10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

(Mark One)
/x/	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
/ /	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from            to             .

Commission File Number 0-22718

ZAMBA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization) 41-1636021
(I.R.S. Employer
Identification No.)

7301 Ohms Lane, Suite 200, Minneapolis, Minnesota 55439
(Address of Principal Executive Offices, including Zip Code)

Registrant's Telephone Number, Including Area Code: (612) 832-9800

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value

    Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES /x/  NO / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $378,675,005 based on the closing sale price of the Company's Common Stock as reported on the Nasdaq National Market on February 22, 2000

The number of shares outstanding of the registrant's common stock, as of February 22, 2000: 31,273,523 shares.

DOCUMENTS INCORPORATED BY REFERENCE

(1)

Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 18, 2000, are incorporated by reference into Part III of this report.

PART I

Disclaimer Regarding Forward-Looking Information

    Certain statements in this report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward looking statements. Factors that impact such forward looking statements include, among others, the growth rate of the customer care marketplace, the ability of our partners to maintain competitive products, our ability to develop skills in implementing customer care packages from additional partners, the impact of competition and pricing pressures from actual and potential competition with greater financial resources, our ability to obtain large-scale consulting services agreements, changes in expectations regarding the information technology industry, our ability to hire and retain competent employees, possible changes in collections of accounts receivable, changes in general economic conditions and interest rates, and other factors identified in the Company's filings with the Securities and Exchange Commission.

Item 1. Business

Our Company

    We provide businesses with consulting and systems integration services to deliver integrated "Customer Care" solutions to their customers. Our solutions help businesses attract and retain customers by improving their interactions with customers during sales, marketing, customer service, and other business functions. We deliver Customer Care solutions in customer care strategy, customer intelligence, e-business, front-office applications, contact centers, wireless and mobile technology, branding, performance improvement and support services. To us, "Customer Care" means ensuring that customers have positive, consistent experiences each time they come in contact with our clients' businesses by using smart, customer-centric strategies leveraged by the appropriate combination of technologies and techniques.

    Our strategic intent is to strive for leadership in the rapidly growing Customer Care market through speed in anticipating and responding to evolving client needs, with the highest quality services available, as well as openness to new ideas and solutions. Our internal resources include business and technological experience, expertise, market position and continuous building of competencies.

Our Market Opportunity

The convergence of E-commerce and Customer Relationship Management (CRM) is driving the growth of the Customer Care solutions market

    IDC has estimated that the market for Internet professional services will be $78.6 billion by 2003. These numbers indicate that the Internet is becoming the preferred means of business-to-business and business-to-customer commerce. The growing number of on-line users and e-commerce applications continue to drive usage growth, merging e-commerce and CRM, the two dominant trends in Customer Care.

    Market growth in the Customer Care industry is being driven by services and technology innovation combined with the increased penetration of Internet, wireless and mobile technology and front-office applications. The market for Customer Care professional services is also being driven by the fast speed of technology improvement, which shortens solution lifecycles.

Segmentation becoming increasingly important

    Customer Care is an integral function of business. It deals with one of the most fundamental business needs—caring for customers. At the same time, with the segmentation of various markets

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and industries, companies are demanding solutions that suit their different customer demographics and psychographics. These two factors have contributed to fast growth in the Customer Care solutions market.

    The rapid shift to customization and one-to-one relationships with customers has required a new approach to developing and deploying Customer Care solutions. Understanding segmentation is a prerequisite for success.

    Today, nearly every company is a potential Customer Care solutions client. The needs and objectives of companies vary widely. As the market has become increasingly segmented, the ability to master various markets, such as Customer Care, has become crucially important.

    In a segmented business market with high competition, critical success factors include a comprehensive service portfolio, a strong and appealing brand image and an ability to respond to specific client/ customer demands rapidly. We will continue to focus in these critical areas with the aim of sustained leadership and continuous brand improvement.

Offering companies cost-effective, scalable solutions

    Clients are demanding complete multi-channel, blended media solutions that help them bring the various points of customer interactions together to eliminate dysfunctional technology "silos." Conventional call center and field interactions with customers are shifting to the Web. We offer our clients rapid, dependable and scalable e-commerce solutions.

Shift from company-centric to customer-centric enterprise model

    As companies recognize the need for improved customer care in the increasingly competitive new economy, the enterprise model is shifting away from the old, company-centric model to a new, customer-centric model.

    The emergence of the Internet prompted a fundamental shift from back-office applications to front-office applications. Just as technology has revolutionized the way companies operate internally (back-office) it is now being utilized to revolutionize customer-facing (front-office) operations.

    Historically, companies have organized their business processes to ensure efficient Enterprise Resource Planning. With this model, front-office functions that interact with the customer are disconnected. Because such a company is not operating with a unified, single face to the customer, an unsatisfactory customer experience may result. Our Customer Care services help companies put their customers at the center of their business processes. The focus of our business model is on achieving long-term customer retention rather than short-term operational efficiencies.

E-business is shaping both content and technologies

    The acquisition of Camworks, an e-business solutions provider, in late 1999 allowed us to approach clients with new service offerings. With the addition, we enhanced our ability to offer Web-based applications to clients. Based in St. Paul, Camworks specialized in robust, e-commerce solutions. In combination with our existing skills, the acquisition will add to our abilities to design and deploy e-business solutions for business, including extranets, intranets and the Internet.

Our solutions

    We offer a broad portfolio of competencies for a "complete" solution approach. We believe that integration and information sharing between various technology solutions in the enterprise will play a critical role as companies strive to provide their customers with a consistently valuable experience across all points of customer contact including their Web sites, contact centers and field representatives. Our

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solution-building process is directly related to the specific needs and objectives of our clients. The typical lifecycle of our client engagements includes four primary phases: strategy, initiative planning, development/deployment and support. Our competencies include Customer Care Strategy, Customer Intelligence, E-Business, Contact Centers, Wireless and Mobile Technology, Front-Office Applications, Branding, Performance Improvement, and Support Services.

The ZAMBA Methodology

    Through strategy, initiative planning, development/deployment and support, our Z-Step™ methodology is the common thread that binds all of the competencies and provides clients with a proven approach for building solutions. The ZAMBA methodology is highly iterative to enable rapid solutions with minimized risks and maximized rewards.

    A common set of deliverables is provided to clients during the separate phases of the engagement lifecycle to provide clients with delivery consistency and maintain integration across all competencies. These deliverables include six primary documents for all ZAMBA engagements: Customer Care Discovery™, Customer Care Strategy™, Customer Care Blueprint™, Customer Care Implementation™, Customer Care Realization™ and Customer Care Solution™.

    In the end, solutions are rapidly delivered to clients with the scalable ZAMBA Agile Architectures™ that are built to accommodate future development and upgrades.

Customer Care Strategy

    Our Customer Care Strategy competency offers a range of solutions to meet the needs of a variety of customers from numerous industries. The ZAMBA Customer Care Strategy™ document provides a customer-centric guide for the solution-building process. On projects with multiple phases, the Customer Care Strategy serves as a guide for future development.

Customer Intelligence

    Our Customer Intelligence services helps clients collect data about their customers, extract relevant information, and turn the information into a knowledge-based product that they can use to enhance their sales, marketing and service approaches.

E-Business

    Our e-business competency offers a full range of services with an e-commerce emphasis to strategize, plan, design and develop successful e-businesses, including Internet strategy, Web design and development, branding, e-sales, e-services, on-line community (portal) building—and e-CRM. Our e-business services overlap and leverage with all of our other services.

Contact Centers

    Customer interactions are designed and managed to exchange information and extract knowledge to be leveraged for sales, marketing and service efforts. In the Internet economy, the role of contact centers has increased, not diminished. Our Contact Center competency has traditionally focused on the development, deployment and management of call centers. The convergence of contact points has shifted the competency to focus on blended media solutions for successful integration and automation of all customer interactions including screen pops, voice response, computer telephony, e-mail, fax and the Web. The Contact Center competency is closely connected to all of our other competencies, and our Customer Intelligence competency in particular.

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Wireless and Mobile Technology

    Our wireless and mobile technology competency helps companies provide rapid call status, electronic messaging, increase productivity, increase timeliness and quality from data from field, and reduced dependence on contact centers with wireless networks and mobile devices. Wireless networks include terrestrial Wide Area Networks ("WANs"), satellite WANs and other networks such as paging, microwave and spread spectrum. Mobile devices include laptops, palm devices and phones.

Front-office Applications

    The Front-office Applications competency is at the core of our business, and will likely continue as the primary source of revenues for the company as the other competencies continue to grow. We provide our clients with front-office application strategy, initiative planning, development, deployment and support. The market for integration of front-office applications continues to grow rapidly. For every dollar spent of software, we believe that an additional $1 to $4 dollars are spent on consulting and systems integration services. The ZAMBA Z-Step™ front-office application implementation methodology is a proven, iterative approach to minimize risks and maximize returns. We work with technology from many of the industry-leading software developers.

Branding

    Our Branding competency specializes in defining customers to create a customer-centric perspective to drive the solution-building process. There is a close connection between branding, customer care strategy and customer intelligence. The branding process begins with the development of a Customer First™ Creative Blueprint in association with the Customer Care Strategy™ document. The creative blueprint drives the development of requirements, functionality, design properties and ultimately the identity.

Performance Improvement

    Our Performance Improvement competency specializes in training and change management. Performance improvement is a systematic approach to improve the productivity and competence within companies to achieve peak performance associated with a solution or set of solutions. This competency helps companies develop a strategy for successful organizational change, then develop solutions that will improve employee performance and interactions with customers. The process begins by defining our client's needs, and the resulting needs definition guides the development of performance improvement solutions. For training, instruction may include Web-based delivery, computer-based delivery, instructor-led classes and/or print-based self-study materials. For change management, we provide a strategic communications plan, electronic performance support system, rewards and recognition programs, employee feedback systems and more. Our Performance Improvement competency is closely associated with the support phase of the ZAMBA Z-step™ methodology.

Support Services

    Our Support Services competency provides a range of services to clients. At year-end we were providing ongoing support for the customer care systems of several notable clients, including Compaq, CompuCom, Enbridge Home Services, Progressive Insurance, Alliant and General Electric. The services we provide include standard maintenance, upgrades, bug fixes, warranty support, technical support, and resolution of systems failures. Many new outsourcing models have emerged recently, such as the Application Service Provider model, and are expanding the scope of support services.

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Our Customers

    We continue to work with an impressive list of leading blue chip companies. These companies hire ZAMBA Solutions for its results-oriented approach, reputation, and ability to deliver on-time, on-budget solutions. Proven experience, expertise, passion, agility and focus set ZAMBA Solutions apart.

    ZAMBA has in the past, and may in the future, derive a significant portion of its revenue from a relatively small number of clients. In 1999, no customer represented more than 10% of ZAMBA's revenue.

    Sample Clients:

3Com, Allina Health System, American Express, Ameritech, Avid Technology, Bay Networks, BellSouth, Best Buy, Borland, Caterpillar, Calico, Cisco, Colorado Springs Utilities, CompuCom, Compaq, Consumers First, Convergys, Decision One, Diebold, Digital, Duty Free Shops, Eaton, GE Capital, GE Medical, GE Power, General Mills, Health Risk Management, Hertz, Hitachi, Data Systems, Honeywell, Houston Industries, Hewlett Packard, IBM, Inktomi, Intermedia, Intuit, Inprise, Lodgenet, Macromedia, MCI, Mervyn's, Network Equipment Technology, Norstan, Nortel, OEC Medical, Palm Computing, Public Service Electric & Gas, Qualcomm, Rockwell, Roche Diagnostics, Silicon Graphics, Southern California Edison, Sprint PCS, Sybase, Symbol, Thermawave, Think3, United HealthCare, US Bank, US West, Vantive, Warner Brothers Music, and Xerox.

Relationships with leading technology providers

    ZAMBA Solutions has a broad range of integration capabilities and relationships with leading technology providers including Allaire, Aspect Communications, Clarify, Calico, Cybercash, Edify, Genesys Telecommunications, IBM, IET—Intelligence Electronics, Microsoft, NewChannel, Net Perceptions, Oracle, Primus, Rubric, Siebel, Sun, Sybase, Vignette, and Workscape.

Our Competition

    The Customer Care consulting systems integration market is highly competitive and served by numerous national, regional and local firms. The market includes participants from a variety of market segments, including systems consulting and integration firms, contract programming companies, application software firms, e-business solutions providers, advertising agencies, digital agencies, professional services groups of software companies and "Big Five" consulting firms.

    Primary competitors in the Customer Care market include practices within eLoyalty, Breakaway Solutions, AnswerThink, Sapient, Scient, USWeb/CKS, agency.com and Cambridge Technology Partners. We also face competition from information services organizations within potential clients. We believe that the principal competitive factors in the systems integration industry include technical expertise, responsiveness to client needs, speed in delivering solutions, quality of service and perceived value. We also believe that our ability to compete depends in part on a number of competitive factors outside our control, including the ability of our competitors to hire, retain, and motivate employees, the price at which other companies offer comparable services, and the extent of our competitors' responsiveness to customer needs.

    Many of our direct, indirect and potential future competitors have financial, technical, marketing, sales, distribution and other resources substantially greater than we do. Some of these competitors have established market positions, greater name recognition, substantial technological capabilities and generate greater consulting revenues. We face competition not only from these established companies, but also from start-up companies that have a niche expertise in specific application technologies. The competitive environment could adversely affect our business, results of operations, and financial condition.

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Our People and Culture

    People are the most important ingredient in our success and we foster programs to make ZAMBA Solutions an enjoyable and rewarding place to work. As of December 31, 1999, ZAMBA Solutions had 185 full-time employees throughout North America. Of that total, 145 individuals were in the professional staff, 29 in administrative roles and 11 in business development.

    Our core values are agility, passion and fun, growth, honesty, results, innovation, diversity, and teamwork. Our values set our direction and stimulate our growth. At the heart of everything we do, they guide our management team and employees, helping us stay focused: to deliver innovative, cutting-edge Customer Care solutions supported by proven expertise and experience. We share these values with our customers, partners and investors. We expect them to hold us to these values and call us on them.

    Our employees are not parties to any collective bargaining agreements, and we believe that relations with our employees are good.

Proprietary Rights

    ZAMBA's success is dependent upon our software deployment and consulting methodologies and other intellectual property rights. We rely upon a combination of trade secret, nondisclosure and other contractual arrangements and technical measures, and copyright and trademark laws, to protect our proprietary rights. ZAMBA generally enters into confidentiality agreements with employees, consultants, clients and potential clients and limits access to, and distribution of its propriety information. There can be no assurance that the steps taken by the Company in this regard will be adequate to deter misappropriation of its propriety information or that the Company will be able to detect unauthorized use and take appropriate steps to enforce its intellectual property rights.

    The Company's business includes the development of custom software applications in connection with specific client engagements. Ownership of such software is generally assigned to the client. In addition, the Company also develops object-oriented software components that can be reused in software application development and certain foundation and application software products, or software "tools," most of which remain the property of the Company.

    Although the Company believes that its services and products do not infringe on the intellectual property rights of others, there can be no assurance that such a claim will not be asserted against the Company in the future.

Year 2000 Update

    Prior to January 2000, we evaluated our business and operational systems to ensure readiness for the year 2000. As a result, we believe that all mission critical software and hardware was assessed, and if necessary, remedied to be ready for the year 2000. All mission critical hardware and software has continued to function beyond January 1, 2000 without interruption.

    As the year 2000 progresses, however, we may experience problems associated with the year 2000 that have not yet been discovered. We are continuing to monitor both our internal systems and transactions with customers and suppliers for any indications of year 2000 related problems. As of February 17, 2000, we had incurred external costs of approximately $30,000 related to Year 2000 readiness, including testing, analysis, and purchase of hardware and software upgrades. We believe this to be the overall cost of our Year 2000 readiness project; however, there can be no assurance that final costs will not exceed this level.

Item 2. Properties

    The Company's headquarters consists of approximately 10,451 square feet located in a multi-story building in suburban Minneapolis, Minnesota. The facility is leased pursuant to an agreement that expires

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in August 2000. The Company also maintains offices and leases space for operations and sales functions in St. Paul, Minnesota, Cupertino and Pleasanton, California, and Boston, Massachusetts. The Company plans to expand its current facilities and to move into new facilities to meet its anticipated level of operations. For additional information concerning the Company's lease obligations, see Note 3 to the Company's consolidated financial statements included in this Annual Report on Form 10-K.

Item 3. Legal Proceedings

    We are not currently involved in any litigation.

Item 4. Submission of Matters to a Vote of Security Holders

    There were no matters submitted to a vote of the security holders in the fourth quarter of 1999.

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PART II

Item 5. Market For Registrant's Common Equity and Related Stockholder Matters.

    The Company's Common Stock began trading on December 10, 1993, on the Nasdaq National Market under the symbol "RACO," in connection with its initial public offering. On October 5, 1998, the Company changed its corporate name to ZAMBA Corporation. As a result of this name change, the Company's Common Stock began trading on the Nasdaq National Market under the symbol "ZMBA."

    A summary of the range of high and low closing prices for the Company's Common Stock for each quarterly period in the two most recent fiscal years, is presented below. These prices reflect interdealer prices and do not include retail markups, markdowns or commissions.

	High		Low
1998
First Quarter	$	4.06	$	1.31
Second Quarter		4.06		2.63
Third Quarter		3.19		1.56
Fourth Quarter		3.19		1.50
1999
First Quarter	$	3.75	$	2.00
Second Quarter		2.97		1.56
Third Quarter		2.56		1.50
Fourth Quarter		18.94		1.88

    The Company has never paid cash dividends on its capital stock and does not anticipate declaring or paying any cash dividends in the foreseeable future. The Company intends to retain future earnings, if any, for the development of its business.

