices),  5.5  (Successors  and  Assigns),  5.6
(Governing  Law), 5.9 (Entire  Agreement;  No Third-Party  Beneficiaries),  5.11
(Severability) and this Section 5.12 shall survive expiration of this Agreement.
All other representations, warranties, agreement and covenants in this Agreement
shall not survive the termination of this Agreement.


                                      -9-
<PAGE>


         The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

                                   KONINKLIJKE PHILIPS ELECTRONICS N.V.

                                   By: /s/ A. Baan
                                      ---------------------------------
                                      Name:  A. Baan
                                      Title: Executive Vice President
                                             Royal Philips Electronics


                                   By: /s/ J.H.M. Hommen
                                      ---------------------------------
                                      Name:  J.H.M. Hommen
                                      Title: Executive Vice President
                                             Royal Philips Electronics


                                   By:  /s/ Ethan Cohen
                                      --------------------------------
                                      Name:  Ethan Cohen
                                      Title: SVP


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.7
<SEQUENCE>8
<FILENAME>0008.txt
<DESCRIPTION>SHAREHOLDER AGREEMENT, RONALD A. SCARPONE
<TEXT>


                              SHAREHOLDER AGREEMENT

         AGREEMENT,  dated  as of  May  22,  2000  between  Koninklijke  Philips
Electronics  N.V., a  corporation  organized  under the laws of The  Netherlands
("Purchaser")  and the beneficial  owner  ("Shareholder")  of Shares of MedQuist
Inc., a New Jersey corporation (the "Company").

         WHEREAS,  in order to induce  Purchaser  to enter into the Tender Offer
Agreement,  dated as of the date hereof,  with the Company  (the  "Tender  Offer
Agreement"), Purchaser has requested Shareholder, and Shareholder has agreed, to
enter into this Agreement and an employment agreement with the Company, dated of
even date  herewith,  to become  effective upon  Purchaser's  payment for Shares
pursuant to the terms of the Offer (the "Employment Agreement");

         WHEREAS,  to  induce  the  Company  to  enter  into  the  Tender  Offer
Agreement,  the Company has requested, and Purchaser has agreed, to enter into a
Governance  Agreement and a License  Agreement,  each to become  effective  upon
Purchaser's payment for Shares pursuant to the terms of the Offer;

         WHEREAS,   Shareholder   and   Purchaser   desire   to   make   certain
representations,  warranties,  covenants and agreements in connection  with this
Agreement; and

         WHEREAS,  capitalized  terms used herein but not defined  herein  shall
have  the  respective  meanings  ascribed  to such  terms  in the  Tender  Offer
Agreement.

         NOW,  THEREFORE,   in  consideration  of  the  premises,   and  of  the
representations,  warranties,  covenants  and  agreements  contained  herein the
parties hereto hereby agree as follows:

                                   ARTICLE I

                        RESTRICTION ON TRANSFER; PURCHASE
                        AND SALE OF SHAREHOLDER'S SHARES

         SECTION 1.1 Restrictions on Transfer.

         (a) Shareholder  hereby agrees that,  except as contemplated by Section
1.1(b) and Section 1.3 hereof (and  provided  that nothing  herein shall prevent
Shareholder from exercising any option for Shares held by  Shareholder),  during
the period beginning on the date hereof and continuing to and including the date
two years after the date hereof, the


<PAGE>

undersigned will not offer, sell,  contract to sell, tender for sale, enter into
a  repurchase  contract  with  respect to, lend,  pledge,  assign,  hypothecate,
encumber,  dispose of, grant any right (including without limitation, any put or
call  option) to purchase,  make any short sale or otherwise  dispose of (i) any
Shares,  or any options or warrants to purchase  any Shares,  or any  securities
convertible  into,  exchangeable  for or that  represent  the  right to  receive
Shares,  owned on the date hereof,  (ii) any Shares  issued upon the exercise of
options or warrants to purchase any Shares  referred to in the preceding  clause
(i),  (iii) any options to purchase  any Shares  issued in  accordance  with the
option grant contemplated by the Employment  Agreement or (iv) any Shares issued
upon the exercise of the options to purchase Shares referred to in the preceding
clause (iii), in each case, owned directly by the undersigned or with respect to
which the undersigned has beneficial  ownership within the rules and regulations
of the SEC  (collectively  the  "Shareholder's  Shares").  Without  limiting the
generality of the foregoing,  it is expressly agreed that Shareholder  shall not
engage in any derivative,  hedging,  swap or other transaction which is designed
to or which  reasonably  could be  expected  to lead to or  result  in a sale or
disposition of, or reduction of economic risk with respect to, the Shareholder's
Shares  even if such  Shares  would be  disposed  of by  someone  other than the
Shareholder.

         (b) Notwithstanding the foregoing  restrictions contained in subsection
(a) above,  Shareholder  may (x) transfer any of  Shareholder's  Shares (i) as a
bona fide gift or gifts,  provided that the donee or donees  thereof agree to be
bound in writing by the restrictions set forth herein, (ii) to any trust for the
direct or indirect  benefit of the  Shareholder  or the immediate  family of the
Shareholder,  provided  that the  trustee  of the  trust  agrees  to be bound in
writing by the restrictions set forth herein, and provided further that any such
transfer  shall not  involve a  disposition  for value,  or (iii) with the prior
written consent of Purchaser or (y) take any of the actions that would otherwise
be  prohibited  by  subsection  (a) above with  respect to or in respect of zero
Shares  (which  number  of  Shares  includes,  and is not in  addition  to,  the
Purchased  Shares (as defined in Section 1.3)).  For purposes of this Agreement,
"immediate  family" shall mean any relationship by blood,  marriage or adoption,
not more remote than first cousin.

         SECTION 1.2 Voting.

         Shareholder  hereby agrees that,  during the time this  Agreement is in
effect, at any meeting of the shareholders of the Company, however called, or in
any  written  consent in lieu

                                      -2-
<PAGE>

thereof, Shareholder shall, or shall cause the record holder(s) of Shareholder's
Shares to (i) vote  Shareholder's  Shares  against any action or agreement  that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Tender
Offer  Agreement;  and (ii) vote  Shareholder's  Shares  against  any  action or
agreement  that would  impede,  interfere  with,  delay,  postpone or attempt to
discourage  the  Offer,  including,  but not  limited  to:  (A) any  acquisition
agreement or other similar agreement related to an Acquisition Proposal, (B) any
change in the  Company's  management or the Company  Board,  except as otherwise
agreed  to in  writing  by  Purchaser  or (C) any other  material  change in the
Company's corporate structure or business.

         SECTION 1.3  Purchase and Sale of Shares by  Purchaser.  Subject to the
terms of this Agreement,  promptly following  expiration of the Offer (and in no
event later than five (5) business days thereafter), and provided that Purchaser
shall have accepted for payment and paid for Shares pursuant to the terms of the
Offer,  Shareholder  shall sell to Purchaser,  and Purchaser shall purchase from
Shareholder,  74,570  Shares  (the  "Purchased  Shares") at a price equal to the
price to be paid per Share in the Offer (the aggregate amount to be paid for the
Shares being the "Purchase Price"). The closing of the transaction  constituting
the sale and purchase of the Shares shall take place at such location,  time and
date as Purchaser and Shareholder  shall mutually agree (the "Closing").  At the
Closing,  (i) Purchaser  shall pay Shareholder the Purchase Price in immediately
available funds by wire transfer to a bank account designated by Shareholder and
(ii) Shareholder  shall deliver to Purchaser (A)  certificates  representing the
Purchased  Shares,  duly endorsed in blank for transfer or  accompanied  by duly
executed blank stock powers  together will all necessary  stock transfer  stamps
affixed  thereto,  and such  instruments  as shall  reasonably  be  required  by
Purchaser to transfer to Purchaser all right,  title and interest in the Shares,
free and clear of any liens or  encumbrances  and (B) such other  documents  and
instruments as may be reasonably requested by Purchaser.

         SECTION  1.4  Expiration.  Except as  provided  in Section  5.12,  this
Agreement  and  all  of  Shareholder's  obligations  hereunder  shall  terminate
concurrent with the earlier of (a) the termination of the Tender Offer Agreement
in accordance  with its terms and (b) the  occurrence  of any of the  conditions
that  result in a  revocation  of the Waiver (as such term is defined in Section
5(b) of the Employment Agreement).

