Document:

Exhibit
10.02

WARRANT NO. PSP 1

 

To Purchase 1,339,286 Shares of Common Stock

of

ZAMBA CORPORATION

 

This Warrant and the Securities issuable upon
exercise of this Warrant have not been registered under the Securities Act of
1933 (the “1933 Act”) or under any state securities or “Blue Sky” laws (“Blue
Sky Laws”).  No transfer, sale,
assignment, pledge, hypothecation or other disposition of this Warrant or the
Securities issuable upon exercise of this Warrant or any interest therein may
be made except (a) pursuant to an effective registration statement under
the 1933 Act and any applicable Blue Sky Laws or (b) if the Corporation has
been furnished with an opinion of counsel for the holder, which opinion and
counsel shall be reasonably satisfactory to the Corporation, to the effect that
no registration is required because of the availability of an exemption from
registration under the 1933 Act and applicable Blue Sky laws.

 

THIS CERTIFIES THAT, for good and valuable consideration Pandora Select Partners L.P.,
a British Virgin Islands limited partnership (the “Holder”), or the Holder’s
registered assigns, is entitled to subscribe for and purchase from Zamba
Corporation, a Delaware corporation (the “Corporation”), at any time on or
after May 15, 2004, to and including May 14, 2009 (subject to the limitations
provided in Section 10 below), 1,339,286 (one million three hundred thirty nine
thousand two hundred eighty six) fully paid and nonassessable shares of the
Common Stock of the Corporation at the price of $0.28 per share (the “Warrant
Exercise Price”), subject to the anti-dilution provisions of this Warrant.

 

The shares which may be acquired upon
exercise of this Warrant are referred to herein as the “Warrant Shares.”  As used herein, the term “Holder” means the
Holder, any party who acquires all or a part of this Warrant as a registered
transferee of the Holder, or any record holder or holders of the Warrant Shares
issued upon exercise, whether in whole or in part, of the Warrant.  The term “Common Stock” means the common
stock, $0.01 par value per share, of the Corporation.

 

This Warrant is subject to the following
provisions, terms and conditions:

 

1.             Exercise; Transferability.

 

(a)           The
rights represented by this Warrant may be exercised by the Holder hereof, in whole
or in part (but not as to a fractional share of Common Stock), by written
notice of exercise (in the form attached hereto) delivered to the Corporation
at the principal office of the Corporation prior to the expiration of this
Warrant and accompanied or preceded by the surrender

 

 

of this Warrant along with a check in payment of the Warrant Exercise
Price for such Warrant Shares.

 

(b)           Except
as provided in Section 7 hereof, this Warrant may not be sold, transferred,
assigned, hypothecated or divided into two or more Warrants of smaller
denominations, nor may any Warrant Shares issued pursuant to exercise of this
Warrant be transferred.

 

2.             Exchange and Replacement.  Subject to Sections 1 and
7 hereof, this Warrant is exchangeable upon the surrender hereof by the Holder
to the Corporation at its office for new Warrants of like tenor and date
representing in the aggregate the right to purchase the number of Warrant
Shares purchasable hereunder, each of such new Warrants to represent the right
to purchase such number of Warrant Shares (not to exceed the aggregate total
number purchasable hereunder) as shall be designated by the Holder at the time
of such surrender.  Upon receipt by the
Corporation of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Corporation will
make and deliver a new Warrant of like tenor, in lieu of this Warrant.  This Warrant shall be promptly canceled by
the Corporation upon the surrender hereof in connection with any exchange or
replacement.  The Corporation shall pay
all expenses, taxes (other than stock transfer taxes), and other charges
payable in connection with the preparation, execution, and delivery of Warrants
pursuant to this Section 2.

 

3.             Issuance of the Warrant Shares.

 

(a)           The
Corporation agrees that the Warrant Shares shall be and are deemed to be issued
to the Holder as of the close of business on the date on which this Warrant
shall have been surrendered and the payment made for such Warrant Shares as
aforesaid.  Subject to the provisions of
paragraph (b) of this Section 3, certificates for the Warrant Shares so
purchased shall be delivered to the Holder within a reasonable time after the
rights represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing the right to purchase the
number of Warrant Shares, if any, with respect to which this Warrant shall not
then have been exercised shall also be delivered to the Holder.