    As of February 28, 2000, the Company had approximately 4,000 stockholders of record.

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Item 6. Selected Financial Data.

CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(for the years ended December 31)
(In thousands, except per share data)

	1999			1998			1997			1996			1995
Net revenues:
Services	$	27,993		$	8,992		$	5,487		$	5,293		$	2,875
Products		283			366			876			1,906			3,298
Total revenues		28,276			9,358			6,363			7,199			6,173
Cost and expenses:
Project costs		14,262			4,440			4,546			3,695			1,385
Product costs		199			47			1,266			2,027			3,001
Other costs		3,000			730			12			—			—
Sales and marketing		2,676			2,186			4,237			6,258			9,045
General and administrative		6,040			2,863			2,709			2,091			2,265
Research and development		—			1,069			3,286			4,215			4,170
Non-cash compensation		325			60			—			—			—
Amortization of intangible assets		3,771			936			—			—			—
Loss from operations		(1,997	)		(2,973	)		(9,693	)		(11,087	)		(13,693	)
Other income (expense), net		(10	)		188			422			855			1,335
Net loss		(2,007	)	$	(2,785	)	$	(9,271	)	$	(10,232	)	$	(12,358	)
Net loss per share—basic and diluted	$	(0.07	)	$	(0.10	)	$	(0.36	)	$	(0.40	)	$	(0.50	)
Weighted average common shares outstanding—basic and diluted		30,548			26,712			25,932			25,372			24,765

CONSOLIDATED BALANCE SHEET DATA
(as of December 31)
(In thousands)

	1999		1998		1997		1996		1995
Cash and cash equivalents and short-term investments	$	7,969	$	3,054	$	5,414	$	11,972	$	15,074
Working capital		6,847		4,172		5,182		12,727		16,818
Total assets		16,164		14,371		7,533		16,995		27,172
Total stockholders' equity		10,350		11,195		6,323		15,383		25,389

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

    ZAMBA is a national customer care consulting company. According to the Gartner Group, customer care is expected to grow at a cumulative average growth rate of 54% per year through 2002. Our services are designed to assist clients in building lasting relationships with customers, increase the effectiveness of customer service and sales operations, and improve overall communication with customers. We deliver our services using a unique combination of accumulated expertise in the customer care field, existing technology, and client knowledge. We perform our services on both a fixed-bid, fixed-timetable and time and material basis. Rapid development and significant client involvement are key aspects to our methodologies. We offer our clients end-to-end assistance with their implementations, including business case evaluation, system planning and design, software implementation, modification and development, training, installation, change management, network management, and post-implementation support. Our services include the design, implementation and integration of enterprise level applications to facilitate sales automation, call center management, marketing automation and automated field service and sales. We also own approximately 35% of the equity in NextNet, Inc., a private corporation engaged in the development of wireless data products targeted at wireless DSL. The chairman of ZAMBA, Joseph B. Costello, is also the chairman of NextNet.

    We currently derive most of our revenue from systems integration services including business case evaluation, system planning and design, software package implementation, custom software development, training, installation and change management. We also derive recurring revenue from providing post-implementation support.

    Our revenues and earnings may fluctuate from quarter to quarter based on the number, size and scope of projects in which we are engaged, the contractual terms and degree of completion of such projects, any delays incurred in connection with a project, employee utilization rates, the adequacy of provisions for losses, the accuracy of estimates of resources required to complete ongoing projects, and general economic conditions and other factors. Also, revenues from a large client may constitute a significant portion of our total revenues in any particular quarter.

Key Financial Transaction

    On December 29, 1999 the Company completed a merger with Camworks, Incorporated, an e-business solutions provider based in St. Paul, Minnesota. The acquisition extends ZAMBA's position in the rapidly growing, Web-based Customer Care market. The deal was valued at approximately $15 million and was accounted for as a pooling-of-interests. All of the financial information is restated on a combined basis for all periods presented. For additional information concerning the Company's merger with Camworks, see Note 4 to the Company's consolidated financial statements included in this Annual Report on Form 10-K.

Results of Operations

Results for all periods include the historical results of Camworks acquired by ZAMBA on December 29, 1999, and the effect of the issuance of shares of ZAMBA common stock in this transaction which was accounted for by the pooling-of-interests method.

Year Ended December 31, 1999, Compared to Year Ended December 31, 1998

Net Revenues

    Net revenues increased 202% to $28.3 million in 1999 compared to $9.4 million in 1998, due principally to increases in both the average size and number of client projects, the acquisition of QuickSilver in September 1998, and the growth in the combined business since the acquisition. The

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increase in service revenue is primarily due to our transition to the sale of system integration services, the QuickSilver acquisition, and increased market acceptance of our services. The decrease in product revenue is due to our transition away from selling stand-alone software products. We expect services revenues to increase throughout 2000 while product revenues should continue to decline.

Project Costs

    Project costs consists primarily of payroll and payroll related expenses for personnel dedicated to client assignments and is directly associated with, and varies with, the level of client services being delivered. These costs represent the most significant expense the Company incurs in providing its services. Project costs were $14.3 million, or 51% of net revenues, in 1999 compared to $4.4 million, or 47% of net revenues, in 1998. The increase in project costs was primarily due to an increase in project personnel from 77 at December 31, 1998 to 145 at December 31, 1999. While the Company expects to meet its hiring goals in 2000, competition for personnel with information technology skills is intense and the Company expects salaries and wages to continue to increase. The Company periodically reviews and updates its billing rates to cover the expected increase in costs.

Product Costs

    Product costs consist of primarily of software resold to the Company's clients. Product costs were $199,000, or 1% of net revenues, in 1999 compared to $47,000, or 1% of net revenues, in 1998. The decrease in product costs relates primarily to Company's change in business strategy during 1998 and 1999.

Other Costs

    Other costs consist of non-billable project personnel costs and other business costs, including training and recruiting costs. Other costs were $3.0 million, or 11% of net revenues, in 1999 compared to $730,000, or 8% of net revenues, in 1998. The increase in other costs relates primarily to the increase in headcount for both training and recruiting personnel.

Sales and Marketing

    Sales and marketing costs consist primarily of salaries, employee benefits, travel expenses of selling and marketing personnel and promotional costs. Sales and marketing expenses were $2.7 million, or 10% of net revenues, in 1999 compared to $2.2 million, or 23% of net revenues, in 1998. The dollar increases were primarily due to investments made by the Company in a new brand identity and to higher paid sales personnel. The percentage decrease is due to our increased net revenues and our success in the marketplace. The Company anticipates the dollar amount and percentage of sales and marketing expenses to increase in 2000.

General and Administrative

    General and administrative costs consist primarily of expenses associated with the Company's management, finance and administrative groups, including occupancy costs. General and administrative expenses were $6.0 million, or 21% of net revenues, in 1999 compared to $2.9 million, or 31% of net revenues, in 1998. The dollar increase was primarily due to an increase in the number of employees hired during 1999, an increase in occupancy costs related to significant expansion of the Company's office space, and increased investments in other information technology infrastructure. The percentage decrease was primarily a result of improved utilization of office space and administrative functions in comparison to the growth of net revenues. As the Company grows and expands geographically in 2000, it anticipates general and administrative expenses to increase.

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Research and Development

    Research and development expenses were $0, or 0% of net revenues, in 1999 compared to $1.1 million, or 11% of net revenues, in 1998. The dollar and percentage decrease is due primarily to the decrease in research and development personnel which occurred as a result of discontinuing any product development or enhancements of the KeyWare product line in 1998, and the transfer of the NextNet technology in September of 1998 to an entity of the same name. The Company anticipates no research and development expenses in 2000.

Non-cash compensation

    Non-cash compensation charges in 1999 consist mainly of expenses associated with Camworks stock granted to Camworks employees' prior to the merger under pre-existing change of control provisions within these employment agreements. These stock grants represented a one-time charge to 1999 earnings of $325,000. The Company also granted stock options to non-shareholder employees of Camworks subsequent to the Company's merger with Camworks. The options were granted with an exercise price less than fair market value as a means of incenting the employees to continue employment with Zamba. Deferred compensation related to these options is $1.1 million, which will be recognized over the four year vesting period. The amount of this charge will be approximately $69,000 per quarter for each quarter during the next four years.

Amortization of Intangibles

    Intangible asset amortization expense in 1999 was $3.8 million compared to $936,000 in 1998. The increase is due to the fact that we amortized the intangible assets resulting from the September 1998 acquisition of QuickSilver for a full year in 1999. The acquisition was accounted for using the purchase method of accounting. The purchase price was allocated to tangible and identifiable intangible assets. The fair value of the identifiable intangible assets acquired was $7.7 million and was recorded in the following categories: people and experiences, client references, client lists, and intellectual property and delivery methodology. These amounts are being amortized over the economic useful lives of between two and four years.

Interest Income

    Interest income was $97,000 in 1999 compared to $229,000 in 1998. The decrease is principally due to decreased cash and investment balances at the beginning of 1999. Because our cash balance increased during 1999, The Company anticipates interest income to increase in 2000.

Interest Expense

    Interest expense in 1999 was $107,000 compared to $59,000 in 1998. The increase is due to interest expense related to the notes payable issued in September 1998 in connection with the acquisition of QuickSilver.

Income Taxes

    The Company has incurred net operating losses since inception. Because of the uncertainty about whether the Company will have taxable earnings in the future, the Company has not reflected any benefit of such net operating loss carryforwards in the accompanying consolidated financial statements.

    At December 31, 1999, the Company has approximately $69.9 million of net operating loss carryforwards for both financial statement and for federal income tax purposes that begin to expire in 2005. The use of these carryforwards in any one-year is limited under Internal Revenue Code Section 382 because of

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significant ownership changes. In addition, the net operating loss carryforward of QuickSilver is limited under the federal consolidated tax return rules.

Year Ended December 31, 1998, Compared to Year Ended December 31, 1997

Net Revenues

    Net revenues increased 47% to $9.4 million in 1998 compared to $6.4 million in 1997, due principally to the Company's transition to the sale of services instead of selling stand-alone software products and the acquisition of QuickSilver on September 22, 1998. As a result of the shift in focus, services revenues increased to $9.0 million in 1998 from $5.5 million in 1997 and product revenues decreased to $366,000 in 1998 from $876,000 in 1997.

Project Costs

    Project costs were $4.4 million, or 47% of net revenues, in 1998 compared to $4.5 million, or 71% of net revenues, in 1997. The dollar and percentage decrease resulted from the cost reduction efforts in the third quarter of 1997, which significantly reduced the number of employees and related expenses for most of 1998. Although the project costs decreased from 1997 compared to 1998 because of the 1997 cost reduction efforts, due to the acquisition of QuickSilver on September 22, 1998, project personnel headcount increased 156% to 77 at December 31, 1998, from 30 employees at December 31, 1997.

Product Costs

    Product costs were $47,000, or 1% of net revenues, in 1998 compared to $1.3 million, or 20% of net revenues, in 1997. The dollar and percentage decrease resulted from the cost reduction efforts in the third quarter of 1997, which significantly reduced the number of employees and related expenses for most of 1998.

Other Costs

    Other costs were $730,000, or 8% of net revenues, in 1998 compared to $12,000, or 0% of net revenues, in 1997. The increase in other costs relates primarily to the increase in headcount for both training and recruiting personnel.

Sales and Marketing

    Sales and marketing expenses were $2.2 million, or 23% of net revenues, in 1998 compared to $4.2 million, or 67% of net revenues, in 1997. The dollar and percentage decrease resulted from the cost reduction efforts made by the Company in the third quarter of 1997 which significantly reduced the number of employees and related expenses for sales and marketing in 1998.

General and Administrative

    General and administrative expenses were $2.9 million, or 31% of net revenues, in 1998 compared to $2.7 million, or 43% of net revenues, in 1997. The percentage decrease resulted from the cost reduction efforts made by the Company in the third quarter of 1997 that significantly reduced the number of administrative employees and related expenses for 1998 relative to the number of professional staff for the same period.

Research and Development

    Research and development expenses were $1.1 million, or 11% of net revenues, in 1998 compared to $3.3 million, or 52% of net revenues, in 1997. The dollar and percentage decrease is due primarily to the decrease in research and development personnel which occurred as a result of discontinuing any product

14

development or enhancements of the KeyWare product line in 1998, and the transfer of the NextNet technology in September of 1998 to an entity of the same name.

Amortization of Intangibles

    Intangible asset amortization expense in 1998 was $936,000 compared to $0 in 1997. The increase is due to the acquisition of QuickSilver on September 22, 1998. The acquisition was accounted for using the purchase method of accounting. The purchase price was allocated to tangible and identifiable intangible assets. The fair value of the identifiable intangible assets acquired was $7.70 million and was recorded in the following categories: people and experiences, client references, client lists, and intellectual property and delivery methodology. These amounts are being amortized over the economic useful lives of between two and four years.

Interest Income

    Interest income was $229,000 in 1998 compared to $427,000 in 1997. The decrease is principally due to decreased cash and investment balances, which were used to fund operating activities.

Interest Expense

    Interest expense in 1998 was $59,000 compared to $8,000 in 1997. The increase is due to interest expense related to the notes payable issued in September 1998 in connection with the acquisition of QuickSilver.

Liquidity and Capital Resources

    The Company primarily funded its operations in 1999 from cash flow generated from operations. The Company invests predominantly in instruments that are highly liquid, investment grade and have maturities of less than one year. At December 31, 1999, the Company had approximately $8.0 million in cash and cash equivalents compared to $3.1 million at December 31, 1998.

    Cash provided by operating activities was $5.0 million for the twelve months ended December 31, 1999 and resulted primarily from income before amortization, depreciation and other non-cash stock compensation charges of $2.9 million, increases in accounts payable of $701,000, accrued expenses of $1.9 million and deferred revenue of $336,000, offset by an increase in accounts receivable of $1.1 million. Cash used in operating activities was $2.3 million for the twelve months ended December 31, 1998 due primarily to a loss before amortization, depreciation and other non-cash stock compensation charges of $1.3 million, and a decrease in both accounts payable of $291,000 and accrued expense of $618,000.

    Cash used in investing activities was $668,000 for the twelve months ended December 31, 1999, and resulted mainly from the purchase of property and equipment. Cash used in investing activities was $155,000 for the twelve months ended December 31, 1998 and consisted primarily of cash provided by the net sale of marketable securities offset by cash used to acquire Quicksilver and property equipment additions.

    Cash provided by financing activities was $629,000 for the twelve months ended December 31, 1999 and consisted primarily of cash received from the sale of Common stock upon employees' exercising stock options, offset slightly by payments of outstanding debt. Cash provided by financing activities was $2.3 million for the twelve months ended December 31, 1998 and consisted primarily of proceeds from the sale of preferred stock to our Chairman Joe Costello.

    The Company believes that its existing cash and cash equivalents at December 31, 1999, together with cash provided from operations will be sufficient to meet the Company's working capital and capital expenditure requirements for at least the next 12 months.

15

New Accounting Standards

    Statement of Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), as amended, effective in 2001, establishes new standards for recognizing all derivatives as either assets or liabilities, and measuring those instruments at fair value. At the present time, the Company does not anticipate that SFAS No. 133 will have a material impact on its financial position or results of operations.

Factors That May Affect Future Results

    There can be no assurance that the Company's business will grow as anticipated or that the Company will achieve or sustain profitability on a quarterly or annual basis in the future. The Company derives a substantial part of its revenues from a small number of clients whom, after evaluating the Company's capabilities, decide whether to engage the Company to create business case evaluations, consult on change management practices and, in some cases, to design, implement and deploy their customer care systems. A decision by any one of these clients to delay a customer care project may have a material adverse effect on the Company's business and results of operations.

    In order for the Company's revenues from consulting and integration services to grow, the Company must continue to add more clients and larger projects to plan, design and implement customer care systems. The Company's inability to obtain clients for large-scale consulting and integration services could materially and adversely affect the growth of its business.

    In addition to the factors listed above, actual results could vary materially from the foregoing forward-looking statements due to the Company's inability to hire and retain qualified personnel, the risk that the Company may need to enhance products and services beyond what is currently planned, the levels of promotion and marketing required to promote the Company's products and services so as to attain a competitive position in the marketplace, or other risks and uncertainties identified in this Annual Report and the Company's other filings with the SEC.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

    The Company is exposed to certain market risks based on the outstanding debt obligations of $1.4 million at December 31, 1999. As discussed in Note 5 to the consolidated financial statements, the interest rate on the Company's long-term debt obligations range from 6% to 10.5% and the obligations mature quarterly on an installment basis commencing in December 1999 and ending in December 2003. The Company does not invest in any derivative financial instruments.

16

Item 8. Financial Statements and Supplemental Schedule.

    The following Financial Statements, Supplemental Schedule and Independent Auditors' Report thereon are included herein (page numbers refer to pages in this Report):

	Page
Reports of Independent Auditors	22-23
Consolidated Balance Sheets as of December 31, 1999 and 1998	24
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997	25
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997	26
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997	27
Notes to Consolidated Financial Statements	28-38
Supplemental Schedule—Schedule II Valuation and Qualifying Accounts	39

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

    On January 25, 1999, PricewaterhouseCoopers LLP ("PwC") resigned as the Company's independent accountants, because the Company intended to enter into a business relationship with the technology consulting practice of PwC. Subsequently, the Company entered into a formal business relationship with PwC. The report of PwC on the financial statements of the Company, before restatement for the 1999 pooling-of-interests, for the year ended December 31, 1997, did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles. In connection with the audit of the Company's financial statements for the year ended December 31, 1997, and through January 25, 1999, there were no "reportable events" as that term is described in Item 304(a)(1)(v) of Regulation S-K, and there were no disagreements between the Company and PwC on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC would have caused PwC to make reference to the matter in their reports on the financial statements for such years.

