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Exhibit (a)(1)(A)
Offer to Purchase for Cash
by
Edgewater Technology, Inc.
up to
16,250,000 Shares of its Common Stock
(Including the Associated Preferred Stock Purchase Rights)
at
$8.00 Net Per Share
---------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, EST, ON TUESDAY, JANUARY 23, 2001, UNLESS THE OFFER IS EXTENDED.
---------------
Edgewater Technology, Inc., a Delaware corporation (the "Company"), is
offering to purchase up to 16,250,000 shares of its common stock, par value
$0.01 per share (the "Shares"), at a price of $8.00 per Share, net to the
seller in cash (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together, as they may be amended from time to time,
constitute the "Offer"), including the proration provisions described herein.
All Shares tendered and purchased will include the associated preferred stock
purchase rights issued pursuant to the Rights Agreement dated as of July 21,
2000 between the Company and EquiServe Trust Company, N.A., as rights agent,
and, unless the context otherwise requires, all references to Shares include
the associated preferred stock purchase rights.
As part of the Offer, the Company is also permitting tenders of up to
408,000 Shares ("Qualified Option Shares") in the Offer in connection with the
conditional exercise of vested options having exercise prices below $8.00
under the Company's stock option plans. The Company will pay to the holders of
such options $8.00 less the per Share exercise price and applicable tax
withholding amount for each Qualified Option Share purchased in the Offer. The
Qualified Option Shares will be subject to the prorationing provisions
described herein on the same basis as the Shares.
The Company reserves the right, in its sole discretion but subject to any
applicable legal requirements, to purchase more than 16,250,000 Shares
pursuant to the Offer but does not currently intend to do so. This Offer is
not conditioned upon any minimum number of Shares or Qualified Option Shares
being tendered. This Offer is subject to certain conditions. See "Section 13.
Certain Conditions to the Offer."
The Shares are listed and traded on the Nasdaq National Market under the
symbol "EDGW." On December 14, 2000, the last full trading day prior to the
Company's announcement of its intent to commence a $130,000,000 fixed price
issuer tender offer, the last reported sales price of the Shares on the Nasdaq
National Market was $5.50 per Share. On December 20, 2000, the last full
trading day before the announcement of all of the terms of the Offer, the last
reported sales price of the Shares on the Nasdaq National Market was $6.0625
per Share.
BEFORE MAKING A DETERMINATION CONCERNING WHETHER TO TENDER IN THE OFFER,
STOCKHOLDERS ARE URGED TO CAREFULLY REVIEW THIS OFFER, INCLUDING, IN
PARTICULAR, SECTIONS 2 AND 3 HEREOF BEGINNING ON PAGES 9 AND 13, RESPECTIVELY,
AND TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS
TO WHETHER ANY STOCKHOLDER SHOULD TENDER ANY OR ALL OF SUCH STOCKHOLDER'S
SHARES OR WHETHER ANY HOLDER OF OPTIONS SHOULD TENDER ANY OR ALL OF SUCH
HOLDER'S QUALIFIED OPTION SHARES PURSUANT TO THE OFFER. EACH STOCKHOLDER AND
HOLDER OF OPTIONS MUST MAKE HIS OR HER OWN DECISION WHETHER TO TENDER SHARES
OR QUALIFIED OPTION SHARES AND, IF SO, HOW MANY SHARES OR QUALIFIED OPTION
SHARES TO TENDER.
Clete T. Brewer, the Company's Chairman and Chief Executive Officer, who
beneficially owns 1,036,084 Shares, has advised us that he intends to tender
into the Offer 569,846 Shares that he owns. The remaining officers and
directors of the Company, as a group, who together beneficially own 164,997
Shares and 132,759 Qualified Option Shares, have advised us that they intend
to tender into the Offer 135,311 Shares that they own and that they intend to
tender 40,000 Qualified Option Shares.
The Dealer Managers for the Offer are:
Credit Suisse First Boston Banc of America Securities LLC
Corporation
<PAGE>
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (i) complete and sign the enclosed Letter of Transmittal
(or a facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed (if required
by Instruction 1 to the Letter of Transmittal), mail or deliver the Letter of
Transmittal (or a facsimile thereof) and any other required documents to
EquiServe Trust Company, N.A. (the "Depositary") and either deliver the
certificates for such Shares along with the Letter of Transmittal to the
Depositary or tender such Shares pursuant to the procedures for book-entry
transfer set forth in "Section 5. Procedures for Tendering Shares" or (ii)
request such stockholder's broker, dealer, commercial bank, trust company or
other nominee (each of the foregoing, a "Custodian") to effect the transaction
for such stockholder. Any stockholder whose Shares are registered in the name
of a Custodian must contact such Custodian to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer described in this Offer to
Purchase on a timely basis, or who cannot deliver all required documents to
the Depositary prior to the expiration of the Offer, may tender such Shares by
following the procedures for guaranteed delivery set forth in "Section 5.
Procedures for Tendering Shares."
Holders of Qualified Option Shares who wish to participate in the Offer by
conditionally tendering the Qualified Option Shares should also follow the
instructions and procedures set forth in the Option Election Form and Related
Instructions provided to them. These documents are also part of the terms of
the Offer.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to Corporate Investor Communications, Inc. ("Corporate Investor
Communications" or the "Information Agent"), Credit Suisse First Boston
Corporation ("Credit Suisse First Boston)" or Banc of America Securities LLC
("Bank of America Securities" and, together with Credit Suisse First Boston,
the "Dealer Managers") at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Stockholders may also
contact their Custodian for assistance concerning the Offer.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER STOCKHOLDERS (OR HOLDERS OF OPTIONS) SHOULD TENDER OR
REFRAIN FROM TENDERING SHARES (OR QUALIFIED OPTION SHARES) PURSUANT TO THE
OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN
THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. IF MADE OR GIVEN, SUCH
RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") HAS NOT APPROVED OR
DISAPPROVED OF THIS TRANSACTION OR PASSED UPON THE FAIRNESS OR MERITS OF SUCH
TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
SUMMARY................................................................... 2
INTRODUCTION.............................................................. 6
THE OFFER................................................................. 8
1. Terms of the Offer; Expiration Date.................................. 8
2. Recent Developments; Purpose of the Offer; Certain Effects of the
Offer................................................................ 9
3. Important Considerations in Deciding Whether to Tender Shares or
Qualified Option Shares Pursuant to the Offer; Forward-Looking
Information.......................................................... 13
4. Acceptance for Payment and Payment for Shares........................ 20
5. Procedures for Tendering Shares...................................... 22
6. Withdrawal Rights.................................................... 24
7. Certain U.S. Federal Income Tax Consequences......................... 25
8. Price Range of Shares; Dividends; Our Rights Plan.................... 28
9. Source and Amount of Funds........................................... 30
10. Certain Information Concerning Us.................................... 30
11. Pro Forma Financial Statements....................................... 31
12. Fees and Expenses.................................................... 38
13. Certain Conditions to the Offer...................................... 39
14. Extension of the Offer; Termination; Amendments...................... 40
15. Certain Legal Matters................................................ 41
16. Interests of Directors and Officers; Transactions and Arrangements
Concerning Shares and
Qualified Option Shares.............................................. 41
17. Miscellaneous........................................................ 43
</TABLE>
i
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SUMMARY
Edgewater Technology, Inc., a Delaware corporation, is offering to purchase
up to 16,250,000 shares of its outstanding common stock for $8.00 per share,
net to you in cash, and, in addition, up to 408,000 Qualified Option Shares,
for the applicable Qualified Option Share Spread. The following are some of the
questions that you, as a stockholder or a holder of Qualified Option Shares of
Edgewater Technology, Inc., may have and answers to those questions. We urge
you to read carefully the remainder of this Offer to Purchase and the
accompanying Letter of Transmittal because the information in this summary is
not complete, and additional important information is contained in the
remainder of this Offer to Purchase and the accompanying Letter of Transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
Edgewater Technology, Inc. See "Section 10. Certain Information Concerning
Us."
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT FOR THE
SHARES?
We are offering to pay $8.00 per share, net to you in cash. If you are the
record owner of your shares and you tender your shares directly to the
depositary in the Offer, you will not have to pay brokerage fees or similar
expenses to the Dealer Managers, the Information Agent or the depositary. If
you own your shares through a custodian, and your custodian tenders your shares
on your behalf, your custodian may charge you a fee for doing so. You should
consult your custodian to determine whether any charges will apply. See
"INTRODUCTION" and "Section 5. Procedures for Tendering Shares."
Stockholders whose shares are purchased in the Offer will be paid the offer
price of $8.00 per share in cash as soon as practicable after the expiration of
the Offer. Under no circumstances will we pay interest on the offer price,
including but not limited to, by reason of any delay in making payment. See
"Section 1. Terms of the Offer; Expiration Date" for a more detailed discussion
of the Offer Price.
HOW ARE YOU OFFERING TO PURCHASE QUALIFIED OPTION SHARES?
Holders of Qualified Option Shares, or shares subject to exercisable options
with an exercise price of less than $8.00 per share granted under our stock
option plans, will be permitted to tender in connection with the conditional
"cashless" exercises of such options and receive the difference between $8.00
and the per share exercise price, less applicable withholding taxes, for each
Qualified Option Share purchased by us (the "Qualified Option Share Spread").
Based upon the Offer Price, if all Qualified Option Shares were tendered
pursuant to the Offer, the maximum aggregate amount of Qualified Option Share
Spread that would be payable would be $700,000. The Qualified Option Shares
will be subject to the prorationing provisions described herein on the same
basis as the Shares. We have been advised that no employee or officer who
received a grant of stock options in connection with the August 2000 grant of
approximately 2.9 million options intends to tender Qualified Option Shares in
the Offer.
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
Yes, we plan to obtain all funds necessary for the Offer from our existing
cash reserves funds. The Offer is not conditioned upon any financing
arrangements. See "Section 9. Source and Amount of Funds."
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have until 12:00 midnight, EST, on Tuesday, January 23, 2001 or any
later date to which we may extend the Offer, to decide whether to tender your
shares or Qualified Option Shares in the Offer. Further, if you
2
<PAGE>
cannot deliver everything that is required in order to make a valid tender by
that time, you may be able to use a guaranteed delivery procedure, which is
described later in this Offer to Purchase. See "Section 5. Procedures for
Tendering Shares."
CAN THE OFFER BE EXTENDED, AMENDED OR TERMINATED AND UNDER WHAT CIRCUMSTANCES?
We can extend or amend the Offer in our sole discretion. If we extend the
Offer, we will delay the acceptance of any shares that have been tendered. See
"Section 14. Extension of the Offer; Termination; Amendments" for a more
detailed discussion of the extension and amendment of the Offer.
We can terminate the Offer under certain circumstances. See "Section 13.
Certain Conditions to the Offer."
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the Offer, we will inform the EquiServe Trust Company, N.A.
("EquiServe"), which is the depositary for the Offer, of that fact and will
make a public announcement of the extension, not later than 9:00 a.m., EST, on
the next business day after the day on which the Offer was scheduled to expire.
See "Section 1. Terms of the Offer; Expiration Date" and "Section 14. Extension
of the Offer; Termination; Amendments" for a more detailed discussion of the
notification procedure.
ARE THERE ANY CONDITIONS TO THE OFFER?
The Offer is not subject to a condition that a minimum number of shares are
tendered.
However, we are not required to accept for payment, purchase or pay for any
shares tendered if certain events occur (or have been determined by us to have
occurred). The most significant of these are:
. Any legal proceeding relating to the Offer or which otherwise is
reasonably likely to have a material adverse effect on us is threatened
or pending.
. Certain disruptions or declines affecting United States securities,
banking or financial markets or institutions shall have occurred.
. Any tender or exchange offer with respect to the shares (other than the
Offer), or any merger, acquisition, business combination or other
similar transaction with or involving us or any of our subsidiaries
(excluding the ClinForce Sale Transaction, which is described in Section
2 herein) shall have been proposed, announced or made by any person or
entity.
. Any change shall occur or be threatened in, or adverse development shall
arise concerning, our and our subsidiaries' (taken as a whole) business,
condition (financial or otherwise), income, operations or prospects,
which, in our exclusive judgment, is or may be (individually, or in the
aggregate) materially adverse to us or affects the anticipated benefits
to us of acquiring shares pursuant to the Offer.
. (i) Anyone (including certain groups) shall have acquired, or proposed
to acquire, beneficial ownership of more than 5% of the outstanding
shares (other than anyone who publicly disclosed such ownership in a
filing with the Securities and Exchange Commission prior to December 21,
2001); (ii) any new group shall have been formed which beneficially owns
more than 5% of the outstanding shares; or (iii) anyone shall have filed
a Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, or made a public announcement reflecting an
intent to acquire us or any of our subsidiaries (excluding the ClinForce
Sale Transaction, which is described in Section 2 herein) or any of our
respective assets or securities.
3
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. There shall be a reasonable likelihood that the purchase of shares
pursuant to the Offer will cause either the shares (i) to be held of
record by less than 300 persons; or (ii) to not continue to be eligible
to be listed on the Nasdaq National Market.
See "Section 13. Certain Conditions to the Offer" for more complete
descriptions of the foregoing conditions as well as other conditions to the
Offer.
HOW DO I TENDER MY SHARES?
To tender your shares, you must deliver the certificates evidencing your
shares, together with a completed Letter of Transmittal, to the depositary
(whose contact information is listed on the back cover of this document), not
later than the time the Offer expires. If your shares are held in street name
(that is, through a custodian), you should instruct your custodian to tender
the shares on your behalf through The Depository Trust Company. Under some
conditions, you may need to obtain a signature guarantee or provide other
documentation. Holders of exercisable options who wish to tender Qualified
Option Shares should also follow the instructions in the Option Election Form
and Related Instructions.
If you are unable to deliver an item that is required to the depositary by
the expiration of the Offer, you may get three extra Nasdaq National Market
trading days to do so by having a broker, bank or other fiduciary who is a
member of the Securities Transfer Agent Medallion Program or other eligible
institution guarantee that the missing items will be received by the depositary
within three Nasdaq National Market trading days. However, the depositary must
receive the missing items within that three-day trading period. "See Section 5.
Procedures for Tendering Shares."
MY SHARES WERE PURCHASED IN THE EMPLOYEE STOCK PURCHASE PROGRAM THROUGH PAYROLL
WITHHOLDING. CAN I TENDER THESE SHARES?
Yes, you can tender shares you purchased in the employee stock purchase program
by following the procedures described in the Direction Form for ESPP
Participants. However, you should review Section 7 regarding the tax
consequences of your tender; see "Section 5. Procedures for Tendering Shares."
WILL TENDERED SHARES AND QUALIFIED OPTION SHARES BE PRORATED?
We will purchase shares from all stockholders who properly tender shares and
Qualified Option shares, on a pro rata basis. Proration will apply even if you
hold under 100 shares. Consequently, we may purchase fewer than all of the
shares or Qualified Option Shares that you tender in the Offer. See "Section 1.
Terms of the Offer; Expiration Date."
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw previously tendered shares at any time until 12:00 midnight,
EST, on Tuesday, January 23, 2001, and, if we have not agreed to accept your
shares for payment by 12:00 midnight, Tuesday, February 20, 2001, you can
withdraw them at any time after such time until we do accept your shares for
payment. See "Section 6. Withdrawal Rights."
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw shares you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the depositary while you
still have the right to withdraw the shares. See "Section 6. Withdrawal
Rights."
4
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DO THE COMPANY'S INSIDERS OR AFFILIATES HAVE ANY MATERIAL INTEREST IN THE
TRANSACTION?
Clete T. Brewer, the Company's Chairman and Chief Executive Officer, who
beneficially owns 1,036,084 Shares, has advised us that he intends to tender
into the Offer 569,846 shares that he owns. The remaining officers and
directors of the Company, as a group, who together beneficially own 164,997
shares and 132,759 Qualified Option Shares, have advised us that they intend to
tender into the Offer 135,311 shares that they own and that they intend to
tender 40,000 Qualified Option Shares.
FOLLOWING THE OFFER, WILL EDGEWATER TECHNOLOGY, INC. CONTINUE AS A PUBLIC
COMPANY?
