exv10w38






Exhibit 10.38




S.A.C. PEI CB Investment, L.P.

c/o Walkers SPV Limited

Walker House, 87 Mary Street

George Town, Grand Cayman

KY1-9002, Cayman Islands




Messrs Paul Brough, Edward Middleton

      and Patrick Cowley

in their capacity as liquidators

without personal liability, of

Lehman Brothers Commercial Corporation Asia Limited

(In Liquidation)

c/o KPMG

8th Floor, Prince’s Building

10 Chater Road, Central

Hong Kong




Ladies and Gentlemen:




Memorandum of Understanding

for S.A.C. PEI CB Investment, L.P. Redemption Transaction


This letter (this “Agreement”) sets forth the understanding of the parties with respect to material
terms and conditions of a transaction (the “Transaction”) between Lehman Brothers Commercial
Corporation Asia Limited a company incorporated in Hong Kong S.A.R. (Registration Number 0157352)
(“LBCCA”), Messrs Paul Brough, Edward Middleton and Patrick Cowley in their capacity as joint and
several liquidators of LBCCA (the “Liquidators”) acting without personal liability, S.A.C. Private
Equity Investors, L.P., a Delaware limited partnership (“SAC PEI”), S.A.C. PEI CB Investment, L.P.,
a Cayman Islands exempted limited partnership (the “Company”), and the Company’s general partner
S.A.C. PEI CB Investment GP, Limited (the “General Partner”), relating to, among other matters,
LBCCA’s ownership of limited partnership interests (the “Interests”) in the Company and the
Company’s beneficial ownership of shares, par value $0.10 per share (the “CBay Shares”) of
CBaySystems Holdings Limited (to be renamed MedQuist Holdings Inc.) (“CBay”).




	 	 	 

	
TERMS
	 
	 	 
	Transaction Structure:

	 	The Transaction is being executed on January [ ], 2011.
	 
	 	 
	 

	 	Equity Contribution. Immediately prior to the Closing
(as defined in the section labelled “Closing” below,
SAC PEI has, directly or indirectly, made or caused to
be made, an equity contribution (the “Contribution”)
in the aggregate amount of US$13.7 million in cash to
the Company in exchange for additional newly issued
limited partnership interests in the Company. LBCCA
hereby consents to the making of the Contribution and
waives any rights to object to the Contribution or to
participation in making the Contribution under the
Third Amended and Restated Exempted Limited
Partnership Agreement of the Company, dated as of August 5, 2008, among






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	 	the parties thereto (the “Limited Partnership Agreement”).
	 
	 	 
	 

	 	Redemption of LBCCA’s Interests in the Company;
Retained CBay Shares. Promptly following the
Contribution, the Company will redeem all of LBCCA’s
Interests in the Company in exchange for (i) an amount
equal to US$13,700,000 in cash and (ii) 4,228,584
shares of CBay (the “Retained CBay Shares”) owned of
record and beneficially by the Company (the
“Redemption”), after giving effect to the 4-1/2:1
stock split (the “CBay Stock-Split”) contemplated in
the Offering described below. Alternatively, at the
Company’s election (provided that such election does
not result in LBCCA incurring or potentially incurring
any additional liabilities, including, without
limitation, tax liabilities), in lieu of the
Redemption, the Company may elect to make a non-pro
rata cash and in-kind distribution to LBCCA of (i) an
amount equal to US$13.7 million in cash and (ii)
4,228,584 shares of CBay owned of record and
beneficially by the Company (after giving effect to
the CBay Stock Split) followed by a redemption of
LBCCA’s Interests in the Company for US$1 (the
“Distribution”). SAC PEI and the General Partner
hereby waive any rights that they may have (pursuant
to the Limited Partnership Agreement or otherwise) to
pro rata treatment with respect to the Redemption or
Distribution. The parties hereby irrevocably and
unconditionally agree that upon the occurrence of such
Redemption or Distribution, LBCCA will no longer be a
party to the Limited Partnership Agreement and,
accordingly, LBCCA shall have no further rights or
obligations with respect to the Company, including as
a limited partner in the Company, or rights or
obligations under the Limited Partnership Agreement,
including, without limitation, with respect to
restrictions on transfer under the Limited Partnership
Agreement. The parties acknowledge and agree that
following the Redemption or Distribution, (i) the
parties will have no recourse against LBCCA under the
Limited Partnership Agreement, including, for the
avoidance of doubt, but not limited to, any rights
that the Company might have otherwise had pursuant to
clauses 5.2(b) and 6.1 of the Limited Partnership
Agreement and (ii) LBCCA will have no recourse against
any of the parties under the Limited Partnership
Agreement, including, for the avoidance of doubt, but
not limited to, any rights that LBCCA might have
otherwise had pursuant to clause 4.4 of the Limited
Partnership Agreement.; provided, however, that, notwithstanding the foregoing, in respect only of claims made by
third parties (e.g., other than LBCCA, the Company or
CBay) clause 4.4 of the Limited Partnership Agreement (as provided under clause 4.4(e) of the Limited
Partnership Agreement), as in effect as the date hereof, shall be deemed to survive (with this transaction being
deemed a termination for such purposes). The Company
acknowledges and agrees that all amounts to be paid
pursuant to this letter agreement shall be paid in
full, without set-off or deduction and hereby
acknowledges and agrees that it is not owed any
amounts from LBCCA under the Limited Partnership
Agreement. Promptly following the Closing of the
Redemption or Distribution, as the






