TABLE OF CONTENTS       **Page**ARTICLE I DEFINITIONS  1      Section 1.1 Definitions  1      ARTICLE II CERTAIN RESTRICTIONS ON TRANSFERS  4      Section 2.1 Agreement to be Bound  4 Section 2.2 Share Certificates  4      ARTICLE III GOVERNANCE  5      Section 3.1 Board Size  5 Section 3.2 Officer Appointment  7 Section 3.3 Proxy  7      ARTICLE IV REGISTRATION  7      Section 4.1 Piggyback Registrations  7 Section 4.2 Lockup Agreements  8 Section 4.3 Registration Procedures  8 Section 4.4 Registration Expenses  10 Section 4.5 Additional Procedures  10 Section 4.6 Termination of Registration Rights  11      ARTICLE V INDEMNIFICATION AND CONTRIBUTION  11      Section 5.1 Indemnification by the Company  11 Section 5.2 Indemnification by Stockholders of Registrable Securities  11 Section 5.3 Conduct of Indemnification Proceedings  11 Section 5.4 Contribution  12      ARTICLE VI MISCELLANEOUS  13      Section 6.1 Recapitalization, Exchanges, etc.  13 Section 6.2 Entire Agreement; Successors and Assigns  13 Section 6.3 No Waivers, Amendments  14 Section 6.4 Notices  14 Section 6.5 Termination  15 Section 6.6 Governing Law  15 Section 6.7 Consent to Jurisdiction  15 Section 6.8 Waiver of Jury Trial  16 Section 6.9 Descriptive Headings  16 Section 6.10 Severability  16 Section 6.11 Counterparts  17 
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        **Page**Section 6.12 Confidentiality  17 Section 6.13 Authority; Effect  17 Section 6.14 Enforcement; Further Assurances  18 
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1**STOCKHOLDERS AGREEMENT**          STOCKHOLDERS AGREEMENT dated as of February 11, 2011 (this “Agreement”) by and among:          (i) CBaySystems Holdings Limited, a Delaware corporation (the “Company”);          (ii) S.A.C. PEI CB Investment, L.P., a Cayman Islands limited partnership (“SAC CBI”);          (iii) S.A.C. PEI CB Investment II, LLC, a Delaware limited liability company (“SAC CBIII”);          (iv) International Equities (S.A.C. Asia) Limited, a company incorporated under the CompaniesAct 2001 of Mauritius (“SAC Asia” and, together with SAC CBI and SAC CBI II, collectively,the “SAC Group”);          (iv) the Investors (as defined below); and          (v) such other Persons who from time to time become party hereto by executing a counterpartsignature page hereof in the form of Exhibit A hereto or such other form as may be designated bythe Board (together with the SAC Group and the Investors, the “Stockholders”).WITNESSETH:          WHEREAS, the Company and the Investors have entered into an Exchange Agreement, dated as ofSeptember 30, 2010, and further amended by Amendment No. 1 thereto, dated December 30, 2010,pursuant to which the Investors agreed to exchange (the “Exchange”) their shares of commonstock, no par value, of MedQuist, Inc., a subsidiary of the Company, for shares of Common Stock (asdefined hereinafter); and          WHEREAS, the parties hereto desire to enter into certain arrangements relating to the Company,the CBAY Shares and the Stockholders.          NOW, THEREFORE, in consideration of the mutual terms, conditions and other covenants andagreements set forth herein, the parties hereto hereby agree as follows:ARTICLE IDEFINITIONS          Section 1.1 Definitions. As used in this Agreement, the following terms have the following meanings:          “Affiliate”, as applied to any Person, means any other Person directly or indirectlythrough one or more intermediaries, controlling, controlled by, or under common control with, thatPerson. For the purposes of this definition “control” (including, with correlativemeanings, the terms “controlling”, “controlled by” and “under common controlwith”), as applied to any

 

