Document:

EXHIBIT
10.1

 

EMPLOYMENT
AGREEMENT

 

This is an Employment
Agreement (Agreement) between ZOMAX
INCORPORATED, a Minnesota corporation, (hereinafter “Zomax”), and Richard D. Barnes (hereinafter “Executive”).

 

Section 1

 

DEFINITIONS

 

1.             Definitions.

 

The following capitalized
terms used in this Agreement shall be defined as follows:

 

Agreement
shall mean this Agreement between Zomax and Executive.

 

Base
Salary shall mean the annual base salary payable to Executive
pursuant to Section 3.1 hereof, and “monthly Base Salary” shall mean the Base
Salary divided by twelve (12).

 

Board
shall mean the Board of Directors of Zomax.

 

Cause
shall mean termination of the Executive’s employment with Zomax by the Board
because of (1) gross misconduct, dishonesty or disloyalty which results in
material harm to Zomax; (2) willful and material breach of this Agreement by
Executive (other than Executive’s failure to perform his duties hereunder
resulting from incapacity due to physical or mental illness as set forth in
Section 4.1c) which has not been corrected by Executive within two weeks of
receipt of notice from Zomax of the occurrence of such event; (3) conviction or
entry of a plea of guilty or nolo contendere to any felony or to any
misdemeanor involving fraud, misrepresentation or theft; or (4) the failure of
Executive to comply in all material respects with policies and procedures
adopted by the Board of Directors and committees of the Board of Directors
relating to and including, but not limited to, governance, securities trading,
corporate disclosure practices and executive annual training and
education.  No act, or failure to act, by
Executive shall be considered “willful” unless committed without good faith and
without a reasonable belief that the act or omission was in Zomax’s best
interest.

 

A Change of
Control shall be deemed to have occurred if (1) any “person” (as
such term is used in Section 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Zomax representing 30% or more of the combined
voting power (with respect to the election of directors) of Zomax’s then
outstanding securities; (2) at any time after the execution of this Agreement,
individuals who as of the date of the execution of this Agreement constitute
the Board (and any new director whose election to the Board or nomination for
election to the Board by Zomax’s stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office) cease for any
reason to constitute a majority of the Board; (3) the consummation of 

 

 

a merger or consolidation of Zomax with or into any other corporation, other
than a merger or consolidation which would result in the holders of the
voting securities of Zomax outstanding immediately prior thereto continuing to
continue to hold (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 70% of the combined voting
power (with respect to the election of directors) of the securities of Zomax or
of such surviving entity outstanding immediately after such merger or
consolidation; or (4) the consummation of a plan of complete liquidation of
Zomax or of an agreement for the sale or disposition by Zomax of all or
substantially all of Zomax’s business or assets.

 

Change of
Control Payments shall mean any payment (including any
benefit or transfer of property) in the nature of compensation to or for the
benefit of Executive under any arrangement that is partially or entirely
contingent on a Change of Control, or is deemed to be contingent on a Change of
Control for purposes of Section 280G of the Code.  As used in this definition, the term “arrangement”
includes any agreement between Executive and Zomax and any and all of Zomax’s
salary, bonus, incentive, compensation or benefit plans, programs or
arrangements, and shall include this Agreement.

 

Code
shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

Company
shall mean Zomax Incorporated, a Minnesota corporation, any subsidiaries
thereof, and any successors or assigns, including any Successor.

 

Company
Product means any product, product line or service (including
any component thereof or research to develop information useful in connection
with a product or service) that is being designed, developed, manufactured,
marketed or sold by Zomax at the time of the termination of Executive’s
employment with Zomax or with respect to which Zomax has acquired, prior to
termination of Executive’s employment, Confidential Information which it
intends to use in the design, development, manufacture, marketing or sale of a
product or service.

 

Competitive
Product means any product, product line or service (including
any component thereof or research to develop information useful in connection
with a product or service) that is being designed, developed, manufactured,
marketed or sold by anyone other than Zomax and is of the same general type,
performs similar functions, or is used for the same purposes as a Company
Product.

 

Confidential
Information means any information or compilation of
information that Executive learns or develops during the course of his
employment with Zomax that derives independent economic value from not being
generally known, or readily ascertainable by proper means, by other persons who
can obtain economic value from its disclosure or use.  It includes but is not limited to trade
secrets, inventions, discoveries, and may relate to such matters as research
and development, manufacturing processes, management systems and techniques and
sales and marketing plans and information.

 

Good
Reason shall mean (1) a substantial reduction in the nature
or status of Executive’s responsibilities hereunder, including if Executive
should no longer serve as Executive Vice 

 

2

 

President and Chief Financial Officer, or report to the Chief Executive
Officer of Zomax or an ultimate parent entity; (2) a reduction by the Company
in the Executive’s Base Salary or target bonus opportunity except a reduction
may be permitted if the Company reduces the base salaries or target bonus
opportunities of its senior executives generally; (3) the failure to comply
with the Section 3.3 of this Agreement; (4) a requirement to relocate outside
of the Minneapolis area; (5) failure by Zomax to allow Executive to participate
to the full extent in all plans, programs or benefits in accordance with this
Agreement; and (6) failure by a successor to assume all of the terms and
conditions of this Agreement. 
Notwithstanding the foregoing, “Good Reason” shall be deemed to occur
only if such event enumerated in (1), (2), (3), (4) or (5) above has not been
corrected by Zomax within two weeks of receipt of notice from Executive of the
occurrence of such event, which notice shall specifically describe such event.

 

Inventions
means any inventions, discoveries, improvements, ideas or works of authorship
(whether patentable or not and including those which may be subject to copyright
protection) generated, conceived, authored or reduced to practice by Executive
alone or in conjunction with others, during or after working hours, while an
employee of Zomax, and that:

 

(i)            are
derived in whole or in part from, or use, incorporate or represent any
improvement to any Invention or trade secret of Zomax; or

 

(ii)           result
from any work Executive performs for Zomax; or

 

(iii)          use
any of Zomax’s equipment, supplies, facilities or trade secret information; or

 

(iv)          otherwise
relate to Zomax’s products or Zomax’s present or reasonably foreseeable future
research or development.

 

Term
shall mean the term of Executive’s employment under Section 2.3 below.

 

Person
shall mean an individual, partnership, corporation, estate or trust or other
entity.

 

Successor
shall be any entity acquiring substantially all of the assets of Zomax or a
corporation into which Zomax is merged or with which it is consolidated.

 

Section
2

 

EMPLOYMENT AND
TERMS OF AGREEMENT

 

2.1          Employment.  Zomax hereby agrees to employ Executive, and
Executive hereby agrees to his employment as Executive Vice President and Chief
Financial Officer of Zomax, subject to the terms and conditions of this
Agreement and shall report directly to the Chief Executive Officer.   Executive understands and agrees that he
will immediately resign from any other Zomax directorships or offices upon
termination of his employment for any reason.

 

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2.2          Duties.

 

a.             During
the term of his employment pursuant to this Agreement, Executive shall serve
Zomax faithfully and to the best of his ability and shall devote substantially
all his business and professional time, energy, and diligence to the
performance of the duties of such office and he shall perform such service and
duties in connection with the business and affairs of Zomax (i) as are
customarily incident to such office and (ii) as may reasonably be assigned or
delegated to him by the Chief Executive Officer.  Executive may engage in appropriate civic,
charitable or religious activities and devote a reasonable amount of time to
private investments or, with the consent of Zomax’s Board of Directors which
shall not be withheld unreasonably, serve on up to two (2) boards of directors
of other entities, in each case, as long as such activities and service do not
interfere or conflict with Executive’s duties and responsibilities to Zomax and
its affiliates.

 

b.             Subject
to the terms of this Agreement, Executive agrees to be subject to Zomax’s
control, rules, regulations, policies and programs.

 

2.3          Term of Employment.

 

a.             The term of this Agreement shall be effective as
of the date hereof and shall extend until terminated as expressly provided
herein.  Executive’s first effective date
of employment pursuant to this Agreement shall be August 22, 2005.