Yes, the completion of the Offer in accordance with its conditions will not
cause Edgewater Technology, Inc. to be delisted on the Nasdaq National Market
or to stop being subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended. It is a condition of our
obligation to purchase shares pursuant to the Offer that there shall not be a
reasonable likelihood that such purchase will cause either the shares (i) to be
held of record by less than 300 persons; or (ii) to not continue to be eligible
to be listed on the Nasdaq National Market. See "Section 13. Certain Conditions
to the Offer" and "Section 2. Recent Developments; Purpose of the Offer;
Certain Effects of the Offer."
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
Stockholders who do not tender pursuant to the Offer will increase their
percentage ownership interest in us and increase their percentage interest in
our future earnings. Our purchase of shares pursuant to the Offer will reduce
the number of shares that might otherwise trade publicly and may reduce the
number of our stockholders. It is not possible to predict the number of
remaining stockholders of record, assuming the maximum number of shares are
tendered without being subject to proration, as that depends on the number of
shares tendered by each tendering stockholder. See "Section 2. Recent
Developments; Purpose of the Offer; Certain Effects of the Offer."
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On December 20, 2000, the last reported sales price per share of our shares,
as reported on the Nasdaq National Market, was $6.0625. See "Section 8. Price
Range of Shares; Dividends; Our Rights Plan."
DO YOU RECOMMEND THAT I TENDER IN THE OFFER?
Our Board of Directors is not making any recommendation whether stockholders
should tender. Each stockholder should make his or her own decision whether to
tender shares and, if so, how many shares to tender. See "Section 3. Important
Considerations in Deciding Whether to Tender Shares or Qualified Option Shares
Pursuant to the Offer; Forward-Looking Information."
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call Corporate Investor Communications, Inc., the Information Agent,
at (201) 896-1900 (banks and brokers call collect) or (800) 752-5316 (all
others call toll free) or Credit Suisse First Boston, a Dealer Manager, at
(800) 881-8320 (call toll free) or Banc of America Securities, a Dealer
Manager, at (866) 691-5066 (call toll free). See the back cover of this
document for more details.
5
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To the Holders of Common Stock
of Edgewater Technology, Inc.:
INTRODUCTION
The Company hereby offers to purchase up to 16,250,000 of its outstanding
Shares at $8.00 per Share, net to the seller in cash, and, in addition up to
408,000 Qualified Option Shares for an amount equal to $8.00 per Share less
the per Share exercise price and the applicable tax withholding amount, upon
the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal. The Company reserves the right, in
its sole discretion but subject to any applicable legal requirements, to
purchase more than 16,250,000 Shares pursuant to the Offer but does not
currently intend to do so.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES OR QUALIFIED
OPTION SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER
CONDITIONS. SEE "SECTION 13. CERTAIN CONDITIONS TO THE OFFER."
EACH STOCKHOLDER OR HOLDER OF QUALIFIED OPTION SHARES MUST MAKE SUCH
HOLDER'S OWN DECISION WHETHER TO TENDER SHARES OR QUALIFIED OPTION SHARES AND,
IF SO, HOW MANY SHARES OR QUALIFIED OPTION SHARES TO TENDER. BECAUSE THE BOARD
OF DIRECTORS BELIEVES THAT THE ATTRACTIVENESS OF THE OFFER FOR EACH INDIVIDUAL
STOCKHOLDER OR HOLDER OF QUALIFIED OPTION SHARES WILL DEPEND UPON THAT
HOLDER'S OWN INVESTMENT PROFILE AND OBJECTIVES AND OTHER CIRCUMSTANCES,
NEITHER THE COMPANY NOR THE BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO
WHETHER ANY STOCKHOLDER OR HOLDER OF QUALIFIED OPTION SHARES SHOULD TENDER ANY
OR ALL OF SUCH HOLDER'S SHARES OR QUALIFIED OPTION SHARES PURSUANT TO THE
OFFER.
Clete T. Brewer, the Company's Chairman and Chief Executive Officer, who
beneficially owns 1,036,084 Shares, has advised us that he intends to tender
into the Offer 569,846 Shares that he owns. The remaining officers and
directors of the Company, as a group, who together beneficially own 164,997
Shares and 132,759 Qualified Option Shares, have advised us that they intend
to tender into the Offer 135,311 Shares that they own and that they intend to
tender 40,000 Qualified Option Shares.
As of December 20, 2000, there were 28,692,766 Shares issued and
outstanding. The 16,250,000 Shares which the Company is offering to purchase
in the Offer represent approximately 56.6% of the Shares outstanding as of
December 20, 2000. The 408,000 Qualified Option Shares outstanding as of
December 20, 2000 represent approximately 7.0% of the outstanding options.
Neither the Company nor the Board of Directors makes any recommendation to
any holder of,options as to whether to exercise any or all such options or to
tender any or all Shares or Qualified Option Shares.
If before the Expiration Date (as defined in Section 1), more than
16,250,000 Shares, or such greater number of Shares as the Company may decide
to purchase, are validly tendered and not properly withdrawn, the Company
will, upon the terms and subject to the conditions of the Offer, accept Shares
for purchase, on a pro rata basis, from all Shares validly tendered and not
properly withdrawn. See "Section 1. Terms of the Offer; Expiration Date."
Qualified Option Shares tendered shall be subject, in such circumstances, to
the same proration procedures. All Shares not purchased pursuant to the Offer,
including Shares not purchased because of proration, will be returned to the
tendering stockholders at the Company's expense. Tendering stockholders who
have Shares registered in their name and tender directly to the Depositary
should not be obligated to pay brokerage commissions, solicitation fees or,
subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes on
the purchase of Shares by the Company. Stockholders who hold their Shares
through a Custodian should consult their Custodian to determine whether any
charges will apply if the custodian tenders the Shares on their behalf.
6
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The Company will pay all reasonable charges and expenses incurred by Credit
Suisse First Boston and Banc of America Securities which have been appointed
as the Dealer Managers, EquiServe, which has been appointed as the Depositary,
and Corporate Investor Communications, which has been appointed the
Information Agent for the Offer. See "Section 12. Fees and Expenses." Any
tendering stockholder who fails to complete and sign the substitute Form W-9
that is included in the Letter of Transmittal may be subject to United States
Federal Income Tax backup withholding equal to 31% of the gross proceeds
payable to such stockholders pursuant to the Offer. See "Section 7. Certain
U.S. Federal Income Tax Consequences."
The Shares are listed and traded on the Nasdaq National Market under the
symbol "EDGW." On December 14, 2000, the last full trading day prior to the
Company's announcement of its intent to commence a $130,000,000 fixed price
issuer tender offer, the last reported sales price of the Shares on the Nasdaq
National Market was $5.50 per Share. On December 20, 2000, the last full
trading day before the announcement of the terms of the Offer, the last
reported sales price of the Shares on the Nasdaq National Market was $6.0625
per Share.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
STOCKHOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED LETTER
OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR SHARES.
7
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THE OFFER
1. Terms of the Offer; Expiration Date.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), the Company will accept for payment, and will pay for, up to
16,250,000 Shares validly tendered prior to the Expiration Date (as
hereinafter defined) and not properly withdrawn as permitted by the terms
described in "Section 6. Withdrawal Rights." The term "Expiration Date" means
12:00 midnight, EST, on Tuesday, January 23, 2001, unless and until the
Company, in its sole discretion, shall have extended the period during which
the Offer is open, in which event the term "Expiration Date" shall mean the
latest time and date at which the Offer, as so extended by the Company, shall
expire. If the Offer is oversubscribed, Shares tendered before the Expiration
Date will be subject to proration. The proration period also expires on the
Expiration Date.
The Company reserves the right, in its sole discretion, at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Depositary and making a
public announcement thereof. See "Section 14. Extension of the Offer;
Termination; Amendments." There can be no assurance, however, that the Company
will exercise its right to extend the Offer. The Offer is not conditioned upon
any minimum number of Shares being tendered. The Offer is, however, subject to
certain other conditions. See "Section 13. Certain Conditions to the Offer."
All Shares purchased pursuant to the Offer will be purchased at the Offer
Price, net to the seller, in cash. If (a) the Company (i) increases or
decreases the price to be paid for Shares or adds a dealer's soliciting fee,
(ii) increases the number of Shares being sought and any such increase exceeds
2% of the outstanding Shares, or (iii) decreases the number of Shares being
sought, and (b) the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from and including the
date that notice of such increase or decrease is first published, sent or
given in the manner specified in "Section 14. Extension of the Offer;
Termination; Amendment," then the Offer will be extended until the expiration
of such ten business day period. For the purposes of the Offer, a "business
day" means any day other than a Saturday, Sunday or Federal holiday and
consists of the time period from 12:01 a.m. through 12:00 midnight, EST.
All Shares not purchased pursuant to the Offer, including Shares not
purchased because of proration, will be returned to the tendering stockholders
at the Company's expense as promptly as practicable (which, in the event of
proration, is expected to be approximately five Nasdaq National Market trading
days) following the Expiration Date.
Holders of Qualified Option Shares (Shares underlying vested (exercisable)
options granted under the Company's stock option plans having exercise prices
below $8.00 per Share) will be permitted to tender in connection with
conditional "cashless" exercises of such options and will receive for each
Qualified Option Share sold in the Offer an amount equal to the difference
between $8.00 and the exercise price per Qualified Option Share, less any
applicable withholding taxes.
If the number of Shares validly tendered and not properly withdrawn before
the Expiration Date is less than or equal to 16,250,000 Shares (or such
greater number of Shares as the Company may elect to purchase pursuant to the
Offer), the Company, upon the terms and subject to the conditions of the
Offer, will purchase at the Offer Price all Shares so tendered and not
properly withdrawn.
If the number of Shares validly tendered and not properly withdrawn before
the Expiration Date is greater than 16,250,000 Shares (or such greater number
of Shares as the Company may elect to purchase pursuant to the Offer), the
Company, upon the terms and subject to the conditions of the Offer, will
accept for purchase all Shares validly tendered and not properly withdrawn
before the Expiration Date on a pro rata basis, if necessary (with adjustments
to avoid purchases of fractional Shares). Holders of fewer than 100 Shares
will be prorated together with all other tendering stockholders.
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Under certain circumstances, we may prorate the number of Shares purchased
pursuant to the Offer. As discussed in Section 7, the number of Shares to be
purchased from a particular stockholder may affect the tax treatment of the
purchase to the stockholder and the stockholder's decision whether to tender.
Therefore, a stockholder may seek to structure the purchase of Shares from the
stockholder pursuant to the Offer in such a manner that it will be treated as
a sale of such Shares by the stockholder, rather than the payment of a
dividend to the stockholder, for U.S. federal income tax purposes.
Accordingly, the Offer provides that each stockholder may effect a
"conditional tender" of Shares, meaning that he or she may tender Shares
subject to the condition that a specified minimum number of the stockholder's
Shares tendered pursuant to a Letter of Transmittal or, if applicable, the
Notice of Guaranteed Delivery must be purchased if any Shares are purchased.
Any stockholder desiring to make a conditional tender must so indicate in the
box captioned "Conditional Tender" in the Letter of Transmittal or, if
applicable, the Notice of Guaranteed Delivery. Each stockholder is urged to
consult with his or her own tax advisor to discuss the conditional tender
alternative.
Any tendering stockholder wishing to make a conditional tender must
calculate and appropriately indicate the minimum number of Shares that must be
purchased if any are purchased. If the effect of accepting tenders on a pro
rata basis would be to reduce the number of Shares to be purchased from any
stockholder (tendered pursuant to a Letter of Transmittal or Notice of
Guaranteed Delivery) below the minimum number specified by that stockholder,
the conditional tender will automatically be regarded as withdrawn (except as
provided in the next paragraph). All Shares tendered by a stockholder subject
to a conditional tender pursuant to the Letter of Transmittal or Notice of
Guaranteed Delivery and regarded as withdrawn as a result of proration will be
returned as promptly as practicable after the Expiration Date.
If conditional tenders would otherwise be regarded as withdrawn because of
proration and would cause the total number of Shares to be purchased to fall
below 16,250,000, then to the extent feasible, we will select enough of the
conditional tenders that would otherwise have been deemed withdrawn to permit
us to purchase 16,250,000 Shares. In selecting among the conditional tenders,
we will select by lot and will limit our purchase in each case to the
designated minimum of Shares to be purchased.
In the event that proration of tendered Shares is required, the Company will
determine the final proration factor as promptly as practicable after the
Expiration Date. Proration for each person tendering Shares shall be based on
the ratio of the number of Shares tendered by such person to the total number
of Shares tendered in the Offer. Although the Company does not expect that it
will be able to announce the final proration factor until approximately five
Nasdaq National Market trading days after the Expiration Date, it will
announce preliminary results of proration by press release as promptly as
practicable after the Expiration Date. Stockholders may obtain such
preliminary information from the Information Agent and may be able to obtain
such information from their Custodian. Qualified Option Shares tendered shall
be subject, in such circumstances, to the same proration provisions.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Shares whose names appear on the Company's stockholder
list and will be furnished, for subsequent transmittal to beneficial owners of
Shares, to Custodians whose names, or the names of whose nominees, appear on
the stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing.
2. Recent Developments; Purpose of the Offer; Certain Effects of the Offer.
Recent Developments.
Introduction. During the first quarter of 1999, market values for publicly
traded staffing companies such as the Company began to decline. At that time,
the Company was exclusively engaged in the temporary and permanent placement
and staffing services businesses, including light industrial and commercial
staffing, finance and accounting staffing and placement, traditional
information technology ("IT") staffing and solutions services (which excludes
eSolutions project work), legal staffing and placement services and clinical
trials staffing and services. For many staffing companies, this trend
subsequently continued or deteriorated further and was compounded by a Year
2000-related slowdown in demand for IT staffing. These circumstances
contributed to depressed market valuations for publicly-traded entities such
as the Company.
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In response to these developments and with guidance from our financial
advisor Credit Suisse First Boston, we began to explore, during the second
half of 1999, strategic alternatives for each of our business platforms in an
effort to maximize stockholder value. In furtherance of these efforts, we
have, over the past twelve months, undergone a comprehensive refocusing of the
Company which has included the divestitures of each of the Company's non-
eSolutions businesses.
Sale of Commercial Services Division and Renaming of Company. After
evaluating our traditional businesses, our eSolutions business and our debt
levels with the assistance of Credit Suisse First Boston, management and the
Board of Directors chose to focus future growth initiatives on our
historically profitable eSolutions business, Edgewater Technology. To further
these objectives, we sold our commercial services division (including its
assets, liabilities and "StaffMark" name) to affiliated entities of Stephens
Group, Inc. for approximately $190.1 million in cash before fees, expenses and
taxes on June 28, 2000. Simultaneous with the closing of this sale, we changed
our name from "StaffMark, Inc." to "Edgewater Technology, Inc." and our stock
symbol from "STAF" to "EDGW."
Divestitures of Professional/IT Segment. In furtherance of our strategy to
focus on the eSolutions business, on July 13, 2000, we sold, through two
indirect wholly-owned subsidiaries, all of our equity interests in our Robert
Walters ("Robert Walters") plc subsidiary through an initial public offering
("IPO") on the London Stock Exchange. Robert Walters had previously been our
finance and accounting platform within our Professional/IT segment. 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.
Following the consummation of the IPO of Robert Walters, we continued to
work with Credit Suisse First Boston in evaluating strategic alternatives for
the remaining three non-eSolutions platform companies in our Professional/IT
segment: IntelliMark (providing traditional IT staffing and solutions),
ClinForce (providing staffing services for clinical trial clients, especially
pharmaceutical companies), and Strategic Legal Resources (providing legal
staffing support for corporations and legal firms). On September 22, 2000, we
completed the sale of the outstanding stock of Strategic Legal Resources 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 is
represented by a promissory note payable in January 2001. On November 16,
2000, we completed the sale of all of the outstanding shares of stock of our
subsidiaries that comprised IntelliMark to an affiliate of Charlesbank Equity
Fund V Limited Partnership for approximately $42.7 million in cash, subject to
potential upward or downward post-closing adjustments.