 

(b)           Notwithstanding
the foregoing, however, the Corporation shall not be required to deliver any
certificate for Warrant Shares upon exercise of this Warrant except in
accordance with exemptions from the applicable securities registration
requirements or registrations under applicable securities laws.  Except as described in Section 9, nothing
herein shall obligate the Corporation to effect registrations under federal or
state securities laws.  If registrations
are not in effect and if exemptions are not available when the Holder seeks to
exercise the Warrant, the Warrant exercise period will be extended, if need be,
to prevent the Warrant from expiring, until such time as either registrations
become effective or exemptions are available, and the Warrant

 

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shall then remain exercisable for a period of at least 30 calendar days
from the date the Corporation delivers to the Holder written notice of the
availability of such registrations or exemptions.  The Holder agrees to execute such documents and make such
representations, warranties and agreements as may be required solely to comply
with the exemptions relied upon by the Corporation, or the registrations made,
for the issuance of the Warrant Shares.

 

4.             Covenants of the Corporation.  The
Corporation covenants and agrees that all Warrant Shares will, upon issuance,
be duly authorized and issued, fully paid, non-assessable and free from all
taxes, liens and charges with respect to the issue thereof.  The Corporation further covenants and agrees
that during the period within which the rights represented by this Warrant may
be exercised, the Corporation will at all times have authorized and reserved
for the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.

 

5.             Anti-dilution Adjustments.  The provisions of this Warrant
are subject to adjustment as provided in this Section 5.

 

(a)           Stock
Splits, Dividends and Combinations.  The Warrant Exercise Price
shall be adjusted from time to time such that in case the Corporation shall
hereafter:

 

(i)  pay any dividends on any
class of stock of the Corporation payable in Common Stock or securities
convertible into Common Stock;

 

(ii)  subdivide its then
outstanding shares of Common Stock into a greater number of shares;  or

 

(iii)  combine outstanding
shares of Common Stock, by reclassification or otherwise;

 

then, in any such event, the Warrant Exercise Price in effect
immediately prior to such event shall (until adjusted again pursuant hereto) be
adjusted immediately after such event to a price (calculated to the nearest
full cent) determined by dividing (A) the number of shares of Common Stock
outstanding immediately prior to such event, multiplied by the then existing
Warrant Exercise Price, by (B) the total number of shares of Common Stock
outstanding immediately after such event (including in each case the maximum
number of shares of Common Stock issuable in respect of any securities
convertible into Common Stock), and the resulting quotient shall be the
adjusted Warrant Exercise Price per share. 
An adjustment made pursuant to this Subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. 
If, as a result of an adjustment made pursuant to

 

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this Subsection, the Holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the
Corporation, the Board of Directors (whose determination shall be conclusive)
shall determine the allocation of the adjusted Warrant Exercise Price between
or among shares of such classes of capital stock or shares of Common Stock and
other capital stock.  All calculations
under this Subsection shall be made to the nearest cent or to the nearest 1/100
of a share, as the case may be.  In the
event that at any time as a result of an adjustment made pursuant to this
Subsection, the holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Corporation other than shares of
Common Stock, thereafter the Warrant Exercise Price of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to Common Stock contained in this Section.

 

(b)           Mechanics
of Adjustment for Stock Splits, Dividends and Combinations. 
Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until
another such adjustment) be entitled to purchase at the adjusted Warrant
Exercise Price the number of shares, calculated to the nearest full share,
obtained by multiplying the number of shares specified in such Warrant (as
adjusted as a result of all adjustments in the Warrant Exercise Price in effect
prior to such adjustment) by the Warrant Exercise Price in effect prior to such
adjustment and dividing the product so obtained by the adjusted Warrant
Exercise Price.