2Person, means the possession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of that Person, whether through the ownership of votingsecurities, by contract or otherwise.          “Agreement” shall have the meaning set forth in the preamble of this Agreement.          “Board” shall have the meaning set forth in Section 3.1.          “Business Day” means any day other than a Saturday, a Sunday or a day on which banksare required to be closed in New York, New York.          “By-Laws” means the by-laws of the Company and any amendments thereto and restatementsthereof.          “Certificate of Incorporation” means the Certificate of Incorporation of the Companyand any amendments thereto and restatements thereof filed on behalf of the Company with theDelaware Secretary of State.          “Change in Control” means the occurrence, in a single transaction or in a series ofrelated transactions, of any one or more of the following events: (i) the sale or disposition ofall or substantially all of the assets of the Company to any Person or “group” (as such term isused for the purposes of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, asamended), other than the Stockholders as of the date of this Agreement and their Affiliates andPermitted Transferees; or (ii) any Person, other than the Stockholders as of the date of thisAgreement, their Affiliates and Permitted Transferees, is or becomes the beneficial owner, directlyor indirectly, of more than fifty percent (50%) of the total voting power of the outstanding votingstock of the Company, including by way of merger, consolidation or otherwise.          “Commission” shall have meaning set forth in Section 4.3(a).          “Common Stock” means the common stock of the Company, par value $0.01 per share.          “Company” shall have the meaning set forth in the preamble of this Agreement.          “Indemnified Party” shall have the meaning set forth in Section 5.3.          “Indemnifying Party” shall have the meaning set forth in Section 5.3.          “Investors” means each of the Stockholders as of the date hereof other than the SACGroup, and the Permitted Transferees of such Stockholders other than the SAC Group.          “NASDAQ” means the NASDAQ Global Market.          “Permitted Transferee” means, with respect to each Stockholder, (a) any Affiliatesthereof (or their Permitted Transferees), (b) any general or limited partner, member, director,officer or employee of such Stockholder (or their Permitted Transferees) and (c) any Person to

 

3whom a Stockholder (or any direct or indirect Permitted Transferee thereof) Transfers equityinterests of the Company in accordance with the terms of this Agreement (including, for theavoidance of doubt, any consent or waiver pursuant to and in accordance with the terms of thisAgreement) by which such Transferor is bound and, in the case of Transfers other than Transfers ofCommon Stock pursuant to a Public Offering or pursuant to Rule 144 under the Securities Act after aPublic Offering, if such Transferee becomes a party to, and is bound to the same extent as itsTransferor by the terms of, this Agreement; provided, that any such Permitted Transfereereferred to in the foregoing clauses agrees in writing to be bound by the terms of this Agreementin accordance with Section 2.1.          “Person” means an individual, partnership, corporation, business trust, joint stockcompany, limited liability company, unincorporated association, joint venture or other entity ofwhatever nature.          “Piggyback Registration” shall have the meaning set forth in Section 4.1.          “Public Offering” means any public offering pursuant to an effective registrationstatement under the Securities Act.          “Registrable Securities” means any outstanding shares of Common Stock held by aStockholder from time to time until the earlier of (i) a registration statement covering suchCommon Stock has been declared effective by the Commission and such stock has been disposed ofpursuant to such effective registration statement, (ii) such Common Stock is eligible to be sold tothe public pursuant to Rule 144 (or any similar provisions then in force) by such Stockholderwithout restriction as to volume or manner of sale under the Securities Act, under circumstances inwhich any legend borne by the Common Stock relating to restrictions on transferability thereofunder the Securities Act is or can be removed or (iii) such Common Stock is no longer subject torestrictions under Rule 144 of the Securities Act.          “Registration Expenses” shall have the meaning set forth in Section 4.4.          “SAC CBI” shall have the meaning set forth in the preamble of this Agreement.          “SAC CBI II” shall have the meaning set forth in the preamble of this Agreement.          “SAC Directors” shall have the meaning set forth in Section 3.1.          “SAC Group” shall have the meaning set forth in the preamble of this Agreement.          “Securities Act” means the United States Securities Act of 1933, as amended.          “Selling Stockholder” shall have the meaning set forth in Section 4.3(c).          “Shares” means shares of Common Stock.          “Stockholder” shall have the meaning set forth in the preamble of this Agreement.

 