    On February 8, 1999, the Audit Committee of the Board of Directors of the Company and subsequently on May 20, 1999, at the Annual Meeting of Stockholders, the stockholders of the Company, both approved the retention of KPMG LLP ("KPMG") to be the Company's new independent accountants. During the two fiscal years ended December 31, 1997, and December 31, 1998, and for the interim period through February 8, 1999, the Company did not seek advice from KPMG regarding (i) the application of accounting principles to a specified transaction or the type of audit opinion that might be rendered on the Company's financial statements; or (ii) any matter that was either the subject of a disagreement, as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K or a reportable event, as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K.

    The resignation of PwC and retention of KPMG were reported on 8-K filings with the Securities and Exchange Commission on January 26, 1999, and February 12, 1999, respectively.

17

PART III

Item 10. Directors and Executive Officers of the Registrant.

    The information concerning the Company's directors and executive officers and compliance with Section 16(a) required by this item is contained in the sections entitled "Nominees" in Proposal No. 1, "Executive Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance," appearing in the Company's Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on May 18, 2000 ("Proxy Statement"). Such information is incorporated herein by reference.

Item 11. Executive Compensation.

    The information required by this item is contained in the sections entitled "Director Compensation" in Proposal No. 1, "Executive Compensation," and "Compensation Committee Interlocks and Insider Participation," appearing in the Company's Proxy Statement. Such information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

    The information required by this item is contained in the section entitled "Security Ownership of Certain Beneficial Owners and Management" appearing in the Company's Proxy Statement. Such information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

    The information required by this item is contained in the section entitled "Certain Transactions" appearing in the Company's Proxy Statement. Such information is incorporated herein by reference.

18

PART IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.

(a)(3) and (c)  Exhibits

3.01	Registrant's Fourth Amended and Restated Certificate of Incorporation(11)
3.02	Certificate of Designation specifying the terms of the Series A Junior Participating Preferred Stock of the Registrant as filed with the Delaware Secretary of State on September 14, 1994(3)
3.03	Registrant's Bylaws, as amended(3)
4.01	Form of specimen certificate for Registrant's Common Stock(1)
4.02	Rights Agreement dated September 12, 1994 between the Registrant and Norwest Bank Minnesota, N.A., as Rights Agent, which includes as exhibits thereto the form of rights certificate and the summary of rights to purchase preferred shares(3)
10.01**	Registrant's 1989 Stock Option Plan, as amended, and related documents(1)
10.02**	Registrant's 1993 Equity Incentive Plan and related documents, as amended through January 10, 1998(8)
10.03**	Registrant's 1993 Directors Stock Plan, as amended, and related documents, as amended through November 14, 1995(5)
10.04**	Registrant's 1994 Officer's Option Plan(4)
10.05	1997 Stock Option Plan for Key Employees, Consultants and Directors of QuickSilver Group, Inc.(12)
10.06**	Registrant's 1998 Non-Officer Stock Option Plan(9)
10.07	Form of Indemnification Agreement entered into by the Registrant and each of its directors and executive officers(1)
10.08	Lease Agreement by and between the Registrant and Connecticut General Life Insurance Company dated May 2, 1994, for premises at 7301 Ohms Lane, Edina, MN 55439(2)
10.09**	Letter agreement by and between Registrant and Paul Edelhertz dated September 25, 1997(7)
10.10	Sublease Agreement dated November 18, 1997, by and between Registrant and ATIO Corporation USA, Inc. for premises at 7301 Ohms Lane, Edina, MN 55439(8)
10.11**	Change in Control Employment and Severance Agreement dated March 10, 1998, by and between Registrant and Michael A. Fabiaschi(8)
10.12**	Change in Control Employment and Severance Agreement dated March 10, 1998, by and between Registrant and Steve Swantek(8)
10.13**	Change in Control Employment and Severance Agreement dated March 10, 1998, by and between Registrant and Paul Edelhertz(8)
10.14	Series A Preferred Stock Purchase Agreement dated October 22, 1998, between the Registrant and Joseph Costello(11)
10.15	Lease Agreement dated October 20, 1995, by and between the Registrant and All Phase Telecommunication, Inc. for premises at 10061 Bubb Road, Cupertino, California 95014(11)
10.16	Lease Agreement dated April 8, 1998, by and between the Registrant and EOP-New England Executive Park, L.L.C. for premises at 8 New England Executive Park, Burlington, Massachusetts 01893(11)

19

10.17	Lease Agreement dated September 14, 1998, by and between the Registrant and Square 24 Associates (d.b.a. Square 24 Associates L.P.) for premises at 3875 Hopyard Road, Pleasanton, California 94588(11)
10.18	Asset Purchase Agreement dated October 23, 1995 between the Registrant and Business Partner Solutions, Inc.(5)
10.19	Agreement and Plan of Merger and Reorganization dated July 6, 1998, between the Registrant, QuickSilver Acquisition Corp. and QuickSilver Group, Inc., and Addendum dated September 2, 1998, to the Agreement and Plan of Merger and Reorganization between the Registrant, QuickSilver Acquisition Corp. and QuickSilver Group, Inc.(10)
10.20	Letter Agreement between the Registrant and Peter Marton dated March 9, 1999(13)
10.21	Change of Control Agreement between the Registrant and Peter Marton dated July 15, 1999(14)
10.22	Change of Control Agreement between the Registrant and Mike Carrel dated July 8, 1999(14)
10.23	Change of Control Agreement between the Registrant and Ian Nemerov dated July 8, 1999(14)
10.24	Agreement and Plan of Merger and Reorganization dated December 28, 1999 between the Registrant, ZCA Corp. and Camworks, Inc.(15)
10.25	Lease dated January 4, 2000, between the Registrant and WTA Campbell Technology Park LLC(16)
10.26	Work Letter Agreement dated January 4, 2000, between the Registrant and WTA Campbell Technology Park LLC(16)
23.01	Consent of KPMG LLP
23.02	Consent of PricewaterhouseCoopers LLP
27	Financial Data Schedule

*

Confidential treatment has been obtained for certain portions of this agreement

**

Management contract or compensatory plan required to be filed as an exhibit to Form 10-K

(1)

Filed as an Exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-70728), that was declared effective December 9, 1993, and incorporated herein by reference

(2)

Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly period ended June 30, 1994, and incorporated herein by reference

(3)

Filed as an Exhibit to the Registrant's Report on Form 8-K that was filed with the Securities and Exchange Commission on September 15, 1994, and incorporated herein by reference

(4)

Filed as an Exhibit to the Registrant's Form 10-K for the year ended December 31, 1994, and incorporated herein by reference

(5)

Filed as an Exhibit to the Registrant's Form 10-K for the year ended December 31, 1995, and incorporated herein by reference

(6)

Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly period ended June 30, 1997, and incorporated herein by reference

(7)

Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly period ended September 30, 1997, and incorporated herein by reference

20

(8)

Filed as an Exhibit to the Registrant's Form 10-K for the year ended December 31, 1997, and incorporated herein by reference

(9)

Filed as an Exhibit to the Registrant's Registration Statement on Form S-8 that was declared effective on September 2, 1998, and incorporated herein by reference

(10)

Filed as an Exhibit to the Registrant's Report on Form 8-K that was filed with the Securities and Exchange Commission on October 7, 1998, and incorporated herein by reference

(11)

Filed as an Exhibit to the Registrant's Form 10-K for the year ended December 31, 1998, and incorporated herein by reference

(12)

Filed as an Exhibit to the Registrant's Registration Statement on Form S-8 that was declared effective on October 22, 1998, and incorporated herein by reference

(13)

Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly period ended March 31, 1999, and incorporated herein by reference.

(14)

Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly period ended June 30, 1999, and incorporated herein by reference.

(15)

Filed as an Exhibit to the Registrant's Report on Form 8-K that was filed with the Securities and Exchange Commission on January 12, 2000 and incorporated herein by reference

(16)

Filed as an Exhibit to this Form 10-K

Item 14(b). Reports on Form 8-K

    On January 12, 2000, the Company filed a Form 8-K to report the acquisition of Camworks, Inc.

    On January 21, 2000, the Company filed a Form 8-K to report the acquisition of Fusion Consulting, Inc.

21

Independent Auditors' Report

The Board of Directors and Stockholders
ZAMBA Corporation:

    We have audited the consolidated financial statements of ZAMBA Corporation and subsidiaries as of and for the years ended December 31, 1999 and 1998 as listed in the accompanying index. In connection with our audit of the consolidated financial statements, we also have audited the financial statement schedule as of and for the years ended December 31, 1999 and 1998 as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audit.

    We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ZAMBA Corporation and subsidiaries as of December 31, 1999 and 1998 and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule as of and for the years ended December 31, 1999 and 1998 when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

    We previously audited and reported on the statements of operations and cash flows of Camworks, Inc. for the year ended December 31, 1997. The contribution of Camworks, Inc. to combined revenues and net loss represented 12% and 0% of the restated totals for the 1999 pooling-of-interests. Separate financial statements of ZAMBA Corporation included in the 1997 restated statements of operations and cash flows were audited and reported on separately by other auditors. We also audited the combination of the accompanying consolidated statements of operations and cash flows for the year ended December 31, 1997 after restatement for the 1999 pooling-of-interests; in our opinion, such consolidated statements have been properly combined on the basis described in Note 4.

/s/ KPMG LLP

Minneapolis, Minnesota
January 21, 2000

22

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of ZAMBA Corporation:

    We have audited the statements of operations and cash flows, and the financial statement schedule of ZAMBA Corporation, formerly known as Racotek, Inc. (the Company), for the year ended December 31, 1997, before restatement for the 1999 pooling-of-interests described in Note 4 to the financial statements included herein. These financial statements and financial statement schedule, which are not included in this Annual Report on Form 10-K, are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.

    We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of ZAMBA Corporation for the year ended December 31, 1997, before restatement for the 1999 pooling-of-interests described in Note 4 to the financial statements included herein, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as whole, before restatement for the 1999 pooling-of-interests described in Note 4 to the financial statements included herein, presents fairly, in all material respects, the information required to be included therein.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota
January 12, 1998

23

ZAMBA CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31, 1999 and 1998

	1999			1998
	(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	7,969		$	3,054
Accounts receivable, net		3,363			2,353
Unbilled receivables		274			309
Prepaid expenses and other current assets		239			299
Total current assets		11,845			6,015
Property and equipment, net		1,036			1,275
Restricted cash		110			210
Identifiable intangible assets, net		3,044			6,768
Goodwill, net		67			38
Other assets		62			65
Total assets	$	16,164		$	14,371
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt	$	573		$	320
Line of credit		—			30
Accounts payable		951			250
Accrued expenses		2,711			816
Deferred revenue		763			427
Total current liabilities		4,998			1,843
Long-term debt, less current installments		816			1,333
Commitments (Note 3)
Total liabilities		5,814			3,176
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized, none issued or outstanding		—			—
Common stock, $0.01 par value, 55,000,000 shares authorized, 31,029,517 and 30,014,203 issued and outstanding at December 31, 1999 and 1998, respectively		310			300
Additional paid-in capital		79,900			78,748
Accumulated deficit		(69,860	)		(67,853	)
Total stockholders' equity		10,350			11,195
Total liabilities and stockholders' equity	$	16,164		$	14,371

The accompanying notes are an integral part of the consolidated financial statements.

24

ZAMBA CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 1999, 1998 and 1997

	1999			1998			1997
	(In thousands, except share and per share data)
Net revenues:
Services	$	27,993		$	8,992		$	5,487
Products		283			366			876
		28,276			9,358			6,363
Cost and expenses:
Project costs		14,262			4,440			4,546
Product costs		199			47			1,266
Other costs		3,000			730			12
Sales and marketing		2,676			2,186			4,237
General and administrative		6,040			2,863			2,709
Research and development		—			1,069			3,286
Non-cash compensation		325			60			—
Amortization of intangibles		3,771			936			—
Loss from operations		(1,997	)		(2,973	)		(9,693	)
Other income (expense):
Interest income		97			229			427
Sublease income		0			18			3
Interest expense		(107	)		(59	)		(8	)
		(10	)		188			422
Net loss	$	(2,007	)	$	(2,785	)	$	(9,271	)
Net loss per share—basic and diluted	$	(0.07	)	$	(0.10	)	$	(0.36	)
Weighted average common shares outstanding		30,547,755			26,712,000			25,931,750

The accompanying notes are an integral part of the consolidated financial statements.

25

ZAMBA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 1999, 1998 and 1997

	1999			1998			1997
	(In thousands)
Cash flows from operating activities:
Net loss	$	(2,007	)	$	(2,785	)	$	(9,271	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		4,610			1,468			1,024
Loss on sale of fixed assets		—			8			—
Write-down of fixed assets		—			—			519
Forgiveness of promissory note receivable		—			150			—
Write-down of inventories		—			—			207
Amortization of premiums (discounts) on investments		—			(17	)		8
Non-cash stock compensation		325			60			147
Changes in operating assets and liabilities:
Accounts receivable		(1,010	)		8			918
Unbilled receivables		35			(295	)		15
Inventories		—			—			167
Prepaid expenses and other current assets		60			55			103
Accounts payable		701			(291	)		(642	)
Accrued expenses		1,904			(618	)		(117	)
Deferred revenue		336			(38	)		271
Net cash provided by (used in) operating activities		4,954			(2,295	)		(6,651	)
Cash flows from investing activities:
Purchase of investments		—			(2,327	)		(2,250	)
Proceeds from maturity of investments		—			4,577			9,000
Purchase of property and equipment		(600	)		(329	)		(156	)
Proceeds from sale of fixed assets		—			91			—
Acquisition, net of cash acquired		—			(2,128	)		—
Other		(68	)		(39	)		10
Net cash provided by (used in) investing activities		(668	)		(155	)		6,604
Cash flows from financing activities:
Proceeds from exercises of options and warrants		729			178			243
Proceeds from sale of preferred stock		—			2,000			—
Proceeds from debt		100			96			69
Payments on debt		(290	)		(70	)		(19	)
Changes in restricted cash		100			155			104
Dividends		(10	)		(36	)		—
Advance to stockholder		—			—			(150	)
Net cash provided by financing activities		629			2,323			247
Net increase (decrease) in cash and cash equivalents		4,915			(127	)		200
Cash and cash equivalents, beginning of period		3,054			3,181			2,981
Cash and cash equivalents, end of period	$	7,969		$	3,054		$	3,181

The accompanying notes are an integral part of the consolidated financial statements.

26

ZAMBA CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31, 1999, 1998 and 1997

	Common Stock
	Shares	$0.01 Par Value		Additional Paid-In Capital			Accumulated Deficit			Promissory Note Receivable			Total Stockholders' Equity
	(In thousands, except share and per share data)
Balances at December 31, 1996	25,740,293	$	257	$	70,923		$	(55,797	)	$	—		$	15,383
Exercise of stock options	258,265		2		241			—			—			243
Stock options issued to consultants	—		1		146			—			—			147
Dividends declared	—		—		(36	)		—			—			(36	)
Other non-cash item	—		—		7			—			—			7
Net loss	—		—		—			(9,271	)		—			(9,271	)
Promissory note receivable	—		—		—			—			(150	)		(150	)
Balances at December 31, 1997	25,998,558		260		71,281			(65,068	)		(150	)		6,323
Exercise of stock options	143,330		2		176			—			—			178
Shares issued in acquisition	2,337,980		23		2,929			—			—			2,952
Options and warrants issued in acquisition	—		—		1,275			—			—			1,275
Issuance and conversion of preferred to common	1,000,000		10		1,990			—			—			2,000
Conversion of note to common stock	534,335		5		1,032			—			—			1,037
Dividends declared					(10	)		—			—			(10	)
Non-cash compensation	—		—		60			—			—			60
Other non-cash item					15			—			—			15
Forgiveness of promissory note receivable	—		—		—			—			150			150
Net loss	—		—		—			(2,785	)		—			(2,785	)
Balances at December 31, 1998	30,014,203		300		78,748			(67,853	)		—			11,195
Exercise of stock options	497,520		4		725			—			—			729
Exercise of warrants	461,183		5		(5	)		—			—			—
Non-cash compensation	—		—		325			—			—			325
Conversion of note to common stock	56,611		1		107			—			—			108
Net loss	—		—		—			(2,007	)		—			(2,007	)
Balances at December 31, 1999	31,029,517	$	310	$	79,900		$	(69,860	)	$	—		$	10,350

The accompanying notes are an integral part of the consolidated financial statements.

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ZAMBA CORPORATION

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Business Description:

    ZAMBA Corporation ("ZAMBA" or "the Company") provides comprehensive Internet and Customer Relationship Management solutions to Fortune 500 companies. ZAMBA helps its clients increase customer loyalty and sales by improving those areas within their business that impact their customers. Prior to October 1998, the Company was known as Racotek, Inc.

Basis of Reporting

    The accompanying consolidated financial statements of ZAMBA include the accounts of Camworks which was acquired December 29, 1999, a transaction accounted for by the pooling-of-interests method and its wholly owned subsidiary QuickSilver which was acquired during 1998 (see Note 4). All intercompany accounts and balances have been eliminated in consolidation.

Use of Estimates:

    The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents:

    The Company considers all highly liquid investments in money market funds or other investments with initial maturities of three months or less to be cash equivalents.

Revenue Recognition:

    Revenues from fixed bid contracts are recognized as the services are performed based on the percent-of-completion method (the ratio of hours incurred to total estimated hours to complete the contract). Revenue from time and material contracts are recognized as the services are performed. Customer support revenues are recognized ratably over the term of the underlying support agreements.

