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REGISTRATION NO. 333-38054
PROSPECTUS FILED PURSUANT TO RULE 424(B)(5)
ZAMBA CORPORATION
7301 OHMS LANE, SUITE 200
MINNEAPOLIS, MINNESOTA 55439
(952) 832-9800
320,001 SHARES OF COMMON STOCK
This prospectus covers the offer and sale of 320,001 shares of Zamba
common stock. The common stock is being offered and sold by certain of our
stockholders. Three of these selling stockholders are former stockholders of
Camworks, Inc. ("Camworks"), and three of these selling stockholders are former
stockholders of Fusion Consulting, Inc. ("Fusion"). We acquired Camworks in
December 1999, and we acquired Fusion in January 2000.
We issued 1,000,000 shares of common stock to the former stockholders
of Camworks in connection with our acquisition of that company, and we issued
80,001 shares of common stock to the former stockholders of Fusion in connection
with our acquisition of that company. This prospectus relates to resales of some
of those shares by certain former stockholders of Camworks and Fusion. We will
not receive any of the proceeds from the sale of the shares.
The selling stockholders will pay any underwriting discounts and
commissions and expenses incurred by the selling stockholders for brokerage,
accounting, tax or legal services or any other expenses incurred by the selling
stockholders in disposing of the shares. We will bear all other costs, fees and
expenses incurred in effecting the registration of the shares covered by this
prospectus, including, without limitation, all registration and filing fees,
Nasdaq listing fees and fees and expenses of our counsel and our accountants.
The selling stockholders, or their pledgees, donees, transferees or
other successors-in-interest, may offer the shares from time to time through
public or private transactions at prevailing market prices, at prices related to
prevailing market prices or at privately negotiated prices. Our common stock is
traded on the Nasdaq National Market under the symbol ZMBA. On May 23, 2000, the
closing sale price of our common stock on Nasdaq was $5.8438 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No underwriting commissions or discounts will be paid by Zamba in
connection with this offering. Expenses payable by Zamba in connection with this
offering are estimated to be $12,000. The aggregate proceeds to the selling
stockholders from the common stock will be the purchase price of the common
stock sold less the aggregate agents' commissions and underwriters' discounts,
if any, and other expenses of issuance and distribution not borne by us. See
"Plan of Distribution."
The date of this Prospectus is June 9, 2000.
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TABLE OF CONTENTS
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PAGE
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Summary Description of Our Business................................................................. 3
Where to Find More Information...................................................................... 3
Incorporation of Certain Documents by Reference..................................................... 3
Risk Factors........................................................................................ 5
Use of Proceeds.....................................................................................11
Dividend Policy.....................................................................................11
Selling Stockholders................................................................................12
Plan of Distribution................................................................................13
Legal Matters.......................................................................................14
Experts.............................................................................................14
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WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM
THAT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. THE SELLING
STOCKHOLDERS ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF OUR
COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF COMMON STOCK.
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SUMMARY DESCRIPTION OF OUR BUSINESS
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. Typically, we perform our services on a
fixed-bid, fixed-timetable 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.
WHERE TO FIND MORE INFORMATION
We file reports, proxy statements, and other documents with the
Securities and Exchange Commission and with Nasdaq. Here are ways you can access
this information:
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WHAT IS AVAILABLE WHERE TO GET IT
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Paper copies of information SEC's Public Reference Room
Judiciary Plaza Building
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
The Nasdaq Stock Market, Inc.
1735 K Street, N.W.
Washington, D.C. 20006
On-line information SEC's Internet website at
http://www.sec.gov
Information about the Call the SEC at
SEC's Public Reference Room 1-800-SEC-0330
</TABLE>
This prospectus is part of a registration statement that we filed with
the SEC. The registration statement contains more information than this
prospectus regarding us and our common stock, including certain exhibits and
schedules. You can obtain a copy of the registration statement from the sources
listed above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate" into this prospectus information
that we file with the SEC in other documents. This means that we can disclose
important information to you by referring to other documents that contain that
information. The information incorporated by reference is considered to be part
of this prospectus. Information contained in this prospectus and information
that we file with the SEC in the future and incorporate by reference in this
prospectus automatically updates and supercedes previously filed information. We
are incorporating by reference the documents listed below and any future filings
we
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make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 prior to the sale of all the shares covered by this
prospectus. You are encouraged to obtain copies of these documents and to review
them.