4          “Subsidiary” means, with respect to any Person, any corporation or other entity ofwhich a majority of the capital stock or other ownership interests having ordinary voting power toelect a majority of the board of directors or other persons performing a similar function at thetime directly or indirectly owned by such Person.          “Transfer” means any direct or indirect transfer, sale, assignment, pledge, mortgage,hypothecation, encumbrance or other disposition of all or a portion of any Shares or any economicinterest therein (including without limitation by means of any participation or swap transaction),but for the avoidance of doubt shall not include an ordinary course transfer of an ownershipinterest in any investment fund or similar entity having an investment in Shares.          “Transferee” means any Person to whom Shares subject to this Agreement areTransferred.          “Transferor” means any Person who Transfers Shares subject to this Agreement.          “Underwriter” means a securities dealer that purchases any Registrable Securities asprincipal in an underwritten offering and not as part of such dealer’s market making activities.ARTICLE IICERTAIN RESTRICTIONS ON TRANSFERS          Section 2.1 Agreement to be Bound. Until the earlier of (a) such time as the Shares held by an Investor may be sold pursuantto Rule 144 under the Securities Act under circumstances in which any legend borne by the Sharesrelating to restrictions on transferability thereof under the Securities Act may be removed or (b)the first anniversary of the closing of the Exchange (the “Closing”), no Transfer of Sharesby an Investor (other than Transfers in a Public Offering or pursuant to Rule 144 of the SecuritiesAct (or any successor provision)) shall be effective unless (i) the Transferee, if not already aparty hereto, shall have executed and delivered to the Company, as a condition precedent to suchTransfer, an instrument reasonably satisfactory to the Company confirming that the Transfereeagrees to be bound by the terms of this Agreement with respect to the Shares so Transferred to thesame extent applicable to the Transferor thereof and acknowledging that such Transferee shall bedeemed to be an Investor hereunder and (ii) the Transferee has delivered to the Company an opinionof counsel reasonably satisfactory to the Company indicating that the proposed Transfer is exemptfrom registration pursuant to applicable securities laws.          Section 2.2 Share Certificates. (a) Each certificate representing Shares held by an Investor will bear a legend onthe face thereof substantially to the following effect (with such additions thereto orchanges therein as the Company may be advised by counsel are required by law ornecessary or appropriate):“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE STOCKHOLDERSAGREEMENT AMONG CBAYSYSTEMS HOLDINGS LIMITED AND THE OTHER

 

5STOCKHOLDERS PARTY THERETO, DATED AS OF FEBRUARY 11, 2011, AS AMENDED ANDSUPPLEMENTED FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS THEREOF, A COPYOF WHICH IS ON FILE WITH THE SECRETARY OF CBAYSYSTEMS HOLDINGS LIMITED. THESTOCKHOLDERS AGREEMENT CONTAINS, AMONG OTHER THINGS, CERTAIN PROVISIONSRELATING TO THE VOTING AND TRANSFER OF THE SHARES SUBJECT TO THE AGREEMENT.NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OFTHE SECURITIES REPRESENTED BY THIS CERTIFICATE, DIRECTLY OR INDIRECTLY, MAYBE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERSAGREEMENT. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THISCERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCHSTOCKHOLDERS AGREEMENT.”“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDERTHE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACTS AND MAY NOT BETRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDERSUCH ACTS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.”ARTICLE IIIGOVERNANCE          Section 3.1 Board Size. (a) The Board of Directors of the Company (the “Board”) shall initiallyconsist of nine (9) directors. Thereafter, the size of the Board shall be determinedin the manner set forth from time to time in the Company’s Certificate of Incorporationand By-Laws. SAC CBI shall have the right to nominate three (3) directors to the Board(the “SAC Directors”). As of the date hereof, the SAC Directors shall beMessrs. Frank Baker, Peter Berger and Jeffrey Hendren.  (b) For so long as SAC CBI has the right to nominate the SAC Directors, the Companyat all times shall take such actions as may be required under applicable Law, NASDAQrules, the Certificate of Incorporation and the By-Laws to cause the Board to consistof the number of directors in accordance with Section 3.1(a), and to include on theBoard or in the slate of nominees recommended by the Board such persons nominated bySAC CBI pursuant to this Section 3.1.  (c) For as long as SAC CBI has the right to nominate the SAC Directors, eachInvestor hereby agrees that it will vote all of the voting Shares owned or held ofrecord by

 