    Deferred revenue is comprised of amounts received or billed in advance of services to be performed. Unbilled revenue represents amounts recognized on services performed in advance of billings in accordance with the terms of the contract.

    Revenue from software sold under license agreements, included in product revenue, is recognized as revenue upon shipment if there are no post-delivery obligations, and if the terms of the agreement are such that the payment of the obligation is non-cancelable and non-refundable. Generally, other product revenue is recognized upon shipment.

Research and Development Costs:

    There were no software development costs capitalized during 1999, 1998, and 1997. Amortization expense of $0, $0, and $121,000 relating to capitalized costs was recognized for the years ended December 31, 1999, 1998, and 1997, respectively.

    All other research and development expenditures are charged to expense as incurred.

    As a result of the transfer of the NextNet technology in September 1998 (see Note 6) the Company did not incur any research and development expenses in 1999.

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Property and Equipment:

    Property and equipment are stated at cost. Significant additions or improvements extending asset lives are capitalized; normal maintenance and repair costs are expensed as incurred. Depreciation is determined using the straight-line method over the estimated useful lives of the assets which range from two to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the underlying lease term (approximately five years). The cost and related accumulated depreciation or amortization of assets sold or disposed of are removed from the accounts and the resulting gain or loss is included in operations.

Intangible Assets:

    Intangible assets are being amortized over the economic useful lives of between two and five years.

    The Company assesses the potential impairment of its intangible assets based on anticipated cash flows from operations. No impairment charges were recorded in 1999, 1998 or 1997.

Income Taxes:

    The Company utilizes the asset and liability method of accounting for income taxes whereby deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the sum of the tax currently payable and the change in the deferred tax assets and liabilities during the period.

Stock-Based Compensation:

    The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations (APB No. 25). The Company accounts for stock-based compensation to non-employees using the fair value method prescribed by Statements of Financial Accounting Standards (SFAS) No. 123. Accordingly, compensation costs for stock options granted to employees are measured as the excess, if any, of the value of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. Compensation cost for stock options granted to non-employees is measured as the fair value of the option at the date of grant. Such compensation costs, if any, are amortized on a straight-line basis over the underlying option vesting terms.

Net Loss Per Share:

    Basic and diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Assumed conversion shares were excluded from the net loss per share computation as their effect is antidilutive. Common stock options could potentially dilute basic earnings per share in future periods if the Company generates net income.

Reclassifications:

    Certain prior year amounts have been reclassified to conform to the current year presentation.

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2. SELECTED BALANCE SHEET INFORMATION:

	December 31,
	1999			1998
	(in thousands)
Accounts Receivable, Net:
Accounts receivable	$	3,639		$	2,594
Less allowance for bad debts		(276	)		(241	)
	$	3,363		$	2,353
Property and Equipment, Net:
Computer equipment	$	2,884		$	2,565
Furniture and equipment		822			555
Leasehold improvements		186			186
		3,892			3,306
Less accumulated depreciation and amortization		(2,856	)		(2,031	)
	$	1,036		$	1,275
Accrued Expenses:
Payroll related	$	1,292		$	140
Vacation		485			265
Interest payable		94			22
Professional fees		487			50
Subcontractor fees		141			44
Other		212			295
	$	2,711		$	816

3. LEASE COMMITMENTS:

    The Company maintains its corporate office in Minneapolis, Minnesota and operating offices in St. Paul, Minnesota, Cupertino and Pleasanton, California, Burlington, Massachusetts and Colorado Springs, Colorado under terms of noncancelable operating leases which expire between August 2000 and December 2005. These leases require the Company to pay a pro rata share of the lessor's operating costs. In addition to the office space leases, the Company also has noncancelable operating leases for equipment.

    The corporate office lease requires ZAMBA to maintain a restricted cash balance as security for the Company's obligations under the lease. The remaining leases require the Company to provide security deposits as part of the lease agreement. Total equipment rent and rent expense, including a pro rata share of the lessor's operating costs, were $943,000, $380,000, and $805,000 for the years ended December 31, 1999, 1998 and 1997, respectively.

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    Future minimum lease payments for office space and equipment under noncancelable operating leases are as follows:

Year Ending December 31	Operating Leases
	(in thousands)
2000	$	1,202
2001		855
2002		602
2003		552
2004 and beyond		985

4. ACQUISITIONS

Camworks, Inc.

    On December 29, 1999, the Company merged with Camworks, Inc. ("Camworks"), an e-business solutions provider based in St. Paul, Minnesota. An aggregate of 1,000,000 shares of Company common stock were issued in exchange for all of the outstanding common stock of Camworks. Such shares were restricted as of December 31, 1999, pursuant to future registrations. The transaction was accounted for as a pooling-of-interests, and accordingly, the accompanying financial statements have been restated to include the financial position and the results of operations and cash flows of Camworks for all periods presented.

    The results of operations of the combining companies for the last three years are as follows (in thousands):

	1999			1998			1997
Net revenues:
ZAMBA	$	25,495		$	8,121		$	5,620
Camworks		2,781			1,237			743
	$	28,276		$	9,358		$	6,363
	1999			1998			1997
Net income (loss):
ZAMBA	$	(1,898	)	$	(2,747	)	$	(9,344	)
Camworks		(109	)		(38	)		73
	$	(2,007	)	$	(2,785	)	$	(9,271	)

    Merger related expenses were approximately $90,000.

The QuickSilver Group, Inc.

    On September 22, 1998, the Company completed the acquisition of the QuickSilver Group, Inc., ("QuickSilver") a customer care consulting company specializing in software package implementation for call center management, sales automation, marketing automation, and automated field service and sales. The acquisition is intended to be a tax-free reorganization under the Internal Revenue Code of 1986, and for financial statement purposes has been recorded using the purchase method of accounting. The

31

consolidated financial statements of the Company include the results of QuickSilver since September 22, 1998. The purchase price consists of the following:

	(in thousands)
Cash Paid	$	2,416
Notes payable (see Note 5)		2,162
Equity Common Stock		23
Additional Paid in Capital—Common Stock		2,929
Additional Paid in Capital—Options Exchanged		684
Additional Paid in Capital—Warrants Exchanged		579
	$	8,793

    The fair value of net tangible assets acquired was $1.09 million. The fair value of the identifiable intangible assets acquired was $7.70 million and was recorded in the following categories: people and experiences, client references, client lists, and intellectual property and delivery methodology.

Proforma Results

    The following table presents the consolidated results of operations for the Company for 1998 and 1997 on an unaudited pro forma basis as if the acquisition had taken place at the beginning of each year:

	Unaudited Pro Forma
	1998			1997
	(in thousands)
Total revenue	$	15,148		$	12,273
Net (loss)		(7,988	)		(12,947	)
Net (loss) per share—basic and diluted		(0.28	)		(0.46	)

5. NOTES PAYABLE AND LINE OF CREDIT:

    As part of the acquisition of QuickSilver, the Company issued $2.16 million in promissory notes payable. Interest on the notes is computed at 7% of the outstanding balance and is paid quarterly on the final day of each quarter, commencing December 31, 1999, and ending December 31, 2003. Principal payments are due quarterly on the last day of each quarter in 16 equal installments, commencing December 31, 1999. Holders may request conversion of their notes to common stock of ZAMBA. Conversion, which is computed at fair market value, is at the sole and absolute discretion of ZAMBA's Board of Directors. During 1999 and 1998, $104,000 and $1.02 million of the notes and $4,000 and $19,000 of accrued interest payable related to such notes were converted to common stock, respectively.

    As part of the acquisitions of QuickSilver and Camworks, the Company also acquired debt related to loan obligations. Loan payments are made monthly and consist of principal and interest which is computed at a rates ranging between 6.00% and 10.50%. Of these obligations, $93,000 are payable in 2000 and $60,000 are payable in 2001, $36,000 are payable in 2002 and $6,000 are payable in 2003.

    The Company also acquired debt related to third party obligations. Payments on these obligations are made monthly and consist of principal and interest. Interest on these obligations range from 9.59% to 20.21%. Of these third party obligations, $6,000 are payable in 2000.

    In September of 1998, the Company purchased software for $300,000. Of this obligation, $150,000 is payable in September of 2000.

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    Aggregate annual maturities of notes payable, subsequent to December 31, 1999, are as follows:

Year Ending December 31	Payments on Notes
	(in thousands)
2000	$	573
2001		320
2002		296
2003		200

    Cash paid for interest charges were $32,000, $37,000 and $8,000 in 1999, 1998 and 1997, respectively.

    As of December 31, 1999, the Company also had an available line of credit of $100,000 of which $0 was outstanding at year end.

6. NEXTNET:

    On September 21, 1998, the Company transferred its patented "NextNet" wireless data technology to an entity of the same name, in conjunction with the receipt by that entity of $8.0 million in private investment capital to fund the further development of the technology. The Company received forty-four percent (44%) ownership of the new company in exchange for the technology. The Company's investment in NextNet, the new company, is carried at $0, the historical carrying basis of the technology transferred, as amounts incurred by the Company up to the date of the transfer were charged to research and development expense. The Company does not have any obligations to provide funding for this investment. As of December 31, 1999, the Company's ownership in NextNet was approximately 35%.

7. STOCKHOLDERS' EQUITY:

    The Company's stock incentive and non-qualified option plans provide for grants of stock options and stock awards. The number of common shares available for grant pursuant to the plans were 1,763,406, 3,107,226, and 621,753 as of December 31, 1999, 1998 and 1997, respectively.

    Options become exercisable over periods of up to four years from the date of grant and expire within ten years from date of grant.

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    The following table details option activity:

	Options		Price Per Option	Weighted Average Exercise Price
Balances, December 31, 1996	2,911,672		0.10-12.625		3.04
Granted	2,078,572		1.50-4.3125		2.37
Exercised	(255,265	)	0.20-3.88		1.16
Canceled	(1,284,714	)	0.10-12.625		5.06
Balances, December 31, 1997	3,450,265		0.20-12.625		2.69
Granted	6,061,492		1.50-4.325		1.93
Exercised	(143,330	)	0.20-3.25		1.38
Canceled	(3,090,228	)	1.50-7.25		2.75
Balances, December 31, 1998	6,278,199		$ 0.20-12.625		1.83
Granted	3,283,950		1.563-11.297		3.06
Exercised	(497,520	)	0.29-3.75		1.47
Canceled	(1,283,484	)	0.42-5.00		1.87
Balances, December 31, 1999	7,781,145		$ 0.20-12.625		2.44
Options exercisable at December 31, 1999	2,851,249		$ 0.20-12.625	$	2.06

    On October 13, 1998, the Company repriced outstanding stock options held by an officer to the market value of the Company's stock as of October 13, 1998. In connection with the repricing of outstanding stock options, all repriced options started vesting on October 13, 1998, and become exercisable over periods of up to four years from October 13, 1998. A total of 500,000 options, with an original exercise price of $3.25, were repriced to $1.75.

    On January 20, 1998, the Company repriced outstanding stock options held by officers to the market value of the Company's stock as of January 20, 1998. In connection with the repricing of outstanding stock options, all repriced options started vesting on January 20, 1998, and become exercisable over periods of up to four years from January 20, 1998. A combined total of 400,000 options, with original exercise prices ranging from $3.00 to $3.9375, were repriced to $2.00

    On October 20, 1997, the Company repriced outstanding stock options held by employees to the market value of the Company's stock as of October 20, 1997. In connection with the repricing of outstanding stock options, all repriced options started vesting on October 20, 1997, and become exercisable over periods of up to four years from October 20, 1997. Approximately 293,000 options, with original exercise prices ranging from $2.25 to $12.625, were repriced to $1.50.

    No compensation cost has been recognized for stock options granted to employees or directors under the 1989 Stock Option Plan, the 1993 Equity Incentive Plan, 1993 Directors Option Plan, the 1998 Non-Officers Plan, the 1997 Stock Option Plan or the 1999 Non-Officers Plan for Key Employees, Consultants and Directors of QuickSilver Group, Inc. (collectively referred to as "the Plans"). Had compensation cost for the Plans been determined based on the fair value of options at the grant date for awards in 1999, 1998

34

and 1997, the Company's net loss and net loss per share would have increased to the pro forma amounts indicated below:

	1999			1998			1997
	(In thousands, except per share amounts)
Net loss
As reported	$	(2,007	)	$	(2,785	)	$	(9,271	)
Pro forma		(4,545	)		(5,020	)		(10,435	)
Net loss per share—
As reported		(.07	)		(.10	)		(.36	)
Basic and diluted
Pro forma		(.15	)		(.20	)		(.40	)

    The pro forma effect on the net loss for 1999, 1998 and 1997 is not fully representative of the pro forma affect on net earnings (loss) in future years because these years do not take into consideration pro forma compensation expense related to grants made prior to 1995. In relation to the option repricing described previously, the above proforma compensation expense includes $120,000 and $37,000, for 1998 and 1997, respectively.

    The aggregate fair value of options granted during 1999, 1998 and 1997, respectively, was $3.35 million, $3.53 million, and $881,000 for the 1993 Equity Incentive Plan, $163,000 $47,000, and $193,000 for the 1993 Directors Option Plan, $3.10 million, $687,000 and $0 for the 1998 Non-Officer Option Plan, $0, $351,000 and $0 for the 1997 Stock Option Plan for Key Employees, Consultants and Directors of QuickSilver Group, Inc. and $2.58 million, $0 and $0 for the 1999 Non-Officer Plan. The aggregate fair value was calculated by using the fair value of each option grant on the date of grant, utilizing the Black-Scholes option-pricing model and the following key assumptions for the Plans:

Assumptions	1999	1998	1997
Risk-free interest rates	4.59%-6.30%	4.18%-5.71%	5.27%-6.77%
Volatility	112%	79%	36%
Expected lives (months)	60	60	60

    The following table summarizes information about fixed-price stock options outstanding at December 31, 1999:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding at December 31, 1999	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price		Number Exercisable at December 31, 1999	Weighted-Average Exercise Price
$0.20-.84	529,728	4.94	$	0.41	477,836	$	0.37
1.50-2.38	5,352,647	8.42		1.86	1,643,393		1.77
2.44-3.88	1,099,386	7.95		2.95	416,048		3.03
4.12-5.50	396,284	7.02		4.76	304,972		4.76
6.00-12.63	403,100	9.83		9.16	9,000		9.90

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Stock-Based Compensation:

    Non-cash compensation charges consist mainly of expenses associated with Camworks stock granted to Camworks employees' prior to the merger under pre-existing change of control provisions within these employment agreements. These stock grants represented a one-time charge to 1999 earnings of $325,000. The Company also granted 161,700 stock options to non-shareholder employees of Camworks subsequent to the Company's merger with Camworks. The options were granted with an exercise price less than fair market value as a means of incenting the employees to continue employment with Zamba. Deferred compensation related to these options is $1.1 million, and will be recognized over the four year vesting period, based upon the intrinsic value method in accordance with APB No. 25.

Preferred Stock:

    The Company's certificate of incorporation authorizes issuance of up to 5.0 million preferred shares with a par value of $0.01 and allows the Company's Board of Directors, without obtaining the stockholders' approval, to issue preferred stock. In October 1998, 1.0 million shares of preferred stock were purchased by the chairman of the Board of Directors of the Company for $2.00 per share. These shares converted by their terms to common stock on December 29, 1998. There were no preferred shares issued or outstanding as of December 31, 1999 or 1998.

Warrants:

    In connection with the acquisition of QuickSilver stock warrants to purchase QuickSilver common stock were converted to 462,247 warrants to purchase ZAMBA common stock. These warrants were exercised during 1999. No other warrants rights are outstanding.

Stockholder Rights Plan:

    On September 7, 1994, the Board of Directors adopted a Stockholder Rights Plan. Under this plan, the Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each share of common stock outstanding as of September 28, 1994 (the "Record Date"). In addition, one Right will be issued with each share of common stock that becomes outstanding after the Record Date, except in certain circumstances. All Rights will expire on September 12, 2004, unless the Company extends the expiration date, redeems the Rights or exchanges the Rights for common stock.

    The Rights are initially attached to the Company's Common Stock and will not trade separately. If a person or a group acquires 20 percent or more of the Company's common stock (an "Acquiring Person") or announces an intention to make a tender offer for 20 percent or more of the Company's common stock, then the Rights will be distributed (the "Distribution Date") and will thereafter trade separately from the common stock. Upon the Distribution Date, each Right may be exercised for 1/100th of a share of a newly designated Series A Junior Participating Preferred Stock at an exercise price of $25.00.

    Upon a person or group becoming an Acquiring Person, holders of the Rights (other than the Acquiring Person) will have the right to acquire shares of the Company's common stock at a substantially discounted price in lieu of the preferred stock. Additionally, if, after the Distribution Date, the Company merges into or engages in certain other business combination transactions with an Acquiring Person or 50 percent or more of its assets are sold in a transaction with an Acquiring Person, the holders of Rights (other than the Acquiring Person) will have the right to receive shares of common stock of the acquiring corporation at a substantially discounted price.

36

    After a person or a group has become an Acquiring Person, the Company's Board of Directors may, at its option, require the exchange of outstanding Rights (other than those held by the Acquiring Person) for common stock at an exchange ratio of one share of the Company's common stock per Right. The board also has the right to redeem outstanding Rights at any time prior to the Distribution Date (or later in certain circumstances) at a price of $0.005 per Right. The terms of the Rights, including the period to redeem the Rights, may be amended by the Company's Board of Directors in certain circumstances.

