<PAGE> 1
SCHEDULE 14A
(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 (AMENDMENT NO. )
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
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
THOMAS 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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
<PAGE> 2
THOMAS GROUP, INC.
5215 N. O'CONNOR BOULEVARD
SUITE 2500
IRVING, TEXAS 75039-3714
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1997
To the Holders of Common Stock of
THOMAS GROUP, INC.:
Notice is hereby given that the 1997 Annual Meeting of Stockholders of
Thomas Group, Inc., a Delaware corporation (the "Company"), will be held at the
executive offices of the Company, 5215 N. O'Connor Boulevard, Suite 2500,
Irving, Texas 75039, on Thursday, May 15, 1997 at 9:00 A.M., Dallas, Texas time,
for the following purposes:
(1) To elect eight persons to serve as directors until the Company's
1998 Annual Meeting of Stockholders or until their successors are duly
elected and qualified; and
(2) To consider and vote upon an amendment to the Amended and Restated
1988 Stock Option Plan, to increase by 375,000 shares, from 800,000 to
1,175,000, the number of shares of the Company's Common Stock currently
available for issuance under the Amended and Restated 1988 Stock Option
Plan; and
(3) To consider and vote upon adoption of the 1997 Stock Option Plan,
pursuant to which 125,000 shares of the Company's Common Stock may be made
available for issuance; and
(4) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed March 20, 1997, at the close of business,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting and any adjournment or postponement thereof. Only
holders of record of the Company's Common Stock on that date are entitled to
vote on matters coming before the meeting and any adjournment or postponement
thereof. A complete list of stockholders entitled to vote at the meeting will be
maintained in the Company's offices at 5215 N. O'Connor Boulevard, Suite 2500,
Irving, Texas 75039-3714, for 10 days prior to the meeting.
Please advise the Company's transfer agent, Harris Trust and Savings Bank,
5050 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270, of any change in
your address.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES. IF YOU
RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT
NAMES OR AT DIFFERENT ADDRESSES, EACH SUCH PROXY CARD SHOULD BE SIGNED AND
RETURNED TO ENSURE THAT ALL OF YOUR SHARES WILL BE VOTED. THE PROXY CARD SHOULD
BE SIGNED BY ALL REGISTERED HOLDERS EXACTLY AS THE SHARES ARE REGISTERED. ANY
PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME PRIOR TO ITS
EXERCISE AND, IF PRESENT AT THE MEETING, MAY WITHDRAW IT AND VOTE IN PERSON.
By Order of the Board of Directors,
/s/ ALEXANDER W. YOUNG
ALEXANDER W. YOUNG
President and Chief Operating Officer
Irving, Texas
April 11, 1997
<PAGE> 3
THOMAS GROUP, INC.
5215 N. O'CONNOR BOULEVARD
SUITE 2500
IRVING, TEXAS 75039-3714
---------------------
PROXY STATEMENT
---------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1997
The accompanying proxy, mailed together with this Proxy Statement to
stockholders on or about April 11, 1997, is solicited by Thomas Group, Inc. (the
"Company") in connection with the Annual Meeting of Stockholders to be held on
May 15, 1997 (the "Annual Meeting").
As stated in the Notice to which this Proxy Statement is attached, matters
to be acted upon at the Annual Meeting include (1) the election to the Board of
Directors of eight directors to serve as directors until the Company's 1998
Annual Meeting of Stockholders or until their successors are duly elected and
qualified, (2) an amendment to the Amended and Restated 1988 Stock Option Plan
(the "1988 Plan"), to increase by 375,000 shares, from 800,000 to 1,175,000, the
number of shares of the Company's Common Stock currently available for issuance
under the 1988 Plan, (3) adoption of the 1997 Stock Option Plan, pursuant to
which 125,000 shares of the Company's Common Stock may be made available for
issuance (the "1997 Plan") and (4) the transaction of such other business as may
properly come before the Annual Meeting or any adjournments or postponements
thereof.
All holders of record of shares of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), at the close of business on March 20, 1997
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
On the Record Date, the Company had outstanding 6,191,782 shares of Common
Stock. Each share of Common Stock is entitled to one vote. The presence, in
person or by proxy, of holders of a majority of the outstanding shares of Common
Stock entitled to vote as of the Record Date is necessary to constitute a quorum
at the Annual Meeting. A plurality of the votes of the shares present in person
or represented by proxy at the Annual Meeting, provided a quorum is present, is
required for the election of directors. All other action proposed herein may be
taken upon the affirmative vote of holders of a majority of the shares of Common
Stock represented at the Annual Meeting, provided a quorum is present in person
or by proxy.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all other proposals and
will be counted as present for purposes of the item on which the abstention is
noted. Abstentions on the proposals to amend the 1988 Plan, or to adopt the 1997
Plan, will have the effect of a negative vote because those proposals require
the affirmative vote of holders of a majority of shares present in person or by
proxy and entitled to vote. Brokers who hold shares in street name for customers
and do not receive voting instructions from such customers are entitled to vote
on the election of directors. Under applicable Delaware law, a broker non-vote
resulting from the failure to deliver voting instructions to a broker will have
(i) the effect of a negative vote on the proposals to amend the 1988 Plan and to
adopt the 1997 Plan and (ii) no effect on the election of directors.
Any stockholder has the unconditional right to revoke his proxy at any time
before it is voted. Any proxy given may be revoked either by a written notice
duly signed and delivered to the Secretary of the Company prior to the exercise
of the proxy, by execution of a subsequent proxy or by voting in person at the
Annual Meeting (although attending the Annual Meeting without executing a ballot
or executing a subsequent proxy will not constitute revocation of a proxy).
Where a stockholder's duly executed proxy specifies a choice with respect to a
voting matter, the shares will be voted accordingly. If no such specification is
made, the shares will
<PAGE> 4
be voted (i) FOR the nominees for director identified below, (ii) FOR amendment
of the 1988 Plan, and (iii) FOR adoption of the 1997 Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 28, 1997, by (i) each
director, nominee for director and named executive officer of the Company, (ii)
all officers and directors of the Company as a group, and (iii) all persons who
are known by the Company to be beneficial owners of 5% or more of the Company's
outstanding Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED(1) PERCENT
------------------------------------ --------------- -------
<S> <C> <C>
Philip R. Thomas(2)..................... 2,332,759(3) 39.6%
Alexander W. Young(2)................... 134,438(4) 2.3%
Leland L. Grubb, Jr.(2)................. 30,134(5) *
Thomas J. Popek(2)...................... 40,952(6) *
Robert W. Stephens(2)................... 14,874(7) *
Donald J. Almquist(2)................... 10,432(8) *
Gerald K. Beckmann(2)................... 37,643(9) *
J. Fred Bucy(2)......................... 24,836 *
Hollis L. Caswell(10)................... 24,576 *
John T. Chain, Jr.(2)................... 17,482(8) *
James E. Dykes(2)....................... 8,482(8) *
All officers and directors as a group 2,723,580(11) 46.2%
(14 persons)..........................
Wanger Asset Management, L.P............ 449,000 7.6%
227 West Monroe Street, Suite 30000
Chicago, Illinois 60606
FMR Corp................................ 362,700 6.2%
82 Devonshire Street
Boston, Massachusetts 02109
Capital Research and Management 388,500 6.6%
Company...............................
333 South Hope Street
Los Angeles, California 90071
</TABLE>
- ---------------
* Less than 1%
(1) Except as otherwise indicated, the persons named in the table possess sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. Includes shares of Common Stock held
by spouses and minor children of such persons and corporations in which
such persons hold a controlling interest. The amount shown also includes
shares of Class B Common Stock, par value $.01 per share (the "Class B
Common Stock"), of the Company. Holders of Class B Common Stock have rights
identical to holders of Common Stock, except that holders of Class B Common
Stock have no voting rights, other than as required by Delaware law. There
are no matters to be considered at the Annual Meeting that holders of Class
B Common Stock would be entitled to vote on under Delaware law. Class B
Common Stock is owned by the persons set forth above as follows: Mr.
Thomas, 140,460 shares; Mr. Bucy, 9,000 shares; and all officers and
directors as a group, 149,460 shares. The amounts shown in the table
include shares of Common Stock and Class B Common Stock issuable upon
exercise of outstanding options exercisable within 60 days of February 28,
1997.
(2) The address of the named individuals is 5215 N. O'Connor Boulevard, Suite
2500, Irving, Texas 75039-3714.
(3) Includes 189,327 shares of Common Stock which may be issued within 60 days
of February 28, 1997 upon exercise of outstanding options.
2
<PAGE> 5
(4) Includes 73,829 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of February 28, 1997.
(5) Includes 25,134 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of February 28, 1997.
(6) Includes 1,092 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1997.
(7) Includes 8,460 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1997.
(8) Includes 5,250 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1997.
(9) Includes 35,713 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of February 28, 1997.
(10) Includes 1,000 shares owned by Mr. Caswell's spouse. Mr. Caswell disclaims
beneficial ownership of such shares.
(11) The amount shown includes a total of 356,762 shares of Common Stock
issuable upon exercise of outstanding options exercisable within 60 days of
February 28, 1997.
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of directors that shall
constitute the entire Board of Directors shall not be less than one and shall be
fixed from time to time exclusively by the Board of Directors. The Board of
Directors has set the number of directors at nine, and accordingly there is
currently a vacancy. The eight nominees for director listed below will stand for
election at this Annual Meeting for a one-year term of office expiring at the
1998 Annual Meeting of Stockholders or until their successors are duly elected
and qualified.
The following table sets forth certain information as to the nominees for
directors of the Company:
<TABLE>
<CAPTION>
NAME AND AGE POSITIONS AND OFFICES WITH THE COMPANY DIRECTOR SINCE
------------ -------------------------------------- --------------
<S> <C> <C>
Philip R. Thomas, 62............................................. Chairman of the Board and 1978
Chief Executive Officer
Alexander W. Young, 53........................................... Director, President and Chief
Operating 1991
Officer
Donald J. Almquist, 63........................................... Director 1995
Gerald K. Beckmann, 54........................................... Director 1991
J. Fred Bucy, 68................................................. Director 1991
Hollis L. Caswell, 65............................................ Director 1991
John T. Chain, Jr., 62........................................... Director 1995
James E. Dykes, 59............................................... Director 1995
</TABLE>
While it is not anticipated that any of the nominees will be unable to
serve, if any nominee should decline or become unable to serve as a director for
any reason, votes will be cast instead for a substitute nominee designated by
the Board of Directors or, if none is so designated, will be cast according to
the judgment of the person or persons voting the proxy.