 

b.             Unless extended by mutual consent or as provided
in Section 2.3(c) below, this Agreement shall terminate on August 22, 2006, one
year after the effective date of employment (the “Initial Term”).

 

c.             On and after the Initial Term, this Agreement
shall be deemed extended from year to year (“Extension Year”) unless, no later
than three (3) months prior to the end of the Initial Term or applicable
Extension Year (as the case may be), Zomax or the Executive shall have notified
the other party in writing that it or he does not elect to extend the Initial
Term or applicable Extension Year (as the case may be) past its then expiration
date.

 

Section 3

 

COMPENSATION,
BENEFITS AND OTHER ENTITLEMENTS

 

3.1          Base Salary.  As compensation for his services to Zomax and
as compensation for his confidentiality and non-competition agreements provided
in Sections 7 and 9 of this Agreement, Executive shall be paid a Base Salary of
$275,000 in bi-weekly amounts of $10,576.92. 
The Base Salary may be increased or reduced; provided, however, that
any reduction shall be permitted only if the Company reduces the base salaries
of its senior executives generally and such reduction shall not exceed
the average percentage reduction for all senior executives.  The Base Salary shall be inclusive of all
applicable income, Social Security, 

 

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and other taxes and charges that are required by law to be withheld by
Zomax or that are requested to be withheld by Executive.

 

3.2          Bonus.  In addition to the Base Salary payable to
Executive pursuant to Section 3.1 above, Executive will be eligible to receive
an annual bonus for each year of service under this Agreement.  During the Term, the bonus shall be targeted
at no less than 50% of Base Salary, unless the Company reduces the target bonus
of its senior executives generally and such reduction does not exceed
the average percentage reduction for all senior executives.  The criteria for payout of Executive’s bonus
and his target bonus opportunity for a particular year shall, subject to the
preceding sentence, be determined solely within the discretion of the Chief
Executive Officer, Board or Compensation Committee of Zomax and shall be
communicated to Executive no later than March 1 of each year.  The bonus earned by Executive, if any, will
be paid to Executive no later than March 1 of the following year.

 

3.3          Long-Term
Incentives.  Upon the first effective date of employment,
August 22, 2005, Executive shall receive an incentive stock option, under the
Company’s 2004 Equity Incentive Plan, to acquire 200,000 shares of the Company’s
Common Stock at the fair market value of such stock on such date.  Such option shall vest 50,000 shares annually
over four years and have a term of 10 years. 
In addition to this grant and to the Base Salary and bonus payable to
Executive pursuant to Sections 3.1 and 3.2, respectively, Executive will be
eligible to receive annual equity-based awards for each year of service under
this Agreement.  The Compensation
Committee in its sole discretion will determine whether to grant to Executive
any equity-based awards in a particular year and the size of such awards.  In making these determinations, the
Compensation Committee will take into account both the Company’s and Executive’s
performances, among other factors.

 

3.4          Benefits.  Executive shall be eligible to participate in
or receive benefits under all senior executive and employee benefit plans,
health plans, or arrangements, if any, made available from time to time by
Zomax to its senior executive employees as set forth in an employee manual or
otherwise, including but not limited to deferred compensation, supplemental
retirement and Section 401(k) plans, disability, life and other insurance plans
and programs, all hospitalization and health and welfare plans and programs,
and stock options, restricted share, incentive or other bonus plans.  Subject to Sections 3.2 and 3.3, Zomax
retains the right to amend, modify or terminate any of its benefits or benefit
plans during the term of Executive’s employment.

 

3.5          Miscellaneous Benefits.  Zomax shall provide Executive the following
additional benefits:

 

a.             Executive
shall be entitled to a sign-on bonus in the amount of $60,000, payable upon his
first day of employment with Zomax.

 

b.             Reimbursement
of all ordinary and necessary expenses incurred by Executive for Zomax
business;

 

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c.             Executive
agrees to be bound by the terms and conditions of the current vacation policy
that may be amended from time to time. 
On the termination of this Agreement or his employment for any reason,
Executive will be paid in cash in an amount equal to the value of unused
vacation days.  This amount will be paid
in full within five (5) days of the effective date of the termination of his
employment or this Agreement for any reason.

 

Section 4

 

TERMINATION OF
EMPLOYMENT

 

4.1          Termination.  Notwithstanding any other provision of this
Agreement to the contrary or appearing to be to the contrary, Executive’s
employment shall terminate as follows:

 

a.             By
mutual written agreement of the parties.

 

b.             Upon
Executive’s death.

 

c.             Zomax
shall have the right to terminate Executive’s employment upon Executive’s
inability to perform the essential functions of his position due to physical or
mental disability as determined in the good faith judgment of the Chief
Executive Officer or the Board of Directors, provided such inability continues
for a period of ninety (90) consecutive days, one hundred twenty (120)
non-consecutive days in any twelve (12) month period, or longer period as may
be required by applicable law.

 

d.             Subject
to Sections 4.1(c) and 4.1(f), upon ninety (90) days’ written notice to
Executive by Zomax.

 

e.             Subject
to Sections 4.1(g) and 4.1(h), upon ninety (90) days’ written notice by
Executive to Zomax.

 

f.              Zomax
shall have the right to terminate Executive’s employment immediately for “Cause”
as defined in Section 1 above.

 

g.             Executive
shall have the right to resign from his employment immediately for “Good Reason”
as defined in Section 1 above.

 

h.             Executive
shall have the right to resign from his employment immediately for any reason
at any time during the one (1) year period after a Change of Control.

 

4.2          Payment
Upon Termination of Employment for Cause or Resignation Without Good Reason.

 

a.             If
Executive’s employment is terminated by Zomax for Cause or if Executive resigns
from his employment hereunder other than for Good Reason, then Executive shall
only be entitled to receive the “Accrued Benefits.”  For purposes of this Agreement, the 

 

6

 

“Accrued Benefits” shall mean any accrued and unpaid Base Salary
through the termination date, any other benefits under any plan or program in
accordance with the terms of such plan or program (including any vesting
requirements) and benefits provided in accordance with customary practices of
Zomax at Executive’s expense (e.g., hospitalization and medical insurance).

 

b.             The
date of termination of Executive’s employment by Zomax under the circumstances
described in this Section 4.2 shall be effective immediately upon receipt by
Executive of written notice of termination. 
The date of resignation by Executive under the circumstances described
in this Section 4.2 shall be ninety (90) days after receipt by Zomax of written
notice of resignation.

 

4.3          Payment
Upon Termination of Employment Without Cause, Termination or Resignation for
Good Reason, Termination or Resignation Following Change of Control, and
Failure to Extend Employment Agreement.

 

a.             If
Executive’s employment is terminated Without Cause, Executive resigns from his
employment hereunder for Good Reason, or Company fails to extend this Agreement
at the end of the Initial Term or an Extension Year, Executive shall be
entitled to the Accrued Benefits and to receive the following:

 

(i)            Executive
shall receive, within thirty (30) days after such termination, resignation, or
end of the Initial Term or an Extension Year without an extension, a lump sum
payment in an amount equal to 1.125 times his Base Salary in effect on the
effective date of such termination or resignation or as of the end of the
Initial Term or Extension Year.  Zomax
shall be entitled to deduct or withhold all taxes and charges which Zomax may
be required to deduct or withhold therefrom.

 

(ii)           With
respect to any outstanding stock options, SARs, restricted stock awards,
performance share awards or other equity-based awards granted to Executive, all
restrictions shall lapse immediately and such awards shall fully vest, all
outstanding options and SARs will become exercisable immediately, and all
performance share objectives shall be deemed to have been met.

 

(iii)          Executive
and his family shall be entitled to continued participation in hospital and
medical plans and programs of Zomax at Zomax’s expense for a nine (9) month
period following such termination, resignation or end of Term subject to early
termination of participation upon Executive becoming entitled to comparable
benefits on subsequent employment.