On December 15, 2000, we announced that we had entered into a definitive
agreement (the "ClinForce Stock Purchase Agreement") to sell all of the
outstanding stock of the two subsidiaries that comprise our ClinForce clinical
trials staffing services business to Cross Country TravCorps, Inc. ("Cross
Country") for approximately $31 million in cash (the "ClinForce Sale
Transaction"). This purchase price is subject to potential upward or downward
post-closing adjustment based on changes to the net working capital of
ClinForce between October 31, 2000 and the closing date of the ClinForce Sale
Transaction. The ClinForce Stock Purchase Agreement contains customary
representations and warranties and covenants, including a no solicitation
covenant whereby we agreed, subject to certain exceptions, not to solicit or
engage in negotiations with third parties concerning the ClinForce business.
In addition, if the ClinForce Stock Purchase Agreement is terminated by Cross
Country or us under certain circumstances, we may be required to pay Cross
Country a termination fee of up to $1,240,000. In connection with the
ClinForce Sale Transaction, we have agreed to indemnify Cross Country in the
future for breaches of certain limited representations and warranties
contained in the ClinForce Stock Purchase Agreement. We have also agreed under
the ClinForce Stock Purchase Agreement to indemnify Cross Country for any
taxes of ClinForce relating to periods before the closing date of the
ClinForce Sale Transaction. The ClinForce Sale Transaction is subject to a
number of conditions, including approval by our stockholders. We obtained
early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 with regard to the ClinForce Sale Transaction.
Assuming our stockholders approve the ClinForce Sale Transaction, we currently
expect the sale of ClinForce to be consummated late in the first quarter of
2001.
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Use of Proceeds. Our Board of Directors decided to use the proceeds from the
sale of the commercial services division, the Robert Walters initial public
offering and the sale of the Professional/IT segment for the following
purposes:
. To repay $288 million in bank debt;
. To repurchase up to $30 million of our outstanding Shares through an
open market repurchase program, pursuant to which 943,000 shares have
been repurchased for an aggregate amount of $6.2 million;
. To repurchase up to $130 million of Shares in this Offer;
. To pay fees and expenses associated with the sales transactions
described above;
. To pay expenses to be incurred in connection with the restructuring and
relocation of the Company's corporate headquarters following the
completion of the ClinForce Sale Transaction from Fayetteville, Arkansas
to Wakefield, Massachusetts; and
. To support the working capital requirements of the Company's eSolutions
business going forward.
Stock Repurchase Program. During the past two years, we have periodically
made open market purchases of Shares at times when we believed that, based on
the prevailing Share price, reacquiring Shares was an attractive use for our
available cash. In 1998, our Board of Directors authorized the repurchase of
up to $10 million in outstanding Shares. In 2000, our Board of Directors
authorized the repurchase of up to $30,000,000 in outstanding Shares. The
following table summarizes our open market repurchases of outstanding Shares
under each of these repurchase programs:
<TABLE>
<CAPTION>
Shares
Repurchased Low High Average
----------- ------ ------ -------
<S> <C> <C> <C> <C>
1998
Fourth quarter............................... 68,310 $17.63 $21.28 $20.12
1999
First Quarter................................ 180,000 6.44 17.50 9.46
Second Quarter............................... 15,000 10.00 10.63 10.21
Third Quarter................................ 0 -- -- --
Fourth Quarter............................... 0 -- -- --
2000
First Quarter................................ 0 -- -- --
Second Quarter............................... 0 -- -- --
Third Quarter................................ 943,000 5.81 7.00 6.63
Fourth Quarter............................... 0 -- -- --
</TABLE>
E-Solutions Focus; Purpose of the Offer. As we continued our progress to
focus on our eSolutions business, in July 2000, we engaged Banc of America
Securities to assist the Board of Directors in determining the appropriate
capital structure for the Company following the divestitures of the non-
eSolutions businesses and to advise us on its positioning relative to its
eSolutions peer group. After completion of the Offer and the ClinForce Sale
Transaction, our eSolutions business will represent our exclusive operating
business focus. Our present business strategy emphasizes growing our core
eSolutions business and returning stockholder value. We believe that the Offer
is consistent with our long-term corporate goal of increasing stockholder
value. We believe that the Offer is a prudent use of our financial resources
and assets, given our recently-announced business strategy and the current
market price of our Shares. We also believe that investing in our own Shares
is an attractive use of capital and an efficient means to provide value to our
stockholders as tendering stockholders who have Shares registered in their own
names and who tender directly to the depositary should not be obligated to pay
brokerage commissions on the purchase of the Shares by the Company.
After the Offer is completed, we believe that the cash remaining following
the Offer, the cash proceeds from the ClinForce Sale Transaction, if
consummated, and our anticipated cash flow from our eSolutions operations
11
<PAGE>
will be, taken together, adequate for our working capital needs for at least
the next 12 months. However, our actual experience may differ significantly
from our expectation, particularly if we pursue growth through internal growth
initiatives and/or business combination transactions. We presently believe
that such growth efforts will be advantageous to building long-term
stockholder value. In addition, other future events may adversely or
materially affect our business, expenses or prospects and could affect our
available cash or the availability or cost of external financial resources.
Our Board of Directors has approved the Offer. However, neither we nor our
Board of Directors nor the Dealer Managers make any recommendation to
stockholders or holders of Shares or Qualified Option Shares as to whether to
tender or refrain from tendering their Shares or Qualified Option Shares, and
none of them have authorized any person to make any such recommendation.
Stockholders and holders of Qualified Option Shares are urged to evaluate
carefully all information in the Offer to Purchase, consult with their own
investment and tax advisors and make their own decision whether to tender and,
if so, how many Shares and Qualified Option Shares to tender.
Certain Effects of the Offer. Upon the completion of the Offer, non-
tendering stockholders will own a greater interest in a company focused on its
core eSolutions businesses. Our new business strategy may or may not be
successful. Non-tendering stockholders will realize a proportionate increase
in their relative ownership interest in the Company and, thus, in our future
earnings and assets, subject to our right to issue additional Shares and other
equity securities in the future. Stockholders may be able to sell non-tendered
Shares in the future on the Nasdaq National Market or otherwise, at a net
price significantly higher or lower than the purchase price in the Offer. We
can give no assurance, however, as to the price at which a stockholder may be
able to sell his or her Shares in the future, which may be higher or lower
than the purchase price paid by us in this Offer. See "Section 3. Important
Considerations in Deciding Whether to Tender Shares or Qualified Option Shares
Pursuant to the Offer; Forward-Looking Information."
Shares that we acquire in this Offer will be restored to the status of
authorized but unissued shares and will be available for us to issue in the
future without further stockholder action (except as required by applicable
law or Nasdaq National Market rules) for purposes, including the acquisition
of other businesses or the raising of additional capital for use in our
businesses. We have no current plans for the issuance of Shares repurchased
pursuant to this Offer.
We are currently considering business expansion plans as discussed below,
which could significantly alter the size and structure of our Company, but we
have no definitive plans or proposals and have pursued no substantive
negotiations concerning business expansion plans. Subject to the foregoing,
and except as otherwise disclosed in the Offer to Purchase, at this date, we
have no plans, proposals or negotiations underway that relate to or would
result in:
. any extraordinary transaction, such as a merger, reorganization or
liquidation, involving us or any of our subsidiaries;
. any purchase, sale or transfer of an amount of our assets or any of our
subsidiaries' assets which is material to us and our subsidiaries, taken
as a whole, other than the ClinForce Sale Transaction;
. any material change in our present Board of Directors or management or
any plans or proposals to change the number or the term of directors
(although we may fill an existing vacancy on the board) or to change any
material term of the employment contract of any executive officer;
. any material change in our present dividend policy of not paying cash
dividends, our capitalization, corporate structure or business;
. any class of our equity securities being delisted by the Nasdaq National
Market or cease to be authorized to be quoted in an automated quotations
system operated by a national securities association;
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<PAGE>
. any class of our equity securities becoming eligible for termination of
registration under section 12(g)(4) of the Securities Exchange Act of
1934, as amended (the "Exchange Act");
. the suspension of our obligation to file reports under Section 15(d) of
the Exchange Act;
. the acquisition or disposition by any person of our securities; or
. any changes in our charter, bylaws or other governing instruments or
other actions that could impede the acquisition of control of us.
After consultation with our financial advisor, we have concluded that it
will be critical to our ability to create long term stockholder value for our
stand-alone eSolutions business that we significantly increase eSolutions
business revenues to be more competitive with our publicly traded eSolutions
peers. We intend to pursue internal growth initiatives and appropriate
business combination alternatives to achieve such objectives. From time to
time, we have engaged in preliminary discussions with various persons
concerning a potential business combination transaction involving our
eSolutions business. At the present time, we have not entered into any
substantive negotiations or agreements with respect to any such transactions.
Although we have no current plans to acquire additional Shares other than
through the Offer, we may, in the future, purchase additional Shares in the
open market, in private transactions, through tender offers or otherwise,
subject to the approval of our Board. We may elect, in the alternative, or in
addition, to repurchases, to return value to our stockholders through the
declaration of a special dividend, if such dividend is prudent relative to
existing cash balances and growth objectives. Future purchases may be on the
same terms as this Offer or on terms that are more or less favorable to
stockholders than the terms of this Offer. However, Rule 13e-4 under the
Exchange Act prohibits us and our affiliates from purchasing any Shares, other
than pursuant to the Offer, until at least ten business days after the
Expiration Date. Any future purchases or dividends by us will depend on many
factors, including:
. the market price of the Shares at that time;
. the results of this Offer;
. our business strategy;
. our business and financial position; and
. general economic and market conditions.
3. Important Considerations in Deciding Whether to Tender Shares or Qualified
Option Shares Pursuant to the Offer; Forward-Looking Information.
Following the recent divestitures of our non-eSolutions businesses, it is
likely that the future value of the Shares will be highly uncertain, and
neither historical trading prices nor the Offer Price may be indicative of the
future trading values of the Shares after consummation of the Offer.
The Board of Directors has set the Offer Price at a level that represents a
premium to the trading prices of the Shares over the last six months. However,
there can be no assurance that, going forward, the Shares will be priced at,
near or above the Offer Price or the trading prices of the Shares for the last
six months. The Company's eSolutions business has never been traded publicly
as a stand-alone company. The Company acquired this business effective April
1, 1999 and, until recently, its results have been reported on a consolidated
basis along with the results of its staffing and professional services and
placement businesses that have been the subject of sales transactions over the
last six months. The Company's eSolutions business is subject to different
risks and uncertainties compared to those of the Company's non-eSolutions
businesses. There can be no assurance that the Company will be valued as a
stand-alone public company in a manner similar to the way it was valued prior
to the recent divestiture transactions. Therefore, neither the Offer Price nor
historical trading prices should be considered as a reliable measure by which
to anticipate future valuations of the Shares. In addition, after giving
effect to the completion of the Offer, the Company will have fewer, and
potentially substantially fewer,
13
<PAGE>
outstanding Shares that may be traded in the market, which may reduce
liquidity and the Company's overall market capitalization. This reduction in
liquidity and market capitalization, and the potential that the Shares will
have lesser institutional investor interest following the Offer, could have a
material adverse effect on trading prices for the Shares.
In addition, if the Company does not successfully conclude the pending
ClinForce Sale Transaction, it may become more difficult for the market to
accurately value the Shares in light of the disparate businesses conducted by
the eSolutions business and the ClinForce clinical trials staffing services
businesses, particularly since there are no pure-play comparable publicly
traded clinical trial staffing services companies.
The Company's comparable publicly traded peers have experienced extreme
volatility in trading prices over the last one-and-one-half years and the
Shares could become highly volatile and trade at prices substantially higher
or lower than the Offer Price after the Offer is consummated.
Between April 1, 1999, the effective date of the Company's acquisition of
the Solutions business, and May of 2000, many of the current publicly traded
competitors of the Company's eSolutions business completed initial and
secondary public offerings and experienced significant, in many cases several
hundred percent, appreciation in their common stock trading values relative to
their initial public offering prices. Since May of 2000, these same companies
have experienced significant, in many cases 70-90% or more, declines in
trading values. As a result, trading prices for eSolutions stocks have been
and may continue to be highly volatile, and it is possible that the Company's
common stock price, whether due to market events affecting the sector or
operating or other factors affecting the Company specifically, could trade
following the Offer with great volatility and at values substantially higher
or substantially lower than the Offer Price. Such volatility and potential
positive or negative variances from the Offer Price could be compounded by the
Company's (i) growth initiatives, the result of which could be largely
affected depending upon whether those initiatives are primarily executed
through internal growth, one the one hand, or through business combination
transactions with third parties, on the other hand; or (ii) failure to execute
targeted growth initiatives.
Volatility of our stock price could result in expensive class action
litigation.
If our Shares suffer from volatility like the securities of other technology
and eSolutions companies, we could be subject to securities class action
litigation similar to that which has been brought against other companies
following periods of volatility in the market price of their common stock.
Furthermore, in 1999, a number of complaints were filed against us alleging
that we violated U.S. federal securities laws. Recently, the trial court
granted our motion for dismissal of all claims in connection with these
actions, although certain claims are the subject of a motion for
reconsideration by the court. The process of defending against these types of
claims, regardless of their merit, is costly and often involves a considerable
distraction to senior management. Any future litigation could result in
substantial additional costs and could divert our resources and senior
management's attention. This could harm our productivity and profitability.
The Company's eSolutions business has never operated on a stand-alone basis as
a public company and its operations management team has never managed a public
company.
It is anticipated that Edgewater's eSolutions business unit will, following
the Offer and the closing of the ClinForce Sale Transaction, be our primary
operating company. Assuming the completion of such events, it is anticipated
that the present executive officers of the Company will transition out of
senior management during the one year period following the later of such
closings. Edgewater's eSolutions management team has never managed a public
company and there can be no assurance that the newly appointed executive
officers will be able to successfully manage the Company as a publicly traded
company. In light of these uncertainties, stockholders considering whether to
tender in this Offer should consider the risk that the actual value of the
Company's common stock following the Offer may be significantly lower than the
Offer Price.
14
<PAGE>
Our success depends on a limited number of significant eSolutions clients, and
our revenues could be negatively affected by the loss of a major eSolutions
client or significant project.
We generate much of our eSolutions revenues from a limited number of
clients. As a result, if we lose a major client or large project, our revenues
could be materially and adversely affected. In 1999, for example, our five
largest eSolutions clients accounted for approximately 87% of our eSolutions
net revenues. During the nine months ended September 30, 2000, our five
largest eSolutions clients accounted for approximately 74% of our total
eSolutions revenues.
We perform varying amounts of work for specific clients from year to year. A
major client in one year may not use our services in another year. In
addition, we may derive revenues from a major client that constitute a large
portion of a particular quarter's total revenues. If we lose any major clients
or any of our clients cancel or significantly reduce a large project's scope,
our results of operations and financial condition could be materially and
adversely affected. In addition, we expect the size of our contracts with
significant clients to grow, resulting in a continued dependence on
significant clients. Further, if we fail to collect a large account
receivable, we could be subjected to significant financial exposure. All of
the foregoing risks are more acute than prior to our recent divestitures, when
our businesses were more diversified and less dependent upon one or more
individual customers.
Our lack of long-term eSolutions client contracts reduces the predictability
of our revenues because these contracts may be canceled on short notice and
without penalty.
Our clients generally retain us on a project-by-project basis, rather than
under long-term contracts. As a result, a client may not engage us for further
services once a project is completed. Also, most of our clients can reduce or
cancel their contracts with little or no notice and without penalty. If a
significant client, or a number of clients, terminate, significantly reduce or
modify their contracts with us, our results of operations would be materially
and adversely affected. Consequently, you should not predict or anticipate our
future revenues based on the number of clients we have or the number and size
of our existing projects. When a client postpones, modifies or cancels a
project, we would be required to shift our consultants to other projects to
minimize the adverse impact on our operating results. We cannot assure you
that we will be successful in efficiently shifting our consultants to new
projects in the event of project terminations.
