THOMAS GROUP INC, 10-Q, 1999-08-16

THOMAS GROUP INC
10-Q, 1999-08-16
MANAGEMENT CONSULTING SERVICES

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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-----------

FORM 10-Q

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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-22010

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THOMAS GROUP, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 72-0843540
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>

5221 NORTH O'CONNOR BOULEVARD
SUITE 500
IRVING, TX 75039-3714
(Address of principal executive offices, including zip code)

(972) 869-3400
(Registrant's telephone number, including area code)

-----------

NONE
(Former name, former address and former fiscal year, if changed since last
report)

-----------

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

As of July 30, 1999 the following number of shares of the registrant's
stock were outstanding:

<TABLE>
<S> <C>
Common Stock 4,826,928
Class B Common Stock 3,970
---------
Total 4,830,898
=========
</TABLE>

<PAGE> 2
THOMAS GROUP, INC.

PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Item 1 - Financial Statements (unaudited)
Consolidated Balance Sheets, June 30, 1999 and
December 31, 1998....................................... 3
Consolidated Statements of Operations for the Three Months and
Six Months Ended June 30, 1999 and 1998................. 4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1999 and 1998.................................. 5
Notes to Consolidated Financial Statements.................. 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 9

PART II - OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K.......................... 15
</TABLE>

2
<PAGE> 3

ITEM I - FINANCIAL STATEMENTS

THOMAS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
--------- ------------
<S> <C> <C>
Current Assets
Cash and cash equivalents ................................................. $ 9,610 $ 6,376
Trade accounts receivable, net of allowances of $396 ...................... 9,564 11,239
Unbilled receivables ...................................................... 380 740
Income tax receivable ..................................................... 1,793 --
Deferred tax asset ........................................................ 1,973 2,331
Other assets .............................................................. 675 405
-------- --------
Total Current Assets ................................................... 23,995 21,091
-------- --------
Property and Equipment, net .................................................. 3,014 3,627
Deferred Tax Asset ........................................................... 287 2,519
Other Assets ................................................................. 3,288 4,394
-------- --------
$ 30,584 $ 31,631
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued liabilities .................................. $ 5,532 $ 6,028
Income taxes payable ...................................................... -- 602
Advance payments .......................................................... -- 532
Current maturities of long-term obligations ............................... 199 329
-------- --------
Total Current Liabilities .............................................. 5,731 7,491
Long-Term Obligations ........................................................ 3,056 2,928
-------- --------
Total Liabilities ...................................................... 8,787 10,419
-------- --------

Commitments and Contingencies

Stockholders' Equity
Common Stock, $.01 par value; 25,000,000 shares authorized;
6,535,241 and 6,536,416 shares issued and outstanding .................. 65 65
Additional paid-in capital ................................................ 23,020 22,699
Retained earnings ......................................................... 15,802 13,654
Accumulated other comprehensive income - foreign currency translation ..... (943) (482)
Treasury stock, 1,725,349 and 1,558,849 shares of Common, at cost ......... (16,147) (14,724)
-------- --------
Total Stockholders' Equity ............................................. 21,797 21,212
-------- --------
$ 30,584 $ 31,631
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

3
<PAGE> 4

THOMAS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue ........................................... $ 15,752 $ 16,565 $ 30,462 $ 32,211
Cost of Sales ............................... 8,875 10,076 17,734 19,801
---------- ---------- ---------- ----------
Gross Margin ...................................... 6,877 6,489 12,728 12,410
Selling, General and Administrative ......... 4,640 14,035 9,217 19,311
---------- ---------- ---------- ----------
Operating Income (Loss) ........................... 2,237 (7,546) 3,511 (6,901)
Interest Income (Expense), Net .................... 29 (90) 66 (61)
---------- ---------- ---------- ----------
Income (Loss) from Continuing Operations Before
Income Tax .................................. 2,266 (7,636) 3,577 (6,962)
Income Tax (Benefit) .............................. 905 (2,905) 1,429 (2,635)
---------- ---------- ---------- ----------
Income (Loss) from Continuing Operations .......... 1,361 (4,731) 2,148 (4,327)
---------- ---------- ---------- ----------
Discontinued Operations:
Loss from Operations, net of income tax ........... -- (350) -- (1,092)
Estimated (Loss) on disposal, including provision
for operating losses through disposal date, net
of income tax .................................. -- (2,905) -- (2,905)
---------- ---------- ---------- ----------
Net Income (Loss) ................................. $ 1,361 $ (7,986) $ 2,148 $ (8,324)
========== ========== ========== ==========

Earnings (Loss) per common share:
Basic:
Income (Loss) from Continuing Operations .......... $ 0.28 $ (0.94) $ 0.43 $ (0.77)
Discontinued Operations:
Loss from Operations ............................ -- (0.07) -- (0.19)
Estimated Loss on Disposal ...................... -- (0.58) -- (0.52)
---------- ---------- ---------- ----------
Net Income (Loss) per share ....................... $ 0.28 $ (1.59) $ 0.43 $ (1.48)
========== ========== ========== ==========

Diluted:
Income from Continuing Operations ................. $ 0.28 -- $ 0.43 --
Discontinued Operations:
Loss from Operations ............................ -- -- -- --
Estimated Loss on Disposal ...................... -- -- -- --
---------- ---------- ---------- ----------
Net Income per share .............................. $ 0.28 -- $ 0.43 --
========== ========== ========== ==========

Weighted average shares:
Basic ............................................. 4,895,870 5,031,498 4,950,961 5,634,525
Diluted ........................................... 4,938,479 -- 5,008,766 --
</TABLE>

See accompanying notes to consolidated financial statements.

4
<PAGE> 5

THOMAS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1999 1998
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) from continuing operations ............................................... $ 2,148 $ (4,327)
Adjustments to reconcile net income (loss) from continuing operations to net cash
from operating activities
Depreciation and amortization .................................................... 791 785
Provision for write-down of assets ............................................... -- 3,602
Deferred taxes ................................................................... 2,877 (3,384)
Gain (loss) on disposal of property .............................................. (3) 36
Other ............................................................................ 146 146
Change in operating assets and liabilities
(Increase) decrease in trade accounts receivable ............................ 1,557 (3,505)
(Increase) decrease in income tax receivable ................................ (1,793) --
(Increase) decrease in unbilled receivables ................................. 360 835
(Increase) decrease in other assets ......................................... 539 1,371
Increase (decrease) in accounts payable and accrued liabilities ............. (571) 2,897
Increase (decrease) in advance payments ..................................... (532) --
Increase (decrease) in income taxes payable ................................. (606) (761)
-------- --------
Net Cash Provided By (Used In) Operating Activities .................... 4,913 (2,305)

Cash Flows From Investing Activities:
Capital expenditures ....................................................................... (190) (402)
-------- --------
Net Cash Used In Investing Activities .................................. (190) (402)

Cash Flows From Financing Activities:
Purchase of treasury stock ................................................................. (1,423) (10,605)
Proceeds from exercise of stock options .................................................... 112 350
Other long-term obligations ................................................................ 128 (81)
Advances - line of credit .................................................................. -- 22,589
Repayment - line of credit ................................................................. -- (19,408)
Net repayments from (advances to) affiliates ............................................... -- 2,274
-------- --------
Net Cash Used In Financing Activities .................................. (1,183) (4,881)

Effect of Exchange Rate Changes on Cash ........................................................ (306) (78)
-------- --------
Net cash provided by (used in) continuing operations ........................................... 3,234 (7,666)
Discontinued Operations:
Net cash used in operating activities ................................................ -- (1,238)
-------- --------

Net increase (decrease) in cash and cash equivalents ........................................... 3,234 (8,904)

Cash and Cash Equivalents:
Beginning of period ........................................................................ 6,376 11,254
-------- --------
End of period .............................................................................. $ 9,610 $ 2,350
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

5
<PAGE> 6

THOMAS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. The unaudited consolidated financial statements of Thomas Group,
Inc. (the "Company") include all adjustments, which include only normal
recurring adjustments, which are, in the opinion of management, necessary to
present fairly the results of operations of the Company for the interim periods
presented. The unaudited financial statements should be read in conjunction
with the consolidated financial statements and notes thereto in the Company's
1998 Annual Report to Stockholders. The results of operations for the three and
six-month periods ended June 30, 1999 are not necessarily indicative of the
results of operations for the entire year ending December 31, 1999. Certain
consolidated financial statement amounts have been reclassified from the
previously reported financial statements in order to conform with the current
presentation.

2. Earnings Per Share - Basic earnings per share is based on the
number of weighted average shares outstanding. The following table reconciles
basic earnings per share to diluted earnings per share under the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."

The following illustrates the reconciliation of the numerators and denominators
of the basic and diluted earnings per share computations:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
In thousands, except per share data 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NUMERATOR:
Income (Loss) available to Common
Stockholders ......................... $ 1,361 $(7,986) $ 2,148 $ (8,324)
======== ======== ======== ========

DENOMINATOR:
Weighted Average Shares Outstanding:
Basic ..................................... 4,895.9 5,031.5 4,951.0 5,634.5

Effect of Dilutive Securities:
Common Stock Options .............. 42.9 150.1 57.8 126.7
-------- -------- -------- --------

Diluted ................................... 4,938.7 5,181.6 5,008.8 5,761.2
======== ======== ======== ========

EARNINGS (LOSS) PER SHARE:
Basic ........................................ $ 0.28 $(1.59) $ 0.43 $ (1.48)
Diluted ...................................... $ 0.28 -- $ 0.43 --
</TABLE>

6
<PAGE> 7

THOMAS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

3. Deferred Taxes - As a result of the restructuring charges and
losses from discontinued operations recognized in the second quarter of 1998,
the Company maintains deferred tax assets of $2.3 million at June 30, 1999.
Utilization of the deferred tax asset is dependent on future taxable income in
excess of existing taxable temporary differences. The asset has been recognized
because management believes it is more likely than not that the deferred tax
asset will be utilized in future years. This conclusion is based on the belief
that current and future levels of taxable income will be sufficient to realize
the benefits of the deferred tax asset on domestic operations.

4. Significant Clients - The Company recorded revenue from one client
of $4.7 million, or 29.8% of total revenue, and $9.7 million, or 31.8% of total
revenue, during the three and six months ended June 30, 1999, respectively.
Revenue from the same client totaled $4.4 million, or 26.7% of total revenue,
and $7.3 million, or 22.7% of total revenue for the three and six months ended
June 30, 1998, respectively. The Company recorded revenue from a second client
of $1.8 million, or 11.4% of total revenue during the three months ended June
30, 1999. There was no other client from which revenue exceeded 10% of total
revenue in the three or six-month periods ended June 30, 1999 or June 30, 1998.

5. Comprehensive Income - In the first quarter of 1998, the Company
adopted Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and display of
comprehensive income. Comprehensive income includes all changes in equity
(foreign currency translation) except those resulting from investments by
owners and distributions to owners.

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
In thousands of dollars 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income ............................... $ 1,361 $(7,986) $ 2,148 $(8,324)
Decrease in other comprehensive income ... (243) (45) (461) (119)
------- ------- ------- -------
Comprehensive income (loss) ............. $ 1,118 $(8,031) $ 1,687 $(8,443)
======= ======= ======= =======
</TABLE>

6. Revolving Credit Agreement - The Company previously maintained a
$20 million revolving credit agreement with Comerica Bank. Terms of the
agreement provided for a $1 million per quarter reduction in available credit
beginning in 1999. In April 1999 the Company amended the agreement to reduce
the maximum available borrowings to $15 million with no quarterly reduction.
The agreement is in place to provide funding for potential future operating
cash requirements or business expansion purposes. Loans under this agreement
bear interest at the prime rate or other similar interest options. There has
been no utilization of the credit facility during the first half of 1999.

7. Litigation - The Company is subject to various claims and other
legal matters, described below, in the course of conducting its business. The
Company believes that neither such claims and other legal matters nor the cost
of prosecuting and/or defending such claims and other legal matters will have a
material adverse effect on the Company's consolidated results of operations,
financial condition or cash flows.

On April 28, 1999 a judgment was entered in all matters in favor of the Company
in the legal action Creative Dimensions in Management, Inc. v. Thomas Group,
Inc. This manner arose out of disputes under two agreements between the Company
and Creative Dimensions in Management, Inc., a small private company with whom
the Company had an alliance.

7
<PAGE> 8

THOMAS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

and consulting agreement in connection with the Company's purchase of Interlink
Technologies ("Interlink"). As a result of losses sustained by its subsidiary,
the Company asserted claims in the Texas action against Ron Blevins and Mike
Smith, the former owners of Interlink, for breach of contract and fraudulent
misrepresentation.

The Texas federal action was transferred to Ohio and consolidated with the Ohio
federal action. The trial date has been set for October 26, 1999. The Company
believes the former owners' claims have no merit, and it is the Company's
intention to vigorously pursue its own claims against the former owners of
Interlink, as well as vigorously defend against the former owners' claims.

The Company is party to a legal action styled Philip R. Thomas and Wayne
Heirtzler Thomas v. Thomas Group, Inc., before the U.S. District Court, Middle
District of Louisiana, consolidated with another action styled Thomas Group of
Louisiana, Inc. v. Philip R. Thomas and Wayne Heirtzler Thomas. Mr. and Mrs.
Thomas sought to "enforce leases" and seized, under a writ of sequestration,
movable assets at the Company's CEO Center in Louisiana. No damages were
alleged by Mr. and Mrs. Thomas. The second suit was filed against Mr. and Mrs.
Thomas by a subsidiary of the Company, seeking to dissolve the writ of
sequestration and asserting a claim for damages. A hearing was held on February
2, 1999 on the motions of the Company and its subsidiary to dissolve the writ
of sequestration, and the court has lifted the sequestration order. The Company
has amended its complaint in this action, to seek a declaratory judgment from
the federal court that the Company is not in default under any of the leases
relating to the Louisiana property.

The Company is party to an arbitration proceeding with the former Chairman and
CEO of the Company, styled Thomas Group, Inc. v. Philip Thomas. The Company
timely paid Mr. Thomas all benefits due him under his written employment
agreement, including a $1.8 million severance payment, yet Mr. Thomas has
demanded additional compensation and retirement benefits. On December 18, 1998,
the Company initiated this proceeding before the American Arbitration
Association in Dallas, Texas pursuant to an arbitration clause in Mr. Thomas'
employment agreement. On December 31, 1998, Mr. Thomas filed suit in Dallas
County District Court in an action styled Philip R. Thomas v. Thomas Group,
Inc. The Company moved to stay the litigation based on the parties' written
agreement to arbitrate, and the litigation has been stayed. The Company
believes Mr. Thomas' claims have no merit, vigorously contests Mr. Thomas'
claims, and is seeking a determination that Mr. Thomas is owed nothing further
as a result of his employment relationship with the Company.

