SCHEDULE 14(A)
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
Preliminary Proxy Statement [ ] Confidential For Use of the [ ]
Definitive Proxy Statement [x] Commission Only (as permitted by
Definitive Additional Materials [ ] Rule 14a-6(e)(2))
Soliciting Material Pursuant to Rule 14a-12 [ ]
DA CONSULTING GROUP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
DA CONSULTING GROUP, INC.
SAN FELIPE PLAZA
5847 SAN FELIPE, SUITE 1100
HOUSTON, TEXAS 77057
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 11, 2001
------------------
To the Shareholders of DA Consulting Group, Inc.:
The annual meeting of shareholders of DA Consulting Group, Inc, a Texas
corporation ("DACG"), will be held at 1:30 p.m., local time, on December 11,
2001, at San Felipe Plaza, 5847 San Felipe, Suite 1100, Houston, TX, 77057, for
the following purposes:
1. To elect two Class C directors of DACG for a three-year term, ending at
DACG's 2004 annual meeting of shareholders; and
2. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only holders of shares of DACG's common stock at the close of business
on November 2, 2001 are entitled to notice of, and to vote at, the annual
meeting and any adjournments or postponements thereof. Such shareholders may
vote in person or by proxy. The stock transfer books of DACG will not be closed.
The accompanying form of proxy is solicited by the board of directors of DACG.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE SELF-ADDRESSED ENVELOPE, ENCLOSED FOR YOUR CONVENIENCE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DECIDE TO ATTEND THE
MEETING AND WISH TO VOTE IN PERSON, YOU MAY REVOKE YOUR PROXY BY WRITTEN NOTICE
AT THAT TIME.
By Order of the Board of Directors
/s/ B.K. PRASAD
B.K. Prasad
Chairman of the Board
November 9, 2000
DA CONSULTING GROUP, INC.
SAN FELIPE PLAZA
5847 SAN FELIPE, SUITE 1100
HOUSTON, TEXAS 77057
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
DECEMBER 11, 2001
------------------
This proxy statement, which is first being mailed to shareholders on or
about November 9, 2001, is furnished in connection with the solicitation by the
board of directors of DA Consulting Group, Inc. ("DACG") of proxies to be used
at the annual meeting of shareholders of DACG, to be held at 1:30 p.m., local
time, on December 11, 2001, at San Felipe Plaza, 5847 San Felipe, Suite 1100,
Houston, Texas, 77057, and at any adjournments or postponements thereof.
If proxies in the accompanying form are properly executed and returned
prior to voting at the annual meeting, the shares represented thereby will be
voted as instructed on the proxy. If no instructions are given on a properly
executed and returned proxy, the shares represented thereby will be voted:
o in favor of the election of the nominees for director named in
Proposal 1 below; and
o in support of management on such other business as may properly
come before the annual meeting or any adjournments thereof.
Shareholders whose shares are held of record by a broker or other
nominee are nevertheless encouraged to fill in the boxes of their choice on the
proxy, as brokers and other nominees may not be permitted to vote shares with
respect to certain matters for which they have not received specific
instructions from the beneficial owners of the shares.
Any proxy may be revoked by a shareholder prior to its exercise:
o upon written notice to the Secretary of DACG;
o by delivering a duly executed proxy bearing a later date; or
o by the vote of a shareholder cast in person at the annual meeting.
VOTING
Holders of record of DACG's common stock, $0.01 par value, on November
2, 2001, will be entitled to vote at the annual meeting or any adjournments or
postponements thereof. As of that date, there were 8,418,604 shares of common
stock outstanding and entitled to vote. Each share of common stock entitles the
holder thereof to one vote on the election of each nominee for director and on
any other matter that may properly come before the annual meeting. Shareholders
are not entitled to cumulative voting in the election of directors.
Under Texas law and the by-laws of DACG, the presence of a quorum is
required for each matter to be acted upon at the annual meeting. The presence at
the annual meeting in person or by proxy, of shareholders entitled to cast at
least a majority of the votes that all shareholders are entitled to cast on a
particular matter shall constitute a quorum for the purposes of consideration
and action on the matter. Directors are elected by a plurality vote. All other
actions to be taken by the shareholders at the annual meeting shall be taken by
the affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon and present in person or represented by proxy at the
meeting. Votes that are withheld and abstentions will be counted in determining
the presence of a quorum, but will not be counted in determining the number of
votes cast in connection with any particular matter. Broker non-votes, which
occur when a broker or other nominee holding shares for a beneficial owner does
not vote on a proposal because the broker or other nominee has not received
specific instructions from the beneficial owners, are not voted and will
therefore have no effect on the outcome of any of the matters to be voted upon
at the annual meeting.
The cost of solicitation of proxies by the board of directors will be
borne by DACG. Proxies may be solicited by mail, personal interview, telephone
or telegraph and, in addition, directors, officers and regular employees of DACG
may solicit proxies by such methods without additional remuneration. Banks,
brokerage houses and other institutions, nominees or fiduciaries will be
requested to forward the proxy materials to beneficial owners in order to
solicit authorizations for the execution of proxies. DACG will, upon request,
reimburse such banks, brokerage houses and other institutions, nominees and
fiduciaries for their expenses in forwarding such proxy materials to the
beneficial owners of DACG's stock.
ELECTION OF DIRECTORS
(PROPOSAL 1)
DACG's board of directors consists of six members, divided into three
classes, with the directors in each class serving for staggered three-year terms
and until their successors are elected and qualified. At the annual meeting, two
Class C directors will be elected to serve for a term of three years, each until
their successors are elected and qualified. Unless otherwise specified in the
accompanying proxy, the shares of common stock voted pursuant thereto will be
cast for Dr. B.K. Prasad and Dennis Fairchild, each for terms expiring at the
annual meeting of shareholders to be held in 2004. If, for any reason, at the
time of election, either of the nominees named should decline or be unable to
accept his nomination or election, it is intended that such proxy will be voted
for the election, in the nominee's place, of a substituted nominee, who would be
recommended by the board of directors. The board of directors, however, has no
reason to believe that either of the nominees will be unable or unwilling to
serve as a director.
Three directors will continue to serve as directors following the
annual meeting as set forth below, with two Class A directors having terms
expiring at the 2002 annual meeting of shareholders and one Class B director
having a term expiring at the 2003 annual meeting of shareholders. The remaining
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vacant Class B seat on the board of directors will not be filled at the annual
meeting and will remain vacant until filled by the board of directors or by the
shareholders at a meeting of the shareholders.
The following biographical information is furnished as to each nominee
for election as a director and each of the current directors:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
Class C Directors for a Three Year Term Expiring at the 2004 Annual
Meeting
B.K. Prasad, Ph.D., age 65, has served as a director since December 2000 and as
the Chairman of the board of directors since August 2001. Dr. Prasad, a
corporate strategy and management consultant, has been employed as a Director
and Vice President by Comcraft Canada Limited since 1987, and by Comcraft Asia
(Pte) Ltd from 1981 to 1987. Prior to joining Comcraft, Dr. Prasad served in
various senior finance and management positions in large industrial
organizations. Dr. Prasad holds an LLB, MBA, FCMA, FCA and CPA. He has been
designated by Purse to serve as a member of the board of directors pursuant to
the Securities Purchase Agreement between DACG and Purse, dated August 2, 2000,
and approved by DACG's shareholders at a special meeting held on October 12,
2000, under which Purse has the right to designate one director for so long as
Purse owns at least 25% of the common stock that it purchased under the
Securities Purchase Agreement. Dr. Prasad is a member of DACG's Audit Committee.