                                      -3-
<PAGE>

                                   ARTICLE II

                REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

         SECTION 2.1 Valid  Title;  Absence of Liens.  Shareholder  is the sole,
true, lawful and beneficial owner of Shareholder's Shares.  Shareholder owns the
Purchased  Shares  free and clear of any liens or  encumbrances  of any kind and
there is no restriction on Shareholder's  ability, power or right to transfer or
dispose  of  the  Purchased   Shares.   Upon  delivery  of  the  certificate  or
certificates  for the Purchased  Shares at the Closing,  Purchaser  will acquire
valid title to the Purchased  Shares free and clear of any encumbrances or liens
of any kind other than restrictions imposed by applicable securities laws.

         SECTION 2.2 Authority; Enforceability;
Noncontravention.

         (a)  Shareholder  has the  requisite  power and authority to enter into
this  Agreement  and  to  consummate  the  transactions   contemplated  by  this
Agreement.  The execution and delivery of this Agreement by Shareholder  and the
consummation by Shareholder of the  transactions  contemplated by this Agreement
have been duly authorized by all necessary action  (including any  consultation,
approval or other action by or with any other  person).  This Agreement has been
duly executed and delivered by Shareholder  and  constitutes a valid and binding
obligation of Shareholder,  enforceable  against  Shareholder in accordance with
its   terms,   subject   to   bankruptcy,   insolvency,   fraudulent   transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.

         (b) The execution and delivery of this  Agreement by  Shareholder  does
not, and the  consummation  by Shareholder of the  transactions  contemplated by
this  Agreement  and  compliance  by  Shareholder  with the  provisions  of this
Agreement  will not,  conflict  with or result in any  violation  of, or default
(with or  without  notice  or lapse of time,  or both)  under,  or result in the
creation  of any  lien or  encumbrance  upon the  Purchased  Shares  under,  any
provision  of  applicable  law  or  regulation  or of any  agreement,  judgment,
injunction,  order,  decree,  or other  instrument  binding on  Shareholder.  No
consent,  approval,  order or authorization of, or registration,  declaration or
filing with or exemption by any Federal, state or local government or any court,
administrative  or  regulatory  agency  or  commission  or  other   governmental
authority  or agency,  domestic  or foreign,  is required by or with  respect to
Shareholder  in connection  with

                                      -4-
<PAGE>

the execution and delivery of this Agreement by Shareholder or the  consummation
by Shareholder of the  transactions  contemplated by this Agreement,  except for
applicable  requirements,  if any, of (a) Sections 13 and 16 of the Exchange Act
and the rules and regulations thereunder and (b) the HSR Act.

         SECTION  2.3  Total  Shares.  Schedule  2.3 sets  forth  (i) a true and
accurate number of the number of Shares  beneficially owned by Shareholder as of
the date  hereof,  and  (ii) a true and  complete  list of all  options  held by
Shareholder as of the date hereof and the number,  exercise price,  vesting date
and expiration date of each option.

         SECTION 2.4 Proxy.  Shareholder  represents  that any proxy  heretofore
given with respect to the Shareholder's Shares is not irrevocable.

                                  ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER


         SECTION 3.1 Corporate  Power and Authority;  Enforceability.  Purchaser
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Purchaser and the consummation of the transactions
contemplated  by this  Agreement  have been  duly  authorized  by all  necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and  delivered by Purchaser and  constitutes  a valid and binding  obligation of
Purchaser,  enforceable against Purchaser in accordance with its terms,  subject
to bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

         SECTION 3.2 Investment  Intent;  Financing.  Purchaser is acquiring the
Purchased Shares for its own account for investment purposes only and not with a
view to, or for sale or resale  in  connection  with,  any  public  distribution
thereof or with any present  intention  of selling,  distributing  or  otherwise
disposing of the Purchased Shares.  Purchaser is an "accredited investor" within
the meaning of Regulation D of the Securities  Act.  Purchaser has and will have
at the Closing the funds necessary to pay the Purchase Price.

                                      -5-
<PAGE>

                                   ARTICLE IV

                            COVENANTS OF SHAREHOLDER

         SECTION 4.1 Covenants of  Shareholder.  For so long as the Agreement is
in effect, Shareholder agrees as follows:

         (a) Shareholder  shall not, except as contemplated by the terms of this
Agreement,  knowingly  take any action that would in any way restrict,  limit or
interfere with the performance of its  obligations  hereunder or the purchase of
the Purchased Shares.

         (b)  Shareholder  will not, except as contemplated by the terms of this
Agreement,  (a)  knowingly  take,  agree or commit to take any action that would
make any representation or warranty of Shareholder  hereunder  inaccurate in any
respect  as of any  time  prior  to the  termination  of this  Agreement  or (b)
knowingly  omit,  or agree or commit to omit,  to take any action  necessary  to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION 5.1 Expenses.  All costs and expenses  incurred by any party in
connection with this Agreement shall be paid by the party incurring such cost or
expense (it being understood that  Shareholder's  costs and expenses incurred in
connection with this Agreement may be paid for by the Company).

         SECTION 5.2 Specific  Performance.  Shareholder agrees that irreparable
damage  would occur in the event that any of the  provisions  of this  Agreement
were not performed in accordance  with their  specific  terms or were  otherwise
breached.  It is  accordingly  agreed  that  Purchaser  shall be  entitled to an
injunction or injunctions  to prevent  breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Federal courts of
the United States of America  located in the State of New Jersey,  this being in
addition to any other remedy to which they are entitled at law or in equity.

         SECTION 5.3 Notices. All notices,  requests,  claims, demands and other
communications  hereunder  shall be in  writing  and  shall be  deemed  given if
delivered  personally or sent by overnight courier (providing proof of delivery)
or by telecopy  (with copies by  overnight  courier) to Purchaser at its

                                      -6-
<PAGE>

address set forth in the Tender Offer  Agreement or  Shareholder  at the address
for the Company set forth in the Tender Offer Agreement or to such other address
as such party may have  furnished to the other  parties in writing in accordance
herewith.

         SECTION 5.4  Amendments.  This Agreement may not be modified,  amended,
altered or  supplemented,  except upon the  execution  and delivery of a written
agreement executed by the parties hereto.

         SECTION 5.5 Successors  and Assigns.  Neither this Agreement nor any of
the rights,  interests or obligations  hereunder shall be assigned by any of the
parties  without the prior  written  consent of the other  parties,  except that
Purchaser  may  assign,  in its  sole  discretion,  any  or  all of its  rights,
interests  and  obligations  hereunder  to any direct or  indirect  wholly-owned
subsidiary  of Purchaser  (it being  understood  that no such  assignment  shall
relieve  Purchaser  of its  obligations  hereunder).  Subject  to the  preceding
sentence,  this Agreement  will be binding upon,  inure to the benefit of and be
enforceable  by,  the  parties  and their  respective  successors  and  assigns.
Shareholder  agrees  that this  Agreement  and the  obligations  of  Shareholder
hereunder  shall  attach to  Shareholder's  Shares and shall be binding upon and
inure to the  benefit  of any  person  or entity  to which  legal or  beneficial
ownership of such Shares shall pass,  whether by operation of law or  otherwise,
including Shareholder's heirs, guardians, administrators or successors.

         SECTION 5.6 (a)  Governing  Law and Venue;  Waiver of Jury Trial.  THIS
AGREEMENT  SHALL  BE  DEEMED  TO BE  MADE  IN  AND  IN  ALL  RESPECTS  SHALL  BE
INTERPRETED,  CONSTRUED  AND GOVERNED BY AND IN  ACCORDANCE  WITH THE LAW OF THE
STATE OF NEW JERSEY  APPLICABLE  TO CONTRACTS  WHOLLY MADE AND PERFORMED IN SUCH
STATE. The parties hereby  irrevocably submit to the jurisdiction of the Federal
courts of the United States of America located in the State of New Jersey solely
in respect of the  interpretation  and  enforcement  of the  provisions  of this
Agreement and of the documents  referred to in this  Agreement and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to assert,
as a  defense  in any  action,  suit or  proceeding  for the  interpretation  or
enforcement  hereof or of any such document,  that it is not subject  thereto or
that such action,  suit or proceeding may not be brought or is not  maintainable
in said  courts or that the venue  thereof may not be  appropriate  or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto  irrevocably agree that

                                      -7-
<PAGE>

all  claims  with  respect  to such  action  or  proceeding  shall be heard  and
determined in such a New Jersey Federal court. The parties hereby consent to and
grant  such court  jurisdiction  over the  person of such  parties  and over the
subject matter of such dispute and agree that mailing of process or other papers
in  connection  with any such  action or  proceeding  in the manner  provided in
Section 5.3 or in such other  manner as may be  permitted  by law shall be valid
and sufficient service thereof.