8. Supplemental Disclosure of Cash Flow Information

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1999 1998
-------- ------
<S> <C> <C>
Interest paid............................. $ 22 $ 124
Income taxes paid......................... $658 $1,965
</TABLE>

8
<PAGE> 9

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

OVERVIEW

The Company derives the majority of its revenue from monthly fixed and
incentive fees for the implementation of Total Cycle Time and other business
improvement programs. Incentive fees are tied to improvements in a variety of
client performance measures typically involving response time, asset
utilization, productivity and profitability. Due to the Company's use of
incentive fee contracts, variations in revenue levels may cause fluctuations in
quarterly results. Factors such as a client's commitment to a Total Cycle Time
program, general economic and industry conditions, and other issues could
affect a client's business performance, thereby affecting the Company's
incentive fee revenue and quarterly earnings. Quarterly revenue and earnings of
the Company may also be impacted by the size and timing of starts and
completions of individual contracts.

UNLESS OTHERWISE STATED, THE DISCUSSION THAT FOLLOWS PERTAINS TO CONTINUING
OPERATIONS ONLY.

The following table sets forth the percentages which items in the statement of
operations bear to revenue:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1999 1998 1999 1998
------- ------- ------ ------
<S> <C> <C> <C> <C>
Revenue ...................................... 100.0% 100.0% 100.0% 100.0%
Cost of Sales .......................... 56.3 60.8 58.2 61.5
----- ------ ------ -----
Gross Margin ................................. 43.7 39.2 41.8 38.5
Selling, General and Administrative ... 29.5 26.3 30.3 29.9
Restructuring costs .................... -- 58.4 -- 30.0
----- ------ ------ -----
Operating Income (Loss) ...................... 14.2 (45.5) 11.5 (21.4)
Interest Income (Expense), Net ............... 0.2 (0.5) 0.2 (0.2)
----- ------ ------ -----
Income (Loss) from Continuing Operations
Before Income Taxes .......................... 14.4 (46.0) 11.7 (21.6)
Income Taxes (Benefit) ....................... 5.8 (17.5) 4.7 (8.2)
----- ------ ------ -----
Income (Loss) from Continuing Operations ..... 8.6% (28.5)% 7.0% (13.4)%
===== ====== ====== =====
</TABLE>

The following table sets forth the Company's revenue by geographic
distribution:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1999 1998 1999 1998
------- ------- ------- --------
<S> <C> <C> <C> <C>
Business Improvement Programs
United States ................. $ 8,834 $11,567 $19,266 $22,222
Europe ........................ 5,287 4,088 8,153 8,200
Asia/Pacific .................. 1,631 910 3,043 1,789
------- ------- ------- -------
Total Revenue .................... $15,752 $16,565 $30,462 $32,211
======= ======= ======= =======
</TABLE>

9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998

REVENUE - Revenue from continuing operations decreased 4.9% in the second
quarter of 1999 from the second quarter of 1998. This revenue decrease resulted
from a $0.6 million decline in fixed fee revenue and a $0.2 million decline in
incentive revenue. Fixed fee and incentive revenue represent 78.9% and 21.1% of
revenue, respectively, for the second quarter of 1999 and 78.6% and 21.4% of
revenue, respectively, for the second quarter of 1998.

The United States component of revenue decreased 23.6% due to contract
completions exceeding new contract start-ups. European revenue increased 29.3%
due to $1.0 million in incentive fees received from a contract that ended in
December 1998. Asia/Pacific revenue increased 79.2% due to new contracts
started in 1999.

GROSS PROFIT - Gross profit was 43.7% of revenue in the second quarter of 1999
compared to 39.2% of revenue in the second quarter of 1998. This increase in
percentage was primarily the result of the use of part-time Resultants(SM) in
1999 who are compensated only when they are working on client assignments.
Average full-time Resultants(SM) headcount decreased from 174 in the second
quarter of 1998 to 152 in the second quarter of 1999. The use of part-time
professionals is intended to reduce the volatility of the Company's profit
margin in the event of a reduction in the number of active contracts.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses consist of all operating expenses not directly
associated with the generation of revenue. A significant portion of selling,
general and administrative expenses are for corporate personnel (including
corporate officers), non-program-related travel and entertainment, corporate
facilities costs, and professional and legal costs. In the second quarter of
1998, selling, general and administrative expenses also include restructuring
cost of $9.7 million.

Selling, general and administrative expenses, excluding the restructuring
charge, as a percentage of total revenue increased to 29.5% in the first
quarter of 1999 from 26.3% in the second quarter of 1998. The increase in
percentage is primarily due to a $0.5 million increase in legal fees related to
three legal issues. In April 1999 the Company received a favorable judgment in
one action and the related legal fees have ceased. Management anticipates
favorable rulings in the remaining actions. There is also a potential that some
of the legal fees may be partially covered by insurance; however, no provision
for reimbursement has been recognized at June 30, 1999. The Company is
currently in discussion with its liability insurers. The 1998 restructuring
costs of $9.7 million included approximately $3.0 million for personnel
reduction costs and $6.7 million for the write-down of leasehold improvements
and other costs associated with underutilized and unnecessary facilities.

DISCONTINUED OPERATIONS - In the second quarter of 1998, the Company announced
its plan to dispose of its Information Technologies business segment. The
Company recorded an after tax charge of approximately $2.9 million as the
estimated loss on disposal of the segment, including estimated operating losses
during the phase-out period. Terms of the sale required a revision to the
estimated loss on disposal and an additional $0.4 million after tax charge was
recorded in the third quarter of 1998. The Company realized a loss of $0.7
million net of tax in the first quarter of 1998 as a result of the operations
of the discontinued segment.

OTHER - The Company's effective tax rate was 40% in the second quarter of 1999,
as compared to the 38% rate in the second quarter of 1998. The increase is
attributable to certain 1998 adjustments made to accommodate the restructuring
charge and discontinued operations and a change in the mix of domestic and
foreign revenue sources.

RESULTS OF OPERATIONS - Net income in the second quarter of 1999 was $1.4
million, or $0.28 per share, an increase of $6.1 million compared to a net loss
of $4.7 million, or $0.94 per share, in the second quarter of 1998. Excluding
the restructuring and non-recurring charges, net income in the quarter ended
June 30, 1998 was $1.3 million, or $0.24 per share.

10
<PAGE> 11
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

REVENUE - Revenue decreased approximately 5.4% in the first half of 1999
compared to the first half of 1998. The decrease consisted of a $0.5 million
increase in fixed fee revenue and a $2.3 million decrease in incentive revenue.
Fixed fee and incentive revenue represent 84.4% and 15.6%, respectively, of
revenue in the first half of 1999 and 78.3% and 21.7% of revenue, respectively,
in the first half of 1998.

The United States component of revenue decreased 13.3%, primarily as a result
of contract completions in the second half of 1998. Asia/Pacific revenue
increased 70.1% for the comparable period due to the increased referenceability
of the Company in the region which has been converted to four new contracts
since the end of 1998.

GROSS PROFIT - Gross profit was 41.8% of revenue in the first half of 1999
compared to 38.5% of revenue in the first half of 1998. This increase was
primarily the result of the use of part-time Resultants(SM) in 1999 who are
compensated only when they are working on client assignments. The use of
part-time professionals is intended to reduce the volatility of the Company's
profit margin in the event of a reduction in the number of active contracts.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - In the six months ended June 30,
1998 selling, general and administrative expenses include restructuring costs
and other nonrecurring personnel costs totalling $10.4 million.

Selling, general and administrative expense, excluding the restructuring
charge, as a percentage of total revenue increased to 30.3% in the first half
of 1999 from 29.9% in the first half of 1998. On an absolute basis, selling,
general and administrative expense decreased $0.4 million, primarily the result
of costs associated with the departure of three senior level managers in the
first quarter of 1998. The full effect of these cost-cutting measures are
partially offset by increased legal costs due to various legal actions. (See
Litigation later in this discussion.)

DISCONTINUED OPERATIONS - In the second quarter of 1998, the Company announced
its plan to dispose of its Information Technologies business segment. The
Company recorded an after tax charge of approximately $2.9 million as the
estimated loss on disposal of the segment, including estimated operating losses
during the phase-out period. Terms of the sale required a revision to the
estimated loss on disposal and an additional $0.4 million after tax charge was
recorded in the third quarter of 1998 resulting in a total charge of $3.3
million as the estimate loss on disposal of the segment for 1998. The Company
realized a loss of $1.1 million net of tax in the first quarter of 1998 as a
result of the operations of the discontinued segment.

OTHER - The Company's effective tax rate was 40% in the first half of 1999, as
compared to the 38% rate in the first half of 1998. The increase is
attributable to certain adjustments made to accommodate the restructuring
charge and discontinued operations.

As a result of the restructuring charges and losses from discontinued
operations recognized in the second quarter of 1998, the Company maintains
deferred tax assets of $2.3 million and an income tax receivable of $1.8
million at June 30, 1999. The income tax receivable is to be applied to current
year tax liability. The deferred tax asset will be applied to future tax
liabilities. Utilization of the deferred tax asset and receivable is dependent
on future taxable profits in excess of existing taxable temporary differences.
At a tax rate of 40% the Company needs to realize pre-tax income of $6.8
million in the next five years to fully realize the total tax benefit of $4.1
million. Assuming margins remain equivalent to historical levels, business
under commitment (backlog) at June 30, 1999 should produce income before taxes
of approximately $6 million in the next two years. Management believes that
closing sufficient additional revenue to generate $1 million of additional
income before taxes in the next two years is highly likely. The Company will
continue in future periods to evaluate the realizability of the tax assets and
make necessary adjustments through charges to expense should projected future
taxable income be insufficient to realize the benefit of the tax assets.

11
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS - Net income in the first half of 1999 was $2.1 million,
or $0.43 per share, an increase of $6.5 million from a net loss of $4.3
million, or $0.77 per share, in the first half of 1998.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents increased by $3.2 million in the first half of 1999
compared to a $8.9 million decrease in the first half of 1998. The major
components of these changes are discussed below:

CASH FLOWS FROM OPERATING ACTIVITIES - Operating activities provided cash of
$4.9 million in the first half of 1999 compared to a use of cash of $2.3
million in the first half of 1998. Accounts receivable balances more than 30
days past due were $1.6 million at June 30, 1999, compared to $2.0 million at
December 31, 1998 and $1.5 million at June 30, 1998. Days sales outstanding in
accounts receivable was 53 days at December 31, 1998 and June 30, 1999.

CASH FLOWS FROM INVESTING ACTIVITIES - Cash flows used in investing activities
totaled $0.2 million in the first half of 1999 and were attributable to office
facilities and miscellaneous equipment. Capital expenditures for the comparable
period of the prior year were primarily for the purchase of computers and
network computing equipment.

CASH FLOWS FROM FINANCING ACTIVITIES - In February 1999, the Board of Directors
of the Company approved a stock repurchase plan for up to 250,000 shares of
Common Stock of the Company. Shares are purchased in the open market. During
the first half of 1999, the Company purchased 166,000 shares of stock its stock
at an average price of approximately $8.57 per share.

Cash flows used in financing activities in the first half of 1998 were
primarily for the purchase of outstanding stock. In February 1998, the Company
entered into a stock purchase agreement with its then Chairman and Chief
Executive Officer to repurchase shares of common stock for $8.2 million in cash
and satisfaction of a $2.3 million debt to the Company. Terms of the agreement
called for independent determination of the value (and consequently, the
number) of shares to be acquired. In April 1998 the number of shares was
determined to be approximately 1.3 million, representing a discount to the
market value during the settlement period.

The Company previously maintained a $20 million revolving credit agreement with
Comerica Bank. Terms of the agreement provided for a $1 million per quarter
reduction in available credit beginning in the first quarter of 1999. In April
1999 the Company amended the agreement to reduce maximum allowable borrowings
to $15 million with no quarterly reduction. The agreement is in place to
provide funding for potential future operating cash requirements or business
expansion purposes. Loans under this agreement bear interest at the prime rate
or other similar interest options. There has been no utilization of the credit
facility during the first half of 1999. At June 30, 1998 the balance due on the
agreement was $3.2 million.

FINANCIAL CONDITION

The Company believes that its financial condition remains strong and that it
has the financial resources necessary to meet its needs. Cash provided by
operating activities and the Company's credit facility should be sufficient to
meet short and long-term operational needs.

LITIGATION

The Company is subject to various claims and other legal matters, described
below, in the course of conducting its business. The Company believes that
neither such claims and other legal matters nor the cost of prosecuting and/or

12
<PAGE> 13

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

defending such claims and other legal matters will have a material adverse
effect on the Company's consolidated results of operations, financial condition
or cash flows.

On April 28, 1999 a judgment was entered in all matters in favor of the Company
in the legal action styled Creative Dimensions in Management, Inc. v. Thomas
Group, Inc. This manner arose out of disputes under two agreements between the
Company and Creative Dimensions in Management, Inc., a small private company
with whom the Company had an alliance.

In the case of Thomas Group, Inc. v. Blevins, et al., filed May 19, 1997 in the
U.S. District Court for the Northern District of Texas, and in the case styled
Blevins, et al. v. Thomas Group, Inc., et al., filed June 9, 1997 in the U.S.
District Court for the Northern District of Ohio, each party has asserted
claims arising out of the purchase agreement and consulting agreement in
connection with the Company's purchase of Interlink Technologies ("Interlink").
As a result of losses sustained by its subsidiary, the Company asserted claims
in the Texas action against Ron Blevins and Mike Smith, the former owners of
Interlink, for breach of contract and fraudulent misrepresentation.

YEAR 2000 ISSUES

The Company's internal business information systems are primarily comprised of
commercial application software products offered for license by Microsoft
Corporation and other recognized providers. Because these providers' products
are widely distributed commercially developed applications, the Company
anticipates these applications have been or will be brought into compliance by
the manufacturers.

13
<PAGE> 14
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

The Company has implemented new accounting and financial reporting software
that is Year 2000 compliant. To be Year 2000 compliant, many of the various
software programs utilized by the Company required upgrading. Generally these
upgrades were included as part of the licensing for use of the program, and
were available at no additional cost. Hardware purchases in the last year have
been made in contemplation of the Year 2000, but not specifically for that
purpose. As such, the Company estimates the total cost incurred to date
specifically for Year 2000 compliance to be less than $0.1 million.

The Company does not anticipate any Year 2000 compliance issues to arise
related to its primary internal business information systems. Thomas Group is
not aware of any further material operational issues or costs associated with
preparing internal systems for the Year 2000. However, the Company utilizes
other third party network equipment, telecommunication products, and other
third party software products that may or may not be Year 2000 compliant.
Although the Company is currently taking steps to address the impact, if any,
of the Year 2000 issue surrounding such third party products, failure of any
critical technology to operate properly in the Year 2000 may have an adverse
impact on business operations or require the Company to incur unanticipated
expenses to remedy any problems.