(i) Our Annual Report on Form 10-K for the year ended December 31,
1999, filed with the SEC on March 8, 2000;
(ii) our Current Reports on Form 8-K and Form 8-K/A, filed with the
SEC on January 12, 2000, January 21, 2000, March 3, 2000, and
March 8, 2000;
(iii) the information contained in the following listed section of
our Proxy Statement for our 2000 Annual Meeting of
Stockholders, filed with the SEC on March 22, 2000:
- "Nominees" in Proposal 1
- "Executive Officers"
- "Section 16(a) Beneficial Ownership Reporting
Compliance"
- "Director's Compensation"
- "Executive Compensation"
- "Compensation Committee Interlocks and Insider
Participation"
- "Security Ownership of Certain Beneficial Owners and
Management"
- "Certain Transactions"
(iv) our Quarterly Report on Form 10-Q for the quarter ended March
31, 2000, filed with the SEC on May 26, 2000;
(v) all of our filings pursuant to the Exchange Act after the date
of filing the initial registration statement and prior to
effectiveness of the registration statement; and
(vi) the description of our common stock contained in our
Registration Statement on Form 8-A, filed with the SEC on
October 25, 1993.
You may request a copy of these documents, which will be provided to
you at no cost, by contacting:
ZAMBA CORPORATION
7301 OHMS LANE, SUITE 200
MINNEAPOLIS, MINNESOTA 55439
ATTENTION: INVESTOR RELATIONS
(952) 832-9800
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RISK FACTORS
THIS PROSPECTUS CONTAINS OR INCORPORATES "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934. YOU CAN IDENTIFY THESE FORWARD-LOOKING
STATEMENTS BY OUR USE OF THE WORDS "BELIEVES," "ANTICIPATES," "PLANS,"
"EXPECTS," "MAY," "WILL," "WOULD," "INTENDS," "ESTIMATES" AND SIMILAR
EXPRESSIONS, WHETHER IN THE NEGATIVE OR AFFIRMATIVE. WE CANNOT GUARANTEE THAT WE
ACTUALLY WILL ACHIEVE THESE PLANS, INTENTIONS OR EXPECTATIONS. ACTUAL RESULTS OR
EVENTS COULD DIFFER MATERIALLY FROM THE PLANS, INTENTIONS AND EXPECTATIONS
DISCLOSED IN THE FORWARD-LOOKING STATEMENTS THAT WE MAKE. WE HAVE INCLUDED
IMPORTANT FACTORS IN THE CAUTIONARY STATEMENTS CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, PARTICULARLY UNDER THE HEADING "RISK FACTORS" THAT
WE BELIEVE COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS THAT WE MAKE. WE DO NOT ASSUME ANY OBLIGATION TO
UPDATE ANY FORWARD-LOOKING STATEMENTS THAT WE MAKE. ALTHOUGH WE BELIEVE THAT THE
EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE
CANNOT GUARANTEE FUTURE RESULTS, LEVELS OF ACTIVITY, AND/OR PERFORMANCE OF
ACHIEVEMENTS.
You should carefully consider the risks described below before you
decide to buy our common stock. The risks and uncertainties described below are
not the only ones facing our company. Additional risks and uncertainties may
also impair or affect our business operations. If any of the following risks
actually occur, our business, financial condition, or results of operations
would likely suffer. In such case, the trading price of our common stock could
fall, and you may lose all or part of the money you paid to buy our common
stock.