We may have lower margins, or lose money, on fixed-price eSolutions contracts.
As part of our strategy, we intend to continue to grow our eSolutions
business with both time-and-materials contracts and fixed-price contracts.
However, we anticipate, given present customer demand trends, that our
customers will increasingly demand fixed-price contracts and such contracts,
compared to contracts based on payment for time and materials, will grow at a
faster rate and constitute a larger percentage of our revenues going forward.
For the nine months ended September 30, 2000, fixed-price contracts
represented approximately 7% of our eSolutions revenues. We assume greater
financial risk on fixed-price contracts than on time-and-materials
engagements, and we cannot assure you that we will be able to successfully
price our larger fixed-price contracts. If we fail to estimate accurately the
resources and time required for an engagement, to manage client expectations
effectively or to complete fixed- price engagements within our budget, on time
and to our clients' satisfaction, we would be exposed to cost overruns,
potentially leading to lower gross profit margins, or even losses on these
engagements.
Because we rely on highly trained and experienced personnel to design and
build complex systems for our customers, our inability to attract and retain
qualified employees would impair our ability to provide our services to
existing and new customers.
Our future success depends in large part on our ability to attract and
retain highly trained and experienced software engineers as well as
recruiters, other technical personnel and sales and marketing professionals of
15
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various experience levels. If we fail to attract and retain these personnel,
we may be unable to complete existing projects or bid for new projects of
similar size, which could reduce our revenues. While attracting and retaining
experienced software engineers is critical to our business and growth
strategy, maintaining our current level of software engineer experience may
also be particularly difficult. Skilled software engineers historically have
been in short supply, and this shortage is likely to continue for some time.
As a result, competition for these people is intense, and the industry
attrition rate for them is high. Additionally, we plan to open new offices in
a select number of geographic markets to attract and retain new employees. Our
failure to open new offices or to open them in areas which experienced
software engineers would find attractive could limit our ability to attract
and retain qualified personnel. Moreover, even if we are able to grow and
expand our employee base, the resources required to attract and retain these
employees may adversely affect our operating margins.
We depend on our key personnel, and the loss of their services may adversely
affect our business.
We believe that our success will depend on the continued employment of the
senior management team of the Company's eSolution business and other key
personnel. This dependence is particularly important to our business because
personal relationships are a critical element of obtaining and maintaining
client engagements. If one or more members of the senior management team of
the Company's eSolution business or other key personnel were unable or
unwilling to continue in their present positions, our business could be
seriously harmed. In addition, if any of our key personnel join a competitor
or form a competing company, some of our clients might choose to use the
services of that competitor or those of a new company instead of our own.
Furthermore, other companies seeking to develop in-house business capabilities
may hire away some of our key personnel.
Competition in the Internet professional services market is intense and,
therefore, we may lose projects to, or face pricing pressure from, our
competitors or prospective clients' internal IT departments.
While the market for Internet professional services is relatively new, it is
already highly competitive. In many cases we compete with the in-house
technical staff of our prospective clients. In addition, the market is
characterized by an increasing number of entrants that have introduced or
developed services similar to those offered by us. We believe that competition
will intensify and increase in the future. Our target market is rapidly
evolving and is subject to continuous technological change. As a result, our
competitors may be better positioned to address these developments or may
react more favorably to these changes, which could have a material adverse
effect on our business. We compete on the basis of a number of factors, many
of which are beyond our control. Existing or future competitors may develop or
offer Internet professional services that provide significant technological,
creative, performance, price or other advantages over the services we offer.
We currently compete for client assignments and experienced personnel
principally with the following:
. Internet service firms: AGENCY.COM, Breakaway Solutions, Diamond
Technology Partners, Granitar, iXL, MarchFirst, Proxicom, Razorfish,
Sapient, Scient and Viant.
. Systems integrators: Andersen Consulting, Cambridge Technology Partners,
Cap Gemini, EDS and WM-Data.
. Management consulting firms: Bain, Booz-Allen & Hamilton, Boston
Consulting Group and McKinsey.
. Computer hardware and service vendors: Compaq, Hewlett-Packard and IBM.
Many of these businesses have longer operating histories and significantly
greater financial, technical, marketing and managerial resources than we do.
There are relatively low barriers to entry into our business. We have no
patented or other proprietary technology that would preclude or inhibit
competitors from entering the Internet professional services market.
Therefore, we must rely on the skill of our personnel and the quality of our
client service. The costs to develop and provide Internet professional
services are low. We expect that we
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will continue to face additional competition from new entrants into the market
in the future, and we are subject to the risk that our employees may leave us
and may start competing businesses. Any one or more of these factors could
hurt our business.
Our future success will depend on the continued growth and development of the
Internet and its infrastructure.
Our future success will depend on the continued growth and use of the
Internet. We cannot assure you that this growth will continue or that a
sufficient number of consumers will adopt and continue to use the Internet.
Internet usage may be inhibited for a number of reasons, including:
. inadequate Internet infrastructure;
. security concerns;
. inconsistent quality of service; or
. unavailability of cost-effective, high-speed access services.
We cannot assure you that the Internet infrastructure will be able to
support expected growth or that the performance and reliability of the
Internet will not decline as a result of this growth. Recently, many web
sites, including those of our clients, have experienced a variety of
interruptions in their service as a result of outages and other delays
occurring throughout the Internet network infrastructure. If these outages or
delays frequently occur in the future, web usage could grow more slowly than
anticipated or decline.
Our future success will depend on the development of the eBusiness market,
which remains uncertain.
Our future success will depend upon the widespread acceptance and use of the
Internet as an effective medium of commerce by businesses and consumers. Rapid
growth in the use of the Internet and commercial online services is a recent
phenomenon. Demand for recently introduced services and products over the
Internet and online services is subject to a high level of uncertainty. The
continued development of the Internet and eBusiness as a viable commercial
marketplace is subject to a number of factors, including the following:
. the willingness of buyers to shift their purchasing habits from
traditional vendors to eBusiness vendors;
. the lack of success, or business failures experienced, with emerging or
developing Internet-based businesses or distribution methodologies;
. insufficient availability of telecommunications services providing
sufficiently fast response times; and
. adverse publicity and consumer concern about the security of eBusiness
transactions.
During the last six months, Internet service providers have experienced
decreased demand from "dot.com" start-ups and established concerns that have
reduced or in certain cases eliminated eSolution spending. We cannot assure
you that this trend will not continue and deteriorate or that such events or
developments will not have an adverse effect on the Company.
Breaches of security and computer viruses on the Internet may adversely affect
our business by slowing the growth of eBusiness.
The need to securely transmit confidential information, such as credit card
and other personal information, over the Internet has been a significant
barrier to eBusiness and Internet communications. Any well-publicized
compromise of security could deter consumers and businesses from using the
Internet to conduct transactions that involve transmitting confidential
information, such as purchases of goods or services. Furthermore, computer
viruses that spread over the Internet could disable or damage the systems we
develop for our clients. Decreased
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Internet traffic or eBusiness sales as a result of general security concerns
or viruses could cause companies to reduce their amount of technology
spending, which could hurt our results of operations.
If we fail to satisfy our eSolutions clients' expectations, our existing and
continuing business could be adversely affected.
Our sales and marketing strategy emphasizes our belief that any client we
have ever worked for would give us a positive reference. Therefore, if we fail
to satisfy the expectations of our clients, we could damage our reputation and
our ability to retain existing clients and attract new clients. In addition,
if we fail to perform our engagements, we could be liable to our clients for
breach of contract. Although most of our contracts limit the amount of any
damages to the fees we received, we could still incur substantial cost,
negative publicity, and diversion of management resources to defend a claim,
and as a result, our business results could suffer.
We may not be able to successfully manage our eSolutions business growth,
which could adversely affect our business.
We have grown rapidly and expect to continue to grow rapidly, both by hiring
new employees and serving new industry and geographic markets. Growth efforts
through potential business combination transactions may also be pursued in the
future after the ClinForce Sale Transaction. Our recent growth has placed, and
is expected to continue to place, a significant strain on our management and
our operating and financial systems. Our headcount has grown from 120 as of
December 31, 1998 to 234 as of September 30, 2000, and several members of our
senior management team have only recently joined us. We do not believe our
recent organic or internal growth rate is sustainable for the long term.
Our personnel, systems, procedures and controls may be inadequate to support
our future operations. In order to accommodate the increased number of
projects, clients and the increased size of our operations, we will need to
hire, train and retain appropriate personnel to manage our operations. We will
also need to improve our financial and management controls, reporting systems
and operating systems. We currently plan to redesign several internal systems.
We may encounter difficulties in developing and implementing these new
systems.
Future eSolutions business combination transactions could disrupt our ongoing
business, distract our management and employees, increase our expenses and
adversely affect our business.
We anticipate that a portion of any future growth may be accomplished
through one or more business combination transactions. The success of any such
transactions will depend upon, among other things, our ability to integrate
acquired personnel, operations, products and technologies into our
organization effectively, to retain and motivate key personnel of acquired
businesses and to retain customers of acquired firms. We cannot assure you
that we will be able to identify suitable opportunities, obtain any necessary
financing or utilize our equity securities as acquisition currency on
acceptable terms to complete such business combination transaction or
successfully integrate acquired personnel and operations. These difficulties
could disrupt our ongoing business, distract our management and employees,
increase our expenses and materially and adversely affect our results of
operations. Any such transactions would involve certain other risks, including
the assumption of additional liabilities, potentially dilutive issuances of
equity securities and diversion of management's attention from operating
activities.
We may not be able to protect our intellectual property rights, which could
adversely affect our business.
Our future success will depend, in part, upon our intellectual property
rights and our ability to protect these rights. We do not have any patents or
patent applications pending. Existing trade secret and copyright laws afford
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us only limited protection. Third parties may attempt to disclose, obtain or
use our solutions or technologies. This is particularly true in foreign
countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States. Others may independently
develop and obtain patents or copyrights for technologies that are similar or
superior to our technologies. If that happens, we may need to license these
technologies and we may not be able to obtain licenses on reasonable terms, if
at all. If we are unsuccessful in any future intellectual property litigation
we may be forced to do one or more of the following:
. cease selling or using technology or services that incorporate the
challenged intellectual property;
. obtain a license, which may not be available on reasonable terms or at
all, to use the relevant technology;
. configure services to avoid infringement; and
. refund license fees or other payments that we have previously received.
Generally, we develop software applications for specific client engagements.
Issues relating to ownership of and rights to use software applications and
frameworks can be complicated. Also, we may have to pay economic damages in
these disputes which could adversely affect our results of operations and
financial condition.
Fluctuations in our quarterly revenues and operating results may lead to
reduced prices for our stock.
Our quarterly revenues and operating results can sometimes be volatile. We
believe comparisons of prior period operating results cannot be relied upon as
indicators of future performance. If our revenues or our operating results in
any future period fall below the expectations of securities analysts and
investors, the market price of our securities would likely decline.
Factors that may cause our quarterly results to fluctuate in the future
include the following:
. variability in market demand for Internet professional services;
. length of the sales cycle associated with our service offerings;
. unanticipated variations in the size, budget, number or progress toward
completion of our engagements;
. unanticipated termination of a major engagement, a client's decision not
to proceed with an engagement we anticipated or the completion or delay
during a quarter of several major client engagements;
. efficiency with which we utilize our employees, or utilization,
including our ability to transition employees from completed engagements
to new engagements;
. our ability to manage our operating costs, a large portion of which are
fixed in advance of any particular quarter;
. changes in pricing policies by us or our competitors;
. seasonality and cyclicality, including the effects of lower utilization
rates during periods with disproportionately high holiday and vacation
usage experience;
. timing and cost of new office expansions;
. the timing of customer year-end periods and the impact of spending
relative to such year-end periods;
. our ability to manage future growth;
. costs of attracting, retaining and training skilled personnel, and
. foreign currency fluctuations.
Some of these factors are within our control while others are outside of our
control.
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Our forward-looking statements in this Offer to Purchase are subject to a wide
variety of factors that could cause actual results to differ materially from
our current beliefs.
Some of the statements in this Offer to Purchase constitute forward-looking
statements, including statements made with respect to the anticipated closing
of the ClinForce Sale Transaction and the Offer, the extension, termination or
amendment of the Offer, the conditions to the Offer, planned eSolutions unit
positioning, the corporate headquarters move, competitive and strategic
initiatives, potential business combination transactions, potential shifts in
management, potential cash dividends, potential future stock repurchases, tax
consequences concerning participation on the Offer and future liquidity needs.
These statements involve known and unknown risks, uncertainties and other
factors that may cause the Offer, the ClinForce Sale Transaction, results,
levels of activity, growth, performance, earnings per share, transactions or
achievements to be materially different from the description of the Offer, the
ClinForce Sale Transaction, future results, levels of activity, growth,
performance, earnings per share, transactions or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, those listed below, as well as those listed elsewhere under "Section
3. Important Considerations in Deciding Whether to Tender Shares or Qualified
Option Shares Pursuant to the Offer; Forward-Looking Information" and in our
1999 Annual Report on Form 10-K as filed with the Commission on March 20,
2000.
The forward-looking statements included in this Offer to Purchase relate to
future events or our future financial condition or performance. In some cases,
you can identify forward-looking statements by terminology such as "may,"
"believe," "enable," "will," "provide," "anticipate," "future," "could,"
"growth," "plan," "intend," "pursue," "provide," "begin," "should," "would,"
"focus," "expect," "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 Offer to Purchase. Factors that may cause the Offer, 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) the occurrence of any event described under "Section 13.
Certain Conditions to the Offer;" (2) the inability to consummate the
ClinForce Sale Transaction; (3) potential miscalculations of the capital
requirements, competitive and strategic positioning and growth of Edgewater;
(4) inability to effect a business combination, execute upon growth
objectives, pay a dividend or repurchase Shares in the future on terms
acceptable to us; (5) changes in industry trends, such as decline in the
demand for or supply of clinical trials support services, whether on a
temporary or permanent basis, or eSolutions services; (6) adverse developments
and volatility involving debt, equity, currency or technology market
conditions; (7) the occurrence of lawsuits or adverse results in litigation
matters; (8) failure to obtain new customers or retain significant existing
customers; (9) loss of key executives; and/or (10) general economic and
business conditions (whether foreign, national, state or local) which include
but are not limited to changes in interest or currency exchange rates. Actual
events or results may differ materially. These factors may cause our actual
results to differ materially from any forward-looking statements.
Although we believe that the expectations in the forward-looking statements
are reasonable, we cannot guarantee that any of the events referenced in the
forward-looking statements will occur or occur as anticipated. However,
neither we nor any other person assumes responsibility for the accuracy and
completeness of such statements.
4. Acceptance for Payment and Payment for Shares.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Company will accept for payment, and will pay for, all
Shares validly tendered prior to the Expiration Date and not properly
withdrawn, as soon as practicable after the Expiration Date. Subject to
applicable rules of the SEC, the Company expressly reserves the right to delay
acceptance for payment of, or payment for, Shares in order to comply in whole
or in part with any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares (the "Certificates") or timely
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confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in "Section 5. Procedures for Tendering
Shares," (ii) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or, in the
case of a book-entry transfer, an Agent's Message (as defined in Section 5) in
lieu of the Letter of Transmittal and (iii) any other documents required by
the Letter of Transmittal, except that holders of exercisable options should
not complete the Letter of Transmittal, but shall instead follow the
instructions and procedures set forth in the Option Election Form and Related
Instructions.
For purposes of the Offer, the Company will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when the Company gives oral or written notice to the
Depositary, as agent for the tendering stockholders, of the Company's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms
and subject to the conditions of the Offer, payment for Shares accepted for
payment pursuant to the Offer will be made by deposit of the Offer Price
therefor with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payments from the Company and
transmitting such payments to tendering stockholders whose Shares have been
accepted for payment. Under no circumstances will interest on the Offer Price
for Shares be paid, regardless of any delay in making such payment.
Special Procedures for Holders of Exercisable Options. Holders of vested,
exercisable options to purchase Shares granted under the Company's stock
option plans may tender Qualified Option Shares in connection with the
conditional exercise of such options as part of the Offer. Such option holders
will instruct the Company, as their agent, to tender part or all of the
Qualified Option Shares resulting from the conditional exercise.
