Exhibit
10.03


 


REGISTRATION
RIGHTS 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 Pandora
Select 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 certain
Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”) with
the Investor pursuant to which the Company has agreed to issue and sell to the
Investor 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 “Common
Stock”);


 


WHEREAS, the Company may make certain principal and
interest payments on the Note by issuance of additional shares of its Common
Stock;


 


WHEREAS, the Company has agreed to grant certain
registration rights with respect to the shares of the Company’s Common Stock
issuable as payments under the Note or upon exercise of the Warrant;


 


NOW, THEREFORE, in consideration of the foregoing and of
the mutual promises and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:


 


ARTICLE 1


DEFINITIONS


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


1.7           “Registrable
Securities” means the Note Registrable Securities or the Warrant
Registrable Securities, or both.


 


1.8           “Registration Expenses” shall mean all expenses incurred by the
Company in complying with Articles 2 and 3 hereof, including, without
limitation, all registration, qualification and Commission, National
Association of Securities Dealers, Inc., stock exchange and other filing fees,
printing expenses, escrow fees, fees and disbursements of legal counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).


 


1.9           “Securities Act” shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission 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 Registrable
Securities registered by the Holders and the fees and expenses of any special
counsel engaged by the Holders.


 


1.11         “Underwriter” shall mean (whether or not the term is
capitalized) a broker-dealer engaged by the Company to distribute Registrable
Securities as principal or agent.


 


1.12         “Underwriting” or “Underwritten” shall mean (whether or not
the term is capitalized) a method of publicly distributing securities through
an Underwriter.


 


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


 


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


 


ARTICLE 2


REQUIRED REGISTRATION


2.1           Required Registration.


 


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


 


(b)           At any time after the earlier of (i) the date upon which the high
closing bid prices of the Company’s Common Stock on the NASDAQ System (or if
not then traded on the NASDAQ System, then on the OTC Bulletin Board as
reported by bigcharts.com, or if this service is discontinued, such other
reporting service acceptable to a majority in interest of the Holders) exceeds
150% 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 Registrable
Securities may, by notice to the Company, require that the Company file with
the Commission a registration statement under the Securities Act (currently
expected to be on Form S-2 or S-3) covering all of the Warrant Registrable
Securities and any Note Registrable Securities then held by the Holders, and
that the Company use its best efforts to obtain the effectiveness of such
registration statement as soon as practicable as would permit or facilitate the
subsequent resale and distribution of all of such Registrable Securities.  Notwithstanding the forgoing, if a
registration statement covering the resale and distribution of any of the
Registrable Securities is in effect at the time the notice is given to the
Company as provided in this subsection 2.1(b), then the Company may satisfy its
obligation to file a registration statement under this Subsection 2.1(b) by
maintaining the effectiveness of the registration statement already in effect
for an additional nine months.


 


2.2           Underwriting.


 


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


 


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


 


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


 


(c)           If any Holder disapproves of the terms of the underwriting, such person
may elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the other Holders.  The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration.


 


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


 


ARTICLE 3


COMPANY REGISTRATION


 


3.1           Notice of Registration to
Holders.  If at any time or from time to time
commencing after the date hereof, the Company shall determine to register any
of its securities, either for its own account or the account of a security
holder or holders, other than (i) a registration on Form S-8 (or any successor
form) or (ii) a registration on Form S-4 (or any successor form) relating in
whole 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 related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or 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 proposed
registration under this Article 3 is not an underwritten offering, the original
issuance or resale distribution of such Registrable Securities is not already
covered by an effective registration statement under Article 2 above or (ii) if
the proposed registration under this Article 3 is an underwritten offering,
such Registrable Securities are not then being offered in a separate
underwritten offering under Article 2 above.


 


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


 


(a)           Notwithstanding any other provision of this Article
3, if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may
exclude some or all Registrable Securities from such registration and
underwriting.  The Company shall so
advise all Holders of Registrable Securities, and the number of shares of Common
Stock to be included in such registration shall be allocated as follows:  first, for the account of the Company, all
shares of Common Stock proposed to be sold by the Company;  and second, for the account of the Holders
and any other shareholders of the Company participating in such registration,
the number of shares of Common Stock requested to be included in the
registration by the Holders and such other shareholders in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities that
are proposed to be offered and sold by the Holders and such other shareholders
of Registrable Securities at the time of filing the registration
statement.  No Registrable Securities
excluded 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 holders
distributing their securities through such underwriting of any such limitation,
and the number of shares of Registrable Securities held by Holders that may be
included in the registration.  If any
Holder disapproves of the terms of any such underwriting, such Holder may elect
to withdraw therefrom by written notice to the Company and the managing
underwriter.  Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration, but
the Holder shall continue to be bound by the terms hereof.