WE MAY NOT BE ABLE TO MANAGE GROWTH SUCCESSFULLY
Our growth has placed significant demands on our management and other
resources. Our revenues increased approximately 202% in 1999 from $9.4 million
in 1998 to $28.3 million in 1999. Our staff increased from 95 full-time
employees at January 1, 1999, to 225 at March 31, 2000. Our future success will
depend on our ability to manage our growth effectively, including by:
- developing and improving our operational, financial and other
internal systems;
- integrating and managing acquired businesses, joint ventures and
strategic investments;
- training, motivating and managing our employees;
- estimating fixed-price fees and project timeframes accurately;
- maintaining high rates of employee utilization; and
- maintaining project quality and client satisfaction.
Our management has limited experience managing a business of Zamba's
current size. If we are unable to manage our growth and projects effectively,
the quality of our services and products, our ability to retain key personnel
and our business, financial condition and results of operations may be
materially adversely affected.
THE FOCUS OF OUR BUSINESS MAY NOT RECEIVE MARKET ACCEPTANCE
We focus on selling system integration services to clients in a small
number of vertical markets, such as sales force automation, call centers,
marketing automation, customer care, field service and sales. Although we
believe that this specialization will increase our market presence, customer
base and profitability, we may fail to obtain customers, effectively deliver
services or meet customer demands in one or more of these markets. If we fail in
any of these respects, such failure could have a material adverse impact on our
financial condition and results of operations.
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The technology consulting industry in general presents several risks,
many of which are outside of our control. As the market changes, we will need to
constantly redefine our company, which is a complex, time-consuming and
expensive process. It involves changing strategies, aligning services and
product categories, changing management and employees, and focusing on new
markets and customers. We could spend considerable amounts of money and commit
resources, but ultimately receive little or no return on our investment.
Customers may not be receptive and competitors may already be established in the
new markets, making it difficult for us to gain a sustainable market share or
acquire new customers.
WE MAY FAIL TO SUCCESSFULLY COMPLETE AND INTEGRATE COMPANIES THAT WE ACQUIRE
On December 29, 1999, we acquired Camworks, Inc. ("Camworks") and on
January 10, 2000, we acquired Fusion Consulting, Inc. ("Fusion"). Integrating
Camworks and Fusion will be a complex, time-consuming and expensive process.
Before the acquisitions, Camworks and Fusion operated independently, each with
its own business, business culture, clients, employees and systems. After the
mergers, Camworks and Fusion must operate together with Zamba as a combined
organization utilizing common (1) information and communication systems, (2)
operating procedures, (3) financial controls and (4) human resource practices,
including benefit, training and professional development programs. There may be
substantial difficulties, costs and delays involved in integrating Camworks and
Fusion. These may include:
- distracting management from the business of the combined
company;
- potential incompatibility of business cultures;
- inability to retain talented employees of the acquired business;
- perceived adverse change in client service standards, business
focus, billing practices, or service offerings available to
clients;
- perceived uncertainty in career opportunities, benefits and the
long-term value of stock options held by employees;
- costs and delays in implementing common systems and procedures;
- inability to achieve efficiencies, or to achieve them in a timely
manner; and
- potential inefficiencies in delivering services to the clients of
the combined company.
Any one or all of these factors may cause increased operating costs,
lower than anticipated financial performance or the loss of clients and
employees. Some of these factors are also outside the control of our company or
the business we acquired. The failure to successfully integrate Camworks and/or
Fusion into Zamba would have a material adverse effect on our business,
financial condition and results of operations.
We could also experience financial or other setbacks if any of the
acquired businesses experienced problems in the past of which our management
does not yet know. For example, if an acquired business had dissatisfied
customers or had any performance problems, our reputation could suffer as a
result of our association with that business. We are not aware of any material
legal claims against the acquired companies. However, to the extent any customer
or other third party asserts any material legal claims against any of the
acquired companies, our business, financial condition and results of operations
could suffer material harm.
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FAILURE TO QUALIFY FOR POOLING OF INTERESTS ACCOUNTING TREATMENT FOR
ACQUISITIONS MAY HARM OUR FUTURE OPERATING RESULTS.
The acquisitions of Camworks and Fusion were accounted for under the
"pooling of interests" accounting treatment under U.S. generally accepted
accounting principles. Under pooling of interests accounting treatment, the
accounts of Camworks and Fusion are combined with those of Zamba at their
historical carrying amounts, and Zamba's financial statements for all prior
periods reflect its accounts as if Camworks and Fusion had been combined for all
periods.
