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Compensation and Corporate Governance Committee Charter

PURPOSES

The Compensation and Corporate Governance Committee (the “Committee”) is formed and appointed by the Board Directors (the “Board”) of Thomas Group, Inc., a Delaware corporation (the “Company”), to (1) identify individuals qualified to become Board members; (2) recommend to the Board a slate of director nominees to be elected by the stockholders at the next annual meeting of stockholders and, when appropriate, director appointees to take office between annual meetings; (3) recommend to the Board membership on standing Board committees; and (4) review and make recommendations to the Board regarding all forms of compensation to be provided to the executive officers of and directors of the Company, including stock compensation and loans (to the extent permitted by law and regulation), and all bonus and stock compensation to all employees. 

The philosophy of the Committee in exercising its compensation function is that the Company should compensate the Company’s officers and directors in such a manner as to attract and retain the best available personnel for positions of substantial responsibility with the Company, to provide incentives for such persons to perform to the best of their abilities for the Company, and to promote the success of the Company’s business. The Committee has the authority and responsibility to undertake the specific activities identified in this Charter and will have the authority and responsibility to undertake such other specific activities as the Board from time to time may prescribe.

AUTHORITY

In exercising its authority, duties and responsibilities under this Charter, the Committee shall have and may exercise all the powers and authority of the Board. The Committee shall have the sole authority to retain and terminate any search firm engaged to assist in identifying director candidates, including the sole authority to approve the search firm’s fees and other retention terms. The Committee also shall have the sole authority to retain and terminate any compensation advisory firm engaged to assist in developing compensation programs for the Company’s officers and employees, including the sole authority to approve the compensation advisory firm’s fees and other retention terms. The Committee shall be assisted by appropriate corporate staff, and in addition, the Committee may obtain advice and assistance from such other persons, who need not be employees of the Company, or organizations as it may deem necessary or appropriate, with the expenses incurred in their use to be paid by the Company. The foregoing authority includes obtaining advice and assistance from internal or external legal, accounting or other advisors.

MEMBERSHIP

The Committee shall consist of a number of non-employee directors fixed from time to time by the Board, but not less than two. The members of the Committee shall be appointed and may be removed by the Board in its discretion. At least two members of the Committee shall be outside directors within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and any applicable guidance issued thereunder. With respect to any member of the Committee who is not such an outside director, there shall be an abstention or recusal of such member from Committee decisions, as appropriate, regarding performance-based compensation and any other compensation that is otherwise intended to be exempt from the tax deduction limitations under Section 162(m)(1) of the Code. All members of the Committee shall be determined to be “independent” as such term is defined in the listing standards of the Nasdaq Stock Market. Notwithstanding the foregoing, the Committee may include one director who does not satisfy the applicable requirements for independence only if the Board, under exceptional and limited circumstances, determines that such individual’s membership is required in the best interests of the Company and its stockholders and is permitted under applicable law and the listing standards of the Nasdaq Stock Market. 

MEETINGS AND PROCEDURES

The Committee shall meet at such times and with such frequency as it determines to be necessary or appropriate, or as meetings may be called by the Chairman of the Committee, any two members of the Committee, or the Chairman of the Board. At a minimum of one such meeting annually, the Committee will consider stock plans, performance goals and incentive awards, and the overall coverage and composition of the compensation package. The Committee may invite members of management or others to attend meetings and/or to furnish pertinent information. The Committee may also meet in executive session as required. The Board shall appoint one member of the Committee as Chairman of the Committee. The Chairman of the Committee shall be responsible for scheduling all meetings of the Committee, determining the agenda for each meeting (following consultation with other members of the Committee and with management), presiding over meetings of the Committee and coordinating reporting to the Board. In the absence of the Chairman of the Committee, the majority of the members of the Committee present at a meeting shall appoint a member to preside at the meeting. The Committee may form and delegate authority to subcommittees when appropriate. 

The Committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the Board. The Committee is governed by the same rules regarding meetings (including meetings by teleconference or similar communications), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board. The Committee is authorized and empowered to adopt its own rules of procedure not inconsistent with (a) any provision of this Charter, (b) any provision of the Bylaws of the Company, or (c) the laws of the state of Delaware.

RESPONSIBILITIES

In the exercise of its nominating and corporate governance oversight functions, the Committee shall:

• Search for, identify, evaluate the qualifications of and recommend to the Board the slate of qualified directors nominees to be elected by the stockholders in connection with each annual meeting, and any directors to be elected by the Board to fill vacancies or newly created directorships between annual meetings. As part of its process, the Committee shall consider and evaluate nominees proposed by stockholders and management;
• In assessing the qualifications of prospective nominees to the Board, consider each nominee’s personal and professional integrity, experience, skills, ability and willingness to devote the time and effort necessary to be an effective board member, and commitment to acting in the best interests of the Company and its stockholders. Consideration shall also be given to the Board’s having an appropriate mix of backgrounds and skills. The Committee shall also evaluate whether it is appropriate to adopt minimum qualifications that the Committee believes must be met by prospective nominees to the Board, qualities or skills that the Committee believes are necessary for one or more of the Company’s directors to possess and standards for the overall structure and composition of the Board;
• Recommend committee assignments for directors to the Board as openings occur on committees of the Board, or as rotations of committee assignments are deemed advisable by the Board upon recommendation from the Committee. The Committee shall recommend committee assignments in accordance with the membership requirements specified in the Charter of each committee, and with due consideration given to each committee’s annual assessment of its composition, performance and effectiveness and the desires and skills of individual directors;
• If requested by the Board, review and report to the Board on the succession planning with respect to the chief executive officer, and recommend to the Board a successor to the chief executive officer when a vacancy occurs through retirement or otherwise, including emergency procedures for succession in the event of unexpected death, disability, or departure of the chief executive officer; and
• If requested by the Board, develop and make recommendations to the Board for approval standards and processes for determining the independence of Board members that meet the requirements of the Nasdaq Stock Market and applicable law and regulation.

In the exercise of its compensation functions, the Committee shall:

• Review and make recommendations to the Board regarding the compensation policy for executive officers of and directors of the Company, and such other officers of the Company as directed by the Board;
• Review and make recommendations to the Board regarding all forms of compensation (including all “plan” compensation, as such term is defined in Item 402(a)(7) of Regulation S-K promulgated by the Securities and Exchange Commission, and all non-plan compensation) to be provided to the executive officers of the Company;
• Review annually and determine the individual elements of total compensation for (i) the chief executive officer, (ii) all other executive officers (within the meaning of Rule 3b-7 issued by the SEC), (iii) all other officers (within the meaning of Rule 16A-1(f) issued by the SEC), and (iv) any principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer, or person performing similar functions, in each case as contemplated by Item 5.02 of Form 8-K under the Securities Exchange Act of 1934 ((i) - (iv) collectively, “Officers”), and communicate in the annual Board Compensation Committee Report to stockholders, if such report is required, the factors and criteria on which the chief executive officer’s and all other executive officers’ (within the meaning of Rule 3b-7 issued by the SEC) compensation for the last year was based;
• Approve all special perquisites, special cash payments and other special compensation and benefit arrangements for the Company’s Officers;
• Work with the chief executive officer of the Company to review and make recommendations to the Board regarding general compensation goals and guidelines for the Company’s non-officer employees and the criteria by which bonuses to the Company’s non-officer employees are determined;
• Approve the individual elements of total compensation for any non-Officer employees who are reasonably expected to receive from the Company in any calendar year total compensation in excess of a dollar amount established from time to time by the Board (“Highly Compensated Non-Officer Employees”);
• Grant stock options and other discretionary awards under the Company’s stock option or other equity incentive plans to all other eligible individuals in the Company’s service. The Committee may delegate to one or more corporate officers designated by the Committee the authority to make grants to eligible individuals (other than any such corporate officer) who are not Officers, provided that the Committee shall have fixed the price (or a formula for determining the price) and the vesting schedule for such grants, approved the form of documentation evidencing such grants, and determined the appropriate number of shares or the basis for determining such number of shares by position, compensation level or category of personnel. Any corporate officer(s) to whom such authority is delegated shall regularly report to the Committee the grants so made. Any such delegation may be revoked at any time by the Committee;
• Periodically review the Company’s employee benefit plans. Responsibility for day-to-day administration, including the preparation and filing of all government reports and the preparation and delivery of all required employee materials and communications, will be performed by Company personnel;
• With sole and exclusive authority, make and approve stock option grants and other discretionary awards under the Company’s stock option or other equity incentive plans to all persons who are Board members or Officers;
• Review and make recommendations to the Board regarding other plans that are proposed for adoption or adopted by the Company for the provision of compensation to employees of, directors of and consultants to the Company;
• Review matters related to management performance, compensation and succession planning (including periodic review and approval of chief executive officer and other Officer succession planning) and executive development for executive staff;
• Approve separation packages and severance benefits for Officers and Highly Compensated Non-Officer Employees to the extent that the packages are outside ordinary plan limits previously approved by the Committee or the Board;
• Exercise, as necessary and appropriate, all of the authority of the Board with respect to the election of corporate officers of the Company during the periods between the regular meetings of the Board;
• To the extent required to be included in the Company’s public filings or otherwise requested by the Board, prepare a report which describes: (a) the factors and criteria on which compensation paid to the chief executive officer for the last completed fiscal year is based; (b) the relationship of such compensation to the Company’s performance; and (c) the Committee’s executive compensation policies applicable to executive officers; and
• Authorize the repurchase of shares from terminated employees pursuant to applicable law.

In the exercise of its functions generally, the Committee shall:

• Report regularly to the Board on the major items covered at each Committee meeting; and
• Fulfill such other duties and responsibilities as are consistent with the purposes of the Committee identified in this Charter or as shall be delegated to it by the Board from time to time under the Company’s corporate governance guidelines or otherwise.

PERFORMANCE

At least annually, the Committee shall review and reassess the adequacy of this Charter. The Committee shall report the results of the review to the Board and, if necessary, recommend that the Board amend this Charter.