The Company is unaware of any client who may be impacted by the Year 2000
issue. A failure of a client to appropriately handle issues related to the Year
2000 might have an adverse impact on the financial results of the Company.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT:

With the exception of historical information, the matters discussed in this
report are "forward looking statements" as that term is defined in Section 21E
of the Securities Exchange Act of 1934.

While the Company believes that its strategic plan is on target and its
business outlook remains strong, several important factors have been
identified, which could cause actual results to differ materially from those
predicted, included by way of example:

o The competitive nature of the management consulting industry, in light
of new entrants into the industry and the difficulty of
differentiating the services offered to potential clients.

o The time required by prospective clients to fully understand the value
and complexity of a typical Total Cycle Time (TCT) program may result
in an extended lead time to close new business.

o Performance-oriented fees are earned upon the achievement of
improvements in a client's business. The client's commitment to a TCT
program and general economic/industry conditions could impact a
client's business performance and consequently the Company's ability
to forecast the timing and ultimate realization of
performance-oriented fees.

o The ability of the Company to productively re-deploy personnel during
program transition periods.

o The ability of the Company to create alliances and make acquisitions
that are accretive to earnings.

14
<PAGE> 15
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

THOMAS GROUP, INC.

PART II - OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K

(a) Exhibits:

3.2 - Amended and Restated Bylaws dated August 9, 1993
4.5 - Amendment No. 2 to Rights Agreement dated
August 12, 1999
10.2 - Employment agreement between the Company and J.
Thomas Williams
10.14 - Amendment No. 1 to Revolving Credit Loan Agreement
dated December 6, 1996 between Comerica Bank-Texas
and the Company dated April 1, 1999 27 - Financial
Data Schedule

(b) Reports on Form 8-K for the Quarter Ending June 30, 1999:
none

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

THOMAS GROUP, INC.
Registrant

<TABLE>
<S> <C>
August 16, 1999 /s/ J. Thomas Williams
--------------- ----------------------
Date J. Thomas Williams
Chief Executive Officer

August 16, 1999 /s/ Leland L. Grubb, Jr.
--------------- ----------------------
Date Leland L. Grubb, Jr.
Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
</TABLE>

15
<PAGE> 16

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.2 - Amended and Restated Bylaws dated August 9, 1993

4.5 - Amendment No. 2 to Rights Agreement dated August 12, 1999

10.2 - Employment agreement between the Company and J. Thomas
Williams

10.14 - Amendment No. 1 to Revolving Credit Loan Agreement dated
December 6, 1996 between Comerica Bank-Texas and the Company
dated April 1, 1999

27 - Financial Data Schedule
</TABLE>

<PAGE> 1

EXHIBIT 3.2

AMENDED AND RESTATED

BYLAWS OF

THOMAS GROUP, INC.

A Delaware Corporation

As of August 9, 1993

<PAGE> 2

BYLAWS OF

THOMAS GROUP, INC.

TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I OFFICES
Section 1. Registered Office.................................................................... 1
Section 2. Other Offices........................................................................ 1

ARTICLE II MEETINGS OF STOCKHOLDERS

Section 1. Place of Meetings.................................................................... 1
Section 2. Annual Meetings...................................................................... 1
Section 3. Special Meetings..................................................................... 1
Section 4. Notice of Meetings and Adjourned Meetings............................................ 2
Section 5. Quorum............................................................................... 2
Section 6. Certain Rules of Procedure Relating to
Stockholder Meetings.............................................................. 3
Section 7. Voting............................................................................... 3
Section 8. Inspectors........................................................................... 4
Section 9. New Business......................................................................... 5
Section 10. Nominations for Director............................................................. 5
Section 11. Requests for Stockholder List and Corporation Records................................ 6

ARTICLE III DIRECTORS

Section 1. Powers............................................................................... 7
Section 2. Number of directors; Term; Qualification............................................. 7
Section 3. Election............................................................................. 7
Section 4. Vacancies............................................................................ 7
Section 5. Place of Meetings.................................................................... 8
Section 6. Regular Meetings..................................................................... 8
Section 7. Special Meetings..................................................................... 8
Section 8. Notice of Meetings................................................................... 8
Section 9. Quorum and Manner of Acting.......................................................... 8
Section 10. Action by consent; Participation by Telephone or Similar Equipment................... 9
Section 11. Resignation; Removal................................................................. 9
Section 12. Compensation of Directors............................................................ 9

ARTICLE IV COMMITTEES OF THE BOARD

Section 1. Designation, Powers and Name........................................................ 10

</TABLE>

-i-

<PAGE> 3

<TABLE>
<S> <C> <C>
Section 2. Meetings; Minutes................................................................... 10
Section 3. Compensation........................................................................ 11
Section 4. Action by Consent; Participation by Telephone or Similar Equipment.................. 11
Section 5. Changes in Committees; Resignations; Removals....................................... 11

ARTICLE V OFFICERS

Section 1. Officers............................................................................ 12
Section 2. Election and Term of Office......................................................... 12
Section 3. Removal and Resignation............................................................. 12
Section 4. Vacancies........................................................................... 12
Section 5. Salaries............................................................................ 13
Section 6. Chairman of the Board............................................................... 13
Section 7. Chief Executive Officer............................................................. 13
Section 8. President and Chief Operating Officer............................................... 13
Section 9. Vice Presidents..................................................................... 14
Section 10. Treasurer........................................................................... 14
Section 11. Assistant Treasurer................................................................. 14
Section 12. Secretary........................................................................... 14
Section 13. Assistant Secretaries............................................................... 15

ARTICLE VI CONTRACTS, CHECKS, LOANS, DEPOSITS, ETC.

Section 1. Contracts........................................................................... 15
Section 2. Checks, etc......................................................................... 15
Section 3. Loans............................................................................... 15
Section 4. Deposits............................................................................ 15

ARTICLE VII CAPITAL STOCK

Section 1. Stock Certificates.................................................................. 16
Section 2. List of Stockholders Entitled to Vote............................................... 16
Section 3. Stock Ledger........................................................................ 17
Section 4. Transfers of Capital Stock.......................................................... 17
Section 5. Lost Certificates................................................................... 17
Section 6. Fixing of Record Date............................................................... 18
Section 7. Beneficial Owners

ARTICLE VIII DIVIDENDS

Section 1. Declaration......................................................................... 18
Section 2. Reserve............................................................................. 18

</TABLE>

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<PAGE> 4

ARTICLE IX INDEMNIFICATION

Section 1. Indemnification..................................................................... 18
Section 2. Advancement of Expenses............................................................. 19
Section 3. Non-Exclusivity..................................................................... 19
Section 4. Insurance........................................................................... 19
Section 5. Continuity.......................................................................... 20

ARTICLE X SEAL................................................................................ 20

ARTICLE XI WAIVER OF NOTICE.................................................................... 20

ARTICLE XII AMENDMENTS.......................................................................... 20

</TABLE>

-iii-

<PAGE> 5

BYLAWS

THOMAS GROUP, INC.

A Delaware Corporation

ARTICLE I
OFFICES

Section 1. Registered Office. The registered office of Thomas
Group, Inc. (hereinafter called the "Corporation") within the State of Delaware
shall be located in the City of Wilmington, County of New Castle.

Section 2. Other Offices. The Corporation may also have an
office or offices and keep the books and records of the Corporation, except as
may otherwise be required by law, in such other place or places, within or
without the State of Delaware, as the Board of Directors of the Corporation
(hereinafter sometimes called the "Board") may from time to time determine or
the business of the Corporation may require.

ARTICLE II
MEETINGS OF STOCKHOLDERS

Section 1. Place of Meetings. All meetings of stockholders of
the Corporation shall be held at the office of the Corporation in the State of
Delaware or at such other place, within or without the State of Delaware, as may
from time to time be fixed by the Board or specified or fixed in the respective
notices or waivers of notice thereof.

Section 2. Annual Meetings. The annual meeting of stockholders
of the Corporation for the election of Directors and for the transaction of such
other business as may properly come before the meeting shall be held annually on
such date and at such time as may be fixed by the Board.

Section 3. Special Meetings. Special meetings of stockholders,
unless otherwise provided by law, may be called at any time only by (i) the
Board pursuant to a resolution adopted by a majority of the then authorized
number of Directors (as determined in accordance with Section 2 of Article III
of these Bylaws), (ii) the Chairman of the Board, or (iii) the President. Any
such call must specify the matter or matters to be acted upon at such meeting
and only such matter or matters shall be acted upon thereat.

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<PAGE> 6

Section 4. Notice of Meetings and Adjourned Meetings. Except as
may otherwise be required by law, notice of each meeting of stockholders, annual
or special, shall be in writing, shall state the purpose or purposes of the
meeting, the place, date and hour of the meeting and, unless it is the annual
meeting, shall indicate that the notice is being issued by or at the direction
of the person or persons calling the meeting, and a copy thereof shall be
delivered or sent by mail, not less than ten (10) or more than sixty (60) days
before the date of said meeting, to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be directed to the stockholder at his
address as it appears on the stock record of the Corporation unless he shall
have filed with the Secretary a written request that notices to him be mailed to
some other address, in which case it shall be directed to him at such other
address. Notice of any adjourned meeting need not be given if the time and place
to which the meeting shall be adjourned were announced at the meeting at which
the adjournment was taken unless (i) the adjournment is for more than thirty
(30) days, (ii) the Board shall fix a new record date for any adjourned meeting
after the adjournment or (iii) these Bylaws otherwise require.

Section 5. Quorum. At each meeting of stockholders of the
Corporation, the holders of a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote shall be present or
represented by proxy to constitute a quorum for the transaction of business,
except as may otherwise be provided by law or the Certificate of Incorporation.

If a quorum is present at a meeting of stockholders, the stockholders
represented in person or by proxy at the meeting may conduct such business as
may be properly brought before the meeting until it is finally adjourned, and
the subsequent withdrawal from the meeting of any stockholder or the refusal of
any stockholder represented in person or by proxy to vote shall not affect the
presence of a quorum at the meeting, except as may otherwise be provided by law
or the Certificate of Incorporation.

If, however, a quorum shall not be present or represented at any
meeting of the stockholders, the chairman of the meeting or holders of majority
of the shares represented in person or by proxy shall have the power to adjourn
the meeting to another time, or to another time and place, without notice
(subject, however, to the requirements of Section 4 of Article II of these
Bylaws) other than announcement of adjournment at the meeting, and there may be
successive adjournments for like cause and in like manner until the requisite
amount of shares entitled to vote at such meeting shall be represented. At such
adjourned meeting at which the requisite amount of shares entitled to vote
thereat

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<PAGE> 7

shall be represented, any business may be transacted that might have
been transacted at the original meeting so adjourned.

Section 6. Certain Rules of Procedure Relating to Stockholder
Meetings. All stockholder meetings, annual or special, shall be governed in
accordance with the following rules:

(i) Only stockholders of record or their proxies will be
permitted to present motions from the floor at any meeting of
stockholders.

(ii) The chairman of the meeting shall preside over and
conduct the meeting in a fair and reasonable manner, and all questions
of procedure or conduct of the meeting shall be decided solely by the
chairman of the meeting. The chairman of the meeting shall have all
power and authority vested in a presiding officer by law or practice to
conduct an orderly meeting. Among other things, the chairman of the
meeting shall have the power to adjourn or recess the meeting, to
silence or expel persons to insure the orderly conduct of the meeting,
to declare motions or persons out of order, to prescribe rules of
conduct and an agenda for the meeting, to impose reasonable time limits
on questions and remarks by any stockholder, to limit the number of
questions a stockholder may ask, to limit the nature of questions and
comments to one subject matter at a time as dictated by any agenda for
the meeting, to limit the number of speakers or persons addressing the
chairman of the meeting or the meeting, to determine when the polls
shall be closed, to limit the attendance at the meeting to stockholders
of record, beneficial owners of stock who present letters from the
record holders confirming their status as beneficial owners, and the
proxies of such record and beneficial holders, and to limit the number
of proxies a stockholder may name.

Section 7. Voting. Except as otherwise provided in the
Certificate of Incorporation, at each meeting of stockholders, every stockholder
of the Corporation shall be entitled to one (1) vote for every share of capital
stock standing in his name on the stock records of the Corporation (i) at the
time fixed pursuant to Section 6 of Article VII of these Bylaws as the record
date for the determination of stockholders entitled to vote at such meeting, or
(ii) if no such record date shall have been fixed, then at the close of business
on the date next preceding the day on which notice thereof shall be given, or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held. At each such meeting, every stockholder shall be
entitled to vote in person, or by proxy

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<PAGE> 8

appointed by an instrument in writing executed by such stockholder or by his
duly authorized agent and bearing a date not more than three (3) years prior to
the meeting in question, unless said instrument provides for a longer period
during which it is to remain in force.

At all meetings of stockholders at which a quorum is present, all
matters (except as otherwise provided in Section 3 of Article III of these
Bylaws and except in cases where a larger vote is required by law, the
Certificate of Incorporation or these Bylaws) shall be decided by a majority of
the votes cast affirmatively or negatively at such meeting by the holders of
shares present or represented by proxy and entitled to vote thereon.

At any meeting of stockholders, every stockholder having the right to
vote may vote either in person or by a proxy executed in writing by the
stockholder or by his duly authorized attorney-in-fact. Each such proxy shall be
filed with the Secretary of the Corporation before or at the time of the
meeting. No proxy shall be valid after three years from the date of its
execution, unless otherwise provided in the proxy. Each proxy shall be revocable
unless expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless otherwise made
irrevocable by law.

Section 8. Inspectors. The Board of Directors shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If any inspector appointed or designated by the
Board shall be unwilling or unable to serve, or if the Board shall fail to
appoint inspectors, the chairman of the meeting shall appoint the necessary
inspector or inspectors. The inspectors so appointed, before entering upon the
discharge of their duties, shall be sworn faithfully to execute their duties
with strict impartiality, and according to the best of their ability, and the
oath so taken shall be subscribed by them. Such inspectors shall (i) ascertain
the number of shares outstanding and the voting power of each, (ii) determine
the shares represented at a meeting, the existence of a quorum, and the validity
of proxies and ballots, (iii) count all votes and ballots, (iv) determine and
retain for a reasonable period a record of the disposition of any challenges
made to any determination by such inspectors, (v) certify their determination of
the number of shares represented at the meeting and their count of all votes and
ballots and (vi) perform such further acts as are proper to conduct any election
or vote with fairness to all stockholders. On request of the chairman of the
meeting, the

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<PAGE> 9

inspectors shall make a report in writing of any challenge, question or matter
determined by them and shall execute a certificate of any fact found by them. An
inspector need not be a stockholder of the Corporation, and any officer or
Director of the Corporation may be an inspector on any question other than a
vote for or against his election to any position with the Corporation or on any
other question in which he may be directly interested.