 

(iv)          Executive
shall be entitled to payment in full, upon the effective date of termination,
of all unpaid vacation allowances.

 

7

 

b.             If
Executive is terminated or resigns from his employment hereunder for any reason
within one (1) year after a Change of Control, Executive shall be entitled to
the Accrued Benefits and the following:

 

(i)            Executive
shall receive within thirty (30) days after such termination or resignation, a
lump sum payment in an amount equal to 1.5 times his Base Salary in effect on
the effective date of such termination or resignation.  Zomax or its successor shall be entitled to
deduct or withhold all taxes and charges which may be required to be deducted
or withheld therefrom.

 

(ii)           With
respect to any outstanding stock options, SARs, restricted stock awards,
performance share awards or other equity-based awards granted to Executive, all
restrictions shall lapse immediately and such awards shall fully vest, all
outstanding options and SARs will become exercisable immediately, and all
performance share objectives shall be deemed to have been met.

 

(iii)          Executive
and his family shall be entitled to continued participation in hospital and
medical plans and programs of Zomax at Zomax’s expense for a twelve (12) month
period following such termination, resignation or end of Term subject to early
termination of participation upon Executive becoming entitled to comparable
benefits on subsequent employment.

 

(iv)          Executive
shall be entitled to payment in full, upon the effective date of termination,
of all unpaid vacation allowances.

 

c.             The
date of termination of Executive’s employment Without Cause shall be ninety
(90) days after receipt by Executive of written notice of termination.  The date of termination or resignation by
Executive for any reason within one (1) year after a Change of Control or
Resignation for Good Reason shall be effective immediately upon receipt by
Zomax of written notice of resignation or the date of receipt by Executive of
the termination notice.  The date of
termination of Executive’s employment for failure to extend his employment
shall be the date on which the Initial Term or Extension Year ends.

 

d.             Anything in the Agreement to the contrary
notwithstanding, if any payment or benefit of any type to or for the benefit of
Executive by Zomax, by any of its affiliates, by any person who acquires
ownership or effective control or ownership of a substantial portion of Zomax’s
assets (within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the “Code”)) or by any
affiliate of such person, whether paid or payable or distributed or
distributable pursuant to the terms of the Agreement or otherwise (the “Payments”),
would, but for this sentence, be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest or penalties, are collectively
referred to as the “Excise Tax”), then such Payment(s) shall be equal to the
Greater Amount.  The “Greater Amount”
shall be either (1) the largest portion of the Payment(s) that would result 

 

8

 

in no portion of the Payment(s) being subject
to the Excise Tax or (2) the Payment(s) in full, whichever amount after taking
into account all applicable federal, state and local taxes and the Excise Tax
(all computed at the highest applicable marginal rate), results in the
Executive’s receipt, on an after-tax basis, of the greatest amount of the
Payment(s).  If a reduction in payments
or benefits is necessary so that the Payment(s) equals the Greater Amount,
reduction shall occur in the following order unless Executive elects in writing
a different order:  reduction of cash
payments; reduction of non-cash payments.

 

4.4.         Termination
of Employment by Disability or Death.

 

a.             In
the event of termination of Executive’s employment pursuant to Section 4.1(b)
or 4.1(c), the Executive and/or his family (or Executive’s estate, as the case
may be), shall be entitled to receive from Zomax the following:

 

(i)            Executive
shall receive, within thirty (30) days after such termination, resignation, or
end of the Initial Term or Extension Year without an extension, a lump sum
payment in an amount equal to 1.125 times his Base Salary in effect on the
effective date of such termination or resignation or as of the end of the
Initial Term or Extension Year.  Zomax
shall be entitled to deduct or withhold all taxes and charges which Zomax may
be required to deduct or withhold therefrom.

 

(ii)           With
respect to any outstanding stock options, SARS, restricted stock awards,
performance share awards or other equity-based awards granted to Executive, all
restrictions shall lapse immediately and such awards shall fully vest, all
outstanding options and SARS will become exercisable immediately, and all
performance share objectives shall be deemed to have been met.

 

(iii)          Executive
and/or his family shall be entitled to continue participation in hospital and
medical plans and programs of Zomax at Zomax’s expense for an eighteen (18)
month period.  Thereafter, Zomax shall
pay to Executive and/or his family the sum of $6,000 per year to be prorated
for a partial year, during the period of disability or, if later, until
Executive reaches age 62 or would have reached age 62 if he had survived;
provided, that the first payment shall be payable on the day following the
expiration of such eighteen (18) month period and any subsequent payments shall
be payable on each anniversary of such day.

 

(iv)          Executive
(or, in the event of his death, Executive’s estate or his designated
beneficiary) shall be entitled to receive benefits under any other Company plan
or program (to the extent Executive is vested) in accordance with the terms of
such plan or program.  Should Executive’s
employment terminate pursuant to Section 4.1(c), he shall be entitled to 

 

9

 

continued contributions
under Zomax’s qualified profit sharing plan 401(k) to the extent permitted in
said Plan.

 

(v)           Executive
shall be entitled to payment in full, upon the effective date of termination,
of all unpaid vacation allowances.

 

b.             The
date of termination of Executive’s employment under the circumstances described
in this Section 4.4 shall be the date Executive’s employment is terminated
pursuant to Section 4.1(c) or the date of Executive’s death, as the case may
be.

 

5.             Legal
Fees and Expenses.  Zomax shall pay for all legal fees and
expenses incurred by Executive up to $5,000 in connection with the negotiation,
preparation, review, execution and interpretation of this Agreement and other
related documents (including any amendment of this Agreement).  Zomax shall directly pay Executive’s legal
counsel in cash within thirty (30) days of Zomax’s receipt of any applicable
invoice(s) for such legal fees and expenses.

 

Prior to a Change of
Control, if Executive is successful in seeking to obtain or enforce any right
or benefit provided by this Agreement from or against Zomax in a proceeding
before a court of competent jurisdiction or before an arbitrator or arbitration
panel, Zomax shall reimburse Executive for all reasonable legal fees and
expenses incurred by Executive in the pursuit of any employment right or
benefit.

 

If after a Change of
Control, Executive is successful in seeking to obtain or enforce any right or
benefit provided by this Agreement from or against a “Successor” of Zomax
before a court of competent jurisdiction or before an arbitrator or arbitrator
panel, Successor shall advance Executive for all reasonable legal fees and
expenses incurred by Executive in the pursuit of any employment right or
benefit.

 

6.             Assignment
of Inventions.  Executive agrees to
promptly disclose to Zomax in writing all Inventions; and all such Inventions
shall be the exclusive property of Zomax and are hereby assigned by Executive
to Zomax.  Further, Employee will, at
Zomax’s expense, give Zomax all assistance it reasonably requires to perfect,
protect, and use its rights to Inventions. 
In particular, but without limitation, Executive will sign all
documents, do all things, and supply all information that Zomax may deem
necessary or desirable to:

 

(i)            transfer
or record the transfer of his entire right, title and interest in Inventions;
and

 

(ii)           enable
Zomax to obtain patent, copyright or trademark protection for Inventions
anywhere in the world.

 

The obligations of this
Section 6 shall continue beyond the termination of employment with respect to
Inventions conceived or made by Executive during the period of his employment
and shall be binding upon assigns, executors, administrators and other legal
representatives.  For 

 

10

 

purposes of this Agreement, any Invention relating to the business of
Zomax on which Executive files a patent application within six (6) months after
termination of employment with Zomax shall be presumed to cover Inventions
conceived by Executive during the term of his employment, subject to proof to
the contrary by good faith, written and duly corroborated records establishing
that such Invention was conceived and made following termination of employment.

 

NOTICE:  Pursuant to Minnesota Statutes § 181.78, Executive
is hereby notified that this Section 6 does not apply to any invention for
which no equipment, supplies, facility, or trade secret information of Zomax
was used and which was developed entirely on Executive’s own time, and (1)
which does not relate (a) directly to the business of Zomax or (b) to Zomax’s
actual or demonstrably anticipated research or development, or (2) which does
not result from any work performed by the employee for Zomax.