Dennis C. Fairchild, age 52, has served as a director since November 1, 2001. He
joined DACG in April 1999 as Executive Vice President and Chief Financial
Officer and is primarily responsible for the finance and administrative
functions of DACG. Prior to joining DACG, Mr. Fairchild provided consulting
services from April 1998 to February 1999. From April 1997 to April 1998 Mr.
Fairchild was Chief Financial Officer at National Water & Power. He served as
Chief Financial Officer at AmeriQuest Technologies from January 1994 to April
1997 and at Southeast Frozen Foods from March 1990 to January 1994.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
TWO CLASS C DIRECTORS NAMED above.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Class A Directors - Terms Expiring at the 2002 Annual Meeting
Nigel W.E. Curlet, age 55, has served as a director since December 1996. Since
1976, he has been employed in various capacities by Shell Chemical Company and
is currently its Manager - Demand Chain Center of Excellence. Mr. Curlet's prior
management roles at Shell were in its information technology, research and
development, and operations and strategic planning departments. He is a member
of DACG's Audit, Compensation and Stock Option Committees.
Gunther E.A. Fritze, age 65, has served as a director since December 1996. Mr.
Fritze is retired. From 1962 to 1999, Mr. Fritze was employed in various
capacities by Bank of Boston. Mr. Fritze's most recent position was Manager,
Finance Companies. Mr. Fritze is a member of DACG's Audit, Compensation and
Stock Option Committees.
-3-
Class B Director - Term Expiring at the 2003 Annual Meeting
Virginia L. Pierpont, age 59, founded DACG as a sole proprietorship in 1984,
incorporated the business in 1987, and opened its United Kingdom operation in
1988. Ms. Pierpont was the Chief Executive Officer of DACG from 1984 to 1993,
and, since August 2001, she serves as DACG's President and Chief Executive
Officer. Ms. Pierpont served as Chairman of the board of directors from December
1996 through August 1998, and from April 2000 through August 2001. She is a
member of DACG's Compensation Committee.
BACKGROUND OF EXECUTIVE OFFICERS
<Table>
<Caption>
Name Offices Held Date of First Election Age
---- ------------ ---------------------- ---
President and Chief
Virginia L. Pierpont Executive Officer August 2001 (1) 59
Executive Vice President
Dennis C. Fairchild and Chief Financial Officer April 1999 52
Malcolm G. Wright Chief Operating Officer February 2001 45
</Table>
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(1) Most recently, Ms. Pierpont was appointed as the President and Chief
Executive Officer of DACG in August 2001. She also served as the Chief Executive
Officer of DACG from 1984 through 1993.
For further information regarding Ms. Pierpont's background, see "Members of the
Board of Directors Continuing in Office." For further information regarding Mr.
Fairchild's background, see "Nominees for Election to the Board of Directors."
Malcolm G. Wright, age 45, joined DACG in March 2000 as Vice President of Europe
and, in February 2001, was promoted to Chief Operating Officer. Prior to joining
DACG, Mr. Wright was with Equifax Plc from November 1996 to January 2000, and
his last position was as European & UK Divisional Director of Commercial
Information Services. He also spent 17 years with Dun & Bradstreet and was
Director of Multinational Development at Dun & Bradstreet Europe from December
1990 to November 1996.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During DACG's 2000 fiscal year, which ended on December 31, the board
of directors held four meetings. Each director attended at least 75% of the
aggregate of the total number of meetings of the board of directors and
committees of the board of directors on which he or she served.
During 2000, the Audit Committee, which during this period consisted of
Messrs. Curlet, Fritze and Thatcher, met four times. In July 2001, Mr. Thatcher
resigned as both a member of the Audit Committee and as a director of the
Company, and his position on the Audit Committee was filled by Dr. Prasad. Each
member of the Audit Committee is considered an "independent director" under
NASD's rules. The function of the Audit Committee is to:
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o review the financial reports and other financial information
prepared by DACG for submission to any governmental or regulatory
body or the public and monitoring the integrity of such financial
reports;
o review DACG's systems of internal controls established by
management and the board of directors for finance, accounting,
legal compliance and ethics;
o review DACG's auditing, accounting and financial reporting
processes generally;
o monitor compliance with legal regulatory requirements;
o monitor the independence and performance of DACG's internal and
independent public accountants; and
o provide effective communication between the board of directors and
DACG's internal and external auditors.
In May 2000, the board of directors unanimously adopted the Audit
Committee charter included as Appendix A to this proxy statement.
During 2000, the Compensation Committee, which consists of Ms. Pierpont
and Messrs. Curlet and Fritze, met six times. The Compensation Committee is
responsible for determining compensation for the executive officers of DACG,
including bonus and benefits, and for administering DACG's compensation
programs, other than DACG's 1997 Stock Plan.
During 2000, the Stock Option Committee, which consists of Messrs.
Curlet and Fritze, met six times. The Stock Option Committee is responsible for
the administration of DACG's 1997 Stock Option Plan.
DACG does not have a standing Nominating Committee.
-5-
THE AUDIT COMMITTEE REPORT
The Audit Committee reviews DACG's financial reporting process on
behalf of the board of directors. In fulfilling its responsibilities, the Audit
Committee has reviewed and discussed the financial statements with management.
The Audit Committee has discussed with PricewaterhouseCoopers LLP,
DACG's independent auditor, the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees). In addition,
the Audit Committee has received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committee) and discussed with
PricewaterhouseCoopers LLP its independence from DACG and its management. The
Audit Committee has not considered whether its independent auditors' provision
of non-audit services to DACG is compatible with the auditor's independence,
because its independent auditors have not provided any non-audit services to
DACG.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the board of directors that the audited financial
statements be included in DACG's Annual Report on Form 10-K for the year ended
December 31, 2000, for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Gunther E.A. Fritze, Chair
Nigel W.E. Curlet
Dr. B.K. Prasad
FEES PAID TO INDEPENDENT AUDITOR
Set forth below are the fees billed for professional services rendered
to DACG by PricewaterhouseCoopers LLP for fiscal 2000.
Audit Fees................................ $199,300
Financial Information Systems and Design
and Implementation Fees................... $ 0
All Other Fees............................ $ 0
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The function of the Compensation Committee is to advise the board of
directors regarding overall compensation policies and recommend specific
compensation for DACG's officers. The Compensation Committee is responsible for
providing guidance to the board of directors regarding broad compensation and
stock issues. The Committee is composed of Virginia L. Pierpont, Gunther E.A.
Fritze and Nigel W.E. Curlet.
DACG applies a consistent philosophy to compensation for all employees,
at all levels. This philosophy is based on the premises that the success of DACG
results from the efforts of each employee and that a performance,
team-orientated environment is an essential part of DACG's culture. DACG
believes in the importance of rewarding employees for DACG's successes.
Particular emphasis is placed
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on broad employee equity participation through the use of stock options and
annual cash bonuses linked to overall Company results.
