Ephraim Fields of Echo Lake Capital Issues Letter to

Ephraim Fields of Echo Lake Capital Issues Letter to Independent
Board Members of Edgewater Technology, Inc. 
NEW YORK, NY -- (Marketwire) -- 11/19/12 -- 

--  Demands Board explore strategic alternatives to maximize shareholder
--  Stock declined by 55% from 2007 to 2011
--  Stock underperformed peer group by 89% from 2007 to 2011
--  $39 million of shareholder value destroyed while top three executives
    received $8.6 million of compensation
--  Cash represents 33% of equity market capitalization
--  Independent Directors highly compensated but own little stock

Mr. Ephraim Fields of Echo Lake Capital today announced he had issued
the following letter to the Independent Board Members of Edgewater
Technology, Inc., which is traded on the Nasdaq Global Market
November 19, 2012 
To the Independent Members of the Board of Directors: 
While it is generally our strong preference not to publicize such
letters, our private conversations with various parties combined with
your longstanding, questionable track record have compelled us to go
public. Simply put, we have grave concerns about your willingness
and/or ability to fulfill your fiduciary responsibility to act in the
best interests of shareholders. Over many years, the stock price of
Edgewater Technology, Inc. ("EDGW" or the "Company") has
significantly underperformed on both a relative and absolute basis
and tremendous shareholder value has been destroyed. During this
time, we have seen EDGW's Board of Directors (the "Board") do very
little to enhance shareholder value. In fact, we believe many of your
decisions (including those related to management compensation and
capital allocation) have contributed to the tremendous destruction of
shareholder value. As a result of these and other factors, we believe
EDGW's shareholders would be best served if the Board were to
immediately hire a reputable investment bank to explore strategic
alternatives designed to maximize shareholder value. We would
anticipate that such alternatives would include returning a
significant amount of capital to shareholders as well as selling the
entire company.  
Despite EDGW's strong underlying business, the performance of the
company's stock price has been abysmal. From 2007 to 2011, EDGW's
ck price declined by a staggering 55%. Even worse, this decline
occurred during a time when the benchmark indices appreciated
significantly, resulting in EDGW underperforming its New Peer Group
by 89%. As illustrated below, EDGW's stock price has a history of
significant underperformance.  

Total Return:                                     2007 - 2011    2009 - 2011
                                                 ------------- -------------
  EDGW                                                  -54.8%          6.6%
  New Peer Group                                         34.4%        105.1%
  S&P 600 IT Services                                    48.7%         77.8%
EDGW Over/(Under)Performance Versus:                                        
  New Peer Group                                        -89.2%        -98.5%
  S&P 600 IT Services                                  -103.5%        -71.3%

When a company underperforms so significantly and over such an
extended period of time, often the board will replace the company's
CEO. You, however, took an atypical approach and not only decided to
retain the CEO but also to generously compensate her. From 2007 to
2011, during a time when EDGW's stock declined 55% and approximately
$39 million of shareholder value was destroyed, you rewarded Ms.
Singleton total compensation of $3.0 million and EDGW's top three
executives (including Ms. Singleton) total compensation of $8.6
million. Not only does this compensation seem excessive considering
EDGW's poor performance, but it seems quite large for a company as
small as EDGW. To put this into perspective, we note that in 2011 the
compensation of these three executives equaled 165% of EDGW's pretax
profits. In light of these various data points, we fail to understand
how any credible board can justify such compensation.  
We believe one of the reasons EDGW's stock has so dramatically
underperformed has been the Board's poor capital allocation. EDGW
generates significant free cash flow, in part because of its
attractive business model, limited capex requirements and sizeable
NOL. For many years, the Company has retained a significant amount of
cash. Despite maintaining such high cash balances, management has
failed to clearly articulate any likely uses of this excess cash,
besides the occasional stock buyback. Currently, net cash equates to
33% of EDGW's total equity market capitalization, which seems
exceptionally high to us. In fact, EDGW has significantly more net
cash as a percentage of its equity market capitalization than almost
every member of its New Peer Group. We fail to understand why the
Company retains so much cash and we believe shareholders would be far
better served if the Company returned a significant amount of capital
to shareholders.  
Given EDGW's historical underperformance, we wonder why the Board has
not been more proactive in attempting to create shareholder value.
Most of you have been on the Board for over six years and you are all
well compensated for your service (your average Board compensation
was over $74,000 last year). However, despite your combined 45 years
of Board service, you collectively only own approximately 87,000
shares of stock (excluding options you were given by the Company).
Considering your questionable track record, we wonder if your lack of
financial investment in EDGW (aka your lack of "skin in the game")
limits your incentive to act in the best interests of EDGW's
shareholders. As shareholders, we would expect more from you,
especially considering your combined total compensation last year was
almost $0.5 million (which equates to 37% of EDGW's 2011 pretax
EDGW is an illiquid, microcap company whose stock remains undervalued
and has historically underperformed. The company has failed to
attract interest from the investment community and we doubt the
company will ever achieve a fair valuation in the public markets. In
addition, the company has no need to access the capital markets. In
light of all these factors (as well as others that we have chosen not
to mention at this point), we wonder why EDGW continues to expend
relatively high costs to remain publicly traded when the company's
shareholders receive very little benefit from it.  
We believe there are parties who would be interested in acquiring
EDGW at a significant premium to its current stock price. Considering
EDGW's overcapitalization, excessive corporate overhead, and
relatively high public company expenses, we believe an acquirer can
create significant value for EDGW shareholders... something you have
largely failed to do. Importantly, we believe that an acquirer would
likely be interested in retaining most of EDGW's consultants.  
Our sole objective is to create long-term shareholder value for all
EDGW shareholders. EDGW's stock has been and continues to be
undervalued. Based on your track record, we have grave concerns about
your ability to and/or interest in creating shareholder value.
Therefore, we call upon you to immediately hire a reputable
investment bank to explore strategic alternatives designed to
maximize shareholder value. We would anticipate that such
alternatives would includ
e returning a significant amount of capital
to shareholders as well as selling the entire company. 
No doubt you can attempt to refute this letter with irrelevant
information, vague promises, personal attacks or anti-takeover
measures. However, we hope you won't waste even more of shareholders'
money by doing so since we believe the evidence is clear and your
shareholders are becoming increasingly frustrated. We believe EDGW's
Board has, over an extended period of time, failed to fulfill its
fiduciary responsibility. Under your watch, EDGW's shareholders have
suffered while you and EDGW's top three executives have benefitted. 
We hope your response to this letter will be to finally do what is in
the best interests of all shareholders. As always, we can be reached
at (212) 259-0530 or ef@echolakecapital.com. 
Ephraim Fields 
Ephraim Fields
(212) 259-0530
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