 


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


 


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ARTICLE 4


EXPENSES OF REGISTRATION


 


All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Articles 2 and 3 hereof shall be borne by the Company, except as
provided by Section 2.2(b).  The expense
described in Section 2.2(b), and all Selling Expenses relating to Registrable
Securities registered by the Holders, shall be borne by the Holders of such
Registrable Securities pro rata on the basis of the number of shares so
registered.


 


ARTICLE 5


REGISTRATION PROCEDURES


 


(a)           In the case of each registration effected by the Company pursuant to
this Agreement, the Company will keep each Holder advised in writing as to the
initiation of each registration and as to the completion thereof.  The Company agrees to use its best efforts
to effect or cause such registration to permit the sale of the Registrable
Securities covered thereby by the Holders thereof in accordance with the
intended method or methods of distribution thereof described in such
registration statement.  In connection
with any registration of any Registrable Securities, the Company shall, as soon
as reasonably possible:


 


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


 


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


 


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


 


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(A) when such registration
statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with respect to
such registration statement or any post-effective amendment, when the same has
become effective, (B) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the initiation
of any proceedings for that purpose, (C) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose or (D) if, to the Company’s
knowledge, it shall be the case, at any time when a prospectus is required to
be delivered under the Securities Act, that such registration statement or
prospectus, or any document incorporated by reference in any of the foregoing,
contains 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 light of the circumstances then existing;


 


(iv)          use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of such registration statement or any post-effective
amendment thereto or of any order suspending or preventing the use of any
related prospectus or suspending the qualification of any Registrable
Securities included in such registration statement for sale in any jurisdiction
at the earliest practicable date;


 


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


 


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


 


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efforts), (B) keep such registrations or qualifications in effect and
comply with such laws so as to permit, as to a registration statement filed
under Article 2 above, the continuance of offers, sales and dealings therein in
such jurisdictions for the same period after the initial effective date of the
registration statement filed under the Securities Act as described in Section
5(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 to
complete its distribution of the Registrable Securities pursuant to such
registration statement and (C) take any and all such actions as may be
reasonably necessary or advisable to enable such Holder, agent, if any, and underwriter
to consummate the disposition in such jurisdictions of such Registrable
Securities;  provided, however, that in
order to fulfill the foregoing obligations under this Section 5(a)(vi), the
Company shall not (unless otherwise required to do so in any jurisdiction) be
required to (1) qualify generally to do business as a foreign company or a
broker-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 in
the registration, on the date that such Registrable Securities are delivered to
the underwriters for sale, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters,
on the date that the registration statement with respect to such securities
becomes effective, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.


 


(b)           The Company may require each Holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such Holder and such Holder’s method of distribution of
such Registrable Securities as the Company may from time to time reasonably
request in writing.  Each such Holder
agrees to notify the Company as promptly as practicable of any inaccuracy or
change in information previously furnished by such Holder to the Company or of
the occurrence of any event in either case as a result of which any prospectus
relating to such registration contains or would contain an untrue statement of
a material fact regarding such Holder or the distribution of such Registrable
Securities or omits to state any material fact regarding such Holder or the
distribution of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional


 


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information required to correct and update
any previously furnished information or required so that such prospectus shall
not contain, with respect to such Holder or the distribution of such
Registrable Securities, an untrue statement or a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.


 


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


 


ARTICLE 6


INDEMNIFICATION


 


6.1           The
Company will indemnify each Holder, each of its officers, directors and
partners, and such Holder’s legal counsel and independent accountants, if any,
and each person controlling any such persons within the meaning of Section 15
of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act or
any state securities laws applicable to the Company and relating to action or
inaction by the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers,
directors and partners and such Holder’s legal counsel and independent
accountants, and each person controlling any such persons, each such
underwriter and each person who controls any such underwriter, for any legal
and 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 not
be 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 or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by such Holder,
officers, directors, partners, legal counsel, accountants, underwriter or
controlling persons, and expressly intended for use in such registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereof.


 


6.2           Each
Holder will, if Registrable Securities held by such Holder are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors and officers and its
legal counsel and independent 


 


9

















 


accountants, each underwriter, if any, of the
Company’s securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of
the Securities Act, and each other such Holder, each of its officers,
directors, partners, legal counsel and independent accountants, if any, and
each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such Holders, such directors, officers, partners, legal counsel,
independent accountants, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating, preparing
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, other document or
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Holder and expressly intended for
use in such registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereof;  provided, however, that the obligations of each Holder hereunder
shall be limited to an amount equal to the proceeds to such Holder of
Registrable Securities sold as contemplated herein.