6   such Investor, or (as applicable) provide its written consent in respect thereof, inorder to elect or appoint (as applicable) the SAC Directors to the Board.  (d) For so long as SAC CBI has the right to nominate the SAC Directors, without theprior written consent of SAC CBI, each Investor agrees not to take any action thatwould cause the number of directors constituting the entire Board to be greater thannine (9).  (e) For so long as SAC CBI has the right to nominate the SAC Directors, in theevent a vacancy is created at any time, including by the death, disability, retirement,resignation or removal (with or without cause) of any SAC Director, SAC CBI maynominate another individual to be elected to fill each such vacancy created thereby andthe parties hereto agree to take, at any time, and from time to time, all actionsnecessary or appropriate in order to effect the election or appointment (as applicable)of each such individual to the Board.  (f) Any proposed SAC Director, at the time when such person is nominated to serveas a director, shall be reasonably acceptable to the Company’s Nominating and CorporateGovernance Committee as determined in good faith. SAC CBI shall notify the Company ofany proposed SAC Director, in writing, a reasonable time in advance of the mailing ofany proxy statement, information statement or registration statement in which suchproposed SAC Director would be named, together with all information concerning suchnominee reasonably requested by the Company so that the Company can comply withapplicable disclosure rules; provided that in the absence of such notice, SACCBI shall be deemed to have designated or nominated the same SAC Directors currently inoffice or, if applicable, set forth in the most recent notice delivered to the Companypursuant to this Section 3.1(f).  (g) For as long as SAC CBI has the right to nominate the SAC Directors, eachInvestor agrees that, (i) if at any time SAC CBI shall notify such Investor of itsdesire to remove, with or without cause, any SAC Director, such Investor will vote, orcause to be voted, all of the voting Shares owned or held of record by such Investor,and shall take all such other actions promptly as shall be necessary or appropriate tocause the removal of such director and (ii) it will not take any action to remove anySAC Director unless so notified by SAC CBI.  (h) The parties acknowledge that the Company may enter into agreements with each ofthe SAC Directors providing for the payment of a total aggregate compensation amountfor each SAC Director equal to $4 million to be paid in equal installments of $1million due and payable on each of the first four (4) anniversaries of the date hereof,and such payments will be structured to minimize their effect on the on-going valuationof the Company (including, without limitation, through lump sum payments at the time ofany Initial Public Offering). Each of the other parties hereto agrees to take, at anytime, and from time to time, all actions necessary or appropriate to effect suchpayments and further agrees not, at any time, directly or indirectly, any action inopposition to such payments.

 

7 (i) After the first anniversary of the Closing, the obligations provided bySections 3.1(c) and 3.1(g) will terminate with respect to each Investor when suchInvestor owns less than 3.0% of the Company’s outstanding shares of Common Stock. Theprovisions of this Section 3.1 shall terminate and be of no further force or effectupon the earlier of consummation of a Change in Control or, with respect to anyInvestor, at such time as all Common Stock held by such Investor are sold, inaccordance with this Agreement, to a third party not bound by this Agreement orrequired to become a party hereto, and otherwise upon the tenth anniversary hereof.          Section 3.2 Officer Appointment. The Company and each Investor acknowledge and agree that as of the date hereof and until thefourth anniversary of the date hereof, at the discretion of SAC CBI, Mr. Jeffrey Hendren shallhave the opportunity to serve as Vice-Chairman, Finance of the Company. In the event that avacancy in such position is created at any time prior to the fourth anniversary of the datehereof, including as a result of the death, disability, retirement, resignation or removal(with or without cause) of Mr. Hendren or any successor, SAC CBI may nominate anotherindividual to be appointed by the Company to fill the vacancy created thereby and the partieshereto agree to take, at any time, and from time to time, all actions necessary or appropriateto effect such appointment, to the extent requested by SAC CBI.          Section 3.3 Proxy. In the event that any Investor entitled or required to vote on or provide its writtenconsent with respect to a matter specified in Sections 3.1 and 3.2 shall fail at any time to voteor act by written consent (as applicable) with respect to any Shares held of record or beneficiallyowned by such Investor (or as to which such Investor otherwise has direct or indirect votingcontrol), as set forth in this Agreement, such Investor hereby irrevocably appoints SAC CBI as suchInvestor’s proxy and attorney-in-fact (with full power of substitution), for and in the name, placeand stead of such Investor, to vote or act by written consent with respect to such Shares and togrant a consent, proxy or approval in respect of such Shares, in each case in such manner and tothe extent as is necessary or appropriate to vote such Shares in accordance with this Agreement.Each Investor hereby affirms that the irrevocable proxy and irrevocable power of attorney set forthin this Section 3.3 will be valid for the term of this Agreement and are given to secure theperformance of the obligations of such Investor under this Agreement. Each Investor hereby furtheraffirms that each proxy and power of attorney hereby granted shall, for the term of this Agreement,be irrevocable and shall be deemed coupled with an interest.ARTICLE IVREGISTRATION          Section 4.1 Piggyback Registrations. (a) Right to Piggyback. Until the earlier of (a) such time as the Sharesheld by an Investor may be sold pursuant to Rule 144 under the Securities Act undercircumstances in which any legend borne by the Shares relating to restrictions ontransferability thereof under the Securities Act may be removed or (b) the firstanniversary of the Closing, if the Company proposes to register and sell any of its

 