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	 	case may be, the
parties shall execute and deliver a novation
agreement, in form and substance reasonably
satisfactory to them, evidencing the termination of
the Limited Partnership Agreement in respect of LBCCA.
The parties agree that, except for the Consulting
Agreement or as otherwise expressly set forth in this
Agreement, it is the intention of the parties that all
other agreements and arrangements related to LBCCA’s
participation as a limited partner in the Company
shall be terminated, whether set forth in the Limited
Partnership Agreement or otherwise.
	 
	 	 
	 

	 	Entry into Lock-up Agreement. Simultaneously with the
Redemption or Distribution, LBCCA will enter into a
lockup agreement in the form attached as Exhibit A
hereto (the “Lock-Up Agreement"). CBay will procure
that the Company will enter into a lock-up agreement
in substantially the same form as the Lock-Up
Agreement and no such lock-up agreement entered into
by the Company will contain any more favourable or
less restrictive terms in any material respect than
the Lock-Up Agreement.
	 
	 	 
	 

	 	Proxy Agreement. LBCCA agrees that, for the period
that LBCCA beneficially owns any of the CBay Shares
(it being agreed that except for the Lockup Agreement
and compliance with US Securities laws nothing herein
shall limit or restrict in any manner the ability of
LBCCA to transfer or otherwise dispose of the Retained
CBay Shares at any time in its sole discretion), the
Company or its designee is hereby granted an
irrevocable proxy with respect to such CBay Shares to
vote and cause to be voted at any meeting of
shareholders or by written consent any (i) Retained
CBay Shares or (ii) CBay Shares issued pursuant to the
Consulting Agreement (as defined below), in favour of
the board nominees designated by the Company (or any
of its affiliates) to the Board of Directors of CBay
(or its successor) or by CBay (or any nominating
committee thereof). Such proxy entitles the Company
or its designee to vote LBCCA’s CBay Shares in favour
of directors. LBCCA will not directly or indirectly
vote against any such director. Such proxy is deemed
to be coupled with an interest. If, for any reason,
the proxy is unenforceable, LBCCA will agree to vote
its shares for CBay directors as directed by the
Company. For the avoidance of doubt, the proxy
granted herein does not confer any right to vote on
any matter other than the election of directors as set
forth above., The foregoing proxy and agreement to
vote may be terminated at any time by the Company, by
written notice to LBCCA.
	 
	 	 
	 

	 	Rights under the Consulting Agreement. Any rights and
obligations of LBCCA accrued or arising under the
Agreement, dated as of August 19, 2008, by and among
CBay, S.A.C. PEI CB Investment II, LLC and LBCCA (the
“Consulting Agreement”), including without limitation
the Annual LBCCA






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	 	Payment and reimbursement of
Out-of-Pocket Expenses as such terms are defined in
the Consulting Agreement, shall be unaffected by this
Transaction. The parties acknowledge that they are
each expressly reserving all of their respective
rights in relation to the Consulting Agreement and
nothing in this letter or the Closing of the
Transaction, shall amend, vary or extinguish such
rights.
	 
	 	 
	The Closing:

	 	Closing of the Transaction including the Redemption or
Distribution, payment of the US$13.7 million to LBCCA
and issuance of 4,228,584 shares in CBay (after giving
effect to the CBay Stock Split) to LBCCA will take
place as soon as possible following execution of this
Agreement (the “Closing”).
	 
