THOMAS GROUP INC, PRE 14A, 1998-03-25

THOMAS GROUP INC
PRE 14A, 1998-03-25
MANAGEMENT CONSULTING SERVICES

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<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:
[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.

<PAGE> 2

[ ] 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:

2
<PAGE> 3

THOMAS GROUP, INC.
5215 N. O'CONNOR BOULEVARD
SUITE 2500
IRVING, TEXAS 75039-3714

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 1998

To the Holders of Common Stock of THOMAS GROUP, INC.:

Notice is hereby given that the 1998 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 7, 1998 at 9:00 A.M., Dallas, Texas time,
for the following purposes:

(1) To elect seven persons to serve as directors until the Company's
1999 Annual Meeting of Stockholders or until their successors are duly
elected and qualified; and

(2) To consider and vote upon an amendment to the Company's Amended
and Restated Certificate of Incorporation ("Certificate of Incorporation")
increasing the number of authorized shares of Common Stock from 12,500,000
to 25,000,000; and

(3) To consider and vote upon an amendment to the Certificate of
Incorporation to authorize the issuance of up to 1,000,000 shares of
Preferred Stock, par value $.01 per share, upon the determination of the
Board of Directors; 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 23, 1998, 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,
1601 Elm Street, Suite 2320 Dallas, Texas 75201, 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
President and Chief Operating
Officer

Irving, Texas
April 11, 1998
<PAGE> 4

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 7, 1998

The accompanying proxy, mailed together with this Proxy Statement to
stockholders on or about April 11, 1998, is solicited by Thomas Group, Inc. (the
"Company") in connection with the Annual Meeting of Stockholders to be held on
May 7, 1998 (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 seven directors to serve as directors until the Company's 1999
Annual Meeting of Stockholders or until their successors are duly elected and
qualified, (2) an amendment to the Company's Amended and Restated Certificate of
Incorporation ("Certificate of Incorporation") increasing the number of its
authorized shares of Common Stock from 12,500,000 to 25,000,000, (3) an
amendment to the Certificate of Incorporation to authorize the issuance of up to
1,000,000 shares of Preferred Stock, par value $.01 per share, upon the
determination of the Board of Directors, 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 23, 1998
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
On the Record Date, the Company had outstanding 6,295,444 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. Approval of each of the proposals to
amend the Certificate of Incorporation requires the affirmative vote of at least
a majority of the issued and outstanding shares of Common Stock. 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 Certificate of Incorporation
will have the effect of a negative vote because those proposals require 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 and will also have discretionary authority to vote on
the proposal to increase the number of authorized shares of Common Stock. 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 Certificate of Incorporation 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
<PAGE> 5

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, (ii) FOR the proposal to increase the number of
authorized shares of Common Stock, and (iii) FOR the proposal to authorize the
issuance of up to 1,000,000 shares of Preferred Stock.

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, 1998, 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)......................................... 1,789,748(3) 29.0%
Alexander W. Young(2)....................................... 143,330(4) 2.4%
J. Thomas Williams(2)....................................... 4,907(5) *
Leland L. Grubb, Jr.(2)..................................... 41,134(6) *
Herbert D. Locke(2)......................................... 43,756(7)
Roger A. Crabb(2)........................................... 3,966(8)
Donald J. Almquist(2)....................................... 13,614(9) *
J. Fred Bucy(2)............................................. 26,168(10) *
Hollis L. Caswell(2)........................................ 25,908(11) *
John T. Chain, Jr.(2)....................................... 56,614(12) *
James E. Dykes(2)........................................... 30,780(13) *
Richard A. Freytag(2)....................................... 3,000(14)
All officers and directors as a group (12 persons).......... 2,182,925(15) 34.4%
Kennedy Capital Management.................................. 469,300 7.8%
10829 Olive Boulevard
St. Louis, Missouri 63141
Warburg, Pincus Counselors.................................. 428,100 7.2%
486 Lexington Avenue, 10th Floor
New York, New York 10017
Capital Research and Management............................. 388,500 6.5%
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,
1998.

(2) The address of the named individuals is 5215 N. O'Connor Boulevard, Suite
2500, Irving, Texas 75039-3714.

(3) Includes 189,767 shares of Common Stock which may be issued within 60 days
of February 28, 1998 upon exercise of outstanding options.