8. INCOME TAXES:

    The Company has incurred net operating losses since inception. Because of the uncertainty about whether the Company will have taxable earnings in the future, the Company has not reflected any benefit of such net operating loss carryforwards in the accompanying consolidated financial statements.

    At December 31, 1999, the Company has approximately $69.9 million of net operating loss carryforwards for both financial statement and for federal income tax purposes that begin to expire in 2005. The use of these carryforwards in any one-year is limited under Internal Revenue Code Section 382 because of significant ownership changes. In addition, the net operating loss carryforward of QuickSilver is limited under the federal consolidated tax return rules.

    The provision for income taxes differs from the expected tax benefit, computed by applying the federal corporate tax rate, as follow:

	1999			1998
Expected federal benefit	$	(683,000	)	$	(934,000	)
Change in valuation allowance		(752,000	)		1,649,000
State taxes, net		764,000			(165,000	)
Subsidiary net operating loss acquired		—			(860,000	)
Amortization		1,276,000			375,000
Stock compensation		(563,000	)		—
Other		(42,000	)		(65,000	)
Total benefit	$	—		$	—

    Valuation allowances have been established for the entire tax benefit associated with the carryforwards and net future deductible temporary differences as of December 31, 1999, 1998 and 1997.

    The tax effect of items that comprise a significant portion of deferred tax assets is:

	1999			1998
Deferred tax assets:
Net operating loss carryforwards	$	27,354,000		$	28,328,000
Tax credits		720,000			670,000
Other, principally depreciation and amortization		676,000			504,000
Valuation allowance		(28,750,000	)		(29,502,000	)
Net deferred tax asset	$	—		$	—

    Due to the uncertainty surrounding the timing of realizing the benefits of its favorable tax attributes in future tax returns, the Company has placed a valuation allowance against its otherwise recognizable deferred tax assets.

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9. EMPLOYEE SAVINGS PLAN:

    The Company offers a 401(k) defined contribution benefit plan for which all regular employees are eligible. Participants may contribute up to 20% of their compensation in any plan year subject to an annual limitation. Employer contributions may be made at the discretion of the Company's Board of Directors. No Company contributions have been made to the Plan.

10. MAJOR CUSTOMER:

    A portion of the Company's revenues have been derived from a significant customer for the years ended December 31, 1999, 1998 and 1997 as follows:

	1999		1998		1997
Customer 1	6	%	16	%	6	%

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

    The carrying amount for cash and cash equivalents, short-term investments and long-term debt approximates fair value because of the short maturity of those instruments.

12. SUBSEQUENT EVENT:

    On January 7, 2000, the Company merged with Fusion, Inc. ("Fusion"), a Colorado Springs, Colorado based consulting firm specializing in front office and contact center customer care solutions. The Company issued 80,001 shares of its common stock in exchange for all of the outstanding common stock of Fusion, and the merger was accounted for as a pooling-of-interests. Fusion had unaudited revenue of $1.0 million in 1999 and $62,000 in 1998, and unaudited net income of $138,000 in 1999 and $3,000 in 1998.

    In connection with the merger agreement, the Company granted Fusion non-shareholder employees a total of 43,800 options to purchase shares of ZAMBA common stock at an exercise price below the then current fair market value. This grant will result in a charge of $87,600 and will be amortized over the four-year option vesting period. Merger related expenses were approximately $25,000.

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ZAMBA Corporation

SCHEDULE II

Valuation and Qualifying Accounts

(In thousands)

Column A	Column B		Column C		Column D			Column E
Description	Balance at Beginning of Period		Additions Charged to Expense		Deductions from Allowance			Balance at End of Period
Year ended December 31, 1999
Allowance for doubtful accounts (deducted from accounts receivable)	$	241	$	133	$	(98	)	$	276
Year ended December 31, 1998
Allowance for doubtful accounts (deducted from accounts receivable)		238		13		(10	)		241
Year ended December 31, 1997
Allowance for doubtful accounts (deducted from accounts receivable)		354		118		(234	)		238
Inventory obsolescence reserve (deducted from inventories)		856		207		(1,063	)		0

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SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ZAMBA CORPORATION
Date: March 8, 2000	By	/s/ PAUL D. EDELHERTZ Paul D. Edelhertz, President and Chief Executive Officer

    Each person whose signature appears below constitutes and appoints Paul Edelhertz and Michael H. Carrel, jointly and severally, his true and lawful attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign amendments to this Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
PRINCIPAL EXECUTIVE OFFICER:
/s/ PAUL D. EDELHERTZ Paul D. Edelhertz	President and Chief Executive Officer	March 8, 2000
PRINCIPAL FINANCIAL OFFICER
/s/ MICHAEL H. CARREL Michael H. Carrel	Vice President and Chief Financial Officer	March 8, 2000
OTHER DIRECTORS:
/s/ JOSEPH B. COSTELLO Joseph B. Costello	Chairman of the Board	March 8, 2000
/s/ DIXON R. DOLL Dixon R. Doll	Director	March 8, 2000

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/s/ MICHAEL A. FABIASCHI Michael A. Fabiaschi	Director	March 8, 2000
/s/ SVEN WEHRWEIN Sven Wehrwein	Director	March 8, 2000

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ANNUAL MEETING

    The ZAMBA Corporation annual stockholders' meeting will be held at the Radisson Plaza Hotel, 35 South Seventh Street, Minneapolis, Minnesota, 55402, at 3:00 p.m. C.S.T. on Thursday, May 18, 2000.

SHAREHOLDER INFORMATION

    ZAMBA common stock trades on the Nasdaq National Market under the symbol ZMBA. Stockholders and prospective investors are welcome to call, write or fax ZAMBA with questions or requests for additional information. Copies of ZAMBA's Annual Report on Form 10-K for the year ended December 31, 1999, may be obtained without charge by directing inquiries to:

ZAMBA Corporation Investor Relations 7301 Ohms Lane, Suite 200 Minneapolis, MN 55439 Tel: 612-832-9800 Fax: 612-832-9383 Website:   http:\\www.ZAMBAsolutions.com   Transfer Agent   Norwest Bank Minnesota, N.A. Stock Transfer Department 161 North Concord Exchange P.O. Box 738 South St. Paul, MN 55075-0738 Tel: 612-450-4101 Fax: 612-450-4078   Independent Auditors   KPMG LLP Minneapolis, MN	Directors   Joseph B. Costello Chairman of the Board ZAMBA Corporation Chairman and Chief Executive Officer think3   Paul D. Edelhertz President and Chief Executive Officer ZAMBA Corporation   Dixon R. Doll Founder and Chairman Doll Capital Management   Michael A. Fabiaschi President and Chief Executive Officer LPA Software, Inc.   Sven Wehrwein Financial Consultant	Corporate Officers   Paul D. Edelhertz President and Chief Executive Officer   Michael H. Carrel Vice President and Chief Financial Officer   Peter Marton Executive Vice President Chief Operating Officer   Todd X. Fitzwater Senior Vice President
	Committees of the Board
	Audit Committee   Joseph B. Costello Sven Wehrwein   Compensation Committee   Joseph B. Costello Dixon R. Doll

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QuickLinks

PART I
PART II
CONSOLIDATED STATEMENTS OF OPERATIONS DATA (for the years ended December 31) (In thousands, except per share data)
CONSOLIDATED BALANCE SHEET DATA (as of December 31) (In thousands)
PART III
PART IV
SIGNATURES

EX-10.25

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EXHIBIT 10.25

LEASE

THIS LEASE is made on the 4th day of January, 2000, by and between WTA Campbell Technology Park LLC, a California limited liability company (hereinafter called "Lessor") and Zamba Corporation, a Delaware corporation (hereinafter called "Lessee").

IN CONSIDERATION OF THE MUTUAL PROMISES HEREIN CONTAINED, THE PARTIES AGREE AS FOLLOWS:

    1.  Premises.  Lessor leases to Lessee, and Lessee leases from Lessor, upon the terms and conditions herein set forth, those certain Premises ("Premises") situated in the City of Campbell, County of Santa Clara,, California, as outlined in Exhibit "A" attached hereto and described as follows: Approximately 28,023 rentable square feet to be defined once the final Premises is determined. 655 Campbell Technology Parkway, Suite 100, Campbell, California. Lessee's pro-rata share of the building will be approximately 35.17%.

    2.  Term.  The term of this Lease shall be for seven (7) years, commencing on the Lease Commencement Date. The "Lease Commencement Date" shall be the date which is the earlier of (i) the date Lessor delivers to Lessee a written notice stating that the Premises are Substantially Complete (as defined in Exhibit "B") and (ii) the date Lessor delivers to Lessee written notice stating the date the Premises would have been Substantially Complete were it not for any Lessee Delay (as defined in Exhibit "B").

    3.  Rent.  Lessee shall pay to Lessor rent for the Premises Fifty Four Thousand One Hundred Ninety-Six Dollars ($54,196.00) per month in lawful money of the United States of America, subject to adjustment as provided in Section A of this Paragraph. Rent shall be paid in advance on the first (1st) day of each calendar month without deduction or offset, prior notice, or demand, at such place as may be designated from time to time by Lessor as follows: $54,196.00, which sum represents the amount of the first month's rent. A deposit of $51,843.00 as a Security Deposit shall be made by Lessee and held by Lessor pursuant to Paragraph 5 of this Lease, and shall be paid upon execution of the Lease.

    Rent for any period during the term hereof which is for less than one (1) full month shall be a pro-rata portion of the monthly rent payment. Lessee acknowledges that late payment by Lessee to Lessor of rent or any other payment due Lessor will cause Lessor to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Lessor by the terms of any encumbrance and note secured by any encumbrance covering the Premises. Therefore, if any installment of rent or other payment due from Lessee is not received by Lessor within ten (10) days following the date it is due and payable, Lessee shall pay to Lessor an additional sum of ten percent (10%) of the overdue amount as a late charge. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Lessor will incur by reason of late payment by Lessee. Acceptance of any late charge shall not constitute a waiver of Lessee's default with respect to the overdue amount, nor prevent Lessor from exercising any of the other rights and remedies available to Lessor.

    If, for any reason whatsoever, Lessor cannot deliver possession of the Premises on the commencement date set forth in Paragraph 2 above, this Lease shall not be void or voidable, nor shall Lessor be liable to Lessee for any loss or damage resulting therefrom; but in such event, Lessee shall not be obligated to pay rent until possession of the Premises is tendered to Lessee and the commencement and termination dates of this Lease shall be revised to conform to the date of Lessor's delivery of possession. In the event that Lessor shall permit Lessee to occupy the Premises prior to the commencement date of the term, such occupancy shall be subject to all of the provisions of this Lease, including the obligation to pay rent at the same monthly rate as that prescribed for the first month of the Lease term.

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A.  Cost-of-Living Increase.  The Base Rent provided for in Section 3 of this Lease shall be subject to adjustment at the commencement of the second year of the term and each and every year thereafter ("the adjustment dates") as follows:

The base for computing the adjustment is the Consumer Price Index for All Urban Consumers (base year 1984=100) for San Francisco-Oakland, California published by the United States Department of Labor, Bureau of Labor Statistics ("Index") which is last published prior to the commencement of the term ("Beginning Index"). If the Index which is last published prior to an adjustment date ("Extension Index") has increased over the Beginning Index, the Base Rent for the period following the adjustment date and until the next adjustment date, if any, shall be the Base Rent set forth in Paragraph 3 multiplied by a fraction, the numerator of which is the Extension Index and the denominator of which is the Beginning Index. In no case shall the Base Rent be less that the Base Rent set forth in Paragraph 3 or that resulting from a previous adjustment hereunder. The Base Rent as adjusted shall continue to be paid in advance on the first day of each and every month of the Lease term.

If the Index is changed during the term of the lease so that the base year for the Index differs from that used in the Beginning Index, the Index shall be converted in accordance with the conversion factor published by the United States Department of labor, Bureau of Labor Statistics. If the Index is discontinued or revised during the term, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the Index had not been discontinued or revised.

In no event shall said Cost-of-Living Increase be less than three percent (3%) per year nor shall it be more than eight percent (8%) per year.

    B.  All taxes, insurance premiums, Reimbursable Expenses and Utilities, late charges, costs and expenses which Lessee is required to pay hereunder, together with all interest and penalties that may accrue thereon in the event of Lessee's failure to pay such amounts, and all reasonable damages, costs, and attorney's fees and expenses which Lessor may incur by reason of any default of Lessee or failure on Lessee's part to comply with the terms of this Lease, shall be deemed to be additional rent (hereinafter, "Additional Rent"), and, in the event of non-payment by Lessee, Lessor shall have all of the rights and remedies with respect thereto as Lessor has for the non-payment of monthly installment of rent.

    4.  Option to Extend Term.

A.  Lessee shall have the option to extend the term on all the provisions contained in this Lease for one five-year period ("extended term") at an adjusted rental calculated as provided in Subparagraph B below on the condition that:

(i) Lessee has given to Lessor written notice of exercise of that option ("option notice") at least six (6) months but no more than twelve (12) months before expiration of the initial term or extended term(s), as the case may be.

    (ii) Lessee is not in default in the performance of any of the terms and conditions of the Lease on the date of giving the option notice, and Lessee is not in default on the date that the extended term is to commence.

B.  Monthly rent for the extended term shall be the then prevailing fair market rent for similar buildings in the area.

    C.  In no event shall the monthly rent for any extended term(s) be less than the Monthly Rent paid immediately prior to such extended term(s). The option to extend shall be personal to Lessee, and shall not be transferable or assignable to any other person or entity. If Lessee has exercised its option to extend, the phrase "Lease term" as used in this Lease shall mean the initial term of the Lease and the extended term(s).

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    5.  Security Deposit.  Lessor acknowledges that Lessee has deposited with Lessor a Security Deposit in the sum of $51,843.00 to secure the full and faithful performance by Lessee of each term, covenant, and condition of this Lease. If Lessee shall at any time fail to make any payment or fail to keep or perform any term, covenant, or condition on its part to be made or performed or kept under this Lease, Lessor may, but shall not be obligated to and without waiving or releasing Lessee from any obligation under this Lease, use, apply, or retain the whole or any part of said Security Deposit (a) to the extent of any sum due to Lessor; or (b) to compensate Lessor for any loss, damage, attorneys' fees or expense sustained by Lessor due to Lessee's default. In such event, Lessee shall, within five (5) days of written demand by Lessor, remit to Lessor sufficient funds to restore the Security Deposit to its original sum. No interest shall accrue on the Security Deposit. Should Lessee comply with all the terms, covenants, and conditions of this Lease and, at the end of the term of this Lease, leave the Premises in the condition required by this Lease, then said Security Deposit or any balance thereof, less any sums owing to Lessor, shall be returned to Lessee within fifteen (15) days after the termination of this Lease and vacancy of the Premises by Lessee. Lessor can maintain the Security Deposit separate and apart from Lessor's general funds, or can co-mingle the Security Deposit with the Lessor's general and other funds.

Lessor shall require from Lessee Additional Security Deposit of $207,370.00 in the form of an Irrevocable Letter of Credit (or its equivalent, or a cash deposit, with interest accruing to the benefit of Lessee) which can be drawn on by Lessor upon any default of this Lease by Lessee in an amount equal to the damages incurred by Lessor as a result of such default.

The Additional Security Deposit shall be released provided that Lessee is not in default and has not been in default at any time during the Lease term, and provided that the following conditions (pursuant to GAAP) have been met by Lessee:

a.  There have been four consecutive quarters of profitability (excluding depreciation and amortization)

    b.  Shareholders Equity is positive

    6.  Use of the Premises.  The Premises shall be used exclusively for the purpose of office, administration, R&D and engineering of computer related products.

    Lessee shall not use or permit the Premises, or any part thereof, to be used for any purpose or purposes other than the purpose for which the Premises are hereby leased; and no use shall be made or permitted to be made of the Premises, nor acts done, which will increase the existing rate of insurance upon the building in which the Premises are located, or cause a cancellation of any insurance policy covering said building, or any part thereof, nor shall Lessee sell or permit to be kept, used, or sold, in or about the Premises, any article which may be prohibited by the standard form of fire insurance policies. Lessee shall not commit or suffer to be committed any waste upon the Premises or any public or private nuisance or other act or thing which may disturb the quiet enjoyment of any other tenant in the building in which the premises are located; nor, without limiting the generality of the foregoing, shall Lessee allow the Premises to be used for any improper, immoral, unlawful, or objectionable purpose.

    Lessee shall not place any harmful liquids in the drainage system of the Premises or of the building of which the Premises form a part. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises outside of the building proper except in trash containers placed inside exterior enclosures designated for that purpose by Lessor, or inside the building proper where designated by Lessor. No materials, supplies, equipment, finished or semi-finished products, raw materials, or articles of any nature shall be stored upon or permitted to remain on any portion of the Premises outside of the building proper. Lessee shall comply with all the covenants, conditions, and/or restrictions ("C.C. & R.'s") affecting the Premises

    Lessor represents and warrants to Lessee that to the best of its knowledge there are no Toxic or Hazardous materials present on, at or under the Premises, which shall be deemed to include underlying

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land and groundwater, at the time of Lessee's occupancy. Lessor shall indemnify, defend and hold harmless Lessee, its partners, directors, officers, employees, lenders, and successors against all claims, obligations, liabilities, demands, damages, judgements, and costs, including reasonable attorneys' fees arising from or in connection with any prior Toxic or Hazardous materials that existed prior to Lessee's occupancy of the Premises. Lessee in turn represents to Lessor that it does not now and will not in the future permit the use or storage on the Premises of Toxic or Hazardous materials, excluding, however basic janitorial, maintenance and office supplies, and materials commonly used in connection with Lessee's business as described in paragraph 6 hereof. For purposes of this paragraph 6 "Toxic or Hazardous Materials" shall mean any product, substance, chemical, material or waste whose presence, nature, quality and/or intensity or existence, use, manufacture, disposal, transportation, spill, release or effect, either by itself or in combination with other materials expected to be on the leased premises, is either (i) potentially injurious to the public health, safety or welfare, the environment, or the leased premises; (ii) regulated or monitored by any governmental authority; or (iii) a basis for potential liability of Lessee and Lessor to any governmental agency or third party under any applicable statute or common law theory. "Toxic or Hazardous Materials" shall include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products or by-products thereof.