Section 9. New Business. Any new business to be taken up at any
annual meeting of stockholders shall be stated in writing and filed with the
Secretary by the Board of Directors or other person or persons proposing such
new business at least ninety (90) days before the date of the annual meeting,
and all business so stated, proposed and filed shall be considered at the annual
meeting, but no other proposal shall be acted upon at the annual meeting of
stockholders. Any stockholder may make any other proposal at the annual meeting,
and the proposal may be discussed and considered, but unless stated in writing
and filed with the Secretary at least ninety (90) days before the meeting such
proposal shall be postponed for action at the next annual or special meeting of
stockholders or at an adjournment of the meeting with respect to which such
business was proposed. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of stockholders of reports of
officers, Directors and committees of the Board of Directors, but in connection
with such reports no new business shall be acted upon at such annual meeting
unless stated and filed as herein provided.

Section 10. Nominations for Director. Notwithstanding anything in
these Bylaws to the contrary, only persons who are nominated in accordance with
the procedures hereinafter set forth in this Section 10 shall be eligible for
election as Directors of the Corporation in accordance with Section 3 of Article
III of these Bylaws.

Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders only (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 10. Such
nominations, other than those made by or at the direction of the Board, shall be
made pursuant to timely notice in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation not less than
thirty (30) days nor more than sixty (60) days prior to the meeting; provided,
however that in the event that less than forty

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<PAGE> 10

(40) days' notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made. Any adjournment(s) or postponement(s) of the
original meeting whereby the meeting will reconvene within thirty (30) days from
the original date shall be deemed for purposes of notice to be a continuation of
the original meeting and no nominations by a stockholder of persons to be
elected Directors of the Corporation may be made at any such reconvened meeting
other than pursuant to a notice that was timely for the meeting on the date
originally scheduled. Such stockholder's notice shall set forth: (i) as to each
person whom the stockholder proposed to nominate for election or re-election as
a Director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of Directors, or as otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, or any successor regulation thereto (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a Director if elected); and (ii) as to the stockholder giving the
notice (a) the name and address, as they appear on the Corporation's books, of
such stockholder, and (b) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. At the request of the Board of
Directors, any person nominated by the Board for election as a Director shall
furnish to the Secretary of the Corporation that information required to be set
forth in a stockholder's notice of nomination which pertains to the nominee.

The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by this Section 10, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.

Section 11. Requests for Stockholder List and Corporation
Records. Stockholders shall have those rights afforded under the General
Corporation Law of the State of Delaware (the "DGCL") to inspect for any proper
purpose the Corporation's stock ledger, list of stockholders and other books and
records, and make copies or extracts therefrom. Such request shall be in writing
in compliance with Section 220 of the DGCL. Information so requested shall be
made available for inspecting, copying or extracting during usual business hours
at the principal executive offices of the Corporation. Alternative arrangements
with respect to this Section 11 may be permitted in the discretion of the
President of the Corporation or by vote of the Board of Directors.

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<PAGE> 11

ARTICLE III
DIRECTORS

Section 1. Powers. The business of the Corporation shall be
managed by or under the direction of the Board. The Board may exercise all such
authority and powers of the Corporation and do all such lawful acts and things
as are not by law or otherwise directed or required to be exercised or done by
the stockholders.

Section 2. Number of Directors; Term; Qualification. The number
of Directors which shall constitute the whole Board of Directors shall be not
less than one (1), and may be from time to time fixed and determined at a
different number only by resolution of the Board of Directors. No decrease in
the number of Directors constituting the Board shall shorten the term of any
incumbent Director.

Except as otherwise provided by law, the Certificate of Incorporation
or these Bylaws, each Director shall hold office until the next annual meeting
and until his successor is elected and qualified, or until his earlier death,
resignation, disqualification or removal. Directors need not be residents of the
State of Delaware or stockholders of the Corporation. Each director must have
attained the age of majority.

Section 3. Election. At each meeting of stockholders for the
election of Directors at which a quorum is present, the persons receiving a
plurality of the votes of the shares represented in person or by proxy and
entitled to vote on the election of Directors shall be elected Directors. All
elections of Directors shall be by written ballot, unless otherwise provided in
the Certificate of Incorporation.

Section 4. Vacancies. Unless otherwise provided by law or by the
Certificate of Incorporation, in the case of any increase in the number of
Directors or any vacancy in the Board of Directors, such newly created
directorship or vacancy may be filled by the affirmative vote of the majority of
the remaining Directors then in office, although less than a quorum, or by a
sole remaining Director. Unless the Certificate of Incorporation or these Bylaws
provide otherwise, when one or more Directors shall resign from the Board of
Directors, effective at a future date, the majority of Directors then in office,
including those who have so resigned, shall have the power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective. Any Director elected or chosen as provided
herein shall serve for the remaining term of the directorship to which appointed
and until

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his successor is elected and qualified or until his earlier death,
resignation or removal.

Section 5. Place of Meetings. Meetings of the Board shall be
held at the Corporation's office in the State of Delaware or at such other
place, within or without such State, as the Board may from time to time
determine or as shall be specified or fixed in the notice or waiver of notice of
any such meeting.

Section 6. Regular Meetings. Regular meetings of the Board shall
be held on such days and at such times as the Board may from time to time
determine. Notice of regular meetings of the Board need not be given except as
otherwise required by law or these Bylaws.

Section 7. Special Meetings. Special meetings of the Board may
be called by the Chairman of the Board or the President and shall be called by
the Secretary at the request of any two of the other Directors.

Section 8. Notice of Meetings. Notice of each special meeting of
the Board (and of each regular meeting for which notice shall be required),
stating the time, place and purposes thereof, shall be mailed to each Director,
addressed to him at his residence or usual place of business, or shall be sent
to him by telex, cable, facsimile or telegram so addressed, or shall be given
personally or by telephone, on twenty-four (24) hours notice, or such shorter
notice as the person or persons calling such meeting may deem necessary or
appropriate in the circumstances. Notice of any such meeting need not be given
to any Director, however, if waived by him before or after the other form of
recorded communication, or if he shall be present at the meeting, except when he
is present for the express purpose of objecting at the beginning of such meeting
to the transaction of any business because the meeting is now lawfully called or
convened.

Section 9. Quorum and Manner of Acting. The presence of at least
a majority of the authorized number of Directors shall be necessary and
sufficient to constitute a quorum for the transaction of business at any meeting
of the Board. If a quorum shall not be present at any meeting of the Board, a
majority of the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. Except where a different vote is required by law, the act of a
majority of the Directors present at any meeting at which a quorum shall be
present shall be the act of the Board.

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Section 10. Action by Consent; Participation by Telephone or
Similar Equipment. Any action required or permitted to be taken by the Board may
be taken without a meeting if all the Directors consent in writing to the
adoption of a resolution authorizing the action, unless otherwise restricted by
the Certificate of Incorporation or these Bylaws. The resolution and the written
consents thereto by the Directors shall be filed with the minutes of the
proceedings of the Board. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any one or more Directors may participate in any
meeting of the Board by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting of the Board.

Section 11. Resignation; Removal. Any Director may resign at any
time by giving written notice to the Corporation, provided, however, that
written notice to the Board, the Chairman of the Board, the President or the
Secretary shall be deemed to constitute notice to the Corporation. Such
resignation shall take effect upon receipt of such notice or at any later time
specified therein, and, unless otherwise specified therein, acceptance of such
resignation shall not be necessary to make it effective.

Any Director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of Directors; provided, however, that when the holders of any
class or series are entitled by the Certificate of Incorporation to elect one
(1) or more Directors, then, with respect to the removal without cause of a
Director or Directors so elected, the required majority vote shall be of the
holders of the outstanding shares of such class or series and not of the
outstanding shares as a whole.

Section 12. Compensation of Directors. The Board may, unless
otherwise restricted by the Certificate of Incorporation or these Bylaws,
provide for the payment to any of the Directors of a specified amount for
services as a Director and/or member of a committee of the Board, or of a
specified amount for attendance at each regular or special Board meeting or
committee meeting, or of both, and all Directors shall be reimbursed for
expenses of attendance at any such meeting; provided, however, that nothing
herein contained shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.

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ARTICLE IV
COMMITTEES OF THE BOARD

Section 1. Designation, Powers and Name. The Board of Directors
may, by resolution passed by a majority of the whole Board, designate one or
more committees, including, if they shall so determine, an Executive Committee,
each such committee to consist of one or more of the directors of the
Corporation.

Except to the extent restricted by law, the Certificate of
Incorporation, or these Bylaws, each committee designated by the Board of
Directors shall have and may exercise such of the powers of the Board in the
management of the business and affairs of the Corporation as may be provided in
such resolution or in these Bylaws; provided, however, that no such committee
shall have the power or authority in reference to amending the Certificate of
Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors pursuant to authority, if any, expressly vested in the
Board by the provisions of the Certificate of Incorporation, (i) fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation, or (ii) fix the number of shares of any
series of stock or authorize the increase or decrease of the shares of any
series), adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
Bylaws of the Corporation; and, provided further, that, unless the resolution
establishing the committee, the Certificate of Incorporation or these Bylaws
expressly so provide, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the DGCL. The committee may
authorize the seal of the Corporation to be affixed to all papers which may
require it. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting.

Section 2. Meetings; Minutes. Unless the Board of Directors
shall otherwise provide, upon designation of any committee by the Board, such
committee shall elect one of its members as chairman and may elect one of its
members as vice

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chairman and shall adopt rules of proceeding providing for, among other things,
the manner of calling committee meetings, giving notices thereof, quorum
requirements for such meetings, and the methods of conducting the same. Each
committee of Directors shall keep regular minutes of its proceedings and report
the same to the Board of Directors when required.

Section 3. Compensation. Members of special or standing
committees may be allowed compensation if the Board of Directors shall so
determine pursuant to Section 12 of Article III of these Bylaws.

Section 4. Action by Consent; Participation by Telephone or
Similar Equipment. Unless the Board of Directors, the Certificate of
Incorporation or these Bylaws shall otherwise provide, any action required or
permitted to be taken by any committee may be taken without a meeting if all
members of the committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
members of the committee shall be filed with the minutes of the proceedings of
the committee. Unless the Board of Directors, the Certificate of Incorporation,
or these Bylaws shall otherwise provide, any other or more members of any such
committee may participate in any meeting of the committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation by such means
shall constitute presence in person at a meeting of the committee.

Section 5. Changes in Committees; Resignations; Removals. The
Board shall have power, by the affirmative vote of a majority of the authorized
number of Directors, at any time to change the members of, to fill vacancies in,
and to discharge any committee of the Board. Any member of any such committee
may resign at any time by giving notice to the Corporation, provided, however,
that notice to the Board, the Chairman of the Board, the President, the chairman
of such committee or the Secretary shall be deemed to constitute notice to the
Corporation. Such resignation shall take effect upon receipt of such notice or
at any later time specified therein; and, unless otherwise specified therein,
acceptance of such resignation shall not be necessary to make it effective. Any
member of any such committee may be removed at any time, with or without cause,
by the affirmative vote of a majority of the authorized number of Directors at
any meeting of the Board called for that purpose.

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ARTICLE V
OFFICERS

Section 1. Officers. The officers of the Corporation shall be a
Chairman of the Board, a Chief Executive Officer, a President, a Chief Operating
Officer, one or more Vice Presidents (any one or more of whom may be designated
Executive Vice President or Senior Vice President), a Secretary and a Treasurer.
The Board of Directors may appoint such other officers and agents, including
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, as it
shall deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined by the
Board. Any two or more offices may be held by the same person. The Chairman of
the Board shall be elected from among the Directors. With the foregoing
exception, none of the other officers need be a Director, and none of the
officers need be a stockholder of the Corporation unless otherwise required by
the Certificate of Incorporation.

Section 2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the Board of Directors at its first
regular meeting held after the annual meeting of stockholders or as soon
thereafter as conveniently practicable. Each officer shall hold office until his
successor shall have been elected or appointed and shall have been qualified or
until his death or the effective date of his resignation or removal, or until he
shall cease to be a Director in the case of the Chairman of the Board.

Section 3. Removal and Resignation. Any officer or agent elected
or appointed by the Board of Directors may be removed, with or without cause, by
the affirmative vote of a majority of the Board of Directors whenever, in its
judgment, the best interests of the Corporation shall be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed. Election or appointment of an officer or agent shall not
of itself create contract rights other than indemnification rights with respect
to officers. Any officer may resign at any time by giving written notice to the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein, and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.

Section 4. Vacancies. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be filled by the
Board of Directors and, in the case of any vacancy in an office other than the
office of Chairman of the Board (if any) or President, by the President for the
unexpired portion of the term.

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Section 5. Salaries. The salaries of all officers and agents of
the Corporation shall be fixed by the Board of Directors or pursuant to its
direction; and no officer shall be prevented from receiving such salary by
reason of his also being a Director.

Section 6. Chairman of the Board. The Chairman of the Board (who
may also hold the office of Chief Executive Officer or other offices) shall have
such duties as the Board of Directors may prescribe. The Chairman of the Board
shall preside at all meetings of the stockholders and of the Board of Directors.
The Chairman of the Board may sign all certificates for shares of stock of the
Corporation. In the Chairman's absence, such duties shall be attended to by the
President or any Vice President.

Section 7. Chief Executive Officer. Unless and to the extent
that such powers and duties are expressly delegated to the Chairman of the Board
or the President by the Board of Directors, the Chief Executive Officer shall be
the Chief Executive Officer of the Corporation and, subject to the supervision
of the Board of Directors, shall, together with the President, have general
management and control of the business and property of the Corporation in the
ordinary course of its business with all such powers with respect to such
general management and control as may be reasonably incident to such
responsibilities, including, but not limited to, the power to employ, discharge,
or suspend employees and agents of the Corporation, and to fix the compensation
of employees and agents. The Chief Executive Officer may, without limitation,
agree upon and execute all division and transfer orders, bonds, contracts, and
other obligations in the name of the Corporation.

Section 8. President and Chief Operating Officer. Unless and to
the extent that such powers and duties are expressly delegated to the Chairman
of the Board or the Chief Executive Officer by the Board of Directors, the
President and Chief Operating Officer shall be an executive officer of the
Corporation and, subject to the supervision of the Board of Directors, shall,
together with the Chairman of the Board and the Chief Executive Officer have
general management and control of the business and property of the Corporation
in the ordinary course of its business with all such powers with respect to such
general management and control as may be reasonably incident to such
responsibilities, including, but not limited to, the power to employ, discharge,
or suspend employees and agents of the Corporation, and to fix the compensation
of employees and agents. The President and Chief Operating Officer may, without
limitation, agree upon and execute all division and transfer orders, bonds,
contracts, and other obligations in the name of the Corporation.

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Section 9. Vice Presidents. Each Vice President shall have such
powers and duties as may be assigned to him by the Board of Directors, the
Chairman of the Board, or the President and (in order of their seniority as
determined by the Board of Directors or, in the absence of such determination,
as determined by the length of time they have held the office of Vice President)
shall exercise the powers of the President during that officer's absence or
inability to act. As between the Corporation and third parties, any action taken
by a Vice President in the performance of the duties of the President shall be
conclusive evidence of the absence or inability to act of the President at the
time such action was taken.

