Engagement Letter - Stonegate Securities Inc. and Thomas Group Inc.
May 29, 1997
Thomas Group, Inc.
5215 North O'Connor Blvd.
Suite 2500
Irving, Texas 75039
Attention: Philip R. Thomas
Chairman and CEO
Gentlemen:
1. The purpose of this letter (the "Agreement") is to set forth
the terms of the engagement by Thomas Group. Inc. ("Thomas Group" or the
"Company") of Stonegate Securities, Inc. ("Stonegate") to serve as its
financial advisor and to furnish Investment Banking services to Thomas Group
with respect to:
(a) assisting the Company in locating prospective clients
for the Company's newly created emerging growth division;
(b) rendering financial advice and services preparatory
to the possible sale of equity interests in the Company,
including introducing Thomas Group to Investment Banking firms
in order to identify potential Investment Bankers for Thomas
Group's acquisition strategy or capital needs, as the case may
be;
(c) evaluating potential acquisitions by the Company with
respect to other consulting or software companies; and
(d) evaluating strategic alternatives available to the
Company, including evaluating the capital structure of the
Company.
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Thomas Group, Inc.
May 29, 1997
Page 2
2. The Company represents that all information provided to
Stonegate in connection with the services to be performed under this Agreement
will be complete and correct in all material respects and will not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading (the "Information").
The Company agrees to advise Stonegate immediately of the occurrence of any
event or any other change known to the Company that results in any of the
Information containing an untrue statement of a material fact or omitting to
state any material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
3. If, in the course of such services, Stonegate advises the
Company in connection with any financial transaction or any sale, merger or
acquisition, Stonegate shall be separately compensated for such services
pursuant to a separate agreement and will receive fees that are customary for
any such transaction. The Company recognizes that Stonegate has followed, and
may continue to follow the Company's stock and, from time to time, Stonegate
may issue research reports concerning the Company and its stock. It is
understood between the Company and Stonegate that such reports are not issued
on behalf, or with the authorization, of the Company and Stonegate shall have
sole responsibility for their content. Neither the Company, nor its officers,
directors, employees or affiliates, shall have any responsibility for any
information contained in such reports or other information disseminated by
Stonegate concerning the Company, regardless of whether or not the Company
reviews or comments upon such reports or information.
4. The term of Stonegate's engagement shall be for the
twenty-four-month period from the date of this Agreement (the ?Initial Term?)
and may be extended beyond the Initial Term by mutual written consent.
Notwithstanding the foregoing, the Company may terminate this Agreement with or
without cause at any time upon delivery to Stonegate of written notice thereof,
except for the provisions set forth in paragraphs 2, 6 and 7, which provisions
shall survive the termination of this Agreement.
5. For providing financial advisory and investment banking
services, the Company agrees to grant Stonegate warrants (the ?Warrants?) to
purchase an aggregate of 50,000 shares of the Company?s common stock at an
exercise price of $11.25 per share. Twenty five thousand (25,000) of the
Warrants shall vest immediately upon execution of this Agreement and shall be
immediately exercisable and 25,000 of the Warrants shall, at the sole
discretion of the Company's management with respect to Stonegate's performance
of the items discussed in paragraph 1 (a) through (d) above, vest on the first
anniversary of the date of this Agreement and shall become immediately
exercisable. It is understood that the second 25,000 Warrants
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Thomas Group, Inc.
May 29, 1997
Page 3
shall vest immediately on the first anniversary of the date of this Agreement
unless the Company notifies Stonegate in writing to the contrary. Any and all
Warrants issued under the terms of this Agreement shall be issued to the
following entities and in the following sharing ratio: 75% of the Warrants
shall be issued to SRG & Associates, Ltd. and 25% of the Warrants shall be
issued to Lyon Securities, Inc. All vested Warrants shall be exercisable in
accordance with their terms regardless of any termination of this Agreement.
Vested Warrants shall be exercisable for five years from the date of vesting.
The agreement evidencing the Warrants shall contain customary terms and
conditions, including, without limitation, anti-dilution provisions. In
addition, the Company shall grant Stonegate customary ?piggy-back? registration
rights with respect to the shares of common stock underlying the Warrants.
6. If in connection with any services or matters that are the
subject of or arise out of this Agreement or Stonegate's engagement hereunder,
Stonegate becomes involved (whether or not as a name party) in any action,
claim or legal proceeding (including any governmental inquiry or investigation
and including, but not limited to, actions, claims or legal proceedings arising
out of or based upon any breach by the Company of any agreement or
representation or warranty of the Company contained herein, or any untrue
statement or alleged untrue statement of a material fact by the Company in any
release or communication to an offeree of the securities or an omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements contained therein, not misleading), the
Company agrees, to the extent permitted by applicable law, to indemnify and
hold Stonegate harmless against any losses, claims, damages or liabilities,
joint or several, as they are incurred, to which Stonegate may become subject
in connection therewith, provided that Stonegate promptly notifies the Company
of any such action, claim or legal proceeding and provides the Company with an
opportunity to defend against or settle such matter with counsel of its choice,
and provided further that the Company shall not be liable under the indemnity
provisions hereof in respect of any loss, claim, damage or liability pertaining
to this engagement to the extent that such loss, claim, damage or liability
resulted from Stonegate's negligence, bad faith, willful misconduct or
violation of any law, rule or regulation. The foregoing agreements shall apply
to any modification of Stonegate's engagement, and shall remain in full force
and effect following the completion or termination of Stonegate's engagement
and the sale of any securities and shall be in addition to any rights that
Stonegate may have at common law or otherwise. The foregoing agreements in this
paragraph shall, upon the same terms and conditions, extend to and inure to the
benefit of each person, if any, who may be deemed to control Stonegate and to
each of Stonegate's and each such person's respective affiliates, directors,
officers, employees and agents.
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Thomas Group, Inc.
May 29, 1997
Page 4
7. Stonegate agrees to indemnify and hold the Company, each
person, if any, who may be deemed to control the Company and to each of the
Company's and each such person's respective affiliates, directors, officers,
employees and agents harmless against any losses, claims, damages, joint or
several, that resulted from Stonegate's gross negligence, bad faith, willful
misconduct or violation of any law, rule or regulation or breach of this
Agreement.
8. This Agreement may not be amended or modified except in
writing and shall be governed by and construed in accordance with the laws of
the State of Texas and all obligations shall be performed in Dallas County,
Texas.
If the foregoing is in accordance with your understanding of the terms
of our engagement, please confirm your agreement by signing and returning the
enclosed copy of this Agreement to the undersigned effective as of the date
first above written.
Very truly yours,
STONEGATE SECURITIES, INC.
By:
--------------------------
E.B. Lyon III, President
Confirmed and agreed to:
THOMAS GROUP, INC.
By:
---------------------------------
Philip R. Thomas
Chairman and
Chief Executive Officer