If events subsequently occur that cause either of the mergers to fail
to qualify for pooling of interests accounting treatment, the purchase method of
accounting would apply. Under that method, we would record the estimated fair
value of our common stock issued in the mergers as the cost of acquiring the
businesses of Camworks or Fusion. That cost would be allocated to the individual
assets acquired and liabilities assumed according to their respective fair
values, with the excess of the estimated fair value of our common stock over the
fair value of net assets acquired recorded as goodwill, to be amortized over a
period that could be as long as 10 years, but is likely to be shorter. The
amount of goodwill amortized reduces our reported earnings. The estimated fair
value of our common stock issued in the mergers is much greater than the
historical net book value at which Camworks and Fusion carried their assets in
their accounts. Therefore, purchase accounting treatment could have a material
adverse effect on the reported operating results of the combined company
compared to pooling of interests accounting treatment.
WE NEED TO ATTRACT AND RETAIN QUALITY EMPLOYEES IN ORDER TO CONTINUE OUR GROWTH
Our business is labor-intensive and requires highly skilled employees.
Most of our consultants possess extensive expertise in information technology,
strategy, project management, sales and marketing. To serve a growing client
base, we must continue to recruit and retain qualified personnel with expertise
in each of these areas. Competition for such personnel is intense. We compete
for such personnel with management consulting firms, software firms and other
businesses. Many of these entities have substantially greater financial and
other resources than we do. In addition, the Internet has created many
opportunities for people with the skills we seek to form their own companies or
join startup companies and these opportunities frequently offer the potential
for significant future financial gain through equity incentives which we cannot
match. Zamba from time to time has had difficulty recruiting a sufficient number
of qualified personnel to serve existing and new clients. If we fail to recruit
and retain a sufficient number of qualified personnel, our ability to expand our
client base or services could be impaired and our business, financial condition
and results of operations could be adversely affected.
OUR OPERATING RESULTS MAY FLUCTUATE
A high percentage of our operating expenses, particularly personnel and
related costs, depreciation, office rent and occupancy costs, are fixed in
advance of any particular quarter. As a result, unanticipated variations in the
number, or progress toward completion, of our projects may cause significant
variations in operating results in any particular quarter and could result in
losses for that quarter. Our net revenue and operating results may fluctuate
significantly because of a number of other factors, some of which are outside
our control. These factors may include:
- losing key personnel and other employees;
- consummating an acquisition;
- costs of integrating acquired operations;
- fluctuations in market demand for our services, consultant
hiring and utilization;
- the contractual terms and timing of completion of projects;
- any delays incurred in connection with projects;
- the accuracy of our estimates of resources required to complete
projects;
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- uncertainty and changes in our sales cycle;
- the adequacy of provisions for losses;
- costs of obtaining or losing customers and accounts;
- increased competition and pricing pressures; and
- changes in our or our competitor's business strategy, pricing
and billing policies.
One or more of the foregoing factors may cause our operating expenses
to be disproportionately high during any given period. Based on the preceding
factors, we may experience a shortfall in revenue or earnings or otherwise fail
to meet public market expectations, which could materially adversely affect our
business, financial condition and the market price of our common stock.
WE FACE RISKS FROM OUR FIXED-PRICE, FIXED-TIMEFRAME BUSINESS MODEL
Most of our projects are performed on fixed-price, fixed-timeframe
contracts, rather than contracts in which payment to us is determined on a time
and materials basis. If we don't accurately estimate the resources required for
a project or fail to complete our contractual obligations in a manner consistent
with the project plan upon which our fixed-price, fixed-timeframe contract was
based, our overall profitability and our business, financial condition and
results of operations could be adversely affected. We have been required to
commit unanticipated additional resources to complete projects in the past,
which has resulted in losses on those contracts. We recognize that we will
experience similar situations in the future and that the consequences could be
more severe than in the past due to the increased size and complexity of our
projects. In addition, for some projects we may fix the price at an early stage
of the process, which could result in a fixed price that turns out to be too low
and therefore would adversely affect our profitability.