8   Common Stock under the Securities Act and the registration form to be used may be usedfor the registration of the Investors’ Registrable Securities (a “PiggybackRegistration”), the Company shall give prompt written notice to the Investors of itsintention to effect such a registration at least ten (10) days before the anticipatedoffering date or as promptly thereafter as reasonably practicable, and will include insuch registration the Shares of the Investors with respect to which the Company hasreceived written requests for inclusion therein within five (5) days after delivery ofthe Company’s notice.  (b) Piggyback Expenses. The Registration Expenses shall be paid by theCompany in all Piggyback Registrations; provided, however, that for the avoidance ofdoubt, each of the Investors shall bear its pro rata portion of any discounts andcommissions with respect to Shares sold by it in connection therewith.  (c) Priority on Registrations. If a Piggyback Registration is anunderwritten registration on behalf of the Company, and the managing Underwritersadvise the Company in writing that in their opinion the number of Shares requested tobe included in such registration exceeds the number which can be sold in such offeringwithout adversely affecting the marketability of the offering, then the number ofShares available for registration shall be allocated (i) first, 100% to the Shares tobe sold by the Company and (ii) second, pro rata based on the relative number ofRegistrable Securities then held by each Investor and Shares held by each other holderof Shares eligible to be sold in such offering; provided, that any such amount therebyallocated to any such holder that exceeds such holder’s request shall be reallocatedamong the remaining requesting holders in like manner.          Section 4.2 Lockup Agreements. With respect to any underwritten Public Offering, each Investor agrees not to effect anysale or distribution (except as part of such underwritten registration) of Registrable Securities,including a sale pursuant to Rule 144 under the Securities Act, (i) during the fifteen (15) daysprior to such offering, (ii) during the 180-day period beginning on the effective date of theInitial Public Offering, unless the investment banks or Underwriters managing the Public Offeringotherwise agree, and (iii) during the 90-day period beginning on the effective date of any otherPublic Offering, unless the investment banks or Underwriters managing the Public Offering otherwiseagree.          Section 4.3 Registration Procedures. Whenever Investors with the right to do so pursuant to Section 4.1 request that any oftheir Registrable Securities be registered pursuant to Section 4.1, the Company will use itsreasonable best efforts to effect the registration of such Registrable Securities in accordancewith the intended method of disposition thereof as quickly as reasonably practicable, and inconnection with any such request: (a) The Company will as expeditiously as reasonably practicable prepare and filewith the Securities and Exchange Commission (the “Commission”) a registrationstatement on any form for which the Company then qualifies and which counsel for theCompany shall deem appropriate and which form shall be available for the sale of theRegistrable Securities to be registered thereunder in accordance with the intendedmethod of distribution thereof (it being understood that the Company shall use Form

 

9   S-3 (or any replacement form) if such form is then available), and use its reasonablebest efforts to cause such filed registration statement to become effective and keepsuch registration statement effective for a period of up to one hundred twenty (120)days or, if earlier, until the distribution contemplated in the registration statementhas been completed; provided, however, that in the case of any registration ofRegistrable Securities on Form S-3 (or any replacement form) that are intended to beoffered on a continuous or delayed basis, subject to compliance with applicableCommission rules, such period shall be extended to the extent reasonably requested inorder to allow sufficient time for all such Registrable Securities to be sold.  (b) The Company will prepare and file with the Commission such amendments andsupplements to such registration statement and the prospectus used in connectiontherewith as may be necessary to comply with the provisions of the Securities Act withrespect to the disposition of all securities covered by such registration statement.  (c) The Company will, prior to filing a registration statement or prospectus or anyamendment or supplement thereto, furnish to each Investor selling RegistrableSecurities pursuant to a registration statement under this Section 4 (each, a“Selling Stockholder”), copies of such registration statement as proposed to befiled, together with exhibits thereto, which documents will be subject to review by theforegoing persons within five (5) Business Days after delivery, and thereafter furnishto such Selling Stockholder such number of copies of such registration statement, eachamendment and supplement thereto (in each case including all exhibits thereto anddocuments incorporated by reference therein), the prospectus included in suchregistration statement (including each preliminary prospectus) and such other documentsas such Selling Stockholder may reasonably request in order to facilitate thedisposition of the Registrable Securities owned by such Selling Stockholder andregistered thereunder.  (d) After the filing of the registration statement, the Company will promptlynotify each Selling Stockholder covered by such registration statement of any stoporder issued or threatened by the Commission and take reasonable actions to prevent theentry of such stop order or to remove it if entered.  (e) The Company will use its reasonable best efforts to register or qualify theRegistrable Securities under such other securities or blue sky laws of suchjurisdictions in the United States and such other jurisdictions as any SellingStockholder reasonably (in light of such Selling Stockholder’s intended plan ofdistribution) requests; provided that the Company will not be required to (A) qualifygenerally to do business in any jurisdiction where it would not otherwise be requiredto qualify but for this paragraph (e), (B) subject itself to taxation in any suchjurisdiction or (C) consent to general service of process in any such jurisdiction.  (f) The (i) Company will promptly notify each Selling Stockholder covered by suchregistration statement and (ii) each Investor will promptly notify the Company, at anytime when a prospectus relating to such registration statement is required to bedelivered under the Securities Act, of the occurrence of an event of which it is aware