This exercise of such options will be "conditional" because the option
holder is deemed to exercise the option only if, and to the extent that, the
Company actually purchases the Qualified Option Shares in the Offer. If, after
taking into account proration, the Company purchases less than all of a
holder's Qualified Option Shares, the options will be exercised, and the
Qualified Option Shares purchased, in the order designated by the holder in
the Option Election Form, and the remaining options will not be considered to
have been exercised and will remain outstanding.
As an accommodation to option holders planning to tender Qualified Option
Shares in the Offer, the Company will permit option holders to elect a
"cashless" exercise of the options for Qualified Option Shares purchased in
the Offer. In this event, the option holder will not be required to pay cash
for the exercise price and the consideration received by the holder whose
Qualified Option Shares are purchased in the Offer will be an amount equal to
the difference between $8.00 and the exercise price per Qualified Option Share
relating to the Qualified Option Shares so purchased (less the applicable tax
withholding amount). Option holders will receive the same consideration they
would have received if the options had been exercised for cash, applicable
taxes had been paid in cash, and the related Shares had been sold for the
Offer Price. Option holders who have not exercised their options for cash and
received Shares upon the exercise of such options may not use the Letter of
Transmittal, and instead should use the Option Election Form, to direct the
tender of the Qualified Option Shares. Instead, such holders must follow the
procedures for tender described in the Option Election Form and Related
Instructions included with this Offer to Purchase.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Certificates are submitted
evidencing more Shares than are tendered, Certificates evidencing unpurchased
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares tendered by book-entry transfer into the Depositary's
account at DTC pursuant to the procedure set forth in "Section 5. Procedures
for Tendering Shares," such Shares will be credited to an account maintained
at DTC), as promptly as practicable following the expiration or termination of
the Offer.
The Company reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its controlled affiliates, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transaction or assignment will not relieve the Company of its
obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
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5. Procedures for Tendering Shares
Except as set forth below, in order for Shares (other than Qualified Option
Shares) to be validly tendered pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees (or, in the case of a book-
entry transfer, an Agent's Message in lieu of the Letter of Transmittal) and
any other documents required by the Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase and either (i) the Certificates evidencing tendered Shares
must be received by the Depositary at such address or such Shares must be
tendered pursuant to the procedure for book-entry transfer described below and
a Book-Entry Confirmation must be received by the Depositary (including an
Agent's Message if the tendering stockholder has not delivered a Letter of
Transmittal), in each case on or prior to the Expiration Date, or (ii) the
tendering stockholder must comply with the guaranteed delivery procedures
described below. No alternative, conditional or contingent tenders will be
accepted. The term "Agent's Message" means a message, transmitted by
electronic means to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation which states that DTC has received an express
acknowledgment from the participant in DTC tendering the Shares which are the
subject of such Book-Entry Confirmation, that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that the
Company may enforce such agreement against such participant.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at DTC for purposes of the Offer within two business days after the
date of this Offer to Purchase. Any financial institution that is a
participant in DTC's system may make a book-entry delivery of Shares by
causing DTC to transfer such Shares into the Depositary's account in
accordance with DTC's procedures for such transfer. However, although delivery
of Shares may be effected through book-entry transfer at DTC, either the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's
Message in lieu of the Letter of Transmittal, and any other required
documents, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedure described below. DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Guarantee Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution"), except
in cases where Shares are tendered (i) by a registered holder of Shares who
has not completed either the box entitled "Special Payment Instructions" or
the box entitled "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. If a Certificate is
registered in the name of a person other than the signatory of the Letter of
Transmittal (or a facsimile thereof), or if payment is to be made, or a
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Certificate,
with the signature(s) on such Certificate or stock powers guaranteed by an
Eligible Institution. If the Letter of Transmittal or stock powers are signed
or any certificate is endorsed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing and, unless waived by the Company, proper evidence satisfactory to the
Company of their authority to so act must be submitted. See Instructions 1 and
5 of the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and the Certificates evidencing such stockholder's Shares are not
immediately available or such stockholder cannot deliver the Certificates and
all other required documents to the Depositary prior to the Expiration Date,
or such Stockholder cannot complete the procedure for delivery by book-entry
transfer on a timely basis, such Shares may nevertheless be tendered, provided
that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Company, is received prior
to the Expiration Date by the Depositary as provided below; and
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(iii) the Certificates (or a Book-Entry Confirmation) evidencing all
tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in
connection with a book-entry transfer, an Agent's Message), and any
other documents required by the Letter of Transmittal are received by
the Depositary within three Nasdaq National Market trading days after
the date of execution of such Notice of Guaranteed Delivery. A "trading
day" is any day on which the Nasdaq National Market and banks in New
York City are open for business.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by facsimile transmission to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the form of
Notice of Guaranteed Delivery made available by the Company.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by the Letter of Transmittal.
Our Employee Stock Purchase Plan. Participants in our Employee Stock
Purchase Plan may elect to tender some or all of the shares held in the
participant's account under the plan by following the instructions in the
Direction Form for ESPP Participants separately and returning it to EquiServe
in accordance with those instructions. Each participant may direct that all,
some or none of the shares held in the participant's account under the
Employee Stock Purchase Plan be tendered. Any Employee Stock Purchase Plan
shares tendered but not purchased will be returned to the participant's
Employee Stock Purchase Plan account. All documents furnished to stockholders
generally in connection with the Offer will be made available to participants
whose accounts are credited with shares. Participants in the Employee Stock
Purchase Plan cannot use the Letter of Transmittal to direct the tender of
shares, but must use the Letter to Participants in Edgewater's Employee Stock
Purchase Plan. Delivery of a Letter of Transmittal by an Employee Stock
Purchase Plan participant does not constitute proper tender of his or her
Employee Stock Purchase Plan shares. Participants in our Employee Stock
Purchase Plan are urged to read the Letter to Participants in Edgewater's
Employee Stock Purchase Plan Transmittal and related materials carefully.
THE METHOD OF DELIVERY OF CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH DTC, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Tenders by Holders of Exercisable Options. Holders of vested, exercisable
options granted under the Company's stock option plans with an exercise price
of less than $8.00 who wish to participate by conditionally exercising options
and tendering the underlying Qualified Option Shares should not complete the
Letter of Transmittal. They should instead complete the Option Election Form
provided to them with this Offer to Purchase. In addition, holders of vested,
exercisable options who wish to participate in the Offer by conditionally
tendering their exercisable options must follow the instructions and
procedures set forth in the documents described below. These documents are
also part of the terms of the Offer.
Holders of vested options exercisable for Qualified Option Shares should
read this Offer to Purchase, the related Letter of Transmittal, the Memorandum
to Holders of Stock Options and Option Election Form and Related Instructions,
as they contain the terms of the Offer. Holders of vested options exercisable
for Qualified Option Shares should also see "Section 7. Certain United States
Federal Income Tax Consequences--Tax Considerations for Holders of Options"
for information about tax considerations.
Holders of vested exercisable options who wish to tender Qualified Option
Shares in the Offer should review the information and must follow the
instructions contained in the Memorandum to Holders of Stock Options and
Option Election Form and Related Instructions. In addition, holders of
exercisable options who also hold Shares directly may participate in the Offer
by following the instructions in this Offer to Purchase and Letter of
Transmittal.
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Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by the Company in its sole discretion,
which determination shall be final and binding on all parties. The Company
reserves the absolute right to reject any and all tenders determined by it not
to be in proper form or the acceptance for payment of which may, in the
opinion of its counsel, be unlawful. The Company also reserves the absolute
right to waive any condition of the Offer or any defect or irregularity in the
tender of any particular Shares or any particular stockholder, whether or not
similar defects or irregularities are waived in the case of other
stockholders, and the Company's interpretation of the terms and conditions of
the Offer will be final and binding on all persons. No tender of Shares will
be deemed to have been validly made until all defects and irregularities have
been cured or waived to the satisfaction of the Company. None of the Company,
either of the Dealer Managers, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or will incur any liability for failure to give any
such notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Company
as such stockholder's proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder
and accepted for payment by the Company (and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after the date of this Offer to Purchase). All such proxies shall be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Company accepts such
Shares for payment. Upon such acceptance for payment, all prior proxies given
by such stockholder with respect to such Shares (and such other Shares and
securities) will be revoked without further action, and no subsequent proxies
may be given nor any subsequent written consent executed by such stockholder
(and, if given or executed, will not be deemed to be effective) with respect
thereto. The designees of the Company will, with respect to the Shares for
which the appointment is effective, be empowered to exercise all voting and
other rights of such stockholder as they in their sole discretion may deem
proper at any annual or special meeting of the Company's stockholders or any
adjournment or postponement thereof, by written consent in lieu of any such
meeting or otherwise. The Company reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Company's
payment for such Shares, the Company must be able to exercise full voting
rights with respect to such Shares.
The acceptance for payment by the Company of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and the Company upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENTS
MADE TO CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED
PURSUANT TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH
SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER ("TIN") AND CERTIFY
THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING
BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP
WITHHOLDING APPLIES WITH RESPECT TO A STOCKHOLDER, THE DEPOSITARY IS REQUIRED
TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH STOCKHOLDER. SEE INSTRUCTION 10
OF THE LETTER OF TRANSMITTAL. NON-UNITED STATES HOLDERS MUST SUBMIT A
COMPLETED FORM W-8 TO AVOID BACKUP WITHHOLDING. SEE INSTRUCTIONS 10 AND 11 OF
THE LETTER OF TRANSMITTAL. THESE FORMS MAY BE OBTAINED FROM THE DEPOSITARY.
6. Withdrawal Rights.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Company pursuant to the Offer,
may also be withdrawn at any time after 12:00 midnight on Tuesday, February
20, 2001. If the Company extends the Offer, is delayed in its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Company's rights under
the Offer,
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<PAGE>
the Depositary may, nevertheless, on behalf of the Company, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in this
Section 6.
For a withdrawal to be effective and proper, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover page of this
Offer to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered holder of such Shares, if different
from that of the person who tendered such Shares. If Certificates evidencing
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Certificates, the
serial numbers shown on such Certificates must be submitted to the Depositary
and the signature(s) on the notice of withdrawal must be guaranteed by an
Eligible Institution, unless such Shares have been tendered for the account of
an Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in "Section 5. Procedures for
Tendering Shares," any notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawn Shares or must
otherwise comply with DTC's procedures.
Withdrawals of tenders of Shares may not be rescinded, and Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following the
procedures described in "Section 5. Procedures for Tendering Shares," at any
time prior to the Expiration Date.
Qualified Option Shares tendered may only be withdrawn as set forth in the
Memorandum to Holders of Stock Options.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Company, in its sole
discretion, whose determination will be final and binding. None of the
Company, the Dealer Managers, the Depositary, the Information Agent or any
other person will be under a duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
7. Certain U.S. Federal Income Tax Consequences.
The following is a general summary of the material U.S. federal income tax
consequences of the sale of Shares pursuant to the Offer. This discussion is
based on the Internal Revenue Code of 1986, as amended (the "Code"), its
legislative history, Treasury Regulations promulgated thereunder and
administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change (possibly on a retroactive basis). This
summary does not discuss all the tax consequences that may be relevant to a
particular stockholder in light of the stockholder's particular circumstances.
Some stockholders, such as holders who acquire their securities through the
exercise of options, insurance companies, tax-exempt persons, financial
institutions, regulated investment companies, dealers in securities or
currencies, persons that hold Shares as a position in a "straddle" or as part
of a "hedge," "conversion transaction" or other integrated investment, persons
who received Shares as compensation or persons whose functional currency is
other than the U.S. dollar, may be subject to different rules not discussed
below. In addition, this summary does not address any state, local or foreign
tax considerations that may be relevant to a stockholder's decision to tender
Shares pursuant to the Offer. This summary assumes Shares are held as capital
assets within the meaning of Section 1221 of the Code. For purposes of this
summary a "U.S. Holder" means a beneficial holder of the securities who, for
U.S. federal income tax purposes is (i) a citizen or resident of the United
States, (ii) a corporation, partnership, or other entity created or organized
in the U.S. or under the laws of the United States or of any political
subdivision thereof, (iii) an estate whose income is includible in gross
income for U.S. federal income tax purposes regardless of its source, or (iv)
a trust whose administration is subject to the primary supervision of a U.S.
court and which has one or more U.S. persons who have the authority to control
all substantial decisions of the trust.
EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT
TO THE U.S. FEDERAL, STATE AND LOCAL CONSEQUENCES OF PARTICIPATING IN THE
OFFER, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER
TAXING JURISDICTION.
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<PAGE>
Tax Consequences of the Offer--Distribution vs. Sale Treatment. The
Company's purchase of Shares from a stockholder pursuant to the Offer will be
treated by the stockholder either as a sale of the Shares or as a distribution
by the Company. The purchase will be treated as a sale if the stockholder
meets any of the three tests discussed below. It will be treated as a
distribution if the stockholder satisfies none of the three tests discussed
below.
If the purchase of Shares from a particular stockholder is treated as a
sale, the stockholder will recognize gain or loss on the exchange in an amount
equal to the difference between the amount of cash received by the stockholder
and the stockholder's tax basis in the Shares sold. The gain or loss will be
capital gain or loss and will be long-term capital gain or loss if the Shares
were held more than one year. A stockholder must calculate gain or loss
separately for each block of Shares that he or she owns. A stockholder may be
able to designate which blocks and the order of such blocks of Shares to be
tendered pursuant to the Offer.
If the purchase of Shares from a particular stockholder is treated as a
distribution by the Company, the full amount of cash received by the
particular stockholder for the Shares (without being offset by its tax basis
in the purchased Shares) will be treated as a dividend and taxed to the
stockholder as ordinary income to the extent that the Company's current and
accumulated earnings and profits would be allocable to the distribution. In
addition, the tax basis of the stockholder's sold Shares will be added to the
tax basis of the remaining Shares. To the extent, if any, payments made by the
Company exceed its earnings and profits, a tendering stockholder will receive
its share of such excess tax-free to the extent of its basis in its Shares and
then as capital gain.
Determination of Sale or Distribution Treatment. The Company's purchase of
Shares pursuant to the Offer will be treated as a sale of the Shares by a
stockholder if:
(a) the purchase completely terminates the stockholder's equity interest in
the Company;
(b) the receipt of cash by the stockholder is "not essentially equivalent
to a dividend;" or
(c) as a result of the purchase there is a "substantially disproportionate"
reduction in the stockholder's equity interest in the Company.
If none of these tests are met with respect to a particular stockholder, then
the Company's purchase of Shares pursuant to the Offer will be treated as a
distribution.
In applying the foregoing tests, the constructive ownership rules of Section
318 of the Code apply. Thus, a stockholder is treated as owning not only
Shares actually owned by the stockholder but also Shares actually (and in some
cases constructively) owned by others. Pursuant to the constructive ownership
rules, a stockholder will be considered to own Shares owned, directly or
indirectly, by certain members of the stockholder's family and certain
entities (such as corporations, partnerships, trusts and estates) in which the
stockholder has an equity interest, as well as Shares which the stockholder
has an option to purchase.
It may be possible for a tendering stockholder to satisfy one of the above
three tests by contemporaneously selling or otherwise disposing of all or some
of the Shares that such stockholder actually or constructively owns that are
not purchased pursuant to the Offer. Correspondingly, a tendering stockholder
may not be able to satisfy one of the above three tests because of
contemporaneous acquisitions of Shares by such stockholder or a related party
whose Shares would be attributed to such stockholder. Stockholders should
consult their tax advisors regarding the tax consequences of such sales or
acquisitions in their particular circumstances.
Complete Termination. A sale of Shares pursuant to the Offer will be deemed
to result in a "complete termination" of the stockholder's interest in the
Company if, immediately after the sale, either:
(a) the stockholder owns, actually and constructively, no Shares; or
26
<PAGE>
(b) the stockholder actually owns no Shares and constructively owns only
Shares as to which the stockholder is eligible to waive, and does
effectively waive, constructive ownership under the procedures
described in Section 302(c)(2) of the Code. If a stockholder desires to
file such a waiver, the stockholder should consult his or her own tax
advisor.