OUR REVENUES ARE DIFFICULT TO PREDICT BECAUSE THEY ARE GENERATED ON A PROJECT-
BY-PROJECT BASIS.
We derive our revenues primarily from fees for services generated on a
project-by-project basis. These projects vary in size and scope. Therefore, a
client that accounts for a significant portion of our revenues in a given period
may not generate a similar amount of revenues, if any, in subsequent periods. In
addition, after we complete a project, we have no assurance that the client will
retain us in the future.
We have clients who may terminate their agreements with us, whether
time and materials or fixed-fee based, without any prior written notice. Clients
may terminate projects before completion. If our clients terminate existing
agreements, our business, financial condition and results of operations could
suffer material harm.
THE LOSS OF A SIGNIFICANT CLIENT COULD IMPACT OUR OPERATIONS
We derive a substantial part of our revenues from a small number of
clients. The loss of one or more of these clients will materially adversely
affect our financial condition and results of operations. Our services often
involve the implementation of complex information systems that are critical to
the clients' operations. Our failure to meet client expectations in the
performance of our services may damage our reputation and adversely affect our
ability to attract and retain clients. If a client is not satisfied with our
services, we will generally spend additional human and other resources at our
own expense to ensure client satisfaction. Such expenditures will typically
result in a lower margin on such engagements and could materially adversely
effect our business, financial condition and results of operations.
In the course of providing services, we may recommend the use of other
software and hardware products. These products may not perform as expected or
may contain defects. If this occurs, our reputation could be damaged and we
could be subject to liability. We attempt to limit our exposure to potential
liability claims. Such limitations may not be effective. A successful liability
claim brought
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against us may adversely affect our reputation and could have a material adverse
effect on our business, financial condition and results of operations. Our
inability to obtain new clients or large-scale implementation and integration
projects could materially and adversely affect the growth of our business.
WE ARE IN A COMPETITIVE MARKET
We compete in the information technology services market, which is
relatively new and intensely competitive. We expect competition to continue to
intensify as the market evolves. We compete with the following kinds of
companies:
- internet service firms;
- technology consulting firms;
- technology integrators;
- strategic consulting firms;
- the consulting divisions of "Big 5" accounting firms; and
- in-house information technology departments of our clients and
potential clients.
Many of our competitors have longer operating histories, larger client
bases, longer relationships with clients, greater brand or name recognition and
significantly greater financial, technical, marketing and public relations
resources than we have.
Relatively few barriers prevent competitors from entering the
information technology services market. As a result, new market entrants pose a
threat to our business. We do not own any patented technology that prevents or
discourages competitors from entering the information technology services
market. Existing or future competitors may develop or offer services that are
comparable or superior to ours at a lower price, which could materially harm our
business, results of operations and financial condition.
We believe that establishing and maintaining a good reputation and name
recognition is critical for attracting and expanding our targeted client base.
We also believe that the importance of reputation and name recognition will
increase due to the growing number of information technology service providers.
If our reputation is damaged or if potential clients do not know what services
we provide, we may become less competitive or lose our market share. Promotion
and enhancement of our name will depend largely on our success in providing high
quality services and digital communications solutions, which we cannot ensure.
If clients do not perceive our services to be effective or of high quality, our
brand name and reputation could be materially and adversely affected.
WE NEED TO KEEP PACE WITH TECHNOLOGICAL CHANGES
Our markets and the technologies used in our solutions are
characterized by rapid technological change. Failure to respond in a timely and
cost-effective way to these technological developments would have a material
adverse effect on our business, financial condition and results of operations.
We expect to derive a substantial portion of our revenues from providing
ecommerce and customer care solutions that are based upon leading technologies
and that are capable of adapting to future technologies. As a result, our
success will depend on our ability to offer services that keep pace with
continuing changes in technology, evolving industry standards and changing
client preferences. We may not be successful in addressing future developments
on a timely basis. Our failure to keep pace with the latest technological
developments would have a material adverse effect on our business, financial
condition and results of operations.
