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 [ ]
Definitive Additional Materials [ ] (as permitted by Rule 14a-6(e)(2))
Soliciting Material Pursuant to Rule 14a-12 [ ]
DA CONSULTING GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ------------------------------------------------------------------------------
(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
NOVEMBER 20, 2002
------------------
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 9:00 a.m., local time, on November 20,
2002, at San Felipe Plaza, 5847 San Felipe, Suite 1100, Houston, TX, 77057, for
the following purposes:
1. To elect two Class A directors of DACG for a three-year term, ending at
DACG's 2005 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
October 18, 2002 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
B.K. Prasad
Chairman of the Board
October 9, 2002
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
NOVEMBER 20, 2002
------------------
This proxy statement, which is first being mailed to shareholders on or
about October 19, 2002, 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 9:00 a.m., local
time, on November 20, 2002, 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 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 October
18, 2002, 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
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 A 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 Nigel Curlet and Gunther Fritze, each for terms expiring at the annual
meeting of shareholders to be held in 2005. 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.
Four directors will continue to serve as directors following the annual
meeting as set forth below, with two Class B directors having terms expiring at
the 2003 annual meeting of shareholders and two Class C director having a term
expiring at the 2004 annual meeting of shareholders.
The following biographical information is furnished as to each nominee
for election as a director and each of the current directors:
-2-
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
Class A Directors - Terms Expiring at the 2002 Annual Meeting
Nigel W.E. Curlet, age 57, 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 66, 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
TWO CLASS A DIRECTORS NAMED above.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Class B Director - Term Expiring at the 2003 Annual Meeting
Virginia L. Pierpont, age 60, 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.
James R. Wilkinson, age 46, is the founder of Capstone Funding Ltd., an
investment company started in 1990, and of The Strategic CFO, a consulting
company started in 1998 where Mr. Wilkinson devotes the majority of his time.
Prior to establishing these two entities, Mr. Wilkinson served in
executive-level positions in real estate and accounting firms. Mr. Wilkinson is
a CPA and a graduate of Texas A&M University.
Class C Directors for a Three Year Term Expiring at the 2004 Annual
Meeting
B.K. Prasad, Ph.D., age 66, 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 served as President and Chief
Executive Officer of Moon Macro Systems Inc since July 2002 and as a independent
Corporate Strategy and Management Consultant from January 2002 until June 2002.
Dr. Prasad was employed as a Director and Vice President by Comcraft Canada
Limited from 1987 to December 2001, 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.
-3-
Dennis C. Fairchild, age 53, 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.
-4-
BACKGROUND OF EXECUTIVE OFFICERS
<Table>
<Caption>
Name Offices Held Date of First Election Age
---- ------------ ---------------------- ---
Virginia L. Pierpont President and Chief August 2001 (1) 60
Executive Officer
Dennis C. Fairchil Executive Vice President April 1999 53
and Chief Financial Officer
Malcolm G. Wright Chief Operating Officer February 2001 46
</Table>
- ----------------
(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 46, 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 2001 fiscal year, which ended on December 31, the board
of directors held ten 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 2001, 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 James Wilkinson.
Each member of the Audit Committee is considered an "independent director" under
NASD's rules. The function of the Audit Committee is to:
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;
-5-
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 a new Audit
Committee Charter outlining the responsibilities and duties of the Audit
Committee.
During 2001, the Compensation Committee, which consists of Ms. Pierpont
and Messrs. Curlet and Fritze, met two 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 2001, the Stock Option Committee, which consists of Messrs.
Curlet and Fritze, met one time. The Stock Option Committee is responsible for
the administration of DACG's 1997 Stock Option Plan.
DACG does not have a standing Nominating Committee.
-6-
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 BDO Seidman, 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 considered whether its independent auditors' provision of
non-audit services to DACG is compatible with the auditor's independence.
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, 2001, for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Gunther E.A. Fritze, Chair
Nigel W.E. Curlet
James R. Wilkinson
FEES PAID TO INDEPENDENT AUDITOR
Set forth below are the fees for professional services rendered to DACG
by BDO Seidman LLP for fiscal 2001.
<Table>
Audit Fees................................ $127,023
Financial Information Systems and Design
and Implementation Fees................... $ 0
Income tax services estimated............. $ 30,000
</Table>
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 on broad employee equity participation through the
use of stock options and annual cash bonuses linked to overall Company results.
