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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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] 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.
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[ ] 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:
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THOMAS GROUP, INC.
5221 N. O'CONNOR BOULEVARD
SUITE 500
IRVING, TEXAS 75039-3714
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 29, 1999
To the Holders of Common Stock of THOMAS GROUP, INC.:
Notice is hereby given that the 1999 Annual Meeting of Stockholders of
Thomas Group, Inc., a Delaware corporation (the "Company"), will be held at the
executive offices of the Company, 5221 N. O'Connor Boulevard, Suite 500, Irving,
Texas 75039, on Tuesday, June 29, 1999 at 9:00 a.m., Dallas, Texas time, for the
following purposes:
(1) To elect five persons to serve as directors until the Company's
Year 2000 Annual Meeting of Stockholders or until their successors are duly
elected and qualified; and
(2) To consider and vote upon an amendment to the 1997 Stock Option
Plan, to increase by 225,000 shares, from 125,000 to 350,000, the number of
shares of the Company's Common Stock currently available for issuance under
the 1997 Stock Option Plan; and
(3) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed May 6, 1999, 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 5221 N. O'Connor Boulevard, Suite 500,
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/ J. THOMAS WILLIAMS
J. THOMAS WILLIAMS
Chief Executive Officer
Irving, Texas
May 24, 1999
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THOMAS GROUP, INC.
5221 N. O'CONNOR BOULEVARD
SUITE 500
IRVING, TEXAS 75039-3714
------------------
PROXY STATEMENT
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 29, 1999
The accompanying proxy, mailed together with this Proxy Statement to
stockholders on or about May 24, 1999, is solicited by Thomas Group, Inc. (the
"Company") in connection with the Annual Meeting of Stockholders to be held on
June 29, 1999 (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 five directors to serve as directors until the Company's Year 2000
Annual Meeting of Stockholders or until their successors are duly elected and
qualified, (2) an amendment to the 1997 Stock Option Plan (the "1997 Plan"), to
increase by 225,000 shares, from 125,000 to 350,000, the number of shares of the
Company's Common Stock currently available for issuance under the 1997 Plan, and
(3) 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 May 6, 1999
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
On the Record Date, the Company had outstanding 4,891,809 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 proposal to amend the 1997 Plan will have the effect
of a negative vote because that proposal requires the affirmative vote of
holders of at least a majority of the issued and outstanding shares of Common
Stock. 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 proposal to amend 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 be voted (i) FOR the nominees for director identified
below and (ii) FOR the proposal to amend the 1997 Plan.
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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 April 30, 1999, 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.
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED(1) PERCENT
------------------------------------ --------------- -------
John T. Chain, Jr.(2)....................................... 73,764(3) 1.2%
J. Thomas Williams(2)....................................... 66,158(4) 1.1%
Richard A. Freytag(2)....................................... 17,177(5) 0.3%
James E. Dykes(2)........................................... 17,086(6) 0.3%
David B. Mathis(2).......................................... 5,202(7) 0.1%
Alexander W. Young(2)....................................... 145,853(8) 2.4%
Leland L. Grubb, Jr.(2)..................................... 57,985(9) 1.0%
Herbert D. Locke(2)......................................... 50,757(10) 0.8%
Jimmy C. Houlditch(2)....................................... 20,208(11) 0.3%
Phillip J. Lovell(2)........................................ 6,061(12) 0.1%
Roger A. Crabb(2)........................................... 3,734(13) 0.1%
All officers and directors as a group (11 persons).......... 463,985(14) 8.9%
Kennedy Capital Management.................................. 327,700 6.7%
10829 Olive Boulevard
St. Louis, Missouri 63141
Dimensional Fund Advisors................................... 247,200 5.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
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* 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 amounts shown in the table
include shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of April 30, 1999.
(2) The address of the named individuals is 5221 N. O'Connor Boulevard, Suite
500, Irving, Texas 75039-3714.
(3) Includes 20,932 shares of Common Stock which may be issued within 60 days
of April 30, 1999 upon exercise of outstanding options.
(4) Includes 62,978 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 30, 1999.