Not Essentially Equivalent to a Dividend. A sale of Shares pursuant to the
Offer will be treated as "not essentially equivalent to a dividend" if it
results in a "meaningful reduction" in the selling stockholder's proportionate
interest in the Company. Whether a stockholder meets this test will depend on
relevant facts and circumstances. The Internal Revenue Service (the "IRS") has
held in a published ruling that, under the particular facts of that ruling, a
3.3% reduction in the percentage stock ownership of a stockholder constituted
a "meaningful reduction" when the stockholder owned 0.0001118% of the publicly
held corporation's stock before a redemption, owned 0.0001081% of the
corporation's stock after the redemption and did not exercise any control over
corporate affairs. In that ruling, the IRS applied the meaningful reduction
standard to the following three important rights attributable to stock
ownership:
(a) the right to vote;
(b) the right to participate in current earnings and accumulated surplus;
and
(c) the right to share in net assets on liquidation.
In measuring the change, if any, in a stockholder's proportionate interest
in the Company, the meaningful reduction test is applied by taking into
account all Shares that the Company purchases pursuant to the Offer, including
Shares purchased from other stockholders.
If, taking into account the constructive ownership rules of Section 318 of
the Code, a stockholder owns Shares that constitute only a minimal interest in
the Company and does not exercise any control over the affairs of the Company,
any reduction in the stockholder's percentage interest in all of the three
rights described in the preceding sentence should be a "meaningful reduction."
Such selling stockholder should, under these circumstances, be entitled to
treat his or her sale of Shares pursuant to the Offer as a sale for U.S.
federal income tax purposes.
Substantially Disproportionate. Under Section 302(b)(2) of the Code a sale
of Shares pursuant to the Offer, in general, will be "substantially
disproportionate" as to a stockholder if immediately after the sale the
percentage of the outstanding Shares that the stockholder then actually and
constructively owns (treating as not outstanding all Shares purchased by the
Company pursuant to the Offer from the particular stockholder and all other
stockholders) is less than 80% of the percentage of the outstanding Shares
that the stockholder actually and constructively owned immediately before its
sale of Shares (treating as outstanding all Shares purchased by the Company
pursuant to the Offer from the particular stockholder and all other
stockholders).
The Company cannot predict whether there will be sale or distribution
treatment. The Company cannot predict whether or the extent to which the Offer
will be oversubscribed. If the Offer is oversubscribed, proration of tenders
pursuant to the Offer will cause the Company to accept from each stockholder
fewer Shares than are tendered by each stockholder. Consequently, the Company
can give no assurance that a sufficient number of any individual stockholder's
Shares will be purchased pursuant to the Offer to ensure that such purchase
will be treated as a sale or exchange, rather than as a distribution, for U.S.
federal income tax purposes pursuant to the rules discussed above.
Consequences to stockholders who do not sell Shares pursuant to the
Offer. Stockholders who do not sell Shares pursuant to the Offer will not
incur any tax liability as a result of the consummation of the Offer.
Tax Considerations for holders of Qualified Option Shares. A holder of a
vested option exercisable for Qualified Option Shares who receives cash in the
Offer in exchange for Qualified Option Shares will be treated as receiving
compensation income per Qualified Option Share sold equal to the excess of
$8.00 over the exercise price per Qualified Option Share of the relevant
option. Such income will be taxed to the option holder at ordinary income
rates and will be subject to withholding for income and employment taxes.
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<PAGE>
Taxation of Non-US Holders. As a general matter, non-U.S. stockholders and
option holders will not be subject to U.S. taxation. The rules governing U.S.
federal income taxation of the receipt by non-U.S. stockholders and option
holders of cash pursuant to the Offer, however, are complex and no attempt is
made herein to provide more than a brief summary of such rules. Accordingly,
non-U.S. stockholders and option holders should consult their own tax advisers
to determine the impact of federal, state, local and foreign income tax laws
with regard to the receipt of cash pursuant to the Offer.
Backup Federal Income Tax Withholding. Payments in connection with the Offer
may be subject to "backup withholding" at a 31% rate. Under the backup
withholding rules, a stockholder may be subject to backup withholding at the
rate of 31% with respect to a payment of cash pursuant to the Offer unless the
stockholder (a) is a corporation or comes within certain other exempt
categories (including financial institutions, tax-exempt organizations and
non-U.S. stockholders) and, when required, demonstrates this fact or (b)
provides a TIN, certifies as to no loss of exemption from backup withholding
and otherwise complies with applicable requirements of the backup withholding
rules. A U.S. stockholder that does not provide the Depositary with a correct
TIN may also be subject to penalties imposed by the IRS.
To prevent backup withholding and possible penalties, each stockholder
should complete the substitute IRS Form W-9 included in the Letter of
Transmittal. In order to qualify for an exemption from backup withholding, a
non-U.S. stockholder must submit a properly executed IRS Form W-8 to the
Depositary. Any amount paid as backup withholding will be creditable against
the stockholder's U.S. federal income tax liability.
Tax Consequences of Tendering Shares Purchased in the Employee Stock
Purchase Program. If a participant in an option plan organized pursuant to
Section 423 of the Code (a "Section 423 Plan") sells Shares more than two
years after the date on which the option to purchase the Shares was granted
and more than one year after the purchase of the Shares (the holding period),
a portion of the participant's gain will be ordinary income and a portion will
be capital gain. The participant will be taxed at ordinary income tax rates on
the excess of the value of the Shares when the option was granted over the
purchase price, or, if less, the entire gain on the sale. The participant will
have additional capital gain or loss equal to the difference, if any, between
the proceeds of the sale and the participant's basis in the Shares (the
purchase price plus any ordinary income realized). The capital gain rate will
depend on how long the stock is held by the participant.
If a participant in Section 423 Plan, such as our Employee Stock Purchase
Plan, sells Shares before the expiration of the holding period, the
participant generally will be taxed at ordinary income tax rates to the extent
that the value of the shares when the Shares were purchased exceeded the
purchase price. We will be entitled to a corresponding deduction. The
participant will have additional capital gain or loss on the difference
between the proceeds of the sale and the participant's basis in the Shares
(the purchase price plus any ordinary income realized). The capital gain rate
will depend on how long the stock is held by the participant.
This description of the federal tax consequences of tendering by
participants in the employee stock purchase plan does not purport to be a
complete description. There may be different tax consequences under certain
circumstances, and there may be state and local tax consequences. You should
seek competent professional advice.
ALL STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF EXCHANGING SHARES
FOR CASH PURSUANT TO THE OFFER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
8. Price Range of Shares; Dividends; Our Rights Plan.
Our Shares are listed for trading on the Nasdaq Stock Market under the
symbol "EDGW." It began trading in September 1996 following our initial public
offering. The following table sets forth, for the fiscal quarters
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indicated, the high and low sales prices per Share as reported on the Nasdaq
Stock Market. We have never paid any cash dividends on our common stock.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
1998
First quarter................................................... $41.88 $23.00
Second quarter.................................................. 44.88 32.38
Third quarter................................................... 37.00 17.00
Fourth quarter.................................................. 24.00 12.75
1999
First quarter................................................... 24.63 5.75
Second quarter.................................................. 12.75 6.88
Third quarter................................................... 12.88 6.94
Fourth quarter.................................................. 8.88 6.13
2000
First quarter................................................... 10.94 7.55
Second quarter.................................................. 8.53 5.00
Third quarter................................................... 7.00 4.84
Fourth quarter (through December 20, 2000) 6.56 4.56
</TABLE>
On December 14, 2000, the last full trading day prior to the Company's
announcement of its intent to commence a $130,000,000 fixed price issuer
tender offer, the last reported sales price of the Shares on the Nasdaq
National Market was $5.50 per Share. On December 20, 2000, the last full
trading day before the announcement of the Offer, the last reported sale price
of the Shares as reported on The Nasdaq Stock Market was $6.0625. We urge
stockholders to obtain current market quotations for the Shares.
Rights Plan. On July 20, 2000, our Board of Directors adopted a share
purchase rights plan, pursuant to which we declared a dividend of one
preferred stock purchase right for each share of our common stock outstanding.
One right attaches to each share of our common stock, and, when exercisable,
each right will entitle the registered holder to purchase from us one one-
hundredth of a share of Series A Junior Participating Preferred Stock, par
value $0.01 per share, at a price of $40.00 per one one-hundredth of a
preferred share, subject to adjustment.
In general, the rights become exercisable or transferable only upon the
occurrence of certain events relating to the acquisition by any person or
group, other than us, of beneficial ownership of 20% or more of the aggregate
voting power represented by our outstanding securities or the commencement of
a tender offer to acquire such beneficial ownership. The rights will expire on
August 2, 2010, subject to our right to extend the date, unless earlier
redeemed or exchanged by us or terminated. The rights may be redeemed in
whole, but not in part, at a price of $0.001 per right by the Board of
Directors at any time before the time a person crosses the beneficial
ownership threshold.
The preferred stock purchase rights are not currently exercisable and trade
together with Shares. Absent circumstances causing the rights to become
exercisable or separately tradable prior to the Expiration Date, the tender of
any Shares pursuant to the Offer will include the tender of the associated
rights. No separate consideration will be paid for the rights. Upon the
purchase of Shares by us pursuant to this Offer, the sellers of the Shares
purchased will no longer own the preferred stock purchase rights associated
with the purchased Shares.
The foregoing description of the preferred stock purchase rights is
qualified in its entirety by reference to the Rights Agreement, a copy of
which has been filed as an exhibit to a Form 8-K filed by us on August 2,
2000. This exhibit may be obtained from the SEC in the manner provided in
"Section 10 Certain Information Concerning Us."
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9. Source and Amount of Funds.
Assuming we purchase all Shares pursuant to this Offer at the offer price of
$8.00 per share and all 408,000 Qualified Option Shares, we expect the maximum
aggregate cost, including all fees and expenses applicable to the Offer, will
be approximately $132.6 million. We will fund the Offer through existing cash
balances.
10. Certain Information Concerning Us
We presently provide human resource and business solutions through two
segments. Our eSolutions segment consists of Edgewater Technology (Delaware),
Inc., an eSolutions consulting firm acquired effective April 1, 1999, which
provides eCommerce software solutions, consulting and web development, as well
as outsourcing to help companies convert to an Internet business model. Our
ClinForce clinical trials staffing services business (which is the subject of
the pending ClinForce Sale Transaction) provides clinical trials support
services. On December 15, 2000, we executed a definitive agreement to sell the
ClinForce business pursuant to the ClinForce Sale Transaction. We are
headquartered at 302 East Millsap Road, Fayetteville, AR 72703. Our telephone
number is (501) 973-6084.
The Company's eSolutions segment is a full-service provider of eBusiness
solutions that we generally refer to throughout this document as the
eSolutions and has developed a service model and approach which includes: (1)
eStrategy--consulting services that aid clients in translating business goals
into eSolutions strategies taking full advantage of Internet technologies; (2)
eSolutions--development of customer eSolutions applications that fully
integrate the client's Web presences, customer service and back-office legacy
systems including fulfillment, procurement and financial; and (3) Internet
Outsourcing--providing a spectrum of services ranging from enhanced site
hosting through semi-custom and custom integrated Application Service
Provision, completed with total Internet application outsourcing.
Edgewater since its inception in 1992, has experienced positive sequential
growth on an annual basis by continually focusing on five key core values: (1)
Excellence in Execution--successfully developing and deploying custom
solutions that meet the clients needs, (2) Maintaining Strong Operational
Metrics--building a growing and historically profitable organization with
formal processes to drive operational excellence and sustain strong metrics,
such as above average utilization rates, gross margins which have been
historically over 50%, positive year over year growth and increasing
consultant headcount; (3) Middle Market focus--positioning Edgewater service
offering to organizations in underserved second-tier cities through
strategically positioned regional solutions centers (4) Vertical Expertise--
integrating our business and technology skills to create competitive advantage
for our clients among a multiple of industries and (5) Technology Excellence--
utilizing innovative technology to build and deploy complex and scalable high-
volume systems. Edgewater currently, provides eSolution services via 247
employees, of which 201 are billable consultants working from eSolution
Centers located in Massachusetts, New Hampshire, Arkansas, Minnesota, North
Carolina and Alabama.
Where You Can Find More Information. We are subject to the informational
filing requirements of the Exchange Act, and, accordingly, are obligated to
file reports, statements and other information with the SEC relating to our
business, financial condition and other matters. Information, as of particular
dates, concerning our directors and officers, their remuneration, options
granted to them, the principal holders of our securities and any material
interest of these persons in transactions with us is required to be disclosed
in proxy statements distributed to our stockholders and filed with the SEC. We
also have filed an Issuer Tender Offer Statement on Schedule TO with the SEC
that includes additional information relating to the Offer. These reports,
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549; and at its regional offices located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of this material may also be
obtained by mail, upon payment of the SEC's customary charges, from the Public
Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains a web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
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<PAGE>
Incorporation by Reference. The rules of the SEC allow us to "incorporate
by reference" information into this document, which means that we can disclose
important information to you by referring you to another document filed
separately with the SEC. These documents contain important information about
us.
<TABLE>
<CAPTION>
SEC Filings (File No. 0-20971) Period or Date Filed
------------------------------ --------------------------------
<S> <C>
Annual Report on Form 10-K (as amended).... Year ended December 31, 1999
Quarterly Reports on Form 10-Q............. Quarter ended March 31, 2000
Quarter ended June 30, 2000
Quarter ended September 30, 2000
Current Reports on Form 8-K................ Report filed April 27, 2000
Report filed July 14, 2000
Report filed July 26, 2000
Report filed August 2, 2000
Report filed September 26, 2000
Report filed December 1, 2000
Report filed December 15, 2000
Report filed December 21, 2000
</TABLE>
We incorporate by reference these documents and any additional documents
that we may file with the SEC between the date of this Offer and the date of
expiration of withdrawal rights. Those documents include periodic reports,
such as annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document from us or from the SEC's web site at the address described above.
Documents incorporated by reference are available from us without charge,
excluding any exhibits to those documents. You can obtain documents
incorporated by reference in this Offer to Purchase by requesting them in
writing or by telephone from us at 302 East Millsap Road, Fayetteville, AR
72703, telephone: (501) 973-6084. Please be sure to include your complete name
and address in your request. If you request any incorporated documents, we
will mail them to you by first class mail, or another equally prompt means,
within one business day after we receive your request.
11. Pro Forma Financial Statements
EDGEWATER TECHNOLOGY, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
INTRODUCTION
We (Edgewater Technology, Inc. and our subsidiaries, or the "Company")
provide business solutions through our eSolutions segment, Edgewater
Technology (Delaware), Inc. ("Edgewater") which was acquired effective April
1, 1999. As discussed below, we have previously sold our interests in our
Commercial staffing segment, Robert Walters plc ("Robert Walters") (finance
and accounting staffing services), and Strategic Legal Resources (legal
staffing). At the time of our Form 10-Q filing for the three months ended
September 30, 2000, we had signed a non-binding letter of intent to sell our
IntelliMark division (information technology staffing and solutions, which was
subsequently sold on November 16, 2000). As a result of the above, the
operating results for these divisions were included in discontinued operations
in the financial statements as of and for the nine months ended September 30,
2000.
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. As a result of the transaction, we changed our name to
"Edgewater Technology, Inc." and our stock symbol from "STAF" to "EDGW."
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<PAGE>
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 our
finance and accounting platform within our Professional/IT segment. Our two
subsidiaries sold 67,200,000 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 10,400,000 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.
On September 22, 2000, we sold all of the outstanding stock of Strategic
Legal Resources, our 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
is represented by a promissory note payable in January 2001.
On November 16, 2000, we sold all of the outstanding shares of stock of our
subsidiaries that comprised IntelliMark, our information technology staffing
and solutions platform within our Professional/IT segment, to an affiliate of
Charlesbank Equity Fund V Limited Partnership for approximately $42.7 million
in cash, subject to potential upward or downward post-closing adjustments.