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WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL CAPITAL
We rely on a combination of copyright, trade secret and trademark laws,
and third party nondisclosure agreements to protect our intellectual property
rights. It may be possible for unauthorized third parties to obtain and use
information that we regard as proprietary or to develop equivalent
implementation methodologies independently. From time to time, third parties may
assert patent, copyright and other intellectual property claims against us.
Litigation, which could result in substantial cost to, and diversion of our
resources, may be necessary to enforce patents or our other intellectual
property rights or to defend ourselves against claimed infringement of the
rights of others. If we are found to have infringed the intellectual property
rights of others, we may be prohibited from using such intellectual property or
might be required to license such intellectual property.
WE MAY NOT BE ABLE TO REUSE TECHNOLOGY THAT WE DEVELOP FOR SPECIFIC CLIENTS
A portion of our business involves the development of technology
solutions for specific client engagements. Ownership of these solutions is the
subject of negotiation and is frequently assigned to the client, although we may
retain a license for certain uses. Some clients have prohibited us from
marketing the applications developed for them for specified periods of time or
to specified third parties clients may demand similar or other restrictions in
the future. Issues relating to the ownership of and rights to use solutions can
be complicated and disputes may arise that affect our ability to resell or reuse
these solutions. Any limitation on our ability to resell or reuse a solution
could require us to incur additional expenses to develop new solutions for
future projects.
ALTHOUGH WE PASSED THE YEAR 2000 DATE CHANGEOVER WITHOUT PROBLEMS, SUBSEQUENT
EVENTS COULD RESULT IN PROBLEMS SIMILAR TO THOSE ANTICIPATED FOR THE YEAR 2000
Many computers and computer programs are designed with dates that
contain two digits instead of four digits, potentially causing "19XX" to be the
date for any year entered or processed. As a result, a date-sensitive program
with a year ending in "00" may be read by the computer as "1900" instead of
"2000." This may cause the computer or program to be unable to process date
information between the twentieth and twenty-first centuries. This inability
could cause the disruption or failure of processing by such computer or program
(the "Year 2000 Issue"). The Year 2000 Issue could affect Zamba in numerous
ways, including temporarily preventing us from sending invoices to our clients,
interfering with or damaging development work we do for our clients, and causing
our clients to lower their budgets for our customer care solutions in order to
fund resolution of their own Year 2000 issues.
We have reviewed our internal computer systems and legacy proprietary
hardware and software products that could be affected by the Year 2000 Issue.
Based on this review, technology changes for potential Year 2000 issues did not
have a material impact on our operations. However, if future defects arise
because of factors not revealed during our review and testing, including future
events that may impact our vendors or other third parties with which we conduct
business, our business, financial condition and results of operations may be
materially adversely affected.
OUR STOCK PRICE IS VOLATILE
Technology companies, including Zamba, frequently experience volatility
in their common stock prices. Factors creating such volatility include:
- quarterly fluctuations in results of operations and achievement of
key business metrics;
- changes in earnings estimates by securities analysts;
- announcements of technological innovations or the introduction of
new products;
- market reaction to any acquisitions, joint ventures or strategic
investments announced by us or our competitors; and
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- extreme price and volume fluctuations of the general stock market,
which have particularly affected the market price for many
technology companies, in some cases unrelated to the operating
performance of those companies. These broad market fluctuations
may materially adversely affect the market price of our stock.
These factors may have a significant adverse impact on the market price
of our stock. If revenues or earnings in any quarter fail to meet the
expectations of the investment community, there could be an immediate impact on
our stock price. In addition, if our issued shares and shared issued upon
exercise of stock options are sold on the open market in large concentrations,
our stock price could decline in the short term.
In the past, securities class action litigation has often been
instituted against companies following periods of volatility in the market price
of their securities. This type of litigation could result in substantial costs
and a diversion of management attention and resources.
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares by the selling
stockholders.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock and
we intend to retain all available funds for use in the operation and expansion
of our business. We do not anticipate that any cash dividends will be declared
or paid in the foreseeable future.
