8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  March 1, 2008

Thomas Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	0-22010	72-0843540
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

5221 N. O’Connor Blvd., Suite 500 Irving, Texas	75039
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number, including area code:  (972) 869-3400

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On March 1, 2008, the Board of Directors of Thomas Group, Inc. (the “Company”) appointed Earle Steinberg to the positions of President and Chief Executive Officer.  There are no family relationships between any current director or executive officer and Mr. Steinberg.  There are no transactions in which Mr. Steinberg has an interest requiring disclosure under Item 404(a) of Regulation S-K.  On March 5, 2008, Thomas Group, Inc. issued a press release announcing the appointment of Earle Steinberg as President and Chief Executive Officer.  A copy of the press release is furnished herewith and attached hereto as Exhibit 99.1.

On March 4, 2008, the Company entered into an employment agreement with Earle Steinberg pursuant to which Mr. Steinberg will be employed as the Company’s President and Chief Executive Officer beginning March 10, 2008.  Pursuant to the employment agreement, Mr. Steinberg will receive annual base compensation of $512,000.  Mr. Steinberg also will be eligible for incentive compensation of up to $350,000 per year if certain criteria relating to the Company’s achievement of targets established and communicated in advance by the Compensation and Corporate Governance Committee (the “Committee”) are satisfied.  The Committee also has authorized the future issuance to Mr. Steinberg of 50,000 shares of restricted stock and equity-based incentive awards for up to 380,000 shares of the Company’s common stock.  Such awards are expected to be granted effective on March 10, 2008 when Mr. Steinberg commences employment with the Company.

Mr. Steinberg has been a partner in the consulting firms Touche Ross, Coopers and Lybrand, Booz Allen and AT Kearney.  At AT Kearney, Mr. Steinberg led the Americas Operations Practice.  Mr. Steinberg also has served as President of MRO Services.  Mr. Steinberg holds a bachelor’s degree in Psychology from Boston College, an MBA in Operations Management, an MDS in Statistical Theory and PhD in Quantitative Methods and Operations Management, all from Georgia State University.

On March 1, 2008, the Committee and the Company’s Board of Directors, upon the Committee’s recommendation, approved a new incentive compensation plan titled the 2008 Omnibus Stock and Incentive Plan of Thomas Group, Inc. (the “2008 Omnibus Plan”).  The 2008 Omnibus Plan provides a means for the Company to grant awards to officers, employees or consultants in the form of options, restricted shares, performance awards and stock appreciation rights.  A total of 1,000,000 shares of the Company’s common stock were reserved for issuance pursuant to awards made under the 2008 Omnibus Plan.  The Committee has the authority to interpret the 2008 Omnibus Plan and to make rules and regulations relating to the 2008 Omnibus Plan, to select participants, to establish the terms and conditions of awards and to grant awards.  The 2008 Omnibus Plan and any awards made thereunder are conditional upon stockholder approval of the 2008 Omnibus Plan at the Company’s 2008 Annual Meeting of Stockholders.

The above description of the 2008 Omnibus Plan above does not purport to be complete and is qualified in its entirety by reference to the complete text of the 2008 Omnibus Plan, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference.

On March 1, 2008, the Committee granted Mr. McGrath an initial award of 100,000 shares of the Company’s common stock and a performance share award entitling Mr. McGrath to up to 350,000 shares of the Company’s common stock if certain conditions related to the Company’s profitability are satisfied.  The initial award was granted by the Committee pursuant to the 2005 Omnibus Stock and Incentive Plan of Thomas Group, Inc.  The performance share award was granted by the Committee pursuant to the 2008 Omnibus Plan and is conditional upon stockholder approval of the 2008 Omnibus Plan at the Company’s 2008 Annual Meeting of Stockholders.

2

Item 8.01  Other Events.

On March 6, 2008, Thomas Group, Inc. issued a press release announcing its intention to repurchase shares of its common stock pursuant to an existing stock repurchase program.  A copy of the press release is furnished herewith and attached hereto as Exhibit 99.2.

3

Item 9.01  Financial Statements and Exhibits

(d) Exhibits

Exhibit Number	Description
10.1	2008 Omnibus Stock and Incentive Plan of Thomas Group, Inc.
10.2	Employment Agreement, dated March 4, 2008, by and between Thomas Group, Inc. and Earle Steinberg.
10.3	Restricted Share Award dated March 1, 2008 granted to Michael E. McGrath
10.4	Performance Share Award dated March 1, 2008 granted to Michael E. McGrath
99.1	Press Release dated March 5, 2008
99.2	Press Release dated March 6, 2008

4

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 hereunto duly authorized.

