-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UjT5tj860yGisIjLpKJh10DzgBlqW6ohmQkKS6c0ndCGgbLF5+ZwrO3GagDmAQ9Q a4NMMDyeE3RoA6qWoc4vuA== 0000930661-01-501320.txt : 20010730 0000930661-01-501320.hdr.sgml : 20010730 ACCESSION NUMBER: 0000930661-01-501320 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDGEWATER TECHNOLOGY INC/DE/ CENTRAL INDEX KEY: 0001017968 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 710788538 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20971 FILM NUMBER: 1690864 BUSINESS ADDRESS: STREET 1: 302 EAST MILLSAP ROAD CITY: FAYETTEVILLE STATE: AR ZIP: 72703 BUSINESS PHONE: 5019736000 MAIL ADDRESS: STREET 1: 302 EAST MILLSAP ROAD CITY: FAYETTEVETTE STATE: AR ZIP: 72703 FORMER COMPANY: FORMER CONFORMED NAME: STAFFMARK INC DATE OF NAME CHANGE: 19960702 10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2001 [_] 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: 0-20971 Edgewater Technology, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 71-0788538 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 20 Harvard Mill Square Wakefield, MA 01880 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number including area code: (781) 246-3343 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_____ ---- The number of shares of Common Stock of the Registrant, par value $.01 per share, outstanding at July 27, 2001 was 11,649,211. 1 EDGEWATER TECHNOLOGY, INC. -------------------------- FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001 --------------------------------------------- INDEX -----
PART I -- FINANCIAL INFORMATION Page ---- Item 1 -- Financial Statements Consolidated Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Operations 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations Business Overview 12 Discontinued Operations 13 Background 14 Financial Information 14 Results for the Three and Six Months Ended June 30, 2001 Compared to Results for the Three and Six Months Ended June 30, 2000 14 Liquidity and Capital Resources 16 Special Note Regarding Forward Looking Statements 17 Item 3 -- Quantitative and Qualitative Disclosures About Market Risk 18 PART II - OTHER INFORMATION Item 1 -- Legal Proceedings 18 Item 2 -- Changes in Securities and Use of Proceeds 18 Item 4 -- Submission of Matters to a Vote of Security Holders 18 Item 6 -- Exhibits and Reports on Form 8-K 19 (a) Exhibits (b) Reports on Form 8-K 19 Signatures
2 EDGEWATER TECHNOLOGY, INC. -------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- (In Thousands, Except Shares) -----------------------------
June 30, December 31, 2001 2000 ----------- ---------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 34,986 $145,581 Accounts receivable, net 5,632 5,875 Income tax receivable 16,131 16,121 Deferred income taxes 985 900 Prepaid expenses and other current assets 860 6,842 --------- -------- Total current assets 58,594 175,319 Property and equipment, net 2,190 2,174 Intangible assets, net 34,125 36,530 Other assets 83 118 Deferred income taxes 22,857 25,728 Net assets from discontinued operations (Note 4) - 14,831 --------- -------- $ 117,849 $254,700 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 1,319 $ 3,151 Other liabilities including restructuring and discontinued operations 7,480 10,819 Current portion of capital lease obligations 340 - Payroll and related liabilities 1,250 3,195 --------- -------- Total current liabilities 10,389 17,165 Long-term liabilities 494 290 Capital lease obligations, net of current portion 181 - Stockholders' equity: Preferred stock, $.01 par value; no shares issued or outstanding - - Common stock, $.01 par value; 11,668,616 and 28,692,766 shares issued and outstanding as of June 30, 2001 and December 31, 2000, respectively 296 296 Paid-in capital 217,827 217,838 Treasury stock, at cost (140,003) (6,158) Retained earnings 28,665 25,269 --------- -------- Total stockholders' equity 106,785 237,245 --------- -------- $ 117,849 $254,700 ========= ========
The accompanying notes are an integral part of these consolidated financial statements. 3 EDGEWATER TECHNOLOGY, INC. -------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 -------- --------- -------- -------- (Unaudited) Revenues $6,723 $ 7,968 $14,450 $ 15,056 Cost of services 4,075 3,726 8,286 7,096 ------ -------- ------- -------- Gross profit 2,648 4,242 6,164 7,960 Operating expenses: Selling, general and administrative 2,612 3,631 6,052 6,798 Depreciation and amortization 1,386 1,089 2,759 2,157 ------ -------- ------- -------- Operating loss (1,350) (478) (2,647) (995) Interest income (expense) and other, net 441 (274) 1,377 (636) ------ -------- ------- -------- Loss before income taxes and extraordinary item (909) (752) (1,270) (1,631) Income tax provision (benefit) 92 (256) 402 (536) ------ -------- ------- -------- Net loss from continuing operations before extraordinary item (1,001) (496) (1,672) (1,095) Discontinued operations (Note 4): Loss from operations of discontinued divisions (393) (100,106) (1,403) (97,576) (Loss) gain on sale of division - (6,175) 6,514 (6,175) Extraordinary item, net of applicable taxes (Note 5) 113 - (43) - ------ -------- ------- -------- Net (loss) income ($1,281) ($106,777) $ 3,396 ($104,846) ====== ======== ======= ======== Basic earnings per share: Continuing operations ($ 0.09) ($ 0.02) ($ 0.12) ($ 0.04) ====== ======== ======= ======== Discontinued operations ($ 0.03) ($ 3.60) $ 0.36 ($ 3.51) ====== ======== ======= ======== Extraordinary item $ 0.01 $ - $ - $ - ====== ======== ======= ======== Net (loss) income ($ 0.11) ($ 3.62) $ 0.24 ($ 3.55) ====== ======== ======= ======== Diluted earnings per share: Continuing operations ($ 0.09) ($ 0.02) ($ 0.12) ($ 0.04) ====== ======== ======= ======== Discontinued operations ($ 0.03) ($ 3.59) $ 0.36 ($ 3.51) ====== ======== ======= ======== Extraordinary item $ 0.01 $ - $ - $ - ====== ======== ======= ======== Net (loss) income ($ 0.11) ($ 3.61) $ 0.24 ($ 3.55) ====== ======== ======= ========
The accompanying notes are an integral part of these consolidated financial statements. 4 EDGEWATER TECHNOLOGY, INC. -------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (In Thousands)
Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 ---- ---- --------- -------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income ($ 1,281) ($106,777) $ 3,396 ($104,846) Loss from operations of discontinued divisions 393 100,106 1,403 97,576 Loss (gain) on sale of division - 6,175 (6,514) 6,175 Extraordinary item, net of applicable taxes (113) - 43 - --------- --------- --------- --------- Net loss from continuing operations (1,001) (496) (1,672) (1,095) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 1,386 1,089 2,759 2,157 Provision for bad debts 80 - 130 - Deferred income taxes and other, net 92 - 401 16 Change in operating accounts, net of effects of dispositions: Accounts receivable 776 (1,327) 177 (1,933) Prepaid expenses and other current assets 391 5,051 848 4,730 Other assets - (23) - 99 Accounts payable and accrued liabilities 186 437 336 659 Payroll and related liabilities (786) 1,761 (1,678) 716 Receipt (payment) relating to extraordinary item 37 - (380) - --------- --------- --------- --------- Net cash provided by operating activities 1,161 6,492 921 5,349 --------- --------- --------- --------- Net cash (used in) provided by discontinued operating activities (8,617) (4,390) (10,620) 10,956 --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of businesses - 204,121 35,246 204,121 Purchases of businesses, net of cash acquired - (663) (1,200) (1,122) Capital expenditures (252) (123) (530) (128) --------- --------- --------- --------- Net cash (used in) provided by investing activities (252) 203,335 33,516 202,871 --------- --------- --------- --------- Net cash used in discontinued investing activities - (8,119) (33) (11,208) --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings - 18,411 - 58,996 Payments on borrowings - (212,591) - (259,134) Proceeds from stock option exercises - 46 143 66 Payments on capital lease obligations (81) - (81) - Repurchases of stock (1,249) - (134,441) - --------- --------- --------- --------- Net cash used in financing activities (1,330) (194,134) (134,379) (200,072) --------- --------- --------- --------- Net cash used in discontinued financing activities - (3,087) - (11,289) --------- --------- --------- --------- Net (decrease) increase in cash and cash equivalents (9,038) 97 (110,595) (3,393) CASH AND CASH EQUIVALENTS, beginning of period 44,024 228 145,581 3,718 CASH AND CASH EQUIVALENTS, discontinued operations - 829 - 829 --------- --------- --------- --------- CASH AND CASH EQUIVALENTS, end of period $ 34,986 $ 1,154 $ 34,986 $ 1,154 ========= ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ - $ 3,431 $ - $ 6,836 ========= ========= ========= ========= Income taxes paid $ - $ 476 $ 180 $ 834 ========= ========= ========= ========= Borrowings on capital leases $ - $ 111 $ 68 $ 259 ========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 5 EDGEWATER TECHNOLOGY, INC. -------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (Unaudited) 1. ORGANIZATION: ------------ We (Edgewater Technology, Inc.) provide business solutions through our eSolutions subsidiary, which was acquired effective April 1, 1999. As discussed in Note 4, we have sold our interests in our Commercial staffing segment, Robert Walters (finance and accounting staffing services), Strategic Legal Resources (legal staffing), IntelliMark (information technology staffing and solutions) and ClinForce (clinical trials support services). As a result of these transactions, the operating results for these non-eSolutions divisions have been included in discontinued operations in the accompanying consolidated financial statements. We are an e-business consulting and systems integration firm that specializes in providing middle-market companies with tailored solutions for today's Internet-centric environment. These services primarily include the design, development and implementation of web-based applications as well as eCommerce software solutions and consulting services to clients throughout the United States. We have approximately 220 employees and offices in Massachusetts, New Hampshire, Arkansas, Minnesota, and North Carolina. Revenues pursuant to time and materials contracts are generally recognized as services are provided. Revenues pursuant to fixed-fee contracts are generally recognized as services are rendered using the percentage-of-completion method of accounting. 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 use of estimates of resources required to complete ongoing projects, general economic conditions and other factors. Certain significant estimates include percentage of completion estimates used for fixed price contracts and the allowance for doubtful accounts. These items are frequently monitored and analyzed by management for changes in facts and circumstances and material changes in these estimates could occur in the future. Gross profit reflects revenues less direct consultant expenses whether or not the consultant's time is billed to a client. Gross margin is affected by the number of workdays in a period and consultant utilization. Any significant decline in fees billed to clients or the loss of a significant client would adversely affect our revenues, gross margins and net earnings. Selling, general and administrative expenses consist of sales and marketing, recruiting, human resources, administration salaries, commissions and related expenses, office facilities, computer system expenditures, professional fees, promotional expenses, and other general corporate expenses. On December 21, 2000, we commenced an issuer tender offer (the "Tender Offer"), which expired on January 23, 2001. As a result of the Tender Offer, we acquired (effective January 30, 2001) 16.25 million shares of our common stock at $8 per share for aggregate consideration of $130 million, and common stock subject to certain vested in-the-money stock options for aggregate consideration of $0.2 million. In addition, during the first six months of 2001, we repurchased 854,200 shares of our common stock for an average price of $4.05 per share. 2. BASIS OF PRESENTATION: --------------------- The accompanying interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to ensure the information presented is not misleading. 6 The accompanying interim financial statements reflect all adjustments (which were of a normal, recurring nature) that, in the opinion of management, are necessary to present fairly our financial position, results of operations and cash flows as of and for the interim periods presented. All significant intercompany transactions have been eliminated in the accompanying consolidated financial statements. Additionally, certain reclassifications have been made to prior period balances in order to conform with the current period presentation. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in our 2000 Edgewater Technology, Inc. Annual Report on Form 10-K as filed with the SEC on March 30, 2001. The results of operations for the three and six months ended June 30, 2001 are not necessarily indicative of the results to be expected for any future period or the full fiscal year. Our revenue and earnings may fluctuate from quarter to quarter based on factors within and outside our control including variability in demand for Internet and for Internet professional services, the length of the sales cycle associated with our service offerings, the number, size and scope of our projects, and the efficiency with which we utilize our employees. 3. BUSINESS TRANSACTIONS: --------------------- Effective April 1, 1999, we acquired Edgewater Technology (Delaware), Inc. ("Edgewater"), a full-service provider of eSolutions services located in Boston's Route 128 technology corridor. Edgewater was acquired in a transaction, which required $17.1 million to be paid on the closing date and provided for additional consideration based on certain events. The aggregate consideration paid with respect to Edgewater was $1.2 million for the six months ended June 30, 2001 and was $0.6 million and $1.1 million for the three and six months ended June 30, 2000, respectively. No further payments are required under the purchase agreement. 