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SELLING STOCKHOLDERS
The following table sets forth, to our knowledge, certain information
about the selling stockholders as of May 26, 2000.
Beneficial ownership is determined in accordance with the rules of the
SEC, and includes voting or investment power with respect to shares. Unless
otherwise indicated below, to our knowledge, all persons named in the table have
sole voting and investment power with respect to their shares of common stock,
except to the extent authority is shared by spouses under applicable law. The
inclusion of any shares in this table does not constitute an admission of
beneficial ownership for the person named below.
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Number of Percentage of Number of Percentage of
Shares of Shares of Shares of Shares of
Common Stock Common Stock Number of Common Stock Common Stock
Beneficially Beneficially Shares of Beneficially Beneficially
Name of Selling Owned Prior to Owned Prior to Common Stock Owned After Owned After
Stockholder Offering (1) Offering Offered Hereby Offering (1)(2) Offering
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<S> <C> <C> <C> <C> <C>
Mark Stallings 26,667 * 6,667 20,000 *
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Doug Eldridge 26,667 * 6,667 20,000 *
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Mark Beale 26,667 * 6,667 20,000 *
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Tim Cameron 558,000 1.77 167,400 390,600 1.24
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Paul Lundberg 372,000 1.18 111,600 260,400 *
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Scott Owens 70,000 * 21,000 49,000 *
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(1) The selling stockholders have sole voting power and investment
power with respect to all shares listed as owned by the selling stockholders. Of
the total shares of common stock listed as owned by Stallings, Eldridge, and
Beale, 8,001 shares are held in an escrow account to secure indemnification
obligations of these former stockholders of Fusion to us. It is expected that
these shares (less any shares that may be distributed from the escrow account to
us in satisfaction of indemnification claims or retained in escrow pending
resolution of any claims) will be released from escrow and distributed to such
selling stockholders on July 7, 2000. Of the total shares of common stock listed
as owned by Cameron, Lundberg, and Owens, 100,000 shares are held in an escrow
account to secure indemnification obligations of these former stockholders of
Camworks to us. It is expected that these shares (less any shares that may be
distributed from the escrow account to us in satisfaction of indemnification
claims or retained in escrow pending resolution of any claims) will be released
from escrow and distributed to such selling stockholders on the earlier of March
31, 2001, or such earlier date that we file our Report on Form 10-K for the year
ended December 31, 2000. The number of shares indicated as owned by each such
selling stockholder includes those shares (representing 10% of the number of
shares listed as beneficially owned by each selling stockholder) which such
selling stockholder is entitled to receive upon distribution of these shares
from the respective escrow accounts. Twenty Percent (20%) of the shares issued
to Cameron, Lundberg, and Owens were previously registered on a Form S-3
registration statement that was declared effective by the Securities and
Exchange Commission on March 27, 2000. With the exception of Owens, the
stockholders are under lock-up agreements that restrict the sale of their
remaining shares. The restrictions under the lock-up agreements with Stallings,
Eldridge and Beale are released with regard to 25% of each of the remaining
shares on April 30, 2001, July 31, 2001, October 31, 2001, and January 31, 2002.
The restrictions under the lock-up agreements with Cameron and Lundberg are
released with regard to 20% of the remaining shares on June 30, 2001, and 40% of
the remaining shares on each of September 30, 2001, and December 31, 2001.
(2) We do not know when or in what amounts a selling stockholder may
offer shares for sale and there can be no assurance that the selling
stockholders will sell any or all of the shares offered hereby. Because each
selling stockholder may offer all or some of the shares pursuant to this
offering, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares that are being
registered in this offering, no estimate can be given as to the amount of the
shares that will be held by the selling stockholders after completion of the
offering. However, for purposes of this table, we have assumed that, after
completion of the offering, none of the shares covered hereby will be held by
the selling stockholders.
* Less than one percent of the number of shares of common stock outstanding.