 

(c)           Consolidations,
Mergers and Reorganization Events.  In case of any consolidation
or merger to which the Corporation is a party other than a merger or
consolidation in which the Corporation is the continuing corporation, or in
case of any sale or conveyance to another corporation of the property of the
Corporation as an entirety or substantially as an entirety, or in the case of
any statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Corporation), there shall be no adjustment under Subsection (a) of this
Section 5;  but the Holder of each
Warrant then outstanding shall have the right thereafter to convert such
Warrant into the kind and amount of shares of stock and other securities and
property which he would have owned or have been entitled to receive immediately
after such consolidation, merger, statutory exchange, sale or conveyance had
such Warrant been converted immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale or conveyance and, in any such
case, if necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Section with respect to the rights and
interests thereafter of any Holders of the Warrant, to the end that the
provisions set forth in this Section shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
and other securities and property thereafter deliverable on the exercise of the
Warrant.  The provisions of this
Subsection shall similarly apply to successive consolidations, mergers,
statutory exchanges, sales or conveyances.

 

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(d)           Adjustments for Diluting Issues.  In
addition to the adjustments of the Warrant Exercise Price provided above, the
Warrant Exercise Price shall be subjected to further adjustment from time to
time as follows (the main operative provision hereof is in Section 5(d)(iii)
below):

 

(i)            Special
Definitions:

 

(A)          “Options” shall mean rights, options
or warrants (other than as excluded by Section 5(d)(i)(D) below) to subscribe
for, purchase or otherwise acquire either Common Stock or Convertible
Securities (as defined herein).

 

(B)           “Original Issue Date” shall mean the date hereof.

 

(C)           “Convertible Securities” shall mean securities (other than as
excluded by (4) below) convertible, either directly or indirectly, into or
exchangeable for Common Stock.

 

(D)          “Additional Shares of Common Stock” shall mean all shares of Common
Stock issued (or, deemed to be issued) by the Corporation after the Original
Issue Date, other than shares of Common Stock issued (or deemed to be issued):

 

1.             to employees, consultants or directors
pursuant to stock option, stock grant, stock purchase or similar plans or
arrangements approved by the Corporation’s Board of Directors;

 

2.             as a dividend or other distribution in
connection with which an adjustment to the Warrant Exercise Price is made;

 

3.             in a merger, consolidation, acquisition or
similar business combination that is approved by the Corporation’s Board of
Directors;

 

4.             pursuant to credit, lease or other commercial
financing arrangements with parties not affiliated with the Corporation that
are approved by the Corporation’s Board of Directors;

 

5.             in exchange for technology or other non-cash
assets as approved by the Corporation’s Board of Directors;

 

6.             pursuant to any rights or agreements
outstanding on the Original Issue Date; or

 

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7.             if the Holder agrees in writing that such
shares shall not constitute Additional Shares of Common Stock.

 

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(ii)           Deemed Issue of Additional Shares of Common
Stock. Except as otherwise
provided in Section 5(d), in the event the Corporation at any time or from time
to time after the Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of any holders of
any class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such record date shall have been fixed, as of the close of
business on such record date, provided that in any such case in which
Additional Shares of Common Stock are deemed to be issued:

 

(A)          no further adjustment in the Warrant Exercise Price shall be made upon
the subsequent issue of such Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or exchange of such Convertible
Securities;

 

(B)           if such Options or Convertible Securities by their terms provide, with
the passage of time or otherwise, for any increase or decrease in the
consideration payable to the Company, or increase or decrease in the number of
shares of Common Stock issuable upon the exercise, conversion or exchange
thereof, the Warrant Exercise Price computed upon the original issue thereof or
upon the occurrence of a record date with respect thereto, and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease;

 

(C)           upon the expiration of any such Option or any rights of conversion or
exchange under such Convertible Securities which shall not have been exercised,
the Warrant Exercise Price computed upon the original issue thereof or upon
occurrence of a record date with respect thereto, and any subsequent
adjustments based thereon, shall, upon such expiration:

 

1.             in the case of Convertible Securities or
Options for Common Stock, be recomputed as though the only Additional Shares of
Common Stock issued were shares of Common Stock, if any, actually issued upon
the exercise of such Options or the conversion or exchange of such Convertible
Securities, and the consideration received therefor was the consideration
actually received by the Company for the issue of all such Options, whether or
not exercised, plus the consideration actually received by the Company upon
such exercise, or for the issue of all such Convertible Securities, whether or
not converted or exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange;  and

 

2.             in the case of Options for Convertible
Securities, be recomputed as though only the Convertible Securities, if any,
actually issued upon the exercise

 

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thereof were issued at the
time of issue of such Options and the consideration received by the Company for
the Additional Shares of Common Stock deemed to have been then issued was the
consideration actually received by the Company for the issue of all such
Options, whether or not exercised, plus the consideration deemed to have been
received by the Company upon the issue of the Convertible Securities with
respect to which such Options were actually exercised.