4. DISCONTINUED OPERATIONS: ----------------------- On June 28, 2000, pursuant to a Purchase Agreement dated May 16, 2000 with Stephens Group, Inc., we sold all of our subsidiaries, and the assets and liabilities of our Commercial staffing segment to affiliate entities of Stephens Group, Inc. As consideration, we received gross proceeds of $190.1 million in cash before fees, expenses and taxes. As part of the transaction, we sold the name "StaffMark" as that was the name used by the Commercial staffing segment. On July 13, 2000, we sold, through two indirect wholly-owned subsidiaries, all of our equity interests in Robert Walters through an initial public offering on the London Stock Exchange. Robert Walters had previously been the finance and accounting platform within our Professional/Information Technology ("IT") segment. Our two subsidiaries sold 67.2 million ordinary shares at a price of 170 pence per share (or $2.57 at then current exchange rates). The shares began trading on a conditional basis on the London Stock Exchange on July 6, 2000. On July 14, 2000, the underwriters exercised the over-allotment of 10.4 million ordinary shares. Our share of offering gross proceeds, including the exercise of the over-allotment option, was $199.2 million prior to offering commissions, fees and expenses. During the second quarter of 2000, in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," we recorded a $150 million non-cash charge for the write-down of the goodwill in our IntelliMark and Strategic Legal Resources divisions to estimated realizable values. This write-down was largely due to a decline in the revenues, gross profit and cash flow of these divisions and the overall decrease in market values within these industries. Accordingly, the carrying values of these assets were written down to management's estimates of fair value, which were based on market comparables for companies operating in similar industries. On September 22, 2000, we sold all of the outstanding stock of Strategic Legal Resources, the legal staffing platform within our Professional/IT segment, to a company owned by a group of investors including MidMark Capital II, L.P. and Edwardstone & Company for $13.25 million, of which $4.25 million was represented by a promissory note. The balance of this note was collected in January 2001. 7 On November 16, 2000, we sold all of the outstanding shares of stock of our subsidiaries that comprised IntelliMark, our IT staffing and solutions division, to IM Acquisition, Inc., an affiliate of Charlesbank Equity Fund V Limited Partnership, for $40.2 million in cash, which consisted of $42.7 million paid at the closing date less a $2.5 million post-closing working capital adjustment paid to IM Acquisition, Inc. in April 2001. In connection with this sale, we recorded a $53.9 million non-cash charge for the write-down of the goodwill in our IntelliMark division to estimated realizable values. On December 15, 2000, we entered into a Stock Purchase Agreement to sell all of our outstanding stock in ClinForce, our clinical trials support services division, to Cross Country TravCorps, Inc. for $31.0 million in cash, before fees and expenses and subject to potential upward or downward post-closing adjustment (the "Transaction"). We held a Special Stockholders' Meeting on March 14, 2001 to approve the Transaction. After receiving approval from stockholders, the Transaction was closed on March 16, 2001. We recorded an after-tax gain of $6.5 million related to the Transaction during the first quarter of 2001. On July 18, 2001, we received approximately $1.4 million from Cross Country TravCorps, Inc. for the post-closing working capital adjustment. During the third and fourth quarters of 2000, as a result of the impending sale of our remaining non-eSolutions divisions, we recorded nonrecurring expenses totaling approximately $3.8 million relating to our divestiture process and costs related to the closing of our former corporate headquarters (in Fayetteville, Arkansas). The move of the corporate headquarters to Wakefield, Massachusetts, where Edgewater is located, was substantially completed during the second quarter of 2001. The restructuring expense includes future contractual obligations to certain employees, which extend through October 2001. The following is a summary of our restructuring accrual, which has been included in other liabilities including restructuring and discontinued operations in the accompanying consolidated balance sheets: (In Thousands) Restructuring expenses: Severance $3,003 Facility 613 Relocation 160 ------ 3,776 Less cash outlays 1,849 ------ Accrual at June 30, 2001 $1,927 ====== As a result of the completion of the transactions described above, the operating results for the Commercial staffing segment, Robert Walters, Strategic Legal Resources, IntelliMark and ClinForce have been included in discontinued operations in the accompanying consolidated financial statements. Revenues from discontinued operations were $7.7 million for the six months ended June 30, 2001 and were $286.8 million and $574.0 million for the three and six months ended June 30, 2000, respectively. Operating loss from discontinued operations was $1.6 million for the six months ended June 30, 2001 and was $146.4 million and $138.1 million for the three and six months ended June 30, 2000, respectively. 8 Net assets from discontinued operations in the accompanying balance sheets represent the net assets of the discontinued operations for ClinForce as of December 31, 2000. (In Thousands) Accounts receivable, net $ 4,689 Prepaid expenses and other current assets (857) Property and equipment, net 404 Intangible assets, net 11,779 Other assets 30 Accounts payable and accrued liabilities (67) Payroll and related liabilities (1,147) ------- Net assets from discontinued operations $14,831 ======= 5. EXTRAORDINARY ITEM - WAKEFIELD TRAGEDY: -------------------------------------- On December 26, 2000, a tragedy occurred at our Wakefield, Massachusetts office, where seven employees were murdered. As a result of this tragedy, the Wakefield office was closed during the last week of December 2000. From December 2000 through June 30, 2001, we have incurred expenses totaling approximately $0.8 million for items such as legal fees, foundation costs, family and employee counselors, and property and facility expenses. These costs are presented as an extraordinary item, net of insurance proceeds of $0.2 million and the applicable tax effect, in the accompanying consolidated statements of operations. 6. EARNINGS PER COMMON SHARE: ------------------------- A reconciliation of net (loss) income and weighted average shares used in computing basic and diluted earnings per share is as follows:
Three Months Six Months Ended June 30, Ended June 30, 2001 2000 2001 2000 -------- -------- --------- -------- (In Thousands, Except Per Share Data) Basic earnings per share: Net (loss) income applicable to common shares ($ 1,281) ($106,777) $ 3,396 ($104,846) ======= ======== ======= ======== Weighted average common shares outstanding 11,700 29,526 14,098 29,494 ======= ======== ======= ======== Basic earnings per share of common stock ($ 0.11) ($ 3.62) $ 0.24 ($ 3.55) ======= ======== ======= ======== Diluted earnings per share: Net (loss) income applicable to common shares ($ 1,281) ($106,777) $ 3,396 ($104,846) ======= ======== ======= ======== Weighted average common shares outstanding 11,700 29,526 14,098 29,494 Dilutive effect of stock options - 30 - 78 ------- -------- ------- -------- Weighted average common shares, assuming dilutive effect of stock options 11,700 29,556 14,098 29,572 ======= ======== ======= ======== Diluted earnings per share of common stock ($ 0.11) ($ 3.61) $ 0.24 ($ 3.55) ======= ======== ======= ========
Options to purchase approximately 4.5 million shares of common stock were outstanding during the three and six months ended June 30, 2001, but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of our common shares. The prices of these options ranging from $4.22 to $39.63 per share for the three months ended June 30, 2001 and from $4.58 to $39.63 for the six months ended June 30, 2001. These options were still outstanding as of June 30, 2001. 9 Options to purchase approximately 3.1 million shares of common stock (at prices ranging from $6.38 to $40.75 per share) and 2.4 million shares of common stock (at prices ranging from $7.63 to $40.75 per share) were outstanding during the three and six months ended June 30, 2000, respectively, but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of our common shares. Options outstanding under the Amended and Restated 1996 Edgewater Stock Option Plan (the "Plan") vested 100% upon the closing of the Transaction as this constituted a "Change in Control" as defined in the Plan, except for 1.1 million stock options granted under the Plan to officers of our eSolutions subsidiary in August 2000. Although most options expire ten years from the date of grant, approximately 1.4 million options held by employees of the Commercial segment and IntelliMark were terminated on April 16, 2001, which was 30 days following the "Change in Control." Employees of ClinForce hold approximately 0.1 million options, which terminated on June 14, 2001, which was 90 days following the "Change in Control." 7. SEGMENT INFORMATION: ------------------- As a result of the divestiture transactions described in Note 4, our eSolutions division now represents our only segment of business, therefore no segment data has been provided. 8. RELATED PARTY: ------------- Synapse Group, Inc., one of our significant customers discussed in Note 9, is considered a related party as their President and Chief Executive Officer Michael Loeb is also a member of our Board of Directors. As of June 30, 2001, we maintained an accounts receivable balance of $2.8 million from Synapse Group, Inc. Subsequent to June 30, 2001, this balance was reduced by payments of $0.9 million and the balance of this account remains on customary business terms. 9. SIGNIFICANT CUSTOMERS: --------------------- The following table summarizes the revenue and accounts receivable from customers in excess of 10% of reported amounts for the periods presented: Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2001 2000 2001 2000 ------- -------- --------- -------- Revenue Synapse Group, Inc. 40.1% 26.7% 35.6% 27.9% Robert Walters 12.4% - 12.2% - Cobb Vantress 10.1% - - - HomeRuns.com - 22.3% - 20.0% American Student Assistance - 19.7% - 20.6% June 30, December 31, 2001 2000 ------------------ ------------------ Accounts Receivable Synapse Group, Inc. 49.3% 36.9% Robert Walters 15.6% - HomeRuns.com - 16.5% American Student Assistance - 10.3% 10 10. NEW ACCOUNTING PRONOUNCEMENTS: ----------------------------- In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", which improves the transparency of the accounting and reporting for business combinations by requiring that all business combinations be accounted for under the purchase method of accounting. This statement is effective for all business combinations initiated after June 30, 2001. In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." This statement applies to intangibles and goodwill acquired after June 30, 2001, as well as goodwill and intangibles previously acquired. Under this statement, goodwill, as well as other intangibles determined to have an infinite life, will no longer be amortized; however, these assets will be reviewed for impairment on a periodic basis. This statement becomes effective January 1, 2002. Accordingly, at the end of our fiscal year December 31, 2001, we will discontinue amortizing our intangible assets and will periodically review the assets for impairment. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Business Overview We are an e-business consulting and systems integration firm that specializes in providing middle-market companies with tailored solutions for today's Internet-centric environment. With approximately 220 employees, Edgewater operates eSolutions centers located in Massachusetts, New Hampshire, Arkansas, Minnesota and North Carolina. We focus on helping customers increase market competitiveness, improve customer business productivity, and reduce operational costs through implementation of business strategies utilizing the Internet and other technologies. Edgewater custom develops systems that allow our customers to improve and expedite the processing and delivery of information to end users, allowing for quicker implementation of business strategies, easier adaptation to change, and effective delivery of results. Edgewater offers an end-to-end platform of e-business solutions to help organizations tackle the barriers of technology transition, including: (1) Strategy -- consulting services to aid customers in translating business goals into eSolutions strategies by taking full advantage of Internet technologies. Strategy services include analyzing a customer's market, business processes and existing technology infrastructure, evaluating both packaged and custom alternative solutions and formulating recommendations for a solution or strategy. Edgewater then provides a tactical road map that customers can implement immediately. (2) Solutions -- designing, building, and deploying large-scale enterprise-wide systems. eSolutions services include developing and implementing custom applications as well as "blend-in" packaged applications to create flexible, scalable custom solutions that integrate a customer's Web presences, customer service and back-office legacy systems into e-business applications. (3) Support -- providing a spectrum of post-deployment support services, including Internet application outsourcing, site maintenance and 7x24 hour monitoring. Since its inception in 1992, Edgewater has continually focused on five key core values: (1) Excellence in Execution -- successfully developing and deploying custom solutions that meet customers' needs; (2) Maintaining Strong Operational Metrics -- building a growing organization with formal processes to drive operational excellence and sustain strong metrics; (3) Middle Market Focus -- positioning Edgewater service offerings to middle market companies, or divisions of companies, with annual revenues of between $50 million and $1 billion and organizations in under-served smaller cities through strategically positioned regional solutions centers; (4) Vertical Expertise -- integrating our business and technology skills to create competitive advantages for our customers among a multitude of industries; and (5) Technology Excellence -- utilizing innovative technology to build and deploy complex and scalable high-volume systems. 