-7-
The Committee utilized databases prepared by a leading consulting firm
on the market and executive compensation programs for 2001. The Committee's
review utilized 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 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 approved base salary levels and annual cash
bonuses of DACG's senior management in 2000. Effective November 2000, the
Compensation Committee approved a base salary of $390,000 for Mr. Mitchell, who
served as the President and Chief Executive Officer of DACG until his
resignation in August 2001. The Compensation Committee approved a base salary of
$220,000 for Mr. Fairchild, effective November 2000. The Compensation Committee
approved bonuses of $175,000 for Mr. Mitchell and $92,000 for Mr. Fairchild for
2000.
At the time of Mr Mitchell's resignation Ms Pierpont assumed the
responsibility of CEO and President at her present salary of $150,000 per year.
Mr Wright continued as COO at a salary of $213,693.
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 of 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 2001, DACG granted
stock options for 1,172,749 shares of common stock to officers and employees of
DACG (of which 720,000 were granted to executive officers of DACG). Stock
options included options for 300,000 shares of common stock with immediate
vesting 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
-8-
EXECUTIVE COMPENSATION
CASH AND NON-CASH COMPENSATION PAID TO CERTAIN EXECUTIVE OFFICERS
The following table sets forth, with respect to services rendered
during 2001, 2000, and 1999, the total compensation earned by (i) each
individual who served as DACG's Chief Executive Officer during 2001, (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 2001 and
whose respective total annual salary and bonus exceeded $100,000 during 2001,
and (iii) two additional individuals who would have been one of the four highest
paid executive officers but for the fact that the individuals were not serving
as executive officers of DACG at the end of 2001 (collectively, the "named
executive officers").
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
YEAR ANNUAL COMPENSATION (1) AWARDS
---- --------------------------- ------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) (2) BONUS($) OPTIONS (#) COMPENSATION ($) (3)
- --------------------------- ------------- --------- ----------- --------------------
Virginia L. Pierpont (4) 2001 $ 112,500 100,000
President and Chief Executive Officer 2000 $ 103,125 -- -- --
1999 $ -- -- 1,025 --
Dennis C. Fairchild (5) 2001 $ 220,000 270,000 $ 18,275 (8)
Executive Vice President - Finance and 2000 $ 189,847 $ 92,000 40,000 $ 17,092
Administration, Chief Financial Officer 1999 $ 142,708 $ 55,000 30,750 $ 46,046
Malcolm G. Wright (6) 2001 $ 213,693 300,000 $ 23,902 (9)
Chief Operating Officer 2000 $ 147,764 $ 73,237 33,000 $ 19,327
1999 -- -- -- --
John E. Mitchell (7) 2001 $ 286,702 50,000 $ 13,793 (10)
Former President and 2000 $ 311,742 $ 175,500 468,000 $ 16,849
Chief Executive Officer 1999 -- -- -- --
</Table>
(1) All figures converted to U.S. dollars based upon the exchange rate at the
end of the applicable fiscal year.
(2) Salary includes amounts deferred, if any, pursuant to the Company's 401(k)
plan.
(3) Amounts include compensation expense attributed to employee stock awards,
employer 401(k) contributions and Company perquisites.
(4) Ms. Pierpont receives $150,000 annually, beginning May 1, 2000, under her
employment agreement for her service as Chairman of the Board of Directors and
later as President and Chief Executive Officer. Ms. Pierpont voluntarily
deferred $37,500 of her compensation until 2002.
(5) Mr. Fairchild was elected as an Executive Vice President and the Chief
Financial Officer of the Company on April 14, 1999 at a base annual salary of
$175,000. His base salary increased to $220,000 effective November 1, 2000.
-9-
(6) Mr. Wright joined the Company on March 21, 2000 as Vice President of Europe
at a base salary of $169,750 and was elected as the Company's Chief Operating
Officer effective February 6, 2001 at a base salary of $213,693.
(7) Mr. Mitchell was elected as an executive officer of the Company in February
2000, and his employment with the Company terminated in August 2001.
(8) Represents $14,400 in car allowance and $3,875 in employer 401(k)
contributions.
(9) Represents $14,246 in car allowance and $9,656 in employer 401(k)
contributions.
(10) Represents $13,973 in car allowance.