2
<PAGE> 6

(4) Includes 82,741 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of February 28, 1998.

(5) Includes 4,907 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1998.

(6) Includes 36,134 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of February 28, 1998.

(7) Includes 3,291 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1998.

(8) Includes 3,966 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1998.

(9) Includes 8,382 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1998.

(10) Includes 1,332 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1998.

(11) Includes 1,000 shares owned by Mr. Caswell's spouse. Mr. Caswell disclaims
beneficial ownership of such shares.

(12) Includes 8,382 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1998.

(13) Includes 27,548 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of February 28, 1998.

(14) Includes 3,000 shares of Common Stock issuable upon exercise of outstanding
options exercisable within 60 days of February 28, 1998.

(15) The amount shown includes a total of 370,782 shares of Common Stock
issuable upon exercise of outstanding options exercisable within 60 days of
February 28, 1998.

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 seven. The seven nominees for
director listed below will stand for election at this Annual Meeting for a
one-year term of office expiring at the 1999 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, 63.............. Chairman of the Board and Chief
Executive Officer 1978
Donald J. Almquist, 64............ Director 1995
J. Fred Bucy, 69.................. Director 1991
Hollis L. Caswell, 66............. Director 1991
John T. Chain, Jr., 63............ Director 1995
Richard A. Freytag, 64............ Director 1997
J. Thomas Williams, 51............ President and Chief Operating Officer --
</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> 7

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 a General Manager of
semiconductor operations for Fairchild Semiconductor Corporation, as General
Manager of the microelectronics division of General Instrument Corporation, 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.

J. THOMAS WILLIAMS became associated with the Company in 1992 and currently
serves as President and Chief Operating Officer. 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.

LELAND L. GRUBB, JR., 52, 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.

HERBERT D. LOCKE, 60, 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.

ROGER A. CRABB, 44, 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.

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 Hughes Electronics Corporation 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.

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. Mr. Bucy currently serves as a director
of ODS Networks, Inc., a manufacturer of computer communication networks.

HOLLIS L. CASWELL was elected a director of the Company in October 1991.
Dr. Caswell serves as chief operating officer and a director of Advanced Energy
Industries, Inc., a power supply provider to the electronics industry. He is
also currently a director of HYPRES, Inc., a superconducting electronics
company. 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 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 National, Northrop Grumman
Corporation, RJR Nabisco Holdings Corp. and Nabisco Holdings, Inc.
4
<PAGE> 8

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, and currently serves as an
outside director and as vice chairman of the board of directors of Citicorp
Banking Corporation. Mr. Freytag is also currently a director of Citicorp
Holdings, Inc., Citibank Overseas Investment Corporation and Citibank Delaware.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

The Board of Directors has established three committees: an Audit
Committee, a Finance Committee, and a Nominating, Corporate Governance and
Compensation Committee.

The Audit Committee, currently composed of Messrs. Bucy, Caswell, Chain and
Freytag, met six times during the fiscal year ended December 31, 1997. 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 1997
audit and the significant accounting policies and internal controls.

The Finance Committee, currently composed of Messrs. Bucy, Caswell, Chain
and Freytag, met six times during the fiscal year ended December 31, 1997. The
Finance Committee 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. Chain, Almquist and Bucy, met [six] times during the fiscal
year ended December 31, 1997. 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 eight meetings during the fiscal year ended
December 31, 1997. All of the directors attended at least 75% of the meetings of
the Board of Directors and its committees on which they served.

5
<PAGE> 9

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, 1997, 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, 1997
exceeded $100,000.

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION 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, 1997 -- $1,199,000 $55,600(1) -- $ 33,825(2)
Chairman of the Board and 1996 -- -- 56,000 -- 58,354
Chief Executive Officer 1995 -- 1,949,000 56,000 -- 293,930
Alexander W. Young, 1997 $385,000 37,000 9,600(1) -- 23,350(3)
President and 1996 385,000 -- 7,200 -- 4,750
Chief Operating Officer 1995 359,000 197,000 7,000 -- 4,620
James E. Dykes, 1997 155,300 17,000 -- 52,396 106,700(4)
Executive Vice President 1996 -- -- -- -- --
1995 -- -- -- -- --
Leland L. Grubb, 1997 300,000 39,600 7,200(1) -- 950(5)
Vice President and Chief 1996 300,000 -- 7,200 -- 950
Financial Officer 1995 140,000 11,000 4,800 -- --
J. Thomas Williams, 1997 250,000 31,900 -- -- 33,851(6)
Vice President(7)
</TABLE>

- ---------------

(1) Represents car allowances for the benefit of the named executive officers.