The Committee retained a leading compensation consulting firm to advise
the Committee on the market and executive compensation programs for 2000. The
consultant's review provides benchmarks for comparison of executive compensation
to that of other companies whose business is similar in nature to DACG's or who
may compete with DACG for executive talent. The compensation consultants advise
the Committee using resources that include publicly available information and
the consultant's prior experience.
The principal elements of DACG's executive compensation program consist
of both annual compensation (primarily base salary and annual incentive cash
bonuses) and long-term incentive compensation in the form of stock options. Base
salary, annual cash bonuses, and option grants are determined on the basis of
the overall financial performance of DACG and the performance of the individual
officer.
The Compensation Committee recommends base salary levels and annual
cash bonuses of DACG's senior management for approval by the Board or Directors.
Effective April 2000, the board of directors approved a base salary of $292,500
for Mr. Mitchell, who served as the President and Chief Executive Officer of
DACG until his resignation in August 2001. The board approved a base salary of
$185,000 for Mr. Fairchild, effective January 2000. The Compensation Committee
recommended, and the Board approved, bonuses of $175,000 for Mr. Mitchell and
$92,000 for Mr. Fairchild for 2000.
As part of a turnaround strategy, additional compensation incentives
have been utilized for senior management and equity participation for all
employees has been adjusted to increase employee motivation and reward their
efforts in DACG. The base pay for Mr. Mitchell was raised to $390,000 and the
base pay for Mr. Fairchild was raised to $220,000, each effective as of November
1, 2000.
At the direction of the Compensation Committee, the Stock Option
Committee was established to administer the 1997 Stock Option Plan. The Stock
Option Committee from time to time will grant options for shares common stock to
executive officers in an effort to further align their long-term interests with
those of DACG and DACG's other shareholders. During 2000, DACG granted stock
options for 1,038,699 shares of common stock to officers and employees of DACG
(of which 553,750 were granted to executive officers of DACG). Stock options
included options for 348,000 shares of common stock with shorter vesting periods
to key management as an incentive to retain key personnel during the financial
downturn of DACG. The Compensation Committee believes that the directors',
officers' and employees' existing equity ownership and stock options
sufficiently link their interests to the financial success of DACG.
THE COMPENSATION COMMITTEE
Nigel W.E. Curlet, Chair
Gunther E.A. Fritze
Virginia L. Pierpont
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SUMMARY COMPENSATION TABLE
The following table sets forth, with respect to services rendered
during 2000, 1999, and 1998, the total compensation earned by (i) each
individual who served as DACG's Chief Executive Officer during 2000, (ii) each
of the four most highly compensated executive officers, other than the Chief
Executive Officer, who were serving as executive officers at the end of 2000 and
whose respective total annual salary and bonus exceeded $100,000 during 2000,
and (iii) two additional individuals who would have been included in part (ii)
above but for the fact that the individuals were not serving as executive
officers of DACG at the end of 2000 (collectively, the "named executive
officers").
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
---------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(2)
- --------------------------- ---- --------- -------- ----------- ------------------
2000 $ 103,125 --- --- ---
Virginia L. Pierpont (3) 1999 --- --- 1,025 ---
President and Chief Executive Officer 1998 --- --- --- ---
Dennis C. Fairchild (4) 2000 $ 189,847 $ 92,000 40,000 $ 17,092 (10)
Executive Vice President - Finance and 1999 $ 142,708 $ 55,000 30,750 $ 46,046
Administration, Chief Financial Officer 1998 --- --- --- ---
John E. Mitchell (5) 2000 $ 311,742 $ 175,500 468,000 $ 16,849 (11)
Former President and Chief Executive 1999 --- --- --- ---
Officer 1998 --- --- --- ---
---
Nicholas H. Marriner (6) 2000 $ 43,020 --- --- $ 66,634 (12)
Former President, Chief Executive Officer 1999 $ 335,000 --- ---
and Chairman of the board of directors 1998 $ 432,000 $ 168,480 --- ---
Patrick J. Newton (7) 2000 $ 63,046 --- --- $ 3,330 (13)
Former President and Chief Executive 1999 $ 333,505 --- 98,500 ---
Officer 1998 $ 306,000 $ 95,068 42,000 $ 2,192,400
Eric J. Fernette (8) 2000 $ 116,048 --- 15,750 $ 113,631 (14)
Former Executive Vice President, 1999 $ 155,700 $ 40,000 27,250 ---
Human Resources 1998 $ 141,583 $ 132,818 4,200 ---
Lisa L. Costello (9) 2000 $ 115,752 --- 40,000 $ 21,759 (15)
Former Executive Vice President, 1999 $ 160,260 $ 40,000 33,500 ---
Research and Development 1998 $ 156,313 $ 138,856 21,000 ---
</Table>
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(1) All figures originally determined in foreign currency have been converted
to U.S. dollars based upon the exchange rate at the end of the applicable fiscal
year.
(2) Amounts include compensation expense attributed to employee stock awards,
employer 401(k) contributions and Company perquisites.
(3) Ms. Pierpont received a $3,125 retainer in the first quarter of 2000 which
was paid to all directors who were not also employees of DACG. Effective April
4, 2000, Ms. Pierpont was named Chairman of the board of directors, and entered
into an employment agreement entitling her to receive $150,000 annually for such
service. Following her appointment as President and Chief Executive Officer and
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resignation as Chairman of the board of directors in August 2001, Ms. Pierpont
continued to receive $150,000 annually for her services as President and Chief
Executive Officer of DACG.
(4) Mr. Fairchild was elected as an Executive Vice President and the Chief
Financial Officer of DACG on April 14, 1999 at a base annual salary of $175,000
and $185,000 effective January 1, 2000. His base salary increased to $220,000
effective November 1, 2000.
(5) Mr. Mitchell joined DACG on October 4, 1999 as president of its Europe,
Middle East, Africa division, was elected as DACG's Chief Operating Officer
effective February 11, 2000 at a base salary of $270,000, and was elected as the
President and Chief Executive Officer of DACG effective April 4, 2000 at a base
annual salary of $292,500. His base salary increased to $390,000 effective
November 1, 2000. He resigned his position as President and Chief Executive
Officer effective as of August 9, 2001.
(6) Mr. Marriner served as Chief Executive Officer of DACG through November 30,
1999. He was elected as the President and Chief Executive Officer of DACG
effective February 11, 2000. He resigned his positions as Chairman of the board
of directors, President and Chief Executive Officer effective April 3, 2000.
(7) Mr. Newton served as Chief Executive Officer of DACG effective December 1,
1999. His base salary was $378,276 on February 11, 2000, the date his
resignation as President and Chief Executive Officer of DACG became effective.
(8) Mr. Fernette resigned his position as Executive Vice President - Human
Resources on August 15, 2000, at which time his base annual salary was $157,248.
(9) Ms. Costello resigned her position as Executive Vice President - Research
and Development on August 10, 2000, at which time her base salary was $165,593.
(10) Represents $14,400 in car allowance and $2,692 in employer 401(k)
contributions.
(11) Represents $16,849 in car allowance.
(12) Represents $66,634 in severance pay.
(13) Represents $3,330 in car allowance.
(14) Represents $9,600 in car allowance, $5,250 in employer 401(k)
contributions, $89,181 in severance pay, and $9,600 from termination of a
deferred compensation plan.
(15) Represents $9,000 in car allowance, $4,959 in employer 401(k)
contributions, and 7,800 from termination of a deferred compensation plan.