 

(D)          no readjustment pursuant to Section 5(d) shall have the effect of
increasing the Warrant Exercise Price to an amount which exceeds the Warrant
Exercise Price existing immediately prior to the original adjustment with
respect to the issuance of such Options or Convertible Securities, as adjusted
for any Additional Shares of Common Stock issued (or deemed to be issued)
between such original adjustment date and such readjustment date;  and

 

(E)           in the case of any Option or Convertible
Security with respect to which the maximum number of shares of Common Stock
issuable upon exercise or conversion or exchange thereof is not determinable,
no adjustment to the Warrant Exercise Price shall be made until such number
becomes determinable.

 

(iii)          Adjustments for Issuance of Additional Shares
of Common Stock.  If the Company, at any time after the
issuance of this Warrant, shall issue any Additional Shares of Common Stock
(otherwise than as provided in the Sections 5(a) and 5(c) above) at a price per
share less than the applicable Warrant Exercise Price then in effect or without
consideration, then the applicable Warrant Exercise Price upon each such
issuance shall be adjusted to that price (rounded to the nearest cent)
determined by multiplying the applicable Warrant Exercise Price then in effect
by a fraction, (i) the numerator of which shall be equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to the issuance
of such Additional Shares of Common Stock plus (B) the number of shares
of Common Stock (rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares of Common Stock so
issued would purchase at a price per share equal to the applicable Warrant
Exercise Price then in effect, and (ii) the denominator of which shall be equal
to the number of shares of Common Stock outstanding immediately after the
issuance of such Additional Shares of Common Stock.

 

The provisions of this Section 5(d)(iii) shall not apply under any of
the circumstances for which an adjustment is provided in Sections 5(a), 5(b) or
5(c) above.  No adjustment of the
applicable Warrant Exercise Price shall be made under this Section 5(d) upon
the issuance of any Additional Shares of Common Stock which are issued pursuant
to any Options or Convertible Securities if upon the issuance of such Options
or Convertible Securities (x) any adjustment shall have been made pursuant to
Section 5(d)(ii) above or (y) no adjustment was required pursuant to this
Section 5(d)(iii).  No adjustment of the
applicable Warrant Exercise Price shall be made under this Section 5(d)(iii) in
an amount less than $.01 per share, but any such lesser adjustment shall be
carried forward and shall be made at the time and together with 

 

8

 

the
next subsequent adjustment, if any, which together with any adjustments so
carried forward shall amount to $.01 per share or more;  provided, however, that upon
any adjustment of the applicable Warrant Exercise Price as a result of any
dividend or distribution payable in Common Stock or Convertible Securities or
the reclassification, subdivision or combination of Common Stock into a greater
or smaller number of shares, the foregoing figure of $.01 per share (or such
figure as last adjusted) shall be adjusted (to the nearest one-half cent) in
proportion to the adjustment in the applicable Warrant Exercise Price.

 

(iv)          Determination of Consideration. For purposes of this Section 5(d), the
consideration received by the Corporation for any Additional Shares of Common
Stock issued (or deemed to be issued) shall be computed as follows:

 

(A)          Cash and Property. 
Such consideration shall:

 

(i)            insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Company;

 

(ii)           insofar as it consists of securities and the
value of such securities is not determinable by reference to a separate
agreement, (A) if the securities are then traded on a national securities
exchange or the Nasdaq Stock Market (or a similar national quotation system),
then the value shall be computed based on the average of the closing prices of
the securities on such exchange or system over the thirty (30)-day period
ending on the date of receipt by the Corporation, (B) if the securities are
actively traded over-the-counter, then the value shall be computed based on the
average of the closing bid prices over the thirty (30) day ending on the date
of receipt by the Corporation, and (C) if there is no active public market,
then the value shall be computed based on the fair market value thereof on the
date of receipt by the Corporation, as determined in good faith by the Board of
Directors;

