Exhibit 10.4


 


Execution Version


 


PERFORMANCE SHARE AWARD

UNDER THE

2008 OMNIBUS STOCK AND INCENTIVE PLAN

for

THOMAS GROUP, INC.


 


Effective as of March 1,
2008 (“Date of Grant”), a PERFORMANCE
SHARE AWARD (“Award”)
is granted by Thomas Group, Inc. (the “Company”)
to Michael E. McGrath (the “Holder”),
provided that this Award is in all respects subject to the terms and provisions
of the 2008 Omnibus Stock and Incentive Plan For Thomas Group, Inc. (the “Plan”), all of which are incorporated
herein by reference, except to the extent otherwise expressly provided in this
Award.  Capitalized terms used herein
without definition shall have the respective meanings specified in the Plan.


 


WITNESSETH


 


WHEREAS, the Company desires to grant to the
Holder an award which entitles the Holder to receive up to 350,000 Shares
subject to certain conditions described herein;


 


WHEREAS, the purpose of this Award is to advance
the interests of the Company and increase shareholder value by providing
additional incentives to attract, retain and motivate the Holder; and


 


WHEREAS, the terms of the Award, including
without limitation the conditions imposed on delivery of the Performance
Shares, are set forth below;


 


NOW
THEREFORE, in
consideration of the mutual covenants hereinafter set forth and for other good
and valuable consideration, the parties agree as follows:


 


1.             Definitions. 
As used in this Award, the following words shall have the following
meanings:


 


“Accounting
Firm” shall mean
the Company’s certified public accounting firm on the date of reference.


 


“Anniversary
Date” shall mean
each anniversary of the Date of Grant.


 


“Annual
Profit” shall
mean the net income of the Company before interest expense, interest income,
gain (loss) on sale of equipment, gain (loss) on investment, gain on sale of
land, depreciation, amortization, taxes on income, extraordinary items, and the
expense attributable to the grant of the Award, all as determined by the
Accounting Firm using generally accepted accounting principles and as reflected
on the Company’s certified financial statements to the extent shown or
reflected on such financial statements. 
For this purpose, extraordinary items are those of a non-recurring and
unusual nature, or resulting from unforeseen and atypical events, as determined
by the Accounting Firm using generally accepted accounting principles and as
reflected on the Company’s certified financial statements as prepared by the
Accounting Firm to the extent shown or reflected on such financial statements.


 


“Change in Control” shall mean the first date, if any, upon
which any of the following occurs:


 


(1)           any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a “Person”) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 50
percent or more of the combined voting power of the Company’s then outstanding
securities; provided, however,
that the term “Person” shall not include (A) the Company, (B) any
employee benefits plan of the Company, (C) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company and acting in
such capacity, (D) a subsidiary of a corporation owned, directly or
indirectly, by the Shareholders in substantially the same proportions as their
ownership of voting securities of the Company, or (E) General John T.
Chain, Jr. or Edward P. Evans; or


 

















(2)           individuals who, as of
the Date of Grant, constitute the Board (the “Incumbent Board Members”) cease
for any reason during any 12-month period to constitute more than 50 percent of
the members of the Board and the election or appointment of the members of the
Board who are not Incumbent Board Members were not endorsed by a majority of
the Incumbent Board Members; provided,
however, that any individual becoming a director subsequent to the
date hereof whose election, nomination for election or appointment was approved
by a vote of at least two-thirds of the directors then constituting Incumbent
Board Members, shall be considered as though such individual were an Incumbent
Board Member; or


 


(3)           a sale or disposition
of all or substantially all of the Company’s assets to any other corporation or
other legal person occurs.


 


“Performance
Shares” shall mean the Shares to be delivered pursuant to this Award.


 


“Performance Target” shall
mean the level of Annual Profits necessary to entitle the Holder to delivery of
Performance Shares for the applicable year.


 


“Termination Date” shall mean the date on which
the Award terminates under Section 9.


 


“Year” shall mean the fiscal year of the
Company.


 


2.             Performance Share Award. 
The Company hereby issues to the Holder the right to receive an
aggregate of up to 350,000 Shares upon the terms and conditions set forth in
this Award.


 


3.             Performance Targets.  The Performance Target for Year 2008 shall be
established by the Committee and communicated to the Holder no later than May 7,
2008 based upon the Annual Profit goal for 2008 set forth in the Company’s
revised internal business plan for 2008 to be developed and approved by the
Board on or before such date.  The
Committee intends that the Performance Target for each of Years 2009 and 2010
shall be established by the Committee during the month of February of the
applicable Year based upon the Annual Profit goal for such Year set forth in
the Company’s internal business plan for such Year to be developed and approved
by the Board; provided, that the Committee
shall establish such Performance Targets and communicate them to the Holder not
later than March 30 of the applicable Year (and under circumstances that
satisfy the requirements of both Sections 162(m) and 409A of the
Code).  If in Year 2010 the Company’s
Annual Profit both (i) meets or exceeds the Performance Target for Year
2010 and (ii) is at least $9 million, then in addition to the delivery of
the 121,334 share increment for such Year, the Holder will be entitled to
receive an additional number of Performance Shares that would result in Holder
having received a total of 350,000 Performance Shares hereunder.  In the event of a reorganization, business
combination or other transaction that materially alters the business or
structure of the Company, the Committee and the Holder will discuss in good
faith any appropriate adjustments to the Performance Targets applicable in the
remaining Years to which this Award applies.