(2) Represents $26,700 in life insurance premiums and the Company's contribution
of $7,125 to such officer's account under the Company's 401(k) Plan.

(3) Represents $18,600 in life insurance premiums and the Company's contribution
of $4,750 to such officer's account under the Company's 401(k) Plan.

(4) Represents a relocation allowance.

(5) Represents the Company's contribution to such officer's account under the
Company's 401(k) plan.

(6) Represents a cost of living adjustment of $31,300 for overseas duty and per
diem amounts, and the Company's contribution of $2,375 to such officer's
account under the Company's 401(k) Plan.

(7) No information is provided for those fiscal years during which Mr. Williams
did not serve as an executive officer of the Company.

6
<PAGE> 10

STOCK OPTION GRANTS

The following table provides information concerning the grant of stock
options during the year ended December 31, 1997 to the named executive officers.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS MARKET PRICE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION 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.................... -- -- -- -- -- -- -- --
Alexander W. Young.................. -- -- -- -- -- -- -- --
James E. Dykes...................... 50,000 20.8 $ 8.63 $ 8.63 5/13/07 -- $271,200 $687,300
1,332 .6 9.38 9.38 3/13/07 -- 7,900 19,900
1,064 .4 11.75 11.75 6/30/07 -- 7,900 19,900
Leland L. Grubb..................... -- -- -- -- -- -- -- --
J. Thomas Williams.................. 5,000 2.1 9.5 9.5 5/15/07 -- 29,900 75,700
10,000 4.2 11.69 11.69 12/17/07 -- 126,100 371,300
</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.

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, 1997.

<TABLE>
<CAPTION>
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)
---- ----------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Philip R. Thomas................... -- -- 189,621/953 $ 4,700/$3,600
Alexander W. Young................. -- -- 81,061/9,203 405,000/40,200
James E. Dykes..................... -- -- 23,282/88,114 63,100/268,000
Leland L. Grubb.................... -- -- 32,467/26,533 1,600/19,900
J. Thomas Williams................. 120 $700 4,295/40,105 8,700/105,700
</TABLE>

- ---------------

(1) For purposes of this table, the value of the Common Stock is $11.75 per
share, the average of the high and low sale prices of the Common Stock on
December 31, 1997 as reported on the NASDAQ National Market System, and the
value of the Class B Common Stock is $8.225 (70% of $11.75).

EMPLOYMENT AGREEMENTS OF CERTAIN EXECUTIVE OFFICERS

Mr. Thomas is employed by the Company under an employment agreement which
became effective January 2, 1998, and Mr. Young, Mr. Dykes and Mr. Grubb are
employed by the Company under employment agreements which became effective in
August 1993, April 1995 and July 1997, respectively.

Mr. Young and Mr. Grubb's employment agreements provide for base
compensation in the initial amount of $300,000, and Mr. Dykes' employment
agreement provides for base compensation in the initial amount of $330,000, with
each of such officers' base compensation to be adjusted at least annually by the
Nominating

7
<PAGE> 11

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.

The expiration of Mr. Young's employment agreement was extended by the
Board of Directors, from August 31, 1998 until December 31, 2000. Mr. Dykes'
employment agreement has a three-year term, and Mr. Grubb's employment agreement
has a five-year term. The employment agreements may be extended for 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. Young, Mr. Dykes or Mr. Grubb had been terminated without
cause as of January 1, 1998, such executives would have been entitled to receive
severance payments of approximately $695,000, $172,000 and $423,000,
respectively. The employment agreements also contain noncompetition,
non-solicitation and confidentiality covenants.

It is anticipated that Mr. J. Thomas Williams, as the new President and
Chief Operating Officer, will have an employment agreement comparable to those
described above.

