EXHIBIT 10.1
CHANGE IN CONTROL
SEPARATION AGREEMENT
AGREEMENT between DA CONSULTING, GROUP, INC., a Texas corporation (the
"Company"), and Dennis Fairchild ("Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to retain certain key employee personnel and,
accordingly, the Board of Directors of the Company (the "Board") has approved
the Company entering into a separation agreement with Executive in order to
encourage Executive's continued service to the Company; and
WHEREAS, Executive is prepared to perform such services in return for
specific arrangements with respect to separation compensation and other
benefits;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive agree as follows:
1. DEFINITIONS.
(a) "CHANGE IN CONTROL" means (i) any merger, consolidation, or
reorganization in which the Company is not the surviving entity (or survives
only as a subsidiary of an entity), (ii) any sale, lease, exchange, or other
transfer of all or substantially all of the assets of the Company to any other
person or entity (in one transaction or a series of related transactions), (iii)
dissolution or liquidation of the Company, (iv) as a result of or in connection
with a contested election of directors, the persons who were directors of the
Company before such election shall cease to constitute a majority of the Board,
or (v) any event that is reported by the Company under Item 1 of a Form 8-K
filed with the Securities and Exchange Commission; provided, however, that the
term "Change in Control" shall not include any reorganization, merger,
consolidation, sale, lease, exchange, or similar transaction involving solely
the Company and one or more previously wholly-owned subsidiaries of the Company
unless such matter is described in clause (v) above.
(b) "CHANGE IN DUTIES" shall mean the occurrence, on the date upon
which a Change in Control occurs or within two years thereafter, of any one or
more of the following:
(i) A significant reduction in the nature or scope of Executive's
authorities or duties from those applicable to Executive immediately prior
to the date on which a Change in Control occurs;
(ii) A reduction in Executive's annual base salary or target
opportunity under any applicable bonus or incentive compensation plan or
arrangement from that provided to Executive immediately prior to the date
on which a Change in Control occurs;
(iii) A diminution in Executive's eligibility to participate in
bonus, stock option, incentive award and other compensation plans which
provide opportunities to receive compensation which are the greater of (A)
the opportunities provided by the Company (including its subsidiaries) for
executives with comparable duties or (B) the opportunities under any such
plans under which Executive was participating immediately prior to the date
on which a Change in Control occurs;
(iv) A diminution in employee benefits (including but not limited
to medical, dental, life insurance, and long-term disability plans) and
perquisites applicable to Executive from the greater of (A) the employee
benefits and perquisites provided by the Company (including its
subsidiaries) to executives with comparable duties or (B) the employee
benefits and perquisites to which Executive was entitled immediately prior
to the date on which a Change in Control occurs; or
(v) A change in the location of Executive's principal place of
employment by the Company by more than 50 miles from the location where
Executive was principally employed immediately prior to the date on which a
Change in Control occurs.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(d) "COMPENSATION" shall mean the greater of:
(i) Executive's annual base salary at the rate in effect
immediately prior to the date on which a Change in Control occurs;
(ii) Executive's annual base salary at the rate in effect sixty
days prior to the date of Executive's Involuntary Termination; or
(iii) Executive's annual base salary at the rate in effect at
the time of Executive's Involuntary Termination.
(d) "INVOLUNTARY TERMINATION" shall mean any termination of
Executive's employment with the Company which:
(i) does not result from a resignation by Executive (other than
a resignation pursuant to clause (ii) of this subparagraph (d)); or
(ii) results from a resignation by Executive on or before the
date which is sixty days after the date upon which Executive receives
notice of a Change in Duties;
provided, however, the term "Involuntary Termination" shall not include a
Termination for Cause or any termination as a result of death, disability under
circumstances entitling Executive to benefits under the Company's long-term
disability plan, or Retirement.
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(e) "RETIREMENT" shall mean Executive's resignation on or after the
date Executive reaches age sixty-five.
(f) "SEPARATION AMOUNT" shall mean two hundred forty-three thousand,
two hundred fifty dollars ($243,250.00).
(g) "TERMINATION FOR CAUSE" shall mean Executive (i) has engaged in
gross negligence or willful misconduct in the performance of Executive's duties,
(ii) has willfully refused without proper legal reason to perform Executive's
duties and responsibilities, (iii) has materially breached any material
provision of any agreement between the Company and Executive, including without
limitation paragraph 2 herein, (iv) has materially breached any material
corporate policy maintained and established by the Company that is of general
applicability to the Company's executive employees, (v) has willfully engaged in
conduct that Executive knows or should know is materially injurious to the
Company or any of its affiliates, or (vi) has engaged in illegal conduct or any
act of serious dishonesty which adversely affects, or reasonably could in the
future adversely affect, the value, reliability, or performance of Executive in
a material manner; provided, however, that in no event shall a termination of
Executive's employment constitute a "Termination for Cause" unless such
termination is approved by at least two-thirds of the members of the Board after
Executive has been given written notice by the Company of the specific reason
for such termination and an opportunity for Executive, together with Executive's
counsel, to be heard before the Board. Members of the Board may participate in
any hearing that is required pursuant to this subparagraph (g) by means of
conference telephone or similar communications equipment by means of which all
persons participating in the hearing can hear and speak to each other; provided,
however, that at least one-half of the members of the Board shall attend the
hearing in person.