12 Discontinued Operations Our restructuring included the following sale transactions: . On June 28, 2000, pursuant to a Purchase Agreement dated May 16, 2000 with Stephens Group, Inc., we sold all of our subsidiaries, and the assets and liabilities of our Commercial segment to affiliate entities of the Stephens Group, Inc. As consideration, we received gross proceeds of $190.1 million in cash before fees, expenses and taxes. As part of the transaction, we sold the name "StaffMark" as that was the name used by the Commercial segment. As a result of the transaction, we changed our name from "StaffMark, Inc." to "Edgewater Technology, Inc." and our stock symbol from "STAF" to "EDGW." The proceeds from this transaction were used to repay a portion of our outstanding borrowings under our credit facility. . On July 13, 2000, we sold, through two indirect wholly-owned subsidiaries, all of our equity interest in Robert Walters through an initial public offering on the London Stock Exchange. Robert Walters had previously been the finance and accounting placement and staffing consultancy platform within our Professional/IT segment. Our two subsidiaries sold 67.2 million ordinary shares at a price of 170 pence per share (or $2.57 at then current exchange rates). The shares began trading on a conditional basis on the London Stock Exchange on July 6, 2000. On July 14, 2000, the underwriters exercised the over-allotment of 10.4 million ordinary shares. Our share of offering gross proceeds, including the exercise of the over-allotment option, was $199.2 million prior to offering commissions, fees and expenses. After repaying the remaining outstanding borrowings under our credit facility, approximately $90 million was invested in short-term securities. . On September 22, 2000, we sold all of the outstanding stock of Strategic Legal Resources, the legal staffing division within our Professional/IT segment, to a company owned by a group of investors including MidMark Capital II, L.P. and Edwardstone & Company for $13.25 million, of which $4.25 million was represented by a promissory note that was collected in January 2001. . On November 16, 2000, we sold all of the outstanding shares of stock of our subsidiaries that comprised IntelliMark, our IT staffing and solutions division, to IM Acquisition, Inc., an affiliate of Charlesbank Equity Fund V Limited Partnership, for $40.2 million in cash, which consisted of $42.7 million paid at the closing date less a $2.5 million post-closing working capital adjustment paid to IM Acquisition, Inc. in April 2001. . On December 15, 2000, we executed a definitive agreement to sell ClinForce, our clinical trials support services division, to Cross Country TravCorps, Inc. for approximately $31.0 million in cash, subject to potential upward or downward post-closing working capital adjustments (the "Transaction"). As the closing of the Transaction was conditioned upon our receipt of stockholder approval and the satisfaction of other customary conditions to closing, we held a Special Stockholders' Meeting on March 14, 2001, where our stockholders approved the Transaction. We consummated the Transaction and received proceeds on March 16, 2001. On July 18, 2001, we received approximately $1.4 million from Cross Country TravCorps, Inc. with respect to the post-closing working capital purchase price adjustment. In accordance with Emerging Issues Task Force No. 95-18, we have reported ClinForce's operating results in discontinued operations for the periods presented. In addition, nonrecurring restructuring charges relating to the closing of our corporate headquarters (in Fayetteville, Arkansas) have been included, as a result of the sale of ClinForce and consistent with the treatment of ClinForce results, as a part of discontinued operations. As a result of the completion of the above sale transactions, the operating results for the Commercial segment, Robert Walters, Strategic Legal Resources, IntelliMark and ClinForce have been included in discontinued operations in the accompanying financial statements. Revenues from discontinued operations were $7.7 million for the six months ended June 30, 2001 and were $286.8 million and $574.0 million for the three and six months ended June 30, 2000, respectively. Operating loss from discontinued operations was $1.6 million for the six months ended June 30, 2001 and was $146.4 million and $138.1 million for the three and six months ended June 30, 2000, respectively. 13 Background Revenues pursuant to time and materials contracts are generally recognized as services are provided. Revenues pursuant to fixed-fee contracts are generally recognized as services are rendered using the percentage-of-completion method of accounting. 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 use of estimates of resources required to complete ongoing projects, general economic conditions and other factors. Certain significant estimates include percentage of completion estimates used for fixed price contracts and the allowance for doubtful accounts. These items are frequently monitored and analyzed by management for changes in facts and circumstances and material changes in these estimates could occur in the future. Gross profit reflects revenues less direct consultant expenses whether or not the consultant's time is billed to a client. Gross margin is affected by the number of workdays in a period and consultant utilization. Any significant decline in fees billed to clients or the loss of a significant client would adversely affect our revenues, gross margins and net earnings. Selling, general and administrative expenses consist of sales and marketing, recruiting, human resources, and administration salaries, commissions and related expenses, office facilities, computer system expenditures, professional fees, promotional expenses, and other general corporate expenses. Financial Information The financial information provided below has been rounded in order to simplify its presentation. The amounts and percentages below have been calculated using the detailed financial information contained in the audited financial statements, the notes thereto and the other financial data included in this Quarterly Report on Form 10-Q. Earnings before interest, taxes, depreciation and amortization ("EBITDA") is included in the following discussion because we believe the year-to-year change in EBITDA is a meaningful measure since the non-cash expenses of depreciation and amortization have a significant impact on operating (loss) income and operating margins. EBITDA should not be construed as an alternative measure of the amount of our income or cash flows from operating activities as EBITDA excludes certain significant costs of doing business. Results For The Three Months Ended June 30, 2001 Compared To Results For The Three Months Ended June 30, 2000 Revenues. Revenues decreased $1.3 million, or 15.6%, to $6.7 million for the three months ended June 30, 2001 compared to $8.0 million for the three months ended June 30, 2000. Revenues decreased $0.6 million, or 4.0%, to $14.5 million for the six months ended June 30, 2001 compared to $15.1 million for the six months ended June 30, 2000. Revenues decreased primarily due to an economic slowdown that has affected spending for information technology services resulting in postponed or delayed projects. Additionally, we estimate that approximately $0.4 million of revenues were lost during the six months ended June 30, 2001 as a result of the Wakefield tragedy. Our current project backlog at June 30, 2001 was $17.9 million, an increase of 14.2% over the same period last year. This current backlog includes $11.2 million of projects for 2002. Gross Profit. Gross profit decreased $1.6 million, or 37.6%, to $2.6 million for the three months ended June 30, 2001 compared to $4.2 million for the three months ended June 30, 2000. Gross profit decreased $1.8 million, or 22.6%, to $6.2 million for the six months ended June 30, 2001 compared to $8.0 million for the six months ended June 30, 2000. Gross profit as a percentage of revenue decreased from 53.2% in the second quarter of 2000 to 39.4% in the second quarter 2001. Gross margin was 42.7% and 52.9% for the six months ended June 30, 2001 and 2000, respectively. Utilization rates have declined from over 80% on a historical basis to 72% during the current quarter, resulting in lower gross profit and gross margin as compared to previous periods. This decrease is primarily the result of lower revenues and the planned retention of our non- utilized consultant base in order to provide for future growth. 14 SG&A. Selling, general and administrative expenses ("SG&A") decreased $1.0 million, or 28.1%, to $2.6 million for the three months ended June 30, 2001 compared to $3.6 million for the three months ended June 30, 2000. SG&A decreased $0.7 million, or 11.0%, to $6.1 million for the six months ended June 30, 2001 compared to $6.8 million for the six months ended June 30, 2000. SG&A as a percentage of revenue was 38.9% and 45.6% for the three months ended June 30, 2001 and 2000, respectively, and was 41.9% and 45.2% for the six months ended June 30, 2001 and 2000, respectively. SG&A decreased primarily as a result of our corporate downsizing, which was due to the divestiture of our non-eSolutions businesses and divisions. EBITDA. EBITDA decreased $0.6 million to $36,000 for the three months ended June 30, 2001 as compared to $0.6 million for the same period in 2000. EBITDA decreased $1.1 million to $0.1 million for the six months ended June 30, 2001 as compared to $1.2 million for the comparable period in 2000. EBITDA as a percentage of revenues was 0.5% and 7.7% for the three months ended June 30, 2001 and 2000, respectively, and was 0.8% and 7.7% for the six months ended June 30, 2001 and 2000, respectively. The decrease in EBITDA and EBITDA margins is primarily the result of the economic slowdown, which resulted in lower revenues, and our planned retention of non-utilized consultant base. EBITDA and EBITDA margins were also impacted by the revenues lost due to the Wakefield tragedy, offset by decreased SG&A as described above. As our consultant costs are relatively fixed, the loss of revenue resulting from the Wakefield tragedy directly affects our gross profit, EBITDA and operating loss results. Depreciation and Amortization Expense. Depreciation and amortization expense increased $0.3 million to $1.4 million for the second quarter of 2001 as compared to $1.1 million for the same period last year. Depreciation and amortization expense increased $0.6 million to $2.8 million for the six months ended June 30, 2001 as compared to $2.2 million for the six months ended June 30, 2000. These increases are a result of our reallocation of Edgewater's purchase price between goodwill and intangible assets during the fall of 2000. In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." Under this statement, goodwill, as well as other intangibles determined to have an infinite life, will no longer be amortized; however, these assets will be reviewed for impairment on a periodic basis. This statement is effective beginning January 1, 2002. Accordingly, at the end of our fiscal year December 31, 2001, we will discontinue amortizing our intangible assets and will periodically review the assets for impairment. Operating Loss. Operating loss increased $0.9 million to $1.4 million for the three months ended June 30, 2001 compared to $0.5 million for the same period last year. Operating loss increased $1.6 million to $2.6 million for the six months ended June 30, 2001 compared to $1.0 million for the comparable period in 2000. Operating losses increased from the prior year primarily due to lower revenues and gross profit affected by the delay in spending for information technology services, as well as higher amortization expense. Interest Income (Expense) and Other, Net. We earned net interest income of $0.4 million and $1.4 million for the three and six months ended June 30, 2001, respectively, as compared to the incurrence of interest expense of $0.3 million and $0.6 million for the three and six months ended June 30, 2000, respectively. Interest expense in 2000 was primarily related to borrowings on our credit facility to fund working capital requirements, the cash portion of our acquisitions and additions to property and equipment. Using the proceeds from the sale of our various divisions, all borrowings were repaid in July 2000 and excess cash amounts have been placed in short-term investments, used to fund the Tender Offer, repurchase shares of our common stock under our stock purchase program and for general corporate purposes. Interest income is primarily related to interest generated from the investment of excess cash amounts. Net Loss From Continuing Operations. Net loss from continuing operations increased $0.5 million, to $1.0 million for the three months ended June 30, 2001 as compared to $0.5 million for the three months ended June 30, 2000. Net loss from continuing operations increased $0.6 million, or 52.7%, to $1.7 million for the six months ended June 30, 2001 as compared to $1.1 million for the comparable period in 2000. Net margin from continuing operations was (14.9%) and (6.2%) for the three months ended June 30, 2001 and 2000, respectively, and was (11.6%) and (7.3%) for the six months ended June 30, 2001 and 2000, respectively. In addition to the matters discussed above, the net losses from continuing operations in the current year were negatively affected by the tax provisions of $0.1 million and $0.4 million for the three and six months ended June 30, 2001, which is the result of 15 non-deductible goodwill amortization. These taxes will not be paid out in cash as we will utilize net operating loss carryforwards to offset taxable income. Our tax losses relate to the sale of our non-eSolutions businesses and divisions and resulted in a deferred tax asset of $23.8 million for use to offset taxable income in future years and a current tax receivable of approximately $16.1 million relating to carryback claims to recover taxes paid in 1998 and 1999. Liquidity and Capital Resources Our primary historical sources of funds are from operations, the proceeds from securities offerings and borrowings under our former credit facility with a consortium of banks. Our principal historical uses of cash have been to fund acquisitions, working capital requirements and capital expenditures. We generally pay our consultants and associates bi-weekly for their services, while receiving payments from customers 30 to 60 days from the date of the invoice. The gross proceeds from the Commercial segment and Robert Walters transactions were used to repay our outstanding borrowings under the credit facility of approximately $288 million. The remaining transaction proceeds were invested in cash and short-term marketable securities and were used to fund the Tender Offer, repurchase shares of our common stock under our stock purchase program and for general corporate purposes. In July 2000, the Board of Directors authorized management, subject to legal requirements, to use up to $30 million to repurchase our common stock over the following twelve months (which has been extended by the Board of Directors). Repurchases have been and will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market. Under this program during 2000, we repurchased 944,000 shares of our common stock for approximately $6.2 million. From January 1, 2001 through July 27, 2001, we repurchased 854,200 shares of our common stock for approximately $3.5 million . The credit facility was secured by all of the issued and outstanding capital stock of our domestic subsidiaries and 65% of the issued and outstanding capital stock of our first-tier foreign subsidiaries. Interest on any borrowings was computed at our option of either the bank group's prime rate or the London interbank offered rate, incrementally adjusted based on our operating leverage ratios. We paid a quarterly facility fee determined by multiplying the total amount of the credit facility by a percentage, which varied based on our operating leverage ratios. Under the credit facility, we had net payments of $194.2 million and $200.1 million for the three and six months ended June 30, 2000, respectively. In July 2000, we paid-off all of our outstanding borrowings under the credit facility and terminated the credit facility. Net cash provided by continuing operating activities was $1.2 million and $0.9 million for the three and six months ended June 30, 2001, respectively, while net cash provided by continuing operating activities was $6.5 million and $5.3 million for the three and six months ended June 30, 2000, respectively. The net cash provided by continuing operating activities for the periods presented was primarily attributable to net (loss) income and changes in operating assets and liabilities. Excluding the receipt and payment of nonrecurring items (such as the Wakefield tragedy), net cash provided by continuing operations was $1.2 million and $1.3 million for the three and six months ended June 30, 2001, respectively. Net cash (used in) provided by continuing investing activities was ($0.3) million and $33.5 million for the three and six months ended June 30, 2001, respectively, while net cash provided by continuing investing activities was $203.3 million and $202.9 million for the three and six months ended June 30, 2000, respectively. Cash provided by continuing investing activities was primarily attributable to the proceeds from the sale of our various non-eSolutions divisions. Cash used in continuing investing activities was primarily attributable to cash paid for contingent consideration for acquisitions completed during prior periods as well as capital expenditures. 