3
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers of the Company serve at the will of the Board of
Directors.
PHILIP R. THOMAS founded the Company in 1978 after serving as a Vice
President of one of RCA's semiconductor business units, as General Manager of
Metal Oxide Semiconductor operations for Fairchild Semiconductor, as a Vice
President and General Manager of the microelectronics division of General
Instrument Corp., an electronics manufacturer, and in operational and strategic
management positions with Texas Instruments Incorporated. He has served as a
director and as Chief Executive Officer of the Company since its inception.
ALEXANDER W. YOUNG became President and Chief Operating Officer of the
Company in January 1991 and was elected as a director of the Company in October
1991. Mr. Young served as the Company's Vice President for Training and Product
Development from 1989 to 1991. Mr. Young served as Executive Vice President,
General Manager, and a director of Zymos Company, a designer and manufacturer of
semiconductors, from August 1986 to October 1989. Mr. Young serves as a director
of DII Group, a publicly-held electronics manufacturing company.
LELAND L. GRUBB, JR., 51, has been associated with the Company since April
1995 as Vice President, Chief Financial Officer and Treasurer. Mr. Grubb is also
currently serving as president of the Automotive Business Unit. Prior to joining
the Company, Mr. Grubb served as Chief Financial Officer of Detroit Diesel
Corporation, a manufacturer of diesel engines and related parts from January
1988 to January 1995, and held senior financial positions with General Motors
Corporation from July 1968 to December 1987.
HERBERT D. LOCKE, 59, became associated with the Company in 1994 and
currently serves as Vice President of the company and President of the
Asia/Pacific Business Unit. From 1993 to 1994, Mr. Locke served as Vice
President, Operations at Farr Company, a California-based company engaged in the
air and gas filtration industry. Prior to that time, Mr. Locke served in various
managerial capacities for Texas Instruments, most recently in the Asia Pacific
region.
ROBERT W. STEPHENS, 65, became associated with the Company in 1993 and was
named Vice President in May 1995. Mr. Stephens is also currently serving as
President of the Manufacturing Business Unit. From 1989 to 1992, Mr. Stephens
was President and Chief Executive Officer of Zodiac Technologies, a company
engaged in the personal computer business. From 1982 to 1989, Mr. Stephens
served in a variety of capacities, most recently as Executive Vice President,
for DSC Communications Corporation, a manufacturer of telephone switching
equipment.
J. THOMAS WILLIAMS, 50, became associated with the Company in 1992 and
currently serves as Vice President in charge of the European business unit.
Prior to joining the Company, Mr. Williams served as the Industrial Facilities
Policy Director for the United States Navy, and as Chief Financial Officer for
the Long Beach Naval Shipyards.
DONALD J. ALMQUIST was elected director of the Company in May 1995. Mr.
Almquist retired in January 1993 as Chairman, President and Chief Executive
Officer of Delco Electronics Corporation. Mr. Almquist had also served as
executive vice president of GM Hughes Electronics and as a director of Hughes
Aircraft Company. Mr. Almquist currently serves on the Board of Directors and
Executive Committee of the Indiana Business Modernization and Technology
Corporation, and as a member of the National Board of Advisors and the Board of
Managers at Rose-Hulman Institute of Technology.
GERALD K. BECKMANN became associated with the Company in 1985 and was
elected a director of the Company in October 1991. From 1981 to 1984, Mr.
Beckmann was the Chief Executive Officer of Threshold Technology, a
publicly-held company and a developer of voice recognition systems. Mr. Beckmann
served from December 1992 through August 1993 as Co-Chairman of Protech, Inc., a
publicly-held manufacturer of electronic circuit board test equipment. Mr.
Beckmann currently serves as President, Chief Executive Officer and a director
of Integrated Security Systems, Inc., a publicly held developer of security
solutions for commercial applications.
4
<PAGE> 7
J. FRED BUCY was elected a director of the Company in October 1991. From
1985 to the present, Mr. Bucy has been involved in a variety of civic endeavors,
including service as Chairman of the Texas National Laboratory Research
Commission, the governmental agency of the State of Texas responsible for the
administration of the Texas funding of the Superconducting Super Collider
project. From 1953 to 1985, Mr. Bucy was employed by Texas Instruments
Incorporated, serving from 1984 through his retirement in 1985 as President,
Chief Executive Officer, and a director; from 1976 to 1984 as President, Chief
Operating Officer, and a director; and from 1974 to 1976 as Executive Vice
President, Chief Operating Officer, and a director. Mr. Bucy currently serves as
a director of Optical Data Systems, Inc., a manufacturer of heterogeneous
computer environments.
HOLLIS L. CASWELL was elected a director of the Company in October 1991.
Dr. Caswell is currently a director of HYPRES, Inc., a superconducting
electronics company. He is also a director of Advanced Energy Industries, Inc.,
a power supply provider to the electronics industry. From 1984 to 1990, Dr.
Caswell was a Senior Vice President at Unisys Corporation.
JOHN T. CHAIN, JR. was elected director of the Company in May 1995. Since
December 1996, Mr. Chain has served as President of Quarterdeck Equity Partners,
Inc., a company involved in the acquisition of small suppliers to the defense
and aerospace industry. Mr. Chain served from 1991 until early 1996 as Executive
Vice President for Burlington Northern Santa Fe. From 1989 to 1991, Mr. Chain
was Commander in Chief of the U.S. Strategic Air Command. Mr. Chain currently
serves on the board of directors for the following companies: Kemper National,
Northrop Grumman Corporation, RJR Nabisco Holdings, Inc. and Nabisco Holdings,
Inc.
JAMES E. DYKES was elected director of the Company in May 1995. Mr. Dykes
has served since August 1994 as President and Chief Operating Officer and a
director of Intellon Corporation, a home-automation electronics company. From
1989 to 1993, Mr. Dykes was President and Chief Executive Officer of Signetics
Company, an integrated circuits company. Mr. Dykes also currently serves on the
board of directors for the following companies: Cree Research Inc., a silicon
carbide electronics company, and Exar Corporation, an integrated circuits
company.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has established three committees, a Compensation and
Stock Option Committee, an Audit and Finance Committee and a Nominating
Committee.
The Compensation and Stock Option Committee, currently composed of Messrs.
Caswell, Almquist and Dykes, met four times during the fiscal year ended
December 31, 1996. The Compensation and Stock Option Committee determines the
amount and form of compensation and benefits payable to all officers and
employees, reviews and approves stock option grants to directors, officers and
employees, and advises and consults with management regarding the benefit plans
and compensation policies and practices of the Company.
The Audit and Finance Committee, currently composed of Messrs. Bucy,
Caswell and Chain, met four times during the fiscal year ended December 31,
1996. This committee monitors and makes recommendations to the Board of
Directors on matters pertaining to the financial management of the Company,
including monitoring the adequacy and effectiveness of the internal and external
audit functions, control systems, financial accounting and reporting, and
adherence to applicable legal, ethical and regulatory requirements. Prior to the
mailing of this Proxy Statement to the stockholders of the Company, the
committee met with the Company's independent auditors to review the plan and
scope of the 1996 audit and the significant accounting policies and internal
controls.
The Nominating Committee, currently composed of Messrs. Chain, Almquist,
Bucy, and Dykes, met one time during the fiscal year ended December 31, 1996.
This committee makes recommendations to the Board of Directors regarding
potential nominees to the Board. See "Stockholder Proposals."
5
<PAGE> 8
The Board of Directors held eight meetings during the fiscal year ended
December 31, 1996. All of the directors attended at least 75% of the meetings of
the Board of Directors and its committees on which they served.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid or accrued by
the Company for services rendered during each of the three years ended December
31, 1996, to (i) the Company's Chief Executive Officer and (ii) the four other
most highly compensated executive officers (collectively, the "named executive
officers") whose total cash compensation for the year ended December 31, 1996
exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------------- ---- -------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Philip R. Thomas, 1996 -- -- $56,000(1) -- $58,354(2)
Chairman of the Board and 1995 -- $1,949,000 56,000 -- 293,930
Chief Executive Officer 1994 -- -- 56,000 -- 352,000
Alexander W. Young, 1996 $385,000 -- 7,200(1) 4,750(3)
President and 1995 359,000 197,000 7,000 -- 4,620
Chief Operating Officer 1994 313,000 19,000 7,000 86,000(4) --
Leland L. Grubb, 1996 300,000 -- 7,200(1) --(3) 950
Vice President and Chief 1995 140,000 11,000 4,800 -- --
Financial Officer 1994 -- -- -- -- --
Thomas J. Popek, 1996 267,000 -- 7,200(1) -- 4,750(3)
Vice President 1995 252,000 17,000 7,000 2,500 4,620
1994 240,000 15,000 7,000 3,500(5) --
Robert W. Stephens, 1996 289,000 -- 7,200(1) -- 2,375(3)
Vice President 1995 205,000 19,000 4,800 -- --
1994 151,000 17,000 -- -- --
</TABLE>
- ---------------
(1) Represents car allowances for the benefit of the named executive officers.
(2) Represents $51,226 in real estate and other rentals and the Company's
contribution of $7,125 to such officer's account under the Company's 401(k)
Plan. See "Certain Transactions."
(3) Represents the Company's contribution to such officer's account under the
Company's 401(k) Plan.
(4) Includes 85,000 options whose exercise price was adjusted.
(5) Includes 2,500 options whose exercise price was adjusted.
6
<PAGE> 9
STOCK OPTION GRANTS
The following table provides information concerning the grant of stock
options during the year ended December 31, 1996 to the named executive officers.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
-------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS MARKET PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO PRICE TERM(1)
OPTIONS EMPLOYEES IN EXERCISE ON DATE EXPIRATION -----------------------------------
NAME GRANTED(2) FISCAL YEAR PRICE OF GRANT DATE 0% 5% 10%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip R. Thomas............ 2,200 .34 $ 8.00 13.50 2/1/06 12,100 30,800 59,400
------------------------------------------------------------------------------------------------------------------
Alexander W. Young.......... 164 .03 14.25 14.25 3/22/06 -- 1,500 3,700
5,000 .76 7.94 7.94 12/18/06 -- 25,000 63,000
------------------------------------------------------------------------------------------------------------------
Leland L. Grubb............. 5,000 .76 7.94 7.94 12/18/06 -- 25,000 63,000
------------------------------------------------------------------------------------------------------------------
Thomas J. Popek............. 15,000 2.28 7.94 7.94 12/18/06 -- 74,900 189,800
1,000 .15 8.00 13.50 2/1/06 5,500 14,000 27,000
250 .04 0.00 19.125 6/3/06 4,800 7,800 12,400
------------------------------------------------------------------------------------------------------------------
Robert W. Stephens.......... 16,000 2.44 7.94 7.94 12/18/06 -- 79,900 202,400
1,000 .15 8.00 8.00 2/1/06 5,500 14,000 27,000
------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Potential realizable value is the amount that would be realized upon
exercise by the named executive officer of the options immediately prior to
the expiration of their respective terms, assuming the specified compound
annual rates of appreciation on Common Stock over the respective terms of
the options. These amounts represent assumed rates of appreciation only.