	 	 
	The Offering:

	 	CBay proposes to carry out an underwritten public
offering of CBay Shares, including through any related
overallotment option (the “Offering”), for which one
or more investment banking firms will act as the
representative of the underwriters. CBay and LBCCA
agree that LBCCA may, at LBCCA’s sole discretion, sell
up to 2,222,222 of the Retained CBay Shares as part of
the “Firm Offer” (as defined in the underwriters
agreement to be entered into between amongst others
Lazard Capital Markets LLC and Macquarie Capital (USA)
LLC and Macquarie Capital (USA) Inc. (together, the
“Representatives”), CBay, the Company and LBCCA (the
“Underwriting Agreement”)) in the Offering, subject to
the Representative’s right to reduce such number of
shares. If, in the Representative’s reasonable
opinion, the number of securities requested to be
included in the Offering (including primary shares
offered by CBay or any other security holder) exceeds
the number which can reasonably be sold in such
Offering within an acceptable price range, it may
reduce the number of Retained CBay Shares that LBCCA
may sell; provided, however, that the Representative
will first be required to attempt to reduce the number
of CBay Shares offered therein by parties other than
LBCCA and if it is unable to reduce other parties’
CBay Shares being sold into the Offering first, then
it may, proportionate with other parties, reduce the
number of CBay Shares being sold into the Offering by
LBCCA. LBCCA will be required to execute the
Underwriting Agreement (together with a side letter
varying certain matters set out in the Underwriting
Agreement) and such other agreements as LBCCA and the
Representatives mutually agree. LBCCA will not be
required to sell any shares or bring down
representations and warranties in the “Option Closing”
(as defined in the Underwriters Agreement). LBCCA
acknowledges and agrees that the Offering may not take
place at all or on the terms contemplated hereby. If
for any reason LBCCA does not sell its Retained CBay
Shares in the Offering, such shares shall remain
Retained CBay Shares for purposes of this Agreement.






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	 	Any CBay Shares beneficially owned by LBCCA but not
sold in the Offering may be freely transferred or
otherwise disposed of by LBCCA following the Offering,
subject to the termination or prior waiver of the
Lock-Up Agreement and to applicable securities laws.
	 
	 	 
	 

	 	CBay will procure that LBCCA has the benefit of
reliance on any SEC rule 10b-5 opinions issued by
CBay’s counsel in connection with the Offering,
provided that LBCCA is a selling stockholder in such
Offering and a party to the Underwriting Agreement.
	 
	 	 
	
OTHER TERMS AND CONDITIONS
	 
	 	 
	Securities Law Matters:

	 	Rule 144 Matters.
	 
	 	 
	 

	 	(a) CBay agrees that following the Offering, CBay will
use its commercially reasonable efforts to file such
reports required to be filed by it under the
Securities Act and the Exchange Act and the rules
promulgated thereunder and to take such further action
as required by Rule 144 to the extent required from
time to time to enable LBCCA to sell the Retained CBay
Shares without registration under the Securities Act,
within the limitation of the exemptions provided by
Rule 144. This clause (a) will expire 12 months from
the date of the Offering.
	 
	 	 
	 

	 	(b) CBay agrees that following the Offering it will
use commercially reasonable efforts to, at CBay’s own
cost, cause its general counsel or an outside legal
counsel reasonably acceptable to the transfer agent of
CBay to issue legal opinions on behalf of LBCCA as
reasonably requested by LBCCA so that any restrictive
legend placed on the certificates of the Retained CBay
Shares held by LBCCA may be removed in connection with
any sale of such Retained CBay Shares pursuant to Rule 144.
	 
	 	 
	 

	 	(c) If, during the six (6) months following the
Closing, there is (i) a sale or conveyance by CBay of
all or a substantial portion of its assets, (ii) an
acquisition of CBay by another person by means of
merger, consolidation, share sale or another form of
corporate reorganisation in which the Retained CBay
Shares are exchanged for other securities or other
consideration, or (iii) any person becomes the
“beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities
of CBay representing fifty percent (50%) or more of
the total voting power of CBay (a “CBay Change of
Control Event”), CBay agrees to take such reasonable
actions as may be necessary or appropriate to ensure
that the Retained CBay Shares held by LBCCA before the
consummation of such CBay Change of Control Event are
not adversely affected relative to other holders of
CBay Shares in connection with such CBay Change of
Control Event.