Mr. Thomas' employment agreement provides for base compensation in the
initial amount of $600,000, with base compensation subject to adjustment
annually by the Nominating, Corporate Governance and Compensation Committee of
the Board. The employment agreement provides for additional compensation,
calculated according to a formula based on the Company's profits and growth in
profits, payable in cash. Mr. Thomas' employment agreement also provides for an
initial grant of stock options whose vesting is tied to earnings per share
milestones for fiscal years 1998, 1999 and 2000. Subsequent years' option
grants, also provided for in Mr. Thomas' employment agreement, as well as the
vesting of such grants, are similarly tied to earnings per share milestones. All
stock options granted under Mr. Thomas' employment agreement will have exercise
prices equal to the market price per share of the Common Stock on the date of
grant, and will expire 10 years from the date of grant. Mr. Thomas' employment
agreement also provides for retirement benefits in the event of termination of
Mr. Thomas' employment. Mr. Thomas' employment agreement will extend until
December 31, 2005.

Mr. Thomas' employment agreement contains "change of control" provisions
which mirror those contained in the employment agreements of Mr. Young and Mr.
Grubb, described above. If the employment of Mr. Thomas had been terminated
without cause as of January 2, 1998 (the effective date of the agreement), Mr.
Thomas would have been entitled to receive a severance payment of approximately
$2,353,000.

8
<PAGE> 12

DIRECTORS' COMPENSATION

In 1997 each non-employee director earned fees at an annual rate of
$50,000, a portion of which was paid in cash and the balance in a combination of
shares of Common Stock of the Company and options. 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.

REPORT OF THE NOMINATING, CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE 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 Nominating, Corporate Governance and Compensation
Committee (the "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.

The Company's executive compensation policy is based on
pay-for-performance. For the Company's senior management, comprised of Messrs.
Thomas, Young, Dykes and Grubb, the Company has established fixed and incentive
components of compensation, where the incentive component is tied specifically
to Company growth and performance.

For Mr. Young, Mr. Dykes 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, Mr. Dykes and Mr. Grubb, the sharing ratio matrix adopted by
the Board is as follows:

<TABLE>
<CAPTION>
SHARING RATIO (%) IBTIC GROWTH RATE
IBTIC AS % OF ----------------------------------------------------------------------------------------
REVENUE STANDARD INCENTIVE
- --------------------- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<5% 5 - 9.99% 10 - 14.99% 15 - 24.99% 25 - 29.99%
---------------- ---------------- ---------------- ---------------- ----------------
4.0 - 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.

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.

The CEO's compensation has a fixed base component of $600,000, and for the
duration of his employment agreement, the balance of his compensation is
performance-based, as determined by the matrix above. Consequently, there is
greater potential variability in the CEO's compensation from year to year than
would be the case were 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.

9
<PAGE> 13

The CEO's employment agreement also provides for an initial grant of stock
options whose vesting is tied to earnings per share milestones for fiscal years
1998, 1999 and 2000. Subsequent years' option grants, also provided for in the
CEO's employment agreement, as well as the vesting of such grants, are similarly
tied to earnings per share milestones.

By providing direct links between compensation and performance, the
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 Nominating, Corporate Governance and
Compensation Committee, comprised of:

John T. Chain, Jr.
Donald J. Almquist
J. Fred Bucy

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. Chain, Mr. Almquist and Mr.
Bucy.

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, 1997. 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.

10
<PAGE> 14

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 PEER GROUP NASDAQ
(FISCAL YEAR COVERED) GROUP, INC. INDEX MARKET INDEX
<S> <C> <C> <C>
8/19/93 100 100 100
12/31/93 129.63 110.60 101.66
12/31/94 46.30 81.27 106.74
12/31/95 100.00 90.70 138.45
12/31/96 66.67 83.26 172.04
12/31/97 92.59 81.11 210.45
</TABLE>

ASSUMES $100 INVESTED ON AUGUST 19, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1997

CERTAIN TRANSACTIONS

Through January 1, 1997 the Company employed two sales executives whose
focus was 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 within a particular industry may be significantly improved. The
general partner of the Partnership is a limited liability company ("Celerity
LLC"), in which Mr. Thomas owns a 40% equity interest. 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, and is precluded from negotiating the Company's agreements
with Celerity LLC. During 1997, the Company entered into a "finders agreement"
with the Partnership which would compensate the Partnership when it delivers
potential clients who ultimately enter into a business improvement program. The
Company made advances to Celerity LLC in 1997 in the amount of $0.2 million,
against future finders fees.