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STOCK OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS DURING LAST FISCAL YEAR
Under the 1997 Stock Option Plan, options to purchase common stock are
available for grant to directors, officers and other key employees of DACG. The
following table sets forth certain information regarding options for the
purchase of common stock that were awarded to the named executive officers
during 2000.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
Number of
Securities Potential Realizable Gain
Underlying Percent of Total at Assumed Annual Rates
Options Options Granted Exercise or of Stock Appreciation for
Granted (#) to Employees in Base Price Expiration Option Terms
Name (1) Last Fiscal Year ($/Sh) (2) Date Compounded Annually
---- ----------- ---------------- ---------- ---- -------------------
5% ($) 10% ($)
------ -------
Virginia L. Pierpont..... 0 -- -- -- -- ---
Dennis Fairchild......... 40,000 (3) 4% $1.44 5/01/2010 $36,224 $ 91,800
John E. Mitchell......... 75,000 7% $3.25 2/11/2010(4) $153,293 $388,475
75,000 7% $3.25 2/11/2010(4) $153,293 $388,475
308,000 30% $1.44 5/01/2010(4) $278,443 $705,269
Nicholas H. Marriner..... 0 -- -- -- -- --
Patrick J. Newton........ 0 -- -- -- -- --
Eric J. Fernette......... 15,750 2% $3.44 8/15/2001 $34,074 $86,349
Lisa L. Costello......... 40,000 4% $1.44 11/10/2000(5) $36,224 $91,800
</Table>
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(1) Unless otherwise, noted, all options vest in one-third installments on the
second, third, and fourth anniversaries of the date of grant.
(2) The exercise price equaled the closing price of a share of common stock as
listed on The Nasdaq National Market on the date of grant. The exercise price is
payable in cash or by delivery of shares of common stock having a fair market
value equal to the exercise price of the options exercised.
(3) The option vests in five equal annual installments beginning on May 1, 2001.
(4) The option was terminated three months after Mr. Mitchell resigned from
DACG.
(5) The option was terminated three months after Ms. Costello resigned from
DACG.
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STOCK OPTIONS EXERCISED BY NAMED EXECUTIVE OFFICERS DURING 2000 AND HELD BY
NAMED EXECUTIVE OFFICERS AT DECEMBER 31, 2000
No options granted by DACG were exercised by the named executive
officers during 2000. The following table sets forth certain information
regarding options for the purchase of common stock that were held by the named
executive officers.
<Table>
<Caption>
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money Options at FY-End
Name Exercise (#) Realized($) Options at FY-End (#) ($)
---- ------------- ----------- ---------------------- -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Virginia L. Pierpont..... --- --- 1,025 -0- --- ---
Dennis C. Fairchild...... --- --- 5,375 66,375 --- ---
John E. Mitchell......... --- --- 38,500 436,500 --- ---
Nicholas H. Marriner..... --- --- -0- -0- --- ---
Patrick J. Newton........ --- --- -0- -0- --- ---
Eric J. Fernette......... --- --- 5,375 65,375 --- ---
Lisa L. Costello......... --- --- -0- -0- --- ---
</Table>
STOCK PERFORMANCE CHART
The following Stock Performance Chart compares DACG's cumulative total
shareholder return on its common stock with the cumulative total return of the
Nasdaq Composite and Nasdaq Computer and Data Processing Indices, quarterly, for
the period from April 24, 1998 (the date the common stock commenced trading on
The Nasdaq National Market) through December 31, 2000 (the date DACG's 2000
fiscal year ended). The comparison assumes $100 was invested on April 24, 1998
in common stock and in each of the foregoing indices and assumes reinvestment of
dividends.
(Performance graph appears here.)
TOTAL STOCKHOLDER RETURN
<Table>
<Caption>
DA CONSULTING NASDAQ NASDAQ COMPUTER
QUARTER ENDING GROUP, INC. US COMPOSITE & DATA PROCESSING
April 24, 1998 (Base Period) 100 100 100
June 30, 1998 78 101 109
September 30, 1998 83 91 102
December 31, 1998 119 119 133
March 30, 1999 54 133 160
June 30, 1999 33 145 167
September 30, 1999 26 149 174
December 31, 1999 19 220 292
March 30, 2000 14 247 288
June 30, 2000 11 215 235
September 30, 2000 10 198 218
December 31, 2000 4 132 135
</Table>
-11-
COMPENSATION OF DIRECTORS
During 2000, DACG paid each director who was not also an employee of
DACG an annual retainer of $12,500 on a quarterly basis and awarded each such
director an option to purchase 5,333 shares of common stock pursuant to DACG's
1997 Stock Option Plan, being that number of options determined by dividing
$10,000 by the fair market value of a share of common stock on June 6, 2000, the
date of DACG's 2000 annual meeting. During 2001, DACG will pay each director,
who is not also an employee of DACG, a $12,500 annual retainer and will award
(as of and on the date of DACG's annual meeting) pursuant to the 1997 Stock
Option Plan, each such director that number of options to purchase common stock
determined by dividing $10,000 by the fair market value of a share of common
stock on the date of the annual meeting. DACG also reimburses directors for
travel expenses incurred on behalf of DACG.
Ms. Pierpont received the first quarterly installment of $3,125 of the
retainer paid to all non-employee directors of DACG during 2000. She did not
receive any further installments of the retainer because she entered into an
employment agreement under which she received a salary for serving as the
Chairman of the board of directors from April 2000 through August 2001, and
thereafter as the President and Chief Executive Officer of DACG, as described
below.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
DACG entered into an employment agreement with Ms. Pierpont, effective April 4,
2000. Pursuant to her employment agreement, Ms. Pierpont received $150,000 per
year and reimbursement for her expenses incurred on behalf of DACG in her
capacity as the Chairman of the board of directors. Ms. Pierpont's salary could
be increased by the board of directors upon its annual review at the beginning
of each calendar year. Ms. Pierpont served at the discretion of the board of
directors, and, if terminated by the board of directors, she was entitled to
receive her salary for 90 days after she received notice of termination. If Ms.
Pierpont were terminated within 180 days of a change of control of DACG, she was
entitled to receive her salary for 180 days after she received notice of
termination. Ms. Pierpont's employment agreement contained a non-compete
covenant that was in effect during the term of her employment and for 18 months
following her termination. Ms. Pierpont was appointed as President and Chief
Executive Officer of DACG in and resigned as Chairman of the board of directors
in August 2001. By oral agreement, Ms. Pierpont serves as the President and
Chief Executive Officer of DACG, and has such responsibilities and authority
consistent such position as may from time to time be reasonably assigned by the
board of directors, for the same salary and according to the same terms and
conditions as provided in her employment agreement described above.
DACG entered into an employment agreement with Mr. Wright, DACG's Chief
Operating Officer, dated February 6, 2001. Pursuant to his employment agreement,
Mr. Wright was entitled to receive an initial base salary of Pound
Sterling150,000 per year or such other rate as is shown on his pay slip, subject
to annual review, and DACG is obligated to match his contributions to his
personal pension up to five percent of his total pay. The annualized salary of
Mr. Wright for 2001 is $216,000. Each of DACG and Mr. Wright may terminate the
employment contract on six months prior notice in writing. Mr. Wright's
employment agreement contains a non-compete covenant that is in effect during
the term of his employment and for six months following his termination.