Actual gains, if any, on stock option exercises depend on the future
performance of the Common Stock and overall market conditions. There can be
no assurances that the potential values reflected in this table will be
achieved.
(2) These options generally vest with respect to 20% of the shares issuable
thereunder on the date of grant and 20% annually thereafter, with
incremental monthly vesting. Vesting of options granted December 18, 1996 is
tied to earnings per share targets set by the Compensation and Stock Option
Committee.
OPTION EXERCISES AND HOLDINGS
The following table provides information related to the number of shares
received upon exercise of options, the aggregate dollar value realized upon
exercise and the number and value of options held by the named executive
officers of the Company at December 31, 1996.
<TABLE>
<CAPTION>
UNEXERCISED OPTIONS AT DECEMBER 31, 1996
--------------------------------------------------------
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXPIRED
ACQUIRED VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ----------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Philip R. Thomas............... 175,096 $209,000 189,181/ 1,393 $ 500/$ 900
Alexander W. Young............. 31,500 $200,800 68,280/21,984 $128,100/$35,500
Leland L. Grubb................ -- -- 21,467/37,533 -- /$ 3,400
Thomas J. Popek................ 5,887 $ 45,400 676/17,667 $ 1,200/$13,400
Robert W. Stephens............. -- -- 7,574/22,181 $ 4,500/$12,700
</TABLE>
- ---------------
(1) For purposes of this table, the value of the Common Stock is $8.625 per
share, the last sale price of the Common Stock on December 31, 1996 as
reported on the NASDAQ National Market System, and the value of the Class B
Common Stock is $6.04 (70% of $8.625).
7
<PAGE> 10
EMPLOYMENT AGREEMENTS OF CERTAIN EXECUTIVE OFFICERS
Mr. Thomas and Mr. Young are employed by the Company under employment
agreements which became effective in August 1993 and Mr. Grubb is employed by
the Company under an employment agreement which became effective in April 1995.
Mr. Young and Mr. Grubb's employment agreements provide for base
compensation in the initial amount of $300,000, with base compensation to be
adjusted at least annually by the Compensation and Stock Option Committee of the
Board. The employment agreements provide for additional compensation, calculated
according to a formula based on the Company's profits and growth in profits,
payable in cash up to a specified amount and in stock options thereafter. The
stock options granted under Mr. Young and Mr. Grubb's employment agreements will
have exercise prices equal to the market price per share of the Common Stock on
the date of grant, will be fully vested, and will expire 10 years from the date
of grant. All stock options granted pursuant to Mr. Young and Mr. Grubb's
employment agreements will be granted under the 1992 Plan and will be subject to
the provisions of the 1992 Plan.
The expiration of Mr. Thomas and Mr. Young's employment agreements has been
extended by the Board of Directors, from August 31, 1998 until December 31,
2000. Mr. Grubb's employment agreement has a five-year term and may be extended
for five additional years by mutual agreement.
The employment agreements may be terminated by the employee upon one year's
notice to the Company. The employment agreements may be terminated by the
Company with or without cause, by the employee with or without "Good Reason",
upon the disability of the employee, or upon the occurrence of a "Change in
Control" of the Company. A "Change in Control" is defined as the occurrence of
any of the following events: (i) a third party acquires securities representing
40% or more of the Common Stock or the combined voting power of the Company's
outstanding securities, (ii) the number of directors of the Company as of the
date of the employment agreements plus the number of directors approved by
two-thirds of those initial directors (or their approved successors) cease to
constitute, in the aggregate, a majority of the members of the Board, (iii)
certain reorganizations, consolidations or mergers involving the Company, or
(iv) a dissolution or liquidation of the Company in certain circumstances. "Good
Reason" is defined to include the failure of the Board to nominate the employee
to stand for election as a director of the Company or the significant diminution
of the employee's responsibilities. In the event of a termination of the
employee by the Company without cause, by the employee with "Good Reason," upon
the disability of the employee, or upon a Change in Control, any of the
employee's stock options that are not fully vested will become fully vested and
immediately exercisable and the employee is entitled to a lump sum cash payment
based on the average compensation paid to the employee during the previous four
years. In the event of termination by the Company with cause or by the employee
without Good Reason, the employee is entitled (i) to reimbursement for expenses
incurred prior to termination, (ii) to the payment of bonuses or incentive
compensation and (iii) to exercise vested options for a period of 90 days. If
the employment of Mr. Thomas, Mr. Young or Mr. Grubb had been terminated without
cause as of January 1, 1997, such executives would have been entitled to receive
severance payments of approximately $1,675,000, $668,000, and $377,000,
respectively. The employment agreements also contain noncompetition,
non-solicitation and confidentiality covenants.
Amendments to the employment agreements are effective only if they are in
writing and signed by both the employee and the Company. In order for Mr. Young
and Mr. Grubb's employment agreements to comply with exemptions contained in the
rules promulgated under Section 16(b) of the Securities Exchange Act of 1934,
the formula provisions of Mr. Young and Mr. Grubb's employment agreements may
not be amended more than once every six months, other than to conform with
changes in the Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules thereunder. Further, the Company would seek stockholder
approval of any amendment to Mr. Young and Mr. Grubb's employment agreements if
the amendment would (i) materially increase the benefits accruing to Mr. Young
or Mr. Grubb under their respective employment agreements or (ii) materially
increase the number of securities which may be issued under the employment
agreements.
8
<PAGE> 11
DIRECTORS' COMPENSATION
In 1996 each non-employee director earned fees at an annual rate of
$50,000, one-half of which was paid in cash and the balance in shares of Common
Stock of the Company. During 1996 one director received a business advisory fee
in the amount of $75,000 for services rendered during 1996. In addition, all
directors were reimbursed for their out-of-pocket expenses incurred in
connection with their attendance at Board and committee meetings. Directors who
are employees of the Company did not receive any compensation in their capacity
as directors.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Final decisions regarding executive compensation are made by the Board of
Directors of the Company. Recommendations to the Board regarding executive
compensation are made by the Compensation and Stock Option Committee (the
"Compensation Committee"). The Compensation Committee consists of Board members
who are "disinterested persons" as that term is defined in the Securities
Exchange Act of 1934, and who are "outside directors" under the Internal Revenue
Code.
The Company's executive compensation policy is based on
pay-for-performance. For the Company's executive officers and other senior
management of the Company, the Company has established fixed and incentive
components of compensation, with the latter component comprised of options whose
vesting is tied to earnings per share targets. For two other officers of the
Company, Mr. Young and Mr. Grubb, the Company has also established fixed and
incentive components of compensation, where the incentive component is tied
specifically to Company growth and performance. Mr. Thomas, the Chief Executive
Officer (the "CEO"), has an agreement with the Company which establishes solely
an incentive component of compensation, where the incentive component is tied
specifically to Company growth and performance.
For Mr. Young and Mr. Grubb, incentive compensation is determined by
multiplying the Company's revenues by a sharing ratio and then by a factor
defined as the entitled percentage. The entitled percentage was initially
calculated by multiplying fixed compensation by 55% and dividing by $1,000,000
and may be adjusted at the Compensation Committee's discretion. The sharing
ratio takes into account two factors: the growth rate of income before tax and
incentive compensation ("IBTIC"), and IBTIC as a percent of revenue. The sharing
ratio method was chosen because the Compensation Committee desired to balance
the goals of maximizing profits with the growth of the Company's business.
For Mr. Young and Mr. Grubb, the sharing ratio matrix adopted by the Board
is as follows:
<TABLE>
<CAPTION>
SHARING RATIO (%)
IBTIC AS % OF REVENUE IBTIC GROWTH RATE
- --------------------- --------------------------------------------------------------------
5% 5-9.99% 10-14.99% 15-24.99% 25%
--- ------- --------- --------- ----
<C> <C> <C> <C> <C> <C>
0 - 8.99% 0.0 0.0 0.0 0.2 0.3
9.00 - 14.99% 0.3 0.4 0.5 0.6 0.7
15.00 - 19.25% 0.5 0.6 0.8 1.0 1.2
Over 19.25% 0.8 1.0 1.3 1.6 1.8
</TABLE>
By way of example, if for a given year revenues are $60 million, IBTIC is
$11.6 million (19.3% of revenue) and IBTIC for the prior year was $8.9 million,
then the IBTIC growth rate is 30.3% and the sharing ratio would be 1.8% of
revenues.
9
<PAGE> 12
If an officer's entitled percentage was 0.0825, incentive compensation
would be calculated as $60 million (revenue) X .018 (sharing ratio X .0825
(entitled percentage), or $89,100. Officer cash incentive compensation is
limited to 55% of fixed compensation. If the formula generates an excess over
this limit, stock options are awarded with the number of shares determined by
dividing the excess by the market price of the Company's Common Stock on date of
grant.
For the CEO, the sharing ratio matrix adopted by the Board is as follows:
<TABLE>
<CAPTION>
SHARING RATIO (%)
IBTIC GROWTH RATE
------------------------------------------------------------------------
IBTIC AS % OF REVENUE STANDARD INCENTIVE FOUNDER'S INCENTIVE
- --------------------- ------------------------------------------------- --------------------
Less
than
5% 5-9.99% 10-14.99% 15-24.99% 25-29.99% 30-39.99% 40%+
---- ------- --------- --------- --------- ----------- ------
<C> <C> <C> <C> <C> <C> <C> <C>
4.0 - 8.99% 0.0 0.0 0.0 0.2 0.3 0.7 1.0
9.00 - 14.99% 0.3 0.4 0.5 0.6 0.7 1.3 1.6
15.00 - 19.25% 0.5 0.6 0.8 1.0 1.2 1.9 2.2
Over 19.25% 0.8 1.0 1.3 1.6 1.8 2.5 2.9
</TABLE>
The CEO's compensation has no fixed base component, and IBTIC as a percent
of revenue has a floor of 4% in the matrix; consequently, the CEO's compensation
is entirely performance-based. Assuming the example above, with annual revenues
of $60 million, the sharing ratio would be 2.5% and incentive compensation for
the CEO would be $1,500,000. In 1996, Company growth and performance did not
exceed the performance thresholds set in Mr. Thomas' employment agreement;
consequently, Mr. Thomas earned no incentive compensation in 1996. See "Certain
Transactions."