Section 10. Treasurer. The Treasurer shall have custody of the
Corporation's funds and securities, shall keep full and accurate account of
receipts and disbursements, shall deposit all monies and valuable effects in the
name and to the credit of the Corporation in such depository or depositories as
may be designated by the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors, the Chairman of the Board, or
the President.

Section 11. Assistant Treasurer. Each Assistant Treasurer shall
have such powers and duties as may be assigned to him by the Board of Directors,
the Chairman of the Board, or the President. The Assistant Treasurers (in the
order of their seniority as determined by the Board of Directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Treasurer) shall exercise the powers of the
Treasurer during that officer's absence or inability to act.

Section 12. Secretary. Except as otherwise provided in these
Bylaws, the Secretary shall keep the minutes of all meetings of the Board of
Directors and of the stockholders in books provided for that purpose, and he
shall attend to the giving and service of all notices. He may sign with the
Chairman of the Board or the President, in the name of the Corporation, all
contracts of the Corporation and affix the seal of the Corporation thereto. He
may sign with the Chairman of the Board or the President all certificates for
shares of stock of the Corporation, and he shall have charge of the certificate
books, transfer books, and stock papers as the Board of Directors may direct,
all of which shall at all reasonable times be open to inspection by any director
upon application at the office of the Corporation during business hours. He
shall in general perform all duties incident to the office of the Secretary,
subject to the control of the Board of Directors, the Chairman of the Board, and
the President.

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Section 13. Assistant Secretaries. Each Assistant Secretary shall
have such powers and duties as may be assigned to him by the Board of Directors,
the Chairman of the Board, or the President. The Assistant Secretaries (in the
order of their seniority as determined by the Board of Directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Secretary) shall exercise the powers of the
Secretary during that officer's absence or inability to act.

ARTICLE VI
CONTRACTS, CHECKS, LOANS, DEPOSITS, ETC.

Section 1. Contracts. The Board may authorize any officer or
officers, agent or agents, in the name and on behalf of the Corporation, to
enter into any contract or to execute and deliver any instrument, which
authorization may be general or confined to specific instances; and, unless so
authorized by the Board, no agent or employee who is not an officer shall have
any power or authority to bind the Corporation by any contract or engagement or
to pledge its credit or to render it liable pecuniarily for any purpose or for
any amount.

Section 2. Checks, etc. All checks, drafts, bills of exchange or
other orders for the payment of money out of the funds of the Corporation, and
all notes or other evidences of indebtedness of the Corporation, shall be signed
in the name and on behalf of the Corporation in such manner as shall from time
to time be authorized by the Board, which authorization may be general or
confined to specific instances.

Section 3. Loans. No loan shall be contracted on behalf of the
Corporation, and no negotiable paper shall be issued in its name, unless
authorized by the Board, which authorization may be general or confined to
specific instances. All bonds, debentures, notes and other obligations or
evidences of indebtedness of the Corporation issued for such loans shall be
made, executed and delivered as the Board shall authorize.

Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositaries as may be selected by or in
the manner designated by the Board. The Board or its designees may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as may be deemed expedient.

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ARTICLE VII
CAPITAL STOCK

Section 1. Stock Certificates. Each stockholder of the
Corporation shall be entitled to have, in such form as shall be approved by the
Board, a certificate or certificates signed by the Chairman of the Board or the
President and by either the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary (except that, when any such certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation itself or any employee, the signatures of any such officers may be
facsimiles, engraved or printed), which may be sealed with the seal of the
Corporation (which seal may be a facsimile, engraved or printed), certifying the
number of shares of capital stock of the Corporation owned by such stockholder.
In case any officer who has signed or whose facsimile signature has been placed
upon any such certificate shall have ceased to be such officer before such
certificate is issued, such certificate may be issued by the Corporation with
the same effect as if he were such officer at the date of its issue.

If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof, and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise stated in Section 202 of the DGCL, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, option or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.

Section 2. List of Stockholders Entitled to Vote. The officer of
the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make or cause to have prepared or made, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be

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open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.

Section 3. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 2 of this Article VII or the
books and records of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.

Section 4. Transfers of Capital Stock. Transfers of shares of
capital stock of the Corporation shall be made only on the stock record of the
Corporation by the holder of record thereof or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation or the transfer agent thereof, and only on surrender of the
certificate or certificates representing such shares, properly endorsed or
accompanied by a duly executed stock transfer power. The Board may make such
additional rules and regulations as it may deem expedient concerning the issue
and transfer of certificates representing shares or uncertificated shares of the
capital stock of the Corporation.

Section 5. Lost Certificates. The Board of Directors may direct
a new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed or the issuance of such new certificate.

Section 6. Fixing of Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividends or other distribution or allotment of any rights, or entitled to
exercise

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any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix, in advance, a record
date, which record date shall (i) not precede the date upon which the resolution
fixing the record date is adopted by the Board and (ii) not be more than sixty
days nor less than ten days before the date of such meeting, nor more than sixty
days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.

Section 7. Beneficial Owners. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.

ARTICLE VIII
DIVIDENDS

Section 1. Declaration. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property or in
shares of capital stock, subject to the provisions of the Certificate of
Incorporation.

Section 2. Reserve. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the Corporation, and the Directors may modify or
abolish any such reserve in the manner in which it was created.

ARTICLE IX
INDEMNIFICATION

Section 1. Indemnification. The Corporation shall indemnify to
the full extent authorized or permitted by Section 145 of the DGCL any person
(his heirs, executors and administrators) made, or threatened to be made, a
party to any

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action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he is or was a Director or officer of
the Corporation or by reason of the fact that as such Director or officer at the
request of the Corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, in
any capacity. The Corporation may indemnify to the full extent authorized or
permitted by Section 145 of the DGCL any person (his heirs, executors and
administrators) made, or threatened to be made, a party to any action, suit or
proceeding (whether civil, criminal, administrative or investigative) by reason
of the fact that he is or was an employee or agent of the Corporation or by
reason of the fact that as such employee or agent, at the request of the
Corporation, is or was serving any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, in any capacity.
Nothing contained herein shall affect any rights to indemnification to which
Directors, officers, employees and agents of the Corporation may be entitled by
law.

Section 2. Advancement of Expenses. Expenses (including
attorneys' fees) incurred by an officer or Director of the Corporation in
defending any civil, criminal, administrative or investigative action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding as authorized by the Board of Directors upon
receipt of an undertaking by or on behalf of such Director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article IX. Such expenses
incurred by employees and agents of the Corporation other than Directors and
officers may be paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.

Section 3. Non-Exclusivity. The indemnification and advancement
of expenses provided for hereby shall not be deemed exclusive of any other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under any bylaw, agreement, vote of stockholders or disinterested
Directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.

Section 4. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise

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against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article IX.

Section 5. Continuity. The indemnification and advancement of
expenses provided for in this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a Director,
officer, employee or agent of the Corporation and shall inure to the benefit of
the heirs, executors and administrators of such a person.

ARTICLE X
SEAL

The seal of the Corporation shall be such as from time to time may be
approved by the Board of Directors.

ARTICLE XI
WAIVER OF NOTICE

Whenever any notice is required by law, the Certificate of
Incorporation or these Bylaws to be given to any Director, member of a committee
or stockholder, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, Directors, or members of a
committee of Directors need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation or these Bylaws.

ARTICLE XII
AMENDMENTS

Subject to the Certificate of Incorporation and applicable law, these
Bylaws or any of them may be amended or supplemented in any respect at any time,
either (a) at any meeting of stockholders, provided that any amendment or
supplement proposed to be acted upon at any such meeting shall have been
described or referred to in the notice of such meeting, or (b) at any meeting of
the Board, provided that any amendment or supplement proposed to be acted upon
at any such meeting shall have been described or referred to in the notice of
such meeting or an announcement with respect thereto shall have been made at the
last previous Board meeting, and provided further

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that no amendment or supplement adopted by the Board shall vary or conflict with
any amendment or supplement adopted by the stockholders.

I, the undersigned, being the Secretary of the Corporation DO HEREBY
CERTIFY THAT the foregoing are the Bylaws of said Corporation, as adopted by the
Board of Directors of said Corporation as of August 9, 1993.

-------------------------------
Alex W. Young
Secretary

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<PAGE> 1
EXHIBIT 4.5

AMENDMENT NUMBER TWO TO RIGHTS AGREEMENT

AMENDMENT NUMBER TWO dated as of August 12, 1999 to the Rights
Agreement dated as of July 9, 1998, as amended (as so amended, the "Rights
Agreement"), between Thomas Group, Inc., a Delaware corporation (the "Company"),
and Harris Trust and Savings Bank, as Rights Agent (the "Rights Agent").

W I T N E S S E T H

WHEREAS, the parties hereto desire to amend the Rights Agreement in
certain respects;

NOW, THEREFORE, the parties hereto agree as follows:

SECTION 1. Defined Terms; References.

(a) Unless otherwise specifically defined herein, each term used herein
which is defined in the Rights Agreement has the meaning assigned to such term
in the Rights Agreement. Each reference to "hereof," "hereunder," "herein" and
"hereby" and each other similar reference and each reference to "this Agreement"
and each other similar reference contained in the Rights Agreement shall, after
this Amendment becomes effective, refer to the Rights Agreement as amended
hereby.

(b) Section 1(o) of the Rights Agreement is hereby amended by deleting
the definition of "Disinterested Director" contained therein.

SECTION 2. Form of Rights Certificates. Section 4(b) of the Rights
Agreement is hereby amended by deleting the words "the Disinterested Directors
have determined" from clause (iii)(B) thereof.

SECTION 3. Exercise of Rights; Purchase Price; Expiration Date of
Rights. Section 7(e) of the Rights Agreement is hereby amended by deleting the
words "the Disinterested Directors have determined" from clause (iii)(B) of the
first sentence thereof.

SECTION 4. Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights. Section 11 of the Rights Agreement is hereby amended by:

(a) replacing the words "a majority of the Disinterested Directors" in
subsection (a)(ii)(A) thereof with the words "the Board, prior to the public
announcement of such tender or exchange offer," and by replacing each subsequent
instance of the words "Disinterested Directors" in subsection (a)(ii)(A) thereof
with the word "Board";

(b) deleting the words "the later of (x)" in the first sentence of
subsection (a)(iii) thereof;

(c) replacing the words "and (y) the date on which the Company's right
of redemption pursuant to Section 23(a) (Redemption and Termination --
Redemption) expires (the later of (x) and

<PAGE> 2

(y)" in the first sentence of subsection (a)(iii) thereof with the words "(the
date of such Flip-in Event";

(d) replacing the words "Disinterested Directors" in subsection (a)(iv)
thereof with the word "Board";

(e) adding the words "the earlier of the Stock Acquisition Date or"
after the first instance of the word "after" in the first sentence of subsection
(n) thereof; and

(f) adding the words "the earlier of the Stock Acquisition Date or"
after the first instance of the word "after" in subsection (o) thereof.

SECTION 5. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. Section 13 of the Rights Agreement is hereby amended by replacing
the word "stated" in subsection (c)(ii) thereof with the word "states".

SECTION 6. Redemption and Termination. Section 23(a) of the Rights
Agreement is hereby amended by:

(a) replacing the words "Close of Business on the tenth Business Day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the Close of Business on the tenth
Business Day following the Record Date)" in the first sentence thereof with the
words "Stock Acquisition Date";

(b) deleting the two provisos and the semicolon immediately preceding
the first proviso from the first sentence thereof; and

SECTION 7. Supplements and Amendments. Section 27 of the Rights
Agreement is hereby amended by:

(a) replacing the words "Prior to the Distribution Date and subject to
the penultimate sentence of this Section 27" in the first sentence thereof with
the words "For so long as the Rights are redeemable, and subject to the
following provisions of this Section 27";

(b) adding the word "may," after the first instance of the word
"Company" in the first sentence thereof;

(c) replacing the proviso and the semicolon preceding such proviso from
the first sentence thereof with the words "or, on and after the Distribution
Date, any holders of Rights Certificates";

(d) replacing the words "From and after the Distribution Date" in the
second sentence thereof with the words "At any time when the Rights are no
longer redeemable,";

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(e) replacing the words "in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable and which shall
not" in the second sentence thereof with the words "; provided, however, that no
such supplement or amendment may (i)";

(f) adding the words ", or, prior to the Distribution Date, the holders
of Common Stock" after the second instance of the words "Rights Certificates" in
the second sentence thereof; and

(g) replacing the first and second proviso and the semicolon preceding
the first proviso in the second sentence thereof with the words ", (ii) cause
this Agreement again to become amendable other than in accordance with this
sentence, or (iii) cause the Rights again to become redeemable."

SECTION 8. Determination and Actions by the Board of Directors, Etc.
Section 29 of the Rights Agreement is hereby amended by:

(a) deleting the words "Disinterested Directors" from the title
thereof;

(b) deleting the first and second parenthetical clauses from the second
sentence thereof; and

(c) deleting the second parenthetical clause and the words "or the
Disinterested Directors" from the third sentence thereof.

SECTION 9. Severability. Section 31 of the Rights Agreement is hereby
amended by deleting the second sentence thereof.

SECTION 10. Form of Rights Certificate. Exhibit 1 to the Rights
Agreement is hereby amended by replacing the words "Close of Business (as such
term is defined in the Rights Agreement) on the tenth (10th) Business Day (as
such term is defined in the Rights Agreement) following the Stock Acquisition
Date (as such term is defined in the Rights Agreement) (as such time period may
be extended pursuant to the Rights Agreement)" in clause (i)(a) of the sixth
paragraph thereof with the words "Stock Acquisition Date (as such term is
defined in the Rights Agreement)".

SECTION 11. Summary of Rights to Purchase Preferred Stock. The Summary
of Rights to Purchase Preferred Stock included in Exhibit 2 to the Rights
Agreement is hereby amended by:

(a) inserting the words "(other than Dorsey R. Gardner or his
affiliates)" after the word "person" in the second sentence of the second
paragraph thereof;

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(b) replacing the words "a majority of the Disinterested Directors (as
defined below)" in clause (ii)(B) of the first sentence of the sixth paragraph
thereof with the words "the Board of Directors";

(d) adding a new sentence to the end of the sixth paragraph thereof
that reads as follows:

The events described in this paragraph are referred to as
"Flip-in Events.";

(e) deleting the last sentence of the eighth paragraph thereof;

(f) inserting two new sentences to the end of the eighth paragraph
thereof that read as follows:

The events described in this paragraph are referred to as
"Flip-over Events." Flip-in Events and Flip-over Events are
referred to collectively as "Triggering Events.";

(g) deleting the words "ten (10) business days following" in the first
sentence of the twelfth paragraph thereof;

(h) deleting the thirteenth paragraph thereof;

(i) replacing the words "prior to the Distribution Date; provided, that
any amendments after the Stock Acquisition Date must be approved by a majority
of the Disinterested Directors" in the first sentence of the fifteenth paragraph
thereof with the words "at any time during the period in which the Rights are
redeemable;"

(j) replacing the words "After the Distribution Date" in the second
sentence of the fifteenth paragraph thereof with the words "At any time when the
Rights are no longer redeemable";

(k) replacing the words "in order to cure any ambiguity, inconsistency
or defect, to make changes which do" in the second sentence of the fifteenth
paragraph thereof with the words "only if such amendment does";

(l) deleting the words "or to shorten or lengthen any time period under
the Rights Agreement" in the second sentence of the fifteenth paragraph thereof;
and

(m) by replacing the words "to adjust the time period governing
redemption shall be made at such time as the Rights are not redeemable; and,
provided, that any amendments after the Stock Acquisition Date must be approved
by a majority of the Disinterested Directors" in the second sentence of the
fifteenth paragraph thereof with the words "may cause the Rights again to become
redeemable".