		Thomas Group, Inc.
		(Registrant)
Date:	March 6, 2008	By:	/s/ Michael Barhydt
			Michael Barhydt,
			Chief Financial Officer

5

EX-10.1

Exhibit 10.1

2008
OMNIBUS STOCK AND INCENTIVE PLAN
FOR
THOMAS GROUP, INC.

TABLE OF CONTENTS

1.	Purpose		1
2.	Definitions		1
	(a)	“Administrator”	1
	(b)	“Agreed Price”	1
	(c)	“Applicable Laws”	1
	(d)	“Award”	1
	(e)	“Board”	1
	(f)	“Cause”	1
	(g)	“Change in Control”	1
	(h)	“Change in Control Price”	2
	(i)	“Code”	2
	(j)	“Committee”	2
	(k)	“Common Stock”	2
	(l)	“Company”	2
	(m)	“Consultant”	2
	(n)	“Date of Grant”	2
	(o)	“Director”	2
	(p)	“Disability”	2
	(q)	“Effective Date”	3
	(r)	“Eligible Person(s)”	3
	(s)	“Employee(s)”	3
	(t)	“Fair Market Value”	3
	(u)	“Holder”	3
	(v)	“Incentive Stock Option”	3
	(w)	“Non-Qualified Stock Option”	3
	(x)	“Option”	3
	(y)	“Option Price”	3
	(z)	“Performance Award”	3
	(aa)	“Performance Measures”	3
	(bb)	“Performance Period”	3
	(cc)	“Plan”	3
	(dd)	“Plan Year”	3
	(ee)	“Reserved Shares”	5
	(ff)	“Restriction(s)”	4
	(gg)	“Restricted Period”	4
	(hh)	“Restricted Shares”	4
	(ii)	“Restricted Share Award”	4
	(jj)	“Restricted Share Distributions”	4
	(kk)	“SAR”	4
	(ll)	“Share(s)”	4
	(mm)	“Shareholders”	4
	(nn)	“Spread”	4
	(oo)	“Separation”	4
	(pp)	“Subsidiary”	4
	(qq)	“1933 Act”	4
	(rr)	“1934 Act”	4
	(ss)	“Vested”	4
	(tt)	“10% Person”	4
3.	Award of Reserved Shares		5
4.	Conditions for Grant of Awards		5
5.	Grant of Options		5
6.	Option Price		6

7.	Exercise of Options	6
8.	Vesting of Award	6
9.	Termination of Option Period	6
10.	Acceleration	7
11.	Adjustment of Reserved Shares	7
12.	Transferability of Awards	8
13.	Issuance of Reserved Shares	9
14.	Exercise of Discretion and Administration of the Plan	9
15.	Tax Withholding	10
16.	Restricted Share Awards	10
17.	Performance Awards	11
18.	Stock Appreciation Rights	11
19.	Section 83(b) Election	13
20.	Interpretation	13
21.	Amendment and Discontinuation of the Plan	13
22.	Effective Date and Termination Date	13

2008 OMNIBUS STOCK AND INCENTIVE PLAN FOR

THOMAS GROUP, INC.

1.             Purpose.  The purpose of this Plan is to advance the interests of Thomas Group, Inc., and increase Shareholder value by providing additional incentives to attract, retain and motivate those qualified and competent employees and consultants, upon whose efforts and judgment its success is largely dependent.

2.             Definitions.  As used herein, the following terms shall have the meaning indicated:

(a)           “Administrator” shall mean the person(s) designated by the Committee to carry out nondiscretionary administrative duties with respect to the Plan and Awards.

(b)           “Agreed Price” shall relate to the grant of an Award in the form of an SAR, and shall mean the value assigned to the Award’s Reserved Shares which will form the basis for calculating the Spread on the date of exercise of the SAR, which assigned value shall be the Fair Market Value of such Reserved Shares on the Date of Grant.

(c)           “Applicable Laws” means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, and the Code; and the similar laws of any foreign country or jurisdiction where Options are, or will be, granted.

(d)           “Award” shall mean either an Option, an SAR, a Restricted Share Award, or a Performance Award, except that where it shall be appropriate to identify the specific type of Award, reference shall be made to the specific type of Award; and provided, further, that references to Award shall be deemed to be references to the written agreement evidencing such Award, and provided, finally, without limitation, that unless expressly provided to the contrary in the terms of the Award, in the event of a conflict between the terms of the Plan and the terms of an Award, the terms of the Plan are controlling.

(e)           “Board” shall mean the Board of Directors of the Company.