 

7.             Confidential
Information.  Executive agrees not to
directly or indirectly use or disclose Confidential Information for the benefit
of anyone other than Zomax, either during or after employment, for as long as
the information retains the characteristics of Confidential Information
described in Section 1 above.

 

8.             Return
of Documents and Property.  All
documents and tangible items provided to Executive by Zomax, or possessed by or
created by Executive for use in connection with his employment, are the
property of Zomax and shall be promptly returned to Zomax on termination of
employment together with all copies, recordings, abstracts, notes or
reproductions of any kind made from or about the documents and tangible items
or the information they contain.

 

9.             Non-competition.  In consideration of Executive’s rights under
this Agreement, Executive agrees that, from and after the Effective Date and
continuing until the one-year anniversary of termination or cessation of
Executive’s employment with Zomax, Executive will not, alone or in any capacity
with another legal entity:

 

(i)            directly
or indirectly, own any interest in, control, be employed by or associated in a
material manner with, or render services to (including but not limited to
services in research), any person or entity (or subsidiary, subdivision,
division, or joint venture of such entity) in connection with the design,
development, manufacture, marketing, or sale of a Competitive Product that is
sold or intended for distribution or sale in any geographic area in which Zomax
actively markets, or in which, to the Executive’s knowledge acquired through
his employment with Zomax, Zomax intends to actively market, a Company Product
of the same general type or function;

 

(ii)           directly
or indirectly, solicit any of Zomax’s then current employees for the purpose of
hiring them or inducing them to leave their employment with Zomax;

 

11

 

(iii)          directly
or indirectly, solicit, attempt to solicit, interfere, or attempt to interfere
with Zomax’s relationship with its then current customers or potential
customers (of which Executive has knowledge acquired through his employment
with Zomax), on behalf of himself or any other person or entity engaged in the
design, development, manufacture, marketing, or sale of a Competitive Product;
or

 

(iv)          directly
or indirectly design, develop, manufacture, market, or sell any Competitive
Product that is sold or intended for distribution or sale in any geographic
area in which Zomax actively markets, or in which, to the Executive’s knowledge
acquired through his employment with Zomax, Zomax intends to actively market, a
Company Product of the same general type or function.

 

In
the event that Executive receives a payment from Zomax pursuant to Section 4.3
above, the reference to the “one-year anniversary” in the first sentence of
this Section shall be changed to the “eighteen-month anniversary”.

 

Notwithstanding
the foregoing in no event shall ownership of less than four percent (4%) of the
outstanding publicly-traded equity or debt securities of any issuer or less
than four percent (4%) of the outstanding interests in a private equity fund,
mutual fund or other pooled investment account, in each case, in which the
Executive does not actively participate in the management thereof, be prohibited
by this Section 9.

 

10.          Breach
of Non-competition Provisions of this Agreement.  In addition to any other relief or remedies
afforded by law or in equity, if Executive breaches Section 10 of this
Agreement, Executive agrees that Zomax shall be entitled, as a matter of right,
to injunctive relief in any court of competent jurisdiction.  Executive recognizes and hereby admits that
irreparable damage will result to Zomax if he violates or threatens to violate
the terms of Section 10 of this Agreement. 
This Section 10 shall not preclude the granting of any other appropriate
relief including, without limitation, money damages against Executive for
breach of Section 10 of this Agreement.

 

11.          Indemnification.  The Company shall indemnify Executive, for
such expenses and liabilities, in such manner, under such circumstances, and to
such extent, as permitted by Minnesota Statutes, Section 302A.521, as now
enacted or hereafter amended.  The right
to indemnification includes the right to be paid by Zomax the expenses incurred
in defending any proceeding in advance of its final disposition.

 

Zomax agrees to provide
to the Executive director’s and officer’s liability insurance coverage that
provides the maximum coverage provided to its other officers and directors in respect
of any liabilities that might arise out of his service as a director and
officer of Zomax.  The parties recognize
and agree that determination as to the amount of such insurance that is
reasonable shall reflect not only the need to protect the Executive against
liability, but also the cost and availability of such insurance.

 

12

 

After termination of
employment, the Executive will be available to give testimony and assistance in
connection with any future litigation or arbitration proceedings arising from
activities of Zomax during the period of his employment.  Such testimony and assistance will be
scheduled at times and locations convenient for the Executive and not
inconsistent with his health and the responsibilities that he then may have in
connection with subsequent employment or other rendering of services.  Zomax shall reimburse him for all reasonable
out-of-pocket travel and other expenses, including legal fees, incurred by him
in connection with his testimony and assistance pursuant to this Section
11.  Such fees and reimbursements shall
be paid promptly after the Executive’s submission to Zomax of statements in
such reasonable detail as to enable Zomax to make such payment.

 

12.          Effect
of Other Obligations.  It is intended
that the obligation of the parties to perform the terms of this Agreement is
unconditional and does not depend on the performance or non-performance of any
terms, duties or obligations not specifically recited in this Agreement.

 

13.          Binding
Agreement.  This Agreement shall be
binding upon, and inure to the benefit of Zomax, its successors and assigns,
but without the prior written consent of Executive, this Agreement may not be
assigned other than in connection with a merger or sale of substantially all
the assets of Zomax or similar transaction. 
The rights of the Executive hereunder to payments and benefits shall
inure to the benefit of, and be enforceable by, the Executive’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

 

14.          Severability.  If the final determination of a court of
competent jurisdiction declares, after the expiration of the time within which
judicial review (if permitted) of such determination may be perfected, that any
term of provision hereof is invalid or unenforceable, (a) the remaining terms
and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable
term or provision shall be deemed replaced by a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.

 

15.          Amendment;
Waiver.  This Agreement may not be
modified, amended or waived in any manner except by an instrument in writing
signed by both parties hereto.  The
waiver by either party of compliance with any provision of this Agreement by
the other party shall not operate or be construed as a waiver of any other
provision of this Agreement, or of any subsequent breach by such party of a
provision of this Agreement.

 

16.          Governing
Law.  All matters affecting this
Agreement, including the validity thereof, are to be governed by, interpreted
and construed in accordance with the laws of the State of Minnesota without
regard to the conflict of laws principles thereof.

 

17.          Notices.  Any notice hereunder by either party to the
other shall be given in writing by personal delivery or certified mail, return
receipt requested.  If addressed to
Executive, the notice shall be delivered or mailed to Executive at the address
most recently communicated in writing by Executive to Zomax, or if addressed to
Zomax, the notice shall be delivered or mailed 

 

13

 

to Zomax at its executive offices to the attention of the Chief
Executive Officer of Zomax.  A notice
shall be deemed given, if by personal delivery, on the date of such delivery
or, if by certified mail, on the date shown on the applicable return receipt.

 

18.          Supersedes
Previous Agreements.  This Agreement
supersedes all prior or contemporaneous negotiations, commitments, agreements
and writings with respect to the subject matter hereof, all such other
negotiations, commitments, agreements and writings will have no further force
or effect, and the parties to any such other negotiation, commitment, agreement
or writing will have no further rights or obligations thereunder.

 

19.          Headings;
Construction.  The headings of
Sections and paragraphs herein are included solely for convenience of reference
and shall not control the meaning or interpretation of any of the provisions of
this Agreement.  This Agreement shall be
construed without regard to any presumption or other rule requiring
construction hereof against the party causing this Agreement to be drafted.

 

20.          Benefit.  Subject to Section 13, nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.

 

21.          Release. 
Executive understands and agrees that he will be entitled to no
severance payments under Section 4.3 and 4.4 above unless he executes and does
not rescind a release agreement in the form mutually agreed to be Zomax and
Executive and that will provide for a mutual and comprehensive release of
claims by each party against the other party, except for any of Executive’s
contractual claims (including, without limitation under this Agreement and any
equity-based award agreements) or claims for accrued benefits in favor of
Executive.