-10-
STOCK OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS DURING LAST FISCAL YEAR
Under the 1997 Stock Option Plan, options to purchase common stock are
available for grant to directors, officers and other key employees of DACG. The
following table sets forth certain information regarding options for the
purchase of common stock that were awarded to the named executive officers
during 2001.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
Number of Potential Realizable Gain
Securities Percent of Total at Assumed Annual Rates
Underlying Options Granted to Exercise or of Stock Appreciation for
Options Employees in Base Price Expiration Option Terms
Name Granted (#) (1) Last Fiscal Year ($/Sh) (2) Date Compounded Annually
- -------------------- --------------- ------------------- ------------ ---------- -------------------------
5% ($) 10% ($)
------ -------
Virginia L. Pierpont... 100,000 (3) 9% 0.30 12/11/2011 18,867 47,812
Dennis Fairchild....... 100,000 (3) 9% 0.30 12/11/2011 18,867 47,812
150,000 (4) 13% 0.30 12/11/2011 28,300 71,718
20,000 (5) 3% 0.75 03/07/2011 9,433 23,906
Malcolm G. Wright...... 100,000 (3) 9% 0.30 12/11/2011 18,867 47,812
150,000 (4) 13% 0.30 12/11/2011 28,300 71,718
50,000 (6) 4% 1.00 02/01/2011 31,445 79,687
John E. Mitchell....... 50,000 (7) 4% 0.75 03/07/2011 23,854 59,765
</Table>
(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 fair market value of a share of Common Stock
on the date of grant as determined by the Board of Directors. 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 options vest in one-third installments beginning December 11, 2002.
(4) The options vested on issuance.
(5) The options vest in one-third installments: one-third on issuance and
one-third on each anniversary.
(6) The options vest in one-third installments beginning on February 1, 2002.
(7) The option was terminated three months after Mr. Mitchell resigned from the
Company.
-11-
STOCK OPTIONS EXERCISED BY NAMED EXECUTIVE OFFICERS DURING 2001 AND HELD BY
NAMED EXECUTIVE OFFICERS AT DECEMBER 31, 2001
No options granted by DACG were exercised by the named executive
officers during 2001. The following table sets forth certain information
regarding options for the purchase of common stock that were held by the named
executive officers.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
Shares Number of Securities
Acquired on Value Underlying Unexercised Value of Unexercised In-the-
Name Exercise (#) Realized($) Options at FY-End (#) Money Options at FY-End ($)
- ---- ------------ ----------- ------------------------------ ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Virginia L. Pierpont... --- --- 1,025 100,000 --- ---
Dennis C. Fairchild.... --- --- 227,417 166,667 --- ---
Malcolm G. Wright...... --- --- 197,667 135,333
John E. Mitchell....... --- --- --- --- --- ---
</Table>
(1) Based on $0.25 per share, the closing price of the Common Stock, as reported
by the Nasdaq National Market, on December 31, 2001.
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
</Table>
-12-
<Table>
September 30, 2000 10 198 218
December 31, 2000 4 132 135
March 30, 2001 7 99 99
June 30, 2001 8 116 129
September 30, 2001 2 81 79
December 31, 2002 1 105 109
</Table>
COMPENSATION OF DIRECTORS
During 2001, each director who was not also an employee of DACG earned
an annual retainer of $12,500 which is paid on a quarterly basis and awarded
each such director an option to purchase 33,333 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 December
11, 2001 the date of DACG's 2001 annual meeting. During 2002, 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. The third and fourth quarter
2001 directors' fees were paid in 2002.
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 was $213,693. 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
April 10, 2000, 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
-13-
is automatically extended for an additional two years. Also, the agreement
remains in force for two years 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.
-14-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ms. Pierpont served as a member of DACG's Compensation Committee in
2001 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 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 October 1, 2002, 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
- ------------------------------------ ------------------------ -----------------
EXECUTIVE OFFICERS AND DIRECTORS (2)
Virginia L. Pierpont (3)........................ 619,868 7.4%
Dennis C. Fairchild (4)......................... 236,917 2.7%
Malcolm G. Wright (5)........................... 197,667 2.3%
Nigel W.E. Curlet (6)........................... 64,871 0.8%
Gunther E.A. Fritze (7)......................... 81,191 1.0%
B.K. Prasad (8)................................. 33,333 0.4%
James R. Wilkinson.............................. 15,000 ---
John E. Mitchell (9)............................ 28,700 0.3%
OTHER SHAREHOLDERS
Worcester Discretionary Trust (10)............. 631,092 7.5%
Woodbourne Discretionary Trust (10)............ 629,034 7.5%
Dimensional Fund Advisors, Inc. (11)............ 480,000 5.7%
John Andrew Cowan (12).......................... 1,260,126 15.0%
Roger Geoffrey Barrs (12)....................... 1,260,126 15.0%
Purse Holding Limited (13)...................... 5,000,000 43.8%
All directors and executive officers as a group
(8 persons) (14)............................ 1,248,847 13.7%
</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 exercisable within 60 days of November 20, 2002 have been
exercised. Options that are not exercisable within 60 days of November 20, 2002
have been excluded. Unless otherwise, noted, the Company 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., 5847 San Felipe, Suite 1100, Houston, Texas 77057.
