Costa Brava Partnership, a MedQuist Shareholder, Sends Letter to Royal Philips Executive



    Costa Brava Partnership III, L.P. ("Costa Brava") today sent the
    following letter to Mr. Clement Revetti, member of the Board of
    Directors of MedQuist Inc. (OTC: MEDQ.PK) and a senior executive of
    Koninklijke Philips Electronics N.V. ("Philips") (AEX: PHI, NYSE:
    PHG).

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    Mr. Clement Revetti, Jr.
    Director
    MedQuist Inc.
    1000 Bishops Gate Boulevard
    Suite 300
    Mount Laurel, NJ 08054

    VIA FEDEX

    Mr. Revetti:
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    I am a manager of Costa Brava Partnership III, L.P., a significant
    owner of the common stock of MedQuist, Inc. ("MedQuist").

    At the annual meeting of MedQuist shareholders held on December
    31, 2007, I posed critical questions to CEO Howard Hoffman and you.
    These questions go to the heart of the involvement of majority
    shareholder Philips Electronics N.V. ("Philips") in the sale process
    of MedQuist stock and the fiduciary duty owed to the minority public
    stockholders. Unfortunately, you were either unprepared or unwilling
    to answer my questions. I find your lack of response particularly
    troubling, in view of your conflicting roles as a member of the Board
    of Directors of Medquist and as the Chief Legal Officer of Philips
    Medical, a division of Philips.

    As you know, Philips has publicly announced that its 70%
    investment in MedQuist is not a core holding and that Philips will
    seek to dispose of this interest. In a maneuver that can be described
    as a classic example of the tail wagging the dog, Philips caused the
    resignation of three independent directors of MedQuist and forced
    MedQuist to seek a sale of itself for Philips´ benefit, to the
    detriment of MedQuist´s minority public stockholders. Indeed, at the
    shareholders meeting Mr. Hoffman stated unequivocally that MedQuist is
    in the midst of the "optimization" stage of its restructuring plan
    that will generate substantial savings and, thus, enhance MedQuist´s
    value.

    As you conceded at the annual meeting, the replacement of these
    three independent directors with two hand-picked alternatives is a
    violation of the Governance Agreement that governs the relationship
    between your principle employer, Phillips, and our company, Medquist.
    Hence, the process by which Phillips and its functionaries are forcing
    the sale of the entirety of Medquist is illegitimate, as it is being
    directed by a conflicted and incomplete Board.

    Finally, Philips has directed MedQuist into related-party
    transactions with Philips, whereby MedQuist pays Philips material
    monetary amounts that have been hidden from MedQuist´s public
    stockholders. These hidden payments are scheduled to continue to 2013,
    well beyond any near term sale of MedQuist directed by Philips. The
    result of this elaborate related-party scheme is that Philips will
    continue to be paid by the presumed acquiror of MedQuist long after
    the public minority stockholders are forced to accept fire-sale values
    for their MedQuist shares.

    My critical questions posed to you at the shareholders meeting
    were two-fold:

    First, in light of the aforementioned related-party scheme with
    Philips, I asked whether the Philips executives on MedQuist´s Board
    (Messrs Rusckowski, Sebasky, Weisenhoff and you) will be recused from
    the MedQuist sale process. Remarkably, you asserted that there is no
    conflict of interest for you and the other three Philips executives to
    act as fiduciaries on behalf of all MedQuist stockholders, and you
    confirmed that none of the Philips executives have been, or will be,
    recused from deliberations about the sale process.

    Second, I asked you whether Philips will compensate the public
    minority stockholders of MedQuist in the sale process for amounts
    diverted to Philips from its continuing vendor relationship with the
    acquirer of MedQuist, since the public stockholders of MedQuist will
    receive no such payments. You refused to answer my question.

    Other parties have raised similar concerns. The world´s leading
    institutional proxy advisory firm, RiskMetrics/ISS, issued a report on
    December 28, 2007 regarding MedQuist. The report identified the
    substantial risk that Philips´ desire to sell MedQuist will conflict
    with the interests of MedQuist´s public stockholders.

    I would like to remind you that Costa Brava has been successful in
    recent weeks in obtaining two court orders in the Superior Court of
    New Jersey against MedQuist, one which was the ordering of this
    stockholders´ meeting, which Philips had impeded since 2003.

    In view of your refusal to answer my questions posed to you at the
    stockholders´ meeting regarding Philips´ role, in additional to your
    denial of the clear conflict of interest of the Philips executives on
    MedQuist´s Board, Costa Brava reserves all of its rights and claims in
    connection with any sale of MedQuist, including its rights to seek
    injunctive relief, monetary damages caused by violations of the New
    Jersey Shareholders Protection Act and appraisal remedies.

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    Sincerely,

    Andrew R. Siegel
    Senior Vice President
    Roark, Rearden & Hamot Capital Management

    Cc: The Board of Directors
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    About Costa Brava Partnership III, L.P.

    Costa Brava is a Boston based investment fund, managed by Roark,
    Rearden & Hamot Capital Management LLC.