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SECTION 12. Governing Law. This Amendment shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such State.

SECTION 13. Counterparts. This Amendment may be executed in any number
of counterparts and such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.

SECTION 14. Effectiveness. This Amendment shall become effective upon
execution by each of the parties hereto of a counterpart hereof.

* * * * *

<PAGE> 6

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

THOMAS GROUP, INC.

By:
---------------------------------------
Name:
------------------------------
Title:
-----------------------------

Attest:

By:
---------------------------------------
Name:
------------------------------
Title:
-----------------------------

HARRIS TRUST AND SAVINGS BANK

By:
---------------------------------------
Name:
------------------------------
Title:
-----------------------------

Attest:

By:
---------------------------------------
Name:
------------------------------
Title:
-----------------------------

<PAGE> 1
EXHIBIT 10.2

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April
2, 1998 with an effective date of March 10th, by and between THOMAS GROUP, INC.,
a Delaware corporation ("Thomas Group") and J. Thomas Williams, an individual
residing in Washington, D.C. ("Employee").

RECITALS

WHEREAS, Employee is the President and Chief Operating Officer of Thomas Group
reporting to the Chief Executive Officer and an integral part of its management
who participates in the decision-making process relative to short and long-term
planning and policy for Thomas Group; and

WHEREAS, Thomas Group has determined that it would be in the best interests of
Thomas Group and its stockholders to assure continuity in the management of
Thomas Group's operations by entering into an employment agreement to retain the
services of Employee; and

WHEREAS, Thomas Group wishes to assure itself of the continued services of
Employee for the period hereinafter provided, and Employee is willing to be
employed by Thomas Group for said period, upon the terms and conditions set
forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the obligations undertaken
by the parties pursuant hereto and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Thomas Group and
Employee agree as follows:

1. Definitions. The defined terms used in this Agreement shall have the
meanings ascribed to them in this Section 1.

1.1 Affiliate. "Affiliate" shall mean any corporation over which
Employee or Thomas Group, as the case may be, can exercise effective management
and control.

1.2 Board of Directors. "Board" or the "Board of Directors" shall mean
the Board of Directors of Thomas Group or any committee of the Board empowered
to act or make decisions or determinations with respect to this Agreement.

1.3 Cause. "Cause" shall mean that, as determined in good faith by the
Board of Directors, Employee has engaged in any act of gross misconduct which is
materially injurious to Thomas Group or its business.

1.4 Change in Control. "Change in Control" shall mean:

<PAGE> 2

(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person" which, for purposes of this
definition, excludes Employee or any of his Affiliates) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of shares
of common stock or other securities of Thomas Group resulting in the beneficial
ownership by such individual, entity or group of 40% or more of either (1) the
then-outstanding shares of common stock of Thomas Group (the "Outstanding Thomas
Group Common Stock") or (2) the combined voting power of the then-outstanding
voting securities of Thomas Group entitled to vote generally in the election of
directors (the "Outstanding Thomas Group Voting Securities"); or

(b) if individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute more than fifty
percent of the members of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election or nomination
for election by Thomas Group's stockholders was approved by a vote of at least
two-thirds of the directors then constituting the Incumbent Board, shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest
subject to Rule 14a-11 of Regulation 14A promulgated under the Exchange Act or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or

(c) approval by the stockholders of Thomas Group of a
reorganization, merger or consolidation unless following such reorganization,
merger or consolidation (1) more than 40% of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such reorganization,
merger or consolidation (the "Outstanding Survivor Common Stock"), and the
combined voting power of the then-outstanding voting securities of such
corporation entitled to vote generally in the election of directors (the
"Outstanding Survivor Voting Securities"), is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Thomas Group Common
Stock and Outstanding Thomas Group Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same proportions as
their ownership immediately prior to such reorganization, merger or
consolidation, of the Outstanding Thomas Group Common Stock and Outstanding
Thomas Group Voting Securities, as the case may be (for purposes of determining
whether such percentage test is satisfied, there shall be excluded from the
number of shares of Outstanding Survivor Common Stock and Outstanding Survivor
Voting Securities owned by Thomas Group's stockholders, but not from the total
number of shares of Outstanding Survivor Common Stock and Outstanding Survivor
Voting Securities, any shares or voting securities received by any such
stockholder in respect of any consideration other than shares or voting
securities of Thomas Group), (2) no Person (excluding Thomas Group, any employee
benefit plan (or related trust) of Thomas Group, any qualified employee benefit
plan of such Surviving Corporation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 40% or more of the Outstanding Thomas Group Common Stock or
Outstanding Thomas Group Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 40% or more of, respectively, the shares of
Outstanding Survivor Common

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<PAGE> 3

Stock or the Outstanding Survivor Voting Securities, and (3) more than 50% of
the members of the board of directors of the Surviving Corporation were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or

(d) (1) approval by the stockholders of Thomas Group of a complete
liquidation or dissolution of Thomas Group or (2) the first to occur of (i) the
sale or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of Thomas Group, or (ii)
the approval by the stockholders of Thomas Group of any such sale or
disposition, other than, in each case, any such sale or disposition to a
corporation with respect to which immediately thereafter (x) more than 40% of,
respectively, the shares of Outstanding Survivor Common Stock and the
Outstanding Survivor Voting Securities is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Thomas Group Common
Stock and Outstanding Thomas Group Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition of the
Outstanding Thomas Group Common Stock and Outstanding Thomas Group Voting
Securities, as the case may be (for purposes of determining whether such
percentage test is satisfied, there shall be excluded from the number of shares
of Outstanding Survivor Common Stock and Outstanding Survivor Voting Securities
owned by Thomas Group's stockholders, but not from the total number of shares of
Outstanding Survivor Common Stock and Outstanding Survivor Voting Securities of
the surviving corporation, any shares or voting securities received by any such
stockholder in respect of any consideration other than shares or voting
securities of Thomas Group), (y) no Person (excluding Thomas Group and any
employee benefit plan (or related trust) of Thomas Group, any qualified employee
benefit plan of such transferee corporation and any Person beneficially owning,
immediately prior to such sale or other disposition, directly or indirectly, 40%
or more of the Outstanding Thomas Group Common Stock or Outstanding Thomas Group
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 40% or more of, respectively, the shares of Outstanding Survivor
Common Stock and the Outstanding Survivor Voting Securities and (z) more than
50% of the members of the board of directors of the surviving corporation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the board providing for such sale or other disposition of
assets of Thomas Group.

1.5 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.

1.6 Common Stock. "Common Stock" shall mean the common stock of Thomas
Group, par value $.01 per share.

1.7 Disability. "Disability" shall mean the inability of Employee to
perform his material managerial duties and responsibilities as contemplated
under Section 3 during the Term of Employment, as determined in accordance with
Section 6.1(e).

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<PAGE> 4

1.8 Good Reason. "Good Reason" shall mean Employee's decision to
terminate his employment under this Agreement if Thomas Group or any successor
thereto commits any material breach of this Agreement.

1.9 Term of Employment. "Term of Employment" shall mean the period of
time commencing on the effective date of this Agreement and continuing until the
fifth anniversary date of this Agreement; provided, however, that Employee and
Thomas Group can agree, in writing, to extend the Term of Employment for an
additional five years, unless terminated earlier pursuant to the terms hereof.

2. Termination of Prior Agreements. Thomas Group and Employee hereby
acknowledge and agree that this Agreement supersedes any prior agreements.

3. Employment. Thomas Group employs Employee and Employee accepts
employment by Thomas Group as President and Chief Operating officer of Thomas
Group for the Term of Employment on the terms and conditions and for the
compensation hereinafter set forth. Subject to the authority of the Board of
Directors, Employee shall be responsible for the overall operations of Thomas
Group in the ordinary course of its business with all such powers as may be
reasonably incident to such responsibilities as its President and Chief
Operating Officer, with all of the rights, powers and decision-making discretion
appertaining thereto. Employee shall devote his full time and effort to the
discharge of his duties as Thomas Group's President and Chief Operating Officer.

4. Compensation and Benefits During the Term of Employment.

4.1 Base Compensation. Employee shall receive base compensation ("Base
Compensation") in the amount determined by the Compensation and Stock Option
Committee of the Board of Directors (the "Compensation Committee"). The amount
of Employee's Base Compensation shall initially be $370,000 annually and shall
be reviewed and adjusted as appropriate at least annually by the Compensation
Committee. Base Compensation shall be paid in equal monthly installments by
Thomas Group to Employee.

4.2 Incentive Compensation Arrangement.

(a) In further consideration of Employee's performance of services
under Section 3 hereof, Thomas Group agrees to compensate Employee under the
incentive compensation arrangement ("Incentive Compensation") set forth in
Section 4.2(b). Except as specifically provided herein, the computation of
annual incentive compensation will be based upon the audited financial results
of Thomas Group.

(b) (1) General. Employee's Incentive Compensation is initially
based upon 25% (the "Entitled Percent") of the dollar value derived from a
formula sharing ratio of Thomas Group's revenues. The sharing ratio is based
upon Thomas Group's percentage increase in cumulative income before tax and
incentive compensation ("IBTIC") for the current fiscal year compared to Thomas
Group's cumulative IBTIC for the prior fiscal year, and upon certain targeted
levels of Thomas Group's IBTIC. For purposes of determining IBTIC, Incentive
Compensation

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<PAGE> 5
includes CEO and other officer Incentive Compensation. The Compensation
Committee may review the percent stated above from time to time and make
appropriate changes. The performance goals for this assignment are shown in
Exhibit 2.

(2) Incentive Compensation Calculation. The formula for
determining incentive compensation is as follows: Incentive Compensation equals
the product of Thomas Group revenues for the applicable fiscal year multiplied
by the income growth sharing ratio expressed as a percentage ("IGSR") for the
fiscal year, the result multiplied by the Entitled Percent. The ISGR is
determined with reference to the following table:

INCOME GROWTH SHARING RATIO

<TABLE>
<CAPTION>
Income Before Tax and
Incentive Compensation Less
as a % of Revenues than 5%* 5%-9.99%* 10%-14.99%* 15%-24.99%* Over 25%*
------------------ -------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
0 - 8.99% 0 0 0 .2% .3%

9.00% - 14.99% .3% .4% .5% .6% .7%

15.00% - 19.25% .5% .6% .8% 1.0% 1.2%

Over 19.25% .8% 1.0% 1.3% 1.6% 1.8%
</TABLE>

*IBTIC Growth Rate

ISGR is determined by first determining the IBTIC as a percent of revenue for
the current fiscal year and then entering the table along that line until the
appropriate IBTIC Growth Rate is reached; the ISGR is shown at that intersection
in the table.

For purposes of this table, IBTIC Growth Rate for each applicable fiscal year is
derived from the following formula:

IBTIC[Current Fiscal Year] minus 1 x 100
--------------------------
IBTIC[Prior Fiscal Year]

In the event that either the IBTIC Growth Rate or the IBTIC, as
computed above, is zero or negative for a particular fiscal year, it shall be
treated as zero for purposes of the foregoing computation for such year.

Note: In the case of good performance an additional bonus of $50K for that year
will be granted and applied to reduce the loan from Thomas Group Inc., to J.
Thomas Williams.

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(3) If Incentive Compensation, as calculated in accordance
with Section 4.2(b) hereof, exceeds 70 percent of Base Compensation in a fiscal
year, the excess of Incentive Compensation, as calculated, over 70 percent of
Base Compensation will not be paid to Employee but will be used to calculate the
award of a stock option to Employee. The number of shares to be awarded under
such option is determined using the following formula:

N = Excess Incentive Compensation
-----------------------------
P

Where:
N = Number of shares subject to such option
P = Market price of the Company's stock on the date of award
Excess Incentive Compensation = Excess of Incentive Compensation as calculated
minus 55 percent of base compensation in a fiscal year.

Options granted hereunder shall be granted pursuant to the
Corporation's Stock Option Plans and shall be subject to all limitations of such
plans, including the aggregate number of options which may be granted. Options
granted pursuant to this Section 4.2(b)(3) shall contain an option price equal
to the market price (average of the day's high and low prices) on the date of
award, shall be fully vested, and shall expire 10 years following date of grant.
This stock option award shall not preclude the Board of Directors from granting
additional options to Employee as it deems appropriate. Options granted pursuant
to this Agreement shall be administered by the Compensation Committee. A initial
grant increasing current options to 80,000 will be made as of the effective date
of this Agreement (current 45,000 plus new 35,000) and will vest as EPS targets
(as in Exhibit 2) are achieved at 7,000 per year for the five year period.

(4) Partial Fiscal Years. The computations set forth in
Section 4.2(b)(2) above shall be adjusted to take into account eligibility for
partial fiscal years by computing them based upon the entire fiscal year and
multiplying these results by the ratio of the number of days of such partial
fiscal year to the number of days in the complete fiscal year. This is
calculated at the completion of the fiscal year.

(5) (i) Payments. Thomas Group shall pay the Incentive
Compensation to Employee on or before the fifteen (15) days after the completion
of the audit of Thomas Group's financial statements by Thomas Group's certified
public accountants.

(ii) Eligibility Under Other Plans. Employee's
eligibility for bonuses or incentive compensation payments under plans in effect
prior to effectiveness of this Agreement shall terminate upon the effectiveness
of this Agreement.

4.3 Travel Costs. Thomas Group shall reimburse Employee for all travel
costs incurred by Employee in connection with Thomas Group's business, together
with all other business expenses of Employee in performing his duties hereunder.

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<PAGE> 7

4.4 Automobile Expenses. Thomas Group shall provide automobile
transportation to employee for Employee's use in connection with Thomas Group's
business.

4.5 Pension and Insurance Benefit Plan Participation; No Other Bonus
Plan Participation. Employee shall be entitled to participate in Thomas Group's
401(k) plan, subject to the terms and conditions of such plans. Thomas Group
also shall provide medical, disability and life insurance coverage to Employee
on the terms and conditions of each of the plans Thomas Group maintains with
respect thereto. Employee will be covered by $1M of term insurance paid by
Thomas Group and payable to employees estate in the case of death while in the
employment of Thomas Group Inc.