         (b) EACH PARTY  ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY  WHICH MAY
ARISE  UNDER THIS  AGREEMENT  IS LIKELY TO  INVOLVE  COMPLICATED  AND  DIFFICULT
ISSUES,  AND THEREFORE EACH SUCH PARTY HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
WAIVES  ANY  RIGHT  SUCH  PARTY  MAY HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY
LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE  TRANSACTIONS  CONTEMPLATED BY THIS  AGREEMENT.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES  THAT (i) NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE  FOREGOING  WAIVER,  (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS  WAIVER  VOLUNTARILY,  AND (iv) EACH PARTY HAS BEEN  INDUCED TO ENTER
INTO  THIS   AGREEMENT   BY,  AMONG  OTHER  THINGS,   THE  MUTUAL   WAIVERS  AND
CERTIFICATIONS IN THIS SECTION 5.6.

         SECTION 5.7 Counterparts;  Effectiveness.  This Agreement may be signed
(including by facsimile) in any number of  counterparts,  each of which shall be
an original,  with the same effect as if the signatures  thereto and hereto were
upon the same instrument.  This Agreement shall become effective when each party
hereto  shall  have  received  counterparts  hereof  signed  by all of the other
parties hereto.

         SECTION  5.8  Stop  Transfer   Restriction.   In  furtherance  of  this
Agreement,  Shareholder  hereby  authorizes  Purchaser's  counsel  to notify the
Company's transfer agent that there is a stop transfer  restriction with respect
to all of  Shareholder's  Shares (and that this  Agreement  places limits on the
voting and transfer of such shares).

         SECTION  5.9  Entire  Agreement;  No  Third-Party  Beneficiaries.  This
Agreement  (i)  constitutes  the  entire  agreement  and  supersedes  all  prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.

                                      -8-
<PAGE>

         SECTION 5.10  Shareholder  Capacity.  By executing and delivering  this
Agreement,  Shareholder  makes  no  agreement  or  understanding  herein  in his
capacity  as a  director  or officer of the  Company  or any  subsidiary  of the
Company.  Shareholder  signs solely in his capacity as the  beneficial  owner of
Shareholder's  Shares and nothing herein shall limit or affect any actions taken
by  Shareholder  in his capacity as an officer or director of the Company or any
subsidiary of the Company.

         SECTION  5.11  Severability.  If any  term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect.  Upon such determination that any
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall  negotiate in good faith to modify this Agreement so as to
effect  the  original  intent  of the  parties  as  closely  as  possible  in an
acceptable  manner  to the end that the  transactions  contemplated  hereby  are
fulfilled to the fullest extent possible.

         SECTION 5.12 Survival.  Sections 1.4 (Expiration),  5.1 (Expenses), 5.2
(Specific  Performance),  5.3  (Notices),  5.5  (Successors  and  Assigns),  5.6
(Governing  Law), 5.9 (Entire  Agreement;  No Third-Party  Beneficiaries),  5.11
(Severability) and this Section 5.12 shall survive expiration of this Agreement.
All other representations, warranties, agreement and covenants in this Agreement
shall not survive the termination of this Agreement.


                                      -9-
<PAGE>


         The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

                                   KONINKLIJKE PHILIPS ELECTRONICS N.V.

                                   By: /s/ A. Baan
                                      ---------------------------------
                                      Name:  A. Baan
                                      Title: Executive Vice President
                                             Royal Philips Electronics


                                   By: /s/ J.H.M. Hommen
                                      ---------------------------------
                                      Name:  J.H.M. Hommen
                                      Title: Executive Vice President
                                             Royal Philips Electronics



                                   By:  /s/ Ronald Scarpone
                                      --------------------------------
                                   Name:  Ronald Scarpone
                                  Title:  SVP

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.8
<SEQUENCE>9
<FILENAME>0009.txt
<DESCRIPTION>SHAREHOLDER AGREEMENT, JOHN W. QUAINTANCE
<TEXT>


                              SHAREHOLDER AGREEMENT

         AGREEMENT,  dated  as of  May  22,  2000  between  Koninklijke  Philips
Electronics  N.V., a  corporation  organized  under the laws of The  Netherlands
("Purchaser")  and the beneficial  owner  ("Shareholder")  of Shares of MedQuist
Inc., a New Jersey corporation (the "Company").

         WHEREAS,  in order to induce  Purchaser  to enter into the Tender Offer
Agreement,  dated as of the date hereof,  with the Company  (the  "Tender  Offer
Agreement"), Purchaser has requested Shareholder, and Shareholder has agreed, to
enter into this Agreement and an employment agreement with the Company, dated of
even date  herewith,  to become  effective upon  Purchaser's  payment for Shares
pursuant to the terms of the Offer (the "Employment Agreement");

         WHEREAS,  to  induce  the  Company  to  enter  into  the  Tender  Offer
Agreement,  the Company has requested, and Purchaser has agreed, to enter into a
Governance  Agreement and a License  Agreement,  each to become  effective  upon
Purchaser's payment for Shares pursuant to the terms of the Offer;

         WHEREAS,   Shareholder   and   Purchaser   desire   to   make   certain
representations,  warranties,  covenants and agreements in connection  with this
Agreement; and

         WHEREAS,  capitalized  terms used herein but not defined  herein  shall
have  the  respective  meanings  ascribed  to such  terms  in the  Tender  Offer
Agreement.

         NOW,  THEREFORE,   in  consideration  of  the  premises,   and  of  the
representations,  warranties,  covenants  and  agreements  contained  herein the
parties hereto hereby agree as follows:

                                   ARTICLE I

                        RESTRICTION ON TRANSFER; PURCHASE
                        AND SALE OF SHAREHOLDER'S SHARES

         SECTION 1.1 Restrictions on Transfer.

         (a) Shareholder  hereby agrees that,  except as contemplated by Section
1.1(b) and Section 1.3 hereof (and  provided  that nothing  herein shall prevent
Shareholder from exercising any option for Shares held by  Shareholder),  during
the period beginning on the date hereof and continuing to and including the date
two years after the date hereof, the


<PAGE>

undersigned will not offer, sell,  contract to sell, tender for sale, enter into
a  repurchase  contract  with  respect to, lend,  pledge,  assign,  hypothecate,
encumber,  dispose of, grant any right (including without limitation, any put or
call  option) to purchase,  make any short sale or otherwise  dispose of (i) any
Shares,  or any options or warrants to purchase  any Shares,  or any  securities
convertible  into,  exchangeable  for or that  represent  the  right to  receive
Shares,  owned on the date hereof,  (ii) any Shares  issued upon the exercise of
options or warrants to purchase any Shares  referred to in the preceding  clause
(i),  (iii) any options to purchase  any Shares  issued in  accordance  with the
option grant contemplated by the Employment  Agreement or (iv) any Shares issued
upon the exercise of the options to purchase Shares referred to in the preceding
clause (iii), in each case, owned directly by the undersigned or with respect to
which the undersigned has beneficial  ownership within the rules and regulations
of the SEC  (collectively  the  "Shareholder's  Shares").  Without  limiting the
generality of the foregoing,  it is expressly agreed that Shareholder  shall not
engage in any derivative,  hedging,  swap or other transaction which is designed
to or which  reasonably  could be  expected  to lead to or  result  in a sale or
disposition of, or reduction of economic risk with respect to, the Shareholder's
Shares  even if such  Shares  would be  disposed  of by  someone  other than the
Shareholder.

         (b) Notwithstanding the foregoing  restrictions contained in subsection
(a) above,  Shareholder  may (x) transfer any of  Shareholder's  Shares (i) as a
bona fide gift or gifts,  provided that the donee or donees  thereof agree to be
bound in writing by the restrictions set forth herein, (ii) to any trust for the
direct or indirect  benefit of the  Shareholder  or the immediate  family of the
Shareholder,  provided  that the  trustee  of the  trust  agrees  to be bound in
writing by the restrictions set forth herein, and provided further that any such
transfer  shall not  involve a  disposition  for value,  or (iii) with the prior
written consent of Purchaser or (y) take any of the actions that would otherwise
be  prohibited  by  subsection  (a) above with  respect to or in respect of zero
Shares  (which  number  of  Shares  includes,  and is not in  addition  to,  the
Purchased  Shares (as defined in Section 1.3)).  For purposes of this Agreement,
"immediate  family" shall mean any relationship by blood,  marriage or adoption,
not more remote than first cousin.