 

10   that requires the preparation of a supplement or amendment to such prospectus so that,as thereafter delivered to the purchasers of such Registrable Securities, suchprospectus will not contain an untrue statement of a material fact or omit to state anymaterial fact required to be stated therein or necessary to make the statements thereinnot misleading, and the Company will promptly make available to each Selling Stockholderany such supplement or amendment.  (g) The Company will use its reasonable best efforts to comply with all applicablerules and regulations of the Commission.  (h) The Company will use its reasonable best efforts to cause all RegistrableSecurities covered by such registration statement to be listed on each nationalsecurities exchange on which similar securities issued by the Company are then listed(if any), if the listing of such Registrable Securities is then permitted under therules of such exchange.  (i) The Company may require each Selling Stockholder of Registrable Securities topromptly furnish in writing to the Company such information regarding the SellingStockholder and the distribution of the Registrable Securities as the Company may fromtime to time reasonably request, and such other information as may be necessary orappropriate in connection with such registration.  (j) Each Selling Stockholder agrees that, upon receipt of any notice from theCompany of the happening of any event of the kind described in Section 4.3(f), suchSelling Stockholder will immediately discontinue disposition of Registrable Securitiespursuant to the registration statement covering such Registrable Securities until suchSelling Stockholder’s receipt of the copies of the supplemented or amended prospectuscontemplated by Section 4.3(f), and, if so directed by the Company, such SellingStockholder will deliver to the Company all copies, other than permanent file copiesthen in such Selling Stockholder’s possession, of the most recent prospectus coveringsuch Registrable Securities at the time of receipt of such notice.          Section 4.4 Registration Expenses. All expenses incident to the Company’s performance of or compliance with this Agreement,including all registration and filing fees, fees and expenses of compliance with securities or bluesky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counselfor the Company and all independent certified public accountants, Underwriters (excludingunderwriting discounts and commissions) and other Persons retained by the Company (all suchexpenses being herein called “Registration Expenses”) shall be borne as provided in thisAgreement, except that the Company shall, in any event, pay its internal expenses (including allsalaries and expenses of its officers and employees performing legal or accounting duties), theexpense of any annual audit or quarterly review, the expense of any liability insurance and theexpenses and fees for listing the securities to be registered on each securities exchange on whichsimilar securities issued by the Company are then listed or on the NASD automated quotation system.          Section 4.5 Additional Procedures. All Selling Stockholders will take all such actions and execute all such documents andinstruments that are reasonably requested by the

 

11Company to effect the registration and sale of their securities pursuant to this Section 4,including, without limitation, being parties to the underwriting agreement entered into by theCompany and any other Selling Stockholders in connection therewith; provided,however, that the aggregate amount of any liability of any Selling Stockholder pursuant tosuch underwriting or other agreement will not exceed such Selling Stockholder’s net proceeds fromsuch offering.          Section 4.6 Termination of Registration Rights. The registration rights and the obligations provided by this Section 4 will terminate withrespect to each Investor when such Investor owns less than 3.0% of the Company’s outstanding sharesof Common Stock.ARTICLE VINDEMNIFICATION AND CONTRIBUTION          Section 5.1 Indemnification by the Company. To the fullest extent permitted by law, the Company agrees to indemnify and hold harmlesseach Selling Stockholder of Registrable Securities included in the applicable registrationstatement, its officers, directors, employees and agents, and each person, if any, who controlssuch Selling Stockholder within the meaning of the Securities Act, from and against any loss,claim, damage or liability, joint or several, or any action in respect thereof to which suchSelling Stockholder, officer, director, employee or agent or controlling Person may become subjectunder the Securities Act or otherwise, insofar as such loss, claim, damage, liability or actionarises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a materialfact contained in any registration statement, prospectus or any preliminary prospectus or anyamendment or supplement thereto relating to the Registrable Securities or (ii) any omission oralleged omission to state therein a material fact required to be stated therein or necessary tomake the statements therein not misleading, in each case except insofar as the same are containedin any information furnished to the Company by a Selling Stockholder or on a Selling Stockholder’sbehalf for use therein.          Section 5.2 Indemnification by Stockholders of Registrable Securities. To the fullest extent permitted by law, each Selling Stockholder agrees, severally but notjointly, to indemnify and hold harmless the Company, each Underwriter and each other SellingStockholder, their respective officers, directors and agents and each Person, if any, who controlsthe Company, any such Underwriter or any such other Selling Stockholder within the meaning of theSecurities Act, to the same extent as the indemnity from the Company to such Selling Stockholderpursuant to Section 5.1, but only with respect to information furnished to the Company by suchSelling Stockholder or on such Selling Stockholder’s behalf for use in any registration statementor prospectus relating to the Registrable Securities, or any amendment or supplement thereto, orany preliminary prospectus.          Section 5.3 Conduct of Indemnification Proceedings. Promptly after receipt by any Person in respect of which indemnity may be sought pursuantto Section 5.1 or 5.2 (an “Indemnified Party”) of notice of any claim or the commencementof any action, the Indemnified Party shall, if a claim in respect thereof is to be made against thePerson against whom such indemnity may be sought (an “Indemnifying Party”), notify theIndemnifying Party in writing of the claim or the commencement of such action provided that thefailure to notify the