(h) "WELFARE BENEFIT PLANS" shall mean the medical, dental, life
insurance, accidental death and dismemberment, and long-term disability plans
provided by the Company to its active employees.
2. SERVICES. Executive agrees that Executive shall (a) render services to
the Company (as well as any subsidiary thereof or successor thereto) during the
period of Executive's employment to the best of Executive's ability and in a
prudent and businesslike manner and (b) devote substantially the same time,
efforts, and dedication to Executive's duties as heretofore devoted.
3. SEPARATION BENEFITS. If Executive's employment by the Company or any
successor thereto shall be subject to an Involuntary Termination that occurs on
the date upon which a Change in Control occurs or within two years thereafter,
then Executive shall be entitled to receive, as additional compensation for
services rendered to the Company (including its subsidiaries), the following
separation benefits:
(a) A lump sum cash payment in an amount equal to the Separation
Amount, which shall be paid to Executive on or before the thirty-first day after
the last day of Executive's employment with the Company.
(b) All of the outstanding stock options granted by the Company to
Executive shall become immediately exercisable in full upon Executive's
termination of employment and for
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a period of three months thereafter or for such greater period as may be
provided in the plan or plans pursuant to which such stock options were granted
(but in no event shall any such stock option be exercisable after the expiration
of the original term of such stock option).
(c) A lump sum cash payment in an amount equal to the greater of (i)
the Company's cost of coverage for Executive and those of Executive's dependents
(including Executive's spouse) who were covered, under the Welfare Benefit Plans
on the day prior to Executive's Involuntary Termination or (ii) the Company's
cost of such coverage paid immediately prior to the Change in Control, for a
period of two years. Nothing herein shall be deemed to adversely affect in any
way the rights of Executive and Executive's eligible dependents to health care
continuation coverage as required pursuant to Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
(d) Executive shall be entitled to receive out-placement services in
connection with obtaining new employment up to a maximum cost of twenty-five
thousand dollars ($25,000.00) (which shall be paid directly by the Company to
the provider of such services).
4. INTEREST ON LATE BENEFIT PAYMENTS. If any payment provided for in
Paragraph 3(a) hereof is not made when due, the Company shall pay to Executive
interest on the amount payable from the date that such payment should have been
made under such paragraph until such payment is made, which interest shall be
calculated at the rate of 1% per month (with a partial month counting as a full
month).
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Notwithstanding anything
to the contrary in this Agreement, in the event that any payment or distribution
by the Company to or for the benefit of Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay to
Executive an additional payment (a "Gross-up Payment") in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax imposed on any
Gross-up Payment, Executive retains an amount of the Gross-up Payment equal to
the Excise Tax imposed upon the Payments. The Company and Executive shall make
an initial determination as to whether a Gross-up Payment is required and the
amount of any such Gross-up Payment. Executive shall notify the Company
immediately in writing of any claim by the Internal Revenue Service which, if
successful, would require the Company to make a Gross-up Payment (or a Gross-up
Payment in excess of that, if any, initially determined by the Company and
Executive) within ten days of the receipt of such claim. The Company shall
notify Executive in writing at least ten days prior to the due date of any
response required with respect to such claim if it plans to contest the claim.
If the Company decides to contest such claim, Executive shall cooperate fully
with the Company in such action; provided, however, the Company shall bear and
pay directly or indirectly all costs and expenses (including additional interest
and penalties) incurred in connection with such action and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax or income
tax, including interest and penalties with respect thereto, imposed as a result
of the Company's action. If, as a result of the Company's action with respect
to a claim, Executive receives a refund of any amount paid by the
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Company with respect to such claim, Executive shall promptly pay such refund to
the Company. If the Company fails to timely notify Executive whether it will
contest such claim or the Company determines not to contest such claim, then the
Company shall immediately pay to Executive the portion of such claim, if any,
which it has not previously paid to Executive.
6. GENERAL.
(a) TERM. The effective date of this Agreement is September 30, 1999.
Within sixty days from and after the expiration of two years after said
effective date and within sixty days after each successive two-year period of
time thereafter that this Agreement is in effect, the Company shall have the
right to review this Agreement, and in its sole discretion either continue and
extend this Agreement, terminate this Agreement, or offer Executive a different
agreement. The Compensation Committee of the Board (excluding any member of
such committee who is covered by this Agreement or by a similar agreement with
the Company) will vote on whether to so extend, terminate, or offer Executive a
different agreement and will notify Executive of such action within said sixty-
day time period mentioned above. This Agreement shall remain in effect until so
terminated or modified by the Company. Failure of the Compensation Committee of
the Board to take any action within said sixty days shall be considered as an
extension of this Agreement for an additional two-year period of time.