    Lessee hereunder shall be responsible for and indemnify, and hold Lessor and its partners, directors, officers, employees, lenders, successors and assigns harmless from all claims, obligations, liabilities, demands, damages, judgments and costs, including reasonable attorneys' fees arising at any time during or in connection with Lessee's causing or permitting any materials referred to under any governmental provisions or regulatory scheme as "hazardous" or "toxic" or which contain petroleum, gasoline, or other petroleum product, to be brought upon, stored, manufactured, generated, handled, disposed, or used on, under or about the Premises. Lessee's and Lessor's obligations hereunder shall survive the termination of this Lease.

    If, at any time during the term of this Lease, Lessor suspects that toxic waste, spillage, or other contaminants may be present on the Premises, Lessor may order a soils report, or its equivalent, and Lessee shall pay such costs within fifteen (15) days from the date upon which it is determined that such contamination was caused by Lessee, its agents, contractors, invitees or employees. If any such toxic waste, spillage, or other contaminants are found upon the Premises, Lessee shall deposit with Lessor, within fifteen (15) days of notice from Lessor to Lessee to do so, the amount necessary to remove the substances and remedy the problem.

    Lessee shall abide by all laws, ordinances, and statutes, as they now exist or may hereafter be enacted by legislative bodies having jurisdiction thereof, relating to its use and occupancy of the Premises.

    7.  Improvements:  Lessor shall provide Lessee with a tenant improvement allowance of $30.00 per rentable square foot for a mutually agreed to space plan to be installed by Lessor's contractor as per Exhibit B. Additionally, Lessor will provide an "industrial shell" which includes all structural items of the building including the building exterior walls, foundation, floors, parking areas, outside lighting, roof, roof structure, shell sprinklers, landscaping, electrical room, power to the building (not including the electrical panel), telephone and cable conduits stubbed to building, elevator pit, and all other utilities stubbed in at the shell, and two (2) ADA compliant stairs. Lessor's contractor shall install and Lessee shall pay in accordance with the provisions of Exhibit B for all interior improvements in excess of said $30.00 per rentable square foot tenant improvement allowance including Lessee's pro-rata share of elevator, bathrooms, lobby, plumbing distribution from Lessor's delivery of plumbing to the slab, stairwells, roof screens, main electrical service panel, common corridor, Lessee's HVAC systems, fire service, electrical distribution,, interior finishes and all other partitions, ceilings and improvements of the Lessee's interior space as well as the cost of permits, drawings and consultant fees related to design, approval and installation of the tenant improvements Lessor shall cause the Base Building Improvements to be constructed in accordance with Exhibit B in good and workmanlike manner in compliance with all applicable codes, laws, regulations and

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governmental requirements. Lessor shall obtain standard and customary construction warranties and shall ensure that all such warranties run to Lessee's benefit and shall be enforceable by Lessee.

    8.  Taxes and Assessments.

A.  Lessee shall pay before delinquency any and all taxes, assessments, license fees, and public charges levied, assessed, or imposed upon or against Lessee's fixtures, equipment, furnishings, furniture, appliances, and personal property installed or located on or within the Premises. Lessee shall cause said fixtures, equipment, furnishings, furniture, appliances, and personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said personal property shall be assessed with Lessor's real property, Lessee shall pay to Lessor the taxes attributable to Lessee within twenty (20) days after receipt of a written statement from Lessor setting forth the taxes applicable to Lessee's property.

    B.  All property taxes or assessments levied or assessed by or hereafter levied or assessed by any governmental authority against the Premises or any portion of such taxes or assessments which becomes due or accrued during the term of this Lease shall be paid by Lessor. Lessee shall pay to Lessor Lessee's proportionate share of such taxes or assessments within twenty (20) days of receipt of Lessor's invoice demanding such payment. Lessee's liability hereunder shall be prorated to reflect the commencement and termination dates of this Lease. If at any time Lessor receives a refund of property taxes already paid by Lessee, Lessee shall be compensated for its pro-rata share of the property tax refund.

    9.  Insurance.

    A.  Indemnity.  Lessee agrees to indemnify, defend and save Lessor against and hold Lessor harmless from any and all demands, claims, causes of action, judgments, obligations, or liabilities, and all reasonable expenses incurred in investigating or resisting the same (including reasonable attorneys' fees) on account of, or arising out of, the condition, use, or occupancy of the Premises, except if caused by Lessor's negiligence or willful act or omission. This Lease is made on the express condition that Lessor shall not be liable for, or suffer loss by reason of, injury to person or property, from whatever cause, in any way connected with the condition, use, or occupancy of the Premises, specifically including, without limitation, any liability for injury to the person or property of Lessee, its agents, officers, employees, licensees, and invitees.

    B.  Liability Insurance.  Lessee shall, at its expense, obtain and keep in force during the term of this Lease a policy of Commercial General Liability insurance insuring Lessor and Lessee, with cross-liability endorsements, against any liability arising out of the condition, use, or occupancy of the Premises and all areas appurtenant thereto, including parking areas and property insurance to cover Lessee's personal property, equipment, inventory, fixtures and tenant improvements on the Premises. Such insurance shall be in an amount satisfactory to Lessor of not less than one million dollars ($1,000,000) for each occurrence for bodily injury and physical damage to the property and two million dollars ($2,000,000) general aggregate limit. The insurance shall be with companies approved by Lessor, which approval Lessor agrees not to withhold unreasonably. Prior to possession, Lessee shall deliver to Lessor a certificate of insurance and endorsement evidencing the existence of the policy which (1) names Lessor as an additional insured, (2) shall not be canceled or altered without thirty (30) days' prior written notice to Lessor, (3) insures performance of the indemnity set forth in Section A of Paragraph 9, and (4) coverage is primary and any coverage by Lessor is in excess thereto.

    C.  Property Insurance.  Lessor shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Premises (which may include earthquake and/or flood insurance), in the amount of the full replacement value thereof. Lessee shall pay to Lessor its pro-rata share of the cost of said insurance within twenty (20) days of Lessee's receipt of Lessor's invoice demanding such payment. Lessee acknowledges that such insurance procured by Lessor shall contain a deductible which reduces Lessee's cost for such insurance, and, in the event of loss or damage, Lessee shall be required to pay to Lessor the amount of such deductible.

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    D.  Notwithstanding anything in this Lease to the contrary, Lessor and Lessee hereby releases each other and their respective agents, employees, successors, assignees and sublessees from all liability for injury to any person or damage to any property that is caused by or results from a risk which is actually insured against, which is required to be insured against under this Lease, or which would normally be covered by "all risk" property insurance, without regard to the negligence or willful misconduct of the person or entity so released. All of Lessor's and Lessee's repair and indemnity obligations under this Lease shall be subject to the waiver and release contained in this paragraph. Each party shall cause each insurance policy it obtains to provide that the insurer thereunder waives all recovery by way of subrogation as required herein in connection with any injury or damage covered by such policy.

    10.  Reimbursable Expenses and Utilities.  Lessee shall pay its pro-rata share based on square footage of all water, gas, light, heat, power, electricity, HVAC, telephone, trash removal, landscaping, sewer charges, and all other services, including normal and customary property management fees, supplied to or consumed on the Premises. In the event that any such services are billed directly to Lessor, then Lessee shall pay Lessor for such expenses within twenty (20) days of Lessee's receipt of Lessor's invoice demanding payment.

    11.  Repairs and Maintenance.

A.  Subject to provisions of paragraph 15, Lessor shall keep and maintain in good order, condition and repair the structural elements of the Premises including the roof, roof membrane, paving, floor slab, foundation, exterior walls, landscaping, irrigation and elevators. Lessor shall make such repairs, replacements, alterations or improvements as Lessor deems reasonably necessary with respect to such structural elements and Lessee shall pay to Lessor, within twenty (20) days of Lessor's invoice to Lessee therefor, Lessee's pro-rata share of such repairs, replacements, alterations or improvements. Notwithstanding the foregoing, if the reason for any repair, replacement, alteration or improvement is caused by Lessee or arises because of a breach of Lessee's obligations under this Lease, then Lessee shall pay the proportionof the costs or expense attributable to Lessee's acts to remedy the same.

    B.  Except as expressly provided in Subparagraph A above, Lessee shall, at its sole cost, keep and maintain the entire Premises and every part thereof, including, without limitation, the windows, window frames, plate glass, glazing, truck doors, doors, all door hardware, interior of the Premises, interior walls and partitions, and electrical, plumbing, lighting, heating, and air conditioning systems in good and sanitary order, condition, and repair. Lessee shall, at all times during the Lease term and at his expense, have in effect a service contract for the maintenance of the heating, ventilating, and air-conditioning (HVAC) equipment with an HVAC repair and maintenance contractor approved by Lessor which provides for periodic inspection and servicing at least once every three (3) months during the term hereof. Lessee shall further provide Lessor with a copy of such contract and all periodic service reports.

    Should Lessee fail to maintain the Premises or make repairs required of Lessee hereunder forthwith upon notice from Lessor, Lessor, in addition to all other remedies available hereunder or by law, and without waiving any alternative remedies, may make the same, and in that event, Lessee shall reimburse Lessor as additional rent for the cost of such maintenance or repairs on the next date upon which rent becomes due.

    Lessee hereby expressly waives the provision of Subsection 1 of Section 1932, and Sections 1941 and 1942 of the Civil Code of California and all rights to make repairs at the expense of Lessor, as provided in Section 942 of said Civil Code.

    12.  Alterations and Additions.  Lessee shall not make, or suffer to be made, any alterations, improvements, or additions in, on, or about, or to the Premises or any part thereof, without prior written consent of Lessor and without a valid building permit issued by the appropriate governmental authority. Lessor retains, at his sole option, the right to retain a General Contractor of his own choosing to perform all repairs, alterations, improvements, or additions in, on, about, or to said Premises or any part thereof. As a

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condition to giving such consent, Lessor may require that Lessee agree to remove any such alterations, improvements, or additions at the termination of this Lease, and to restore the Premises to their prior condition. Any alteration, addition, or improvement to the Premises, with the exception of Lessee's trade fixtures, shall become the property of Lessor upon installation, and shall remain upon and be surrendered with the Premises at the termination of this Lease. Lessor can elect, however, within thirty (30) days before expiration of the term or within five (5) days after termination of the term, to require Lessee to remove any alterations, additions, or improvements that Lessee has made to the Premises. If Lessor so elects, Lessee shall restore the Premises to the condition designated by Lessor in its election, before the last day of the term, or within thirty (30) days after notice of election is given, whichever is later. Alterations and additions which are not to be deemed as trade fixtures include heating, lighting, electrical systems, air conditioning, partitioning, electrical signs, carpeting, or any other installation which has become an integral part of the Premises. In the event that Lessor consents to Lessee's making any alterations, improvements, or additions, Lessee shall be responsible for the timely posting of notices of non-responsibility on Lessor's behalf, which shall remain posted until completion of the alterations, additions, or improvements. Lessee's failure to post notices of non-responsibility as required hereunder shall be a breach of this Lease.

    Notwithstanding anything to the contrary herein, if, during the term hereof, any alteration, addition, or change of any sort through all or any portion of the Premises or of the building of which the Premises form a part, is required by law, regulation, ordinance, or order of any public agency then if such legal requirement is not imposed because of Lessee's specific use of the Premises and is not "triggered" by Lessee's alterations or Lessee's application for a building permit or any other governmental approval (in which instance Lessee shall be responsible for 100% of the cost of such improvement), Lessor shall be responsible for constructing such improvement and Lessee shall be responsible for its proportional share of the cost for said improvement, amortized over the useful life of such improvement that coincides with the remaining Lease term including any extensions.

    13.  Acceptance of the Premises and Covenant to Surrender.  By entry and taking possession of the Premises pursuant to this Lease, Lessee accepts the Premises as being in good and sanitary order, condition, and repair, and accepts the Premises in their condition existing as of date of such entry, and Lessee further accepts any tenant improvements to be constructed by Lessor, if any, as being completed in accordance with the plans and specifications for such improvements.

    Lessee agrees on the last day of the term hereof, or on sooner termination of this Lease, to surrender the Premises, together with all alterations, additions, and improvements which may have been made in, to, or on the Premises by Lessor or Lessee, unto Lessor in good and sanitary order, condition, and repair, excepting for such wear and tear as would be normal for the period of the Lessee's occupancy. Lessee, on or before the end of the term or sooner termination of this Lease, shall remove all its personal property and trade fixtures from the Premises, and all property not so removed shall be deemed abandoned by Lessee. Lessee further agrees that at the end of the term or sooner termination of this Lease, Lessee, at its sole expense, shall have the walls and columns painted, the flooring waxed, any damaged ceiling tile replaced, the windows cleaned, the drapes cleaned, and any damaged doors replaced, if necessary to restore the Premises to its original condition, normal wear and tear excepted.

    If the Premises are not surrendered at the end of the term or sooner termination of this Lease, Lessee shall indemnify Lessor against loss or liability resulting from delay by Lessee in so surrendering the Premises, including, without limitation, any claims made by any succeeding tenant founded on such delay.

    14.  Default.  In the event of any breach of this Lease by the Lessee, or an abandonment of the Premises by the Lessee, the Lessor has the option of (1.) removing all persons and property from the Premises and repossessing the Premises, in which case any of the Lessee's property which the Lessor removes from the Premises may be stored in a public warehouse or elsewhere at the cost of, and for the account of, Lessee; or (2.) allowing the Lessee to remain in full possession and control of the Premises. If the Lessor chooses to repossess the Premises, the Lease will automatically terminate in accordance with the

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provisions of the California Civil Code, Section 1951.2. In the event of such termination of the Lease, the Lessor may recover from the Lessee: (1.) the worth at the time of award of the unpaid rent which had been earned at the time of termination, including interest at the maximum rate an individual is permitted by law to charge; (2.) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided, including interest at the maximum rate an individual is permitted by law to charge; (3.) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (4.) any other amount necessary to compensate the Lessor for all the detriment proximately caused by the Lessee's failure to perform his obligations under the Lease or which, in the ordinary course of things, would be likely to result therefrom. "The worth at the time of award," as used in (1.) and (2.) of this Paragraph, is to be computed by allowing interest at the maximum rate an individual is permitted by law to charge. "The worth at the time of award," as used in (3.) of this Paragraph, is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award, plus one percent (1%).

    If the Lessor chooses not to repossess the Premises, but allows the Lessee to remain in full possession and control of the Premises, then, in accordance with provisions of the California Civil Code, Section 1951.4, the Lessor may treat the Lease as being in full force and effect, and may collect from the Lessee all rents as they become due through the termination date of the Lease, as specified in the Lease. For the purpose of this paragraph, the following do not constitute a termination of Lessee's right to possession: (1.) acts of maintenance or preservation, or efforts to relet the property; (2.) the appointment of a receiver on the initiative of the Lessor to protect his interest under this Lease.

    Lessee shall be liable immediately to Lessor for all costs Lessor incurs in reletting the Premises, including, without limitation, brokers' commissions, expenses of remodeling the Premises required by the reletting, and like costs. Reletting can be for a period shorter or longer than the remaining term of this Lease. Lessee shall pay to Lessor the rent due under this Lease on the dates the rent is due, less the rent Lessor receives from any reletting. No act by Lessor allowed by this Section shall terminate this Lease unless Lessor notifies Lessee that Lessor elects to terminate this Lease. After Lessee's default and for as long as Lessor does not terminate Lessee's right to possession of the Premises, if Lessee obtains Lessor's consent, Lessee shall have the right to assign or sublet its interest in this Lease, but Lessee shall not be released from liability. Lessor's consent to a proposed assignment or subletting shall not be unreasonably withheld.

    If Lessor elects to relet the Premises as provided in this Paragraph, rent that Lessor receives from reletting shall be applied to the payment of: (1.) any indebtedness from Lessee to Lessor other than rent due from Lessee; (2.) all costs, including for maintenance, incurred by Lessor in reletting; (3.) rent due and unpaid under this Lease. After deducting the payments referred to in this Paragraph, any sum remaining from the rent Lessor receives from reletting shall be held by Lessor and applied in payment of future rent as rent becomes due under this Lease. In no event shall Lessee by entitled to any excess rent received by Lessor. If, on the date rent is due under this Lease, the rent received from reletting is less than the rent due on that date, Lessee shall pay to Lessor, in addition to the remaining rent due, all costs, including for maintenance, Lessor incurred in reletting that remain after applying the rent received from the reletting, as provided in this Paragraph.

    Lessor, at any time after Lessee commits a default, can cure the default at Lessee's cost. If Lessor at any time, by reason of Lessee's default, pays any sum or does any act that requires the payment of any sum, the sum paid by Lessor shall be due immediately from Lessee to Lessor at the time the sum is paid, and if paid at a later date shall bear interest at the maximum rate an individual is permitted by law to charge from the date the sum is paid by Lessor until Lessor is reimbursed by Lessee. The sum, together with interest on it, shall be additional rent.

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    Rent not paid when due shall bear interest at the maximum rate an individual is permitted by law to charge from the date due until paid.

