**Exhibit10.03**

 

**REGISTRATIONRIGHTS AGREEMENT**

 

**THIS REGISTRATION RIGHTS AGREEMENT** (the **“Agreement”**) is entered into as of May 14,2004, by and among **Zamba Corporation**, a Delaware corporation(the **“Company”**),and **PandoraSelect Partners L.P.**, a British Virgin Islands limited partnership(the **“Investor”**).

 

**R E C I T A L S****:**

 

**WHEREAS**, the Company has entered into that certainPurchase Agreement, dated as of the date hereof (the **“Purchase Agreement”**) withthe Investor pursuant to which the Company has agreed to issue and sell to theInvestor a secured promissory note (the “**Note**”) and a warrant (the “**Warrant**”)to purchase shares of the Company’s Common Stock, $0.01 par value per share(the “**CommonStock**”);

 

**WHEREAS**, the Company may make certain principal andinterest payments on the Note by issuance of additional shares of its CommonStock;

 

**WHEREAS**, the Company has agreed to grant certainregistration rights with respect to the shares of the Company’s Common Stockissuable as payments under the Note or upon exercise of the Warrant;

 

**NOW, THEREFORE**, in consideration of the foregoing and ofthe mutual promises and covenants contained herein, and for other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties, intending to be legally bound, hereby agree asfollows:

 

**ARTICLE 1**

**DEFINITIONS**

 

As used herein, thefollowing terms shall have the following respective meanings:

 

1.1           **“Commission”** shall mean the U.S. Securities and ExchangeCommission or any other successor federal agency at the time administering theSecurities Act.

 

1.2           **“Common Stock”** shall mean the Company’s common stock, $0.01par value per share.

 

1.3           **“Exchange Act”** shall mean the Securities and Exchange Actof 1934, as amended, or any similar federal statute and the rules andregulations of the Commission thereunder, all as the same shall be in effect atthe time.

 

1.4           **“Holders”** shall mean and include the Investor and anytransferee thereof who holds Registrable Securities of record.

 

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1.5           **“Register,”****“registered”** and **“registration”** refer to aregistration effected by preparing and filing with the Commission aregistration statement in compliance with the Securities Act, and thedeclaration or ordering by the Commission of the effectiveness of such registrationstatement.

 

1.6           **“Note RegistrableSecurities”** means any andall shares of Common Stock issued or issuable as payments under the Note,including Common Stock issued or issuable with respect thereto upon any stocksplit, stock dividend, recapitalization, reclassification, merger,consolidation or other similar event; excluding in all cases, however, NoteRegistrable Securities sold by a Holder to the public pursuant to a registeredoffering or pursuant to Rule 144 promulgated under the Securities Act or soldin a private transaction in which the Holder’s registration rights under thisAgreement are not assigned.

 

1.7           “**RegistrableSecurities”** means the Note Registrable Securities or the WarrantRegistrable Securities, or both.

 

1.8           **“Registration Expenses”** shall mean all expenses incurred by theCompany in complying with Articles 2 and 3 hereof, including, withoutlimitation, all registration, qualification and Commission, NationalAssociation of Securities Dealers, Inc., stock exchange and other filing fees,printing expenses, escrow fees, fees and disbursements of legal counsel for theCompany, blue sky fees and expenses, and the expense of any special auditsincident to or required by any such registration (but excluding thecompensation of regular employees of the Company, which shall be paid in anyevent by the Company).

 

1.9           **“Securities Act”** shall mean the Securities Act of 1933, asamended, or any similar federal statute and the rules and regulations of theCommission thereunder, all as the same shall be in effect at the time.

 

1.10         **“Selling Expenses”** shall mean all underwriting fees, discounts,selling commissions and stock transfer taxes applicable to the RegistrableSecurities registered by the Holders and the fees and expenses of any specialcounsel engaged by the Holders.

 

1.11         **“Underwriter”** shall mean (whether or not the term iscapitalized) a broker-dealer engaged by the Company to distribute RegistrableSecurities as principal or agent.

 

1.12         **“Underwriting”**or **“Underwritten”**shall mean (whether or notthe term is capitalized) a method of publicly distributing securities throughan Underwriter.