For the duration of his employment agreement, the CEO's entire compensation
is performance-based, as determined by the matrix. Consequently, there is
greater potential variability in the CEO's compensation from year to year than
would be the case were (i) a portion guaranteed by a fixed salary or (ii) the
performance goals amended annually. The Compensation Committee is of the view
that by not amending the performance goals every year, the CEO will have a
constant, long-term focus on Company growth and profitability.
By providing direct links between pay and performance, the Compensation
Committee is confident that the incentive compensation program for the CEO and
other officers of the Company aligns management's interests with the long-term
interests of the stockholders.
The preceding report was issued by the Compensation and Stock Option
Committee, comprised of:
Donald J. Almquist
Hollis L. Caswell
James E. Dykes
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions with respect to the executive officers of the
Company are made by the Compensation Committee of the Board, which is comprised
of Mr. Almquist, Mr. Caswell and Mr. Dykes.
10
<PAGE> 13
COMPARISON OF TOTAL SHAREHOLDER RETURN
The following performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the 1933 Act or the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The following graph sets forth the Company's total shareholder return as
compared to the NASDAQ Stock Market (US) Index and an index of companies having
a market capitalization of $50 million to $75 million, over the period beginning
August 19, 1993 and ending December 31, 1996. The total shareholder return
assumes $100 invested at the beginning of the period in the Company's Common
Stock, the NASDAQ Stock Market (US) Index and the index of companies having a
market capitalization of $50 million to $75 million. The Company has chosen an
index of companies having a market capitalization of $50 million to $75 million
for the following reasons: this is the historical market capitalization range
for the Company's Common Stock, the stock price performance for companies in
that range tends to react to market forces in a similar fashion, and the Company
has no true public company peer group.
TOTAL SHAREHOLDER RETURN FOR THOMAS GROUP, INC.,
NASDAQ STOCK MARKET (US) INDEX
AND
COMPANIES WITH MARKET CAPITALIZATION OF
$50 MILLION TO $75 MILLION
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG THOMAS GROUP, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD THOMAS NASDAQ PEER GROUP
(FISCAL YEAR COVERED) GROUP, INC. MARKET INDEX INDEX
<S> <C> <C> <C>
8/19/93 100.00 100.00 100.00
12/31/93 129.63 101.66 106.44
12/31/94 46.30 106.74 89.37
12/31/95 100.00 138.45 97.47
12/31/96 66.67 172.04 95.05
</TABLE>
ASSUMES $100 INVESTED ON AUGUST 19, 1993
ASSUMED DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1996
11
<PAGE> 14
CERTAIN TRANSACTIONS
During 1996 the Company made advances to Mr. Thomas premised upon
anticipated revenues and net income for the year. Such revenues and net income
did not exceed the thresholds set in Mr. Thomas' employment agreement;
consequently, Mr. Thomas earned no incentive compensation in 1996 and has
executed a promissory note payable to the Company in the amount of $1,500,000 to
repay such advances to the Company. The note is due September 25, 1997 and
carries an interest rate of prime plus 1/4%.
The Company has entered into a 25-year lease agreement with Mr. Thomas for
60 acres of land on which the CEO Center is situated. Payments under such lease
totaled $6,000 during 1996. The Company has a separate agreement to lease guest
accommodations situated on Mr. Thomas' personal property adjacent to the CEO
Center. This lease has been prepaid in its entirety.
Through January 1, 1997 the Company employed two sales executives whose
focus is acquiring new business through relationships in the investment banking
community. These executives have an ownership interest in Celerity Partners, a
limited partnership (the "Partnership") which invests in companies whose
competitiveness may be significantly improved. The general partner of the
Partnership is a limited liability company, in which Mr. Thomas, Mr. Beckmann,
and Mr. Jim Dykes (Company directors) own 40%, 15% and 1% equity interests,
respectively. Mr. Beckmann also serves on the board of directors of the general
partner. The Company's board of directors has precluded Mr. Thomas from
negotiating or approving contracts with any potential client in which the
Partnership holds or is negotiating an ownership interest. The agreements
between the Company and its clients (in which the Partnership has an interest)
are on terms no less favorable to the Company than it obtains for similar
services to its unrelated clients.
PROPOSAL TO AMEND
THE AMENDED AND RESTATED 1988 STOCK OPTION PLAN
On April 3, 1997 the Board of Directors adopted, subject to stockholder
approval, an amendment to the 1988 Plan.
PARTICIPANTS
At December 31, 1996, the Company had 349 employees eligible to participate
in the 1988 Plan.
SUMMARY OF 1988 STOCK OPTION PLAN
The 1988 Plan is intended to provide a means of attracting and retaining
certain key employees of the Company, to encourage such persons to exert their
best efforts on behalf of the Company and to identify their interests more
closely with those of the stockholders. It is intended that these purposes will
be effected through the granting of options, which may be in the form of stock
options ("Incentive Stock Options") intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), or
stock options which are not intended to so qualify ("Non-Qualified Stock
Options").
Key employees of the Company, including employees who are officers (but not
directors), and any other person who the Stock Option Committee (the
"Committee") determines has a direct and significant effect on the financial
development of the Company through the performance of consulting or advisory
services for the Company, are eligible for selection as participants in the 1988
Plan. The Committee administers the 1988 Plan with respect to all participants
who are officers or who are holders of 10% or more of the Company's Common
Stock, but the Committee does not have the power to appoint its own members or
to terminate, modify or amend the 1988 Plan. The Board may administer the 1988
Plan with respect to all other persons or may delegate all or part of that duty
to the Committee. Members of the Committee serve on the Committee at the will of
the Board and may be removed from the Committee at the Board's discretion.
The Board has full power and authority to suspend or discontinue the 1988
Plan or revise or amend it. The 1988 Plan may be amended without the consent of
the stockholders unless (i) the aggregate number of shares of Common Stock that
may be issued under the 1988 Plan is materially increased, (ii) the benefits
accruing to participants are materially increased, (iii) the requirements
concerning eligibility for participation in the 1988 Plan are materially
modified, (iv) stockholder approval is required to maintain the special tax
treatment for Incentive Stock Options under the Internal Revenue Code or (v)
stockholder approval is
12
<PAGE> 15
required by any stock exchange or inter-dealer quotation system on which the
Common Stock is listed or quoted. No amendment, however, may adversely affect an
outstanding option without the consent of the optionee. The Committee may
modify, extend or renew outstanding options granted under the 1988 Plan;
provided, however, that such a modification shall not, without the consent of
the optionee, alter or impair any rights or obligations under any option
previously granted under the 1988 Plan.
Subject to the adjustment provisions below, 800,000 shares of Common Stock
and 600,000 shares of Class B Common Stock were originally available for
issuance under the 1988 Plan. Shares covered by options that terminate or expire
unexercised will remain available for future grants of options under the 1988
Plan. No awards may be granted after March 16, 2002.
The Committee may make appropriate adjustments in the number of shares of
Common Stock and Class B Common Stock covered by outstanding options, applicable
option prices and the maximum number of shares which may be issued pursuant to
the 1988 Plan to reflect any stock dividend, share division or combination,
recapitalization, merger, consolidation or reorganization of or by the Company.
In such case, the Committee shall prepare and mail to each participant a copy of
a notice which sets forth the event requiring adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the change
in price and the number of shares of Common Stock or Class B Common Stock
purchasable subject to each outstanding option after giving effect to the
adjustment.
The terms of an option agreement may provide that upon a Change in Control,
all outstanding options shall become fully vested and exercisable in full. A
"Change in Control" is defined as the occurrence of any of the following events:
(i) a third party acquires securities representing 50% or more of the voting
power of the Company's outstanding securities, (ii) the directors of the Company
as of the effective date of the 1988 Plan and directors approved by those
initial directors (or their approved successors) cease to constitute a majority
of the members of the Board, (iii) a public announcement is made by a third
party of a tender or exchange offer for 50% or more of the outstanding voting
securities of the Company and the Board approves or fails to oppose the tender
or exchange offer, (iv) a consolidation or merger in which the Company does not
survive, unless the voting securities of the Company outstanding immediately
prior to the consolidation or merger continue to represent a majority of the
voting power of the securities of the entity surviving the merger or
consolidation, or (v) a liquidation of the Company or sale of all or
substantially all of the Company's assets unless the liquidation or sale results
in the transfer of the Company's assets to a corporation owned by the
stockholders of the Company in substantially the same proportions as their stock
ownership in the Company. If a Change in Control involves (a) a merger or
consolidation of the Company in which (i) the Company is not the continuing or
surviving entity or (ii) the Company is the continuing or surviving entity and
all or a part of the outstanding shares of Common Stock are changed into or
exchanged for stock or other securities of any other entity or (b) the transfer
of all or substantially all of the assets of the Company (whether by sale,
merger, consolidation, liquidation or otherwise) to any person or entity and in
connection with such an event shares of stock, other securities, cash or
property shall be issuable in exchange for Common Stock, then in any such event
the holder of an option shall be entitled to purchase the number of shares of
stock, other securities, cash or property to which that number of shares that
such option would have purchased immediately prior to such event.
The 1988 Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended, and is not intended to be qualified
under Section 401(a) of the Internal Revenue Code. Each grant under the 1988
Plan will specify the number of shares of Common Stock to which it pertains and
an option price. With respect to Incentive Stock Options, the exercise price
shall be not less than the fair market value per share of the Common Stock on
the date of grant (110% of fair market value for employees owning more than 10%
of the outstanding Common Stock). An option must be exercised by delivery of
written notice of exercise to the Company and payment of the full option price
of the shares for which the option is being exercised. The option price is
payable by the optionee at the time of exercise in cash or, at the option of the
Committee, by exchanging previously acquired shares of Class B Common Stock with
a fair market value equal to the option price or, at the option of the
Committee, by a combination of these payment methods. The options are
exercisable during the term determined by the Committee and set forth in each
option grant, provided that no Incentive Stock Option shall be exercised after
the expiration of ten years from the date of grant (five years if the exercise
price is at least 110% of fair market value and the holder of the Incentive
Stock
13
<PAGE> 16
Options owns more than 10% of the outstanding Common Stock). The Committee shall
provide in each grant of an option the time or periods, if any, during which the
right to exercise the option shall vest.