Prior to his appointment as Chief Operating Officer of DACG, Mr. Wright
entered into a change in control separation agreement with DACG, effective
September 30, 1999, the initial term of which is two years. DACG may, in its
sole discretion, extend, terminate or modify the agreement within 60 days
following its expiration and, if it takes no action within 60 days after
expiration of the term, the agreement is automatically extended for an
additional two years. Also, the agreement remains in force for two years
-12-
after any change in control of the company, as defined in the agreement. Under
the agreement, if Mr. Wright is involuntarily terminated within two years after
a change in control of DACG, he is entitled to (i) Pound Sterling117,000 as a
lump sum in cash, (ii) a lump sum in cash equal to the cost of his benefits for
two years, (iii) out-placement services in connection with finding new
employment and (iv) the right to immediately exercise all outstanding stock
options granted to him by DACG.
DACG entered into a change in control separation agreement with Mr.
Fairchild, DACG's Chief Financial Officer, effective September 30, 1999, the
initial term of which is two years. DACG may, in its sole discretion, extend,
terminate or modify the agreement within 60 days following its expiration and,
if it takes no action within 60 days after expiration of the term, the agreement
is automatically extended for an additional two years. Also, the agreement
remains in force for two years after any change in control of DACG, as defined
in the agreement. Under the agreement, if Mr. Fairchild is involuntarily
terminated within two years after a change in control of DACG, he is entitled to
(i) $243,250 as a lump sum in cash, (ii) a lump sum in cash equal to the cost of
his benefits for two years, (iii) out-placement services in connection with
finding new employment and (iv) the right to immediately exercise all
outstanding stock options granted to him by DACG.
DACG entered into an employment agreement with Mr. Mitchell, DACG's
former President and Chief Executive Officer, effective April 4, 2000. Pursuant
to his employment agreement, Mr. Mitchell received an initial base salary of
Pound Sterling195,000 per year which could be increased by the Board upon its
annual review at the beginning of each calendar year. For 2001, the board of
directors increased Mr. Mitchell's salary to an annual amount of $390,000. Mr.
Mitchell received customary benefits, including medical, dental, disability and
life insurance and other employee benefit plans available to employees at his
level. Further, he was eligible for an annual performance bonus, as determined
by DACG. Mr. Mitchell could be terminated without cause, as defined in the
employment agreement, upon 90 days written notice. If so terminated, he was
entitled to receive his salary and benefits for 18 months after termination,
including any bonus paid or payable for the calendar year before his
termination, and all of his outstanding stock options became fully vested and
exercisable. If Mr. Mitchell voluntarily terminated his employment agreement on
30 days prior written notice with good reason, as defined in the agreement, then
he was entitled to receive his salary and benefits for 12 months, including any
bonus paid or payable for the previous calendar year, and all of his stock
options became fully vested and exercisable. If Mr. Mitchell terminated his
employment agreement on one year's prior written notice, he was eligible to
receive his salary and benefits for 12 months after the termination was
effective, including any bonus paid or payable for the calendar year before the
termination. Mr. Mitchell's employment agreement contained a non-compete
covenant that was in effect during the term of his employment and for 18 months
after his termination, unless termination were by DACG without cause or by Mr.
Mitchell for good reason. DACG also entered into a change in control separation
agreement with Mr. Mitchell, effective April 4, 2000, the initial term of which
was two years. The agreement remained in force for two years after any change in
control of DACG, as defined in the agreement. Under the agreement, if Mr.
Mitchell were involuntarily terminated within two years after a change in
control of DACG, he was entitled to (i) Pound Sterling195,000 as a lump sum in
cash, (ii) a lump sum in cash equal to the cost of his benefits for two years,
(iii) out-placement services in connection with finding new employment and (iv)
the right to immediately exercise all outstanding stock options granted to him
by DACG. The foregoing agreements with Mr. Mitchell were terminated when he
resigned his position as President and Chief Executive Officer effective August
9, 2001, and he received payment of his salary through August 31, 2001.
DACG entered into employment agreements with each of Messrs. Marriner,
Newton and Fernette and Ms. Costello effective January 1, 1998, the initial
terms of which expired on December 31, 1998 and which renewed automatically for
additional one-year periods on expiration of prior terms. The initial base
annual salaries under the employment agreements of the former executive officers
were: $432,000 for Mr. Marriner, $306,000 for Mr. Newton; $144,000 for Mr.
Fernette and $144,000 for Ms. Costello.
-13-
The base annual salary of each of the former executive officers was subject to
increases periodically at the discretion of the board of directors, and each
former executive officer was eligible to receive an annual bonus as determined
by DACG. The base annual salary of each of the former executive officers at the
time that the officer resigned was: $259,614 for Mr. Marriner; $378,276 for Mr.
Newton; $157,248 for Mr. Fernette and $165,593 for Ms. Costello. Each of the
employment agreements provided for customary benefits, including life, health
and disability insurance and 401(k) plan participation. Each of the employment
agreements further provided that if the employee was terminated without cause,
such employee was entitled to severance pay: Mr. Fernette and Ms. Costello were
entitled to salary and benefits for 12 months and 50% of any bonus paid with
respect to the calendar year immediately preceding termination; and Messrs.
Marriner and Newton were entitled to salary and benefits for 18 months and 100%
of any bonus paid with respect to the calendar year immediately preceding
termination. If the former executive employee voluntarily terminated the
employment agreement for good reason (as defined therein), Mr. Fernette and Ms.
Costello were entitled to salary and benefits for six months, including 50% of
any bonus paid with respect to the calendar year immediately preceding
termination, and Messrs. Marriner and Newton were entitled to salary and
benefits for twelve months, including 100% of any bonus paid with respect to the
calendar year immediately preceding termination. In the event the former
executive officer was terminated in connection with a change in control (as
defined therein), Mr. Fernette and Ms. Costello were entitled to receive one
year's base salary and benefits and 100% of any bonus paid with respect to the
calendar year immediately preceding termination, and Messrs. Marriner and Newton
were entitled to receive two years' base salary and benefits and 200% of any
bonus paid with respect to the calendar year immediately preceding termination.
In the event of termination of the former executive officer by DACG without
cause, by the former executive officer for good reason or following a change of
control, all outstanding options held by such officer would become fully vested
and exercisable. The former executive employees' employment agreements contained
non-compete covenants that were in effect during the terms of their employment
and for (i) 18 months after termination for each of Messrs. Marriner and Newton
and (ii) 12 months after termination for each of Mr. Fernette and Ms. Costello,
unless termination was without cause or by the former executive officer for good
reason.
DACG entered into an Agreement and Release with Mr. Fernette, dated
August 15, 2000, in connection with his termination of employment with DACG
effective the same date. Under the Agreement and Release, DACG agreed to pay Mr.
Fernette (i) $8,769.60 in lieu of accrued unused vacation, (ii) $7,325.98 as
full payout as part of a deferred compensation plan, and (iii) $204,483.92 less
customary withholding taxes, in installment payments, beginning August 31, 2000,
and ending August 15, 2001. Also, all of Mr. Fernette's outstanding stock
options became fully vested and exercisable and remained exercisable during the
period of time that he received separation payments. Additionally, Mr.