(5) Includes 12,177 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 30, 1999.
(6) Includes 13,854 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 30, 1999.
(7) Includes 5,202 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of April 30, 1999.
(8) Includes 85,264 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 30, 1999.
(9) Includes 51,985 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 30, 1999.
(10) Includes 10,292 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 30, 1999.
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(11) Includes 20,208 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of April 30, 1999.
(12) Includes 6,061 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of April 30, 1999.
(13) Includes 3,734 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of April 30, 1999.
(14) The amount shown includes a total of 292,687 shares of Common Stock
issuable upon exercise of outstanding options exercisable within 60 days of
April 30, 1999.
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 five. The five nominees for
director listed below will stand for election at this Annual Meeting for a
one-year term of office expiring at the Year 2000 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:
NAME AND AGE POSITIONS AND OFFICES WITH THE COMPANY DIRECTOR SINCE
------------ -------------------------------------- --------------
J. Thomas Williams, 52............. President, Chief Executive Officer, 1998
Director
John T. Chain, Jr., 64............. Chairman of the Board 1995
Richard A. Freytag, 65............. Director 1997
James E. Dykes, 61................. Director 1995
David B. Mathis, 61................ Director 1998
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.
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers of the Company serve at the will of the Board of
Directors.
J. Thomas Williams became associated with the Company in 1992 and currently
serves as President, Chief Executive Officer, and a director. 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.
Alexander W. Young currently serves as President of the Services Business
Unit. Mr. Young became President and Chief Operating Officer of the Company in
January 1991 and served in that role until March 1998. Mr. Young 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 director of DII Group, a publicly-held
electronics manufacturing company. Mr. Young is not standing for re-election to
the Board.
Leland L. Grubb, Jr., 53, has been associated with the Company since April
1995 and currently serves as Vice President, Chief Financial Officer and
Treasurer, and President of the Automotive Business Unit. Prior to joining the
Company, Mr. Grubb served from January 1988 to January 1995 as Chief Financial
Officer of Detroit Diesel Corporation, a manufacturer of diesel engines and
related parts, and held senior financial positions with General Motors
Corporation from July 1968 to December 1987.
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Herbert D. Locke, 61, joined 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 Incorporated, most recently in the Asia Pacific region.
Jimmy C. Houlditch, 63, joined the Company in 1996 and currently serves as
President of the Aviation Business Unit. Prior to joining the Company, Mr.
Houlditch served as corporate vice president of manufacturing and productivity
for Allied Signal Corporation, as chief operating officer for Allied Signal's
Gas Turbine Company. He was previously with Texas Instruments Semiconductor as
senior vice president of automation, quality and worldwide product
rationalization and senior vice president of operations for TI's Defense Systems
Electronics Company.
Phillip J. Lovell, 50, joined the Company in October 1994 and currently
serves as President and Managing Director of the European Business Unit. Prior
to joining the Company, Mr. Lovell held senior general management and marketing
positions with major multinational corporations such as Braun/Gillette, Avery
and American Brands.
Roger A. Crabb, 45, joined the Company in May 1994 as Legal Counsel and
became Secretary in May 1995. Immediately prior to joining the Company, Mr.
Crabb had a private law practice, and from 1988 to 1993, Mr. Crabb served as
Associate General Counsel of Triton Energy Limited, a publicly-held oil and gas
exploration company.
John T. Chain, Jr. was elected director of the Company in May 1995 and as
Chairman of the Board in May 1998. Since December 1996, Mr. Chain has served as
President of Quarterdeck Equity Partners, Inc., a company involved in the
acquisition of suppliers to the defense and aerospace industry. Mr. Chain served
from 1991 until early 1996 as Executive Vice President for Burlington Northern
Santa Fe Corporation. From 1986 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 Kemper, Northrop Grumman Corporation, RJR Nabisco Holdings Corp. and Nabisco
Holdings, Inc.
James E. Dykes was elected director of the Company in May 1995. In 1997, he
accepted a one-year appointment as executive vice president of corporate
development. Mr. Dykes was a four-time Thomas client during his 35 year
management career in the electronics and semiconductor industries. Mr. Dykes
served from 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, Exar Corporation, an integrated circuits company and
Theseus Logic, an integrated circuits company.