The exercise of Incentive Stock Options is subject to a $100,000
calendar-year limit for each option holder based on the fair market value of the
Common Stock at the time the option was granted. Options are not transferable
(other than by will or the laws of descent and distribution) and may be
exercised only by the optionee. Upon termination of an optionee's employment
with the Company other than by reason of death, disability or normal retirement,
his or her options will remain exercisable for the lesser of (a) the remainder
of the term of the option or (b) 90 days following the date of termination.
Despite termination, each option of the terminated optionholder that is
scheduled to vest during the period specified in (a) or (b) of the preceding
sentence, as applicable, shall vest; however, each such option shall expire at
the same time that all other options expire pursuant to (a) or (b) in the
preceding sentence, as applicable. If terminated for dishonesty or other acts
detrimental to the interests of the Company or for any breach of any employment
contract (or if such acts are committed during (a) or (b) above, as applicable),
all options held by such holder become null and void. Upon termination of an
employee's employment with the Company by reason of death, disability or normal
retirement, (i) all options not yet exercisable as of such event shall become
null and void, and (ii) any options that are exercisable as of such event shall
be exercisable for a period of the lesser of (a) the remainder of the term of
the option or (b) 180 days following such event.
1988 PLAN BENEFITS
The following table provides certain summary information concerning stock
options granted during 1996, at the discretion of the Stock Option and
Compensation Committee, under the 1988 Plan to the executive officers named in
"Executive Compensation -- Summary Compensation Table" and the groups indicated.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION DOLLAR VALUE UNITS
----------------- ------------ ---------
<S> <C> <C>
Philip R. Thomas, ...................... -- --
Chairman of the Board and Chief
Executive Officer
Alexander W. Young, .................... $ 45,000 5,000
President and Chief Operating Officer
Leland L. Grubb, Jr., .................. $ 45,000 5,000
Vice President and Chief Financial
Officer
Thomas J. Popek, ....................... $ 146,250 16,250
Vice President
Robert W. Stephens, .................... $ 153,000 17,000
Vice President
Current Executive Group................. $ 676,908 75,212
Non-Executive Director Group............ -- --
Non-Executive Employee Group............ $4,273,101 474,789
</TABLE>
- ---------------
(1) The options granted to the named executive officers have the exercise prices
specified in "Executive Compensation -- Stock Option Grants" above. Those
exercise prices, as well as the exercise prices of options awarded to the
members of the specified group, are equal to the market value per share of
the Common Stock on the date of grant. The last sale price of the Common
Stock as reported on the NASDAQ National Market System on December 31, 1996
was $8.625 per share.
THE PROPOSED AMENDMENT
Pursuant to the proposed amendment, the shares of Common Stock available
for issuance under the 1988 Plan would be increased by 375,000 shares, from
800,000 to 1,175,000.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
APPROVAL OF THE AMENDMENT TO THE 1988 STOCK OPTION PLAN.
*****
14
<PAGE> 17
PROPOSAL TO ADOPT
THE 1997 STOCK OPTION PLAN
On April 3, 1997 the Board of Directors adopted, subject to stockholder
approval, the 1997 Plan. A copy of the 1997 Plan is attached hereto as Appendix
I.
PARTICIPANTS
At December 31, 1996, the Company had 349 employees, all of whom will be
eligible to participate in the 1997 Plan.
SUMMARY OF 1997 STOCK OPTION PLAN
The 1997 Stock Option Plan is intended to afford a proprietary interest in
the Company to key employees of the Company. The Company believes that stock
ownership by these persons provides added incentives to continue employment with
the Company and encourages increased efforts to promote the Company's best
interests. A maximum of 125,000 shares of the Company's Common Stock may be
issued pursuant to the 1997 Plan, subject to adjustment by reason of stock
dividends, stock splits or other capitalization changes. The following is a
brief description of the principal provisions of the 1997 Plan and is qualified
in its entirety by reference to the 1997 Plan.
The 1997 Plan is administered by the Board, if all Board members are
"disinterested" as defined in the 1997 Plan, or by a committee of two or more
disinterested members of the Board (the "Committee"). The Committee determines
the persons who receive stock options, the number of options to be granted and
the vesting schedule for the options granted. All options are granted with an
exercise price equal to 100% of the fair market value of the underlying Common
Stock at the date of grant. The Company receives no consideration upon the grant
of options.
It is intended that options under the 1997 Plan may be incentive stock
options for federal income tax purposes. Under the Internal Revenue Code, an
employee generally is not subject to regular income tax upon the grant or
exercise of an incentive option. Instead, the employee is subject to tax upon
disposition of the stock held pursuant to the exercise of the option (the "ISO
Shares"). At that time, if the employee has held the ISO Shares for at least (i)
two years from the date of grant and (ii) one year from the date of exercise
(the "Required Holding Period"), the employee will have long-term capital gain
(or loss) equal to the difference, if any, between the amount realized from the
disposition and the employee's tax basis in the ISO Shares. However, if the
employee disposes of the ISO Share prior to the Required Holding Period, a
portion (generally, the excess of the fair market value of the ISO Shares at the
date of exercise over the exercise price) of any gain realized would be taxable
to the employee as ordinary income.
All employees of the Company, including directors who are also employees,
are eligible to participate in the 1997 Plan. The 1997 Plan shall terminate on
March 31, 2007. Options having a term not to exceed 10 years will be available
to employees under the 1997 Plan. Non-Qualified Stock Options will be
transferable by the optionee. Shares issued to officers of the Company on
exercise of options may not be sold within six months of the grant of the
option.
Shares subject to options that are surrendered or expire unexercised may
again be made subject to options under the 1997 Plan.
In the discretion of the Board, the purchase price for shares may be paid
in cash, shares of Common Stock of the Company with a fair market value equal to
the purchase price, or both.
Notwithstanding any schedule for vesting of options contained in any option
agreement, all options granted under the 1997 Plan become immediately
exercisable if the Company is subject to a change of control as described in the
1997 Plan.
15
<PAGE> 18
THE PROPOSED PLAN ADOPTION
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
ADOPTION OF THE 1997 STOCK OPTION PLAN.
*****
SECTION 16(a) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission, and to furnish to the
Company copies of such reports. Based solely upon its review of the copies of
such forms received by it, the Company believes that, during the fiscal year
ended December 31, 1996, Company officers, directors and greater than 10%
beneficial owners complied with all such filing requirements, with the following
exceptions: Mr. Philip Thomas failed to file a Form 4 on a timely basis in
connection with one transaction involving the Company's Common Stock, and Mr. J.
Thomas Williams failed to file a Form 3 on a timely basis. All such reports have
now been filed.
AUDITORS
The Company has appointed BDO Seidman, LLP as the independent auditors of
the Company for the fiscal year ending December 31, 1997.
Representatives of BDO Seidman, LLP are expected to be present at the
meeting with the opportunity to make a statement if they desire to do so and to
be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
In order for stockholder proposals to receive consideration for inclusion
in the Company's Proxy Statement for its Annual Meeting of Stockholders to take
place in 1998, such proposals must be received at the Company's offices at 5215
N. O'Connor Boulevard, Suite 2500, Irving, Texas, 75039-3714, Attention:
Secretary, by December 9, 1997.
The Company's By-Laws contain a provision which requires that a stockholder
may nominate a person for election as a director only if written notice of such
stockholder's intent to make such nomination has been given to the Secretary of
the Company not later than 30 days prior to an annual meeting. This provision
also requires that the notice set forth, among other things, the name and
address of the stockholder giving the notice, as it appears on the Company's
books and records, and the class and number of shares of capital stock of the
Company owned by such stockholder. Such notice must also contain such other
information regarding the nominee as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated by the Board. Such notice must also be
accompanied by the written consent of the person being nominated to the naming
of that person in the Proxy Statement as a nominee and to serve as a director if
elected. The chairman of the annual meeting shall, if facts warrant, determine
and declare to the annual meeting that a nomination has not been made in
accordance with these procedures and if the chairman should so determine, he or
she shall so declare to the annual meeting and the defective nomination shall be
disregarded. No stockholder has nominated a candidate for election to the Board
of Directors at the Annual Meeting.
16
<PAGE> 19
SOLICITATION OF PROXIES
The Company will pay the expenses of this proxy solicitation. In addition
to the solicitation by mail, some of the officers and regular employees of the
Company may solicit proxies personally or by telephone, if deemed necessary. The
Company will request brokers and other fiduciaries to forward proxy soliciting
material to the beneficial owners of shares which are held of record by the
brokers and fiduciaries, and the Company may reimburse them for reasonable
out-of-pocket expenses incurred by them in connection therewith.
OTHER MATTERS
The Annual Report to Stockholders for the fiscal year ended December 31,
1996, which includes financial statements, is enclosed herewith. The Annual
Report does not form a part of this Proxy Statement or the materials for the
solicitation of proxies to be voted at the annual meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE FURNISHED AT NO
CHARGE TO EACH PERSON TO WHOM A PROXY STATEMENT IS DELIVERED UPON RECEIPT OF A
WRITTEN REQUEST OF SUCH PERSON ADDRESSED TO THOMAS GROUP, INC., 5215 N. O'CONNOR
BOULEVARD, SUITE 2500, IRVING, TEXAS 75039-3714, TELEPHONE (972) 869-3400. THE
COMPANY WILL ALSO FURNISH SUCH ANNUAL REPORT ON FORM 10-K TO ANY "BENEFICIAL
OWNER" OF SUCH SECURITIES AT NO CHARGE UPON RECEIPT OF A WRITTEN REQUEST,
ADDRESSED TO THE COMPANY, CONTAINING A GOOD FAITH REPRESENTATION THAT, AT THE
RECORD DATE, SUCH PERSON WAS A BENEFICIAL OWNER OF SECURITIES OF THE COMPANY
ENTITLED TO VOTE AT THE ANNUAL MEETING. COPIES OF ANY EXHIBIT TO THE FORM 10-K
WILL BE FURNISHED UPON THE PAYMENT OF A REASONABLE FEE.