 

1.13         **“Warrant RegistrableSecurities”**means any andall shares of Common Stock issued or issuable upon the exercise of the Warrant,including Common Stock issued or issuable with respect thereto upon any stocksplit, stock dividend, recapitalization, reclassification, merger,consolidation or other similar event; excluding in all cases, however, WarrantRegistrable Securities sold by a Holder to the public pursuant to a registeredoffering or pursuant to Rule 144

 

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promulgated under the Securities Act or soldin a private transaction in which the Holder’s registration rights under thisAgreement are not assigned.

 

**ARTICLE 2**

# **REQUIRED REGISTRATION**

2.1           **Required Registration**.

 

(a)           Not later than August 15, 2004 (unless a majority in interest of theHolders request a delay of the Company for up to an additional 90 days inwriting and in such case, upon expiration of this requested delaying period),the Company will prepare and file with the Commission a registration statementunder the Securities Act (currently expected to be on Form S-2 or S-3) coveringall of the Registrable Securities, and use its best efforts to obtain theeffectiveness of such registration as soon as practicable as would permit orfacilitate the original issuance or subsequent resale and distribution of allof such Registrable Securities.  TheCompany’s failure to obtain effectiveness of this registration statement byNovember 15, 2004 (subject to an extension of such date to correspond to afiling date extension, if any, granted by the Holders above, and subject todelays incurred by any Holder’s failure to comply with the provisions of Section5(b) below) will commence the running of the first “Failure Term” as defined inSection 4 of the Note and will also constitute an event of default under thisAgreement.

 

(b)           At any time after the earlier of (i) the date upon which the highclosing bid prices of the Company’s Common Stock on the NASDAQ System (or ifnot then traded on the NASDAQ System, then on the OTC Bulletin Board asreported by bigcharts.com, or if this service is discontinued, such otherreporting service acceptable to a majority in interest of the Holders) exceeds150% of the exercise price of the Warrant for 20 consecutive trading days, or(ii) November 15, 2007, the Holders of a majority of the Warrant RegistrableSecurities may, by notice to the Company, require that the Company file withthe Commission a registration statement under the Securities Act (currentlyexpected to be on Form S-2 or S-3) covering all of the Warrant RegistrableSecurities and any Note Registrable Securities then held by the Holders, andthat the Company use its best efforts to obtain the effectiveness of suchregistration statement as soon as practicable as would permit or facilitate thesubsequent resale and distribution of all of such Registrable Securities.  Notwithstanding the forgoing, if aregistration statement covering the resale and distribution of any of theRegistrable Securities is in effect at the time the notice is given to theCompany as provided in this subsection 2.1(b), then the Company may satisfy itsobligation to file a registration statement under this Subsection 2.1(b) bymaintaining the effectiveness of the registration statement already in effectfor an additional nine months.

 

2.2           **Underwriting**.

 

(a)           The resale distribution of the Registrable Securities covered by theregistration statements referred to in Section 2.1 above shall be effected bymeans of the method of distribution selected by the Holders holding a majorityof the Registrable Securities covered by 

 

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such registration.  The Holders holding a majority of the Registrable Securities mayalso change the resale distribution method from time to time (subject toamendment of the registration statement as required to describe such changes).  If such distribution is to be effected bymeans of an underwriting, the right of any Holder to registration pursuant tothis Article 2 shall be conditioned upon such Holder’s participation in suchunderwriting and the inclusion of such Holder’s Registrable Securities in theunderwriting to the extent provided herein.

 

(b)           If such distribution is effected by means of an underwriting, theCompany (together with all Holders proposing to distribute their securitiesthrough such underwriting) shall enter into an underwriting agreement incustomary form and under terms reasonably acceptable to the Company with amanaging underwriter of nationally recognized standing selected for suchunderwriting by a majority in interest of the Holders and approved by theCompany, which approval shall not be unreasonably withheld.  The reasonable fees of legal counsel for theCompany solely in connection with the negotiation and execution of theunderwriting agreement (but as to no other Registration Expenses) will be borneby the Holders.

 

(c)           If any Holder disapproves of the terms of the underwriting, such personmay elect to withdraw therefrom by written notice to the Company, the managingunderwriter and the other Holders.  TheRegistrable Securities and/or other securities so withdrawn shall also bewithdrawn from registration.