         SECTION 1.2 Voting.

         Shareholder  hereby agrees that,  during the time this  Agreement is in
effect, at any meeting of the shareholders of the Company, however called, or in
any  written  consent in lieu

                                      -2-
<PAGE>

thereof, Shareholder shall, or shall cause the record holder(s) of Shareholder's
Shares to (i) vote  Shareholder's  Shares  against any action or agreement  that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Tender
Offer  Agreement;  and (ii) vote  Shareholder's  Shares  against  any  action or
agreement  that would  impede,  interfere  with,  delay,  postpone or attempt to
discourage  the  Offer,  including,  but not  limited  to:  (A) any  acquisition
agreement or other similar agreement related to an Acquisition Proposal, (B) any
change in the  Company's  management or the Company  Board,  except as otherwise
agreed  to in  writing  by  Purchaser  or (C) any other  material  change in the
Company's corporate structure or business.

         SECTION 1.3  Purchase and Sale of Shares by  Purchaser.  Subject to the
terms of this Agreement,  promptly following  expiration of the Offer (and in no
event later than five (5) business days thereafter), and provided that Purchaser
shall have accepted for payment and paid for Shares pursuant to the terms of the
Offer,  Shareholder  shall sell to Purchaser,  and Purchaser shall purchase from
Shareholder,  29,600  Shares  (the  "Purchased  Shares") at a price equal to the
price to be paid per Share in the Offer (the aggregate amount to be paid for the
Shares being the "Purchase Price"). The closing of the transaction  constituting
the sale and purchase of the Shares shall take place at such location,  time and
date as Purchaser and Shareholder  shall mutually agree (the "Closing").  At the
Closing,  (i) Purchaser  shall pay Shareholder the Purchase Price in immediately
available funds by wire transfer to a bank account designated by Shareholder and
(ii) Shareholder  shall deliver to Purchaser (A)  certificates  representing the
Purchased  Shares,  duly endorsed in blank for transfer or  accompanied  by duly
executed blank stock powers  together will all necessary  stock transfer  stamps
affixed  thereto,  and such  instruments  as shall  reasonably  be  required  by
Purchaser to transfer to Purchaser all right,  title and interest in the Shares,
free and clear of any liens or  encumbrances  and (B) such other  documents  and
instruments as may be reasonably requested by Purchaser.

         SECTION  1.4  Expiration.  Except as  provided  in Section  5.12,  this
Agreement  and  all  of  Shareholder's  obligations  hereunder  shall  terminate
concurrent with the earlier of (a) the termination of the Tender Offer Agreement
in accordance  with its terms and (b) the  occurrence  of any of the  conditions
that  result in a  revocation  of the Waiver (as such term is defined in Section
5(b) of the Employment Agreement).

                                      -3-
<PAGE>

                                   ARTICLE II

                REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

         SECTION 2.1 Valid  Title;  Absence of Liens.  Shareholder  is the sole,
true, lawful and beneficial owner of Shareholder's Shares.  Shareholder owns the
Purchased  Shares  free and clear of any liens or  encumbrances  of any kind and
there is no restriction on Shareholder's  ability, power or right to transfer or
dispose  of  the  Purchased   Shares.   Upon  delivery  of  the  certificate  or
certificates  for the Purchased  Shares at the Closing,  Purchaser  will acquire
valid title to the Purchased  Shares free and clear of any encumbrances or liens
of any kind other than restrictions imposed by applicable securities laws.

         SECTION 2.2 Authority; Enforceability;
Noncontravention.

         (a)  Shareholder  has the  requisite  power and authority to enter into
this  Agreement  and  to  consummate  the  transactions   contemplated  by  this
Agreement.  The execution and delivery of this Agreement by Shareholder  and the
consummation by Shareholder of the  transactions  contemplated by this Agreement
have been duly authorized by all necessary action  (including any  consultation,
approval or other action by or with any other  person).  This Agreement has been
duly executed and delivered by Shareholder  and  constitutes a valid and binding
obligation of Shareholder,  enforceable  against  Shareholder in accordance with
its   terms,   subject   to   bankruptcy,   insolvency,   fraudulent   transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.

         (b) The execution and delivery of this  Agreement by  Shareholder  does
not, and the  consummation  by Shareholder of the  transactions  contemplated by
this  Agreement  and  compliance  by  Shareholder  with the  provisions  of this
Agreement  will not,  conflict  with or result in any  violation  of, or default
(with or  without  notice  or lapse of time,  or both)  under,  or result in the
creation  of any  lien or  encumbrance  upon the  Purchased  Shares  under,  any
provision  of  applicable  law  or  regulation  or of any  agreement,  judgment,
injunction,  order,  decree,  or other  instrument  binding on  Shareholder.  No
consent,  approval,  order or authorization of, or registration,  declaration or
filing with or exemption by any Federal, state or local government or any court,
administrative  or  regulatory  agency  or  commission  or  other   governmental
authority  or agency,  domestic  or foreign,  is required by or with  respect to
Shareholder  in connection  with

                                      -4-
<PAGE>

the execution and delivery of this Agreement by Shareholder or the  consummation
by Shareholder of the  transactions  contemplated by this Agreement,  except for
applicable  requirements,  if any, of (a) Sections 13 and 16 of the Exchange Act
and the rules and regulations thereunder and (b) the HSR Act.

         SECTION  2.3  Total  Shares.  Schedule  2.3 sets  forth  (i) a true and
accurate number of the number of Shares  beneficially owned by Shareholder as of
the date  hereof,  and  (ii) a true and  complete  list of all  options  held by
Shareholder as of the date hereof and the number,  exercise price,  vesting date
and expiration date of each option.

         SECTION 2.4 Proxy.  Shareholder  represents  that any proxy  heretofore
given with respect to the Shareholder's Shares is not irrevocable.

                                  ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER


         SECTION 3.1 Corporate  Power and Authority;  Enforceability.  Purchaser
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Purchaser and the consummation of the transactions
contemplated  by this  Agreement  have been  duly  authorized  by all  necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and  delivered by Purchaser and  constitutes  a valid and binding  obligation of
Purchaser,  enforceable against Purchaser in accordance with its terms,  subject
to bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

         SECTION 3.2 Investment  Intent;  Financing.  Purchaser is acquiring the
Purchased Shares for its own account for investment purposes only and not with a
view to, or for sale or resale  in  connection  with,  any  public  distribution
thereof or with any present  intention  of selling,  distributing  or  otherwise
disposing of the Purchased Shares.  Purchaser is an "accredited investor" within
the meaning of Regulation D of the Securities  Act.  Purchaser has and will have
at the Closing the funds necessary to pay the Purchase Price.

                                      -5-
<PAGE>

                                   ARTICLE IV

                            COVENANTS OF SHAREHOLDER

         SECTION 4.1 Covenants of  Shareholder.  For so long as the Agreement is
in effect, Shareholder agrees as follows:

         (a) Shareholder  shall not, except as contemplated by the terms of this
Agreement,  knowingly  take any action that would in any way restrict,  limit or
interfere with the performance of its  obligations  hereunder or the purchase of
the Purchased Shares.

         (b)  Shareholder  will not, except as contemplated by the terms of this
Agreement,  (a)  knowingly  take,  agree or commit to take any action that would
make any representation or warranty of Shareholder  hereunder  inaccurate in any
respect  as of any  time  prior  to the  termination  of this  Agreement  or (b)
knowingly  omit,  or agree or commit to omit,  to take any action  necessary  to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION 5.1 Expenses.  All costs and expenses  incurred by any party in
connection with this Agreement shall be paid by the party incurring such cost or
expense (it being understood that  Shareholder's  costs and expenses incurred in
connection with this Agreement may be paid for by the Company).

         SECTION 5.2 Specific  Performance.  Shareholder agrees that irreparable
damage  would occur in the event that any of the  provisions  of this  Agreement
were not performed in accordance  with their  specific  terms or were  otherwise
breached.  It is  accordingly  agreed  that  Purchaser  shall be  entitled to an
injunction or injunctions  to prevent  breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Federal courts of
the United States of America  located in the State of New Jersey,  this being in
addition to any other remedy to which they are entitled at law or in equity.