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	Expenses:

	 	Each of the parties shall pay its own expenses
incurred by or on its behalf related to the
Transaction (including, but not limited to, reasonable
fees and expenses of each of their counsel,
accountants and financial advisors).
	 
	 	 
	The Liquidators:

	 	The Liquidators have entered into and signed this
letter and would sign any separate agreement solely as
agents for and on behalf of LBCCA. In their capacity
as Liquidators, none of the Liquidators, their firm,
officers, directors, staff, partners, employees,
agents, advisors and representatives shall have any
personal liability whatsoever in respect of (a) any of
the obligations undertaken by LBCCA; (b) any failure
on the part of LBCCA to observe, perform or comply
with any such obligations; (c) under or in relation to
any associated arrangements or negotiations; or (d)
under any document or assurance made pursuant to this
letter or any definitive agreement. Each party
acknowledges and agrees that (a) in their capacity as
liquidators, the Liquidators are parties to this
letter and any definitive agreement solely for the
purpose of obtaining the benefit of each provision of
this Agreement in their favour; and (b) the
Liquidators are the agents of LBCCA and shall incur no
personal liability from acting in the capacity of
agents or otherwise, nor shall any claim arise against
any of them otherwise than against LBCCA.





Representations and Warranties of LBCCA. LBCCA hereby represents and warrants to SAC PEI, the
Company and the General Partner, to the extent only of the actual factual knowledge of the
Liquidators (which does not include implied or imputed knowledge), that (a) it has the authority
under the laws of Hong Kong to enter into, perform and deliver this Agreement, and has taken all
necessary action to approve and authorize the same and (b) its obligations under this Agreement are
legal, valid, binding and enforceable against LBCCA in accordance with its terms except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law) and do not conflict
with any law or regulation or its constitutional documents or any other document binding on it. In
addition, LBCCA hereby represents and warrants to SAC PEI, the Company and the General Partner that
(i) it has not since September 19, 2008 (the “Appointment Date”) (A) entered into any agreement
under which it is obligated to sell, assign or otherwise transfer, hypothecate, pledge or cause or
permit any lien or other encumbrance to be placed on any of its Interests or (B) sold, assigned or
otherwise transferred, hypothecated, pledged or caused or permitted any lien or other encumbrance
to be placed on any of its Interests or assigned any of its rights under the Limited Partnership
Agreement; and (ii) to the extent only of the actual factual knowledge of the Liquidators (which
does not include implied or imputed knowledge), it did not prior to the Appointment Date (A) enter
into any agreement under which it is or was obligated to sell, assign or otherwise transfer,
hypothecate, pledge or cause or permit any lien or other encumbrance to be placed on any of its
Interests or (B) sell, assign or otherwise transfer, hypothecate, pledge or cause or permit any
lien or other encumbrance to be placed on any of its Interests or assign any of its rights under
the Limited Partnership Agreement. LBCCA further represents and warrants to the Company, to the extent only of the actual factual knowledge of the





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Liquidators (which does not include implied or imputed knowledge), that (i) it is the sole legal
and beneficial owner of the Interests which will be transferred to the Company pursuant to the
Redemption or Distribution and (ii) there is no encumbrance on, over or affecting such Interests to
be transferred (or any of them) nor any agreement or commitment to create any such encumbrance and
no claim has been made that any person is entitled to such encumbrance. For the purposes of this
paragraph, the term encumbrance means any option, transfer, mortgage, pledge, lien, charge,
assignment by way of security, hypothecation, security interest, any arrangements commonly referred
to as flawed assets arrangements and set-off rights which exceed the rights of the insolvency
set-off rules of any relevant jurisdiction, or any other security arrangement or agreement, whether
conditional or not.