    15.  Destruction.  In the event the Premises are destroyed in whole or in part from any cause, Lessor may, at its option, (1.) rebuild or restore the Premises to their condition prior to the damage or destruction or (2.) terminate the Lease as provided for below.

    If Lessor does not give Lessee notice in writing within thirty (30) days from the destruction of the Premises of its election either to rebuild and restore the Premises, or to terminate this Lease, Lessor shall be deemed to have elected to rebuild or restore them, in which event Lessor agrees, at its expense, promptly to rebuild or restore the Premises to its condition prior to the damage or destruction. If Lessor does not complete the rebuilding or restoration within one hundred fifty (150) days following the date of destruction (such period of time to be extended for delays caused by the fault or neglect of Lessee of because of acts of God, acts of public agencies, labor disputes, strikes, fires, freight embargoes, rainy or stormy weather, inability to obtain materials, supplies or fuels, acts of contractors or subcontractors, or delay of the contractors or subcontractors due to such causes or other contingencies beyond control of Lessor), then Lessee shall have the right to terminate this Lease by giving fifteen (15) days prior written notice to Lessor. Lessor's obligation to rebuild or restore shall not include restoration of Lessee's trade fixtures, equipment, merchandise, or any improvements, alterations, or additions made by Lessee to the Premises.

    Unless this Lease is terminated pursuant to the foregoing provisions, this Lease shall remain in full force and effect. Lessee hereby expressly waives the provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code.

    In the event that the building in which the Premises are situated is damaged or destroyed to the extent of not less than thirty-three and one-third percent (33¹/3%) of the replacement cost thereof, Lessor may elect to terminate this Lease, whether the Premises be injured or not.

    16.  Condemnation.  If any part of the Premises shall be taken for any public or quasi-public use, under any statute of by right of eminent domain, or private purchase in lieu thereof, and a part thereof remains, which is susceptible of occupation hereunder, this Lease shall, as to the part so taken, terminate as of the date title shall vest in the condemnor or purchaser, and the rent payable hereunder shall be adjusted so that the Lessee shall be required to pay for the remainder of the term only such portion of such rent as the value of the part remaining after taking such bears to the value of the entire Premises prior to such taking. Lessor shall have the option to terminate this Lease in the event that such taking causes a reduction in rent payable hereunder by fifty percent (50%) or more. If all of the Premises or such part thereof be taken so that there does not remain a portion susceptible for occupation hereunder, as reasonably necessary for Lessee's conduct of its business as contemplated in this Lease in Lessee's reasonable discretion, this Lease shall thereupon terminate. If a part of all of the Premises be taken, all compensation awarded upon such taking shall go to the Lessor, and the Lessee shall have no claim thereto, and the Lessee hereby irrevocably assigns and transfers to the Lessor any right to compensation or damages to which the Lessee may become entitled during the term hereof by reason of the purchase or condemnation of all or a part of the Premises, except that Lessee shall have the right to recover its share of any award or consideration for (1.) moving expenses; (2.) loss or damage to Lessee's trade fixtures, furnishings, equipment, and other personal property; and (3.) business goodwill. Each party waives the provisions of the Code of Civil Procedure, Section 1265.130, allowing either party to petition the Superior Court to terminate this Lease in the event of a partial taking of the Premises.

    17.  Free from Liens.  Except for Tenant Improvements which Lessor is responsible, Lessee shall (1.) pay for all labor and services performed for materials used by or furnished to Lessee, or any contractor employed by Lessee with respect to the Premises, and (2.) indemnify, defend, and hold Lessor and the Premises harmless and free from any liens, claims, demands, encumbrances, or judgments created or suffered by reason of any labor or services performed for materials used by or furnished to Lessee or any

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contractor employed by Lessee with respect to the Premises, and (3.) give notice to Lessor in writing five (5) days prior to employing any laborer or contractor to perform services related, or receiving materials for use upon the Premises, and (4.) shall post, on behalf of Lessor, a notice of non-responsibility in accordance with the statutory requirements of the California Civil Code, Section 3904, or any amendment thereof. In the event an improvement bond with a public agency in connection with the above is required to be posted, Lessee agrees to include Lessor as an additional obligee.

    18.  Compliance with Laws.  Lessee shall, at its own cost, comply with and observe all requirements of all municipal, county, state, and federal authority now in force, or which may hereafter be in force, pertaining to the use and occupancy of the Premises.

    19.  Subordination.  Lessee agrees that this Lease shall, at the option of Lessor, be subjected and subordinated to any mortgage, deed of trust, or other instrument of security, which has been or shall be placed on the land and building, or land or building of which the Premises form a part, and this subordination is hereby made effective without any further act of Lessee or Lessor. The Lessee shall, at any time hereinafter, on demand, execute any instruments, releases, or other documents that may be required by any mortgagee, mortgagor, trustor, or beneficiary under any deed of trust, for the purpose of subjecting or subordinating this Lease to the lien of any such mortgage, deed of trust, or other instrument of security. If Lessee fails to execute and deliver any such documents or instruments, Lessee irrevocably constitutes and appoints Lessor as Lessee's special attorney-in-fact to execute and deliver any such documents or instruments. Any such subordination shall be conditioned upon Lessor obtaining a Nondisturbance Agreement in Lender's standard format.

    20.  Abandonment.  Lessee shall not vacate or abandon the Premises at any time during the term; and if Lessee shall abandon, vacate, or surrender said Premises, or be dispossessed by process of law, or otherwise, any personal property belonging to Lessee and left on the Premises shall be deemed to be abandoned, at the option of Lessor, except such property as may be mortgaged to Lessor; provided, however, that Lessee shall not be deemed to have abandoned or vacated the Premises so long as Lessee continues to pay all rents as and when due, and otherwise performs pursuant to the terms and conditions of this Lease.

    21.  Assignment and Subletting.

    A.  Definitions.  For purposes of this Paragraph 21, the following terms shall be defined as follows:

(i)

Sublet.  The term "Sublet" shall mean any transfer, sublet, assignment, license or concession agreement, change of ownership, mortgage, or hypothecation of this Lease or the Lessee's interest in the Lease or in and to all or a portion of the Premises.

(ii)

Subrent.  The term "Subrent" shall mean any consideration of any kind received, or to be received, by Lessee from a Sublessee if such sums are related to Lessee's interest in this Lease or in the Premises, including, but not limited to, bonus money and payments (in excess of market value) for Lessee's assets including its trade fixtures, equipment and other personal property, goodwill, general intangibles, and any capital stock or other equity ownership of Lessee.

(iii)

Sublessee.  The term "Sublessee" shall mean the person or entity with whom a Sublet agreement is proposed to be or is made.

    B.  Lessor's Consent.  Lessee shall not enter into a Sublet without Lessor's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Any attempted or purported Sublet without Lessor's prior written consent shall be void and confer no rights upon any third person and, at Lessor's election, shall terminate this Lease. In determining whether or not to consent to a proposed Sublet, Lessor may consider the following factors, among others, all of which shall be deemed reasonable; (i) whether the proposed Sublessee has a net worth equal to or greater than the net worth of Lessee; (ii) whether the proposed use of the Premises by the proposed Sublessee is consistent with the permitted use for the Premises set forth in Paragaph 6 of this Lease; (iii) whether the experience and business reputation

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of the proposed Sublessee is equal to or greater than that of Lessee; (iv) whether the rent payable by the Sublessee under the proposed Sublet reflects the current fair market rent for the subleased Premises as reasonably determined by Lessor; and (v) whether Lessor's consent will result in a breach of any other lease or agreement to which Lessor is a party affecting the Building. Each Sublessee shall agree in writing, for the benefit of Lessor, to assume, to be bound by, and to perform the terms and conditions and covenants of this Lease to be performed by Lessee. Notwithstanding anything contained herein, Lessee shall not be released from liability for the performance of each term, condition and covenant of this Lease by reason of Lessor's consent to a Sublet unless Lessor specifically grants such release in writing. Consent by Lessor to any Sublet shall not be deemed a consent to any subsequent Sublet. Lessee shall reimburse Lessor for all reasonable costs and attorneys' fees incurred by Lessor in connection with the evaluation, processing and/or documentation of any requested Sublet, if Lessor's consent is granted. Lessor's reasonable costs shall include the cost of any review or investigation by Lessor of any hazardous or toxic materials which may be used, stored, or disposed of at the Premises by the Sublessee, including fees paid to consultants hired to perform such review or investigation.

    C.  Information to be Furnished.  If Lessee desires at any time to Sublet the Premises or any portion thereof, it shall first notify Lessor of its desire to do so and shall submit in writing to Lessor: (i) the name and legal composition of the proposed Sublessee, (ii) the nature of the proposed Sublessee's business to be carried on in the Premises; (iii) the terms and provisions of the proposed Sublet and a copy of the proposed Sublet form containing a description of the subject premises; (iv) a statement of all consideration to be paid by the Sublessee in connection with the Sublet; (v) a current financial statement of Lessee; and (vi) such financial information, including financial statements, as Lessor may reasonably request concerning the proposed Sublessee.

    D.  Lessor's Alternatives.  At any time within thirty (30) days after the Lessor's receipt of the information specified in Paragraph 21.C., Lessor may, by written notice to Lessee, elect: (i) to consent to the Sublet by Lessee; (ii) to refuse its consent to the Sublet, or (iii) elect to terminate this Lease, or in the case of a partial Sublet, terminate this Lease as to the portion of the Premises proposed to be Sublet. If Lessor consents to the Sublet, Lessee may thereafter enter into a valid Sublet of the Premises or portion thereof, upon the terms and conditions and with the proposed Sublessee set forth in the information furnished by Lessee to Lessor pursuant to Paragraph 21.B., subject, however, at Lessor's election, to the condition of any excess of the Subrent over the Rent required to be paid by Lessee under this Lease (after first deducting a reasonable leasing commission, tenant improvements of up to $3.00 per square foot and reasonable legal fees) shall be split equally between Lessor and Lessee.

    E.  Proration.  If a portion of the Premises is Sublet, the pro rata share of the Rent attributable to such partial area of the Premises shall be determined by Lessor by dividing the Rent payable by Lessee hereunder by the total square footage of the Premises and multiplying the resulting quotient (the per square foot rent) by the number of square feet of the Premises which are Sublet.

    F.  Exempt Sublets.  Notwithstanding the above, Lessor's prior written consent shall not be required for an assignment of this Lease to an entity which controls, is controlled by or under common control with, Lessee, or a corporation into which Lessee merges or consolidates, provided that (i) Lessee gives Lessor prior written notice of the name any such assignee, (ii) at the time of such assignment, the assignee has net worth that is equal to or greater than the net worth of Lessee immediately prior to such assignment; and (iii) the assignee assumes, in writing, for the benefit of Lessor, all of Lessee's obligations under the Lease. An assignment or other transfer of this Lease to a purchaser of all or substantially all of the assets of Lessee shall be deemed a Sublet requiring Lessor's prior written consent.

    22.  Parking Charges.  Lessee agrees to pay upon demand, based on its percent of occupancy of the entire Premises, its pro-rata share of any parking charges, surcharges, or any other cost hereafter levied or assessed by local, state, or federal governmental agencies in connection with the use of the parking facilities

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serving the Premises, including, without limitation, parking surcharge imposed by or under the authority of the Federal Environmental Protection Agency.

    23.  Insolvency or Bankruptcy.  Either (1.) the appointment of a receiver to take possession of all or substantially all of the assets of Lessee, or (2.) a general assignment by Lessee for the benefit of creditors, or (3.) any action taken or suffered by Lessee under any insolvency or bankruptcy act shall constitute a breach of this Lease by Lessee. Upon the happening of any such event, this Lease shall terminate ten (10) days after written notice of termination from Lessor to Lessee. This section is to be applied consistent with the applicable state and federal law in effect at the time such event occurs.

    24.  Lessor Loan or Sale.  Lessee agrees promptly following request by Lessor to (1.) execute and deliver to Lessor any documents, including estoppel certificates presented to Lessee by Lessor, (a.) certifying that this Lease is unmodified and in full force and effect, or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect and the date to which the rent and other charges are paid in advance, if any, and (b.) acknowledging that there are not, to Lessee's knowledge, any uncured defaults on the part of Lessor hereunder, and (c.) evidencing the status of the Lease as may be required either by a lender making a loan to Lessor, to be secured by deed of trust or mortgage covering the Premises, or a purchaser of the Premises from Lessor, and (2.) to deliver to Lessor the current financial statements of Lessee with an opinion of a certified public accountant, including a balance sheet and profit and loss statement, for the current fiscal year and the two immediately prior fiscal years, all prepared in accordance with Generally Accepted Accounting Principles consistently applied. Lessee's failure to deliver an estoppel certificate within five (5) days following such request shall constitute a default under this Lease and shall be conclusive upon Lessee that this Lease is in full force and effect and has not been modified except as may be represented by Lessor. If Lessee fails to deliver the estoppel certificates within the five (5) days, Lessee irrevocably constitutes and appoints Lessor as its special attorney-in-fact to execute and deliver the certificate to any third party.

    25.  Surrender of Lease.  The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, shall not work a merger nor relieve Lessee of any of Lessee's obligations under this Lease, and shall, at the option of Lessor, terminate all or any existing Subleases or Subtenancies, or may, at the option of Lessor, operate as an assignment to him of any or all such Subleases or Subtenancies.

    26.  Attorneys' Fees.  If, for any reason, any suit be initiated to enforce any provision of this Lease, the prevailing party shall be entitled to legal costs, expert witness expenses, and reasonable attorneys' fees, as fixed by the court.

    27.  Notices.  All notices to be given to Lessee may be given in writing, personally, or by depositing the same in the United States mail, postage prepaid, and addressed to Lessee at the said Premises, whether or not Lessee has departed from, abandoned, or vacated the Premises. Any notice or document required or permitted by this Lease to be given Lessor shall be addressed to Lessor at the address set forth below, or at such other address as it may have theretofore specified by notice delivered in accordance herewith:

LESSOR:	WTA Campbell Technology Park LLC 900 Welch Road, Suite 10 Palo Alto, California 94304 Phone (650) 322-2121 Fax (650) 322-5029
LESSEE:	Zamba Corporation 655 Campbell Technology Parkway, Suite 100 Campbell, CA 95008 Phone Fax

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COPY TO:  
Zamba Corporation
7301 Ohms Lane, Suite 200
Minneapolis, Minnesota 55439

    28.  Transfer of Security.  If any security be given by Lessee to secure the faithful performance of all or any of the covenants of this Lease on the part of Lessee, Lessor may transfer and/or deliver the security, as such, to the purchaser of the reversion, in the event that the reversion be sold, and thereupon Lessor shall be discharged from any further liability in reference thereto, upon the assumption by such transferee of lessor's obligations under this Lease.

    29.  Waiver.  The waiver by Lessor or Lessee of any breach of any term, covenant, or condition, herein contained shall not be deemed to be a waiver of such term, covenant, or condition, or any subsequent breach of the same or any other term, covenant, or condition herein contained. The subsequent acceptance of rent hereunder by lessor shall not be deemed to be a waiver of any preceding breach by Lessee of any term, covenant, or condition of this Lease, other than the failure of Lessee to pay the particular rental so accepted, regardless of Lessor's knowledge of such preceding breach at the time of acceptance of such rent.

    30.  Holding Over.  Any holding over after the expiration of the term or any extension thereof, with the consent of lessor, shall be construed to be a tenancy from month-to-month, at a rental of one and one-half (1¹/2) times the previous month's rental rate per month, and shall otherwise be on the terms and conditions herein specified, so far as applicable.

    31.  Covenants, Conditions, and Restrictions.  Attached hereto, marked Exhibit "C" and by this reference incorporated as if set out in full, are Covenants, Conditions, and Restrictions pertaining to Campbell Technology Park. As a condition to this Lease, Lessee agrees to abide by all of said Covenants, Conditions, and Restrictions. Moreover, such reasonable rules and regulations as may be hereafter adopted by Lessor for the safety, care, and cleanliness of the Premises and the preservation of good order thereon, are hereby expressly made a part hereof, and Lessee agrees to obey all such rules and regulations.

    32.  Limitation on Lessor's Liability.  If Lessor is in default of this Lease, and, as a consequence, Lessee recovers a money judgment against Lessor, the judgment shall be satisfied only out of the proceeds of sale received on execution of the judgment and levy against the right, title, and interest of Lessor in the Premises, or in the building, other improvements, and land of which the Premises are part, and out of rent or other income from such real property receivable by Lessor or out of the consideration received by Lessor from the sale or other disposition of all or any part of Lessor's right, title, and interest in the Premises or in the building, other improvements, and land of which the Premises are part. Neither Lessor nor any of the partners comprising the partnership designated as Lessor shall be personally liable for any deficiency.

    33.  Signage.  Lessor, without warranty of success, shall use its best efforts to cooperate with Lessee and the appropriate governmental agencies to acquire Lessee's pro-rata share of the maximum allowable signage for Lessee, including monument, building, lobby, and floor signage, all of which shall comply with governmental regulations and Campbell Technology Park signage program. All signage shall be at Lessee's sole cost

    34.  Miscellaneous.

A.

Time is of the essence of this Lease, and of each and all of its provisions.



B.

The term "building" shall mean the building in which the Premises are situated.

C.

If the building is leased to more than one tenant, then each such tenant, its agents, officers, employees, and invitees, shall have the non-exclusive right (in conjunction with the use of the part of the building leased to such Tenant) to make reasonable use of any driveways, sidewalks, and parking areas located on the parcel of land on which the building is situated, except such parking areas as may from time to time be leased for exclusive use by other Tenant(s).

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D.

Lessee's such reasonable use of parking areas shall not exceed that percent of the total parking areas which is equal to the ratio which floor space of the Premises bears to floor space of the building.