The Board of Directors is not aware of any matter, other than the matters
described above, to be presented for action at the Annual Meeting. However, if
any other proper items of business should come before the Annual Meeting, it is
the intention of the person or persons acting under the enclosed form of proxy
to vote in accordance with their best judgment on such matters.
Information contained in the Proxy Statement relating to the occupations
and security holdings of directors and officers of the Company is based upon
information received from the individual directors and officers.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT
WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
/s/ ALEXANDER W. YOUNG
ALEXANDER W. YOUNG
President and Chief Operating
Officer
Irving, Texas
April 11, 1997
17
<PAGE> 20
APPENDIX I
THOMAS GROUP, INC.
1997 STOCK OPTION PLAN
<PAGE> 21
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 PURPOSE
ARTICLE 2 DEFINITIONS
ARTICLE 3 ADMINISTRATION
ARTICLE 4 ELIGIBILITY
ARTICLE 5 SHARES SUBJECT TO PLAN
ARTICLE 6 GRANT OF AWARDS
6.1 In General
6.2 Maximum ISO Grants
ARTICLE 7 OPTION PRICE
ARTICLE 8 AWARD PERIOD; VESTING
8.1 Award Period
8.2 Vesting
ARTICLE 9 TERMINATION OF SERVICE
9.1 Death
9.2 Retirement
9.3 Disability
9.4 Leave of Absence
ARTICLE 10 EXERCISE OF INCENTIVE
10.1 In General
10.2 Disqualifying Disposition of ISO
ARTICLE 11 AMENDMENT OR DISCONTINUANCE
ARTICLE 12 TERM
ARTICLE 13 CAPITAL ADJUSTMENTS
ARTICLE 14 RECAPITALIZATION, MERGER AND CONSOLIDATION; CHANGE IN
CONTROL
ARTICLE 15 LIQUIDATION OR DISSOLUTION
ARTICLE 16 INCENTIVES IN SUBSTITUTION FOR INCENTIVES GRANTED BY OTHER
CORPORATIONS
ARTICLE 17 MISCELLANEOUS PROVISIONS
17.1 Investment Intent
17.2 No Right to Continued Employment
17.3 Indemnification of Board and Committee
17.4 Effect of the Plan
17.5 Compliance With Other Laws and Regulations
17.6 Tax Requirements
17.7 Assignability
17.8 Use of Proceeds
</TABLE>
-i-
<PAGE> 22
THOMAS GROUP, INC.
1997 STOCK OPTION PLAN
The name of the plan is the THOMAS GROUP, INC. 1997 STOCK OPTION PLAN (the
"PLAN"). The Plan was adopted by the Board of Directors of THOMAS GROUP, INC., a
Delaware corporation (hereinafter called the "COMPANY"), effective as of April
3, 1997.
ARTICLE 1
PURPOSE
The purpose of the Plan is to attract and retain the services of key
employees of the Company and its Subsidiaries and to provide such persons with a
proprietary interest in the Company through the granting of incentive stock
options and non-qualified stock options that will
(a) increase the interest of such persons in the Company's welfare;
(b) furnish an incentive to such persons to continue their services
for the Company; and
(c) provide a means through which the Company may attract able persons
as employees.
With respect to Reporting Participants, the Plan and all transactions under
the Plan are intended to comply with all applicable conditions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934 (the "1934 ACT"). To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void ab initio, to the extent permitted by law and
deemed advisable by the Committee.
ARTICLE 2
DEFINITIONS
For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
2.1 "AWARD" means the grant of any Incentive Stock Option or Non-qualified
Stock Option, whether granted singly, in combination or in tandem (each
individually referred to herein as an "Incentive").
2.2 "AWARD AGREEMENT" means a written agreement between a Participant and
the Company which sets out the terms of an Award.
2.3 "AWARD PERIOD" means the period during which one or more Incentives
granted under an Award may be exercised.
2.4 "BOARD" means the board of directors of the Company.
2.5 "CHANGE OF CONTROL" means any of the following: (i) any consolidation,
merger or share exchange of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company's
Common Stock would be converted into cash, securities or other property, other
than a consolidation, merger or share exchange of the Company in which the
holders of the Company's Common Stock immediately prior to such transaction have
the same proportionate ownership of Common Stock of the surviving corporation
immediately after such transaction; (ii) any sale, lease, exchange or other
transfer (excluding transfer by way of pledge or hypothecation) in one
transaction or a series of related transactions, of all or substantially all of
the assets of the Company; (iii) the stockholders of the Company approve any
plan or proposal for the liquidation or dissolution of the Company; (iv) the
cessation of control (by virtue of their not constituting a majority of
directors) of the Board by the individuals (the "CONTINUING DIRECTORS") who (x)
at the date of this Plan were directors or (y) become directors after the date
of this Plan and whose election or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the directors
then in office who were directors at the date of this Plan or whose election or
nomination for election was previously so approved; (v) the acquisition of
beneficial ownership (within the meaning of Rule 13d-3
<PAGE> 23
under the 1934 Act) of an aggregate of twenty percent (20%) of the voting power
of the Company's outstanding voting securities by any person or group (as such
term is used in Rule 13d-5 under the 1934 Act) who beneficially owned less than
15% of the voting power of the Company's outstanding voting securities on the
date of this Plan, or the acquisition of beneficial ownership of an additional
5% of the voting power of the Company's outstanding voting securities by any
person or group who beneficially owned at least 15% of the voting power of the
Company's outstanding voting securities on the date of this Plan, provided,
however, that notwithstanding the foregoing, an acquisition shall not constitute
a Change of Control hereunder if the acquirer is (x) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company and
acting in such capacity, (y) a Subsidiary of the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of voting securities of the Company or (z)
any other person whose acquisition of shares of voting securities is approved in
advance by a majority of the Continuing Directors; or (vi) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended.
2.7 "COMMITTEE" means the Compensation and Stock Option Committee or
another committee appointed or designated by the Board to administer the Plan.
2.8 "COMMON STOCK" means the common stock, par value $.01 per share, which
the Company is currently authorized to issue or may in the future be authorized
to issue.
2.9 "COMPANY" means THOMAS GROUP, INC., a Delaware corporation, and any
successor entity.
2.10 "DATE OF GRANT" means the effective date on which an Award is made to
a Participant as set forth in the applicable Award Agreement; provided, however,
that solely for purposes of Section 16 of the 1934 Act and the rules and
regulations promulgated thereunder, the Date of Grant of an Award shall be the
date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.
2.11 "EMPLOYEE" means common law employee (as defined in accordance with
the Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company or any Subsidiary of the Company.
2.12 "FAIR MARKET VALUE" of a share of Common Stock is the mean of the
highest and lowest prices per share on the New York Stock Exchange Consolidated
Tape, or such reporting service as the Committee may select, on the appropriate
date, or in the absence of reported sales on such day, the most recent previous
day for which sales were reported.
2.13 "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.
2.14 "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
Employee and who satisfies the requirements of Rule 16b-3(b)(3) promulgated
under the 1934 Act or any successor provision.
2.15 "NON-QUALIFIED STOCK OPTION" or "NQSO" means a non-qualified stock
option granted pursuant to this Plan.
2.16 "OPTION PRICE" means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.
2.17 "PARTICIPANT" shall mean an Employee of the Company or a Subsidiary
to whom an Award is granted under this Plan.
2.18 "PLAN" means this THOMAS GROUP, INC. 1997 Stock Option Plan, as
amended from time to time.
2.19 "REPORTING PARTICIPANT" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.
2
<PAGE> 24
2.20 "RETIREMENT" means any Termination of Service solely due to
retirement upon attainment of age 60, or permitted early retirement as
determined by the Committee.
2.21 "STOCK OPTION" means a Non-qualified Stock Option or an Incentive
Stock Option.
2.22 "SUBSIDIARY" means (i) any corporation or limited liability company
in an unbroken chain of corporations or limited liability companies beginning
with the Company, if each of the corporations or limited liability companies
other than the last corporation or limited liability company in the unbroken
chain owns equity securities possessing a majority of the total combined voting
power of all classes of equity securities in one of the other corporations or
limited liability companies in the chain, and (ii) any limited partnership, if
the Company or any corporation or limited liability company described in item
(i) above owns a majority of the general partnership interest and a majority of
the limited partnership interests entitled to vote on the removal and
replacement of the general partner. "SUBSIDIARIES"means more than one of any
such corporations, limited partnerships or limited liability companies.
2.23 "TERMINATION OF SERVICE" occurs when a Participant who is an Employee
of the Company or any Subsidiary shall cease to serve as an Employee of the
Company and its Subsidiaries, for any reason.
2.24 "DISABILITY" shall have the meaning given it in the employment
agreement of the Participant; provided, however, that if that Participant has no
employment agreement, "Disability" shall mean a physical or mental impairment of
sufficient severity that, in the opinion of the Company, either the Participant
is unable to continue performing the duties he performed before such impairment
or the Participant's condition entitles him to disability benefits under any
insurance or employee benefit plan of the Company or its Subsidiaries and that
impairment or condition is cited by the Company as the reason for termination of
the Participant's employment; provided, however, with respect to any Incentive
Stock Option, Disability shall have the meaning given it under the rules
governing Incentive Stock Options under the Code.
ARTICLE 3
ADMINISTRATION
The Plan shall be administered by the Committee appointed by the Board. The
Committee shall consist of not fewer than two persons. Any member of the
Committee may be removed at any time, with or without cause, by resolution of
the Board. Any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board.
Membership on the Committee shall be limited to those members of the Board
who are Non-employee Directors and who are "OUTSIDE DIRECTORS" under Section
162(m) of the Code. The Committee shall select one of its members to act as its
Chairman. A majority of the Committee shall constitute a quorum, and the act of
a majority of the members of the Committee present at a meeting at which a
quorum is present shall be the act of the Committee.
The Committee shall determine and designate from time to time the eligible
persons to whom Awards will be granted and shall set forth in each related Award
Agreement the Award Period, the Date of Grant, and such other terms, provisions,
limitations, and performance requirements, as are approved by the Committee, but
not inconsistent with the Plan. The Committee shall determine whether an Award
shall include one type of Incentive, or two or more Incentives granted in
combination.
The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.
With respect to restrictions in the Plan that are based on the requirements
of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the Code, Section
162(m) of the Code, the rules of any exchange or inter-dealer quotation system
upon which the Company's securities are listed or quoted, or any other
applicable law, rule or restriction (collectively, "APPLICABLE LAW"), to the
extent that any such restrictions are no longer
3
<PAGE> 25
required by applicable law, the Committee shall have the sole discretion and
authority to grant Awards that are not subject to such mandated restrictions
and/or to waive any such mandated restrictions with respect to outstanding
Awards.