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 executed a
promissory note payable to the Company in the amount of $1,500,000 to repay such
advances to the Company. The note was initially due September 25, 1997, carries
an interest rate of prime plus 1/4%, has been extended,

11
<PAGE> 15

and will be paid by Mr. Thomas as a result of the Company's purchase of shares
from Mr. Thomas, as described in the following paragraph. In 1997, Mr. Thomas
earned $0.8 million in incentive compensation and was paid compensation advances
of $1.4 million. The excess of $0.6 million will be repaid through the tender of
shares to the Company, as described in the following paragraph.

On February 19, 1998, the Company entered into a stock purchase agreement
with Mr. Philip R. Thomas, Chairman and Chief Executive Officer, for an as yet
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 shall be determined
based upon a formula and at a discount to market. The Company utilized an
investment banking firm to determine the appropriate discount factor. Mr. Thomas
delivered to the Company 1.4 million shares to be held in escrow until such time
as the final reconciliation is performed on April 27, 1998. Any excess shares
held in escrow shall be returned to Mr. Thomas. If there is a deficiency at the
reconciliation, Mr. Thomas shall execute a promissory note for the difference.
In addition, Mr. Thomas has the option to pay the Company in cash at the date of
the reconciliation for the $2.3 million debt owed to the Company.

12
<PAGE> 16

*****

PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK

The Thomas Group Board of Directors is submitting to stockholders a
proposal to amend the Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 12,500,000 to 25,000,000.

The Board of Directors believes that this amendment is in the best interest
of the Company and its stockholders because it would provide greater flexibility
to the Board of Directors to issue additional equity securities, for example, to
raise additional capital, to provide stock related employee benefits, to effect
stock splits of the outstanding Common Stock, and to effect acquisitions of
other businesses if favorable opportunities become available. It is important
for the Company's Board of Directors to have the flexibility to act promptly to
address future business needs as they arise. Other than issuances of shares of
Common Stock pursuant to the Company's option plans and upon the exercise of
warrants, the Company has no current plans to issue any newly authorized shares
of Common Stock.

The text of the proposed amendment is set forth on Annex I, which is
attached to and made a part of this Proxy Statement. Stockholders are encouraged
to read carefully the full text of the amendment.

Of the 12,500,000 shares of Common Stock currently authorized for issuance
under the Company's Restated Articles of Incorporation, the Company had
6,295,444 shares issued and outstanding on February 28, 1998. As of such date,
the Company also had 47,176 shares subject to issuance pursuant to the Company's
1988 Stock Option Plan, 33,552 shares subject to issuance pursuant to the
Company's 1992 Stock Option Plan, 125,000 shares subject to issuance pursuant to
the Company's 1997 Stock Option Plan, and 225,000 shares subject to issuance
upon the exercise of warrants.

The availability of an adequate supply of authorized and unissued shares of
Common Stock provides the Company flexibility by allowing shares to be issued
for general corporate needs without the delay and expense incident to the
holding of a special meeting of stockholders to consider any specific issuance.

Stockholders should note that certain disadvantages may result from the
authorization of additional shares of Common Stock. For example, the issuance of
a significant amount of Common Stock could result in a significant dilution of
the beneficial ownership and/or voting power of the holders of Common Stock.
Moreover, once authorized in the Certificate of Incorporation by the vote of the
holders of a majority of the Company's issued and outstanding shares of Common
Stock, such shares generally may be issued by the Board of Directors without
further authorization from the Company's stockholders. Shares of Common Stock
have no preemptive rights and, therefore, will not be entitled to preferential
rights to purchase any additional shares of Common Stock that might be issued in
the future.

In addition, the proposed amendment to the Certificate of Incorporation
could have an anti-takeover effect because the Board of Directors would have the
ability to issue a significant number of shares of Common Stock as a defense to
an attempted takeover that the Board of Directors considered not to be in the
best interests of the Company and its stockholders. The Board of Directors is
not aware of any current proposals by any party to acquire control of the
Company.