         SECTION 5.3 Notices. All notices,  requests,  claims, demands and other
communications  hereunder  shall be in  writing  and  shall be  deemed  given if
delivered  personally or sent by overnight courier (providing proof of delivery)
or by telecopy  (with copies by  overnight  courier) to Purchaser at its

                                      -6-
<PAGE>

address set forth in the Tender Offer  Agreement or  Shareholder  at the address
for the Company set forth in the Tender Offer Agreement or to such other address
as such party may have  furnished to the other  parties in writing in accordance
herewith.

         SECTION 5.4  Amendments.  This Agreement may not be modified,  amended,
altered or  supplemented,  except upon the  execution  and delivery of a written
agreement executed by the parties hereto.

         SECTION 5.5 Successors  and Assigns.  Neither this Agreement nor any of
the rights,  interests or obligations  hereunder shall be assigned by any of the
parties  without the prior  written  consent of the other  parties,  except that
Purchaser  may  assign,  in its  sole  discretion,  any  or  all of its  rights,
interests  and  obligations  hereunder  to any direct or  indirect  wholly-owned
subsidiary  of Purchaser  (it being  understood  that no such  assignment  shall
relieve  Purchaser  of its  obligations  hereunder).  Subject  to the  preceding
sentence,  this Agreement  will be binding upon,  inure to the benefit of and be
enforceable  by,  the  parties  and their  respective  successors  and  assigns.
Shareholder  agrees  that this  Agreement  and the  obligations  of  Shareholder
hereunder  shall  attach to  Shareholder's  Shares and shall be binding upon and
inure to the  benefit  of any  person  or entity  to which  legal or  beneficial
ownership of such Shares shall pass,  whether by operation of law or  otherwise,
including Shareholder's heirs, guardians, administrators or successors.

         SECTION 5.6 (a)  Governing  Law and Venue;  Waiver of Jury Trial.  THIS
AGREEMENT  SHALL  BE  DEEMED  TO BE  MADE  IN  AND  IN  ALL  RESPECTS  SHALL  BE
INTERPRETED,  CONSTRUED  AND GOVERNED BY AND IN  ACCORDANCE  WITH THE LAW OF THE
STATE OF NEW JERSEY  APPLICABLE  TO CONTRACTS  WHOLLY MADE AND PERFORMED IN SUCH
STATE. The parties hereby  irrevocably submit to the jurisdiction of the Federal
courts of the United States of America located in the State of New Jersey solely
in respect of the  interpretation  and  enforcement  of the  provisions  of this
Agreement and of the documents  referred to in this  Agreement and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to assert,
as a  defense  in any  action,  suit or  proceeding  for the  interpretation  or
enforcement  hereof or of any such document,  that it is not subject  thereto or
that such action,  suit or proceeding may not be brought or is not  maintainable
in said  courts or that the venue  thereof may not be  appropriate  or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto  irrevocably agree that

                                      -7-
<PAGE>

all  claims  with  respect  to such  action  or  proceeding  shall be heard  and
determined in such a New Jersey Federal court. The parties hereby consent to and
grant  such court  jurisdiction  over the  person of such  parties  and over the
subject matter of such dispute and agree that mailing of process or other papers
in  connection  with any such  action or  proceeding  in the manner  provided in
Section 5.3 or in such other  manner as may be  permitted  by law shall be valid
and sufficient service thereof.

         (b) EACH PARTY  ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY  WHICH MAY
ARISE  UNDER THIS  AGREEMENT  IS LIKELY TO  INVOLVE  COMPLICATED  AND  DIFFICULT
ISSUES,  AND THEREFORE EACH SUCH PARTY HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
WAIVES  ANY  RIGHT  SUCH  PARTY  MAY HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY
LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE  TRANSACTIONS  CONTEMPLATED BY THIS  AGREEMENT.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES  THAT (i) NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE  FOREGOING  WAIVER,  (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS  WAIVER  VOLUNTARILY,  AND (iv) EACH PARTY HAS BEEN  INDUCED TO ENTER
INTO  THIS   AGREEMENT   BY,  AMONG  OTHER  THINGS,   THE  MUTUAL   WAIVERS  AND
CERTIFICATIONS IN THIS SECTION 5.6.

         SECTION 5.7 Counterparts;  Effectiveness.  This Agreement may be signed
(including by facsimile) in any number of  counterparts,  each of which shall be
an original,  with the same effect as if the signatures  thereto and hereto were
upon the same instrument.  This Agreement shall become effective when each party
hereto  shall  have  received  counterparts  hereof  signed  by all of the other
parties hereto.

         SECTION  5.8  Stop  Transfer   Restriction.   In  furtherance  of  this
Agreement,  Shareholder  hereby  authorizes  Purchaser's  counsel  to notify the
Company's transfer agent that there is a stop transfer  restriction with respect
to all of  Shareholder's  Shares (and that this  Agreement  places limits on the
voting and transfer of such shares).

         SECTION  5.9  Entire  Agreement;  No  Third-Party  Beneficiaries.  This
Agreement  (i)  constitutes  the  entire  agreement  and  supersedes  all  prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.

                                      -8-
<PAGE>

         SECTION 5.10  Shareholder  Capacity.  By executing and delivering  this
Agreement,  Shareholder  makes  no  agreement  or  understanding  herein  in his
capacity  as a  director  or officer of the  Company  or any  subsidiary  of the
Company.  Shareholder  signs solely in his capacity as the  beneficial  owner of
Shareholder's  Shares and nothing herein shall limit or affect any actions taken
by  Shareholder  in his capacity as an officer or director of the Company or any
subsidiary of the Company.

         SECTION  5.11  Severability.  If any  term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect.  Upon such determination that any
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall  negotiate in good faith to modify this Agreement so as to
effect  the  original  intent  of the  parties  as  closely  as  possible  in an
acceptable  manner  to the end that the  transactions  contemplated  hereby  are
fulfilled to the fullest extent possible.

         SECTION 5.12 Survival.  Sections 1.4 (Expiration),  5.1 (Expenses), 5.2
(Specific  Performance),  5.3  (Notices),  5.5  (Successors  and  Assigns),  5.6
(Governing  Law), 5.9 (Entire  Agreement;  No Third-Party  Beneficiaries),  5.11
(Severability) and this Section 5.12 shall survive expiration of this Agreement.
All other representations, warranties, agreement and covenants in this Agreement
shall not survive the termination of this Agreement.


                                      -9-
<PAGE>


         The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

                                   KONINKLIJKE PHILIPS ELECTRONICS N.V.

                                   By: /s/ A. Baan
                                      ---------------------------------
                                      Name:  A. Baan
                                      Title: Executive Vice President
                                             Royal Philips Electronics


                                   By: /s/ J.H.M. Hommen
                                      ---------------------------------
                                      Name:  J.H.M. Hommen
                                      Title: Executive Vice President
                                             Royal Philips Electronics



                                   By:  /s/ John W. Quaintance
                                      --------------------------------
                                   Name:  John W. Quaintance
                                   Title: SVP

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.9
<SEQUENCE>10
<FILENAME>0010.txt
<DESCRIPTION>GOVERNANCE AGREEMENT
<TEXT>


                              GOVERNANCE AGREEMENT

                                      AMONG

                                  MEDQUIST INC.

                                       AND

                      KONINKLIJKE PHILIPS ELECTRONICS N.V.