16 Net cash used in continuing financing activities was $1.3 million and $134.4 million for the three and six months ended June 30, 2001, respectively, while net cash used in continuing financing activities was $194.1 million and $200.1 million for the three and six months ended June 30, 2000, respectively. For the six months ended June 30, 2001, cash used in continuing financing activities was primarily related to the Tender Offer in January 2001 to repurchase 16.25 million shares of common stock. For the three and six months ended June 30, 2000, cash provided by financing activities was primarily related to borrowings under our credit facility to finance several of the acquisitions and contingent consideration payments completed during these periods. As a result of the above, and as a result of cash flows from discontinued operations, our combined cash and cash equivalents decreased $9.0 million and $110.6 million in the three and six months ended June 30, 2001, respectively, while increasing $0.1 million in the three months ended June 30, 2000 and decreasing $3.4 million in the six months ended June 30, 2000. We believe that our cash flows from operations and available cash will provide sufficient liquidity for our existing operations for the foreseeable future. We periodically reassess the adequacy of our liquidity position, taking into consideration current and anticipated operating cash flow, anticipated capital expenditures, business combinations, and public or private offerings of debt or equity securities. Special Note Regarding Forward Looking Statements Some of the statements in this Quarterly Report on Form 10-Q (this "10-Q") constitute forward-looking statements under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements made with respect to the corporate headquarters move, competitive and strategic initiatives, potential stock repurchases, future results, tax consequences, liquidity needs and restructuring efforts. These statements involve known and unknown risks, uncertainties and other factors that may cause results, levels of activity, growth, performance, tax consequences or achievements to be materially different from any future results, levels of activity, growth, performance, tax consequences or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, those listed below, as well as those listed under "Business - Factors Affecting Finances, Business Prospects and Stock Volatility" and elsewhere in our 2000 Annual Report on Form 10-K as filed with the SEC on March 30, 2001. The forward-looking statements included in this Form 10-Q relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "continue," "believe," "enable" "will," "provide," "anticipate," "future," "could," "growth," "increase," "modifying," "reacting," or the negative of such terms or comparable terminology. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on our current plans or assessments which are believed to be reasonable as of the date of this 10-Q. Factors that may cause actual results, financial statement effects, disposition plans or proceeds, goals, targets, objectives or repurchases to differ materially from those contemplated, projected, forecast, estimated, anticipated, planned or budgeted in such forward-looking statements include, among others, the following possibilities: (1) potential miscalculations of the capital requirements and growth of our eSolutions business; (2) inability to execute upon growth objectives; (3) changes in industry trends, such as decline in the demand for Solutions, Strategy and Support services; (4) failure to obtain new customers or retain significant existing customers; (5) loss of key executives; (6) general economic and business conditions (whether foreign, national, state or local) which include, but are not limited to, slowdown in information technology services spending by companies or changes in interest or currently exchange rates; (7) failure of the middle market and the needs of middle market enterprises for e-business services to develop as anticipated; (8) inability to recruit and retain professionals with the high level of information technology skills and experience needed to provide our services; (9) the inability to collect the $16.1 million receivable relating to the use of net operating losses to recover prior years' taxes; and/or (10) any changes in ownership that would result in a limitation on the use of the net operating loss carry-forward under applicable tax laws, which is referred to as a deferred tax asset of approximately $23.8 million in this Form 10-Q. Actual events or results may differ materially. These factors may cause our actual results to differ materially from any forward-looking statements. 17 Although we believe that the expectations in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, growth, earnings per share or achievements. However, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We are under no duty to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None PART II ITEM 1. LEGAL PROCEEDINGS We have been subject to a number of stockholder lawsuits alleging that we and one of our officer/directors violated federal securities laws. Such actions were consolidated into one action in United States District Court for the Eastern District of Arkansas (the "Court"). On January 11, 2000, the plaintiffs amended their complaint, which superseded all other complaints. The amended complaint named us and one of our officer/directors as defendants. We filed a motion to dismiss this amended consolidated complaint. On June 29, 2000, the Court issued a Memorandum Opinion and Order (the "Order") dismissing most of the allegations in the consolidated complaint. As to the remaining allegations in the consolidated complaint, following the Order, on July 12, 2000, we filed a motion for partial reconsideration to dismiss the remaining allegations in the consolidated complaint. The lead plaintiffs filed a response to our partial reconsideration motion on July 24, 2000 and we filed a reply motion to the response by the lead plaintiffs on July 26, 2000. On November 27, 2000, the Court granted our motion for partial reconsideration and dismissed all of the remaining allegations in the complaint. The lead plaintiffs filed a motion for reconsideration on December 11, 2000. We filed a response to the lead plaintiffs' motion for reconsideration on December 20, 2000. On January 9, 2001, the Court rejected the lead plaintiffs' request for reconsideration resulting in the entire consolidated complaint being dismissed by the Court. On February 9, 2001, the lead plaintiffs appealed the dismissal of the consolidated complaint by the Court to the Eighth Circuit Court of Appeals (the "Eighth Circuit Court") in St. Louis, Missouri. However, on April 24, 2001, the lead plaintiffs dismissed their appeal to the Eighth Circuit Court and on May 30, 2001, the Eighth Circuit Court issued an order dismissing the plaintiffs' appeal. In light of the order of dismissal by the Eighth Circuit Court and the dismissal of the consolidated complaint by the Court, this litigation matter has been concluded without our company or any of our officers or directors having any responsibility, obligation or liability as to this matter. We also are a party to litigation incidental to our business. We believe that these routine legal proceedings will not have a material adverse effect on the results of operations or financial condition. We maintain insurance in amounts, with coverages and deductibles, that we believe are reasonable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS We held our 2001 Annual Meeting of Stockholders on June 6, 2001 (the "Meeting"). Our stockholders elected six (6) directors to serve until the 2002 Annual Meeting or until their successors are duly elected and qualified. Of the 11,660,816 shares of outstanding common stock entitled to vote at the Meeting, 10,105,800 shares, or approximately 86.7% of the shares entitled to vote, were represented either in person or by proxy at the Meeting. The stockholders voted on and approved the matter described below, with the voting results therein noted at the Meeting: 18 Election of Directors -------------------------------------------------------------- Authority Name For Withheld ------------------------- ------------- ------------ Clete T. Brewer 9,208,815 896,985 Shirley Singleton 9,302,865 784,935 William J. Lynch 9,377,367 728,433 Charles A. Sanders, M.D. 9,399,754 706,046 Bob L. Martin 9,401,844 703,956 Michael R. Loeb 9,320,865 784,935 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11.1 Statement re: computation of per share earnings, reference is made to Note 6 of the Edgewater Technology, Inc. Consolidated Financial Statements contained in this Form 10-Q. 10.45 Employment Agreement dated as of April 14, 2000 by and between Shirley Singleton and Edgewater Technology (Delaware), Inc. 10.46 Employment Agreement dated as of April 14, 2000 by and between David Clancey and Edgewater Technology (Delaware), Inc. 99.1 Press Release dated as of May 30, 2001 announcing the dismissal of the securities litigation matter. (b) Reports on Form 8-K 1. A Form 8-K was filed with the SEC on April 2, 2001 relating to the sale of our ClinForce division. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EDGEWATER TECHNOLOGY, INC. Date: July 27, 2001 /s/ CLETE T. BREWER ------------------------------------ Clete T. Brewer Chief Executive Officer and Chairman Date: July 27, 2001 /s/ TERRY C. BELLORA ------------------------------------ Terry C. Bellora Chief Financial Officer 19 EX-10.45 2 dex1045.txt EMPLOYMENT AGREEMENT APRIL 14, 2000 Exhibit 10.45 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of April 14, 2000, among Edgewater Technology (Delaware), Inc., a Delaware corporation (hereinafter referred to as the "Company" or "Edgewater"), and Shirley Singleton (hereinafter referred to as "Employee"). WITNESSETH WHEREAS, in the course of building the business of Edgewater, and in her capacity as an executive officer thereof, Employee will be engaged in a confidential relationship and will gain knowledge of the business, affairs, customers and methods of Edgewater and each of Edgewater's direct and indirect subsidiaries during her employment with Edgewater and will have access to lists of Edgewater's and its Subsidiaries' customers and their needs, and will become personally known to and acquainted with Edgewater's and its Subsidiaries' customers, thereby establishing a personal relationship with such customers for the benefit of Edgewater; and WHEREAS, the corporate party being duly authorized hereto by its board of directors and the individual having the requisite capacity and authority, desire to enter into this Agreement to reflect the foregoing, and for other purposes as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. TERM OF AGREEMENT. The term of this Agreement shall commence on the date hereof and shall continue until March 1, 2003, unless terminated sooner in accordance with Sections 5 or 6 hereof. During the term of this Agreement, the calendar year shall be referred to herein as a "Compensation Year." 2. DUTIES AND PERFORMANCE. (a) During the term of this Agreement, Employee shall be employed by the Company on a full-time basis as Chief Executive Officer of Edgewater and shall have such authority and shall perform such duties consistent with her position as may be reasonably assigned to her by, and shall report to, the Board of Directors. Employee shall use all reasonable efforts to further the interests of Edgewater and shall devote substantially all of her business time and attentions to her duties hereunder; provided, however, that Employee shall not be prohibited from making investments of a passive nature (other than investment in more than five percent (5%) of the outstanding shares of companies engaged in competition with Edgewater) and devoting time to non-business related ventures, such as real estate investments, so long as such activities do not prevent or materially interfere with Employee's performance of her obligations hereunder. At all times during the term of this Agreement, Employee's office and the base from which she primarily performs her duties hereunder shall be located at the Company's offices which shall not be located more than twenty (20) miles from Wakefield, Massachusetts, unless otherwise agreed to by Employee. (b) Employee shall be entitled to be reimbursed in accordance with the policies of Edgewater, as adopted and amended from time to time, for all reasonable and necessary expenses incurred by her in connection with the performance of her duties of employment hereunder; provided Employee shall, as a condition of such reimbursement, submit verification of the nature and amount of such expenses in accordance with the reimbursement policies from time to time adopted by Edgewater. 3. COMPENSATION. 