In addition, the Board of Directors is in the process of considering the
adoption of a stockholder rights plan. Such plans are designed to protect
stockholders from unfair or coercive takeover attempts and to prevent a
potential acquiror from gaining control of a company without fairly compensating
all of the company's stockholders. Stockholders should be aware, however, that
rights plans are viewed by certain investors to be detrimental to stockholder
value because they may render more difficult or even discourage attempts to
acquire control of a company, thereby depriving stockholders of the opportunity
to participate in possible premiums that might have been obtained in the absence
of such plans. Rights plans have also been criticized by certain investors as
making the removal of management more difficult. The goal of a rights plan,
however, is to enable the Board of Directors to negotiate in the best interests
of the stockholders.

13
<PAGE> 17

The Board of Directors has the authority to adopt a rights plan without
obtaining stockholder approval. Stockholder approval is necessary, however, to
increase the number of shares of Common Stock authorized for issuance in order
that the Company may fully implement a rights plan if the Board of Directors
determines to do so.

The Board of Directors believes that this amendment is in the best interest
of the Company and its stockholders.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
THE APPROVAL OF SUCH AMENDMENT.

*****

PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO AUTHORIZE THE ISSUANCE OF PREFERRED STOCK

The Thomas Group Board of Directors is submitting to stockholders a
proposal to amend the Certificate of Incorporation to authorize the issuance of
up to 1,000,000 shares of Preferred Stock, $.01 par value per share, upon the
determination of the Board of Directors. The Company's Certificate of
Incorporation does not presently authorize the issuance of Preferred Stock.

The right to issue Preferred Stock, in the judgment of the Board of
Directors, is in the best interest of the Company and its stockholders because
it would provide desirable flexibility in connection with future financings,
acquisitions and other corporate transactions. Having authorized shares of
Preferred Stock available for issuance will also avoid the delay and expense
associated with a special stockholders' meeting. The Company has no current
plans to issue any newly authorized shares of Preferred Stock.

The text of the proposed amendment is set forth on Annex I, which is
attached to and made a part of this Proxy Statement. Any reference to the
proposed amendment is qualified in its entirety by reference to Annex I, which
stockholders are encouraged to review carefully. Upon approval of the amendment
by stockholders, the Board of Directors of the Company will be delegated the
power and authority to issue shares of Preferred Stock from time to time in one
or more series.

Each series of Preferred Stock issued by the Company (i) may have such
number of shares; (ii) may have such voting rights, full, special or limited, or
may be without voting powers, and may confer rights to vote as a class to the
holders thereof, alone or together with other classes or series of stock; (iii)
may be subject to redemption at such time or times and at such price or prices
(which may be payable in the form of cash, notes, securities or other property);
(iv) may be entitled to receive dividends, whether payable in cash, stock of the
Company or other property, which may be cumulative or noncumulative, at such
rate or rates, on such conditions, from such date or dates, and at such times,
and payable in preference to, or in such relation to, the dividends payable on
any other class or classes or series of stock; (v) may have such rights upon the
dissolution of, or upon any distribution of the assets of the Company; (vi) may
be convertible into, or exchangeable for, shares of any other class or classes
or of any other series of the same or any other class or classes of stock,
securities or other property of the Company at such price or prices or at such
rates of exchange, and with such adjustments; and (vii) may have such other
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof; all as shall be stated in the resolution or
resolutions adopted by the Board of Directors providing for the issue of such
series of Preferred Stock.

Upon any liquidation of the Company, no distribution of the Company's
assets may be made to the holders of Common Stock until the holders of all
classes or series of stock having a preference over the Common Stock upon
liquidation have been paid in full the amounts to which they respectively are
entitled.

As noted above, the Board of Directors would have authority to designate
whether dividends on the Preferred Stock shall be cumulative. If so designated,
cash dividends would not be paid on Common Stock

14
<PAGE> 18

until all past dividends have been set aside or paid on the Preferred Stock.
Distributions on the Common Stock in liquidation could be made only if all
Preferred Stock dividends have been paid in full.

Since no preemptive rights exist with respect to the issuance of additional
shares of capital stock, no further stockholder authorization will be sought for
the issuance of shares of Preferred Stock unless deemed advisable by the Board
of Directors or otherwise required by law.

While the Board of Directors is of the opinion that the proposed amendment
is in the best interests of the Company and its stockholders, the Board of
Directors recognizes that there may be some disadvantages to stockholders.
Holders of Common Stock of the Company may be adversely affected by any issuance
and sale of Preferred Stock, due to possible dilutive effects upon any such
issuance (because of any voting or conversion rights pertaining to shares of
Preferred Stock) and the fact that holders of Preferred Stock would be entitled
to receive any dividends and distributions in liquidation before holders of
Common Stock.