 

22.          No Mitigation.  Executive shall not be required to
mitigate the amount of any payment or benefit hereunder, nor shall any payment
or benefit be reduced by any earnings or benefits that Executive may receive
from another source.

 

14

 

IN WITNESS WHEREOF, Zomax
has caused this Agreement to be signed by its President and Chief Executive
Officer pursuant to the authority of its Board and Executive has executed this
Agreement, effective as of August 22, 2005.

 

	
   

  	
  ZOMAX INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Anthony Angelini

  	
   

  
	
   

  	
   

  	
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Richard D. Barnes

  	
   

  
	
   

  	
  Richard D. Barnes

  

 

15EXHIBIT 4.1

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”)
is made as of August 4, 2005, by and between NuVasive, Inc., a Delaware
corporation (the “Company”) and Pearsalls Limited, a private limited
company incorporated in England and Wales under registration number 03851227
(the “Stockholder”).

 

The Company has no intention to and shall
have no obligation to repurchase any Registrable Securities issued to the
Stockholder pursuant to the Purchase Agreement.

 

The parties hereto agree as follows:

 

1.             Definitions.  The following terms as used
herein shall have the following meanings:

 

“Closing Date” shall have the meaning
specified in the Purchase Agreement.

 

“Closing Shares” shall
have the meaning specified in the Purchase Agreement.

 

“Commission” means the Securities and
Exchange Commission and any other similar or successor agency of the Federal
government then administering the Securities Act or the Exchange Act.

 

“Common Stock” means the Common Stock,
par value $0.001 per share, of the Company.

 

“Company” shall have the meaning
specified in the introductory paragraph of this Agreement.

 

“Exchange Act” means the Securities
Exchange Act of 1934, as amended, or any similar
Federal statute then in effect, and any reference to a particular section
thereof shall include a reference to the comparable section, if any, of any
such similar Federal statute, and the rules and regulations thereunder.

 

“First Contingent Milestone Payment” shall
have the meaning specified in the Purchase Agreement.

 

“First Milestone Shares” shall mean
the shares of Common Stock issued as part of the First Contingent Milestone
Payment.

 

“Measurement Amount” shall mean an
amount equal to the product of (i) the number of Closing Shares multiplied by
(ii) the Reference Market Value on the date of the issuance of the Closing
Shares.

 

 

“Measurement Date” shall mean the date
that the Company notifies the Stockholder that the Shelf Registration Statement
covering the Closing Shares has been declared effective by the Commission and
provides the Stockholder with copies of the Prospectus.

 

“Person” means any individual,
corporation, partnership, association, trust or other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.

 

“Prospectus” means the prospectus
included in any Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any of the
Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.

 

“Purchase Agreement” means the Asset
Purchase Agreement, dated as of August 4, 2005, by and between the Company and
the Stockholder.

 

“Reference Market Value” shall
have the meaning specified in the Purchase Agreement.

 

“Registrable Securities” means
(i) all Common Stock owned by the Stockholder and which has been issued,
or may in the future be issued, pursuant to the Purchase Agreement, including,
but not limited to the Closing Shares, the First Milestone Shares, the Second
Milestone Shares and the Third Milestone Shares, and  (ii) any shares of Common Stock issued
or issuable in respect of the securities described in clause (i) by reason of a
stock split, stock dividend or other recapitalization of the Company. For the
purposes of this Agreement, Registrable Securities will cease to be Registrable
Securities when (i) a registration statement covering such Registrable
Securities has been declared effective and they have been disposed of pursuant
to such effective registration statement, (ii) they are distributed to the
public pursuant to Rule 144 (or any similar provision then in force), or
(iii) they have been otherwise sold or transferred by the Stockholder.

 

“Registration Statement” means any
registration statement filed by the Company under the Securities Act that
covers any of the Registrable Securities, including the Prospectus, any
amendments and supplements to such Registration Statement, including
post-effective amendments and all exhibits and all material incorporated by
reference in such registration statement.

 

“Rule 144” means Rule 144 under the
Securities Act.

 

“Second Contingent Milestone
Payment” shall
have the meaning specified in the Purchase Agreement.

 

“Second Milestone Shares” shall mean
the shares of Common Stock issued as part of the Second Contingent Milestone
Payment.

 

2

 

“Securities Act” means the Securities
Act of 1933, as amended, or any similar Federal
statute then in effect, and any reference to a particular section thereof shall
include a reference to a comparable section, if any, of any such similar Federal
statute, and the rules and regulations thereunder.

 

“Shelf Registration Statement” shall
have the meaning specified in Section 2.1.

 

“Stockholder” shall have the meaning
specified in the introductory paragraph of this Agreement.

 

“Third Contingent Milestone
Payment” shall
have the meaning specified in the Purchase Agreement.

 

“Third Milestone Shares” shall mean
the shares of Common Stock issued as part of the Third Contingent Milestone
Payment.

 

2.             Demand Registrations.

 

2.1.          Demand Registration.  The Company
shall file as promptly as practicable (but in any event within 30 days after
the date of this Agreement) and use its reasonable efforts to have declared
effective as promptly as practicable (but in any event, within 120 days after
the date of this Agreement) a shelf registration statement pursuant to Rule 415
(or any successor rule thereto) under the Securities Act (the “Shelf
Registration Statement”) for a delayed or continuous public offeringof the
Closing Shares and the First Milestone Shares registering the resale from time
to time by the Stockholder thereof, subject to the provisions of Section 2.2
and the other terms and conditions of this Agreement. Such registration
statement shall be on Form S-3 (or any successor form to Form S-3) or another appropriate
form permitting registration of such Registrable Securities for resale by the
Stockholder on a delayed or continuous basis as contemplated by this Section.
In the event the registration of a delayed or continuous offering is not
permitted under the Securities Act, the Company will provide comparable
alternative registration rights under the Securities Act to the
Stockholder.    In the event that both
(i) the Shelf Registration Statement is not effective on the date of the
payment of the First Contingent Milestone Payment and (ii) all of the First
Milestone Shares are not eligible to be sold within a three month period
pursuant to Rule 144 under the Securities Act, the Company shall,
notwithstanding the provisions of Section 2.5 of the Purchase Agreement pay the
entire amount of the First Contingent Milestone Payment entirely in cash and
shall not be permitted to pay any portion thereof in Common Stock.

 

2.2.          Limitations on Shelf Registrations.  The
Shelf Registration rights granted to the Stockholder pursuant to Section 2.1
are subject to the following limitations:

 

(a)           the Company shall not be obligated under Section
2.1 to file more than one Shelf Registration Statement, provided that a Shelf
Registration Statement which does not become or remain effective for the period
specified in Section 3.1(a) shall not be deemed to constitute a Shelf
Registration Statement filed pursuant to Section 2.1 (unless such Shelf
Registration Statement

 

3

 

has not become effective or does not remain
effective due solely to the fault of the Stockholder);

 

(b)           the Company shall be entitled to postpone for a
reasonable time, not exceeding 10 days, the filing of the Shelf Registration
Statement or its efforts to cause the Shelf Registration Statement to become
effective if at the time the right to delay is exercised the Company shall
determine in good faith that such offering would interfere with any
acquisition, financing or other transaction which the Company is actively pursuing
and is material to the Company or would involve initial or continuing
disclosure obligations that would not be in the best interests of the Company;

 

(c)           the Company by notice to the Stockholder may
postpone all sales under the Shelf Registration Statement for a reasonable
time, not exceeding 30 days, if the Company shall determine in good faith that
permitting such sales would interfere in any material respect with any material
acquisition, financing or other transaction which the Company is actively pursuing
or require premature disclosure (if the Company is so advised by its legal
counsel) of any other material corporate development or event, which
disclosure  the Company believes would
adversely affect the interests of the Company; provided that  the Company
may not implement more than one such postponement; provided, however, that
notwithstanding the foregoing, the Company may postpone all sales under the
Shelf Registration Statement at any time beginning on the date on which such
registration statement has been effective for an aggregate total of 120 days
and ending on the date of the issuance of the First Milestone Shares; and

 

(d)           Notwithstanding the Company’s obligation to
register any Registrable Securities hereunder, the Stockholder shall sell, if
and to the extent sales may be made pursuant to Rule 144 under the Securities
Act, all Registrable Securities pursuant to Rule 144  and not under the Shelf Registration
Statement.