 


4.             Delivery of Shares. 
The Performance Shares shall be delivered to the Holder for any Year in
which the Company’s Annual Profit meets or exceeds the Performance Target
applicable for such Year as follows:


 


2008        107,333


2009        121,333


2010        121,334


 


The Company shall deliver
an earned increment of Performance Shares to the Holder on the first business
day following the day that both (i) the Accounting Firm certifies the
Company’s financial statements which reflect that the Annual Profit for that
Year meets or exceeds the applicable Performance Target and (ii) the
Committee certifies the attainment of the applicable Performance Target.


 


5.             Change in Control. 
If a Change in Control occurs prior to the time at which all of the
Performance Shares have been delivered to the Holder, the Company shall deliver
all such undelivered Performance Shares to the Holder immediately prior to the
closing of such Change in Control transaction.


 

















6.             Withholding. 
On each date on which Performance Shares are delivered, the Holder shall
be required to pay to the Company, in cash, the amount which the Company
reasonably determines to be necessary in order for the Company to comply with
applicable federal or state income tax withholding requirements and the
collection of employment taxes; provided that the Holder may elect to offset
the amount the Company reasonably determines as necessary to comply with
applicable tax requirements from the Performance Shares otherwise deliverable
to the Holder (valued at their Fair Market Value on the applicable date) and a
net number of Performance Shares shall thereafter be delivered to the Holder.


 


7.             Status of the Holder With
Respect to Shares.  The Holder shall have no
rights, powers or privileges with respect to the Performance Shares until such
Performance Shares are delivered to the Holder.


 


8.             Representations and Warranties. 
As a condition to the delivery of the Performance Shares, the Board may
obtain such agreements or undertakings, if any, as the Board may deem necessary
or advisable to assure compliance with any law or regulation including, but not
limited to, the following:


 


(a)           a representation, warranty or
agreement by the Holder to the Company that he is acquiring the Performance
Shares for investment and not with a view to, or for sale in connection with,
the distribution of any such Performance Shares; and


 


(b)           a representation, warranty or
agreement to be bound by any legends that are, in the opinion of the Board,
necessary or appropriate to comply with the provisions of any securities law
deemed by the Board to be applicable to the issuance of the Performance Shares
and are endorsed upon the Share certificates.


 


9.             Termination of the Award. 
Without limitation, this Award shall automatically terminate and expire
on the earlier of (i) the first date in 2011 on which either (A) all
Performance Shares have been delivered or (B) the Committee determines
that the Performance Target for Year 2010 has not been attained, or (ii) the
date of the Holder’s Separation, and upon the date of such termination of the
Award all Performance Shares which have not been delivered on or prior to such
date will be permanently forfeited.


 


10.          Shareholder Approval of 2008 Plan. 
This Award
is subject to approval of the 2008 Plan by a majority of the Company’s
stockholders; provided, however, that if the 2008 Plan is not so approved by December 31,
2008, this Award shall terminate and be null and void ab initio; and provided,
further, that no Performance Shares shall be delivered prior to such
stockholder approval.


 


11.          Interpretation of the Award
Provisions.  The Committee shall have the authority to the
full extent provided under the terms of the Plan to interpret all terms of the
Plan and this Award, and to otherwise supervise the implementation of such
terms.


 


12.          Governing Law.  TO THE MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW,
THIS AWARD SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS.


 


13.          Binding Effect. 
This Award shall inure to the benefit of and be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.


 


14.          Amendments.  This Award may only be amended by
a written document signed by the Company and the Holder.


 


15.          Severability. 
If any provision of this Award is declared or found to be illegal,
unenforceable or void, in whole or in part, the remainder of this Award will
not be affected by such declaration or finding and each such provision not so
affected will be enforced to the fullest extent permitted by law.


 


16.          Counterparts.  This Award may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.


 

















 


IN
WITNESS WHEREOF,
the Company has caused these presents to be executed on its behalf and the
Holder has hereunto set his hand, all on the day and year first above written.


 


	
  THOMAS
  GROUP, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Edward P. Evans

  
	
   

  	
  Edward P. Evans,
  Director

  



 


ACKNOWLEDGMENT


 


The Holder agrees
to be bound by all the terms of this Award and the Plan.


 


	
  /s/ Michael E. McGrath

  
	
  Michael E. McGrath