In addition, the proposed amendment to the Certificate of Incorporation
could have an anti-takeover effect because the Board of Directors would have the
ability to issue Preferred Stock as a defense to an attempted takeover that the
Board of Directors considered not to be in the best interests of the Company and
its stockholders. The Board of Directors is not aware of any current proposals
by any party to acquire control of the Company.

The Board of Directors has the authority to adopt a rights plan without
obtaining stockholder approval. Stockholder approval is necessary, however, to
authorize the issuance of Preferred Stock in order that the Company may fully
implement a rights plan if the Board of Directors determines to do so.

The Board of Directors believes that this amendment is in the best interest
of the Company and its stockholders.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
THE APPROVAL OF SUCH AMENDMENT.

*****

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, 1997, Company officers, directors and greater than 10%
beneficial owners complied with all such filing requirements.

15
<PAGE> 19

AUDITORS

The Company has appointed BDO Seidman, LLP as the independent auditors of
the Company for the fiscal year ending December 31, 1998.

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 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 5215 N. O'Connor Boulevard, Suite 2500, Irving,
Texas, 75039-3714, Attention: Secretary, by December 9, 1998.

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,
1997, 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

16
<PAGE> 20

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/ J. THOMAS WILLIAMS
------------------------------------
J. Thomas Williams
President and Chief Operating
Officer

Irving, Texas
April 11, 1998

17
<PAGE> 21

ANNEX I

AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
THOMAS GROUP, INC.

Following is the full text of Article Fourth, as proposed for amendment:

FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 27,200,000, consisting of:

(i) 25,000,000 shares of Common Stock, par value $.01 per share
("Common Stock"); and

(ii) 1,200,000 shares of Class B Common Stock, par value $.01 per share
("Class B Stock"); and

(iii) 1,000,000 shares of Preferred Stock, par value $.01 per share
"Preferred Stock").

A. Provisions Relating to the Preferred Stock

1. The Preferred Stock may be issued from time to time in one or more
series, the shares of each series to have such designations and
powers, preferences, rights, qualifications, limitations, and
restrictions thereof as are stated and expressed herein and in the
resolution or resolutions providing for the issue of such series
adopted by the Board of Directors of the Corporation as hereafter
prescribed.

2. Authority is hereby expressly granted to and vested in the Board of
Directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more series, and with
respect to each series of the Preferred Stock, to fix and state by
the resolution or resolutions from time to time adopted providing for
the issuance thereof the following:

(i) whether or not shares of a series shall have voting rights,
full, special, or limited, or shall be without voting rights,
and whether or not the holders of such shares are to be
entitled to vote as a separate class either alone or together
with the holders of one or more other classes or series of
stock;

(ii) the number of shares to constitute the series and the
designations thereof;

(iii) the preferences, and relative, participating, optional, or
other special rights, if any, and the qualifications,
limitations, or restrictions thereof, if any, with respect to
any series;

(iv) whether or not the shares of any series shall be redeemable at
the option of the Corporation or the holders thereof or upon
the happening of any specified event, and, if redeemable, the
redemption price or prices (which may be payable in the form
of cash, notes, securities, or other property), and the time
or times at which, and the terms and conditions upon which,
such shares shall be redeemable and the manner of redemption;

(v) whether or not the shares of a series shall be subject to the
operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if
such retirement or sinking fund or funds are to be
established, the annual amount thereof, and the terms and
provisions relative to the operation thereof;

(vi) the dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, the conditions
upon which and the times when such dividends are payable, the
preference or the relation to the payment of dividends payable
on any other class or classes or series of stock, whether or
not such dividends shall be cumulative or noncumulative, and
if cumulative, the date or dates from which such dividends
shall accumulate;

18
<PAGE> 22

(vii) the preferences, if any, and the amounts thereof which the
holders of shares of any series shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;

(viii) whether or not the shares of any series shall be entitled to
the benefit of conditions and restrictions upon the creation
of indebtedness of the Corporation or any subsidiary of the
Corporation, upon the issue of any additional stock
(including, without limitation, additional shares of such
series or of any other class or series) and upon the payment
of dividends or the making of other distributions on, and the
purchase, redemption or other acquisition by the Corporation
or any subsidiary of the Corporation of, any outstanding stock
of the Corporation;