On December 15, 2000, we executed a definitive agreement to sell ClinForce,
our clinical trials support services platform within our Professional/IT
segment, to Cross Country TravCorps, Inc. for approximately $31.0 million in
cash, subject to potential upward or downward post-closing adjustments (the
"ClinForce Sale Transaction"). The closing of the ClinForce Sale Transaction
is conditioned upon our receipt of stockholder approval and the satisfaction
of other customary conditions to closing. We will hold a Special Stockholders'
Meeting to approve the ClinForce Sale Transaction. Subject to the receipt of
stockholder approval for the ClinForce Sale Transaction, we anticipate that we
would receive proceeds from the ClinForce Sale Transaction late in the first
quarter of 2001.
The following unaudited pro forma consolidated statements of income set
forth the results of operations for the twelve months ended December 31, 1999
and for the nine months ended September 30, 2000 as if the ClinForce Sale
Transaction and $130 million issuer tender offer ("the Tender Offer") had
occurred at the beginning of fiscal 1999. The unaudited pro forma consolidated
balance sheet sets forth the financial position as of September 30, 2000, as
if the ClinForce Sale Transaction and Tender Offer had occurred as of that
date.
Edgewater, our eSolutions segment, had selling, general and administrative
expenses ("SG&A") of $7.8 million for the nine months ended September 30,
2000. Including the pro forma results for the three months ended March 31,
1999, Edgewater had SG&A of $5.1 million for the twelve months ended December
31, 1999. In addition to these segment costs, the accompanying pro forma
statements of income include the costs that remain after the allocation of
corporate costs to the respective discontinued divisions. As these remaining
corporate costs were incurred in historical periods based on a larger public
company and a different corporate structure, these costs are not necessarily
indicative of the future corporate costs that will be necessary to operate
Edgewater as a stand-alone public company.
The pro forma results of operations are not necessarily indicative of future
operations or the actual results that would have occurred had the ClinForce
Sale Transaction and Tender Offer been completed at the beginning of fiscal
1999. These statements should be read in conjunction with the accompanying
notes herein and the historical consolidated financial statements and related
notes included in our 1999 Annual Report of Form 10-K and Quarterly Report on
Form 10-Q for the three months ended September 30, 2000.
32
<PAGE>
Edgewater Technology, Inc.
Unaudited Pro Forma Combined
Balance Sheet
As of September 30, 2000
(In Thousands)
<TABLE>
<CAPTION>
IntelliMark ClinForce Tender Offer
Edgewater Pro Forma Pro Forma Pro Forma Pro
Technology, Inc. Adjustments Adjustments Adjustments Forma
---------------- ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents.......... $100,226 $41,000 (a) $ 246 (f) $(130,000)(k) $ 35,235
(4,138)(b) 31,000 (g) (1,485)(l)
(1,614)(h)
Accounts receivable,
net.................. 12,374 -- (4,078)(f) -- 8,296
Prepaid expenses and
other................ 6,681 -- 496 (f) -- 7,177
Income tax
receivable........... -- 14,000 (c) -- -- 14,000
Deferred income
taxes................ 1,484 -- -- -- 1,484
-------- ------- ------- --------- --------
Total current
assets.............. 120,765 50,862 26,050 (131,485) 66,192
PROPERTY AND EQUIPMENT,
net.................... 2,154 -- (433)(f) -- 1,721
INTANGIBLE ASSETS, net.. 49,390 -- (11,889)(f) -- 37,501
DEFERRED INCOME TAXES... 51,646 325 (c) (6,080)(i) -- 31,390
(14,501)(c)
OTHER ASSETS............ 164 -- (20)(f) -- 144
NET ASSETS HELD FOR
SALE................... 39,710 (39,710)(d) -- -- --
-------- ------- ------- --------- --------
$263,829 $(3,024) $ 7,628 $(131,485) $136,948
======== ======= ======= ========= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
other accrued
liabilities.......... $ 14,107 $ -- $ (131)(f) $ -- $ 13,976
Payroll and related
liabilities.......... 3,946 -- (1,094)(f) -- 2,852
Income taxes payable.. 501 (501)(c) -- -- --
-------- ------- ------- --------- --------
Total current
liabilities......... 18,554 (501) (1,225) -- 16,828
OTHER LONG-TERM
LIABILITIES............ 238 -- -- -- 238
STOCKHOLDERS' EQUITY:
Common stock.......... 296 -- -- -- 296
Treasury stock........ (6,127) -- -- (130,000)(k) (136,127)
Paid-in capital....... 217,604 -- -- -- 217,604
Retained earnings 33,264 (2,523)(e) 8,853(j) (1,485)(l) 38,109
-------- ------- ------- --------- --------
Total stockholders'
equity.............. 245,037 (2,523) 8,853 (131,485) 119,882
-------- ------- ------- --------- --------
Total Liabilities and
Stockholders' Equity... $263,829 $(3,024) $ 7,628 $(131,485) $136,948
======== ======= ======= ========= ========
</TABLE>
33
<PAGE>
EDGEWATER TECHNOLOGY, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(a) Records the proceeds of $42.7 million received by the Company for the sale
of IntelliMark net of receivable collections already reflected in the cash
balance.
(b) Records the payment of estimated transaction fees and reserves associated
with the sale of IntelliMark.
(c) Records the income tax effects of the sale of IntelliMark. The current
classification represents recovery of 1998 fiscal year taxes paid which we
will file a refund for in 2001 and which we expect to receive within the
next twelve months.
(d) Represents the assets and liabilities of IntelliMark that were sold by the
Company.
(e) Records the book loss generated from the sale of IntelliMark.
(f) Represents the assets and liabilities of ClinForce that are being sold by
the Company as part of the ClinForce Sale Transaction.
(g) Records the proceeds of $31.0 million to be received by the Company for
the ClinForce Sale Transaction, pending stockholder approval.
(h) Records the payment of estimated transaction fees associated with the
ClinForce Sale Transaction.
(i) Records the income tax effects of the ClinForce Sale Transaction, which
resulted in a reduction of our deferred tax asset.
(j) Records the book gain generated from the ClinForce Sale Transaction.
(k) Records the use of $130 million to repurchase Shares of our common stock
via the Tender Offer.
(l) Records the payment of estimated transaction fees (including the
anticipated purchase of Qualified Option Shares) associated with the
Tender Offer.
34
<PAGE>
Edgewater Technology, Inc.
Unaudited Pro Forma Combined
Statement of Income
for the Nine Months Ended
September 30, 2000
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Edgewater Previous Pro Forma Pro
Technology, Inc.(a) Dispositions(b) ClinForce(c) Adjustments Forma
------------------- --------------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C>
SERVICE REVENUES........ $ 43,969 $ -- $(20,554) $ -- $23,415
COST OF SERVICES........ 25,491 -- (14,338) -- 11,153
--------- -------- -------- ------- -------
Gross profit.......... 18,478 -- (6,216) -- 12,262
OPERATING EXPENSES:
Selling, general and
administrative........ 14,656 -- (3,392) (885) (d) 10,379
Depreciation and
amortization.......... 3,724 -- (418) -- 3,306
Nonrecurring
restructure charge.... 2,803 -- -- (2,803) (e) --
--------- -------- -------- ------- -------
Operating (loss)
income............... (2,705) -- (2,406) 3,688 (1,423)
--------- -------- -------- ------- -------
OTHER INCOME (EXPENSE):
Interest income........ 35 -- -- 1,322 (f) 1,357
Other, net............. 817 -- -- -- 817
--------- -------- -------- ------- -------
(LOSS) INCOME BEFORE
INCOME TAXES........... (1,853) -- (2,406) 5,010 751
INCOME TAX (BENEFIT)
PROVISION.............. (710) -- (922) 1,920 (g) 288
--------- -------- -------- ------- -------
(Loss) income from
continuing
operations........... (1,143) -- (1,484) 3,090 463
DISCONTINUED OPERATIONS:
Loss from operations of
discontinued
divisions............. (105,637) 105,637 -- -- --
Gain on sale of
divisions............. 63,513 (63,513) -- -- --
--------- -------- -------- ------- -------
Net (loss) income..... $ (43,267) $ 42,124 $ (1,484) $ 3,090 $ 463
========= ======== ======== ======= =======
EARNINGS PER COMMON
SHARE
BASIC................. $ (1.47) $ 0.04
========= =======
DILUTED............... $ (1.47) $ 0.03
========= =======
WEIGHTED AVERAGE SHARES
OUTSTANDING
BASIC................. 29,387 13,137 (h)
========= =======
DILUTED............... 29,492 13,242 (i)
========= =======
</TABLE>
35
<PAGE>
EDGEWATER TECHNOLOGY, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(a) As we had signed a non-binding letter of intent to sell our IntelliMark
division as of September 30, 2000, the results of operation for this
division are included in discontinued operations. IntelliMark was sold on
November 17, 2000. As we have previously sold our interests in our
Commercial staffing segment, Robert Walters, and Strategic Legal
Resources, the operating results for these divisions are also included in
discontinued operations for the nine months ended September 30, 2000.
(b) Adjustment to remove discontinued operations, which include results from
our Commercial staffing segment, Robert Walters, Strategic Legal Resources
and IntelliMark.
(c) Represents the unaudited financial results of ClinForce, our clinical
trials support services division, which is being sold as part of the
ClinForce Sale Transaction, pending stockholder approval.
(d) Represents an allocation of the Company's corporate costs that relate to
ClinForce.
(e) Adjustment to remove nonrecurring corporate charges that relate to our
restructure and sale of various divisions.
(f) Adjustment to reflect interest income that would have resulted if the
Tender Offer and sale of the Commercial staffing segment, Robert Walters,
Strategic Legal Resources, IntelliMark and ClinForce had occurred
effective January 1, 2000.
(g) Records the provision for federal and state income taxes at an effective
combined tax rate of approximately 38.3%.
(h) Reflects the actual weighted average basic shares outstanding for the nine
months ended September 30, 2000 of 28,387, 232 adjusted to reflect the
repurchase as of January 1, 2000 of 16,250,000 shares of our common stock
through the $130 million Tender Offer priced at $8.00 per share.
(i) Pro forma weighted average diluted shares outstanding for the nine months
ended September 30, 2000 include the shares discussed in Note (h) above
and 105,094 shares representing the incremental dilutive effect of our
outstanding stock options.
36
<PAGE>
Edgewater Technology, Inc.
Unaudited Pro Forma Combined
Statement of Income
for the Twelve Months Ended
December 31, 1999
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Edgewater Previous Preqacquisition Pro Forma Pro
Technology, Inc. Dispositions(a) ClinForce(b) Edgewater(c) Adjustments Forma
---------------- --------------- ------------ --------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
SERVICE REVENUES........ $1,220,852 $(1,179,317) $(26,496) $4,790 $ -- $19,829
COST OF SERVICES........ 918,574 (893,388) (19,200) 2,087 828 (d) 8,901
---------- ----------- -------- ------ ------- -------
Gross profit........ 302,278 (285,929) (7,296) 2,703 (828) 10,928
OPERATING EXPENSES:
Selling, general and
administrative....... 214,824 (189,344) (3,913) 1,237 (11,422)(e) 10,554
(828)(d)
Depreciation and
amortization......... 21,448 (19,975) (577) 128 1,021 (f) 2,045
Non-recurring
charges.............. 2,153 (2,153) -- -- -- --
---------- ----------- -------- ------ ------- -------
Operating income
(loss)............. 63,853 (74,457) (2,806) 1,338 10,401 (1,671)
---------- ----------- -------- ------ ------- -------
OTHER INCOME (EXPENSE):
Interest (expense)
income............... (17,419) -- -- (67) 18,714 (g) 1,228
Other, net............ (227) 227 -- -- -- --
---------- ----------- -------- ------ ------- -------
INCOME (LOSS) BEFORE
INCOME TAXES........... 46,207 (74,230) (2,806) 1,271 29,115 (443)
INCOME TAX PROVISION
(BENEFIT).............. 15,994 (25,694) (971) 440 10,078 (h) (153)
---------- ----------- -------- ------ ------- -------
Net income (loss)... $ 30,213 $ (48,536) $ (1,835) $ 831 $19,037 $ (290)
========== =========== ======== ====== ======= =======
EARNINGS PER COMMON
SHARE
BASIC............... $ 1.03 $ (0.02)
========== =======
DILUTED............. $ 1.02 $ (0.02)
========== =======
WEIGHTED AVERAGE SHARES
OUTSTANDING
BASIC............... 29,280 13,030 (i)
========== =======
DILUTED............. 29,526 13,276 (j)
========== =======
</TABLE>
37
<PAGE>
EDGEWATER TECHNOLOGY, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(a) Represents the results of operations for the Commercial staffing segment,
Robert Walters, Strategic Legal Resources and IntelliMark. These divisions
were previously sold by the Company during 2000.
(b) Represents the unaudited financial results of ClinForce, our clinical
trials support services division, which is being sold as part of the
ClinForce Sale Transaction, pending stockholder approval.
(c) Represents the unaudited financial results of Edgewater, our eSolutions
segment, for the three months ended March 31, 1999 as this segment was
acquired effective April 1, 1999.
(d) Reclassification adjustment to properly present benefit and tax costs for
Edgewater's consultants as components of Cost of Services instead of
Selling, General and Administrative Expenses.
(e) Represents an allocation of the Company's corporate costs that relate to
the Commercial staffing segment, Robert Walters, Strategic Legal
Resources, IntelliMark and ClinForce.
(f) Adjustment to reflect the amortization expense relating to the intangible
assets recorded in conjunction with the acquisition of Edgewater, our
eSolutions segment, for the three months ended March 31, 1999. Intangible
assets recorded in conjunction with this acquisition include goodwill of
approximately $40.8 million which is being amortized over ten years.
(g) Adjustment to reflect interest income that would have resulted if the
Tender Offer and the sale of the Commercial staffing segment, Robert
Walters, Strategic Legal Resources, IntelliMark and ClinForce had occurred
effective January 1, 1999.
(h) Records the provision for federal and state income taxes at an effective
combined tax rate of approximately 34.6%.
(i) Reflects the actual weighted average basic shares outstanding for the
twelve months ended December 31, 1999 of 29,280,117 adjusted to reflect
the repurchase as of January 1, 1999 of 16,250,000 shares of our common
stock through the $130 million Tender Offer priced at $8.00 per share.
(j) Pro forma weighted average diluted shares outstanding for the twelve
months ended December 31, 2000 include the shares discussed in Note (i)
above and 246,176 shares representing the incremental dilutive effect of
our outstanding stock options
12.Fees and Expenses.
Except as set forth below, the Company will not pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Shares
pursuant to the Offer.
Credit Suisse First Boston and Banc of America Securities are acting as
Dealer Managers in connection with the Offer and have provided certain
financial advisory services to the Company in connection with the Offer. Each
Dealer Manager will receive reasonable and customary compensation for its
services, and the Company has agreed to reimburse each Dealer Manager for all
out-of-pocket expenses incurred by it, including the reasonable fees and
expenses of legal counsel, and to indemnify each Dealer Manager against
certain liabilities and expenses in connection with its engagement as a Dealer
Manager, including certain liabilities under the federal securities laws.
The Company has retained Corporate Investor Communications as the
Information Agent, and EquiServe as the Depositary, in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
facsimile, telegraph and personal interview and may request Custodians to
forward materials relating to the Offer to beneficial owners.
38
<PAGE>
As compensation for acting as Information Agent in connection with the Offer,
Corporate Investor Communications will receive reasonable and customary
compensation for its services and will also be reimbursed for certain out-of-
pocket expenses and may be indemnified against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws. The Company will pay the Depositary reasonable and
customary compensation for their services in connection with the Offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Depositary
against certain liabilities and expenses in connection therewith, including
certain liabilities under federal securities laws. Custodians will be
reimbursed by the Company for customary handling and mailing expenses incurred
by them in forwarding material to their customers.
13.Certain Conditions to the Offer.