 

2.3           **Inclusion of Shares by theCompany**.  If the resale distribution of RegistrableSecurities is being effected by means of an underwriting and if the managingunderwriter will not limit the number of Registrable Securities to be underwritten,the Company may include securities for its own account or for the account ofothers in such registration if the managing underwriter so agrees.  The inclusion of such shares shall be on thesame terms as the registration of shares held by the Holders.  In the event that the underwriters excludesome of the securities to be registered, the securities to be sold for theaccount of the Company and any other holders shall be excluded in theirentirety prior to the exclusion of any Registrable Securities.

 

**ARTICLE 3**

**COMPANY REGISTRATION**

 

3.1           **Notice of Registration toHolders**.  If at any time or from time to timecommencing after the date hereof, the Company shall determine to register anyof its securities, either for its own account or the account of a securityholder or holders, other than (i) a registration on Form S-8 (or any successorform) or (ii) a registration on Form S-4 (or any successor form) relating inwhole or in part to a Commission Rule 145 transaction, the Company will:

 

(a)           promptly give to each Holder written notice thereof and

 

(b)           include in such registration (and any relatedqualification under blue sky laws or other compliance), and in any underwritinginvolved therein, all the Registrable Securities specified in a written requestor requests, made within 30 days after receipt of such written notice 

 

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from the Company described in Section 3.1(a),by any Holder or Holders, but only to the extent that (i) if the proposedregistration under this Article 3 is not an underwritten offering, the originalissuance or resale distribution of such Registrable Securities is not alreadycovered by an effective registration statement under Article 2 above or (ii) ifthe proposed registration under this Article 3 is an underwritten offering,such Registrable Securities are not then being offered in a separateunderwritten offering under Article 2 above.

 

3.2           **Underwriting**.  Ifthe registration of which the Company gives notice is for an offering involvingan underwriting, the Company shall so advise the Holders as a part of thewritten notice given pursuant to Section 3.1(a).  In such event, the right of any Holder to registration pursuantto this Article 3 shall be conditioned upon such Holder’s participation in suchunderwriting and the inclusion of such Holder’s Registrable Securities in theunderwriting to the extent provided herein. All Holders proposing to distribute their securities through suchunderwriting shall (together with the Company) enter into an underwritingagreement in customary form with the managing underwriter selected for suchunderwriting by the Company.

 

(a)           Notwithstanding any other provision of this Article3, if the managing underwriter determines that marketing factors require alimitation of the number of shares to be underwritten, the underwriter mayexclude some or all Registrable Securities from such registration andunderwriting.  The Company shall soadvise all Holders of Registrable Securities, and the number of shares of CommonStock to be included in such registration shall be allocated as follows:  first, for the account of the Company, allshares of Common Stock proposed to be sold by the Company;  and second, for the account of the Holdersand any other shareholders of the Company participating in such registration,the number of shares of Common Stock requested to be included in theregistration by the Holders and such other shareholders in proportion, asnearly as practicable, to the respective amounts of Registrable Securities thatare proposed to be offered and sold by the Holders and such other shareholdersof Registrable Securities at the time of filing the registrationstatement.  No Registrable Securitiesexcluded from the underwriting in this Article 3 by reason of the underwriters’marketing limitation shall be included in such registration.

 

(b)           The Company shall so advise all Holders and the other holdersdistributing their securities through such underwriting of any such limitation,and the number of shares of Registrable Securities held by Holders that may beincluded in the registration.  If anyHolder disapproves of the terms of any such underwriting, such Holder may electto withdraw therefrom by written notice to the Company and the managingunderwriter.  Any securities excluded orwithdrawn from such underwriting shall be withdrawn from such registration, butthe Holder shall continue to be bound by the terms hereof.

 

(c)           The Company shall have the right to terminate or withdraw anyregistration initiated by it under this Article 3 prior to the effectiveness ofsuch registration, whether or not a Holder has elected to include RegistrableSecurities in such registration.

 

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**ARTICLE 4**

**EXPENSES OF REGISTRATION**

 

All Registration Expensesincurred in connection with any registration, qualification or compliancepursuant to Articles 2 and 3 hereof shall be borne by the Company, except asprovided by Section 2.2(b).  The expensedescribed in Section 2.2(b), and all Selling Expenses relating to RegistrableSecurities registered by the Holders, shall be borne by the Holders of suchRegistrable Securities pro rata on the basis of the number of shares soregistered.