                            DATED AS OF MAY 22, 2000


<PAGE>


                                TABLE OF CONTENTS

ARTICLE I    DEFINITIONS.......................................................1
     Section 1.01. Definitions.................................................1

ARTICLE II   PURCHASES AND SALES OF EQUITY SECURITIES..........................3
     Section 2.01. Purchases of Equity Securities..............................3
     Section 2.02. Transfer of Common Stock....................................3
     Section 2.03. Co-Sale Right...............................................4

ARTICLE III  CORPORATE GOVERNANCE..............................................5
     Section 3.01. Composition of the Board of Directors.......................5
     Section 3.02. Election and Removal of Directors...........................7
     Section 3.03. Solicitation and Voting of Shares...........................7
     Section 3.04. Committees..................................................8
     Section 3.05. Certificate of Incorporation and By-Laws....................9

ARTICLE IV   REPRESENTATIONS AND WARRANTIES....................................9
     Section 4.01. Representations of Purchaser and the Company................9
     Section 4.02. Required Filings and Consents..............................10

ARTICLE V    DIRECTORS AND OFFICERS LIABILITY INSURANCE.......................10
     Section 5.01. Insurance..................................................10

ARTICLE VI   MISCELLANEOUS....................................................10
     Section 6.01. Notices....................................................10
     Section 6.02. Amendments; No Waivers.....................................12
     Section 6.03. Severability...............................................12
     Section 6.04. Entire Agreement; Assignment...............................12
     Section 6.05. Parties in Interest........................................12
     Section 6.06. Governing Law and Venue; Waiver of Jury Trial;
                   Specific Performance.......................................12
     Section 6.07. Headings...................................................13
     Section 6.08. Counterparts; Facsimile....................................14
     Section 6.09. Effective Time; Termination................................14
     Section 6.10. Combinations or Divisions of Equity Securities.............14


                                       -i-


<PAGE>


                              GOVERNANCE AGREEMENT

         GOVERNANCE AGREEMENT (this "Agreement"), dated as of May 22, 2000,
between Koninklijke Philips Electronics N.V., a corporation organized under the
laws of The Netherlands ("Purchaser"), and MedQuist Inc., a New Jersey
corporation (the "Company").

         WHEREAS, Purchaser and the Company have entered into a Tender Offer
Agreement dated as of May 22, 2000 (the "Tender Offer Agreement") pursuant to
which Purchaser will commence a tender offer for 22,250,327 shares of the
Company's common stock, no par value (the "Common Stock"), at a price of $51.00
per share in cash net to the Seller, subject to the terms and conditions set
forth in the Tender Offer Agreement (the "Tender Offer"); and

         WHEREAS, Purchaser and the Company desire to establish in this
Agreement certain terms and conditions concerning the corporate governance of
the Company and certain terms and conditions concerning the acquisition and
disposition of securities of the Company by Purchaser and its Affiliates and
Associates (each as defined in Section 1.01 below); and

         WHEREAS, to induce the Company to enter into the Tender Offer
Agreement, the Company has requested that Purchaser enter into this Agreement;
and

         NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, Purchaser and the Company hereby agree
as follows:

                                    ARTICLE I

                                   DEFINITIONS

         Section 1.01. Definitions. As used in this Agreement, the following
terms have the following meanings:

              (a) "Affiliate" has the same meaning as in Rule 12b-2 promulgated
under the Exchange Act.

              (b) "Associate" has the same meaning as in Rule 12b-2 promulgated
under the Exchange Act.

              (c) "Beneficial owner" and to "beneficially own" has the same
meaning as in Rule 13d-3 promulgated under the Exchange Act.


<PAGE>


              (d) "Board of Directors" means the entire Board of Directors of
the Company, as constituted from time to time.

              (e) "Director" means a member of the Board of Directors.

              (f) "Equity Security" means any (i) Voting Stock, (ii) securities
of the Company convertible into or exchangeable for Voting Stock, and (iii)
options, rights, warrants and similar securities issued by the Company to
purchase Voting Stock.

              (g) "Exchange Act" means the Securities Exchange Act of 1934, and
the rules and regulations promulgated thereunder, as amended.

              (h) "Independent Director" means a director of the Company (i) who
is not and has never been an officer or employee of the Company, any Affiliate
or Associate of the Company, or an entity that derived 5% or more of its
revenues or earnings in its most recent fiscal year from transactions involving
the Company or any Affiliate or Associate of the Company, (ii) who is not and
has never been an officer, employee or director of Purchaser, any Affiliate or
Associate of Purchaser, or an entity that derived more than 5% of its revenues
or earnings in its most recent fiscal year from transactions involving Purchaser
or any Affiliate or Associate of Purchaser and (iii) who was nominated for such
position by the Nominating Committee in accordance with Section 3.04(a)(i). The
initial Independent Directors shall be John H. Underwood, Richard H. Stowe and
A. Fred Ruttenberg.

              (i) "Officer" has the same meaning as in Rule 16a-1(f) promulgated
under the Exchange Act.

              (j) "SEC" means the United States Securities and Exchange
Commission.

              (k) "Securities Act" means the Securities Act of 1933, and the
rules and regulations promulgated thereunder, as amended.

              (l) "Subsidiary" has the same meaning as in Rule 12b-2 promulgated
under the Exchange Act.

              (m) "Voting Stock" means shares of capital stock of the Company
(including the Common Stock) having the right to vote generally in any election
of Directors.

                                      -2-


<PAGE>


                                   ARTICLE II

                    PURCHASES AND SALES OF EQUITY SECURITIES

         Section 2.01. Purchases of Equity Securities.

              (a) Until the third anniversary of the Effective Time, Purchaser
shall not, directly or indirectly through one or more of its Affiliates or
Associates, purchase or otherwise acquire, or propose or offer to purchase or
acquire, or otherwise become the beneficial owner, individually or as a member
of a "group" (as defined for purposes of Section 13d of the Exchange Act), of
any Equity Securities, whether by merger, consolidation, recapitalization,
tender or exchange offer, market purchase, privately negotiated purchase, or
otherwise, if, immediately after such transaction, Purchaser and its Affiliates
or Associates would, directly or indirectly, beneficially own in excess of 75%
of the then outstanding shares of Voting Stock; provided, however, that after
the first anniversary of the Effective Time, subject to the receipt of the
approval of the Supervisory Committee (as defined below), Purchaser or any of
its Affiliates or Associates may acquire, in one transaction or in a series of
related transactions, all, but not less than all, of the Equity Securities of
the Company which are not then, directly or indirectly, beneficially owned by
Purchaser or one or more of its Affiliates or Associates.

              (b) Notwithstanding the foregoing, Purchaser shall not be deemed
to be in violation of this Section 2.01 if Purchaser, or its Affiliates or
Associates in the aggregate, inadvertently becomes the direct or indirect
beneficial owner of more than 75% of the then outstanding shares of Voting Stock
and, as soon as commercially practicable, divests itself or themselves of a
sufficient amount of the Equity Securities so that it or they are no longer the
beneficial owner of more than 75% of the then outstanding shares of Voting
Stock.

         Section 2.02. Transfer of Common Stock.

              (a) Until the first anniversary of the Effective Time, Purchaser
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, sell, transfer or otherwise dispose of any Equity Securities
beneficially owned, directly or indirectly, by Purchaser or its Subsidiaries
except to Purchaser or to any Subsidiary of Purchaser. Until the first
anniversary of the Effective Time, Purchaser will not sell, transfer or
otherwise dispose of any of the capital stock (or any options or warrants to
purchase capital stock or securities convertible or exchangeable for capital
stock (collectively, "Derivative Equity Securities")) of any Subsidiary of
Purchaser that owns Equity Securities if, as a result of such sale, transfer or
other disposition, such Subsidiary would no longer be a Subsidiary, unless
Purchaser shall have first caused any such Equity Securities to be transferred
to another Subsidiary of Purchaser. Notwithstanding anything to the contrary
contained in

                                      -3-


<PAGE>


Section 2.02(a), Purchaser may sell, transfer or assign Equity Securities, or
the capital stock or Derivative Equity Securities of its Subsidiaries, or permit
any of its Subsidiaries which beneficially own Equity Securities to sell,
transfer or assign such Equity Securities, so long as after giving affect to any
such sales, transfers or assignments of Equity Securities, Purchaser and its
Subsidiaries, beneficially own at least 60% of the then outstanding shares of
Voting Stock.

              (b) Subject to the provisions of Section 2.03, after the first
anniversary of the Effective Time, Purchaser and its Subsidiaries may sell,
transfer or otherwise dispose of any of the Equity Securities beneficially owned
to any person or entity.

              (c) Until the third anniversary of the Effective Time, each
certificate evidencing outstanding Equity Securities that is beneficially owned
by Purchaser or its Affiliates or Associates shall be stamped or otherwise
imprinted with a legend substantially in the following form:

               "THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE
               SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET
               FORTH IN A STOCKHOLDERS AGREEMENT DATED AS OF MAY
               22, 2000, A COPY OF WHICH IS AVAILABLE AT THE
               PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.  NO
               REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE
               MADE ON THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH
               RESTRICTIONS HAVE BEEN COMPLIED WITH."