Richard A. Freytag was elected director of the Company in September 1997.
Mr. Freytag served as president of Citicorp Banking Corporation from 1984 until
1989, when he was appointed chief executive officer. Mr. Freytag retired as an
officer of Citicorp Banking Corporation in 1996 and remained both as an outside
director and as vice chairman until January 1, 1998, when he retired as a
director. Mr. Freytag also served as a director of Citicorp Holdings, Inc.,
Citibank Overseas Investment Corporation and Citibank Delaware until January 1,
1998, at which time he retired.
David B. Mathis was elected director of the Company in August 1998. Mr.
Mathis serves as chairman and chief executive officer of Kemper Insurance
Companies, which has operations in commercial and personal insurance, risk
management, and reinsurance. Mr. Mathis' long career with Kemper has included
executive assignments with both Kemper Insurance Companies and Kemper
Corporation, its former publicly owned affiliate. Mr. Mathis also serves on the
board of directors of the American Insurance Association, IMC Global Inc., the
Museum of Science and Industry and the Chicago Symphony Orchestra.
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COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has established two committees: an Audit Committee;
and a Nominating, Corporate Governance and Compensation Committee.
The Audit Committee, currently composed of Messrs. Freytag, Chain, Dykes
and Mathis, met five times during the fiscal year ended December 31, 1998. 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. The Audit Committee also
reviews the financial performance and cash flow of the Company, and makes
recommendations on financial matters such as capital expenditures and dividend
policy
The Nominating, Corporate Governance and Compensation Committee, currently
composed of Messrs. Dykes, Chain, Freytag and Mathis, met eight times during the
fiscal year ended December 31, 1998. The Nominating, Corporate Governance and
Compensation Committee makes recommendations to the Board of Directors regarding
potential nominees to the Board, overseas the performance and effectiveness of
the Board, reviews the Company's compensation policies, determines the amount
and form of compensation and benefits payable to officers, reviews and approves
significant stock option awards, and establishes succession plans for executives
of the Company.
The Board of Directors held 11 meetings during the fiscal year ended
December 31, 1998. All of the directors attended at least 75% of the meetings of
the Board of Directors and its committees on which they served.
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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, 1998, to (i) the Company's then-current 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, 1998 exceeded $100,000.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ------------------------- ---- -------- ---------- ------------ ------------ ------------
J. Thomas Williams, 1998 $389,356 $ 262,850 $ 9,600(2) -- $ 3,750(3)
President, Chief Executive Officer(1) 1997 250,000 31,900 -- -- 33,851
1996
Alexander W. Young, 1998 339,167 -- 12,000(2) -- 5,000(3)
President, Services Business Unit, 1997 385,000 37,000 9,600 -- 23,350
Former President and COO 1996 385,000 -- 7,200 -- 4,750
Leland L. Grubb, 1998 300,000 58,590 7,200(2) -- 1,000(3)
Vice President, Chief Financial Officer, 1997 300,000 39,600 7,200 -- 950
President, Automotive Business Unit 1996 300,000 -- 7,200 -- 950
Herbert C. Locke, 1998 275,000 53,710 -- -- 1,000(3)
Vice President, President, 1997
Asia/Pacific Business Unit 1996
Philip R. Thomas, 1998 250,000 -- 13,908(2) -- 1,798,313(4)
former Chairman and CEO 1997 -- 1,199,000 55,600 -- 33,825
1996 -- -- 56,000 -- 58,354
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(1) No information is provided for the fiscal year during which Mr. Williams did
not serve as an executive officer of the Company.
(2) Represents car allowances for the benefit of the named executive officers.
(3) Represents the Company's contribution to such officer's account under the
Company's 401(k) Plan.
(4) Represents a severance payment in the amount of $1,758,065, an allocation of
personnel costs in the amount of $38,373, and the Company's contribution of
$1,875 to such person's account under the Company's 401(k) Plan.
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STOCK OPTION GRANTS
The following table provides information concerning the grant of stock
options during the year ended December 31, 1998 to the named executive officers.