 

**ARTICLE 5**

**REGISTRATION PROCEDURES**

 

(a)           In the case of each registration effected by the Company pursuant tothis Agreement, the Company will keep each Holder advised in writing as to theinitiation of each registration and as to the completion thereof.  The Company agrees to use its best effortsto effect or cause such registration to permit the sale of the RegistrableSecurities covered thereby by the Holders thereof in accordance with theintended method or methods of distribution thereof described in suchregistration statement.  In connectionwith any registration of any Registrable Securities, the Company shall, as soonas reasonably possible:

 

(i)            prepare and file with the Commission aregistration statement with respect to such Registrable Securities and use itsefforts to cause such registration statement filed to become effective;

 

(ii)           prepare and file with the Commission such amendments and supplements tosuch registration statement and the prospectus included therein as may benecessary to effect and maintain the effectiveness of such registration statementas may be required by the applicable rules and regulations of the Commissionand the instructions applicable to the form of such registration statement(provided, however, that the Company shall not be obliged to maintain theeffectiveness of the registration statement described in Subsection 2.1(a)longer than through the earlier of (A) the second anniversary of the date onwhich the last of the Note Registrable Securities are issued as payment underthe Note, (B) the date on which the Holder may sell all Note RegistrableSecurities then held by the Holder, or which may become issuable as paymentunder the Note, pursuant to Rule 144 of the Securities Act, without restrictionby the volume limitations of paragraph (e) of such Rule, or (C) such time asall Note Registrable Securities held by such Holder have been sold; and shallnot be obligated to maintain the effectiveness of the registration statementdescribed in Subsection 2.1(b) longer than nine months from the effectivenessof such registration statement), and furnish to the holders of the RegistrableSecurities covered thereby copies of any such supplement or amendment prior tothis being used and/or filed with the Commission;

 

(iii)          promptly notify the Holders of Registrable Securities to be included ina registration statement hereunder, the sales or placement agent, if any,therefor and the managing underwriter of the securities being sold, and confirmsuch advice in writing,

 

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(A) when such registrationstatement or the prospectus included therein or any prospectus amendment orsupplement or post-effective amendment has been filed, and, with respect tosuch registration statement or any post-effective amendment, when the same hasbecome effective, (B) of the issuance by the Commission of any stop ordersuspending the effectiveness of such registration statement or the initiationof any proceedings for that purpose, (C) of the receipt by the Company of anynotification with respect to the suspension of the qualification of theRegistrable Securities for sale in any jurisdiction or the initiation orthreatening of any proceeding for such purpose or (D) if, to the Company’sknowledge, it shall be the case, at any time when a prospectus is required tobe delivered under the Securities Act, that such registration statement orprospectus, or any document incorporated by reference in any of the foregoing,contains an untrue statement of a material fact or omits to state any materialfact required to be stated therein or necessary to make the statements thereinnot misleading in light of the circumstances then existing;

 

(iv)          use its best efforts to obtain the withdrawal of any order suspendingthe effectiveness of such registration statement or any post-effectiveamendment thereto or of any order suspending or preventing the use of anyrelated prospectus or suspending the qualification of any RegistrableSecurities included in such registration statement for sale in any jurisdictionat the earliest practicable date;

 

(v)           furnish to each Holder of Registrable Securities to be included in suchregistration statement hereunder, each placement or sales agent, if any,therefor and each underwriter, if any, thereof a conformed copy of suchregistration statement, each such amendment and supplement thereto (in eachcase excluding all exhibits and documents incorporated by reference) and suchnumber of copies of the registration statement (excluding exhibits thereto anddocuments incorporated by reference therein unless specifically so requested bysuch holder, agent or underwriter, as the case may be) of the prospectusincluded in such registration statement (including each preliminary prospectusand any summary prospectus), in conformity with the requirements of theSecurities Act, as such Holder, agent, if any, and underwriter, if any, mayreasonably request in order to facilitate the disposition of the RegistrableSecurities owned by such Holder sold by such agent or underwritten by suchunderwriter and to permit such Holder, agent and underwriter to satisfy theprospectus delivery requirements of the Securities Act;

 