(f)            “Cause” shall mean the occurrence of any one or more of the following: (i) Holder engages in any act of gross misconduct that is injurious to the Company or its business: (ii) Holder engages in any act of dishonesty, misconduct, fraud, misappropriation, embezzlement, theft, moral turpitude or the like; (iii) Holder refuses to perform the duties or responsibilities properly assigned to him by the Company, or the dereliction of duty by Holder; or (iv) a material breach or a violation by Holder of any material provision of Holder’s employment agreement.

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

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

(2)           individuals who, as of March 1, 2008, constitute the Board (the “Incumbent Board”) cease for any reason to constitute more than 50 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 the Company’s Shareholders was approved by a vote of at least two-thirds of the directors then

1

constituting the Incumbent Board, shall be considered as though such individual were a member of the Incumbent Board;

(3)           Shareholders approve a merger, consolidation, or reorganization of the Company with or into another corporation or other legal person and, as a result of such merger, consolidation or reorganization, the holders of the Company’s Shares immediately prior to such transaction do not have the same proportionate ownership of the common stock of the surviving entity immediately after such transaction;

(4)           Shareholders approve a sale or disposition of all or substantially all of the Company’s assets to any other corporation or other legal person and as a result of such transaction, the holders of the Company’s Shares immediately prior to such transaction do not have the same proportionate ownership of the common stock of the surviving entity immediately after such transaction;

(5)           Shareholders approve a plan of liquidation or dissolution of the Company;

(6)           a public announcement is made of a tender or exchange offer by any Person for fifty percent or more of the outstanding voting securities of the Company, and the Board approves or fails to oppose that tender or exchange offer in its statements in Schedule 14D-9 under the Exchange Act; or

(7)           in a Title 11 Bankruptcy Proceeding, there is the appointment of a trustee or the conversion of a case involving the Company to a case under Chapter 7.

(h)           “Change in Control Price” shall mean the higher of (i) the highest price per Share paid in any transaction reported on the NASDAQ or such other exchange or market as is the principal trading market for the Shares, or (ii) the highest price per Share paid in any bona fide transaction related to a Change in Control, at any time during the 60 day period immediately preceding such occurrence; with such occurrence date to be determined by the Committee.

(i)            “Code” shall mean the Internal Revenue Code of 1986, as now or hereafter amended.

(j)            “Committee” shall mean the Compensation and Corporate Governance Committee of the Board, provided, further, that in granting Performance Awards, Committee shall refer to only those members of the Compensation and Corporate Governance Committee who are “Outside Directors” within the meaning of Section 162(m) of the Code.

(k)           “Common Stock” shall mean the common stock, par value $.01 per Share, of the Company.

(l)            “Company” shall mean the Thomas Group, Inc.

(m)          “Consultant” shall mean, any person or entity who or which is engaged by the Company or a Subsidiary to render consulting services and is compensated for such consulting services, and meets the definition of “employee” as set forth in the instructions to Form S-8 Registration Statement under the 1933 Act.

(n)           “Date of Grant” shall mean the date on which the Committee takes formal action to grant an Award, provided that it is followed, as soon as reasonably practicable, by written notice to the Eligible Person receiving the Award.

(o)           “Director” shall mean a member of the Board of the Company.

(p)           “Disability” shall mean a Holder’s present incapacity resulting from an injury or illness (either mental or physical) which, in the reasonable opinion of the Committee based on such medical evidence as it deems necessary, will result in death or can be expected to continue for a period of at least twelve (12) months and will prevent the Holder from performing the normal services required of the Holder by the Company; provided, however,

2

that such disability did not result, in whole or in part:  (i) from chronic alcoholism; (ii) from addiction to narcotics; (ii) from a felonious undertaking; or (iv) from an intentional self inflicted wound.

(q)           “Effective Date” shall mean March 1, 2008.

(r)           “Eligible Person(s)” shall mean those persons or entities, as applicable, who are Employees, or Consultants.

(s)           “Employee(s)” shall mean each person who is designated as an employee on the books of the Company, including, without limitation, persons so designated who are employed by a Subsidiary.

(t)            “Fair Market Value” per Share shall be determined by the Committee and, on the date of reference, shall be the Closing Price on such date, provided, further, that if the actual transaction involving the Shares occurs at a time when the NASDAQ National Market System (“NASDAQ”) (or other exchange on which Shares are traded) is closed for regular trading, then it shall be the most recent Closing Price; provided, further, that “Closing Price” means the closing price of the Shares on the NASDAQ as reported in any newspaper of general circulation, or in the absence of such report, as reflected on the records of the system on which the Shares are reported or quoted.