 

2.3.          Facilitation of Sale of Registrable Securities.  The
Company shall use its reasonable  efforts to facilitate (as explained
below) upon the written request of the Stockholder the private sale by the
Stockholder of the Registrable Securities to a third party in the event that
the Shelf Registration Statement has not been declared effective within 120
days after the date of this Agreement; provided that the Company shall be
entitled to suspend such efforts if and when the Shelf Registration Statement
is thereafter declared effective. The Stockholder acknowledges and agrees that
the reasonable efforts to facilitate obligations of the Company under this
Section will be satisfied by the chief executive officer or the president of
the Company giving a “road show” type presentation about the Company to
prospective buyers identified by the Stockholder, that the Company shall not be
required by this Section to disclose any material inside information in any
such presentation and that the obligations of the Company under this Section do
not require among other things the Company to make representations and
warranties to any buyer of Registrable Securities. The Company and the
Stockholder shall cooperate in good faith to schedule the time and place for
any above described and requested “road show” presentation.

 

4

 

2.4.          Issuance
of Additional Shares.  In the event that on the date of the payment of
the Second Contingent Milestone Payment or the Third Contingent Milestone
Payment both (i) the shares to be issued upon such payment may not be resold
pursuant to an effective Registration Statement and (ii) all of the shares to
be issued in respect of such milestone payment are not (a) eligible to be sold
within a three month period pursuant to Rule 144 under the Securities Act; or
(b) eligible to be sold pursuant to Rule 144(k) under the Securities Act, the
Company shall, notwithstanding the provisions of Section 2.5 of the Purchase
Agreement pay the entire amount of such milestone payment entirely in cash and
shall not be permitted to pay any portion thereof in Common Stock.  Furthermore, the Company agrees that in the
event that the conditions set forth in both Section 2.4(ii)(a) and (b) are not
met on the date of payment of the Second Contingent Milestone Payment or the
Third Contingent Milestone Payment, as the case may be, and the Stockholder
receives shares of Common Stock in full or partial satisfaction of such
payments, all of the terms of Sections 1 through 4, 5, 6 and 8 of this
Agreement shall govern the registration of such shares, as if (A) the Shelf
Registration Statement had originally been filed and declared effective in
respect of such shares of Common Stock, 
(B) Section 3.1(a)(i) referred to the date on which all of the Second
Milestone Shares or Third Milestone Shares, as the case may be, cease to be
Registrable Securities and (C) Section 3.1(a)(ii) referred to the date that is
one hundred twenty (120) days after the payment of th Second Contingent
Milestone Payment or Third Contingent Milestone Payment, as the case may be.

 

3.             Registration Procedures.

 

3.1.          Preparation and Filing.  The
Company will:

 

(a)           prepare and file with the Commission a Shelf
Registration Statement with respect to the Registrable Securities and use its
reasonable efforts to cause the Shelf Registration Statement to become and
remain effective until the earlier of (i) the date on which all of the
Closing Shares and the First Milestone Shares have ceased to be Registrable
Securities, (ii) the date that is one hundred twenty (120) days after of
the payment of the First Contingent Milestone Payment, or (iii) the date on
which all remaining Closing Shares and First Milestone Shares held by
Stockholder may be sold pursuant to Rule 144 under the Securities Act within a
three month period (such date, the “Shelf Expiration Date”);

 

(b)           otherwise use its reasonable efforts to comply in all
material respects with all applicable rules and regulations of the Commission;

 

(c)           use its reasonable efforts to cause all the
Registrable Securities to be listed on the Nasdaq National Market, if the
Registrable Securities are not so already listed, or such other market as
mutually agreed upon by the Company and the Stockholder in writing;

 

(d)           take such reasonable actions as the Stockholder shall
request in order to expedite or facilitate the disposition of the Registrable

 

5

 

Securities, subject to the terms and conditions of this Agreement;
provided, that, such reasonable actions can be performed without significant
time or expense on the part of the Company;

 

(e)           permit the Stockholder to participate in the
preparation of the Shelf Registration Statement (provided that the Stockholder
does not unreasonably delay the preparation thereof) and to require the
insertion therein of material furnished to the Company in writing which in the
judgment of the Stockholder should be included and which is reasonably
acceptable to the Company;

 

(f)            use such reasonable efforts to prevent the
issuance of any stop order suspending the effectiveness of the Shelf
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus and, if any such order is issued, to obtain the lifting
thereof at the earliest reasonable time;

 

(g)           not at any time file or make any amendment to the
Shelf Registration Statement, or any amendment of or supplement to the
Prospectus (excluding the documents incorporated by reference into the
Prospectus), of which the Stockholder shall not have previously been advised or
furnished a copy or to which the Stockholder, or counsel for the Stockholder,
shall reasonably object;

 

(h)           furnish to the Stockholder without charge as many
signed copies of the Shelf Registration Statement (as originally filed) and of
all amendments thereto, whether filed before or after the Shelf Registration
Statement becomes effective, copies of all exhibits and documents filed
therewith, including documents incorporated by reference into the Prospectus,
and signed copies of all consents and certificates of experts, as the Stockholder
may reasonably request;

 

(i)            will deliver to the Stockholder, without charge,
from time to time during the period when the Prospectus is required to be
delivered under the Securities Act, such number of copies of the Prospectus (as
supplemented or amended) as the Stockholder may reasonably request; and

 

(j)            use reasonable efforts to comply in all material
respects with the Securities Act and the rules and regulations of the
Commission thereunder, and the Exchange Act and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of
the Registrable Securities in accordance with the intended method or methods of
distribution contemplated in the Prospectus and permitted by this Agreement. If
at any time when a prospectus is required by the Securities Act to be delivered
in connection with sales of the Registrable Securities any event shall occur or
condition exist as a result of which it is necessary or desirable, based on the
advice of counsel for the Stockholder or agents or counsel for the Company, to

 

6

 

amend the Shelf Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser, or if it shall be necessary or
desirable, based on the advice of such counsel, at any such time to amend the
Shelf Registration Statement or amend or supplement such Prospectus of the
Company, the Company will promptly prepare and file with the Commission such
amendment or supplement as may be necessary to correct such untrue statement or
omission or to make the Shelf Registration Statement or the Prospectus comply
with such requirements.

 

3.2.          Amendments.  In connection with the Shelf
Registration Statement filed pursuant to this Agreement, the Company shall file
any post-effective amendment or amendments to the Shelf Registration Statement
which may be required under the Securities Act during the period required to effect the distribution contemplated thereby.

 

3.3.          Notification of Certain Events.

 

(a)           During the period for which the Company is
required to file and keep effective the Shelf Registration Statement pursuant
to this Agreement, the Company shall promptly notify the Stockholder during the
period the Shelf Registration Statement is required to remain effective, or at
any time when a Prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event or the existence of any fact,
as a result of which the Shelf Registration Statement or such Prospectus
contained in the Shelf Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of circumstances then existing. The Stockholder agrees,
upon receipt of such notice, forthwith to cease making offers and sales of such
securities pursuant to the Shelf Registration Statement or deliveries of the
Prospectus contained therein for any purpose and to return to the Company the
copies of such Prospectus not theretofore delivered by the Stockholder. Subject
to Section 3.2, the Company shall prepare and furnish to the Stockholder a
reasonable number of copies of any supplement to or amendment of such
Prospectus that may be necessary so that, as thereafter delivered to the
purchaser of the Registrable Securities, such Prospectus shall not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make these statements therein not
misleading in the light of circumstances then existing.