3.1 Base Salary. Edgewater shall pay to Employee a base salary at the ----------- rate of $200,000 per annum through the expiration of the term of the Agreement, payable bi-weekly as per normal pay practices 1 of the Company. Such base salary shall be subject to increase based upon review by the Board of Directors of the Company from time to time. 3.2 Stock Options. Employee is hereby granted options (the "Options") ------------- to purchase 400,000 shares of Common Stock of Edgewater at a per share price of $6.00. The Options to purchase twenty percent (20%) of the underlying shares of Common Stock shall vest on the date of this Agreement; an additional twenty percent (20%) shall vest on the first anniversary of this Agreement; and an additional thirty percent (30%) shall vest on each of the second and third anniversaries of the date of this Agreement, such that all of the underlying shares of Common Stock shall vest by the third anniversary of the date of this Agreement. All terms and conditions shall be subject to the Company's 2000 Stock Option Plan adopted February 26, 2000 (the "Plan"); provided; however, that such options shall fully vest and become exercisable upon a "Change in Control" as defined in the Plan. 3.3 Bonus. The Employee shall be entitled to receive an annual bonus ----- of up to 100% of Employee's base salary for each calendar year and up to 100,000 additional Options for the period ended December 31, 2000, based on targeted budget performance and other performance measures which are detailed on Exhibit A and such agreements, terms and conditions on Exhibit --------- ------- A shall be incorporated herein. Any additional Options granted for calendar - year 2000 performance, pursuant to this Section 3.3, shall be issued at a strike price equivalent to the fair market value of the share price of the underlying common stock of the Company at the time of grant and shall vest on the same schedule as the Options described in Section 3.2 hereof. In addition, Employee may earn up to 100,000 additional options for each of the periods ending December 31, 2001 and December 31, 2002, based on targeted budget performance and other performance measures which shall be agreed to by the parties after the date hereof and detailed on Exhibit B, and such agreements, terms and conditions on Exhibit B shall be incorporated herein. 4. BENEFITS. (b) (a) The Employee shall be entitled annually to four (4) weeks vacation and shall be entitled to accrued vacation consistent with Employee's existing employment agreement. During the Term of this Agreement, the Company shall pay for the lease, insurance and maintenance expenses with respect to a car leased by the Employee (or a comparable car) consistent with Employee's existing employment agreement. The Employee shall be entitled, if eligible and selected for participation in accordance with the terms thereof, to participate in any insurance, stock purchase, or other benefit plan of the Company or StaffMark now existing or hereafter adopted as offered to other employees of the Company similarly situated. Nothing herein contained shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligation under this Agreement. The Company will provide the Employee with prompt reimbursement for all reasonable business expenses incurred in the performance of the Employee's duties pursuant to this Agreement subject to the Employee's provision of receipts for such expenses, to the Company. 5. TERMINATION OF AGREEMENT. (a) The Company shall be entitled to terminate Employee's services, in any of the following circumstances: (i) For "cause," which shall mean by reason of any of the following: (A) the Employee's material breach of any provision of Section 7 of this Agreement; (B) the final written determination by the Board of Directors of the Company after 30 days notice to the Employee and the opportunity for the Employee to be heard by the Board of Directors regarding the Employee's willful failure and refusal to comply with the material and reasonable directives of the Company; (C) the Employee's willful and repeated failure to perform the duties for which the Employee has been provided with written notice of nonperformance and for which the Employee has been provided with thirty (30) days to cure such nonperformance; (D) the Employee's gross negligence or willful or intentional misconduct; (E) final written determination after thirty (30) days notice to the Employee and the opportunity for the Employee to be 2 heard by the Board of Directors of the Company in respect of the Employee's breach of her fiduciary duties to the Company; or (F) the conviction of, or the entering of a guilty plea or plea of no contest with respect to, a felony with respect to the Employee, or any other criminal activity which materially affects the Employee's ability to perform her duties or materially harms the reputation of the Company. (ii) If, during the Term, in the opinion of the Company, the Employee because of physical or mental illness or incapacity shall be unable for any reason to substantially perform all of her duties and responsibilities under this Agreement for a period of one hundred and eighty (180) days in the aggregate in any twelve (12) month period ("Disability"); provided that the Company shall give Employee at least ten (10) days prior written notice of its intention to terminate this Agreement, as of the date set forth in the notice, at any time after the expiration of such one hundred and eighty (180) day period. In case of termination for Disability, the Employee shall be entitled to receive salary, benefits, and reimbursable expenses owing the Employee through the date of termination.; or (iii) The death of Employee. In case of death during the Term, the Company's obligations hereunder shall terminate on the date death occurs, except as to compensation and other benefits previously earned through and until such date. (b) Except as provided in Section 6 hereof, in the event of the termination of Employee's employment: (i) For cause, or in the event of the resignation of Employee (excluding circumstances involving Good Reason, as defined below), then as of the date of such termination all of the Company's obligations hereunder, including, without limitation, the Company's obligations to pay Employee's base salary accruing after the date of such termination, and any benefits (except as otherwise required by applicable law), other than those obligations which have accrued but remain unpaid as of the date of such termination (such as accrued but unpaid salary, any accrued but unpaid bonus, expense reimbursements, health insurance premiums, retirement plan contributions, if any, vacation pay, sick pay, etc.), and all of the Employee's obligations hereunder except with respect to Section 7 below, shall cease and Employee shall not be entitled to receive any incentive compensation for the Compensation Year of such termination; or (ii) By the Company for any other reason other than for the reasons set forth in clause (i) above, or by Employee for Good Reason (as defined below), then in such event: (a) Employee shall receive from the Company two payments, each equal to one-half of the following: the amount of Employee's base salary (without offset for any compensation received by Employee from any subsequent employment by any person other than by any affiliate of the Company or in violation of Section 7 of this Agreement) provided, however, that in the event the Company intends to offset against any such severance payment as the result of any alleged violation of Section 7 by the Employee, the Company shall place in escrow the amount of any such offset with an escrow agent reasonably acceptable to Employee and Employee's legal counsel pending a final non-appealable determination by a court of competent jurisdiction as to whether Employee has indeed violated Section 7 of this Agreement for a period which is the greater of (A) sixty (60) days from the date of such termination, or (B) the lesser of two years or the remaining term of this Agreement. The first payment shall be due on the effective date of termination and the second payment shall be due ninety days after the effective date of termination. Upon the effective date of termination in either case, all Options granted to Employee in Section 3.2 shall become immediately vested and exercisable. Further, any such termination shall operate to shorten the period set forth in Section 7(b) and during which the terms of Section 7 apply to twelve (12) months from the date of termination of employment. In addition, in the case of any such termination, the Company shall continue Employee's health care, life insurance and disability coverage for Employee for the period described in clause (B) of this subparagraph 5(b)(ii), (i) under the terms of the applicable Company sponsored health care plan by which he was covered at the time of such termination of employment, as such plan may be in effect or may be modified from time to time, or (ii) if such Company sponsored health care, life insurance or disability plan does not by its terms allow Employee's participation or continued participation, the Company shall 3 obtain, at the Company's expense, such insurance coverage on behalf of Employee that provides all benefits otherwise provided under such Company sponsored health care, life insurance and disability plans (collectively, "Continued Health Care Coverage"). "Good Reason" shall mean any of the following circumstances unless remedied by the Company within thirty (30) days after receipt of written notification by Employee that such circumstances exist or have occurred: (A) assignment to Employee of any duties inconsistent with Employee's position, authority, duties or responsibilities as contemplated by paragraph 1 of the Agreement or location of employment, or any other action by the Company that results in a material diminution of such position, authority, duties or responsibilities; (B) a material reduction of Employee's compensation and/or benefits; or (C) any material failure by the Company to comply with any of the material provisions of this Agreement. 6. CHANGE IN CONTROL. (a) If Employee's employment with Edgewater is terminated during the term of this Agreement following a Change in Control either by Edgewater which is not for "cause" (as defined in this Agreement) or by the Employee for Good Reason only, (i) Edgewater shall pay Employee a lump sum in the amount of Employee's base salary then in effect (which amount shall in no event be less than the amount of the base salary payment due to Employee under Section 5(b)(ii)(a) above), and her bonus for the year immediately preceding the year in which the termination of employment occurs and such lump sum payment shall be due on the effective date of the termination of Employee's employment; (ii) the provisions of paragraph 5(b)(ii) relating to exercisability of Options and Continued Health Care Coverage shall apply; and (iii) the non-competition provisions of paragraph 7 shall apply for a period of one (1) year from the effective Date of termination. In such event, Employee shall have no further obligations under this Agreement, other than continued compliance with Section 7 hereof, (b) A "Change in Control" shall be deemed to have occurred if: (i) any person, other than StaffMark or an employee benefit plan of StaffMark or Edgewater, acquires directly or indirectly the "beneficial ownership" (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended, "Beneficial Ownership") of any voting security of Edgewater and immediately after such acquisition such person is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding Edgewater voting securities of Edgewater; (ii) the stockholders of Edgewater shall approve a merger or merger agreement involving Edgewater (except into Edgewater's parent in which event this provision shall apply to the parent), a consolidation transaction involving Edgewater, a recapitalization or reorganization of Edgewater, a reverse stock split of outstanding Edgewater voting securities, or the consummation of any such transaction if stockholder approval is not sought nor obtained, provided, -------- however, that the foregoing referenced transactions or events in this clause - ------- (ii) shall not constitute a "Change of Control" if such transaction or event would result in at least 60% of the total voting power represented by outstanding securities of the surviving or resulting entity (immediately after such transaction or event after giving effect to the consideration issued or transferred in such transaction or event on an as-converted or fully-diluted basis) being Beneficially Owned by at least 60% of the holders of outstanding voting securities of Edgewater immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not altered in the transaction in any material way; or (iii) the stockholders of Edgewater shall approve a plan of complete liquidation of Edgewater or an agreement for the sale or disposition by Edgewater of all or a substantial portion of Edgewater's assets (i.e., 50% or more of the total assets of Edgewater). (c) (i) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by Edgewater to or for the benefit of Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), amounts payable or distributable to or for the benefit of the Employee pursuant to this Agreement that are determined to be "parachute payments" within the meaning of Section 280G(b)(2) of the Code (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Agreement Payments") shall not be paid or distributed in the amounts or at the times otherwise required by this Agreement, but shall instead be paid or distributed annually, beginning as of the effective date of the termination of Employee's employment and thereafter on each anniversary thereof, in the maximum substantially equal amounts and over the minimum number of years that are 4 determined to be required to reduce the aggregate present value of Agreement Payments to an amount that will not cause any Payment to be non- deductible under section 280G of the Code. For purposes of this Section 6, present value shall be determined in accordance with section 280G(d)(4) of the Code. (ii) All determinations to be made under this Section 6 (c) shall be made by Edgewater's independent public accountant immediately prior to the Change of Control (the "Accounting Firm"), which firm shall provide its determinations and any supporting calculations both to Edgewater and Employee within 10 days of the effective date of the termination of Employee's employment. Any such determination by the Accounting Firm shall be binding upon Edgewater and Employee. (iii) Within two years after the effective date of the termination of Employee's employment, the Accounting Firm shall review the determination made by it pursuant to paragraph (i), above. If at that time, as a result of the uncertainty in the application of