(3) Includes (i) 370,000 shares owned by Ms. Pierpont's spouse, Nicholas
Marriner, the former President and Chief Executive Officer of the Company and
Chairman of the Board of Directors, (ii) 8,400 shares
-15-
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 227,417 shares that may be acquired upon exercise of stock
options.
(5) Includes 197,667 shares that may be acquired upon exercise of stock options.
(6) Represents (i) 11,130 shares owned by Mr. Curlet's spouse, (ii) 1,450 shares
owned by Mr. Curlet's son, and (iii) 52,291 shares that may be acquired upon the
exercise of stock options.
(7) Includes 52,291 shares that may be acquired upon exercise of stock options.
(8) Includes 33,333 shares that may be acquired upon exercise of stock options.
(9) Mr. Mitchell is a former Director and executive officer.
(10) 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 stockholder is: Victory
House, 7th Floor, Prospect Hill, Douglas, Isle of Man, British Isle, IM1 1EQ.
(11) Information with respect to the ownership of this stockholder was obtained
from Schedule 13G filed February 2, 2001 with the Securities and Exchange
Commission. The address of this stockholder is: 1299 Ocean Avenue, Eleventh
Floor, Santa Monica, CA 90401.
(12) Represents (i) 631,092 shares held by such stockholder as a co-trustee of
the Worcester Discretionary Trust and (ii) 629,034 shares held by such
stockholder as co-trustee of the Woodbourne Discretionary Trust. Such
stockholder disclaims beneficial ownership of the shares held by the trusts. The
address of this stockholder is: Victory House, 7th Floor, Prospect Hill,
Douglas, Isle of Man, British Isle, IM1 1EQ.
(13) Includes 3,000,000 shares that may be acquired by Purse Holding Limited
("Purse") upon exercise of a warrant, exercisable until October 16, 2003. 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 the 5,000,000 shares of 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
stockholders was obtained from Schedule 13D filed March 16, 2001 with the
Securities and Exchange Commission.
(14) Includes an aggregate of 662,690 shares that may be exercised upon exercise
of stock options.
-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, 2001, all Section 16(a) filing
requirements applicable to DACG's officers, directors and greater than
ten-percent beneficial owners were complied with except directors Pierpont,
Fritze, Fairchild and Prasad and Malcolm Wright, an executive officer, who were
each late in filing a Form 5 to report the receipt of stock options.
-17-
INDEPENDENT AUDITORS
The board of directors has selected BDO Seidman, LLP, independent
public accountants, to audit the consolidated financial statements of DACG for
the fiscal year ending December 31, 2002. BDO Seidman, 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 2003 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 2003 annual meeting of shareholders. The 2003 annual
meeting of shareholders is presently scheduled to take place in November 2003.
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 2003 annual meeting of
shareholders, and DACG receives notice of the proposal a reasonable time before
it mails the proxy materials for its 2003 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 on Form 10-K as filed with the SEC for
the year ended December 31, 2001 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-
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE.
ANNUAL MEETING OF SHAREHOLDERS
DA CONSULTING GROUP, INC.
NOVEMBER 20, 2002
Please Detach and Mail in the Envelope Provided
[X] Please mark your
votes as in this
example.
1. ELECTION OF DIRECTORS.
VOTE FOR all (except as marked to the contrary below)
[ ]
WITHHOLD AUTHORITY to vote for all
[ ]
NOMINEES: Nigel W. E. Curlet
Gunther E. A. Frize
each as a director of DACG to serve for a three-year term expiring at the
annual meeting to be held in 2005.
THE 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.
Signature of Shareholder __________________________________
Signature of Shareholder __________________________________
Date ___________, 2002
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 duty authorized officer or officers
and affix the corporate seal. Where stock is issued in the name of two or more
persons, all such person should sign.
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 November 20, 2002, 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)