 

(b)           The Company will promptly notify the Stockholder
and confirm the notice in writing, (i) when the Shelf Registration
Statement, or any post-effective amendment to the Shelf Registration Statement,
shall have become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of any request by the Commission to
amend the Shelf Registration Statement or amend or supplement the Prospectus or
for additional information relating specifically to the Shelf Registrations
Statement or

 

7

 

Prospectus and (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Shelf Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus, or of
the suspension of the qualification of the Registrable Securities for offering
or sale in any jurisdiction, or of the institution or threatening of any
proceedings for any of such purposes.

 

3.4.          Provision of Information.  As a
condition to the obligation of the Company under Section 2 to cause the Shelf
Registration Statement or an amendment to be filed or shares to be included in
the Shelf Registration Statement, the Stockholder shall provide such
information and execute such documents, powers of attorney and questionnaires
as may reasonably be required by the Company in connection with such
registration.

 

3.5.          Reports.  The Company covenants that it
will use reasonable efforts to file the reports required to be filed by it
under the Securities Act and the rules and regulations of the Commission
thereunder and it will take such further action as the Stockholder may
reasonably request, all to the extent required from time to time to enable the
Stockholder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

 

3.6.          State Securities Laws.  In
connection with the offering of any securities registered pursuant to this
Agreement, the Company shall use its reasonable efforts to qualify or register
the securities to be sold under the securities or “blue sky” laws of such
jurisdictions as may be reasonably requested by the Stockholder or any other
acts and things which may be necessary or advisable to enable the Stockholder
to consummate the disposition in such jurisdiction of such securities;
provided, however, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction in which it
is not then qualified or to file any general consent to service of process.

 

4.             Holdback Arrangements.

 

The Company shall have the right to require
that the Stockholder shall not effect any public sale or distribution
(including sales pursuant to the Shelf Registration Statement or pursuant to
Rule 144) of Common Stock during the ten business days prior to, and the 60-day
period beginning on, the effective date of the registration under the
Securities Act of any underwritten offering of Common Stock for cash by the
Company (or such an offering by the Company and stockholders of the Company),
if the managing underwriter(s) for the public offering so request. The Company
shall be entitled to exercise its rights under this Section not more than twice
during any calendar year.

 

5.             Registration Expenses.

 

(a)           The Company will pay and bear all costs and
expenses incident to the performance of its obligations under this Agreement
with respect to the registration pursuant to Section 2, including:

 

8

 

(i)                            the preparation, printing and filing of the Shelf
Registration Statement (including financial statements and exhibits) as
originally filed and as amended, any preliminary prospectuses and the
Prospectus and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Stockholder;

 

(ii)                           the preparation and printing of certificates
representing the Registrable Securities, any blue sky survey and other
documents relating to the performance of and compliance by the Company with
this Agreement;

 

(iii)                          all fees and expenses incurred in connection with
the listing of the Registrable Securities on any securities exchange or other
trading market, if the Registrable Securities are not already so registered.

 

(b)           The Stockholder will pay and bear all costs and
expenses incident to the delivery of the Registrable Securities to be sold by
it, including any stock transfer taxes payable upon the sale of such
Registrable Securities and any underwriter discounts or commissions, broker or
dealer fees or costs and any similar costs and expenses in connection
therewith. The Stockholder will also bear the costs and expenses of its own counsel
and other agents retained in connection with the Shelf Registration Statement.

 

6.             Indemnification.

 

6.1.          Indemnification by the Company.  In
connection with any registration of securities pursuant to this Agreement, to
the extent permitted by law, the Company shall indemnify and hold harmless the
Stockholder and each officer, director and agent of the Stockholder and each
Person, if any, who controls the Stockholder (within the meaning of the
Securities Act or the Exchange Act) (such holder and any such other Person
being hereinafter an “Indemnitee”) (i) against any and all losses, claims,
damages and expenses whatsoever to which such Indemnitee may become subject, to
the extent such losses, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Shelf Registration Statement,
Prospectus or any amendment or supplement to any of the foregoing, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; (ii) against any and all losses, claims, damages and expenses
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with the
written consent of the Company; and (iii) against any and all expense
whatsoever (including reasonable fees and disbursements of counsel), as
reasonably incurred in investigating, preparing for or defending against any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii) above;
provided,

 

9

 

however, that the Company shall not be required to indemnify and hold
harmless or reimburse an Indemnitee to the extent that any such loss, claim,
damage or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission in any document made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Indemnitee expressly for use in the preparation of such
documents; provided further that the Company shall not be required to indemnify
any Indemnitees, to the extent that the loss, claim, damage, liability (or
actions in respect thereof) or expense for which indemnification is claimed
results from the failure by such Indemnitee to send or give a copy of the then
current Prospectus (if theretofore made available to the Stockholder) or a
prospectus supplement to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission if such statement or omission
was corrected in the then current Prospectus or in the prospectus supplement;
provided further that the Company shall not be required to indemnify any
Indemnitees to the extent that the loss, claim, damage, liability (or actions
in respect thereof) or expense for which indemnification is claimed arises with
respect to a sale or transfer of Common Stock made during a period during which
the sale or transfer thereof is not permitted under this Agreement.

 

6.2.          Indemnification by the Stockholder.  In
connection with the Shelf Registration Statement, the Stockholder will furnish
to the Company in writing such information as shall be reasonably requested by
the Company for use in the Shelf Registration Statement or prospectus and
shall, to the extent permitted by law, indemnify and hold harmless the Company,
its directors, officers and agents and each Person, if any, who controls the
Company (within the meaning of the Securities Act or the Exchange Act) (the
Company and any such other Person being hereinafter a “Company Indemnitee”)
against all losses, claims, damages or liabilities to which any such Company
Indemnitee may become subject, under the Securities Act or the Exchange Act or
otherwise., insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Shelf Registration Statement,
prospectus or any preliminary prospectus or any amendment or supplement to any
of the foregoing, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, in each case, to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Stockholder expressly for use in the
preparation of such documents; and, subject to Section 6.3, the Stockholder
shall reimburse the Company Indemnitee for any and all expenses whatsoever
(including reasonable fees and
disbursements of counsel chosen by the Company), reasonably incurred by the
Company Indemnitee in connection with investigating, preparing for or defending
against any such loss, claim, damage, liability or action; provided, however,
that the maximum amount of liability of the Stockholder under this Section
shall be limited to an amount equal to the net proceeds actually received by
the Stockholder from the sale of securities effected pursuant to such
registration.

 

10

 

6.3.          Indemnification Procedures.  Promptly
after receipt by an indemnified party under Section 6.1 or Section 6.2 of
notice of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such Person will claim indemnification
or contribution pursuant to this Agreement, the indemnified party shall notify
the indemnifying party thereof in writing and, unless in such indemnified party’s
reasonable judgment a conflict of interest may exist between such indemnified
and indemnifying parties with respect to such claim, shall permit such
indemnifying party to assume and control the defense of such claim at its
expense with counsel reasonably satisfactory to such indemnified party. The
failure to so notify the indemnifying party shall relieve the indemnifying
party from any liability hereunder with respect to the action if such failure
prevents the indemnifying party from contesting such action; provided, however that any such failure shall not
relieve the indemnifying party from any other liability which it may have to
any other party. If the indemnifying party gives notice to such indemnified
party of its election to assume and control the defense of such claim, the
indemnifying party will not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense or investigation of the action unless the indemnified party
shall have given the indemnifying party notice of a conflict of interest with
respect to such claim. The failure of an indemnifying party to give notice to
the indemnified party of its election to assume and control the defense of any
action for which notice has been received by the indemnifying party in
accordance with this Section within 45 days after the receipt of such notice
shall constitute an election by the indemnifying party not to assume and control the defense of
such action. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other indemnified party with respect to such claim,
in which event the indemnifying party shall be obligated to pay the fees and
expenses of separate counsel for such indemnified parties. No indemnified party
shall consent to entry of any judgment or enter into any settlement with
respect to a claim without the consent of the indemnifying party.