Fernette's 401(k) benefits fully vested on his last day of employment. Mr.
Fernette remained bound by the non-compete covenant in his employment agreement
with DACG which was in effect for 12 months after his termination of employment.
DACG entered into an agreement with Mr. Marriner, dated April 4, 2000,
in connection with his termination of employment with DACG effective the same
date. Under the agreement, DACG agreed to pay Mr. Marriner two months salary in
lieu of all notice entitlement and, additionally, a lump sum ex gratia payment
of Pound Sterling30,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ms. Pierpont served as a member of DACG's Compensation Committee in
2000 and also served as the Chairman of the board of directors from April 2000
through August 2001 for which she received a salary of $150,000 annually and
reimbursement for her expenses incurred on behalf of DACG. Following her
appointment as President and Chief Executive Officer in August 2001 and
subsequent resignation as
-14-
Chairman of the board of directors in August 2001, Ms. Pierpont continued to
receive $150,000 annually for her services as President and Chief Executive
Officer of DACG.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of November 9, 2001,
with respect to the beneficial ownership of shares of common stock of DACG by
each person who is known to DACG to be the beneficial owner of more than five
percent of the outstanding common stock, each director or nominee for director,
each of the named executive officers, and all directors and executive officers
as a group.
<Table>
<Caption>
Amount and Nature of Percent of Voting
Name and Address of Beneficial Owner Beneficial Ownership (1) Power
- ------------------------------------ ------------------------ -----------------
NAMED EXECUTIVE OFFICERS AND DIRECTORS (2)
Virginia L. Pierpont (3)......................... 619,868 7.4%
Dennis C. Fairchild (4).......................... 34,416 *
Malcolm G Wright (5)............................. 14,000 *
John E. Mitchell ................................ 28,700 *
Nicholas H. Marriner (6)......................... 619,868 7.4%
Patrick J. Newton................................ 0 *
Eric J. Fernette ................................ 0 *
Lisa L. Costello................................. 4,200 *
Nigel W.E. Curlet (7)............................ 31,538 *
Gunther E.A. Fritze (8).......................... 33,658 *
B.K. Prasad...................................... 0 *
OTHER SHAREHOLDERS
Worcester Discretionary Trust (9)............... 631,092 7.5%
Woodbourne Discretionary Trust (9).............. 629,034 7.5%
Dimensional Fund Advisors, Inc. (10)............. 480,000 5.7%
John Andrew Cowan (11)........................... 1,260,126 15.0%
Roger Geoffrey Barrs (11)........................ 1,260,126 15.0%
Purse Holding Limited (12) ...................... 5,000,000 43.8%
All directors and executive officers as a group
( 6 persons)................................. 733,480 8.6%
</Table>
- ----------------
* Less than 1%
(1) Each beneficial owner's percentage ownership is determined by assuming that
options that are held by such person (but not those held by any other person)
and that are currently exercisable or exercisable within 60 days of November 9,
2001 have been exercised. Options that are not exercisable within 60 days of
November 9, 2001 have been excluded. Unless otherwise noted, DACG believes that
all persons named in the above table have sole voting and investment power with
respect to all shares of common stock beneficially owned by them.
(2) Unless indicated otherwise, the address of each of these people is: c/o DA
Consulting Group, Inc., San Felipe Plaza, 5847 San Felipe, Suite 1100, Houston,
Texas 77057.
-15-
(3) Includes (i) 370,000 shares owned by Ms. Pierpont's spouse, Nicholas
Marriner, the former President and Chief Executive Officer of DACG and Chairman
of the board of directors, (ii) 8,400 shares held by Ms. Pierpont as custodian
for three minors, and (iii) 1,025 shares that may be acquired upon exercise of
stock options. Ms. Pierpont disclaims beneficial ownership of the shares owned
by her spouse and held as custodian for three minors.
(4) Includes 25,416 shares that may be acquired upon exercise of stock options.
(5) Represents 14,000 shares that may be acquired upon exercise of stock
options.
(6) Includes (i) 240,443 shares owned by Mr. Marriner's spouse, Virginia
Pierpont, the President and Chief Executive Officer and director of DACG, (ii)
8,400 shares held by his spouse as custodian for three minors, and (iii) 1,025
shares that his spouse may acquire upon exercise of stock options. Mr. Marriner
disclaims beneficial ownership of the shares owned by his spouse, held by his
spouse as custodian for three minors and which his spouse may acquire upon
exercise of stock options.
(7) Represents (i) 11,130 shares owned by Mr. Curlet's spouse, (ii) 1,450
shares owned by Mr. Curlet's son, and (iii) 18,958 shares that may be acquired
upon the exercise of stock options.
(8) Includes 18,958 shares that may be acquired upon exercise of stock options.
(9) Messrs. John Andrew Cowan and Roger Geoffrey Barrs are the co-trustees of
the trust. The trustees have the power to appoint all or any part of the capital
and income of the trust to one or more of the beneficiaries described in the
trust deed and in such names and proportions and at such time as such trustees
shall in their discretion determine. The address of this shareholder is: Victory
House, 7th Floor, Prospect Hill, Douglas, Isle of Man, British Isle, IM1 1EQ.
(10) Information with respect to the ownership of this shareholder was obtained
from Schedule 13G filed February 2, 2001. The address of this shareholder is:
1299 Ocean Avenue, Eleventh Floor, Santa Monica, CA 90401.
(11) Represents (i) 631,092 shares held by such shareholder as a co-trustee of
the Worcester Discretionary Trust and (ii) 629,034 shares held by such
shareholder as co-trustee of the Woodbourne Discretionary Trust. Such
shareholder disclaims beneficial ownership of the shares held by the trusts. The
address of this shareholder is: Victory House, 7th Floor, Prospect Hill,
Douglas, Isle of Man, British Isle, IM1 1EQ.
(12) Includes 3,000,000 shares that may be acquired by Purse Holding Limited
("Purse") upon exercise of warrants. Purse is a British Virgin Islands limited
company. Chandaria Charitable Foundation 1982 No. 5 ("Foundation") is the sole
shareholder of Purse. R&H Trust Co. (Bermuda) Limited ("Trust") is the Trustee
of Foundation. John David Boden and Paul Barrington Hubbard are the joint owners
of Trust. Mr. Boden is also the President and a Director of Trust. Mr. Hubbard
is also the Vice-President and a Director of Trust and the settlor of
Foundation. Purse, Foundation, Trust, and Messrs. Boden and Hubbard have the
shared power to vote or to direct the vote of or to dispose or direct the
disposition of the shares of common stock. Foundation, Trust, and Messrs. Boden
and Hubbard disclaim beneficial ownership of shares of DACG common stock. The
address of Purse is: Altstetterstrasse 126, P.O. Box 1705, CH-8048, Zurich,
Switzerland. The address of Foundation, Trust and Messrs. Boden and Hubbard is:
Corner House, 20 Parliament Street, Hamilton HM 12, Bermuda. Information with
respect to these shareholders was obtained from Schedule 13D filed March 16,
2001.