(ix) whether or not the shares of any series, at the option of the
Corporation or the holders thereof or upon the happening of
any specified event, shall be convertible into or exchangeable
for the shares of any other class or classes or of any other
series of the same or any other class or classes of stock,
securities, or other property of the Corporation and the
conversion price, ratio or rate at which such exchange may be
made, with such adjustments, if any, as shall be provided for
in such resolutions; and

(x) such other special rights and protective provisions with
respect to any series as the Board of Directors of the
Corporation may deem advisable.

3. The shares of each series of the Preferred Stock may vary from the
shares of any other class or series in any or all of the foregoing
respects. The Board of Directors of the Corporation may increase the
number of shares of the Preferred Stock designated for any existing
series (but not above the total number of authorized shares of the
class) by a resolution adding to such series authorized and unissued
shares of the Preferred Stock not designated for any other series.
The Board of Directors of the Corporation may decrease the number of
shares of the Preferred Stock designated for any existing series (but
not below the number of shares thereof then outstanding) by a
resolution subtracting from such series unissued shares of the
Preferred Stock designated for such series, and the shares so
subtracted shall become authorized, unissued, and undesignated shares
of the Preferred Stock.

B. Provisions Relating to the Common Stock and Class B Stock

1. Except as otherwise required by law, and subject to any special
voting rights which may be conferred upon any class or series of
stock of the Corporation, each holder of Common Stock shall be
entitled to one vote for each share of the Common Stock standing in
such holder's name on the records of the Corporation on each matter
submitted to a vote of the stockholders. Except as required by law,
the holders of the Class B Stock shall have no voting rights
whatsoever.

2. Subject to the rights of the holders of any class or series of stock
of the Corporation, the holders of the Common Stock shall be entitled
to receive when, as, and if declared by the Board of Directors of the
Corporation, out of funds legally available therefor, dividends
payable in cash, stock, or otherwise.

3. Upon any liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary, and after the holders of any class
or series of stock of the Corporation having a preference over the
Common Stock and Class B Stock with respect to distributions of
assets upon any such liquidation, distribution or winding up, and any
bonds, debentures, or other obligations of the Corporation shall have
been paid in full the amounts to which they shall be entitled (if
any), or a sum sufficient for such payment in full shall have been
set aside, the remaining net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock and Class B
Stock, to the exclusion of the holders of shares of any other class
or series of stock and any bonds, debentures, or other obligations of
the Corporation.

19
<PAGE> 23
THOMAS GROUP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR WITHHELD FOR ALL
1. Election of Directors ALL ALL EXCEPT
(see reverse) [ ] [ ] [ ]
-----------------
Nominee Exception

2. Proposal to amend the FOR AGAINST ABSTAIN
Company's Amended and Restated [ ] [ ] [ ]
Certificate of Incorporation
("Certificate of Incorporation")
increasing the number of its autho-
rized shares of Common Stock from
12,500,000 to 25,000,000.

3. Proposal to amend the Certificate of FOR AGAINST ABSTAIN
Incorporation to authorize the [ ] [ ] [ ]
issuance of up to 1,000,000 shares
of Preferred Stock, par value $.01
per share, upon the determination
of the Board of Directors.
</TABLE>

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
---------------------- -------------

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.

<PAGE> 24
THOMAS GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

P The undersigned hereby appoint(s) Philip R. Thomas and J. Thomas
Williams, or either of them, with full power of substitution, proxies of
the undersigned, with all the powers that the undersigned would posses if
R 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 7, 1998, at the principal
O 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
X the generality of the foregoing) to vote and act as follows:

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DIRECTORS SET FORTH
Y BELOW AND FOR THE PROPOSALS SET FORTH ON THE REVERSE SIDE.

Election of Directors, Nominees: (change of address)

Philip R. Thomas J. Fred Bucy _______________________

Hollis L. Caswell Donald J. Almquist _______________________

John T. Chain, Jr. Richard A. Freytag _______________________

J. Thomas Williams _______________________
(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 SEE REVERSE
Proxy promptly in the enclosed envelope. SIDE
No postage is required for mailing in the United States.