ARTICLE 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an officer)
whose judgment, initiative, and efforts contributed or may be expected to
contribute to the successful performance of the Company is eligible to
participate in the Plan; provided that only Employees shall be eligible to
receive Incentive Stock Options. The Committee, upon its own action, may grant,
but shall not be required to grant, an Award to any Employee of the Company or
any Subsidiary. Awards may be granted by the Committee at any time and from time
to time to new Participants, or to then Participants, or to a greater or lesser
number of Participants, and may include or exclude previous Participants, as the
Committee shall determine. Except as required by this Plan, Awards granted at
different times need not contain similar provisions. The Committee's
determinations under the Plan (including without limitation determinations of
which Employees, if any, are to receive Awards, the form, amount and timing of
such Awards, the terms and provisions of such Awards and the agreements
evidencing same) need not be uniform and may be made by it selectively among
Employees who receive, or are eligible to receive, Awards under the Plan.
ARTICLE 5
SHARES SUBJECT TO PLAN
Subject to adjustment as provided in ARTICLES 13 AND 14, the maximum number
of shares of Common Stock that may be delivered pursuant to Awards granted under
the Plan is (a) one hundred twenty-five thousand (125,000) shares; plus (b)
shares of Common Stock previously subject to Awards which are forfeited,
terminated, or expired unexercised; plus (c) without duplication for shares
counted under the immediately preceding clause, a number of shares of Common
Stock equal to the number of shares repurchased by the Company in the open
market or otherwise and having an aggregate repurchase price no greater than the
amount of cash proceeds received by the Company from the sale of shares of
Common Stock under the Plan; plus (d) any shares of Common Stock surrendered to
the Company in payment of the exercise price of options issued under the Plan.
Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan.
ARTICLE 6
GRANT OF AWARDS
6.1 IN GENERAL. The grant of an Award shall be authorized by the Committee
and shall be evidenced by an Award Agreement setting forth the Incentive or
Incentives being granted, the total number of shares of Common Stock subject to
the Incentive(s), the Option Price (if applicable), the Award Period, the Date
of Grant, and such other terms, provisions, limitations, and performance
objectives, as are approved by the Committee, but not inconsistent with the
Plan. The Company shall execute an Award Agreement with a Participant after the
Committee approves the issuance of an Award. Any Award granted pursuant to this
Plan must be granted within ten (10) years of the date of adoption of this Plan.
The Plan shall be submitted to the Company's stockholders for approval; however,
the Committee may grant Awards under the Plan prior to the time of stockholder
approval. Any such Award granted prior to such stockholder approval shall be
made subject to such stockholder approval. The grant of an Award to a
Participant shall not be deemed either to entitle the Participant to, or to
disqualify the Participant from, receipt of any other Award under the Plan.
4
<PAGE> 26
6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan which is designated as an Incentive Stock Option exceeds this
limit or otherwise fails to qualify as an Incentive Stock Option, such Stock
Option shall be a Non-qualified Stock Option.
ARTICLE 7
OPTION PRICE
The Option Price for any share of Common Stock which may be purchased under
a Stock Option shall be at least one hundred percent (100%) of the Fair Market
Value of the share on the Date of Grant. If an Incentive Stock Option is granted
to an Employee who owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than ten percent (10%) of the combined
voting power of all classes of stock of the Company (or any parent or
Subsidiary), the Option Price shall be at least one hundred and ten percent
(110%) of the Fair Market Value of the Common Stock on the Date of Grant.
ARTICLE 8
AWARD PERIOD; VESTING
8.1 AWARD PERIOD. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be exercised
in whole or in part for any period or periods of time or beyond any date
specified in the Award Agreement. Except as provided in the Award Agreement, an
Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of
Service in accordance with this ARTICLE 8 AND ARTICLE 9. No Incentive granted
under the Plan may be exercised at any time after the end of its Award Period.
No portion of any Incentive may be exercised after the expiration of ten (10)
years from its Date of Grant. However, if an Employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company (or any parent or Subsidiary) and an Incentive Stock Option is granted
to such Employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five (5) years
from the Date of Grant.
8.2 VESTING. Except as otherwise provided in the Award, vesting of all
Awards shall be annually, with monthly incremental vesting. The Committee, in
its sole discretion, may determine that an Incentive will be immediately
exercisable, in whole or in part, or that all or any portion may not be
exercised until a date, or dates, subsequent to its Date of Grant, or until the
occurrence of one or more specified events, subject in any case to the terms of
the Plan. Subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of an Incentive may
be exercised.
ARTICLE 9
TERMINATION OF SERVICE
9.1 DEATH. Upon the death of a Participant, then any and all Awards held
by the Participant that are not yet exercisable as of the date of the
Participant's death shall be fully vested as of the date of death, and shall be
exercisable by that Participant's legal representatives, legatees or
distributees for a period of the lesser of (a) the remainder of the term of the
Award or (b) 180 days following the date of the Participant's death. Any portion
of an Award not exercised upon the expiration of the periods specified in (a) or
(b) shall be null and void.
9.2 RETIREMENT. If a Participant's employment relationship is terminated
by reason of the Participant's Retirement, then the portion, if any, of any and
all Awards held by the Participant that are not yet exercisable as of the date
of that Retirement shall become null and void as of the date of Retirement;
provided, however,
5
<PAGE> 27
that the portion, if any, of any and all Awards held by the Participant that are
exercisable as of the date of that Retirement shall be exercisable for the
lesser of (a) the remainder of the term of the Award or (b) 90 days following
the date of Retirement.
9.3 DISABILITY. If a Participant's employment relationship is terminated
by reason of the Participant's Disability, then the portion, if any, of any and
all Awards held by the Participant that are not yet exercisable as of the date
of that termination for Disability shall become null and void as of the date of
termination; provided, however, that the portion, if any, of any and all Awards
held by the Participant that are exercisable as of the date of that termination
shall survive the termination for the lesser of (a) the original term of the
Award and (b) 180 days following the date of termination, and the Award shall be
exercisable by the Participant, his guardian, or his legal representative.
9.4 LEAVE OF ABSENCE. With respect to an Award, the Committee may, in its
sole discretion, determine that any Participant who is on leave of absence for
any reason will be considered to still be in the employ of the Company for
vesting and other purposes.
ARTICLE 10
EXERCISE OF INCENTIVE
10.1 IN GENERAL. A vested Incentive may be exercised during its Award
Period, subject to limitations and restrictions set forth therein and in ARTICLE
9. A vested Incentive may be exercised at such times and in such amounts as
provided in this Plan and the applicable Award Agreement, subject to the terms,
conditions, and restrictions of the Plan.
In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares of
Common Stock on a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required under the
circumstances has not been accomplished. No Incentive may be exercised for a
fractional share of Common Stock. The granting of an Incentive shall impose no
obligation upon the Participant to exercise that Incentive.
STOCK OPTIONS. Subject to such administrative regulations as the Committee
may from time to time adopt, a Stock Option may be exercised by the delivery of
written or telephonic notice to the Company setting forth the number of shares
of Common Stock with respect to which the Stock Option is to be exercised and
the date of exercise thereof (the "EXERCISE DATE"), which shall be at least
three (3) days after giving such notice unless an earlier time shall have been
mutually agreed upon. On the Exercise Date, the Participant shall deliver to the
Company consideration with a value equal to the total Option Price of the shares
to be purchased, payable as follows: (a) cash, check, bank draft, or money order
payable to the order of the Company, (b) Common Stock owned by the Participant
on the Exercise Date, valued at its Fair Market Value on the Exercise Date,
and/or (c) by delivery (including by FAX) to the Company or its designated agent
of an executed irrevocable option exercise form together with irrevocable
instructions from the Participant to a broker or dealer, reasonably acceptable
to the Company, to sell certain of the shares of Common Stock purchased upon
exercise of the Stock Option or to pledge such shares as collateral for a loan
and promptly deliver to the Company the amount of sale or loan proceeds
necessary to pay such purchase price.
Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be delivered as
directed by the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date. The obligation of the Company to deliver shares of
Common Stock shall, however, be subject to the condition that if at any time the
Committee shall determine in its discretion that the listing, registration, or
qualification of the Stock Option or the Common Stock upon any securities
exchange or inter-dealer quotation system or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the Stock Option or the
issuance or purchase of shares of Common Stock thereunder, the Stock Option may
not be exercised in whole or in part
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<PAGE> 28
unless such listing, registration, qualification, consent, or approval shall
have been effected or obtained free of any conditions not acceptable to the
Committee.
10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock acquired
upon exercise of an Incentive Stock Option are disposed of by a Participant
prior to the expiration of either two (2) years from the Date of Grant of such
Stock Option or one (1) year from the transfer of shares of Common Stock to the
Participant pursuant to the exercise of such Stock Option, or in any other
disqualifying disposition within the meaning of Section 422 of the Code, such
Participant shall notify the Company in writing of the date and terms of such
disposition. A disqualifying disposition by a Participant shall not affect the
status of any other Stock Option granted under the Plan as an Incentive Stock
Option within the meaning of Section 422 of the Code.
ARTICLE 11
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this ARTICLE 11, the Board may at
any time and from time to time, without the consent of the Participants, alter,
amend, revise, suspend, or discontinue the Plan in whole or in part; provided,
however, that no amendment which requires stockholder approval in order for the
Plan and Incentives awarded under the Plan to continue to comply with Section
162(m) of the Code, including any successors to such Section, shall be effective
unless such amendment shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon. Any such amendment shall,
to the extent deemed necessary or advisable by the committee, be applicable to
any outstanding Incentives theretofore granted under the Plan, notwithstanding
any contrary provisions contained in any stock option agreement. Notwithstanding
anything contained in this Plan to the contrary, unless required by law, no
action contemplated or permitted by this ARTICLE 11 shall adversely affect any
rights of Participants or obligations of the Company to Participants with
respect to any Incentive theretofore granted under the Plan without the consent
of the affected Participant.
ARTICLE 12
TERM
The Plan shall be effective from the date that this Plan is approved by the
Board. Unless sooner terminated by action of the Board, the Plan will terminate
on March 31, 2007, but Incentives granted before that date will continue to be
effective in accordance with their terms and conditions.