(vi)          use its best efforts to (A)register or qualify the Registrable Securities to be included in suchregistration statement under such other securities laws or blue sky laws ofsuch states of the United States or the District of Columbia to be designatedby the Holders of a majority of such Registrable Securities participating insuch registration and each placement or sales agent, if any, therefor andunderwriter, if any, thereof, as any Holder and each underwriter, if any, ofthe securities being sold shall reasonably request (provided, that the Companyshall not be required to use its best efforts to register or qualify theRegistrable Securities in more than Minnesota and three other suchjurisdictions unless the expenses thereof are borne by the Holders requestingsuch

 

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efforts), (B) keep such registrations or qualifications in effect andcomply with such laws so as to permit, as to a registration statement filedunder Article 2 above, the continuance of offers, sales and dealings therein insuch jurisdictions for the same period after the initial effective date of theregistration statement filed under the Securities Act as described in Section5(a)(ii) above or, as to a registration statement filed under Article 3 above,for a period of 90 days after the effective date of the registration statement,or if underwritten, as long as may be necessary to enable the underwriter tocomplete its distribution of the Registrable Securities pursuant to suchregistration statement and (C) take any and all such actions as may bereasonably necessary or advisable to enable such Holder, agent, if any, and underwriterto consummate the disposition in such jurisdictions of such RegistrableSecurities;  provided, however, that inorder to fulfill the foregoing obligations under this Section 5(a)(vi), theCompany shall not (unless otherwise required to do so in any jurisdiction) berequired to (1) qualify generally to do business as a foreign company or abroker-dealer, (2) execute a general consent to service of process or (3)subject itself to taxation;  and

 

(vii)         furnish, at the request of a majority of the Holders participating inthe registration, on the date that such Registrable Securities are delivered tothe underwriters for sale, if such securities are being sold throughunderwriters, or, if such securities are not being sold through underwriters,on the date that the registration statement with respect to such securitiesbecomes effective, (i) an opinion, dated as of such date, of the counselrepresenting the Company for the purposes of such registration, in form andsubstance as is customarily given to underwriters in an underwritten publicoffering and reasonably satisfactory to a majority in interest of the Holdersrequesting registration, addressed to the underwriters, if any, and to theHolders requesting registration of Registrable Securities and (ii) a letterdated as of such date, from the independent certified public accountants of theCompany, in form and substance as is customarily given by independent certifiedpublic accountants to underwriters in an underwritten public offering andreasonably satisfactory to a majority in interest of the Holders requestingregistration, addressed to the underwriters, if any, and if permitted byapplicable accounting standards, to the Holders requesting registration ofRegistrable Securities.

 

(b)           The Company may require each Holder of Registrable Securities as towhich any registration is being effected to furnish to the Company suchinformation regarding such Holder and such Holder’s method of distribution ofsuch Registrable Securities as the Company may from time to time reasonablyrequest in writing.  Each such Holderagrees to notify the Company as promptly as practicable of any inaccuracy orchange in information previously furnished by such Holder to the Company or ofthe occurrence of any event in either case as a result of which any prospectusrelating to such registration contains or would contain an untrue statement ofa material fact regarding such Holder or the distribution of such RegistrableSecurities or omits to state any material fact regarding such Holder or thedistribution of such Registrable Securities required to be stated therein ornecessary to make the statements therein not misleading in light of thecircumstances then existing, and promptly to furnish to the Company anyadditional

 

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information required to correct and updateany previously furnished information or required so that such prospectus shallnot contain, with respect to such Holder or the distribution of suchRegistrable Securities, an untrue statement or a material fact or omit to statea material fact required to be stated therein or necessary to make thestatements therein not misleading in light of the circumstances then existing.

 

(c)           Each of the Holders will comply with the provisions of the SecuritiesAct with respect to disposition of the Registrable Securities to be included inany registration statement filed by the Company.