Notwithstanding anything to the contrary contained in this "sunset provision,"
it is agreed that if a Change in Control occurs while this Agreement is in
effect, then this Agreement shall not be subject to termination or modification
under this "sunset provision," and shall remain in force for a period of two
years after such Change in Control, and if within said two years the contingency
factors occur which would entitle Executive to the benefits as provided herein,
this Agreement shall remain in effect in accordance with its terms. If, within
such two years after a Change in Control, the contingency factors that would
entitle Executive to said benefits do not occur, thereupon this two-year "sunset
provision" shall again be applicable with the sixty-day time period for action
by the Compensation Committee of the Board to thereafter commence at the
expiration of said two years after such Change in Control and on each two-year
anniversary date thereafter.
(b) INDEMNIFICATION. If Executive shall obtain any money judgment or
otherwise prevail with respect to any litigation brought by Executive or the
Company to enforce or interpret any provision contained herein, the Company, to
the fullest extent permitted by applicable law, hereby indemnifies Executive for
Executive's reasonable attorneys' fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and disbursements
and (ii) to pay prejudgment interest on any money judgment obtained by Executive
from the earliest date that payment to Executive should have been made under
this Agreement until such judgment shall have been paid in full, which interest
shall be calculated at the rate of 1% per month (with a partial month counting
as a full month).
(c) PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to pay (or
cause one of its subsidiaries to pay) Executive the amounts and to make the
arrangements provided herein shall be absolute and unconditional and shall not
be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company (including
its subsidiaries) may have against Executive or anyone else. All amounts
payable by the Company (including its subsidiaries hereunder) shall be paid
without notice or demand. Executive
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shall not be obligated to seek other employment in mitigation of the amounts
payable or arrangements made under any provision of this Agreement, and, except
as provided in Paragraph 3(c) hereof, the obtaining of any such other employment
shall in no event effect any reduction of the Company's obligations to make (or
cause to be made) the payments and arrangements required to be made under this
Agreement.
(d) SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Company and any successor of the Company, by merger or otherwise.
This Agreement shall also be binding upon and inure to the benefit of Executive
and Executive's estate. If Executive shall die prior to full payment of amounts
due pursuant to this Agreement, such amounts shall be payable pursuant to the
terms of this Agreement to Executive's estate.
(e) SEVERABILITY. Any provision in this Agreement which is prohibited
or unenforceable in any jurisdiction by reason of applicable law shall, as to
such jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
(f) NON-ALIENATION. Executive shall not have any right to pledge,
hypothecate, anticipate or assign this Agreement or the rights hereunder, except
by will or the laws of descent and distribution.
(g) NOTICES. Any notices or other communications provided for in this
Agreement shall be sufficient if in writing. In the case of Executive, such
notices or communications shall be effectively delivered if hand delivered to
Executive at Executive's principal place of employment or if sent by registered
or certified mail to Executive at the last address Executive has filed with the
Company. In the case of the Company, such notices or communications shall be
effectively delivered if sent by registered or certified mail to the Company at
its principal executive offices.
(h) CONTROLLING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas without regard to
conflict of law.
(i) FULL SETTLEMENT; WITHHOLDING. If Executive is entitled to and
receives the benefits provided hereunder, performance of the obligations of the
Company hereunder will constitute full settlement of all claims that Executive
might otherwise assert against the Company on account of Executive's termination
of employment. Any separation benefits paid pursuant to this Agreement shall be
deemed to be a separation payment and not "Compensation" for purposes of
determining benefits under the Company's qualified plans (unless and to the
extent that any such qualified plan expressly provides otherwise), and shall be
subject to any required tax withholding.
(j) UNFUNDED OBLIGATION. The obligation to pay amounts under this
Agreement is an unfunded obligation of the Company (including its subsidiaries),
and no such obligation shall create a trust or be deemed to be secured by any
pledge or encumbrance on any property of the Company (including its
subsidiaries).
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(k) NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute a contract of employment, nor shall any provision hereof affect
(i) the right of the Company (or its subsidiaries) to discharge Executive at
will or (ii) the terms and conditions of any other agreement between the Company
and Executive except as provided herein.
(l) NUMBER AND GENDER. Wherever appropriate herein, words used in the
singular shall include the plural and the plural shall include the singular.
The masculine gender where appearing herein shall be deemed to include the
feminine gender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
2nd day of November, 1999.
"EXECUTIVE"
/s/Dennis C. Fairchild
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"COMPANY"
DA CONSULTING GROUP, INC.
By: /s/ Nicholas H. Marriner
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Name: Nicholas H. Marriner
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Title: Chairman and Chief Executive Officer
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