section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, the annual amounts of Agreement Payments or the period over which Agreement Payments are paid or distributed, as determined pursuant to clause (i), above, are determined not to satisfy the requirements of clause (i), then the annual amount of future Agreement Payments and/or the period over which future Agreement Payments are paid or distributed shall be redetermined to satisfy the requirements of clause (i), and all future Agreement Payments shall be paid or distributed in accordance with such redetermination. (iv) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in paragraphs (ii) and (iii) above shall be borne solely by Edgewater. Edgewater agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to paragraphs (ii) and (iii) above, except for claims, damages or expenses resulting from the negligence or misconduct of the Accounting Firm. 7. COVENANT NOT TO COMPETE, CONFIDENTIALITY. (a) Employee acknowledges that in the course of her employment by the Company she has and will become privy to various economic and trade secrets and relationships of the Company and its subsidiaries under its direct control ("Subsidiaries"). Therefore, in consideration of this Agreement, Employee hereby agrees that he will not, directly or indirectly, except for the benefit of the Company or its Subsidiaries, or with the prior written consent of the Board of Directors of the Company, which consent may be granted or withheld at the sole discretion of the Company's Board of Directors: (i) During the Noncompetition Period (as hereinafter defined), become an officer, director, stockholder, partner, member, manager, associate, employee, owner, creditor, independent contractor, co- venturer, consultant or otherwise, or be interested in or associated with any other person, corporation, firm or business engaged in providing software solutions services, including but not limited to, systems integration, custom software development, training, systems support, outsourcing and/or information technology consulting services (an "Edgewater Services Business") within a radius of fifty (50) miles from any office operated during the Noncompetition Period by the Company, or any of its Subsidiaries (collectively, the "Territory") or in any Edgewater Services Business directly competitive with that of the Company, or any of its Subsidiaries, or itself engage in such business; provided, however, that -------- -------- (A) Nothing herein shall be construed to prohibit Employee from owning not more than five percent (5%) of any class of securities issued by an entity which is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or which is traded over the counter; (B) The foregoing shall not restrict Employee with respect to businesses, other than Edgewater Services Businesses, engaged in by the Company or its Subsidiaries during the Noncompetition Period unless Employee either is or was substantially involved 5 in such other businesses of the Company or such Subsidiaries or had access to Confidential Information (as hereinafter defined) with respect to such other businesses; or (C) Nothing herein shall be construed to prohibit Employee from engaging in general business consulting to companies or individuals that (i) do not compete, directly or indirectly, with an Edgewater Services Business or (ii) who are not or have not been customers of Edgewater for a period of one (1) year. Further, nothing herein shall be construed to prohibit Employee from engaging in Edgewater Service Business as an employee of any firm or entity that does not compete directly or indirectly with Edgewater or any of its Subsidiaries and which maintains an internet application, such as a web site, or is engaged in the distribution and sale of software products, provided that the Employee performs such Edgewater Service Business only for that particular firm or entity as an employee thereof and the internet application or software products of such firm or entity are not directly competitive with any Edgewater Service Business conducted by Edgewater or its Subsidiaries. (ii) During the Noncompetition Period, in the Territory, solicit, cause or authorize, directly or indirectly, to be solicited for or on behalf of herself or third parties, from parties who are or were customers of the Company or its Subsidiaries, any Edgewater Services Business transacted by or with such customer by the Company or its Subsidiaries; or (iii) During the Noncompetition Period, in the Territory, accept or cause or authorize, directly or indirectly, to be accepted for or on behalf of herself or for third parties, any such Edgewater Services Business from any such customers of the Company or its Subsidiaries; or (iv) (A) From and after the date hereof and during the Noncompetition Period, use, publish, disseminate or otherwise disclose, directly or indirectly, any information heretofore or hereafter acquired, developed or used by the Company or its Subsidiaries relating to their business or the operations, employees or customers of the Company or its Subsidiaries which constitutes proprietary or confidential information of the Company or its Subsidiaries ("Confidential Information"), including without limitation any Confidential Information contained in any customer lists, mailing lists and sources thereof, statistical data and compilations, patents, copyrights, trademarks, trade names, inventions, formulae, methods, processes, agreements, contracts, manuals or any other documents; provided that the foregoing shall not apply to any Confidential Information which has become part of the common knowledge or understanding in the Edgewater Services Business industry or otherwise in the public domain (other than from disclosure by Employee in violation of this Agreement), any information which is disclosed to the Employee by a third party not under any obligation of confidentially after the Term of this Employment Agreement, or any information which is independently developed by Employee after the Term of this Employment Agreement; provided, however, this -------- ------- subparagraph (iv) shall not be applicable to the extent Employee is required to testify in. a judicial or regulatory proceeding pursuant to the order of a judge or administrative law judge after Employee requests that such Confidential Information be preserved; or (v) During the Noncompetition Period, in the Territory, (A) Solicit, entice, persuade or induce, directly or indirectly, any employee (or person who within the preceding ninety (90) days was an employee) of the Company or its Subsidiaries or any other person who is under contract with or rendering services to the Company or its Subsidiaries, to terminate his or her employment by, or contractual relationship with, such person or to refrain from extending or renewing the same (upon the same or new terms) or to refrain from rendering, services to or for such person or to become employed by or to enter into contractual relations with any persons other than such person or to enter into a relationship with a competitor of the Company or its Subsidiaries; 6 (B) Solicit, induce, attempt to hire, or hire any employee of the Company (or anyone who was an employee of the Company during the preceding ninety (90) days), or assist in such hiring by any other person or business entity; or (C) Authorize or knowingly approve or assist in the taking of any such actions by any person other than the Company or its Subsidiaries. (b) For purposes of this Agreement, the term "Noncompetition Period" shall mean the period commencing on the date hereof and ending twenty-four (24) months after the date Employee ceases to be an officer or employee of, or consultant to the Company or any of its Subsidiaries; provided, however, that the Noncompetition Period shall end one (1) year from the date of termination of the employment of Employee by the Company under this Agreement which is without cause or by the Employee for Good Reason. (c) The invalidity or non-enforceability of this Section 7 in any respect shall not affect the validity or enforceability of this Section 7 in any other respect or of any other provisions of this Agreement. In the event that any provision of this Section 7 shall be held invalid or unenforceable by a court of competent jurisdiction by reason of the Geographic or business scope or the duration thereof, such invalidity or unenforceability shall attach only to the scope or duration of such provision and shall not affect or render invalid or unenforceable any other provision of this Agreement, and, to the fullest extent permitted by law, this Agreement shall be construed as if the geographic or business scope or the duration of such provision had been more narrowly drafted so as not to be invalid or unenforceable and further, to the extent permitted by law, such geographic or business scope or the duration thereof may be re-written by a court of competent jurisdiction to make such sufficiently limited to be enforceable. (d) Employee acknowledges that the Company's remedy at law for any breach of the provisions of this Section 7 is and will be insufficient and inadequate and that the Company shall be entitled to equitable relief, including by way of temporary and permanent injunction, in addition to any remedies the Company may have at law. (e) The provisions of this Section 7 shall survive termination of this Agreement. 8. DIVISIBILITY OF AGREEMENT. In the event that any term, condition or provision of this Agreement is for any reason rendered void, all remaining terms, conditions and provisions shall remain and continue as valid and enforceable obligations of the parties hereto. 9. NOTICES. Any notices or other communications required or permitted to be sent hereunder shall be in writing and shall be duly given if personally delivered or sent postage prepaid by certified or registered mail, return receipt requested, or sent by prepaid overnight courier service, delivery confirmed, as follows: If to Employee: Shirley Singleton 9 Jewett Hill Road Ipswich, MA 01938 If to the Company: Clete T. Brewer Chairman 234 East Millsap Road Fayetteville, Arkansas 72703 Either party may change her or its address for the sending of notice to such party by written notice to the other party sent in accordance with the provisions hereof. 10. COMPLETE AGREEMENT. This Agreement contains the entire understanding of the parties with respect to the employment of Employee (including nonsolicitation and noncompetition agreements) and supersedes 7 all prior arrangements or understandings with respect thereto. This Agreement may not be altered or amended except by a writing, duly executed by the party against whom such alteration or amendment is sought to be enforced. 11. ASSIGNMENT. This Agreement is personal and non-assignable by Employee. It shall inure to the benefit of any corporation or other entity with which the Company shall merge or consolidate or to which the Company shall lease or sell all or substantially all of its assets and may be assigned by the Company to any affiliate of the Company or to any corporation or entity with which such affiliate shall merge or consolidate or which shall lease or acquire all or substantially all of the assets of such affiliate. 12. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. 13. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Delaware IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement in multiple counterparts as of the day and year first above written. EMPLOYEE /s/ Shirley Singleton --------------------- Shirley Singleton /s/ Clete T. Brewer ------------------- Witness EDGEWATER TECHNOLOGY (DELAWARE), INC. By:/s/ Terry C. Bellora ----------------------- Terry C. Bellora Executive Vice President 8 EX-10.46 3 dex1046.txt EMPLOYMENT AGREEMENT DATED APRIL 14, 2000 Exhibit 10.46 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of April 14, 2000, among Edgewater Technology (Delaware), Inc., a Delaware corporation (hereinafter referred to as the "Company" or "Edgewater"), and David Clancey (hereinafter referred to as "Employee"). WITNESSETH WHEREAS, in the course of building the business of Edgewater, and in his capacity as an executive officer thereof, Employee will be engaged in a confidential relationship and will gain knowledge of the business, affairs, customers and methods of Edgewater and each of Edgewater's direct and indirect subsidiaries during his employment with Edgewater and will have access to lists of Edgewater's and its Subsidiaries' customers and their needs, and will become personally known to and acquainted with Edgewater's and its Subsidiaries' customers, thereby establishing a personal relationship with such customers for the benefit of Edgewater; and WHEREAS, the corporate party being duly authorized hereto by its board of directors and the individual having the requisite capacity and authority, desire to enter into this Agreement to reflect the foregoing, and for other purposes as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. TERM OF AGREEMENT. The term of this Agreement shall commence on the date hereof and shall continue until March 1, 2003, unless terminated sooner in accordance with Sections 5 or 6 hereof. During the term of this Agreement, the calendar year shall be referred to herein as a "Compensation Year." 2. DUTIES AND PERFORMANCE. (a) During the term of this Agreement, Employee shall be employed by the Company on a full-time basis as Chief Technology Officer of Edgewater and shall have such authority and shall perform such duties consistent with his position as may be reasonably assigned to him by, and shall report to, the President of the Company. Employee shall use all reasonable efforts to further the interests of Edgewater and shall devote substantially all of his business time and attentions to his duties hereunder; provided, however, that Employee shall not be prohibited from making investments of a passive nature (other than investment in more than five percent (5%) of the outstanding shares of companies engaged in competition with Edgewater) and devoting time to non-business related ventures, such as real estate investments, so long as such activities do not prevent or materially interfere with Employee's performance of his obligations hereunder. At all times during the term of this Agreement, Employee's office and the base from which he primarily performs his duties hereunder shall be located at the Company's offices which shall not be located more than twenty (20) miles from Wakefield, Massachusetts, unless otherwise agreed to by Employee. (b) Employee shall be entitled to be reimbursed in accordance with the policies of Edgewater, as adopted and amended from time to time, for all reasonable and necessary expenses incurred by him in connection with the performance of his duties of employment hereunder; provided Employee shall, as a condition of such reimbursement, submit verification of the nature and amount of such expenses in accordance with the reimbursement policies from time to time adopted by Edgewater. 