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%
- ---- ---------- ------------ -------- -------- ---------- --- ------------- -------------
J. Thomas Williams......... 25,000 8.7381 $9.3750 $9.3750 3/10/08 0 $ 147,397.18 $ 373,533.39
26,546 9.2784 9.3750 9.3750 3/10/08 0 156,512.22 396,632.69
8,454 2.9549 9.3750 9.3750 3/10/08 0 49,843.83 126,314.05
100,000 34.9522 9.4375 9.4375 3/10/08 0 593,519.30 1,504,094.45
Alexander W. Young......... -- -- -- -- -- -- -- --
Leland L. Grubb............ -- -- -- -- -- -- -- --
Herbert D. Locke........... 3,000 1.0486 8.75 8.75 2/20/08 0 16,508.48 41,835.74
Philip R. Thomas........... 114 0.0398 8.7813 8.7813 3/30/08 0 629.56 1,595.43
721 0.2520 8.7813 8.7813 6/30/08 0 4,817.73 12,209.06
125,000 43.9603 12.125 12.125 1/2/08 0 953,168.42 2,415,515.92
250,000 87.3805 12.125 12.125 1/2/08 0 1,906,336.84 4,831,031.83
- ---------------
(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.
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, 1998.
UNEXERCISED OPTIONS AT DECEMBER 31, 1997
--------------------------------------------------------
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)
- ---- ----------- --------- ------------------------- ----------------------------
J. Thomas Williams............. 300 $ 788 48,038/131,162 $ 17,585/$77,277
Alexander W. Young............. 85,264/ 5,000 255,975/ 9,063
Leland L. Grubb................ 43,467/ 15,533 -- / 9,063
Herbert C. Locke............... 6,972/ 26,128 5,032/ 45,731
Philip R. Thomas............... 140,460 $(206,294) 375,835/ -- 110/ --
- ---------------
(1) For purposes of this table, the value of the Common Stock is $9.75 per
share, the average of the high and low sale prices of the Common Stock on
December 31, 1998 as reported on the NASDAQ National Market System, and the
value of the Class B Common Stock is $6.83 (70% of $9.75).
EMPLOYMENT AGREEMENTS OF CERTAIN EXECUTIVE OFFICERS
Mr. Williams is employed by the Company under an employment agreement which
became effective March 10, 1998. Mr. Young is employed by the Company under an
employment agreement which became effective in August 1993. Mr. Grubb is
employed by the Company under an employment agreement which
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became effective in April 1995. Mr. Thomas was employed by the Company under an
employment agreement which became effective January 2, 1998 (amended effective
March 31, 1998).
Mr. Williams' employment agreement provides for base compensation in the
initial amount of $425,000, Mr. Young's employment agreement provides for base
compensation in the initial amount of $330,000, and Mr. Grubb's employment
agreement provides for base compensation in the initial amount of $300,000, with
each of such officers' base compensation potentially adjusted annually by the
Nominating, Corporate Governance and Compensation 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 such officers' 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.
Mr. Williams' employment agreement has a five-year term, Mr. Young's
employment agreement has a seven-year term, and Mr. Grubb's employment agreement
has a five-year term. The employment agreements may be extended 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. Williams, Mr. Young, or Mr. Grubb had been terminated
without cause as of January 1, 1999, such executives would have been entitled to
receive severance payments of approximately $625,059, $559,719 and $408,789,
respectively. The employment agreements also contain non-competition,
non-solicitation and confidentiality covenants.
DIRECTORS' COMPENSATION
With the exception of the Chairman of the Board, each non-employee director
serving for the entirety of the 1998 calendar year earned fees of less than
$25,000 in cash and an aggregate of 18,402 options to purchase shares of Common
Stock of the Company. Gen. Chain, Chairman of the Board, earned director fees of
$31,250 and an aggregate of 7,501 options to purchase shares of Common Stock of
the Company. 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.
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REPORT OF THE NOMINATING, CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
The Nominating, Corporate Governance and Compensation Committee (the
"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.