5. Term of the Agreement. The term of this Agreement, unless terminated
sooner pursuant to Section 5, shall be for the Term of Employment.

6. Termination; Disability; Death, Change in Control.

6.1 Basis. Employee's employment under this Agreement may be
terminated as described in this Section 6.1. In the event that Employee's
employment is terminated in accordance with this Section 6.1, Employee shall be
entitled to receive the benefits described in Section 6.2 that correspond with
the manner of such termination.

(a) Termination Without Cause. Thomas Group may terminate
Employee's employment hereunder without Cause by written notice to Employee to
that effect. Unless otherwise specified in the notice, such termination shall be
effective immediately.

(b) Termination With Cause. Thomas Group may terminate the
employment of Employee hereunder for Cause by written notice to Employee to that
effect. Unless otherwise specified in the notice, such termination shall be
effective immediately.

(c) Good Reason. Upon the occurrence of an event constituting
Good Reason as described in Section 1.10 hereof, Employee may terminate his
employment hereunder for Good Reason within 30 days thereafter upon written
notice to Thomas Group to that effect. If the effect of the occurrence of the
event described in Section 1.10 may be cured, Thomas Group shall have the
opportunity to cure any such effect for a period of 30 days following receipt of
Employee's termination notice. The right of Employee to terminate his employment
for Good Reason under this Section 6.1(c) shall not limit Thomas Group's ability
to terminate Employee for Cause under Section 6.1(b) hereof if Cause is
determined to exist prior to the time Employee delivers his written notice of
termination for Good Reason to Thomas Group.

(d) Without Good Reason. Employee may voluntarily terminate his
employment hereunder without Good Reason upon written notice to Thomas Group to
that effect.

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<PAGE> 8

(e) Disability. Employee or Thomas Group may terminate Employee's
employment by reason of Disability upon written notice to the other party to
that effect. If the parties hereto are unable to agree as to the existence of
Disability or as to the date of commencement of Disability, each of Employee and
Thomas Group shall select a physician licensed to practice medicine in the
United States and the determination as to any such question shall be made by
such physicians; provided, however, that if such two physicians are unable to
agree, they shall mutually select a third physician licensed to practice
medicine in the United States and the determination as to any such question
shall be made by a majority of such physicians. Any determination made by
physicians in accordance with the provisions of the immediately foregoing
sentence shall be final and binding on the parties hereto. Employee agrees to
submit to any and all reasonable medical examinations or procedures and to
execute and deliver any and all consents to release of medical information and
records or otherwise as shall be reasonably required by any of the physicians
selected in accordance with this Section 6.1(e). Unless otherwise specified in
the notice, such termination shall be effective immediately.

(f) Death. This Employment Agreement shall automatically terminate
as of the date of Employee's death during the Term of Employment.

(g) Change in Control. If a Change in Control occurs during the
Term of Employment, Thomas Group shall promptly give written notice to Employee
thereof. Following a Change in Control, Employee shall be required to continue
his employment hereunder for 90 days after the date of such Change in Control,
unless his employment is terminated sooner by Thomas Group as set forth in
Section 6.1(h). In the event that Employee decides to resign or otherwise
voluntarily terminate his employment following the occurrence of a Change in
Control, Employee may do so by giving written notice to Thomas Group to that
effect on or before 180 days after the occurrence of the Change in Control,
which notice shall be effective on the later to occur of (i) 180 days after the
occurrence of the Change in Control or (ii) 90 days after the date of such
notice. If Employee does not give such notice to Thomas Group, this Agreement
will remain in effect; provided, however, that the failure of Employee to
terminate this Agreement following the occurrence of a Change in Control shall
not be deemed a waiver of Employee's right to terminate his employment upon a
subsequent occurrence of a Change in Control in accordance with the terms of
this subsection.

(h) Notwithstanding that Employee has given notice of termination
pursuant to subsections (d) or (g) of this Section 6.1, Thomas Group may, in its
sole discretion, thereafter require Employee to terminate his employment prior
to the expiration of the applicable notice period.

6.2 Benefits Upon Termination. Employee shall receive the benefits
described in the subsection below that corresponds with the manner of
termination of Employee's employment under Section 6.1.

(a) Without Cause. In the event Thomas Group terminates Employee's
employment hereunder without Cause during the Term of Employment, Employee shall
be entitled to the payments and benefits set forth on Exhibit I.

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<PAGE> 9

(b) With Cause. In the event Employee's employment is terminated
with Cause, no further payments or benefits shall be paid or provided by Thomas
Group to Employee hereunder except for reimbursement for expenses incurred prior
to the date of termination, or the payment of Incentive Compensation that has
become due and payable to Employee on or before the date of such termination
under Section 4.2 hereof. In addition, Employee shall be entitled to exercise
any vested but unexercised stock options for a period of 90 days following the
effective date of the termination of Employee for Cause, and if any such options
remain unexercised upon the expiration of such 90-day period, they shall be
determined forfeited by Employee and have no further force and effect.

(c) Good Reason. In the event Employee terminates his employment
for Good Reason during the Term of Employment, Employee shall be entitled to the
payments and benefits set forth on Exhibit I.

(d) Without Good Reason. In the event Employee terminates his
employment without Good Reason pursuant to Section 6.1(d) hereof, Employee shall
be entitled to the benefits or payments provided for in Section 6.2(b) hereof.

(e) Disability. In the event that Employee's employment is
terminated by reason of Disability, Employee shall be entitled to the payments
and benefits set forth on Exhibit I.

(f) Death. In the event Employee's employment is terminated by
reason of his death, Thomas Group shall not be required to make any payments or
provide any benefits hereunder, except for (a) reimbursement for expenses
incurred prior to such termination date, (b) payment of Incentive Compensation
through such termination date as provided in Section 4.2, (c) the use by Thomas
Group of its best efforts to remove any guaranties by Employee of indebtedness
of Thomas Group, and provided, however, that nothing contained herein shall
limit or diminish any rights of Employee's estate or any other person to
payments under any life insurance policy maintained by Thomas Group for the
benefit of Employee or his beneficiaries or any health, disability, pension or
other benefit plan provided pursuant to Section 4.7, in each case in accordance
with the terms thereof. If Employee's employment is terminated by reason of his
death, the benefits provided under this Section 6.2(f) shall be paid to the
beneficiary or beneficiaries designated in writing by Employee and delivered
during Employee's lifetime to an officer of Thomas Group; however, if no such
beneficiary designation is made by Employee during his lifetime, the benefits
hereunder shall be paid to his estate. In addition, Employee's estate shall be
entitled to exercise any vested but unexercised stock options for a period of
180 days following the date of Employee's death, and if any such options remain
unexercised upon the expiration of such 180-day period, they shall be determined
forfeited by Employee's estate and have no further force and effect.

(g) Change in Control. In the event Employee terminates his
employment as provided in Section 6.1(g) following the occurrence of a Change in
Control, Employee shall be entitled to the payments and benefits provided in
Exhibit I.

-9-
<PAGE> 10

7. Non-Competition, Non-Solicitation, and Confidentiality Covenants.

7.1 Non-competition Covenant.

(a) In consideration for the execution of this Agreement by Thomas
Group and the payments for services to be rendered by Employee hereunder,
Employee agrees that during the Term of Employment and, in the case of a
termination Without Good Reason or for Cause, for a period of three years after
the date of such termination, Employee shall not engage in competition with
Thomas Group in any manner or capacity (e.g., as an advisor, principal, agent,
partner, officer, director, shareholder, employee, member of any association or
otherwise) that materially adversely affects Thomas Group, including without
limitation, rendering time based management counseling services, soliciting
customers of Thomas Group for any competitor of Thomas Group, or soliciting any
employee of Thomas Group to leave the employ of Thomas Group to work for or on
behalf of any competitor of Thomas Group (the "Prohibited Activities"). Employee
further agrees that, during the Term of Employment, and, in the case of a
termination Without Good Reason or for Cause, for a period of three years after
the date of such termination, Employee will not assist or encourage any other
person in carrying out any activity that would be one of the Prohibited
Activities if such activity were carried out by Employee and, in particular,
Employee agrees that he will not induce any employee of Thomas Group to carry
out any such activity.

(b) The obligations of Employee under this Section 7.1 shall apply
to any geographic area in which Thomas Group is operating. In addition to the
exclusion from Prohibited Activities set forth in Section 7.1(a) hereof,
ownership by Employee, as a passive investment, of less than 5% of the
outstanding shares of capital stock of any corporation listed on a national
securities exchange or publicly traded in the over-the-counter market shall not
constitute a breach of this Section 7.1.

7.2 Right to Work Product and Confidentiality.

(a) Thomas Group and Employee each acknowledge that performance of
this Agreement may result in the discovery, creation or development of
inventions, combinations, methods, formulae, techniques, processes,
improvements, software designs, computer programs, strategies, specific
computer-related know-how, course materials, seminar materials, computer models,
customer lists, data and original works of authorship (collectively, the "Work
Product"). Employee agrees that Employee will promptly and fully disclose to
Thomas Group any and all Work Product generated, conceived, reduced to practice
or learned by Employee, either solely or jointly with others, during the Term of
Employment, which in any way relates to the business of Thomas Group. Employee
further agrees that neither Employee, nor any party claiming through Employee
will, other than in the performance of this Agreement, make use of or disclose
to others any proprietary information relating to the Work Product.

-10-
<PAGE> 11

(b) Employee agrees that, whether or not the services performed by
Employee hereunder are considered works made for hire or an employment to
invent, all Work Product discovered, created or developed under this Agreement
shall be and remain the sole property of Thomas Group and its assigns. Except as
specifically set forth in writing and signed by both Thomas Group and Employee,
Employee agrees that Thomas Group shall have all copyright and patent rights
with respect to any Work Product discovered, created, or developed under this
Agreement without regard to the origin of the Work Product.

(c) If and to the extent that Employee may, under applicable law,
be entitled to claim any ownership interest in the Work Product, Employee hereby
transfers, grants, conveys, assigns and relinquishes exclusively to Thomas Group
any and all right, title and interest it now has or may hereafter acquire in and
to the Work Product under patent, copyright, trade secret and trademark law in
perpetuity or for the longest period otherwise permitted by law. Employee
further agrees, as to the Work Product, to assist Thomas Group in every
reasonable way to obtain and, from time to time, enforce patents, copyrights,
trade secrets and other rights and protection relating to said Work Product, and
to that end, Employee will execute all documents for use in applying for and
obtaining such patents, copyrights, trade secrets and other rights and
protection with respect to such Work Product as Thomas Group may desire,
together with any assignments thereof to Thomas Group or persons designated by
it. Employee's obligations to assist Thomas Group in obtaining and enforcing
patents, copyrights, trade secrets and other rights and protection relating to
the Work Product shall continue beyond the Term of Employment.

(d) If and to the extent that any preexisting rights of Employee
are embodied or reflected in the Work Product, Employee hereby grants to Thomas
Group the irrevocable, perpetual, non-exclusive, worldwide, royalty-free right
and license to (i) use, execute, reproduce, display, perform and distribute
copies of and prepare derivative works based upon such preexisting rights and
any derivative works thereof and (ii) authorize others to do any or all of the
foregoing.

(e) Employee acknowledges that much, if not all, of the material
and information related to the products, consulting techniques, or other
business affairs of Thomas Group and its Affiliates, including, without
limitation, any and all Work Product discovered or created pursuant to this
Agreement, and the business affairs of Thomas Group's clients and customers
which have or will come into Employee's possession or knowledge in connection
with the performance of this Agreement, consists of confidential and proprietary
data of Thomas Group and its Affiliates (collectively, "Confidential
Information"), disclosure of which to, or use by, third parties would be
damaging to Thomas Group or its clients. Employee agrees to hold such
Confidential Information in strictest confidence and agrees not to release such
information to any other Thomas Group employee unless such employee has a need
for such knowledge. Employee further agrees not to make use of Confidential
Information for Employee's own benefit or for the benefit of any third parties,
other than for the performance of this Agreement, and not to release or disclose
the Confidential Information to any other party either during or after the Term
of Employment. In the event of any breach of this confidentiality obligation,
Employee acknowledges that Thomas Group would have no adequate remedy at law,
since the harm caused by such a breach

-11-
<PAGE> 12

would not be easily measured and compensated for in the form of damages, and
hereby waives its right to contest any equitable relief sought by Thomas Group,
though not Employee's right to contest the question of whether a breach has
occurred, and Employee waives the requirement of any bond being posted as
security for such equitable relief.

8. General Provisions.

8.1 Notices. All notices, requests, demands, or other communications
with respect to this Agreement shall be in writing and shall be personally
delivered, telecopied, or mailed, postage prepaid, certified or registered mail,
or delivered by a nationally recognized express courier service, charges
prepaid, to the following addresses (or such other addresses as the parties may
specify from time to time in accordance with this Section 8.1):

Employee: J. Thomas Williams
5215 North O'Connor Boulevard
Suite 2500
Irving, TX 75039

Thomas Group: Thomas Group, Inc.
5215 North O'Connor Boulevard
Suite 2500
Irving, TX 75039

Any such notice shall, when sent in accordance with the preceding
sentence, be deemed to have been given and received (i) on the day personally
delivered or telecopied, (ii) on the third day following the date mailed, or
(iii) 24 hours after shipment by such courier service.

8.2 Entire Agreement. This Agreement, together with the exhibits
hereto, supersedes any and all other agreements, either oral or written between
the parties hereto with respect to the employment of Employee by Thomas Group
and contains all of the covenants and agreements between the parties with
respect to such employment. Any modification of this Agreement will be effective
only if it is in writing signed by each of the parties hereto.

8.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

8.4 Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach.

8.5 Severability. The provisions of this Agreement are severable, and
if any one or more provisions may be determined to be judicially unenforceable
and/or invalid by a court of competent jurisdiction, in whole or in part, the
remaining provisions shall nevertheless be binding, enforceable and in full
force and effect.

-12-
<PAGE> 13

8.6 Titles and Headings. The titles and headings of the various
sections hereof are intended solely for convenience of reference and not
intended for any purpose whatsoever to explain, modify or place any construction
upon any of the provisions of this Agreement.

8.7 Attorney's Fees. In the event any one or more of the parties
hereto bring suit against any other part hereto, based upon or arising out of a
breach or violation of this Agreement, each party hereto agrees that each party
who is successful on the merits, upon final adjudication from which no further
appeal can be taken or is taken within the time allowed by law, shall be
entitled to recover his or its reasonable attorneys' fees and expenses from the
party or parties which is or are (as the case may be) not successful.

8.8 Benefit and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns;
provided, however, that nothing contained in this Section 8.8 shall impair
Employee's rights under Section 6.2(g), if the successor or assign of Thomas
Group became such upon the occurrence of a Change in Control. Notwithstanding
anything herein to the contrary, Employee shall not assign any of his rights or
obligations under this Agreement.