3. COMPENSATION. 3.1 Base Salary. Edgewater shall pay to Employee a base salary at the ----------- rate of $200,000 per annum through the expiration of the term of the Agreement, payable bi-weekly as per normal pay practices 1 of the Company. Such base salary shall be subject to increase based upon review by the Board of Directors of the Company from time to time. 3.2 Stock Options. Employee is hereby granted options (the "Options") ------------- to purchase 400,000 shares of Common Stock of Edgewater at a per share price of $6.00. The Options to purchase twenty percent (20%) of the underlying shares of Common Stock shall vest on the date of this Agreement; an additional twenty percent (20%) shall vest on the first anniversary of this Agreement; and an additional thirty percent (30%) shall vest on each of the second and third anniversaries of the date of this Agreement, such that all of the underlying shares of Common Stock shall vest by the third anniversary of the date of this Agreement. All terms and conditions shall be subject to the Company's 2000 Stock Option Plan adopted February 26, 2000 (the "Plan"); provided; however, that such options shall fully vest and become exercisable upon a "Change in Control" as defined in the Plan. 3.3 Bonus. The Employee shall be entitled to receive an annual bonus ----- of up to 100% of Employee's base salary for each calendar year and up to 100,000 additional Options for the period ended December 31, 2000, based on targeted budget performance and other performance measures which are detailed on Exhibit A and such agreements, terms and conditions on Exhibit --------- ------- A shall be incorporated herein. Any additional Options granted for calendar - year 2000 performance, pursuant to this Section 3.3, shall be issued at a strike price equivalent to the fair market value of the share price of the underlying common stock of the Company at the time of grant and shall vest on the same schedule as the Options described in Section 3.2 hereof. In addition, Employee may earn up to 100,000 additional options for each of the periods ending December 31, 2001 and December 31, 2002, based on targeted budget performance and other performance measures which shall be agreed to by the parties after the date hereof and detailed on Exhibit B, and such agreements, terms and conditions on Exhibit B shall be incorporated herein. 4. BENEFITS. (b) (a) The Employee shall be entitled annually to four (4) weeks vacation and shall be entitled to accrued vacation consistent with Employee's existing employment agreement. During the Term of this Agreement, the Company shall pay for the lease, insurance and maintenance expenses with respect to a car leased by the Employee (or a comparable car) consistent with Employee's existing employment agreement. The Employee shall be entitled, if eligible and selected for participation in accordance with the terms thereof, to participate in any insurance, stock purchase, or other benefit plan of the Company or StaffMark now existing or hereafter adopted as offered to other employees of the Company similarly situated. Nothing herein contained shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligation under this Agreement. The Company will provide the Employee with prompt reimbursement for all reasonable business expenses incurred in the performance of the Employee's duties pursuant to this Agreement subject to the Employee's provision of receipts for such expenses, to the Company. 5. TERMINATION OF AGREEMENT. (a) The Company shall be entitled to terminate Employee's services, in any of the following circumstances: (i) For "cause," which shall mean by reason of any of the following: (A) the Employee's material breach of any provision of Section 7 of this Agreement; (B) the final written determination by the Board of Directors of the Company after 30 days notice to the Employee and the opportunity for the Employee to be heard by the Board of Directors regarding the Employee's willful failure and refusal to comply with the material and reasonable directives of the Company; (C) the Employee's willful and repeated failure to perform the duties for which the Employee has been provided with written notice of nonperformance and for which the Employee has been provided with thirty (30) days to cure such nonperformance; (D) the Employee's gross negligence or willful or intentional misconduct; (E) final written determination after thirty (30) days notice to the Employee and the opportunity for the Employee to be 2 heard by the Board of Directors of the Company in respect of the Employee's breach of her fiduciary duties to the Company; or (F) the conviction of, or the entering of a guilty plea or plea of no contest with respect to, a felony with respect to the Employee, or any other criminal activity which materially affects the Employee's ability to perform her duties or materially harms the reputation of the Company. (ii) If, during the Term, in the opinion of the Company, the Employee because of physical or mental illness or incapacity shall be unable for any reason to substantially perform all of her duties and responsibilities under this Agreement for a period of one hundred and eighty (180) days in the aggregate in any twelve (12) month period ("Disability"); provided that the Company shall give Employee at least ten (10) days prior written notice of its intention to terminate this Agreement, as of the date set forth in the notice, at any time after the expiration of such one hundred and eighty (180) day period. In case of termination for Disability, the Employee shall be entitled to receive salary, benefits, and reimbursable expenses owing the Employee through the date of termination.; or (iii) The death of Employee. In case of death during the Term, the Company's obligations hereunder shall terminate on the date death occurs, except as to compensation and other benefits previously earned through and until such date. (b) Except as provided in Section 6 hereof, in the event of the termination of Employee's employment: (i) For cause, or in the event of the resignation of Employee (excluding circumstances involving Good Reason, as defined below), then as of the date of such termination all of the Company's obligations hereunder, including, without limitation, the Company's obligations to pay Employee's base salary accruing after the date of such termination, and any benefits (except as otherwise required by applicable law), other than those obligations which have accrued but remain unpaid as of the date of such termination (such as accrued but unpaid salary, any accrued but unpaid bonus, expense reimbursements, health insurance premiums, retirement plan contributions, if any, vacation pay, sick pay, etc.), and all of the Employee's obligations hereunder except with respect to Section 7 below, shall cease and Employee shall not be entitled to receive any incentive compensation for the Compensation Year of such termination; or (ii) By the Company for any other reason other than for the reasons set forth in clause (i) above, or by Employee for Good Reason (as defined below), then in such event: (a) Employee shall receive from the Company two payments, each equal to one-half of the following: the amount of Employee's base salary (without offset for any compensation received by Employee from any subsequent employment by any person other than by any affiliate of the Company or in violation of Section 7 of this Agreement) provided, however, that in the event the Company intends to offset against any such severance payment as the result of any alleged violation of Section 7 by the Employee, the Company shall place in escrow the amount of any such offset with an escrow agent reasonably acceptable to Employee and Employee's legal counsel pending a final non-appealable determination by a court of competent jurisdiction as to whether Employee has indeed violated Section 7 of this Agreement for a period which is the greater of (A) sixty (60) days from the date of such termination, or (B) the lesser of two years or the remaining term of this Agreement. The first payment shall be due on the effective date of termination and the second payment shall be due ninety days after the effective date of termination. Upon the effective date of termination in either case, all Options granted to Employee in Section 3.2 shall become immediately vested and exercisable. Further, any such termination shall operate to shorten the period set forth in Section 7(b) and during which the terms of Section 7 apply to twelve (12) months from the date of termination of employment. In addition, in the case of any such termination, the Company shall continue Employee's health care, life insurance and disability coverage for Employee for the period described in clause (B) of this subparagraph 5(b)(ii), (i) under the terms of the applicable Company sponsored health care plan by which he was covered at the time of such termination of employment, as such plan may be in effect or may be modified from time to time, or (ii) if such Company sponsored health care, life insurance or disability plan does not by its terms allow Employee's participation or continued participation, the Company shall 3 obtain, at the Company's expense, such insurance coverage on behalf of Employee that provides all benefits otherwise provided under such Company sponsored health care, life insurance and disability plans (collectively, "Continued Health Care Coverage"). "Good Reason" shall mean any of the following circumstances unless remedied by the Company within thirty (30) days after receipt of written notification by Employee that such circumstances exist or have occurred: (A) assignment to Employee of any duties inconsistent with Employee's position, authority, duties or responsibilities as contemplated by paragraph 1 of the Agreement or location of employment, or any other action by the Company that results in a material diminution of such position, authority, duties or responsibilities; (B) a material reduction of Employee's compensation and/or benefits; or (C) any material failure by the Company to comply with any of the material provisions of this Agreement. 6. CHANGE IN CONTROL. (a) If Employee's employment with Edgewater is terminated during the term of this Agreement following a Change in Control either by Edgewater which is not for "cause" (as defined in this Agreement) or by the Employee for Good Reason only, (i) Edgewater shall pay Employee a lump sum in the amount of Employee's base salary then in effect (which amount shall in no event be less than the amount of the base salary payment due to Employee under Section 5(b)(ii)(a) above), and his bonus for the year immediately preceding the year in which the termination of employment occurs and such lump sum payment shall be due on the effective date of the termination of Employee's employment; (ii) the provisions of paragraph 5(b)(ii) relating to exercisability of Options and Continued Health Care Coverage shall apply; and (iii) the non-competition provisions of paragraph 7 shall apply for a period of one (1) year from the effective Date of termination. In such event, Employee shall have no further obligations under this Agreement, other than continued compliance with Section 7 hereof, (b) A "Change in Control" shall be deemed to have occurred if: (i) any person, other than StaffMark or an employee benefit plan of StaffMark or Edgewater, acquires directly or indirectly the "beneficial ownership" (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended, "Beneficial Ownership") of any voting security of Edgewater and immediately after such acquisition such person is, directly or indirectly, the Beneficial Owner of voting securities representing 50% or more of the total voting power of all of the then-outstanding Edgewater voting securities of Edgewater; (ii) the stockholders of Edgewater shall approve a merger or merger agreement involving Edgewater (except into Edgewater's parent in which event this provision shall apply to the parent), a consolidation transaction involving Edgewater, a recapitalization or reorganization of Edgewater, a reverse stock split of outstanding Edgewater voting securities, or the consummation of any such transaction if stockholder approval is not sought nor obtained, provided, -------- however, that the foregoing referenced transactions or events in this clause - ------- (ii) shall not constitute a "Change of Control" if such transaction or event would result in at least 60% of the total voting power represented by outstanding securities of the surviving or resulting entity (immediately after such transaction or event after giving effect to the consideration issued or transferred in such transaction or event on an as-converted or fully-diluted basis) being Beneficially Owned by at least 60% of the holders of outstanding voting securities of Edgewater immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not altered in the transaction in any material way; or (iii) the stockholders of Edgewater shall approve a plan of complete liquidation of Edgewater or an agreement for the sale or disposition by Edgewater of all or a substantial portion of Edgewater's assets (i.e., 50% or more of the total assets of Edgewater). (c) (i) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by Edgewater to or for the benefit of Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), amounts payable or distributable to or for the benefit of the Employee pursuant to this Agreement that are determined to be "parachute payments" within the meaning of Section 280G(b)(2) of the Code (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Agreement Payments") shall not be paid or distributed in the amounts or at the times otherwise required by this Agreement, but shall instead be paid or distributed annually, beginning as of the effective date of the termination of Employee's employment and thereafter on each anniversary thereof, in the maximum substantially equal amounts and over the minimum number of years that are 4 determined to be required to reduce the aggregate present value of Agreement Payments to an amount that will not cause any Payment to be non- deductible under section 280G of the Code. For purposes of this Section 6, present value shall be determined in accordance with section 280G(d)(4) of the Code. (ii) All determinations to be made under this Section 6 (c) shall be made by Edgewater's independent public accountant immediately prior to the Change of Control (the "Accounting Firm"), which firm shall provide its determinations and any supporting calculations both to Edgewater and Employee within 10 days of the effective date of the termination of Employee's employment. Any such determination by the Accounting Firm shall be binding upon Edgewater and Employee. (iii) Within