-16-
SALE OF COMMON STOCK AND WARRANTS TO PURCHASE COMMON STOCK
On October 16, 2000, DACG consummated the sale to Purse Holding
Limited, a British Virgin Islands limited company ("Purse"), of two million
shares of common stock for $4.8 million and warrants to purchase up to three
million shares of common stock. The sale was effected pursuant to a Securities
Purchase Agreement, dated August 2, 2000, between DACG and Purse. The agreement
was approved by DACG's shareholders at a special meeting held on October 12,
2000. DACG credited a $2 million loan received from Purse on August 3, 2000
toward the $4.8 million purchase price of the two million shares of common
stock. Purse paid the purchase price from internally generated funds.
In accordance with the terms of the agreement, DACG issued (i) two
million shares of common stock at a price of $2.40 per share and (ii) two
warrants, the first to purchase two million shares of common stock, exercisable
until October 16, 2003, at the greater of $3.00 per share or 85% of the market
price per share of common stock at the time of exercise, and the second to
purchase one million shares of common stock, exercisable for the period of time
after January 1, 2002, and until October 16, 2003, at $3.00 per share.
Prior to the consummation of the agreement, no single shareholder of
DACG beneficially owned more than 11% of the outstanding shares of common stock.
As a result of its purchase of the two million shares of common stock, Purse
owns approximately 24% of DACG's outstanding shares and is its largest single
shareholder. If Purse purchases all three million shares provided for in the
warrants, it would own approximately 44% of the outstanding shares, assuming
DACG issues no additional equity and the antidilution provisions of the warrants
are not triggered.
The agreement requires DACG to register for resale under the Securities
Act of 1933 with the Securities Exchange Commission ("SEC"), on or prior to
October 16, 2001, the shares of common stock purchased by Purse and any shares
of common stock purchased upon exercise of either of the warrants. DACG has
requested a waiver from Purse regarding the timing for registering such common
stock.
Further, for so long as Purse owns at least 25% of the common stock
that it has purchased, Purse is entitled under the agreement to designate one
director on the board of directors. Dr. Prasad has been designated by Purse to
serve on the board of directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires DACG's
directors and executive officers, and persons who own more than ten percent of a
registered class of DACG's equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of DACG. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish DACG with
copies of all Section 16(a) forms they file.
To DACG's knowledge, based solely on review of the copies of such
reports furnished to DACG and written representations that no other reports were
required, during the year ended December 31, 2000, all Section 16(a) filing
requirements applicable to DACG's officers, directors and greater than
ten-percent beneficial owners were complied with except (i) Purse, which
purchased more than 10% of DACG's common stock on October 16, 2000, and
Chandaria Charitable Foundation 1982 No. 5, the sole shareholder of Purse, filed
a late joint Form 3, and (ii) Virginia L. Pierpont, a director of DACG, filed a
Form 5 to report, among other transactions, a delinquent Form 3 holding,
delinquent Form 4 transaction and delinquent Form 5 transaction.
-17-
INDEPENDENT AUDITORS
The board of directors has selected PricewaterhouseCoopers LLP,
independent public accountants, to audit the consolidated financial statements
of DACG for the fiscal year ending December 31, 2001. PricewaterhouseCoopers LLP
is not expected to have a representative present at the annual meeting.
OTHER BUSINESS
Management knows of no other matters that will be presented at the
annual meeting. However, if any other matter properly comes before the meeting,
or any adjournment or postponement thereof, it is intended that proxies in the
accompanying form will be voted in accordance with the judgment of the persons
named therein.
SHAREHOLDER PROPOSALS
Shareholders interested in submitting a proposal for inclusion in the
proxy materials for DACG's 2002 annual meeting of shareholders may do so by
following the procedures prescribed in Rule 14a-8 promulgated under the
Securities Exchange Act of 1934. To be eligible for inclusion in the proxy
materials, shareholder proposals must be received by DACG at its principal
executive offices, San Felipe Plaza, 5847 San Felipe, Suite 1100, Houston,
Texas, 77057, within a reasonable time before DACG begins to print and mail its
proxy materials for its 2002 annual meeting of shareholders. The 2002 annual
meeting of shareholders is presently scheduled to take place in July 2002.
Further, in the event a shareholder submits a proposal outside the process of
Rule 14a-8, intended to be presented to a vote at the 2002 annual meeting of
shareholders, and DACG receives notice of the proposal a reasonable time before
it mails the proxy materials for its 2002 annual meeting of shareholders, then
so long as DACG includes in its proxy statement for such annual meeting advice
on the nature of the proposal and how the named proxyholders intend to vote the
shares for which they have received discretionary authority, such proxyholders
may exercise discretionary authority with respect to such proposal, except to
the extent limited by the SEC's rules governing shareholder proposals.
ANNUAL REPORT
A copy of DACG's annual report of Form 10-K as filed with the SEC for
the year ended December 31, 2000 is being mailed together with this proxy
statement to all shareholders entitled to notice of and to vote at the annual
meeting.
DACG WILL PROVIDE TO EACH PERSON SOLICITED, COPIES OF ANY EXHIBITS IN
ITS ANNUAL REPORT, BUT MAY CHARGE A REASONABLE COPYING CHARGE. SHAREHOLDERS
SHOULD ADDRESS REQUESTS FOR COPIES OF ANY OF THE EXHIBITS TO: CHIEF FINANCIAL
OFFICER, DA CONSULTING GROUP, INC., SAN FELIPE PLAZA, 5847 SAN FELIPE, SUITE
1100, HOUSTON, TEXAS 77057.
-18-
APPENDIX A
CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
DA CONSULTING GROUP, INC.
MAY 2000
ARTICLE I
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to
assist the Board of Directors (the "Board") of DA Consulting Group, Inc. (the
"Company") in undertaking and fulfilling its oversight responsibilities in
connection with: (a) reviewing the financial reports and other financial
information prepared by the Company for submission to any governmental or
regulatory body or the public and monitoring the integrity of such financial
reports; (b) reviewing the Company's systems of internal controls established by
management for finance, accounting, legal compliance and ethics that management
and the Board have established; (c) reviewing the Company's auditing, accounting
and financial reporting processes generally; (d) monitoring compliance with
legal regulatory requirements; (e) monitoring the independence and performance
of the Company's internal and independent public accountants; and (f) providing
effective communication between the Board and the Company's internal and
external auditors.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full power to retain
special legal, accounting or other consultants to advise the Committee.
ARTICLE II
MEMBERSHIP AND TERM
(a) Membership. The Committee shall be comprised of at least three
members of the Board, and the Committee's composition shall meet the following
listing requirements of the NASD:
1. Each member of the Committee must not have any relationship
with the Company that may interfere with the exercise of the
member's independence;
2. Each member of the Committee must be financially literate1 or
become financially literate within a reasonable period of time
after appointment to the Committee; and
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(1) The term "financial literacy" means that a member of the audit committee
must have the ability to read and understand fundamental financial
statements, including a balance sheet, income statement and statement of
cash flows or will become able to do so within a reasonable period of time
after being appointed to an audit committee. The term "financial literacy"
does not mean that a member must have a chief financial officer's or
accounting practitioner's understanding of generally accepted accounting
principles, consistently applied, as adopted in the United States of America
by the Financial Accounting Standards Board ("GAAP").
A-1
3. At least one member of the Committee shall have expertise in
accounting or financial reporting.2
(b) Term; Removal. The members of the Committee shall be appointed for
a one year term by the Board at its annual meeting. Unless a chairman of the
Committee is designated by the Board, the members of the Committee will elect a
chairman by formal vote of the Committee's full membership. A member of the
Committee may be removed from the Committee at any time at the discretion of the
Board.