Compensation Philosophy
The Committee works with senior management to develop and implement the
Company's executive compensation philosophy. Generally, the Company's philosophy
on executive compensation has been to provide a base cash compensation and to
provide additional incentive compensation in the form of cash bonuses and grants
of options based on the realization of stated objectives, expected to result in
improvements in total stockholder return. Stated another way, the Company's
executive compensation policy is based on pay-for-performance.
Executive Compensation
During 1998, Mr. Williams, the Company's Chief Executive Officer, received
a base cash compensation related primarily to competitive factors and the level
of his responsibilities. For the latter half of fiscal 1998, Mr. Williams
received a bonus premised upon the achievement of revenue and profitability
targets for such period.
For Messrs. Williams, Young and Grubb, the Company has established an
incentive component of compensation, where the incentive component is tied
specifically to Company growth and performance. 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 may be
adjusted at the 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 Committee desired to balance the goals of maximizing profits
with the growth of the Company's business.
For Mr. Williams, Mr. Young and Mr. Grubb, the sharing ratio matrix is as
follows:
SHARING RATIO (%) IBTIC GROWTH RATE
------------------------------------------------
STANDARD INCENTIVE
------------------------------------------------
IBTIC AS % OF REVENUE <5% 5-9.99% 10-14.99% 15-24.99% OVER 25%
--------------------- --- ------- --------- --------- --------
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
Officer cash incentive compensation is limited to a percentage 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 the date of grant.
Effective January 1, 1999, the Company adopted an Executive Incentive
Compensation Plan covering the Chief Executive Officer, the Chief Financial
Officer and the Business Unit Presidents. Under this plan, financial performance
measures are to be set at the beginning of each fiscal year. For 1999, for each
participant, performance will be measured by the amount of revenue generated and
the return on revenue.
The incentive awards for the CEO and CFO will be based solely on
consolidated corporate performance for each measure. The incentive award for the
Business Unit Presidents will be based on consolidated corporate performance and
individual business unit performance, weighted equally. Each plan participant
must meet a minimum threshold level of performance on both measures before any
award will be paid to the participant.
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As the Company moves forward in its efforts to create stockholder value in
the years ahead, the Committee will continue to review, monitor and evaluate the
Company's program for executive compensation to ensure that it is internally
effective in support of the Company's strategy, is competitive in the
marketplace to attract, retain and motivate the talent needed to achieve the
Company's objectives, and appropriately rewards the creation of value on behalf
of the Company's stockholders.
The preceding report was issued by the Nominating, Corporate Governance and
Compensation Committee, comprised of:
James E. Dykes
Gen. John T. Chain, Jr.
Richard A. Freytag
David B. Mathis
NOMINATING, CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
Compensation decisions with respect to the executive officers of the
Company are made by the Nominating, Corporate Governance and Compensation
Committee of the Board, which is comprised of Mr. Dykes, Gen. Chain, Mr. Freytag
and Mr. Mathis.
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
January 1, 1994 and ending December 31, 1998. 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.
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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
MEASUREMENT PERIOD THOMAS PEER GROUP NASDAQ
(FISCAL YEAR COVERED) GROUP INC. INDEX MARKET INDEX
12/31/93 100 100 100
12/30/94 35.71 85.89 104.99
12/29/95 77.14 94.42 136.18
12/31/96 51.43 107.37 169.23
12/31/97 71.43 109.42 207.00
12/31/98 58.57 77.25 291.96
ASSUMES $100 INVESTED ON JANUARY 1, 1994
ASSUMED DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1998
CERTAIN TRANSACTIONS
In 1997, Mr. Philip R. Thomas, then the Chairman and Chief Executive
Officer, earned $0.8 million in incentive compensation and was paid compensation
advances of $1.4 million. The excess of $0.6 million was repaid through the
tender of shares to the Company, as described in the following paragraph. Mr.
Thomas did not earn incentive compensation in 1996 and therefore executed a $1.5
million promissory note, bearing interest at prime plus 1/4% for advances made
to him. This note was extended and was paid by Mr. Thomas as a result of the
Company's purchase of shares from Mr. Thomas, as described in the following
paragraph.