Representations and Warranties of the Company and the General Partner. Each of the Company and the
General Partner hereby represents and warrants to LBCCA, to the extent only of the actual factual
knowledge of the General Partner (which does not include implied or imputed knowledge), that (a) it
has the authority under the laws of the Cayman Islands to enter into, perform and deliver this
Agreement, and has taken all necessary action to approve and authorize the same and (b) its
obligations under this Agreement are legal, valid, binding and enforceable against it in accordance
with its terms except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally
and by general equitable principles (whether enforcement is sought by proceedings in equity or at
law) and do not conflict with any law or regulation or its constitutional documents or any other
document binding on it. The Company further represents and warrants to LBCCA,that it is the sole
legal and beneficial owner of the Retained CBay Shares which will be transferred to LBCCA pursuant
to the Redemption or Distribution. The Company confirms to LBCCA, that there is no encumbrance on,
over or affecting such Retained CBay Shares to be transferred (or any of them), nor any agreement
or commitment to create any such encumbrance and no claim has been made that any person is entitled
to such encumbrance. For the purposes of this paragraph, encumbrance shall mean any option,
transfer, mortgage, pledge, lien, charge, assignment by way of security, hypothecation, security
interest, any arrangements commonly referred to as flawed assets arrangements and set-off rights
which exceed the rights of the insolvency set-off rules of any relevant jurisdiction, or any other
security arrangement or agreement, whether conditional or not.



Representations and Warranties of SAC PEI. SAC PEI hereby represents and warrants to each of the
LBCCA, the Company and the General Partner, to the extent only of the actual factual knowledge of
the SAC PEI (which does not include implied or imputed knowledge), that (a) it has the authority
under the laws of the State of Delaware to enter into, perform and deliver this Agreement, and has
taken all necessary action to approve and authorize the same and (b) its obligations under this
Agreement are legal, valid, binding and enforceable against it in accordance with its terms except
as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors’ rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law) and do not conflict
with any law or regulation or its constitutional documents or any other document binding on it.



Representations and Warranties of CBay. CBay hereby represents and warrants to each of the LBCCA,
the Company, SAC PEI and the General Partner, to the extent only of the actual factual knowledge of
the board of directors of CBay (which does not include implied or imputed knowledge), that (a) it
has the authority under the laws of the British Virgin Islands to enter into, perform and deliver
this Agreement, and has taken all necessary action to approve and authorize the same and (b) its
obligations under this Agreement are legal, valid, binding and enforceable




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against it in accordance with its terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law) and do not conflict with any law or regulation or its
constitutional documents or any other document binding on it. CBay further represents and warrants
that the CBay Shares to be transferred to LBCCA pursuant to the Redemption or Distribution have
been duly authorised, validly issued and are fully paid, non-assessable and free of liens and
encumbrances (as defined above).



Further Assurance. The parties shall perform all further acts and things and execute and deliver
(or procure the execution and delivery of) such further documents, as may be required by law or as
may be necessary or required to implement and give effect to this letter and the Transaction.



Commercially Reasonable Efforts. The parties will use their commercially reasonable efforts to give
effect to the terms set out in this letter and the Transaction.



Amendment. This letter may not be amended, modified or otherwise supplemented except by an
instrument in writing signed by, or on behalf of, each of the parties hereto.



Miscellaneous. This letter may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. Facsimile or PDF
signatures shall be deemed to constitute originals. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in construing or interpreting
this letter. This letter shall be governed by, and construed in accordance with, the laws of the
State of New York.




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	 	Very truly yours,



S.A.C. PEI CB INVESTMENT, L.P.,

acting by its general partner

S.A.C. PEI CB INVESTMENT GP, LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Accepted, Agreed and Acknowledged as of January __, 2011:




	 	 	 	 	 
	 
	SIGNED by ____________one of the Liquidators

for and on behalf of

LEHMAN BROTHERS COMMERCIAL

CORPORATION ASIA LIMITED

acting without personal liability

in the presence of

 	 	)
)
)
)
)
)
 
	 	 	 
	Name: 	 	 
	Title: 	 	 
	 
	 
	SIGNED by ____________one of the Liquidators

for and on behalf of all of them

acting without personal liability, solely to take the benefit

of this letter, in the presence of

 	 	)
)
)
)
 
	 	 	 
	Name: 	 	 
	Title: 	 	 
	 




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	S.A.C. PRIVATE EQUITY INVESTORS, L.P.
 	 	 
	By:  	S.A.C. Private Equity GP, L.P., its general partner 	 	 
	 
	By:  	S.A.C. Capital Management, LLC, its general partner 	 	 
	 
	 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 
	 
	 
	S.A.C. PEI CB INVESTMENT GP, LIMITED

 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 
	 
	 
	CBAYSYSTEMS HOLDINGS LIMITED

 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 
	 




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