              (d) Any Affiliate or Associate of Purchaser that is a purported
purchaser, transferee or other recipient of Equity Securities permitted pursuant
to this Article II (other than in open-market purchases) shall, as a condition
precedent to its receipt and ownership of any such Equity Securities, execute an
agreement pursuant to which it becomes legally bound by this Agreement and the
restrictions contained herein.

              (e) Proposed transfers of Equity Securities that are not in
compliance with this Article II shall be of no force or effect and the Company
shall not be required to recognize any such transfer or purported transfer.

         Section 2.03. Co-Sale Right.

              (a) During the period beginning on the first anniversary of the
Effective Time and ending on the third anniversary of the Effective Time,
Purchaser shall not enter into or consummate any transaction (or series of
related transactions) involving the sale

                                      -4-


<PAGE>


or transfer of Equity Securities (or the sale or transfer of capital stock or
Derivative Equity Securities of any Subsidiary which beneficially owns Equity
Securities) that would result in (i) any person other than the Purchaser or any
Affiliate or Associate of Purchaser beneficially owning in excess of 10% of the
outstanding Voting Stock (a "Third Party Purchaser") and (ii) Purchaser and its
Affiliates and Associates beneficially owning less than a majority of the then
outstanding Voting Stock, unless:

                  (i) the Third-Party Purchaser contemporaneously therewith
offers to acquire, or acquires, on the same terms and conditions as are
applicable to Purchaser, its Affiliates or Associates, 100% of the Voting Stock
beneficially owned by persons or entities other than Purchaser, its Affiliates
or Associates, or

                  (ii) the Third-Party Purchaser offers to purchase, on the same
terms and conditions as are applicable to the Purchaser, its Affiliates or
Associates, pursuant to a tender or exchange offer made in accordance with
applicable law, including Section 14(d)(l) and Regulation 14D of the Exchange
Act, all or a specified percentage of the outstanding shares of Voting Stock; it
being understood that in such event, Purchaser agrees that neither it, nor any
of its Affiliates or Associates will sell to the Third Party Purchaser, its
Affiliates or Associates, any shares of Voting Stock beneficially owned by it
other than pursuant to such contemplated tender or exchange offer.

                                   ARTICLE III

                              CORPORATE GOVERNANCE

         Section 3.01. Composition of the Board of Directors.

              (a) The Company shall take any and all action necessary (including
by securing the resignation of persons who were Directors prior to the Effective
Time) so that promptly following the Effective Time, the Board of Directors
shall consist of eleven Directors, of which (i) one Director shall be the Chief
Executive Officer of the Company and one Director shall be another Officer of
the Company designated by the Chief Executive Officer of the Company (together,
the "Management Directors"), (ii) six Directors shall be designated by
Purchaser, all of whom may be directors, officers, employees, Affiliates or
Associates of Purchaser (the "Purchaser Directors"), and (iii) three Directors
shall be Independent Directors. From and after the time the Board of Directors
has been reconstituted in accordance with the preceding sentence, the Board of
Directors shall consist of eleven Directors, of which (i) two Directors shall be
Management Directors, (ii) in accordance with subsection (b) below, six or fewer
Directors shall be Purchaser Directors, and (iii) in accordance with subsection
(c) below, three or more shall be Independent Directors; provided, however, the
Board of Directors shall be empowered in its discretion to increase or decrease,
from time to time, the

                                      -5-


<PAGE>


number of Directors so long as (x) there shall be at least two Management
Directors and three Independent Directors, and (y) the relative percentage of
Management Directors, Independent Directors and Purchaser Directors shall be
maintained, in all material respects, as in effect immediately prior to any such
increase or decrease; and, provided, further, that if the Board of Directors
changes the number of Directors constituting the entire Board of Directors, then
the number of Directors and the percentages set forth in subsection (b) below
shall be appropriately adjusted, subject to the immediately preceding
provisions.

              (b) Subject to subsection (a) above and subsection (c) below, the
parties agree that:

                  (i) until the first date that Purchaser and its Subsidiaries
shall not beneficially own, in the aggregate, at least a majority of the
outstanding Voting Stock, Purchaser shall have the right to designate six
Purchaser Directors;

                  (ii) after the first date that Purchaser and its Subsidiaries
shall beneficially own, in the aggregate, less than a majority but at least 36%
of the outstanding Voting Stock, Purchaser shall have the right to nominate
four, but not more than four, Purchaser Directors;

                  (iii) after the first date that Purchaser and its Subsidiaries
shall beneficially own, in the aggregate, less than 36% but at least 27% of the
outstanding Voting Stock, Purchaser shall have the right to nominate three, but
not more than three, Purchaser Directors;

                  (iv) after the first date that Purchaser and its Subsidiaries
shall beneficially own, in the aggregate, less than 27% but at least 18% of the
outstanding Voting Stock, Purchaser shall have the right to nominate two, but
not more than two, Purchaser Directors;

                  (v) after the first date that Purchaser and its Subsidiaries
shall beneficially own, in the aggregate, less than 18% but at least 5% of the
outstanding Voting Stock, Purchaser shall have the right to nominate one, but
not more than one, Purchaser Director; and

                  (vi) After the first date that Purchaser and its Subsidiaries
shall beneficially own, in the aggregate, less than 5% of the outstanding Voting
Stock, Purchaser shall have no right to nominate any Directors.

              (c) In the event that Purchaser shall have the right to designate
less than six Directors pursuant to subsection 3.01(b) above, the Nominating
Committee shall

                                      -6-


<PAGE>


nominate that number of additional Independent Directors as is necessary to
constitute the entire Board of Directors (as constituted at such time) and
Purchaser shall cause such Purchaser Directors to resign promptly so as to
permit the additional Independent Directors to be appointed or elected.

              (d) Purchaser shall have the right to designate any replacement
for a Purchaser Director at the termination of such Director's term or upon such
Director's death, resignation, retirement, disqualification, removal from office
or other cause, and the Chief Executive Officer of the Company shall have the
right to designate any replacement for a Management Director at the termination
of such Director's term or upon such Director's death, resignation, retirement,
disqualification, removal from office or other cause.

              (e) No individual who is an officer, director, partner or
principal stockholder of any competitor of the Company or any of its
Subsidiaries shall serve as a Director; provided, however, the foregoing shall
not apply to officers, directors, partners or principal stockholders of
Purchaser, its Affiliates or Associates.

              (f) The parties hereto acknowledge that no director of the Company
shall be deemed to be the deputy of, or otherwise be required to discharge his
or her duties as a member of the Board of Directors under the direction of, or
with special attention to the interests of, any shareholder of the Company, and
each director shall be required to discharge his or her duties to all
shareholders of the Company.

         Section 3.02. Election and Removal of Directors. In connection with the
filling of any vacancy on the Board of Directors, however such vacancy shall
have resulted, Purchaser shall cause each Purchaser Director to vote in favor of
those Directors nominated or designated in accordance with this Article III.
Purchaser shall not take any action or permit any Purchaser Director to take any
action to remove any Director, other than a Purchaser Director, without cause.

         Section 3.03. Solicitation and Voting of Shares.

              (a) The Company shall use commercially reasonable efforts to
solicit from the stockholders of the Company eligible to vote for the election
of Directors proxies in favor of the nominees designated or nominated in
accordance with this Article III.

              (b) Purchaser shall vote or cause to be voted all of its shares of
Voting Stock beneficially owned by it or by any of its Affiliates or Associates
(other than shares of Voting Stock obtained by its Affiliates (other than its
Subsidiaries) or Associates in

                                      -7-


<PAGE>


open-market purchases) in favor of nominees designated or nominated in
accordance with this Article III.

              (c) Purchaser shall vote or cause to be voted, whether at a
meeting or by execution of a written consent, all of the shares of Voting Stock
beneficially owned by it or by any of its Affiliates or Associates in favor of
the approval of an increase in the maximum number of shares of the Common Stock
which may be issued under the Company's Incentive Stock Option Plan for Officers
and Key Employees to 7,130,000 shares.

         Section 3.04. Committees.