 

**ARTICLE 6**

**INDEMNIFICATION**

 

6.1           TheCompany will indemnify each Holder, each of its officers, directors andpartners, and such Holder’s legal counsel and independent accountants, if any,and each person controlling any such persons within the meaning of Section 15of the Securities Act, with respect to which registration, qualification orcompliance has been effected pursuant to this Agreement, and each underwriter,if any, and each person who controls any underwriter within the meaning ofSection 15 of the Securities Act, against all expenses, claims, losses, damagesand liabilities (or actions in respect thereof), including any of the foregoingincurred in settlement of any litigation, commenced or threatened, arising outof or based on any untrue statement (or alleged untrue statement) of a materialfact contained in any registration statement, prospectus, offering circular orother document, or any amendment or supplement thereof, incident to any suchregistration, qualification or compliance, or based on any omission (or allegedomission) to state therein a material fact required to be stated therein ornecessary to make the statements therein not misleading, or any violation bythe Company of any rule or regulation promulgated under the Securities Act orany state securities laws applicable to the Company and relating to action orinaction by the Company in connection with any such registration, qualificationor compliance, and will reimburse each such Holder, each of its officers,directors and partners and such Holder’s legal counsel and independentaccountants, and each person controlling any such persons, each suchunderwriter and each person who controls any such underwriter, for any legaland any other expenses reasonably incurred in connection with investigating,preparing or defending any such claim, loss, damage, liability or action;  provided, however, that the Company will notbe liable in any such case to the extent that any such claim, loss, damage,liability or expense arises out of or is based on any untrue statement oromission or alleged untrue statement or omission made in reliance upon and inconformity with written information furnished to the Company by such Holder,officers, directors, partners, legal counsel, accountants, underwriter orcontrolling persons, and expressly intended for use in such registrationstatement, prospectus, offering circular or other document, or any amendment orsupplement thereof.

 

6.2           EachHolder will, if Registrable Securities held by such Holder are included in thesecurities as to which such registration, qualification or compliance is beingeffected, indemnify the Company, each of its directors and officers and itslegal counsel and independent 

 

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accountants, each underwriter, if any, of theCompany’s securities covered by such a registration statement, each person whocontrols the Company or such underwriter within the meaning of Section 15 ofthe Securities Act, and each other such Holder, each of its officers,directors, partners, legal counsel and independent accountants, if any, andeach person controlling such Holder within the meaning of Section 15 of theSecurities Act, against all expenses, claims, losses, damages and liabilities(or actions in respect thereof), including any of the foregoing incurred insettlement of any litigation, commenced or threatened, arising out of or basedon any untrue statement (or alleged untrue statement) of a material factcontained in any such registration statement, prospectus, offering circular orother document, or any amendment or supplement thereto, incident to any suchregistration, qualification or compliance or based on any omission (or allegedomission) to state therein a material fact required to be stated therein ornecessary to make the statements therein not misleading, and will reimburse theCompany, such Holders, such directors, officers, partners, legal counsel,independent accountants, underwriters or control persons for any legal or anyother expenses reasonably incurred in connection with investigating, preparingor defending any such claim, loss, damage, liability or action, in each case tothe extent, but only to the extent, that such untrue statement (or allegeduntrue statement) or omission (or alleged omission) is made in suchregistration statement, prospectus, offering circular, other document oramendment or supplement in reliance upon and in conformity with writteninformation furnished to the Company by such Holder and expressly intended foruse in such registration statement, prospectus, offering circular or otherdocument, or any amendment or supplement thereof;  provided, however, that the obligations of each Holder hereundershall be limited to an amount equal to the proceeds to such Holder ofRegistrable Securities sold as contemplated herein.

 

6.3           Eachparty entitled to indemnification under this Section 6 (the **“IndemnifiedParty”**) shall give notice to the party required to provideindemnification (the **“Indemnifying Party”**) promptly after suchIndemnified Party has actual knowledge of any claim as to which indemnity maybe sought, and shall permit the Indemnifying Party to assume the defense of anysuch claim or any litigation resulting therefrom, provided that counsel for theIndemnifying Party, who shall conduct the defense of such claim or litigation,shall be approved by the Indemnified Party (whose approval shall notunreasonably be withheld).  TheIndemnified Party may participate in such defense at such party’s expense;  provided, however, that the IndemnifyingParty shall bear the expense of such defense of the Indemnified Party ifrepresentation of both parties by the same counsel would be inappropriate dueto actual or potential conflicts of interest. The failure of any Indemnified Party to give notice as provided hereinshall not relieve the Indemnifying Party of its obligations under thisAgreement, unless such failure is prejudicial to the ability of theIndemnifying Party to defend the action. No Indemnifying Party, in the defense of any such claim or litigation,shall, except with the consent of each Indemnified Party, consent to entry ofany judgment or enter into any settlement which does not include as anunconditional term thereof the giving by the claimant or plaintiff to suchIndemnified Party of a release from all liability in respect of such claim orlitigation.