 

(iii)          insofar as it consists of property other than
cash and securities, be computed at the fair market value thereof at the time
of such issuance, as determined in good faith by the Board of Directors; and

 

(iv)          if Additional Shares of Common Stock are
issued (or deemed to be issued) together with other shares or securities or
other assets of the Corporation for consideration which cover both, by the
proportion of such consideration so received, computed as provided in the
immediately preceding Sections 5(d)(iv)(A)(i), 5(d)(iv)(A)(ii) and
5(d)(iv)(A)(iii), as determined in good faith by the Board of Directors.

 

(B)           Options and Convertible Securities.  The
consideration received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 5(d) relating to Option and
Convertible Securities, shall be the sum of (x) the total 

 

9

 

amount,
if any, received or receivable by the Corporation as consideration for the
issue of such Options or Convertible Securities, plus (y) the minimum aggregate
amount of additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such consideration) payable to the Corporation upon the exercise
of such Options or the conversion or exchange of such Convertible Securities,
or in the case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange of such
Convertible Securities.

 

(e)           Certificate as to Adjustments. 
Upon the occurrence of each adjustment or readjustment of the Warrant
Exercise Price or the number of Warrants covered hereby pursuant to this
Section 5, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
the Holder a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based.  The Corporation shall, upon the
written request at any time of the Holder, furnish or cause to be furnished to
the Holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Warrant Exercise Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the exercise of this
Warrant.

 

6.             No Voting Rights.  This Warrant shall not entitle
the Holder to any voting rights or other rights as a shareholder of the
Corporation.

 

7.             Notice of Transfer of Warrant or Resale of the Warrant Shares.

 

(a)           Subject
to the sale, assignment, hypothecation or other transfer restrictions set forth
in Section 1 hereof, the Holder, by acceptance hereof, agrees to give
written notice to the Corporation before transferring this Warrant or
transferring any Warrant Shares of such Holder’s intention to do so, describing
briefly the manner of any proposed transfer, the identity of the proposed
transferee, whether such transferee is an accredited investor and whether such
transferee is sufficiently knowledgeable to assess the risks and merits of an
investment in the Warrant or the Common Stock. 
Promptly upon receiving such written notice, the Corporation shall
present copies thereof to the Corporation’s counsel.  If in the opinion of such counsel the proposed transfer may be
effected without registration or qualification (under any federal or state
securities laws), the Corporation, as promptly as practicable, shall notify the
Holder of such opinion, whereupon the Holder shall be entitled to transfer this
Warrant or to dispose of Warrant Shares received upon the previous exercise of
this Warrant, all in accordance with the terms of the notice delivered by the
Holder to the Corporation; provided that an appropriate legend may be endorsed
on this Warrant or the certificates for such Warrant Shares respecting
restrictions upon transfer thereof necessary or advisable in the opinion of
counsel and satisfactory to the Corporation to prevent further transfers which
would be in violation of Section 5 of the 1933 Act and applicable state
securities laws;  and provided further
that the prospective transferee or 

 

10

 

purchaser shall execute such documents and make such representations,
warranties and agreements as may be required solely to ensure compliance with
the exemptions from registration under the 1933 Act relied upon by the
Corporation for the transfer or disposition of the Warrant or Warrant Shares,
and compliance with the anti-fraud provisions of the Securities Exchange Act of
1934.

 

(b)           If,
in the opinion of the Corporation’s counsel, the proposed transfer or
disposition of this Warrant or such Warrant Shares described in the written
notice given pursuant to this Section 7 may not be effected without
registration or qualification of this Warrant or such Warrant Shares, the
Corporation shall promptly give written notice thereof to the Holder, and the
Holder will limit its activities in respect to such transfer or disposition as,
in the opinion of such counsel, are permitted by law.