 

6.4.          Rights of Contribution.  In order
to provide for just and equitable contribution in circumstances under which the
indemnity contemplated by Section 6.1 and Section 6.2 is for any reason not
available, other than by reason of the exceptions provided therein, the parties
required to indemnify by the terms thereof shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
such indemnity agreement incurred by the Company and the Stockholder, except to
the extent that contribution is not permitted under Section 11(f) of the
Securities Act. In determining the amounts which the respective parties shall
contribute, there shall be considered the relative benefits received by each
party from the offering of the Registrable Securities (taking into account the
portion of the proceeds of the offering realized by each), the relative
knowledge of the parties and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and prevent
any statement or omission and any other equitable considerations appropriate
under the circumstances. The Company and the Stockholder agree with each other
that the Stockholder shall not be required to contribute any amount in excess
of the amount the

 

11

 

Stockholder would have been required to pay to an indemnified party if
the indemnity under Section 6.2 were available. For purposes of this Section,
each director and each officer of the Company who signed the Shelf Registration
Statement, and each Person, if any, who controls the Company or the Stockholder
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company or the Stockholder, as the case may be.

 

7.             Differential Payments.

 

7.1.          Differential Payment.  As of
the Measurement Date, the Stockholder shall calculate the amount equal to  (X) the last sale price of a share of Common
Stock traded on the Nasdaq National Market on the trading day immediately
preceding the Measurement Date, multiplied by (Y) the number Closing Shares
issued to Stockholder (such amount, the “Proceeds”).  Stockholder shall notify the Company of the
amount of the Proceeds not later than the fifth business day following the
Measurement Date.  If the Proceeds exceeds $7,700,000.00, then the Stockholder shall pay to the
Company not later than the fifteenth business day following the Measurement
Date an amount in cash by wire transfer, or delivery of other immediately
available funds, equal to the excess of the Proceeds over $7,700,000.00.  If the Proceeds are not equal to at least
$6,300,000, then the Company shall pay to the Stockholder not later than the
fifteenth business day following the Measurement Date an amount in cash by wire
transfer, or delivery of other immediately available funds, equal to the amount
by which the Proceeds are less than $6,300,000.00.  If the Proceeds are at least $6,300,000.00
but not greater than $7,700,000.00, no differential payment in respect of the
Proceeds shall be payable by either the Stockholder or the Company

 

7.2.          No Interest or Transfer.  No
interest shall be paid with respect to any amount due and timely paid pursuant
to this Section 7. The right of the Stockholder and the Company to any payment
under this Section 7 shall not be sold, assigned, pledged, gifted, conveyed,
transferred or otherwise disposed of (a “Transfer”) by either the Company or
the Stockholder.  Any Transfer in
violation of this subsection 7.5 shall be null and void.

 

8.             Miscellaneous.

 

8.1.          Mergers and Other Transactions.  The
Company agrees that, as a condition to any merger, consolidation or the sale of
all or substantially all of its assets in exchange for securities of another
entity, it will cause all future payments owed to Stockholder pursuant ot the
Purchase Agreement to be made in cash..

 

8.2.          Assignment.  The registration rights
contained in Section 2 of this Agreement shall not be transferable by the
Stockholder. The rights of any party under this Agreement shall not be
assignable without the written consent of the other party, which shall not be
unreasonably withheld or delayed; provided,however,
that either party may, without such consent, assign this Agreement and its
rights and obligations hereunder in connection with the transfer or sale of all
or substantially all of its assets or in the event of a merger or consolidation
or change in control or similar transaction.

 

12

 

8.3.          Limitation of Registration Rights.  Nothing
contained in this Agreement shall create any obligation on behalf of the
Company to register under the Securities Act any securities which are not
Registrable Securities held by the Stockholder or issuable to the Stockholder
pursuant to the Purchase Agreement.

 

8.4.          No Inconsistent Agreements.  The
Company has not entered into, and will not hereafter enter into, any agreement
with respect to its securities which is inconsistent with the rights granted to
the Stockholder in this Agreement..

 

8.5.          Remedies.  The Stockholder, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.

 

8.6.          Arbitration; Dispute Resolution.  Any
dispute or claim arising out of or in connection with this Agreement will be
finally settled by binding arbitration in New York, New York, in accordance
with the then-current Commercial Arbitration Rules of the American Arbitration
Association by one (1) arbitrator appointed in accordance with said rules.  The arbitrator shall apply Delaware law,
without reference to rules of conflicts of law or rules of statutory
arbitration, to the resolution of any dispute. 
Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. 
Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to
compel arbitration in accordance with this paragraph, without breach of this
arbitration provision.

 

8.7.          Notices.  All notices, requests,
consents, instructions or other communications or other documents required or
permitted hereunder shall be in writing and shall be deemed given or delivered
when delivered personally, via facsimile or five (5) days after being sent,
when sent by registered or certified mail, or one (1) day after being sent,
when sent by overnight courier, addressed as follows:

 

If to the Company:

 

NuVasive, Inc.

4545 Towne Center Court

San Diego, California  92121

Attention: 
Jason Hannon, Vice President, Legal

Facsimile: 
(858) 909-2000

 

with a copy (which shall not constitute notice) to:

 

Heller Ehrman LLP

4350 LaJolla Village Drive, 7th
Floor

San Diego, California  92122

Attention: 
Michael S. Kagnoff, Esq.

 

13

 

Facsimile: 
(858) 450-8499

 

If to the Stockholder:

 

Pearsalls Limited

Tancred Street

Taunton, Somerset, TA1 1RY

Attention:              D.
Lawson Lyon

Facsimile:               011-44-1823-336-824

 

with a copy (which shall not constitute notice) to:

 

Gardner, Carton & Douglas

191 North Wacker Drive, Suite 3700

Chicago, Illinois  60606

Attention: 
David L. Wolfe

Facsimile: 
(312) 569-3313

 

or to such other
address as such party may indicate by a notice delivered to the other parties
hereto.

 

8.8.          Counterparts.  This agreement may be executed
in two or more counterparts, each of which shall be deemed an original and all
of which taken together shall constitute one and the same agreement. A
facsimile copy of this Agreement and any signatures hereon shall be considered
as originals for all purposes.

 

8.9.          Headings.  Section headings are inserted
herein for convenience only and do not form a part of this Agreement.

 

8.10.        Governing Law.  This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
regard to principles of conflicts of law.

 

8.11.        Severability.  In the event that any one or
more of the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained herein shall not
be in any way impaired thereby, it being intended that all of the rights and
privileges of the Stockholder shall be enforceable to the fullest extent
permitted by law.

 

8.12.        Entire Agreement; Amendment.  This
agreement contains the entire agreement among the parties hereto with respect
to the transactions contemplated herein, and supersedes all prior written
agreements and negotiations and oral understandings, if any, with respect to
its subject matter. This Agreement may not be amended, supplemented or
discharged except by an instrument in writing signed by the Company and the
Stockholder.

 

14

 

8.13         Limitation
of Liability.  EXCEPT FOR ANY
LIABILITY PURSUANT TO SECTION 6 OF THIS AGREEMENT, DAMAGES FOR ANY BREACH OF
THIS            AGREEMENT
BY THE COMPANY SHALL BE LIMITED TO A MAXIMUM OF, WITH RESPECT TO EACH SHARE OF
COMMON STOCK ISSUED TO STOCKHOLDER PURSUANT TO THE PURCHASE AGREEMENT, THE DIFFERENCE
BETWEEN THE REFERENCE MARKET VALUE OF SUCH SHARE ON THE DATE OF ISSUANCE AND
THE ACTUAL PRICE AT WHICH SUCH SHARE IS ULTIMATELY SOLD.

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed as of the date first written above.

 

	
   

  	
   

  	
  NUVASIVE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Alexis V. Lukianov

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chairman &
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PEARSALLS LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Richard C.
  Adloff

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Sr. V.P.,
  Finance

  	
   

  

 

 

SIGNATURE PAGE TO
REGISTRATION
RIGHTS AGREEMENT

 

15

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