 

6.4           Ifthe indemnification provided for in Section 6.1 or 6.2 is unavailable orinsufficient to hold harmless an Indemnified Party, then each IndemnifyingParty shall contribute to the amount

 

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paid or payable by such Indemnified Party asa result of the expenses, claims, losses, damages or liabilities (or actions orproceedings in respect thereof) referred to in Section 6.1 or 6.2, in suchproportion as is appropriate to reflect the relative fault of the Company onthe one hand and the sellers of Registrable Securities on the other hand inconnection with statements or omissions which resulted in such losses, claims,damages or liabilities (or actions or proceedings in respect thereof) orexpenses, as well as any other relevant equitable considerations.  The relative fault shall be determined byreference to, among other things, whether the untrue or alleged untruestatement of a material fact or the omission or alleged omission to state amaterial fact relates to information supplied by the Company or the sellers ofRegistrable Securities and the parties’ relative intent, knowledge, access toinformation and opportunity to correct or prevent such untrue statement oromission.  The Company and the Holdersagree that it would not be just and equitable if contributions pursuant to thisSection 6.4 were to be determined by pro rata allocation (even if all Sellersof Registrable Securities were treated as one entity for such purpose) or byany other method of allocation which does not take account of the equitableconsiderations referred to in the first sentence of this Section 6.4.  The amount paid by an Indemnified Party as aresult of the expenses, claims, losses, damages or liabilities (or actions orproceedings in respect thereof) referred to in the first sentence of thisSection 6.4 shall be deemed to include any legal or other expenses reasonablyincurred by such Indemnified Party in connection with investigating ordefending any claim, action or proceeding which is the subject of this Section6.4.  No person guilty of fraudulentmisrepresentation (within the meaning of Section 11(f) of the Securities Act)shall be entitled to contribution from any person who was not guilty of suchfraudulent misrepresentation.  Theobligations of sellers of Registrable Securities to contribute pursuant to thisSection 6.4 shall be several in proportion to the respective amount ofRegistrable Securities sold by them pursuant to a registration statement.

 

**ARTICLE 7**

**RULE 144 REPORTING**

 

With a view to makingavailable the benefits of certain rules and regulations of the Commission whichmay at any time permit the sale of securities of the Company to the publicwithout registration, the Company agrees to use its best efforts to:

 

7.1           Makeand keep public information available as those terms are understood and definedin Rule 144 under the Securities Act, at all times after the date hereof;  and

 

7.2           Filewith the Commission in a timely manner all reports and other documents requiredof the Company under the Securities Act and the Exchange Act.

 

**ARTICLE 8**

# **TRANSFER OF REGISTRATION RIGHTS**

 

The rights to cause theCompany to register Registrable Securities under this Agreement may be assignedby a Holder to Whitebox Advisors, LLC (**“Whitebox”**) or to a transferee or assigneeof Registrable Securities that (i) is a subsidiary, parent or affiliatedentity, general partner or limited partner, member or retired partner or memberof a Holder or of Whitebox, (ii)

 

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is an affiliated fund, a follow-on fund orpredecessor fund of a Holder or a related fund or of Whitebox, (iii) is aHolder’s family member or trust for the benefit of an individual Holder or(iv) acquires at least 400,000****shares of Registrable Securities (asadjusted for stock splits, stock dividends, stock combinations,reclassifications, recapitalizations, mergers, consolidations or other similarevents);  provided, however,(A) the transferor shall, within ten days before such transfer, furnish tothe Company written notice of the name and address of such transferee orassignee and the securities with respect to which such registration rights arebeing assigned and (B) such transferee shall agree in writing to besubject to all restrictions set forth in this Agreement.  In each case, such rights may only betransferred together with the underlying Registrable Securities in a transferpermitted hereunder, and by the Securities Act and applicable state securitieslaws.  Any such transferee or assigneeshall be deemed a Holder hereunder.

 

**ARTICLE 9**

**LIMITATIONS ON REGISTRATION RIGHTSGRANTED TO OTHER SECURITIES**

 

From and after the date ofthis Agreement, the Company shall not without the prior written consent of theholders of a majority of the Registrable Securities then outstanding, enterinto any agreement with any holder or prospective holder of any securities ofthe Company providing for the grant to such holder of registration rightssuperior to those granted herein, except as to registrations for which theHolder is excluded from participation under Section 3.1.