8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one agreement.

8.10 Reliance on Authority of Person Signing Agreement. Each
individual signing this Agreement on behalf of a corporation warrants that such
execution has been duly authorized by the corporation for which he or she is
signing. The execution and performance of this Agreement by each party has been
duly authorized by all applicable laws and regulations and (in the case of a
corporation) all necessary corporate action, and this Agreement constitutes the
valid and enforceable obligation of each party in accordance with its terms.

8.11 Amendments. Amendments to any section of this Agreement shall not
be effective unless agreed to in writing by the parties hereto. This Agreement,
including this provision against oral modification, shall not be amended,
modified or terminated except in a writing signed by each of the parties to this
Agreement, and no waiver of any provision of this Agreement shall be effective
unless in a writing duly signed by the party sought to be bound.

8.12 Waiver. No waiver of any provision of this Agreement shall be
deemed to operate as waiver of any past or future right.

9. Renewal Discussions. Unless Employee's employment hereunder has been
earlier terminated, the parties hereto agree that they will use their reasonable
best efforts to enter into discussions six months prior to the fifth anniversary
of the effective date of this Agreement with respect to whether and on what
terms Employee's employment after such date, and the terms thereof, this
Agreement shall automatically terminate on such fifth anniversary.

-13-
<PAGE> 14

10. Certain Tax Provisions. Employee acknowledges and agrees that all
payments and benefits made or provided to Employee pursuant to the terms hereof
which are required by applicable federal, state or local laws to be subject to
withholding for income taxes, shall be so subject.

11. RESOLUTION OF CERTAIN CONTROVERSIES. In the event of any controversy
or claim arising out of or related to the provisions concerning the use and
protection of Confidential Information or the non-solicitation prohibitions, or
the breach thereof, the parties agree that Thomas Group may seek equitable and
other relief. In the event of any controversy or claim arising out of or related
to the other provisions of this Agreement, the parties agree first to try in
good faith to settle the dispute by non-binding mediation administered by the
American Arbitration Association under its Commercial Mediation Rules. In the
event that mediation does not resolve the dispute, such dispute shall be settled
exclusively by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association in Dallas, Texas, and judgment may be
entered in any court having jurisdiction thereof.

IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement effective as of the date first above written.

EMPLOYEE: J. Thomas Williams

----------------------------------------
J. Thomas Williams

THOMAS GROUP, INC.

By:
-------------------------------------
Name: PHILIP R. THOMAS
Title: Chairman and Chief Executive Officer

-14-
<PAGE> 15

EXHIBIT I

SEVERANCE BENEFIT PAYMENTS

1. A lump sum payment in cash, not later than 20 days after the
termination of Employee's employment, in an amount equal to eighteen (18) months
at Employee's average "Annualized Includible Compensation" (Annualized
Includible Compensation is defined as the total cash paid in Base Compensation,
salary and incentive compensation to Employee during the period consisting of
the preceding full taxable year, after the date of this Agreement).

2. The unvested portion of stock options granted to Employee shall become
fully vested and immediately exercisable on the effective date of such
termination and shall be exercisable for the maximum period specified in such
options.

-15-

<PAGE> 16

EXHIBIT 2

This minimum performance goals for this assignment and 3 years into the
potential extension period are shown in the following table.

<TABLE>
<CAPTION>
YEAR 1998 1999 2000 2001 2002 2003 2004 2005
- ------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FULL YEAR EPS
HURDLE $1.30 $ 1.49 $ 1.71 $ 1.96 $ 2.25 $ 2.58 $ 2.96 $ 3.40

FULL YEAR
REVENUES
HURDLE (IN
$MILLION) $91.1 $104.8 $120.5 $138.6 $159.4 $183.4 $210.9 $242.5
</TABLE>

-16-

<PAGE> 1
EXHIBIT 10.14

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT

THIS FIRST AMENDMENT TO FIRST AMENDED AND RESTATED REVOLVING REDIT
LOAN AGREEMENT (the "AMENDMENT"), dated as of April 1, 1999, is between THOMAS
GROUP, INC., a Delaware corporation ("BORROWER") and COMERICA BANK-TEXAS, a
Texas banking association ("LENDER").

RECITALS:

Borrower and Lender have entered into that certain First Amended and
Restated Revolving Credit Loan Agreement dated as of December 4, 1996 (as
amended or otherwise modified from time to time, the "AGREEMENT").

Borrower and Lender desire to amend the Agreement.

NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

Definitions

Section I.1 Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.

ARTICLE II

Amendments

Section II.1 Amendment to Recitals and to Definitions. Effective as of
the date hereof the following changes are made to the Recitals and Section 1.1:

(a) All references in the Recitals to "$20,000,000" shall be
changed to read "$15,000,000".

(b) The definition of "REDUCTION DATES" is deleted in its
entirety and no replacement definition is provided.

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT - Page 1

<PAGE> 2

"EBITDA" shall mean at any time, and for the previous four
calendar quarters then ending as computed in accordance with GAAP, (a)
the sum of the Borrower's consolidated net income, plus interest
expense, taxes, depreciation and amortization expense for the same
period, plus (b) the non-cash portion of the one-time restructuring
charge taken in the second fiscal quarter of 1998, excluding (c) any
gain or loss from the sale of any capital assets.

"REVOLVING CREDIT COMMITMENT" shall mean the obligation of the
Lender to make Revolving Credit Loans to the Borrower in an aggregate
principal amount at any time outstanding up to but not to exceed
$15,000,000, from the date of this Agreement through December 2, 2003.

(d) The following definition is hereby added to Section 1.1 in
alphabetical order to read as follows:

"NET INTEREST EXPENSE RATIO" shall mean, at any particular time,
the ratio resulting as the quotient of (a) the Borrower's EBITDA for
the immediately preceding twelve-month period divided by (b) the
Borrower's Net Interest Expense.

Section II.2. Amendment to Section 3.1. Effective as of the date of
this Amendment, the following changes are made to Section 3.1:

(e) Section 3.1 of the Agreement is amended by adding the
following sentence to become the last sentence of Section 3.1:

No Letter of Credit will be issued with an expiration date that
extends beyond November 1, 2003.

(f) All references in Section 3.1 to "$20,000,000" shall be
changed to read "$15,000,000".

Section II.3. Amendment to Section 10.1. Effective as of the date of
this Amendment, Section 10.1 of the Agreement is deleted in its entirety and is
replaced by the following:

10.1. Acquisitions; New Subsidiaries. The Borrower will not
engage in any acquisition of stock or assets (an "Acquisition") or
any combination of stock and assets of any entity without the prior
written consent of the Lender. The Borrower will not form any new
Subsidiary unless such subsidiary, simultaneous with its formation,
executes an unlimited guaranty in favor of the Lender, in form and
substance satisfactory to the Lender.

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT - Page 2

<PAGE> 3

Section II.4. Amendment to Section 10.2. Effective as of the date of
this Amendment, Section 10.2 of the Agreement is amended by adding thereto the
following sentence to become the last sentence of Section 10.2:

Additionally, the Borrower and each Guarantor agrees that
notwithstanding anything to the contrary contained in this Agreement,
if at any time the Indebtedness should exceed $10,000,000, upon the
request of the Lender, the Borrower and each Guarantor will execute
the documents attached hereto as Annex I, together with such other
documents and agreements which the Lender deems necessary to grant to
the Lender and to perfect a first priority lien and security interest
in all of the Borrower's and each Guarantor's assets, wherever
located.

Section II.5. Addition of New Section 10.14. Effective as of the date
hereof, the following new Section 10.14. is added to the Agreement:

10.14 Consecutive Losses. Permit any "Loss" to exist on a
rolling two-quarter basis. For purposes of this covenant, "Loss"
shall mean as of any date of computation any negative number
resulting from the computation of net income for the previous two
quarters, as computed in accordance with GAAP (excluding within the
computation of net income all extraordinary and non-recurring charges
to income).

ARTICLE III

Conditions Precedent

The effectiveness of this Amendment is subject to the condition that
all parties hereto (including Guarantors) shall have executed the same and that
Lender shall have received as of the date hereof, in form and substance
satisfactory to Lender, an amended Note and resolutions of the Board of
Directors of Borrower certified by a senior officer which authorize the
execution, delivery, and performance by Borrower of this Amendment.

ARTICLE IV

Ratification and Other Agreements

Section IV.1 Ratification. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement, the Note and all other
documents executed in connection with the Agreement are hereby ratified and
confirmed and shall continue in full force and effect. Borrower and Lender
agree that the Agreement as amended hereby and all other documents executed in
connection with the

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT - Page 3
<PAGE> 4
Agreement or this Amendment to which Borrower is a party shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms.

Section IV.2. Representations and Warranties. Borrower hereby
represents and warrants to Lender that (a) the execution, delivery and
performance of this Amendment and any and all other documents executed and/or
delivered in connection herewith have been authorized by all requisite
corporate action on the part of Borrower and will not violate the certificate
of incorporation or bylaws of Borrower or any agreement to which Borrower or
any of its properties is bound, (b) except for certain amendments to the
Borrower's certificate of incorporation dated July 10, 1998, neither the
certificate of incorporation nor the bylaws of Borrower have been amended or
revoked since the date of the Agreement and such certificate of incorporation
and bylaws are in full force and effect, (c) the representations and warranties
contained in the Agreement, as amended hereby, and any other documents executed
in connection therewith or herewith are true and correct on and as of the date
hereof as though made on and as of the date hereof, (d) no Event of Default has
occurred and is continuing and no event or condition has occurred that with the
giving of notice or lapse of time or both would be an Event of Default, and (e)
Borrower is in full compliance with all covenants and agreements contained in
the Agreement as amended hereby.

Section IV.3. Agreement. If any provision hereof extends any
Termination Date, it is agreed that any covenants in the Agreement which,
because of references to dates, could be interpreted as expiring prior to any
Termination Date (as extended by this Amendment) are automatically extended in
scope until such time as all Indebtedness is paid in full.

Section IV.4. Certain References to Borrower. It is agreed that all
references to "BORROWER" in Sections 5, 6, and 7 of the Agreement shall be
deemed to be references to the Borrower and its Subsidiaries on a consolidated
basis. Additionally, all annual Financial Statements shall be audited
statements.

ARTICLE V

Miscellaneous

Section V.1. Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any other document
executed in connection herewith shall survive the execution and delivery of
this Amendment, and no investigation by Lender or any closing shall affect the
representations and warranties or the right of Lender to rely upon them.

Section V.2. Reference to Agreement. Each of the Agreement and any and
all other agreements, documents, or instruments now or hereafter executed and
delivered pursuant to the terms hereof or pursuant to the terms of the
Agreement as amended hereby, are hereby amended so that any reference in such
documents to the Agreement shall mean a reference to the Agreement as amended
hereby.

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT - Page 4

<PAGE> 5

Section V.3. Expenses of Lender. As provided in the Agreement,
Borrower agrees to pay on demand all reasonable costs and expenses incurred by
Lender in connection with the preparation, negotiation, and execution of this
Amendment and any other documents executed pursuant hereto and any and all
amendments, modifications, and supplements thereto, including without
limitation the costs and reasonable fees of Lender's legal counsel, and all
costs and expenses incurred by Lender in connection with the enforcement or
preservation of any rights under the Agreement, as amended hereby, or any other
document executed in connection therewith, including without limitation the
costs and reasonable fees of Lender's legal counsel.

Section V.4. Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.

Section V.5. Applicable Law. This Amendment and all other documents
executed pursuant hereto shall be deemed to have been made and to be
performable in Dallas, Dallas County, Texas and shall be governed by and
construed in accordance with the laws of the State of Texas.

Section V.6. Successors and Assigns. This Amendment is binding upon
and shall inure to the benefit of Lender, Borrower, Guarantor and their
respective successors and assigns, except Borrower may not assign or transfer
any of its rights or obligations hereunder without the prior written consent of
Lender.

Section V.7. Counterparts. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument.

Section V.8. Effect of Waiver. No consent or waiver, express or
implied, by Lender to or for any breach of or deviation from any covenant,
condition or duty by Borrower or any obligated party shall be deemed a consent
or waiver to or of any other breach of the same or any other covenant,
condition or duty.

Section V.9. Headings. The headings, captions, and arrangements used
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.

Section V.10. Non-Application of Chapter 346 of Texas Finance Code.
The provisions of Chapter 346 of the Texas Finance Code, as amended (formerly
Chapter 15 of the Texas Credit Code (Vernon's Texas Civil Statutes), Article
5069-15), are specifically declared by the parties not to be applicable to this
Amendment or any of the Loan Documents or the transactions contemplated hereby.

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT - Page 5

<PAGE> 6

Section V.11. ENTIRE AGREEMENT. THE AGREEMENT, THIS AMENDMENT AND ALL
OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN
CONNECTION WITH THE AGREEMENT OR THIS AMENDMENT EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

[Remainder of page left intentionally blank]

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT - Page 6

<PAGE> 7

Executed as of the date first written above.

BORROWER:

THOMAS GROUP, INC.,
a Delaware corporation

By:
--------------------------------------
J. Thomas Williams,
Chief Executive Officer and President

LENDER:

COMERICA BANK-TEXAS

By:
--------------------------------------
David Terry, Vice President

The undersigned guarantors hereby (i) consent and agree to this
Amendment and (ii) confirm and agree that the Guaranty of each Guarantor is in
full force and effect and is the legal, valid and binding obligation of each of
the undersigned guarantors enforceable against each such guarantor in
accordance with its terms. Additionally, Thomas Group Information Technologies,
Inc., formerly Thomas Group Acquisition, Corp. ("TGA"), agrees that it has
succeeded to all guarantee liabilities of Bermac Communications, Inc.
("BERMAC") by reason of the merger of Bermac into TGA; TGA subsequently changed
its name to Thomas Group Information Technologies, Inc.

GUARANTORS:

THOMAS GROUP GMBH

By:
--------------------------------------
Philip J. Lovell, Managing Director

THOMAS GROUP (SWITZERLAND) GMBH

By:
---------------------------------------
Robert French, Managing Director

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT - Page 7

<PAGE> 8

THOMAS GROUP OF LOUISIANA, INC.

By:
----------------------------------------
Alexander W. Young, President

THOMAS GROUP INFORMATION
TECHNOLOGIES, INC., formerly Thomas Group
Acquisition, Corp., and successor-by-merger
to Bermac Communications, Inc.

By:
-----------------------------------------
Alexander W. Young, President

THOMAS GROUP ASIA PRIVATE LIMITED

By:
----------------------------------------
Alexander W. Young, Officer

THOMAS GROUP OF SWEDEN, INC.

By:
----------------------------------------
J. Thomas Williams, President

THOMAS GROUP HONG KONG, LIMITED

By:
----------------------------------------
Herbert D. Locke, Officer

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT - Page 8

<PAGE> 9

ANNEX I

FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT - Page 9

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
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