              (a) Subject to the general oversight and authority of the full
Board of Directors, the Board of Directors shall establish and, during the term
of this Agreement, empower and maintain the committees of the Board of Directors
contemplated by this Section 3.04:

                  (i) a Nominating Committee, responsible, among other things,
for the nomination, subject to Section 3.01, of the Independent Directors and
consisting solely of two Independent Directors, one Purchaser Director and one
Management Director as selected by the Board of Directors from time to time;

                  (ii) a Compensation Committee, responsible, among other
things, for the adoption, amendment and administration of all employee benefit
plans and arrangements and the compensation of all Officers of the Company, and
consisting of two Independent Directors and two Purchaser Directors as selected
by the Nominating Committee and the Purchaser, respectively, from time to time;

                  (iii) a Supervisory Committee, responsible, among other
things, for (A) the general oversight, administration, amendment and
enforcement, on behalf of the Company, of (1) those provisions of the Tender
Offer Agreement that survive Purchaser's purchase of shares pursuant to the
Tender Offer, (2) this Agreement, and (3) that certain License Agreement dated
today's date between an Affiliate of Purchaser and the Company, and (B) the
entry into, general oversight, administration, amendment and enforcement, on
behalf of the Company, of any other agreements or arrangements between the
Company or any of its Subsidiaries, on the one hand, and the Purchaser and any
of its Subsidiaries on the other hand, which would be required pursuant to
Regulation S-K promulgated by the SEC to be disclosed in a registration
statement filed under the Securities Act or in a proxy statement or other report
filed under the Exchange Act; and consisting of at least three Independent
Directors selected by a majority of the Independent Directors; and

                                      -8-


<PAGE>


                  (iv) such other committees as the Board of Directors deems
necessary or desirable; provided that such committees shall not conflict with,
supersede or duplicate the duties or responsibilities of the Committees
established pursuant to this Section 3.04.

              (b) Each Committee established pursuant to this Agreement shall
act by the affirmative vote of a majority of its members or by unanimous written
consent.

         Section 3.05.  Certificate of Incorporation and By-Laws.

              (a) The Company and Purchaser shall take or cause to be taken all
lawful action necessary to ensure at all times that the Company's Certificate of
Incorporation and By-Laws are not, at any time, inconsistent with the provisions
of this Agreement.

              (b) The Certificate of Incorporation and By-laws of the Company
shall contain provisions no less favorable with respect to indemnification than
are set forth in Article X of the By-laws of the Company as in effect on the
date hereof, which provisions shall not be amended, repealed or otherwise
modified in any manner that would affect adversely the rights thereunder of the
directors, officers, employees, fiduciaries or agents of the Company, unless
such modification shall be required by law.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         Section 4.01. Representations of Purchaser and the Company. Purchaser
and the Company represent and warrant, to each other as follows:

              (a) Authority Relative to This Agreement. It has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by it and the consummation by it of
this Agreement have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on its part are necessary to authorize
this Agreement. This Agreement has been duly and validly executed and delivered
by it and constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

              (b) No Conflict. The execution and delivery by it of this
Agreement do not, and its performance of its obligations under this Agreement
will not, (i) conflict with or violate the Certificate of Incorporation or
By-Laws (or similar constitutive documents)

                                      -9-


<PAGE>


of it or any of its Subsidiaries, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to it or to any of its
Subsidiaries, or by which any of its property or assets or any of the property
or assets of its Subsidiaries is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrances on any of its property or assets or on
any of the property or assets of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which it or any of its Subsidiaries is a party
or by which it or any of its Subsidiaries or any of its property or assets or
any of the property or assets of its Subsidiaries is bound or affected, except
for any such conflicts, violations, breaches, defaults or other occurrences
which could not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on its ability to perform its obligations under
this Agreement (a "Material Adverse Effect").

         Section 4.02. Required Filings and Consents. This execution and
delivery by it of this Agreement does not, and the performance of this Agreement
by it will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, state blue sky and takeover laws, and (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on it.

                                    ARTICLE V

                   DIRECTORS AND OFFICERS LIABILITY INSURANCE

         Section 5.01. Insurance. The Company hereby agrees that it shall
maintain the same directors and officers liability ("D&O Insurance") for the
benefit of each Director and officer of the Company, provided, however, that in
the event that Purchaser determines that it can provide such D&O Insurance more
cost effectively than the Company, Purchaser may do so.

                                   ARTICLE VI

                                  MISCELLANEOUS

         Section 6.01. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
transmission,

                                      -10-


<PAGE>


overnight courier guaranteeing next business day delivery, or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section):

         if to Purchaser, to:

                  Koninklijke Philips Electronics N.V.
                  Rembrandt Tower
                  Amstelplein 1
                  1096 HA Amsterdam,
                  The Netherlands
                  Attention:  General Secretary
                  Facsimile:  (011) 31-20-597-7150

         with a copy to:

                  Sullivan & Cromwell
                  125 Broad Street
                  New York, NY 10004
                  Attention:  Stephen M. Kotran
                  Facsimile:  212-558-3588

         if to the Company, to:

                  MedQuist Inc.
                  Five Greentree Centre, Suite 311
                  Mariton, New Jersey 08053
                  Attention: Chief Executive Officer; and
                                Senior Vice President and General Counsel
                  Facsimile: 856-596-3351

         with a copy to:

                  Pepper Hamilton LLP
                  3000 Two Logan Square
                  Eighteenth and Arch Streets
                  Philadelphia, PA 19103-2799
                  Attention:  James D. Epstein
                  Facsimile:  215.981.4750

                                      -11-


<PAGE>


         Section 6.02. Amendments; No Waivers.

              (a) Any provision of this Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed, in the case of
any amendment, by Purchaser and the Company, or in the case of a waiver, by the
party against whom the waiver is to be effective; provided that no such
amendment or waiver by the Company shall be effective without the approval of
the Supervisory Committee.

              (b) No failure or delay by any party in exercising any right,
power or privilege hereunder, shall operate as waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

         Section 6.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the matters contemplated hereby are not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner.

         Section 6.04. Entire Agreement; Assignment. This Agreement constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
This Agreement shall not be assigned by operation of law or otherwise without
the written consent of the other parties hereto.

         Section 6.05. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

         Section 6.06. Governing Law and Venue; Waiver of Jury Trial; Specific
Performance.

              (a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW JERSEY

                                      -12-


<PAGE>


WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties hereby
irrevocably submit to the jurisdiction of the Federal courts of the United
States of America located in the State of New Jersey solely in respect of the
interpretation and enforcement of the provisions of this Agreement, and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Federal court. The parties hereby
consent to and grant any such court jurisdiction over the person of such parties
and over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner
provided in Section 6.01 or in such other manner as may be permitted by law
shall be valid and sufficient service thereof.

              (b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND (ii) AGREES THAT THE
PARTIES SHALL BE ENTITLED TO SPECIFIC PERFORMANCE OF THE TERMS HEREOF WITHOUT
THE REQUIREMENT THAT A BOND BE POSTED. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 6.06.

         Section 6.07. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.

                                      -13-


<PAGE>


         Section 6.08. Counterparts; Facsimile. This Agreement may be executed
and delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

         Section 6.09. Effective Time; Termination. This Agreement shall
automatically become effective, without any action on the part of any party
hereto, upon payment by Purchaser for all shares of Common Stock validly
tendered and not withdrawn (subject to the terms and conditions of the Offer (as
defined in the Tender Offer Agreement)) pursuant to the Tender Offer Agreement
(the "Effective Time"), and shall terminate upon the earlier of (i) the mutual
agreement of the parties hereto and (ii) the first date on which Purchaser no
longer, directly or indirectly, beneficially owns at least 5% of the Voting
Stock; provided, however, the provisions of Section 3.04 shall terminate and be
of no further force or effect as of the first date when Purchaser Directors do
not constitute a majority of the Board of Directors.

         Section 6.10. Combinations or Divisions of Equity Securities. In the
event that any of the outstanding Equity Securities shall be subdivided into a
greater or combined into a lesser number of such securities, whether by stock
dividend, stock split, reverse stock split, recapitalization, combination of
shares or any similar action, any references to numbers, percentages or
calculations thereof in this Agreement shall be proportionately adjusted
wherever applicable.

                                      -14-


<PAGE>


              IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.

                                            KONINKLIJKE PHILIPS ELECTRONICS N.V.


                                            By:  /s/ A. Baan
                                               ---------------------------------
                                               Name:  A. Baan
                                               Title: Executive Vice President
                                                      Philips Electronics


                                            By:  /s/ J.H.M. Hommen
                                               ---------------------------------
                                               Name:  J.H.M. Hommen
                                               Title: Executive Vice President
                                                      Philips Electronics


                                            MEDQUIST INC.


                                            By:  /s/ David A. Cohen
                                               ---------------------------------
                                               Name:  David A. Cohen
                                               Title: Chairman & CEO


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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