Notwithstanding any other provision of the Offer, and in addition to (and
not in limitation of) the Company's right to extend, amend or terminate the
Offer as set forth in Section 14, the Company shall not be required to accept
for payment, purchase or pay for any Shares or Qualified Option Shares
tendered, and may terminate or amend the Offer or may postpone the acceptance
for payment of, or the purchase and the payment for Shares or Qualified Option
Shares tendered, subject to Rule 13e-4(f) promulgated under the Exchange Act,
if, at any time on or after January 23, 2001 and before acceptance for payment
of or payment for any such Shares or Qualified Option Shares, any of the
following events shall have occurred (or shall have been determined by the
Company to have occurred) that, in the Company's sole and reasonable judgment
in any such case and regardless of the circumstances giving rise thereto,
including any action or omission to act by the Company, makes it inadvisable
to proceed with the Offer or the acceptance for payment:
(a) there shall be threatened or pending any suit, action or proceeding by
any court, agency, authority or other tribunal of action, suit or
proceeding by any government or governmental, regulatory or administrative
agency or authority or by any other person, domestic or foreign (the
"Governmental Entity") (i) challenging the acquisition by the Company of
any Shares or Qualified Option Shares, seeking to restrain or prohibit the
making or consummation by the Company, of the Offer or otherwise relating
to the Offer, or (ii) which otherwise is reasonably likely to have a
material adverse effect on the Company;
(b) any statute, rule, regulation, legislation, judgment, order or
injunction shall be threatened, proposed, sought, enacted, entered,
enforced, promulgated, amended or issued with respect to, or deemed
applicable to, or any consent or approval withheld with respect to, (i) the
Company or any of its subsidiaries or otherwise relates in any manner to
the Offer or (ii) the Offer, in each of the cases of clauses (i) and (ii),
by any Governmental Entity that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange or the
Nasdaq National Market for a period in excess of 24 hours (excluding
suspensions or limitations resulting solely from physical damage or
interference with such exchange or market not related to market
conditions), (ii) any suspension of, or material limitation on, the markets
for United States currency exchange rates, (iii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iv) any limitation (whether or not mandatory) by any Governmental
Entity on, or other event that would reasonably be expected to materially
adversely affect, the extension of credit by United States banks or other
United States lending institutions, (v) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States that would reasonably be expected to
have a material adverse effect on bank syndication or the financial markets
in the United States, (vi) any decline in either the Dow Jones Industrial
Average, the Nasdaq Composite Index or the S&P 500 Composite Index by an
amount in excess of 15% measured from the close of business on December 20,
2000, or (vii) in the case of any of the foregoing existing on the date of
this Offer to Purchase, a material acceleration or worsening thereof;
(d) any tender or exchange offer with respect to the Shares (other than the
Offer), or any merger, acquisition, business combination or other similar
transaction with or involving the Company or any subsidiary (excluding the
ClinForce Sale Transaction), shall have been proposed, announced or made by
any person or entity;
39
<PAGE>
(e) any change shall occur or be threatened in, or any adverse development
shall arise concerning, the business, condition (financial or otherwise),
income, operations or prospects of the Company and its subsidiaries, taken
as a whole, or the ClinForce Sale Transaction, in any case (individually or
in the aggregate) which, in the sole and reasonable judgment of the
Company, is or may be materially adverse to the Company or affects the
anticipated benefits to the Company of acquiring Shares or Qualified Option
Shares pursuant to the Offer;
(f) (i) any person, entity or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) shall have acquired, or proposed to acquire,
beneficial ownership of more than 5% of the outstanding Shares (other than
a person, entity or group which had publicly disclosed such ownership in a
Schedule 13D or 13G (or an amendment thereto) on file with the SEC prior to
December 21, 2001), (ii) any new group shall have been formed which
beneficially owns more than 5% of the outstanding Shares; or (iii) any
person, entity or group shall have filed a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or made a
public announcement reflecting an intent to acquire the Company or any of
its subsidiaries (excluding, with respect to the ClinForce Sale
Transaction) or any of their respective assets or securities; or
(g) there shall be a reasonable likelihood that the purchase of Shares
pursuant to the Offer will cause either (i) the Shares to be held of record
by less than 300 persons; or (ii) the Shares not continuing to be eligible
to be listed on the Nasdaq National Market;
which, in the sole and reasonable judgment of the Company, in any such case,
makes it inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company or may be waived by the Company in whole or in part at
any time and from time to time in its exclusive judgment. The failure by the
Company at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect
to particular facts and circumstances shall not be deemed a waiver with
respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to
time.
14.Extension of the Offer; Termination; Amendments.
The Company expressly reserves the right, in its sole discretion and at any
time or from time to time, to extend the period of time during which the Offer
is open by making a public announcement thereof. There can be no assurance,
however, that the Company will exercise its right to extend the Offer. During
any such extension, all Shares previously tendered will remain subject to the
Offer, except to the extent that such Shares may be withdrawn as set forth in
Section 6. The Company also expressly reserves the right, in its sole
discretion, (i) to terminate the Offer and not accept for payment any Shares
not previously accepted for payment or, subject to Rule 13e-4(f)(5) under the
Exchange Act, which requires the Company either to pay the consideration
offered or to return the Shares tendered promptly after the termination or
withdrawal of the Offer, to postpone payment for Shares upon the occurrence of
any of the conditions specified in Section 13 hereof, by making a public
announcement of such termination and (ii) at any time, or from time to time,
regardless of the existence of any of the conditions specified in Section 13,
to amend the Offer in any respect. Amendments to the Offer may be effected by
public announcement. Without limiting the manner in which the Company may
choose to make public announcement of any extension, termination or amendment,
the Company shall have no obligation (except as otherwise required by
applicable law) to publish, advertise or otherwise communicate any such public
announcement, other than by making a release to the Dow Jones news service,
except in the case of an announcement of an extension of the Offer, in which
case the Company shall have no obligation to publish, advertise or otherwise
communicate such announcement other than by issuing a notice of such extension
by press release or other public announcement, which shall be issued no later
than 9:00 a.m., EST, on the next business day after the previously scheduled
Expiration Date. Material changes to information previously provided to
holders of the Shares in this Offer or in documents furnished subsequent
thereto will be disseminated to holders of Shares in compliance with Rule 13e-
4(e)(3) under the Exchange Act.
40
<PAGE>
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(3) under the Exchange Act. Those rules require that the minimum
period during which an offer must remain open following material changes in
the terms of the Offer or information concerning the Offer (other than a
change in price, change in dealer's soliciting fee or change in percentage of
securities sought) will depend on the facts and circumstances, including the
relative materiality of such terms or information. In a published release, the
SEC has stated that in its view, an offer should remain open for a minimum of
five business days from the date that notice of such material change is first
published, sent or given. If (a) the Company (i) increases or decreases the
price to be paid for Shares or adds a dealer's soliciting fee, (ii) increases
the number of Shares being sought and any such increase exceeds 2% of the
outstanding Shares, or (iii) decreases the number of Shares being sought, and
(b) the Offer is scheduled to expire at any time earlier than the expiration
of a period ending on the tenth business day from and including the date that
notice of such increase or decrease is first published, sent or given in the
manner specified above, the Offer will be extended until the expiration of
such ten business day period.
15. Certain Legal Matters.
General. To the best knowledge of the Company there is no license or
regulatory permit that appears to be material to the business of the Company
and that might be adversely affected by the Company's acquisition of Shares
pursuant to the Offer, or any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of Shares by the Company
pursuant to the Offer. Should any such approval or other action be required,
it is presently contemplated that such approval or action would be sought.
While the Company does not currently intend to delay acceptance for payment of
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no assurance that any such approval or other action, if required,
would be obtained without substantial conditions or that adverse consequences
would not result to the Company's business or that certain parts of the
Company's business would not have to be disposed of in the event that such
approval were not obtained or such other actions were not taken or in order to
obtain any such approval or other action. If certain types of adverse action
are taken with respect to the matters discussed below, the Company may decline
to accept for payment or pay for any Shares tendered.
Litigation.
As reported in our Form 10-Q for the quarter ended September 30, 2000, we
have been subject to a number of stockholder lawsuits alleging that we, one of
our officer/directors and one of our directors violated federal securities
laws. Such actions were consolidated into one action in United States District
Court for the Eastern District of Arkansas. On January 11, 2000, the
plaintiffs amended their complaint, which supercedes all other complaints. The
amended complaint named us and one of our officer/directors as defendants. 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. 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 plaintiffs filed a motion for
reconsideration on December 11, 2000. We filed a response to the plaintiffs'
motion for reconsideration on December 20, 2000. To date, the Court has yet to
rule on the plaintiffs' motion for reconsideration.
16. Interests of Directors and Officers; Transactions and Arrangements
Concerning Shares and Qualified Option Shares.
As of December 20, 2000, there were 28,692,766 Shares issued and
outstanding. The 16,250,000 Shares which the Company is offering to purchase
in the Offer represent approximately 56.6% of the Shares outstanding as of
December 20, 2000. The 408,000 Qualified Option Shares outstanding as of
December 20, 2000 represent approximately 7.0% of the outstanding options.
41
<PAGE>
The following table provides information as of December 20, 2000 about the
beneficial ownership of common stock by each of our directors and executive
officers. To the best of our knowledge, each such person has sole voting and
investment power over the shares shown in this table, except as otherwise
indicated.
<TABLE>
<CAPTION>
Shares Beneficially
Owned(/1/)
-----------------------
Number Percent
------------ ----------
Name and Address of Executive Officers and
Directors(/2/)
------------------------------------------
<S> <C> <C>
Clete T. Brewer(/3/)............................ 1,055,084 3.67%
Stephen R. Bova(/4/)............................ 116,660 *
Terry C. Bellora(/5/)........................... 251,226 *
Gordon Y. Allison(/6/).......................... 38,000 *
William J. Lynch(/7/)........................... 77,699 *
R. Clayton McWhorter(/8/)....................... 32,059 *
Charles A. Sanders, M.D.(/9/)................... 42,059 *
Bob L. Martin(/10/)............................. 15,005 *
Michael R. Loeb(/11/)........................... 10,047 *
All officers and directors, as a group.......... 1,641,339 5.63%
</TABLE>
--------
*Less than 1%.
(1) The percentages shown with respect to any identified individual or group
other than the entity listed under Principal Stockholders are calculated
by dividing: (i) the sum of (a) the number of shares of common stock
beneficially owned as of December 20, 2000 plus (b) the number of shares
of common stock that may be acquired through the exercise of stock options
or other rights on or before February 20, 2000 ("currently exercisable
options") by (ii) the sum of 28,692,766 shares of common stock outstanding
on December 20, 2000 plus the amount referenced in clause (i)(b).
(2) The address of each of the directors and executive officers listed above
is c/o Edgewater Technology, Inc., 302 E. Millsap Rd, Fayetteville, AR
72703.
(3) Includes 15,750 shares held by Mr. Brewer's spouse, as to which Mr. Brewer
disclaims beneficial ownership, and 19,000 shares subject to currently
exercisable options. There are no Qualified Option Shares subject to such
options.
(4) Includes 2,060 shares held by Mr. Bova's spouse, as to which Mr. Bova
disclaims beneficial ownership. Includes 40,000 shares subject to
currently exercisable options, including 40,000 Qualified Option Shares
subject to such options.
(5) Includes 248,926 shares subject to currently exercisable options,
including 44,426 Qualified Option Shares subject to such options, 200
shares held by a trust of which Mr. Bellora is the trustee and 1,100
shares owned by Mr. Bellora's son, to which Mr. Bellora disclaims
beneficial ownership.
(6) Includes 38,000 shares subject to currently exercisable options. There are
no Qualified Option Shares subject to such options.
(7) Includes 3,033 shares held by a trust for which Mr. Lynch is trustee and
23,665 shares subject to currently exercisable options, including 8,332
Qualified Option Shares subject to such options.
(8) Includes 23,665 shares subject to currently exercisable options, including
8,332 Qualified Option Shares subject to such options.
(9) Includes 23,665 shares subject to currently exercisable options, including
8,332 Qualified Option Shares subject to such options.
(10) Includes 15,005 shares subject to currently exercisable options,
including 15,005 Qualified Option Shares subject to such options.
(11) Includes 8,332 shares subject to currently exercisable options, including
8,332 Qualified Option Shares subject to such options.
42
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Directors and officers of the Company may participate in the Offer on the
same basis as the Company's other stockholders.
Clete T. Brewer, the Company's Chairman and Chief Executive Officer, who
beneficially owns 1,036,084 Shares, has advised us that he intends to tender
into the Offer 569,846 Shares that he owns. The remaining officers and
directors of the Company, as a group, who together beneficially own 164,997
Shares and 132,759 Qualified Option Shares, have advised us that they intend
to tender into the Offer 135,311 Shares that they own and that they intend to
tender 40,000 Qualified Option Shares.
Assuming 16,250,000 Shares are purchased by the Company in the Offer, and
the officers and directors tender all of their Shares pursuant to the Offer in
accordance with their plans, as set forth herein, the Company's officers' and
directors' aggregate percentage ownership of outstanding Shares would decrease
from 4.18% to 3.99% as a result of the Offer.
Neither the Company, nor, to the best of the Company's knowledge, any of the
Company's directors or executive officers, nor any affiliates of the
foregoing, had any transactions involving the Shares during the 60 business
days prior to the date of the Offer.
Except for outstanding options to purchase Shares granted to certain of the
Company's employees (including executive officers), and except as otherwise
described herein, neither the Company nor, to the best of the Company's
knowledge, any of its affiliates, directors or officers or any of the officers
or directors of the Company's affiliates, is a party to any contract,
arrangement, understanding or relationship with any other person relating,
directly or indirectly, to the Offer with respect to any of the Company's
securities (including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
such securities, joint ventures, loan or other option arrangements, puts or
calls, guaranties of loan, guaranties against loss or the giving or
withholding of any proxies, consents or authorizations). The Company is
currently evaluating its compensation policies and plans and intends to modify
its existing plans and/or adopt new plans, including the granting of
additional stock options to officers and directors, as the Company deems
reasonable and appropriate to retain and attract management.
17. Miscellaneous.
The Offer is being made to all holders of Shares. The Company is not aware
of any jurisdiction where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If the
Company becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, the Company will make a
good faith effort to comply with any such state statute or seek to have such
statute declared inapplicable to the Offer. If, after such good faith effort,
the Company cannot comply with any such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to be made on behalf of the Company by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
The Company has filed with the SEC a Tender Offer Statement on Schedule TO,
together with all exhibits thereto, pursuant to Regulation M-A under the
Exchange Act, furnishing certain additional information with respect to the
Offer. Such Schedules and any amendments thereto, including exhibits, may be
inspected and copies may be obtained from the offices of the SEC in the manner
set forth in "Section 10. Certain Information Concerning Us" (except that they
will not be available at the regional offices of the SEC).
December 21, 2000 EDGEWATER TECHNOLOGY, INC.
43
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Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each stockholder of the Company or his broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of its addresses
set forth below:
The Depositary for the Offer is:
EquiServe Trust Company, N.A.
By Registered or By Overnight Courier: By Hand:
Certified Mail: EquiServe Trust Company, EquiServe Trust Company,
EquiServe Trust Company, N.A. N.A.
N.A. 40 Camparelli Drive c/o Securities Transfer
Corporate Actions Braintree, MA 02184 and
Department Attn: Edgewater Tender Reporting Services, Inc.
P.O. Box 842011 Offer 100 William Street--
Boston, MA 02284-2011 Galleria
New York, NY 10038
Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth below. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may
be directed to the Information Agent or the Depositary. Stockholders may also
contact their brokers, dealers, commercial banks, trust companies or other
nominees for assistance concerning the Offer.
The Information Agent for the Offer is:
Corporate Investor Communications, Inc.
A Georgeson Shareholder Communications Company
111 Commerce Road . Carlstadt, New Jersey 07072-2586
Banks and Brokers call collect (201) 896-1900
All others call Toll Free (800) 752-5316
The Dealer Managers for the Offer are:
Credit Suisse First Boston Banc of America Securities LLC
Corporation 9 West 57th Street
New York, New York 10019
Eleven Madison Avenue Toll Free: (866) 691-5066
New York, New York 10010-3629
Toll Free: (800) 881-8320