 

12Indemnifying Party shall not relieve it from any liability which it may have to an IndemnifiedParty, except to the extent of any actual prejudice resulting therefrom. If any such claim oraction shall be brought against an Indemnified Party, the Indemnifying Party shall be entitled toparticipate therein, and, to the extent that it wishes, jointly with any other Indemnifying Party,assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. Afternotice from the Indemnifying Party to the Indemnified Party of its election to assume the defenseof such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party forany legal or other expenses subsequently incurred by the Indemnified Party in connection with thedefense thereof unless (i) the Indemnifying Party shall have agreed in writing to be liable forsuch expenses or (ii) the Indemnifying Party engages the same counsel to represent itself and theIndemnified Party in such action and such counsel advises that representation of both parties bythe same counsel would be inappropriate due to an actual or reasonably likely potential conflict ofinterests between them. No Indemnifying Party will, without the prior written consent of theIndemnified Party (not to be unreasonably withheld), effect any settlement of any claim or pendingor threatened proceeding in respect of which the Indemnified Party is a party and indemnity hasbeen sought hereunder by such Indemnified Party, unless such settlement includes an unconditionalrelease of such Indemnified Party from all liability arising out of such claim or proceeding. NoIndemnified Party will, without the prior written consent of the Indemnifying Party (not to beunreasonably withheld), effect any settlement of any claim or pending or threatened proceeding inrespect of which indemnity has or may be sought hereunder by such Indemnified Party.          Section 5.4 Contribution. If the indemnification provided for in this Article V is unavailable to any IndemnifiedParties in respect of any losses, claims, damages, liabilities or expenses referred to herein, theneach Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to theamount paid or payable by such Indemnified Party as a result of such losses, claims, damages,liabilities or expenses (i) as between the Company and the Selling Stockholders on the one hand andthe Underwriters on the other, in such proportion as is appropriate to reflect the relativebenefits received by the Company and the Selling Stockholders on the one hand and the Underwriterson the other from the offering of the Registrable Securities, or if such allocation is notpermitted by applicable law, in such proportion as is appropriate to reflect not only the relativebenefits but also the relative fault of the Company and the Selling Stockholders on the one handand of the Underwriters on the other in connection with the statements or omissions which resultedin such losses, claims, damages or liabilities, as well as any other relevant equitableconsiderations and (ii) as between the Company and/or one or more other Selling Stockholders on theone hand and any Selling Stockholder on the other, in such proportion as is appropriate to reflectthe relative fault of the Company and of each Selling Stockholder in connection with suchstatements or omissions, as well as any other relevant equitable considerations. The relativebenefits received by the Company and the Selling Stockholders on the one hand and the Underwriterson the other shall be deemed to be in the same proportion as the total proceeds from the offering(net of underwriting discounts and commissions but before deducting expenses) received by theCompany and the Selling Stockholders bear to the total underwriting discounts and commissionsreceived by the Underwriters, in each case as set forth in the table on the cover page of theprospectus. The relative fault of the Company and the Selling Stockholders on the one hand and ofthe Underwriters on the other shall be determined by reference to, among other things, whether theuntrue or alleged untrue statement of a material fact or the omission or alleged omission to state

 