ARTICLE III
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Company's independent public accountants shall be accountable to
the Board and the Committee, and the Board and Committee shall have ultimate
authority to select, evaluate and replace the Company's independent public
accountants.
ARTICLE IV
MEETINGS
The Committee shall meet at such times and from time to time as it
deems to be appropriate, but not less than four times a year. The Committee
shall report to the Board at the first board meeting following each such
Committee meeting. The Committee may request any officer or employee of the
Company or the Company's outside counsel or independent public accountants to
attend a meeting of the Committee or to meet with any members of, or consultants
to, the Committee.
ARTICLE V
RESPONSIBILITIES
The following functions are the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this
function as appropriate given the circumstances.
1. Review and reassess (using assessment tools available through
third parties or developed internally) the adequacy of this
Committee and its Charter not less than annually and recommend
any proposed changes to the Board for approval.
2. In accordance with Article III, hold such regular meetings as
may be necessary and such special meetings as may be called by
the Chairman of the Audit Committee or at the request of the
independent accountants or management.
3. Review with management and the independent public accountants
the audited financial statement to be included in the Company's
Annual Report on Form 10-K (or the Annual Report to
Shareholders if distributed prior to the filing of Form 10-K),
including major issues regarding accounting and auditing
principles and practices and any related party transactions as
well as the adequacy of internal controls that could
significantly affect the Company's financial statements, and
- -------------
2 The term "expertise in accounting or financial reporting" means that at least
one member of the audit committee must have had some past employment
experience in finance or accounting, a professional certification in
accounting, or any other comparable experience or background which results in
the individual's financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
A-2
review and consider with the independent public accountants the
matters required to be discussed by Statement on Auditing
Standards ("SAS") 61.
4. Review of significant financial reporting issues and judgments
made by management and independent public accountants in
connection with the preparation of the Company's financial
statements.
5. Review with the independent public accountants the Company's
interim financial results to be included in the Company's
quarterly reports to be filed with Securities and Exchange
Commission and the matters required to be discussed by SAS 61
prior to such filing.
6. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to
monitor and control such exposures.
7. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent public
accountants, internal auditors or management.
8. Obtain from the independent public accountants their
recommendation regarding internal controls and other matters
relating to the accounting procedures and the books and records
of the Company and its subsidiaries and reviewing the
correction of controls deemed to be deficient;
9. Receive periodic reports from the independent public
accountants regarding the independent public accountants'
relationships between the independent public accountants and
the Company consistent with Independence Standards Board
Standard Number 1. The Committee shall also discuss with the
independent public accountants any such disclosed relationships
and their impact on the auditor's independence. The Committee
shall recommend that the Board take appropriate action to
ensure the continuing objectivity and independence of the
independent public accountants;
10. Review the performance of the independent public accountants
and recommend to the Board the appointment or termination of
the independent public accountants and the selection of new
independent public accountants. The Committee shall also review
the fees to be paid to the independent public accountants.
After the completion of the audit, the Committee shall review
with the independent public accountants any problems or
difficulties the auditor may have encountered and any
management letter provided by the independent public
accountants (and the Company's response to such letter.);
11. Recommend to the Board the proposed scope of services for the
independent public accountants for each fiscal year, including
a review of the independent public accountant's risk assessment
process in establishing the scope of the examination, proposed
fees, and the reports to be rendered; and
12. Review the advisability of having the independent public
accountants make specified studies and reports as to auditing
matters, accounting procedures, tax, or other matters.
A-3
13. Review the coordination between the independent public
accountants and the internal auditor and review the risk
assessment process, scopes, and procedures of the Company's
internal audit work and whether such risk assessment process,
scopes and procedures are adequate to attain the internal audit
objectives, as determined by the Company's management and
approved by the Committee; review the significant findings of
the internal auditor for each fiscal year; and review the
quality and composition of the Company's internal audit staff.
14. Review with the Company's general counsel legal matters that
may have a material impact on the financial statements, the
Company's compliance policies and any material reports or
inquiries received from regulators or governmental agencies.
15. Review the procedures established by the Company that monitor
the compliance by the Company with its loan and indenture
covenants and restrictions.
16. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual
proxy statement.
17. Report through its Chairman to the Board following the meetings
of the Committee.
18. Maintain minutes or other records of meetings and activities of
the Committee.
19. Conduct or authorize investigation into any matters within the
Committee's scope of responsibilities.
20. Consider such other matters in relation to the financial
affairs of the Company and its accounts, and in relation to the
internal and external audit of the Company as the Committee
may, in its discretion, determine to be advisable.
While the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with the generally accepted accounting principles. This is
the responsibility of management and the independent public accountants.
The Committee recognizes that the Company's management is responsible
for preparing the Company's financial statements, and the independent public
accountants are responsible for auditing or reviewing those financial statements
in compliance with applicable law. The Committee also recognizes that management
of the Company, including the internal audit staff, as well as the independent
public accountants have more time, knowledge and more detailed information on
the Company than do Committee members. Consequently, in carrying out is
oversight responsibility, the Committee will not provide any special assurances
as to the Company's financial statements or any professional certification as to
the independent public accountants' work. In addition, it is not the duty of the
Committee to conduct investigations, to resolve disagreements, if any, between
management and the independent public accountants, or to assure compliance with
laws and regulations.
A-4
DA CONSULTING GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FROM HOLDERS OF COMMON STOCK
The undersigned, revoking all previous proxies, hereby appoints
Virginia L. Pierpont and Dennis C. Fairchild, and each of them acting
individually, as the attorney and proxy of the undersigned, with full power of
substitution, to vote all shares of common stock, par value $0.01 per share, of
DA Consulting Group, Inc. which the undersigned would be entitled to vote at the
annual meeting of the shareholders of DACG to be held on December 11, 2001, and
at any adjournment or postponement thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES
FOR DIRECTOR LISTED ON THE REVERSE SIDE HEREOF. THIS PROXY ALSO DELEGATES
DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
The undersigned hereby acknowledges receipt of the notice of annual
meeting and proxy statement.
(continued on reverse side)
Annual Meeting of Shareholders
DA CONSULTING GROUP, INC.
December 11, 2001
Please Detach and Mail in the Envelope Provided.
Please mark your votes as in this example. [X]
This proxy, when properly dated and executed, will be voted in the
manner directed herein by the undersigned shareholder. Please mark, sign, date
and return the proxy promptly using the enclosed envelope.
1. Election of Directors.
Nominees: B. K. Prasad and Dennis C. Fairchild, each as a director
of DACG to serve for a three-year term expiring at the annual meeting
to be held in 2004.
[ ] Vote for all (except as marked to the contrary below).
[ ] Withhold authority to vote for all.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THE
NAME OF THE NOMINEE ON THE LINE BELOW.)
--------------------------------
Note: Please sign this proxy exactly as your name appears on your stock
certificate. When signing as attorney-in-fact, executor, administrator, trustee
or guardian, please add your title as such, and if signed as a corporation,
please sign with full corporate name by a duly authorized officer or officers
and affix the corporate seal. Where stock is issued in the name of two or more
persons, all such persons should sign.
Signature of Shareholder _______________________ Date: ________________, 2001
Signature of Shareholder _______________________
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