None of the selling stockholders has held any position or office with,
or has otherwise had a material relationship with, us or any of our subsidiaries
within the past three years, except that the selling stockholders have been
employed by us and Fusion or Camworks. In connection with the acquisitions of
both Fusion and Camworks, we entered into employment agreements with each of the
selling stockholders. Stallings, Eldridge and Beale are all former employees of
Fusion, and Cameron, Lundberg, and Owens are all former employees of Camworks.
The employment agreements with Stallings, Eldridge, and Beale are
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for terms of fifteen (15) months. However, Stallings is no longer employed with
Zamba. The employment agreements with Cameron and Lundberg are for terms of
twenty-four (24) months, and the employment agreement with Owens is for a term
of twelve (12) months. In connection with the merger agreements, all selling
stockholders also entered into non-competition agreements with Zamba.
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time
to time by the selling stockholders. The term "selling stockholders" includes
donees, pledgees, transferees or other successors-in-interest selling shares
received after the date of this prospectus from a selling stockholder as a gift,
pledge, partnership distribution or other non-sale related transfer. The selling
stockholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. Such sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices and under
terms then prevailing or at prices related to the then current market price or
in negotiated transactions. The selling stockholders may sell their shares by
one or more of, or a combination of, the following methods:
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- block trades in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
- an over-the-counter distribution in accordance with the rules
of the Nasdaq National Market;
- in privately negotiated transactions; and
- in options transactions.
In addition, any shares that qualify for sale pursuant to Rule 144 may
be sold under Rule 144 rather than pursuant to this prospectus.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of the shares or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealers or other financial
institutions. In connection with such transactions, broker-dealers or other
financial institutions may engage in short sales of the common stock in the
course of hedging the positions they assume with selling stockholders. The
selling stockholders may also sell the common stock short and redeliver the
shares to close out such short positions. The selling stockholders may also
enter into option or other transactions with broker-dealers or other financial
institutions which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction). The selling
stockholders may also pledge shares to a broker-dealer or other financial
institution, and, upon a default, such broker-dealer or other financial
institution, may effect sales of the pledged shares pursuant to this prospectus
(as supplemented or amended to reflect such transaction).
In effecting sales, broker-dealers or agents engaged by the selling
stockholders may arrange for other broker-dealers to participate. Broker-dealers
or agents may receive commissions, discounts or concessions from the selling
stockholders in amounts to be negotiated immediately prior to the sale.
In offering the shares covered by this prospectus, the selling
stockholders and any broker-dealers who execute sales for the selling
stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. Any profits realized by the
selling stockholders and the compensation of any broker-dealer may be deemed to
be underwriting discounts and commissions.
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In order to comply with the securities laws of certain states, if
applicable, the shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, we will make copies of this prospectus available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. The selling stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.
At the time a particular offer of shares is made, if required, a
prospectus supplement will be distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
We have agreed to indemnify the selling stockholders against certain
liabilities, including certain liabilities under the Securities Act.
We have agreed with the selling stockholders to keep the Registration
Statement of which this prospectus constitutes a part effective until the
earlier of (i) such time as all of the shares covered by this prospectus have
been disposed of pursuant to and in accordance with the Registration Statement
or (ii) January 7, 2001.
LEGAL MATTERS
Leonard, Street and Deinard Professional Association has passed on the
validity of the issuance of the shares offered by this prospectus.
EXPERTS
The consolidated financial statements of Zamba Corporation as of
December 31, 1999 and 1998, and for each of the years in the three-year period
ended December 31, 1999, which are incorporated by reference in this prospectus,
have been audited by KPMG LLP, independent auditors, as set forth in their
report thereon, which as to the year 1997 is based in part on the report of
PricewaterhouseCoopers LLP, independent auditors. The financial statements
referred to above are incorporated herein by reference in reliance upon these
reports given upon the authority of the firms as experts in accounting and
auditing.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS AT
ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR
OTHER PERSON TO GIVE ANY INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS
PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS
DOES NOT OFFER TO SELL OR BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS
UNLAWFUL. THE INFORMATION IN THIS PROSPECTUS IS CURRENT ONLY AS OF MAY 23, 2000.
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