E.

The term "assign" shall include the term "transfer."



F.

The invalidity or unenforceability of any provision of this Lease shall not affect the validity or enforceability of the remainder of this Lease.

G.

All parties hereto have equally participated in the preparation of this Lease.

H.

The headings and titles to the Paragraphs of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part thereof.

I.

Lessor has made no representation(s) whatsoever to Lessee (express or implied) except as may be expressly stated in writing in this Lease instrument.

J.

This instrument contains all of the agreements and conditions made between the parties hereto, and may not be modified orally or in any other manner than by agreement in writing, signed by all of the parties hereto or their respective successors in interest.

K.

It is understood and agreed that the remedies herein given to Lessor shall be cumulative unless otherwise stated, and the exercise of any one remedy by Lessor shall not be to the exclusion of any other remedy.

L.

The covenants and conditions herein contained shall, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors, and administrators, and assigns of all the parties hereto; and all of the parties hereto shall jointly and severally be liable hereunder.

M.

This Lease has been negotiated by the parties hereto and the language hereof shall not be construed for or against either party.

N.

All exhibits to which reference is made are deemed incorporated into this Lease, whether covenants or conditions, on the part of Lessee shall be deemed to be both covenants and conditions.

IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the date first above-written.

LESSOR: WTA Campbell Technology Park LLC	LESSEE: Zamba Corporation
By:	By:
Its:	Its:
Date:	Date:

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EX-10.26

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EXHIBIT 10.26

EXHIBIT "B" WORK LETTER AGREEMENT

    This WORK LETTER AGREEMENT ("Agreement") is made and entered into as of the 4^th day of January, 2000, by and between WTA Campbell Technology Park LLC, a California limited liability company ("Lessor") and Zamba Corporation, a Delaware corporation ("Lessee"), in connection with the execution of the Lease between Lessor and Lessee of even date herewith ("Lease"), who hereby agree as follows:

    1.  General.

    (a)  Purpose of Work Letter Agreement.  The purpose of this Agreement is to set forth how the Base Building Improvements (as defined in Section 3(b) below) and the Tenant Improvements (as defined in Section 5 below), are to be constructed, who will undertake the construction of the Base Building Improvements and the Tenant Improvements, who will pay for the construction of the Base Building Improvements and the Tenant Improvements, and the time schedule for completion of the construction of the Base Building Improvements and the Tenant Improvements.

    (b)  Incorporation of Lease Definitions.  Except as defined in this Agreement to the contrary, all terms utilized in this Agreement shall have the same meaning ascribed to them in the Lease. When work, services, consents or approvals are to be provided by or on behalf of Lessor, the term "Lessor" shall include Lessor's agents, contractors, employees and affiliates.

    (c)  Incorporation of Lease Terms.  The provisions of the Lease, except where clearly inconsistent or inapplicable to this Agreement, are incorporated into this Agreement.

    (d)  Landlord to Pay for Base Building improvements.  The Base Building Improvements shall be constructed pursuant to this Agreement by Lessor at Lessor's sole cost and expense.

    (e)  Tenant Improvement Allowance.  The Tenant Improvements shall be constructed by Lessor, at Lessee's expense, subject to Lessor's obligations to provide the Tenant Improvement Allowance as described in Section 6 below.

    2.  Lease Commencement Date.  The "Lease Commencement Date" shall be the date which is the earlier of (i) the date Lessor delivers to Lessee written notice stating that the Premises are Substantially Complete (as defined in Section 2(a)(i) below), and (ii) the date Lessor delivers to Lessee written notice stating the date the Premises would have been Substantially Complete were it not for any Lessee Delay (as defined in Section 2(a)(ii) below).

    (a)  Certain Definitions.

     (i) The term "Substantially Complete" or "Substantial Completion" as used in the Lease or this Agreement shall mean: (1) the shell and core of the Building are complete and in compliance with all applicable laws, statutes, codes, rules and regulations (collectively, "Laws") and all of the Building's heating, ventilating, air-conditioning ("HVAC") and plumbing, life safety, mechanical and/or electrical systems (collectively, "Building Systems") are operational to the extent necessary to service the Premises; (2) Lessor has sufficiently completed all the work required to be performed by Lessor in accordance with this Agreement (except minor punch list items which Lessor shall thereafter promptly complete); (3) Lessor has obtained a certificate of occupancy for the Building, or a temporary certificate of occupancy (except to the extent delayed by any Lessee Delay); and (4) Lessee has been provided with the number of parking privileges and spaces to which it is entitled under the Lease.

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    (ii) The term "Lessee Delay" as used in the Lease, or this Agreement shall mean any delay that Lessor actually encounters in the performance of Lessor's obligations under the Lease because of: (1) delay attributable to changes in or additions to the Final Plans (as defined in Section 3(d) below) following approval by Lessee; (2) delay attributable to the postponement of any Tenant Improvements at the request of Lessee; and (3) delay by Lessee in the submission of information or the giving of authorizations or approvals within the time limits set forth in this Agreement; and (4) delay attributable to the failure of Lessee to pay, when due, any amounts required to be paid by Lessee pursuant to this Agreement. Lessee shall pay all actual costs and expenses incurred by Lessor which result from any Lessee Delay, including, without limitation, any actual costs and expenses attributable to increases in the cost of labor or materials.

    No Lessee Delay shall be deemed to have occurred unless and until Lessor has given written notice to Lessee specifying the action or inaction by Lessee which Lessor contends constitutes a Lessee Delay. If such action or inaction is not cured within two (2) business day after receipt of such notice, then a Lessee Delay, as set forth in such notice, shall be deemed to have occurred commencing as of the date Lessee received such notice and continuing for the number of days the Substantial Completion of the Premises was in fact delayed as a direct result of such action or inaction.

    (iii) The term "Force Majeure Delay" as used in the Lease or this Agreement shall mean any delay in the Substantial Completion of the Tenant Improvements which is attributable to any: (1) actual delay affecting the Building, attributable to any strike, lockout or other labor or industrial disturbance (whether or not on the part of the employees of either party hereto), civil disturbance, future order claiming jurisdiction, act of the public enemy, war, riot, sabotage, blockade, embargo, inability to secure customary materials or Lessee's special requirements, supplies or labor through ordinary sources by reason of regulation or order of any government or regulatory body or lack of availability; (2) delay attributable to the failure of Lessor to secure building permits and approvals (including any failure to obtain a temporary certificate of occupancy), despite Lessor's best efforts to obtain such permits and approvals, within the same time period that normally prevailed for obtaining such permits and approvals at the time this Lease was negotiated, which time period Lessor and Lessee hereby stipulate to be one hundred and twenty (120) days; (3) delay in completing the Final Plans, the construction of the Tenant Improvements, and/or Lessee's move into the Premises because of changes in any Laws or Building Requirements (as defined in Section 3(b) below), or the interpretation thereof; or (4) delay attributable to lightning, earthquake, fire, storm, hurricane, tornado, flood, washout, explosion, or any other similar industry-wide or Building-wide cause beyond the reasonable control of the party from whom performance is required, or any of its contractors or other representatives. Any prevention, delay or stoppage due to any Force Majeure Delay shall excuse the performance of the party affected for a period of time equal to any such prevention, delay or stoppage (except the obligations of either party to pay money, including rental and other charges, pursuant to the Lease).

    No Force Majeure Delay shall be deemed to have occurred unless and until the party claiming such Force Majeure Delay has provided written notice to the other party specifying the action or inaction that such notifying party contends constitutes a Force Majeure Delay. If such action or inaction is not cured within one (1) business day after receipt of such notice, then a Force Majeure Delay, as set forth in such notice, shall be deemed to have occurred commencing as of the date such notice is received and continuing for the number of days the Substantial Completion of the Premises was in fact delayed as a direct result of such action or inaction.

    (b)  Delay of Rent Commencement Date.

    The Lease Commencement Date shall be delayed by one (1) business day for each business day of delay in the Substantial Completion of the Premises that is caused by any Force Majeure Delay or any Lessor Delay.

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    3.  Construction Schedule and Procedures.

    (a)  Selection of Designer.  Lessee has selected Don L. Beck Associates, Inc. as its architect and designer ("Designer")who will be familiar with all applicable Laws and Building Requirements (as defined in Section 3(b) below).

    (b)  Base Building Plans.  Lessor has submitted instructions and Building plans and specifications prepared by TSH Architects and described on the attached Schedule 3 ("Base Building Plans") and the improvements detailed therein ("Base Building Improvements") and all rules, regulations, instructions and procedures promulgated by Lessor with respect to tenant design and/or construction in the Building (collectively, "Building Requirements") sufficient to allow Lessee to complete a Space Plan (as defined in Section 3(c) below). To the extent the Base Building Plans are revised to accommodate the requirements of the City of Campbell during the permit approval process, Lessor shall submit such revised plans to Lessee for its approval, which approval shall not be unreasonably withheld.

    (c)  Preparation and Approval of Space Plan.  Lessee shall submit to the Designer all additional information including occupancy requirements for the Premises ("Information") necessary to enable the Designer to prepare a space plan showing all demising walls, corridors, entrances, exits, doors, interior partitions, and the locations of all offices, conference rooms, computer rooms, mini-service kitchens, and the reception area, and other requirements of Lessee ("Space Plan"). Once completed the Space Plan shall be attached hereto as Schedule 1.

    Lessee shall cause the Designer to submit to Lessee and Lessor the Space Plan with sufficient time to ensure that Lessor can complete its review and Lessee and Lessor can finally approve the Space Plan no later than December 17, 1999.

    (d)  Integration of Final Plans and Construction of Tenant Improvements.  Lessee's Designer shall integrate the Space Plan and any working drawings or engineering drawings that may be required in order to construct the Tenant Improvements as shown on the approved Space Plan into the plans, specifications and drawing for the Base Building Improvements, which integrated drawings ("Final Plans") shall be thereafter delivered by Lessee to Lessor with sufficient time to ensure that Lessor and Lessee can finally approve the Final Plans no later than January 16, 2000.

    (e)  Bidding.  As soon as practical following receipt of all necessary permits and approvals, Lessor shall put the Final Plans out to bid to multiple licensed and insured subcontractors. Lessee may submit subcontractors to Lessor for Lessor's review. Lessor, with input from Lessee, shall select which subcontractors will perform the Tenant Improvements.

    (f)  Notice of Substantial Completion.  Lessor shall deliver to Lessee one (1) week's prior written notice stating the date that the Premises are expected to be Substantially Complete, or would be Substantially Complete were it not for any Lessee Delay.

    4.  Change Orders.  In the event that Lessee requests any changes to the Final Plans after such plans have been approved by Lessee and Lessor, Lessor shall not unreasonably withhold its consent to any such changes, and shall grant its consent to such changes within three (3) business days after Lessor's receipt of same, provided the changes do not adversely affect the Building's structure, systems, equipment or appearance. If any changes requested by Lessee and approved by Lessor increase the cost to Lessor of constructing the Tenant Improvements shown on the Final Plans, Lessor shall provide Lessee invoices documenting and evidencing such increased costs, and Lessee shall reimburse Lessor for such increased costs as provided in Section 8. The costs charged by Lessor to Lessee pursuant to this Section shall be an amount equal to the actual costs incurred by Lessor to review the requested changes and to cause the Tenant Improvements, as reflected by revised Final Plans, to be constructed above the costs that Lessor would have had to pay to cause the Tenant Improvements to be constructed if such changes had not been made. Subject to Section 2(a)(ii) above, if such changes delay Lessor's completion of the work shown on the Final Plans, then such delay shall constitute a Lessee Delay.

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    5.  Tenant Improvements.  The term "Tenant Improvements"shall mean all improvements shown in the Final Plans other than the Base Building Improvements. Tenant Improvements shall not include any personal property of Lessee.

    6.  Tenant Improvement Allowance Amount.  Landlord will pay on behalf of Tenant an amount equal to Thirty Dollars ($30.00) per rentable square foot of the Premises, for an approximate total of Eight Hundred Forty Thousand Six Hundred Ninety Dollars ($840,690.00) ("Tenant Improvement Allowance") over and above the items included in the Base Building Improvements, as set forth in the Base Building Plans, for the costs of the design and construction of the Tenant Improvements. The Tenant Improvement Allowance shall be used to pay for permitted Tenant Improvements and shall be disbursed by Landlord to the contractor engaged to construct the Tenant Improvements.

    7.  Tenant Improvement Costs.  The Tenant Improvements' Cost ("Tenant Improvement Costs") shall mean and include any and all costs and expenses of construction the Tenant Improvements, including, without limitation, all of the following:

    (a) All costs of preliminary space planning and final architectural and engineering plans and specifications for the Tenant Improvements, and architectural fees, engineering costs and fees, and other costs associated with completion of the Space Plan;

    (b) All costs of obtaining building permits and other necessary authorizations and approvals from the City of Campbell and other applicable jurisdictions for the Tenant Improvements, but not for the Base Building Improvements;

    (c) All costs of interior design and finish schedule plans and specifications including as-built drawings for Tenant Improvements;

    (d) All direct and indirect costs of procuring, constructing and installing the Tenant Improvements in the Premises, including, but not limited to, a construction fee not to exceed 10% for overhead and profit, and all labor (including overtime if requested and approved by Lessee) and materials.

    (e) All fees payable to the General Contractor, architect and Lessor's engineering firm if they are required by Lessee to redesign any portion of the Tenant Improvements following Lessee's approval of the Final Plans.

    8.  Excess Tenant Improvement Costs.  Prior to commencing the Tenant Improvements, Lessor shall submit to Lessee a written statement of the actual Tenant Improvement Costs (the "Actual TI Costs") (which shall include the amount of any overtime projected as necessary to Substantially Complete the Tenant Improvements by the Completion Date if the necessity of using such overtime to meet the Scheduled Completion date was made necessary by a Lessee Delay) as then known by Lessor, and such statement shall indicate the amount, if any, by which the Actual TI Costs exceeds the Tenant Improvement Allowance (including the additional allowance amortized as provided for in Section 7 of the Lease) (the "Excess Tenant Improvement Costs"). The term "Excess Tenant Improvement Costs" shall also include the costs related to any and all Change Orders required by Lessee's requesting a change in the Final Plans following Final Approval for which Lessee was notified of the cost and agreed. Lessee agrees, within five (5) business days after submission to it of such statement, to execute and deliver to Lessor, in the form then in use by Lessor or Lessor's contractor, an authorization to proceed with the Tenant Improvements. No Tenant Improvements shall be commenced until Tenant has fully complied with the preceding provisions of this Section 8.

    (a)  Payment of Excess Tenant Improvements Costs.  Once construction has commenced, Lessor shall submit to Lessee, on a monthly basis, progress payment bills for Excess Tenant Improvement Costs. Said progress payments will be due on the 10th of each following month, with the final payment to be made upon Lessee taking occupancy of the Premises. If Tenant fails to remit the sums so

60

demanded by Lessor pursuant to this Section 8 within the time periods required, Lessor may, at its option, declare Lessee in default under the Lease. If Lessee so desires, Lessee may request and Lessor shall provide, copies of Lien Releases from Lessor prior to payment of Excess Tenant Improvement Costs.

    Lessee shall retain from progress payment bills a percentage of ten percent (10%) until after final acceptance of the project by Lessee, which acceptance shall not be unreasonably withheld, conditioned or delayed. Within five (5) days of final acceptance, but in no event later than thirty (30) days after Substantial Completion, all retention funds shall be paid to Lessor at Lessor's place of business.

    9.  Inspection.  After Lessor has completed the construction of the Tenant Improvements (excepting punch list items) and again thirty (30) days after the Premises are Substantially Complete ("Second Time"), in each case following two (2) business days' advance written notice from Lessee to Lessor, Lessor shall cause the Contractor to inspect the Premises with a representative of Lessee and complete a punch list of unfinished items of the Tenant Improvements. Authorized representatives for Lessor and Lessee shall execute said punch list to indicate their approval thereof. The items listed on such punch list shall be completed by the Contractor within thirty (30) days after the approval of such punch list or as soon thereafter as reasonably practicable.

    10.  Clean-Up Expenses.  Upon Substantial Completion of the Tenant Improvements, Lessor shall thoroughly clean the Premises. The costs of the cleaning provided by Lessor pursuant to this Section shall not be included in Operating Expenses for the Building prior to Lessee's occupancy of the Premises.

IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first written above.

LESSOR: WTA Campbell Technology Park LLC	LESSEE: Zamba Corporation.
By:	By:
Its:	Its:

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QuickLinks

EXHIBIT "B" WORK LETTER AGREEMENT

EX-23.01

Exhibit 23.01

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Zamba Corporation:

    We consent to incorporation by reference in the Registration Statements (No. 333-66021, 333-62783, 333-45077, 333-35595, and 33-73456) of Zamba Corporation on Form S-8 of our report dated January 21, 2000, relating to the consolidated balance sheets of Zamba Corporation and subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended, and the related financial statement schedule, which report appears in the 1999 annual report on Form 10-K of Zamba Corporation.

/s/ KPMG LLP

Minneapolis, Minnesota
March 8, 2000

62

EX-23.02

Exhibit 23.02

Consent of Independent Accountants

    We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Registration No.'s 333-66021, 333-62783, 33-73456, 333-45077 and 333-35595) of Zamba Corporation, formerly Racotek, Inc., of our report dated January 12, 1998, relating to the statements of operations and cash flows, and the financial statement schedule, before restatement for the 1999 pooling-of-interests, which appears in this 1999 Annual Report on Form 10-K.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota
March 8, 2000

63

EX-27

 


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

<MULTIPLIER> 1,000

                             
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<INTEREST-EXPENSE>                                 107
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