 

**ARTICLE 10**

**MISCELLANEOUS**

 

10.1         **Governing Law**.  Thelaws of the state of Minnesota shall govern the interpretation, validity andperformance of the terms of this agreement, regardless of the law that might beapplied under principles of conflicts of law.

 

10.2         **Successors and Assigns**. Except as otherwise expressly provided herein, the provisions hereofshall inure to the benefit of, and be binding upon, the successors, assigns, heirs,executors and administrators of the parties hereto.

 

10.3         **Entire Agreement**. This Agreement constitutes the full and entire understanding andagreement between the parties with regard to the subject matter hereof.

 

10.4         **Termination**.  Theobligations of the Company to register Registrable Securities under thisAgreement shall terminate in any event on the tenth anniversary of the date ofthis Agreement.  In addition, the rightof any Holder to request inclusion in any registration under Article 3 shallterminate on the date hereafter when (i) such Holder (together with itsaffiliates, partners, members and former partners and members) holds less than1% of the Company’s outstanding Common Stock and (ii) all RegistrableSecurities held by or issuable to such Holder (and its affiliates, partners,members and former partners and members) as payment under the Note or uponexercise of the Warrant may be sold under Rule 144 during any 90 day period.

 

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10.5         **Notices**.  Allnotices, requests, consents, and other communications hereunder shall be inwriting and shall be deemed effectively given and received when delivered inperson or by national overnight courier service or by certified or registeredmail, return receipt requested, or by telecopier, addressed as follows:

 

(a)           if to the Company, at

 

ZambaCorporation

3033Excelsior Boulevard, Suite 200

Minneapolis,Minnesota  55416

Attention:  Norman D. Smith,President and Chief Executive Officer

Facsimile:  (952) 832-9383

 

witha copy to:

 

Felhaber, Larson, Fenlon&Vogt, P.A.

601 Second Avenue South,Suite 4200

Minneapolis, Minnesota  55402

Attention:  Roger H. Frommelt, Esq.

Facsimile:  (612) 338-4608

 

(b)           if to the Investor, in care of:

 

Whitebox Advisors, LLC

3033 Excelsior Boulevard,Suite 300

Minneapolis, Minnesota  55416

Attention:  Jonathan Wood, Chief Financial Officer

Facsimile:  (612) 253-6151

 

witha copy to:

 

Messerli& Kramer P.A.

150 South Fifth Street,Suite 1800

Minneapolis,Minnesota  55402

Attention:  Jeffrey C. Robbins, Esq.

Facsimile:  (612) 672-3777

 

(c)           if to any other Holder, to the address reflected on the records of theCompany, or such other address or addresses as shall have been furnished inwriting by such party to the Company and to the other parties to thisAgreement.

 

10.6         **Severability**.  Theinvalidity, illegality or unenforceability of one or more of the provisions ofthis Agreement in any jurisdiction shall not affect the validity, legality orenforceability of the remainder of this Agreement in such jurisdiction or thevalidity, legality or 

 

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enforceability of this Agreement, includingany such provision, in any other jurisdiction, it being intended that allrights and obligations of the parties hereunder shall be enforceable to thefullest extent permitted by law.

 

10.7         **Titles and Subtitles**.  Thetitles of the sections and subsections of this Agreement are for convenience ofreference only and are not to be considered in construing this Agreement.

 

10.8         **Counterparts**. This Agreement may be executed in any number of counterparts, each ofwhich shall be an original, but all of which together constitute oneinstrument.

 

**IN WITNESS WHEREOF**, the parties hereto have caused thisAgreement to be executed and delivered by their respective duly authorizedofficers or representatives as of the date first written above.

 
|   | **ZAMBA CORPORATION**            |
|--------|----------------------------------|
|   |                             |   |
|   |                             |   |
|   | By                               | /s/ Michael H. Carrel |   |
|   |                             | Michael H. Carrel,  Treasurer |
|   |                             |   |
|   |                             |   |
|   | **PANDORA SELECT PARTNERS L.P.** |
|   |                             |   |
|   |                             |   |
|   | By                               | /s/ Jonathon Wood |   |
|   | Its                              | Director |   |
|        |                                  |  |  |  |  |

 

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