 

8.             Fractional Shares.  Fractional shares shall not be
issued upon the exercise of this Warrant, but in any case where the holder
would, except for the provisions of this Section, be entitled under the terms
hereof to receive a fractional share, the Corporation shall, upon the exercise
of this Warrant for the largest number of whole shares then called for, pay a
sum in cash equal to the sum of (a) the excess, if any, of the Market
Price of such fractional share over the proportional part of the Warrant
Exercise Price represented by such fractional share, plus (b) the
proportional part of the Warrant Exercise Price represented by such fractional
share.  For purposes of this Section,
the term “Market Price” with respect to shares of Common Stock of any class or
series means the last reported sale price or, if none, the average of the last
reported closing bid and asked prices on any national or regional securities
exchange or quoted in the National Association of Securities Dealers, Inc.’s
Automated Quotations System (“Nasdaq”), or if not listed on a national or
regional securities exchange or quoted in Nasdaq, the average of the last
reported closing bid and asked prices as reported by Metro Data Corporation,
Inc. or the OTC Bulletin Board from quotations by market makers in such Common
Stock on the Minneapolis-St. Paul local over-the-counter market, or if no
quotations in such Common Stock are available, the fair market value of the
shares as determined in good faith by the Board of Directors of the
Corporation.

 

9.             Registration Rights.  Holder shall have registration
rights for the shares underlying its Warrants as described in the Registration
Rights Agreement of this same date.

 

10.          Limitation of
Exercise of this Warrant.  Despite anything to the contrary in this
Warrant, the Holder may not exercise this Warrant during the time period and to
the extent that the shares of Common Stock that the Holder could acquire upon
the exercise hereof would cause Holder’s Beneficial Ownership (as defined below)
of the Corporation’s Common Stock to exceed 4.99%.  These limitations on the right to exercise this Warrant shall
first reduce the Holder’s Beneficial Ownership of the Corporation’s Common
Stock before limitation of the Corporation’s right to make payments in Common
Stock under the Note.  The parties shall
compute the 

 

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Holder’s “Beneficial Ownership” of Common
Stock in accordance with U.S. Securities and Exchange Commission Rule
13d-3.  The Holder will, at the request
of the Corporation, from time to time, notify the Corporation of the Holder’s
computation of Holder’s Beneficial Ownership.

 

IN WITNESS WHEREOF, Zamba Corporation has caused this Warrant to be signed by its duly
authorized officer and this Warrant to be dated May 14, 2004.

 

	
   

  	
  ZAMBA
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Michael H. Carrel

  	
   

  
	
   

  	
   

  	
  Michael
  H. Carrel, Treasurer

  

 

12

 

EXERCISE FORM

 

(To Be Executed by the
Registered Holder in Order to Exercise the Warrant)

 

To:          Zamba Corporation

 

The undersigned hereby irrevocably elects to exercise the attached
Warrant to purchase for cash,
                  
of the shares issuable upon the exercise of such Warrant, and requests that
certificates for such shares (together with a new Warrant to purchase the
number of shares, if any, with respect to which this Warrant is not exercised)
shall be issued in the name of:

 

 

	
   

  	
  NAME:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SOC.
  SEC. or

  	
   

  
	
   

  	
  TAX
  I.D. NO.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ADDRESS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:
                   ,
  20      .

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  *

  

 

*                                         The signature on the Notice of Exercise of
Warrant must correspond to the name as written upon the face of the Warrant in
every particular without alteration or enlargement or any change
whatsoever.  When signing on behalf of a
corporation, partnership, trust or other entity, please indicate your
position(s) and title(s) with such entity.

 

 

ASSIGNMENT FORM

 

(To be Executed by the
Registered Holder in Order to Transfer the Warrant)

 

To:          Zamba Corporation

 

 

FOR VALUE RECEIVED, the undersigned hereby
sells, assigns, and transfers unto
                                 
the right to purchase the securities of Zamba Corporation to which the within
Warrant relates and appoints
                       ,
attorney, to transfer said right on the books of Zamba Corporation with full
power of substitution in the premises.

 

	
  Dated:
                    20    

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
  Address: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

 

2

 

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 

 

3

 

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 

 

4

 

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.

 

5

 

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,

 

6

 

(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

 

7

 

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

 

8

 

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

 

10

 

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)

 

11

 

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.

 

12

 

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 

 

13

 

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

  	
   

  
						

 

14

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