ARTICLE 13
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect, or Incentives are outstanding,
there shall be any increase or decrease in the number of issued and outstanding
shares of Common Stock resulting from (1) the declaration or payment of a stock
dividend, (2) any recapitalization resulting in a stock split-up, combination,
or exchange of shares of Common Stock, or (3) other increase or decrease in such
shares of Common Stock effected without receipt of consideration by the Company,
then and in such event:
(i) An appropriate adjustment shall be made in the maximum number of
shares of Common Stock then subject to being awarded under the Plan and in
the maximum number of shares of Common Stock that may be awarded to a
Participant to the end that the same proportion of the Company's issued and
outstanding shares of Common Stock shall continue to be subject to being so
awarded.
(ii) Appropriate adjustments shall be made in the number of shares of
Common Stock and the Option Price thereof then subject to purchase pursuant
to each such Stock Option previously granted and unexercised, to the end
that the same proportion of the Company's issued and outstanding shares of
Common Stock in each such instance shall remain subject to purchase at the
same aggregate Option Price.
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<PAGE> 29
Except as otherwise expressly provided herein, the issuance by the Company
of shares of its capital stock of any class, or securities convertible into
shares of capital stock of any class, either in connection with direct sale or
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to the number of or Option Price of shares of Common Stock
then subject to outstanding Stock Options granted under the Plan.
Upon the occurrence of each event requiring an adjustment with respect to
any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.
ARTICLE 14
RECAPITALIZATION, MERGER AND
CONSOLIDATION; CHANGE IN CONTROL
(a) The existence of this Plan and Incentives granted hereunder shall
not affect in any way the right or power of the Company or its stockholders
to make or authorize any or all adjustments, recapitalizations,
reorganizations, or other changes in the Company's capital structure and
its business, or any merger or consolidation of the Company, or any issue
of bonds, debentures, preferred or preference stocks ranking prior to or
otherwise affecting the Common Stock or the rights thereof (or any rights,
options, or warrants to purchase same), or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger,
consolidation or share exchange, any Incentive granted hereunder shall
pertain to and apply to the securities or rights (including cash, property,
or assets) to which a holder of the number of shares of Common Stock
subject to the Incentive would have been entitled.
(c) In the event of any merger, consolidation or share exchange
pursuant to which the Company is not the surviving or resulting
corporation, there shall be substituted for each share of Common Stock
subject to the unexercised portions of such outstanding Incentives, that
number of shares of each class of stock or other securities or that amount
of cash, property, or assets of the surviving, resulting or consolidated
company which were distributed or distributable to the stockholders of the
Company in respect to each share of Common Stock held by them, such
outstanding Incentives to be thereafter exercisable for such stock,
securities, cash, or property in accordance with their terms.
Notwithstanding the foregoing, however, all such Incentives may be canceled
by the Company as of the effective date of any such reorganization, merger,
consolidation, share exchange or any dissolution or liquidation of the
Company by giving notice to each holder thereof or his personal
representative of its intention to do so and by permitting the purchase
during the thirty (30) day period next preceding such effective date of all
of the shares of Common Stock subject to such outstanding Incentives.
(d) In the event of a Change of Control, then, notwithstanding any
other provision in this Plan to the contrary, all unmatured installments of
Incentives outstanding shall thereupon automatically be accelerated and
exercisable in full. The determination of the Committee that any of the
foregoing conditions has been met shall be binding and conclusive on all
parties.
ARTICLE 15
LIQUIDATION OR DISSOLUTION
In case the Company shall, at any time while any Incentive under this Plan
shall be in force and remain unexpired, (i) sell all or substantially all of its
property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution,
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liquidation, or winding up with respect to each share of Common Stock of the
Company. If the Company shall, at any time prior to the expiration of any
Incentive, make any partial distribution of its assets, in the nature of a
partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices then in effect with respect to each
Stock Option shall be reduced, on the payment date of such distribution, in
proportion to the percentage reduction in the tangible book value of the shares
of the Company's Common Stock (determined in accordance with generally accepted
accounting principles) resulting by reason of such distribution.
ARTICLE 16
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER CORPORATIONS
Incentives may be granted under the Plan from time to time in substitution
for similar instruments held by employees of a corporation who become or are
about to become management Employees of the Company or any Subsidiary as a
result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of stock of the employing corporation.
The terms and conditions of the substitute Incentives so granted may vary from
the terms and conditions set forth in this Plan to such extent as the Board at
the time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the Incentives in substitution for which they are granted.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 INVESTMENT INTENT. The Company may require that there be presented to
and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.
17.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any Incentive
granted under the Plan shall confer upon any Participant any right with respect
to continuance of employment by the Company or any Subsidiary.
17.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or the
Committee, nor any officer or Employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.
17.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any action
of the Board or the Committee shall be deemed to give any person any right to be
granted an Award or any other rights except as may be evidenced by an Award
Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.
17.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding anything
contained herein to the contrary, the Company shall not be required to sell or
issue shares of Common Stock under any Incentive if the issuance thereof would
constitute a violation by the Participant or the Company of any provisions of
any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of
Common Stock are quoted or traded (including without limitation Section 16 of
the 1934 Act and Section 162(m) of the Code); and, as a condition of any sale or
issuance of shares of Common Stock under an Incentive, the Committee may require
such agreements or undertakings, if any, as the Committee may deem necessary or
advisable to assure compliance with any such law or regulation. The Plan, the
grant and exercise of Incentives hereunder, and the obligation of the Company to
sell and
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<PAGE> 31
deliver shares of Common Stock, shall be subject to all applicable federal and
state laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required.
17.6 TAX REQUIREMENTS. The Company shall have the right to deduct from all
amounts hereunder paid in cash or other form, any Federal, state, or local taxes
required by law to be withheld with respect to such payments. The Participant
receiving shares of Common Stock issued under the Plan shall be required to pay
the Company the amount of any taxes which the Company is required to withhold
with respect to such shares of Common Stock. Notwithstanding the foregoing, in
the event of an assignment of a Non-qualified Stock Option pursuant to Section
17.7, the Participant who assigns the Non-qualified Stock Option shall remain
subject to withholding taxes upon exercise of the Non-qualified Stock Option by
the transferee to the extent required by the Code or the rules and regulations
promulgated thereunder. Such payments shall be required to be made prior to the
delivery of any certificate representing such shares of Common Stock. Such
payment may be made in cash, by check, or through the delivery of shares of
Common Stock owned by the Participant (which may be effected by the actual
delivery of shares of Common Stock by the Participant or by the Company's
withholding a number of shares to be issued upon the exercise of a Stock Option,
if applicable), which shares have an aggregate Fair Market Value equal to the
required minimum withholding payment, or any combination thereof.
17.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the Participant or the
Participant's legally authorized representative. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock Option.
The Committee may waive or modify any limitation contained in the preceding
sentences of this Section 17.7 that is not required for compliance with Section
422 of the Code. Unless the Committee provides otherwise, all or a portion of a
Non-qualified Stock Option to be granted to a Participant may be transferred by
such Participant to (i) the spouse, children or grandchildren of the Participant
("IMMEDIATE FAMILY MEMBERS"), (ii) a trust or trusts for the exclusive benefit
of such Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, (iv) an entity exempt from federal income
tax pursuant to Section 501(c)(3) of the Code or any successor provision, or (v)
a split interest trust or pooled income fund described in Section 2522(c)(2) of
the Code or any successor provision, provided that (x) there shall be no
consideration for any such transfer, and (y) subsequent transfers of transferred
Non-qualified Stock Options shall be prohibited except those by will or the laws
of descent and distribution or pursuant to a qualified domestic relations order
as defined in the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended. Following transfer, any such Non-qualified Stock Option
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of ARTICLES 10, 11,
13, 15 AND 17 hereof the term "PARTICIPANT" shall be deemed to include the
transferee. The events of Termination of Service shall continue to be applied
with respect to the original Participant, following which the Non-qualified
Stock Options shall be exercisable by the transferee only to the extent and for
the periods specified in the Award Agreement. The Committee and the Company
shall have no obligation to inform any transferee of a Non-qualified Stock
Option of any expiration, termination, lapse or acceleration of such Option. The
Company shall have no obligation to register with any federal or state
securities commission or agency any Common Stock issuable or issued under a
Non-qualified Stock Option that has been transferred by a Participant under this
Section 17.7.
17.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.
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A copy of this Plan shall be kept on file in the principal office of the
Company in Dallas, Texas.
* * * * * * * * * * * * * * *
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
as of April 3, 1997 by its duly authorized representative.
THOMAS GROUP, INC.
By:
----------------------------------
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P R O X Y
THOMAS GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Philip R. Thomas and Alexander W. Young,
or either of them, with full power of substitution, proxies of the undersigned,
with all the powers that the undersigned would possess if personally present to
cast all votes that the undersigned would be entitled to vote at the Annual
Meeting of Stockholders of Thomas Group, Inc. (the "Company") to be held on
Thursday, May 15, 1997, at the principal executive offices of the Company, 5215
N. O'Connor Boulevard, Suite 2500, Irving, Texas at 9:00 A.M., Dallas time, and
any and all adjournments or postponements thereof (the "Annual Meeting"),
including (without limiting the generality of the foregoing) to vote and act as
follows:
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE (change of address)
DIRECTORS SET FORTH BELOW AND FOR THE PROPOSALS SET
FORTH ON THE REVERSE SIDE. ------------------------
------------------------
------------------------
(If you have written in
the above space, please
mark the corresponding
box on the reverse side
of this card)
Nominees:
Philip R. Thomas J. Fred Bucy Hollis L. Caswell
Donald J. Almquist John T. Chain James E. Dykes
Alexander W. Young Gerald K. Beckmann
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IN THE UNITED STATES.
SEE REVERSE
SIDE
<PAGE> 34
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
1. Election of FOR WITHHELD
Directors [ ] [ ]
(see reverse)
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------
2. Proposal to amend the Amended and Restated 1988 Stock Option Plan, to
increase by 375,000 shares the number of shares of Common Stock available
for issuance.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to adopt the 1997 Stock Option Plan, pursuant to which 125,000
shares of Common Stock may be made available for issuance.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting. This Proxy will be
voted at the Annual Meeting or any adjournment or postponement thereof as
specified. If no specifications are made, this Proxy will be voted FOR the
election of directors and FOR the proposals set forth above. This Proxy
hereby revokes all prior proxies given with respect to the shares of the
undersigned.
Change of Address [ ]
SIGNATURE(S) DATE
--------------------------------------- -------------------
SIGNATURE(S) DATE
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NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