 


6.3           Each
party entitled to indemnification under this Section 6 (the “Indemnified
Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld).  The
Indemnified Party may participate in such defense at such party’s expense;  provided, however, that the Indemnifying
Party shall bear the expense of such defense of the Indemnified Party if
representation of both parties by the same counsel would be inappropriate due
to actual or potential conflicts of interest. 
The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Agreement, unless such failure is prejudicial to the ability of the
Indemnifying 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 of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.


 


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


 


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


 


ARTICLE 7


RULE 144 REPORTING


 


With a view to making
available the benefits of certain rules and regulations of the Commission which
may at any time permit the sale of securities of the Company to the public
without registration, the Company agrees to use its best efforts to:


 


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


 


7.2           File
with the Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act.


 


ARTICLE 8


TRANSFER OF REGISTRATION RIGHTS


 


The rights to cause the
Company to register Registrable Securities under this Agreement may be assigned
by a Holder to Whitebox Advisors, LLC (“Whitebox”) or to a transferee or assignee
of Registrable Securities that (i) is a subsidiary, parent or affiliated
entity, general partner or limited partner, member or retired partner or member
of a Holder or of Whitebox, (ii)


 


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is an affiliated fund, a follow-on fund or
predecessor fund of a Holder or a related fund or of Whitebox, (iii) is a
Holder’s family member or trust for the benefit of an individual Holder or
(iv) acquires at least 400,000  shares of Registrable Securities (as
adjusted for stock splits, stock dividends, stock combinations,
reclassifications, recapitalizations, mergers, consolidations or other similar
events);  provided, however,
(A) the transferor shall, within ten days before such transfer, furnish to
the Company written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned and (B) such transferee shall agree in writing to be
subject to all restrictions set forth in this Agreement.  In each case, such rights may only be
transferred together with the underlying Registrable Securities in a transfer
permitted hereunder, and by the Securities Act and applicable state securities
laws.  Any such transferee or assignee
shall be deemed a Holder hereunder.


 


ARTICLE 9


LIMITATIONS ON REGISTRATION RIGHTS
GRANTED TO OTHER SECURITIES


 


From and after the date of
this Agreement, the Company shall not without the prior written consent of the
holders of a majority of the Registrable Securities then outstanding, enter
into any agreement with any holder or prospective holder of any securities of
the Company providing for the grant to such holder of registration rights
superior to those granted herein, except as to registrations for which the
Holder is excluded from participation under Section 3.1.


 


ARTICLE 10


MISCELLANEOUS


 


10.1         Governing Law.  The
laws of the state of Minnesota shall govern the interpretation, validity and
performance of the terms of this agreement, regardless of the law that might be
applied under principles of conflicts of law.


 


10.2         Successors and Assigns. 
Except as otherwise expressly provided herein, the provisions hereof
shall 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 and
agreement between the parties with regard to the subject matter hereof.


 


10.4         Termination.  The
obligations of the Company to register Registrable Securities under this
Agreement shall terminate in any event on the tenth anniversary of the date of
this Agreement.  In addition, the right
of any Holder to request inclusion in any registration under Article 3 shall
terminate on the date hereafter when (i) such Holder (together with its
affiliates, partners, members and former partners and members) holds less than
1% of the Company’s outstanding Common Stock and (ii) all Registrable
Securities held by or issuable to such Holder (and its affiliates, partners,
members and former partners and members) as payment under the Note or upon
exercise of the Warrant may be sold under Rule 144 during any 90 day period.


 


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10.5         Notices.  All
notices, requests, consents, and other communications hereunder shall be in
writing and shall be deemed effectively given and received when delivered in
person or by national overnight courier service or by certified or registered
mail, return receipt requested, or by telecopier, addressed as follows:


 


(a)           if to the Company, at


 


Zamba
Corporation


3033
Excelsior Boulevard, Suite 200


Minneapolis,
Minnesota  55416


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


Facsimile:  (952) 832-9383


 


with
a 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


 


with
a 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 the
Company, or such other address or addresses as shall have been furnished in
writing by such party to the Company and to the other parties to this
Agreement.


 


10.6         Severability.  The
invalidity, illegality or unenforceability of one or more of the provisions of
this Agreement in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Agreement in such jurisdiction or the
validity, legality or 


 


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


 


10.7         Titles and Subtitles.  The
titles of the sections and subsections of this Agreement are for convenience of
reference 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 of
which shall be an original, but all of which together constitute one
instrument.


 


IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective duly authorized
officers 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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