two years after the effective date of the termination of Employee's employment, the Accounting Firm shall review the determination made by it pursuant to paragraph (i), above. If at that time, as a result of the uncertainty in the application of section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, the annual amounts of Agreement Payments or the period over which Agreement Payments are paid or distributed, as determined pursuant to clause (i), above, are determined not to satisfy the requirements of clause (i), then the annual amount of future Agreement Payments and/or the period over which future Agreement Payments are paid or distributed shall be redetermined to satisfy the requirements of clause (i), and all future Agreement Payments shall be paid or distributed in accordance with such redetermination. (iv) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in paragraphs (ii) and (iii) above shall be borne solely by Edgewater. Edgewater agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to paragraphs (ii) and (iii) above, except for claims, damages or expenses resulting from the negligence or misconduct of the Accounting Firm. 7. COVENANT NOT TO COMPETE, CONFIDENTIALITY. (a) Employee acknowledges that in the course of her employment by the Company he has and will become privy to various economic and trade secrets and relationships of the Company and its subsidiaries under its direct control ("Subsidiaries"). Therefore, in consideration of this Agreement, Employee hereby agrees that he will not, directly or indirectly, except for the benefit of the Company or its Subsidiaries, or with the prior written consent of the Board of Directors of the Company, which consent may be granted or withheld at the sole discretion of the Company's Board of Directors: (i) During the Noncompetition Period (as hereinafter defined), become an officer, director, stockholder, partner, member, manager, associate, employee, owner, creditor, independent contractor, co- venturer, consultant or otherwise, or be interested in or associated with any other person, corporation, firm or business engaged in providing software solutions services, including but not limited to, systems integration, custom software development, training, systems support, outsourcing and/or information technology consulting services (an "Edgewater Services Business") within a radius of fifty (50) miles from any office operated during the Noncompetition Period by the Company, or any of its Subsidiaries (collectively, the "Territory") or in any Edgewater Services Business directly competitive with that of the Company, or any of its Subsidiaries, or itself engage in such business; provided, however, that (A) Nothing herein shall be construed to prohibit Employee from owning not more than five percent (5%) of any class of securities issued by an entity which is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or which is traded over the counter; (B) The foregoing shall not restrict Employee with respect to businesses, other than Edgewater Services Businesses, engaged in by the Company or its Subsidiaries during the Noncompetition Period unless Employee either is or was substantially involved 5 in such other businesses of the Company or such Subsidiaries or had access to Confidential Information (as hereinafter defined) with respect to such other businesses; or (C) Nothing herein shall be construed to prohibit Employee from engaging in general business consulting to companies or individuals that (i) do not compete, directly or indirectly, with an Edgewater Services Business or (ii) who are not or have not been customers of Edgewater for a period of one (1) year. Further, nothing herein shall be construed to prohibit Employee from engaging in Edgewater Service Business as an employee of any firm or entity that does not compete directly or indirectly with Edgewater or any of its Subsidiaries and which maintains an internet application, such as a web site, or is engaged in the distribution and sale of software products, provided that the Employee performs such Edgewater Service Business only for that particular firm or entity as an employee thereof and the internet application or software products of such firm or entity are not directly competitive with any Edgewater Service Business conducted by Edgewater or its Subsidiaries. (ii) During the Noncompetition Period, in the Territory, solicit, cause or authorize, directly or indirectly, to be solicited for or on behalf of herself or third parties, from parties who are or were customers of the Company or its Subsidiaries, any Edgewater Services Business transacted by or with such customer by the Company or its Subsidiaries; or (iii) During the Noncompetition Period, in the Territory, accept or cause or authorize, directly or indirectly, to be accepted for or on behalf of herself or for third parties, any such Edgewater Services Business from any such customers of the Company or its Subsidiaries; or (iv) (A) From and after the date hereof and during the Noncompetition Period, use, publish, disseminate or otherwise disclose, directly or indirectly, any information heretofore or hereafter acquired, developed or used by the Company or its Subsidiaries relating to their business or the operations, employees or customers of the Company or its Subsidiaries which constitutes proprietary or confidential information of the Company or its Subsidiaries ("Confidential Information"), including without limitation any Confidential Information contained in any customer lists, mailing lists and sources thereof, statistical data and compilations, patents, copyrights, trademarks, trade names, inventions, formulae, methods, processes, agreements, contracts, manuals or any other documents; provided that the foregoing shall not apply to any Confidential Information which has become part of the common knowledge or understanding in the Edgewater Services Business industry or otherwise in the public domain (other than from disclosure by Employee in violation of this Agreement), any information which is disclosed to the Employee by a third party not under any obligation of confidentially after the Term of this Employment Agreement, or any information which is independently developed by Employee after the Term of this Employment Agreement; provided, however, this -------- ------- subparagraph (iv) shall not be applicable to the extent Employee is required to testify in. a judicial or regulatory proceeding pursuant to the order of a judge or administrative law judge after Employee requests that such Confidential Information be preserved; or (v) During the Noncompetition Period, in the Territory, (A) Solicit, entice, persuade or induce, directly or indirectly, any employee (or person who within the preceding ninety (90) days was an employee) of the Company or its Subsidiaries or any other person who is under contract with or rendering services to the Company or its Subsidiaries, to terminate his or her employment by, or contractual relationship with, such person or to refrain from extending or renewing the same (upon the same or new terms) or to refrain from rendering, services to or for such person or to become employed by or to enter into contractual relations with any persons other than such person or to enter into a relationship with a competitor of the Company or its Subsidiaries; 6 (B) Solicit, induce, attempt to hire, or hire any employee of the Company (or anyone who was an employee of the Company during the period from the date six months prior to my termination of employment with the Company), or assist in such hiring by any other person or business entity; or (C) Authorize or knowingly approve or assist in the taking of any such actions by any person other than the Company or its Subsidiaries. (b) For purposes of this Agreement, the term "Noncompetition Period" shall mean the period commencing on the date hereof and ending twenty-four (24) months after the date Employee ceases to be an officer or employee of, or consultant to the Company or any of its Subsidiaries; provided, however, that the Noncompetition Period shall end one (1) year from the date of termination of the employment of Employee by the Company under this Agreement which is without cause or by the Employee for Good Reason. (c) The invalidity or non-enforceability of this Section 7 in any respect shall not affect the validity or enforceability of this Section 7 in any other respect or of any other provisions of this Agreement. In the event that any provision of this Section 7 shall be held invalid or unenforceable by a court of competent jurisdiction by reason of the Geographic or business scope or the duration thereof, such invalidity or unenforceability shall attach only to the scope or duration of such provision and shall not affect or render invalid or unenforceable any other provision of this Agreement, and, to the fullest extent permitted by law, this Agreement shall be construed as if the geographic or business scope or the duration of such provision had been more narrowly drafted so as not to be invalid or unenforceable and further, to the extent permitted by law, such geographic or business scope or the duration thereof may be re-written by a court of competent jurisdiction to make such sufficiently limited to be enforceable. (d) Employee acknowledges that the Company's remedy at law for any breach of the provisions of this Section 7 is and will be insufficient and inadequate and that the Company shall be entitled to equitable relief, including by way of temporary and permanent injunction, in addition to any remedies the Company may have at law. (e) The provisions of this Section 7 shall survive termination of this Agreement. 8. DIVISIBILITY OF AGREEMENT. In the event that any term, condition or provision of this Agreement is for any reason rendered void, all remaining terms, conditions and provisions shall remain and continue as valid and enforceable obligations of the parties hereto. 9. NOTICES. Any notices or other communications required or permitted to be sent hereunder shall be in writing and shall be duly given if personally delivered or sent postage prepaid by certified or registered mail, return receipt requested, or sent by prepaid overnight courier service, delivery confirmed, as follows: If to Employee: Dave Clancey 48 Way To The River Road West Newbury, MA 01985 If to the Company: Clete T. Brewer Chairman 234 East Millsap Road Fayetteville, Arkansas 72703 Either party may change her or its address for the sending of notice to such party by written notice to the other party sent in accordance with the provisions hereof. 10. COMPLETE AGREEMENT. This Agreement contains the entire understanding of the parties with respect to the employment of Employee (including nonsolicitation and noncompetition agreements) and supersedes 7 all prior arrangements or understandings with respect thereto. This Agreement may not be altered or amended except by a writing, duly executed by the party against whom such alteration or amendment is sought to be enforced. 11. ASSIGNMENT. This Agreement is personal and non-assignable by Employee. It shall inure to the benefit of any corporation or other entity with which the Company shall merge or consolidate or to which the Company shall lease or sell all or substantially all of its assets and may be assigned by the Company to any affiliate of the Company or to any corporation or entity with which such affiliate shall merge or consolidate or which shall lease or acquire all or substantially all of the assets of such affiliate. 12. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. 13. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the State of Delaware. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement in multiple counterparts as of the day and year first above written. EMPLOYEE /s/ Dave Clancey ---------------- Dave Clancey /s/ Clete T. Brewer ------------------- Witness EDGEWATER TECHNOLOGY (DELAWARE), INC. By: /s/ Terry C. Bellora --------------------- Terry C. Bellora Executive Vice President 8 EX-99.1 4 dex991.txt PRESS RELEASE [LETTERHEAD OF EDGEWATER TECHNOLOGY] Exhibit 99.1 Contacts: Clete T. Brewer, Chairman and CEO Kim Polan/Susan Burns (501) 973-6084 Citigate Sard Verbinnen (212) 687-8080 Terry C. Bellora, Chief Financial Officer (781) 246-3343 EDGEWATER ANNOUNCES DISMISSAL OF SECURITIES LITIGATION MATTER ________________________________________________________________________________ Wakefield, MASS. - May 30, 2001 - Edgewater Technology, Inc. f/k/a StaffMark, Inc. (NASDAQ: EDGW, www.edgewater.com, the "Company") today announced that the appeal by the lead plaintiffs to the Eighth Circuit Court of Appeals in the securities litigation matter filed against the Company in 1999 has been dismissed. The complaints that were filed in 1999 relating to this securities litigation matter were consolidated into one complaint in January 2000. In two different orders, in June 2000 and November 2000, respectively, the Honorable Thomas Eisele of the United States District Court for the Eastern District of Arkansas, Western Division granted defendants' motion and dismissed the consolidated complaint and all of its allegations as being without legal merit. Following the November 2000 order by Judge Eisele, the lead plaintiffs appealed to the Eighth Circuit Court of Appeals, and that appeal has now been dismissed. The effect of Judge Eisele's dismissal of the consolidated complaint and the dismissal of the appeal to the Eighth Court of Appeals is that the litigation is now concluded, without any finding of liability, obligation or fault on the part of the Company or any of its officers or directors. Clete T. Brewer, Chairman and Chief Executive Officer, said, "We have always stated that this litigation matter was without merit and Judge Eisele's dismissal of the consolidated complaint and the dismissal of the appeal confirm our views in this regard. We are pleased that this matter has been concluded favorably on the Company's behalf, as we continue to transition our corporate headquarters to Wakefield, Massachusetts and focus our resources and energies on our eSolutions business." About Edgewater Technology, Inc. Founded in 1992, Edgewater Technology, Inc. is an award-winning e-business consulting and systems integration firm that specializes in providing middle-market companies with tailored solutions for today's Internet-centric environment. Headquartered in Wakefield, Massachusetts, the Company has taken a partnership approach with its clients, targeting strategic, mission-critical applications. Edgewater Technology services its client base by leveraging a combination of leading-edge technologies and proven reengineering techniques provided by its network of national solutions centers strategically positioned across the United States. For further information, visit www.edgewater.com or call 781-246-3343. -----END PRIVACY-ENHANCED MESSAGE-----