13a material fact relates to information supplied by the Company and the Selling Stockholders orby the Underwriters. The relative fault of the Company and/or one or more other SellingStockholders on the one hand and of any Selling Stockholder on the other shall be determined byreference to, among other things, whether the untrue or alleged untrue statement of a material factor the omission or alleged omission to state a material fact relates to information supplied bysuch Person, and the Persons’ relative intent, knowledge, access to information and opportunity tocorrect or prevent such statement or omission.     The Company and the Selling Stockholders agree that it would not be just and equitable ifcontribution pursuant to this Section 5.4 were determined by pro rata allocation (even if theUnderwriters were treated as one entity for such purpose) or by any other method of allocationwhich does not take account of the equitable considerations referred to in the immediatelypreceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses,claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemedto include, subject to the limitations set forth above, any legal or other expenses reasonablyincurred by such Indemnified Party in connection with investigating or defending any such action orclaim. Notwithstanding the foregoing provisions of this Section 5.4, no Underwriter shall berequired to contribute any amount in excess of the amount by which the total price at which theRegistrable Securities underwritten by it and distributed to the public were offered to the publicexceeds the amount of any damages which such Underwriter has otherwise been required to pay byreason of such untrue or alleged untrue statement or omission or alleged omission, and no SellingStockholder shall be required to contribute any amount in excess of the amount by which the totalprice at which the Registrable Securities of such Selling Stockholder were offered to the public(less underwriting discounts and commissions) exceeds the amount of any damages which such SellingStockholder has otherwise been required to pay by reason of such untrue or alleged untrue statementor omission or alleged omission. Notwithstanding the foregoing provisions of this Section 5.4, noPerson guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of theSecurities Act) shall be entitled to contribution from any Person who was not guilty of suchfraudulent misrepresentation.ARTICLE VIMISCELLANEOUS          Section 6.1 Recapitalization, Exchanges, etc.In the event that any capital stock or other securities are issued in respect of, in exchangefor, or in substitution of, any Registrable Securities by reason of any reorganization,recapitalization, reclassification, merger, consolidation, spin-off, partial or completeliquidation, stock dividend, split-up, sale of assets, distribution to Stockholders or combinationof the Shares or any other change in capital structure of the Company, appropriate adjustmentsshall be made with respect to the relevant provisions of this Agreement so as to fairly andequitably preserve, as far as reasonably practicable, the original rights and obligations of theparties hereto under this Agreement and the term “Registrable Securities,” as used herein, shall bedeemed to include shares of such capital stock or other securities, as appropriate.          Section 6.2 Entire Agreement; Successors and Assigns. Except for restrictions on Transfer of Shares set forth in other agreements, plans or otherdocuments, this Agreement

 

14constitutes the entire agreement of the parties with respect to its subject matter, supersedesall prior or contemporaneous oral or written agreements or discussions with respect to such subjectmatter, and shall be binding upon and inure to the benefit of the parties hereto and theirrespective heirs, representatives, successors and assigns. Except as otherwise expressly providedherein, no Stockholder party hereto may assign any of its respective rights or delegate any of itsrespective obligations under this Agreement without the prior written consent of the other partieshereto, and any attempted assignment or delegation in violation of the foregoing shall be null andvoid.          Section 6.3 No Waivers, Amendments. (a) No delay of or omission in the exercise of any right, power or remedy accruingto any party as a result of any breach or default by any other party under thisAgreement shall impair any such right, power or remedy, nor shall it be construed as awaiver of or acquiescence in any such breach or default, or of any similar breach ordefault occurring later; nor shall any such delay, omission nor waiver of any singlebreach or default be deemed a waiver of any other breach or default occurring before orafter that waiver.  (b) This Agreement may be amended or modified, or any provision hereof may bewaived, provided that such amendment, modification or waiver is set forth in a writingexecuted by (i) the Company, (ii) the SAC Group and (iii) each Investor that would beadversely affected thereby. Notwithstanding the foregoing, each of the Stockholdersacknowledges and agrees that in respect of a Transfer pursuant to Section 2.1 of thisAgreement, the Transferee may be added as an additional party to this Agreement by awritten joinder, provided that such addition is done in accordance with and pursuant tothe provisions of this Agreement. No course of dealing between or among any Personshaving any interest in this Agreement will be deemed effective to modify, amend ordischarge any part of this Agreement or any rights or obligations of any Person underor by reason of this Agreement.          Section 6.4 Notices. Any notices and other communications required or permitted in this Agreement shall beeffective if in writing and (a) delivered personally or (b) sent (i) by nationally-known, reputableovernight carrier or (ii) by facsimile, in each case, addressed as follows:if to the Company:CBaySystems Holdings Limited