On February 19, 1998, the Company entered into a stock purchase agreement
with Mr. Thomas, for an undetermined number of shares of common stock in
exchange for $8.2 million in cash and the satisfaction of a $2.3 million
outstanding debt to the Company. The ultimate number of shares to be purchased
from Mr. Thomas was determined based on a formula and at a discount to market.
The Company utilized an investment banking firm to determine the appropriate
discount factor. At the close of the market on April 24, 1998 the number of
shares to be purchased was determined to be approximately 1.3 million shares.
In 1996 the Company advanced Mr. Thomas Williams $0.2 million. Mr. Williams
executed a promissory note due December 18, 2000. Mr. Williams repaid
approximately $0.1 million on the note during 1998.
*****
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PROPOSAL TO AMEND
THE 1997 STOCK OPTION PLAN
On April 1, 1999 the Board of Directors adopted, subject to stockholder
approval, an amendment to the 1997 Plan.
PARTICIPANTS
At December 31, 1998, the Company had 264 employees, all of whom are
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.
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1997 PLAN BENEFITS
The following table provides certain summary information concerning stock
options granted during 1998, at the discretion of the Stock Option and
Compensation Committee, under the 1997 Plan to the executive officers named in
"Executive Compensation -- Summary Compensation Table" and the groups indicated.
NUMBER OF
NAME AND POSITION DOLLAR VALUE UNITS
----------------- ------------ ---------
J. Thomas Williams.......................................... $ -- --
Alexander W. Young.......................................... -- --
Leland L. Grubb............................................. -- --
Herbert C. Locke............................................ 26,250 3,000
Philip R. Thomas............................................ -- --
Non-Executive Director Group................................ -- --
Non-Executive Employee Group................................ 1,024,641 115,500
- ---------------
(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, 1998
was $10.25 per share.
THE PROPOSED AMENDMENT
Pursuant to the proposed amendment, the shares of Common Stock available
for issuance under the 1997 Plan would be increased by 225,000 shares, from
125,000 to 350,000.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
APPROVAL OF THE AMENDMENT TO 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, 1998, Company officers, directors and greater than 10%
beneficial owners complied with all such filing requirements.
AUDITORS
The Company has appointed Ernst & Young LLP ("E&Y") as the independent
auditors of the Company for the fiscal year ending December 31, 1999.
Representatives of E&Y 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 2000, such proposals must meet the requirements set forth in the rules
and regulations of the Securities and Exchange Commission, and must be received
at the Company's offices at 5221 N. O'Connor Boulevard, Suite 500, Irving,
Texas, 75039-3714, Attention: Secretary, by December 9, 1999.
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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.
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,
1998, 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., 5221 N. O'CONNOR
BOULEVARD, SUITE 500, 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.
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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/ J. THOMAS WILLIAMS
J. THOMAS WILLIAMS
President and Chief Executive
Officer
Irving, Texas
May 24, 1999
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PROXY
THOMAS GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) J. Thomas Williams 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 Tuesday, June 29, 1999, at the
principal executive offices of the Company, 5221 N. O'Connor Boulevard, Suite
500, 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 DIRECTORS SET FORTH BELOW
AND FOR THE PROPOSALS SET FORTH ON THE REVERSE SIDE.
(Change of Address)
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
(If you have written in the above space,
please mark the corresponding box on the
reverse side of this card.)
Please complete, date, sign and mail this Proxy promptly in the enclosed
envelope. No postage is required for mailing in the United States.
SEE REVERSE
SIDE
20
THOMAS GROUP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of Directors, Nominees:
John T. Chain, Jr., Richard A. Freytag, J. Thomas Williams,
James E. Dykes, David B. Mathis
FOR WITHHELD FOR ALL
ALL ALL EXCEPT
[ ] [ ] [ ]
--------------------------------------
Nominee Exception
2. Proposal to amend the 1997 Stock Option Plan, to increase by 225,000 shares,
from 125,000 to 350,000, the number of shares of the Company's Common Stock
currently available for issuance under the 1997 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In his discretion, the proxy is 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
------------------ -----
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.