(u)           “Holder” shall mean, at each time of reference, each person with respect to whom an Award is in effect; provided, further, that following the death of a Holder, it shall refer to the person who succeeds to the rights of such Holder.

(v)            “Incentive Stock Option” shall mean an Option that is an incentive stock option as defined in Section 422 of the Code.

(w)           “Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option.

(x)           “Option” (when capitalized) shall mean the grant of the right to purchase Reserved Shares through the payment of the Option Price and taking the form of either an Incentive Stock Option or a Non-Qualified Stock Option; except that, where it shall be appropriate to identify a specific type of Option, reference shall be made to the specific type of Option; provided, further, without limitation, that a single Option may include both Incentive Stock Option and Non-Qualified Stock Option provisions.

(y)           “Option Price” shall mean the price per Reserved Share which is required to be paid by the Holder in order to exercise his or her right to acquire the Reserved Share under the terms of the Option.

(z)           “Performance Award” shall mean the award which is granted contingent upon the attainment of the performance objectives during the Performance Period, all as described more fully in Section 17.

(aa)         “Performance Measures” shall mean one or more of the following: (i) Share price (ii) earnings per Share, (iii) return on average common equity, (iv) pre-tax income, (iv) pre-tax operating income, (v) net revenue, (vi) net income, (vii) profits before taxes, (viii) Fair Market Value per Share, (ix) net asset value, (x) net asset value per Share, (xi) operating cost reductions, or (xii) such other similar measures as the Committee may select, and provided that such measures may be made before or after adjustments as determined by the Committee at the time of the grant of the Award and designated in writing in the Award, provided, without limitation, that while a performance standard can include remaining in the employ of the Company for a period of time, it shall not be based on merely remaining in the employ of the Company for a specified period of time.

(bb)         “Performance Period” shall mean the period selected by the Committee with respect to which the performance objectives relate or a measured.

(cc)         “Plan” shall mean this 2008 Omnibus Stock and Incentive Plan for Thomas Group, Inc.

(dd)         “Plan Year” shall mean the calendar year.

3

(ee)         “Reserved Shares” shall mean, at each time of reference, the total number of Shares described in Section 3 with respect to which the Committee may grant an Award, all of which Reserved Shares shall be held in the Company’s treasury or shall be made available from the Company’s authorized and unissued Shares.

(ff)           “Restriction(s)” “Restricted” and similar terms shall mean the restrictions applicable to Reserved Shares subject to an Award which constitute “a substantial risk of forfeiture” of such Reserved Shares within the meaning of Section 83(a)(1) of the Code.

(gg)         “Restricted Period” shall mean the period during which Restricted Shares are subject to Restrictions.

(hh)         “Restricted Shares” shall mean the Reserved Shares granted to an Eligible Person which are subject to Restrictions; provided, further, that the Committee may, in its sole discretion, determine that the Restrictions which otherwise would have been imposed have been fully satisfied on the Date of Grant by reason of prior service and/or other considerations, and thus provide that such Restricted Shares shall be fully Vested on the Date of Grant.

(ii)           “Restricted Share Award” shall mean the award of Restricted Shares.

(jj)           “Restricted Share Distributions” shall mean any amounts, whether Shares, cash or other property (other than regular cash dividends) paid or distributed by the Company with respect to Restricted Shares during a Restricted Period.

(kk)        “SAR” shall mean a stock appreciation right as defined in Section 18 hereof.

(ll)           “Share(s)” shall mean a share or shares of Common Stock.

(mm)       “Shareholders” shall mean persons owning one or more Shares at the time of reference.

(nn)         “Spread” shall mean the difference between the Option Price, or the Agreed Price, as the case may be, of the Share(s) on the Date of Grant of the Award, and the Fair Market Value of such Share(s) on the later date of reference.

(oo)         “Separation” shall mean the date on which a Holder ceases to have an employment relationship with the Company for any reason, including death or Disability; and provided, further, without limitation, such employment relationship will cease, in the case of a consultant, upon his or her ceasing to render services to the Company, as determined by the Committee in its sole discretion; provided, however, that a Separation will not be considered to have occurred while an Employee is on sick leave, military leave, or any other leave of absence approved by the Company, if the period of such leave does not exceed 90 days, or, if longer, so long as the Employee’s right to redeployment with the Company is guaranteed either by statute or by contract.

(pp)         “Subsidiary” shall mean, where the Award is an Incentive Stock Option, a “subsidiary corporation”, as defined in Section 424(f) of the Code, and where the Award is not an Incentive Stock Option, any entity which would be a “subsidiary corporation” as defined in Section 424(f) of the Code if it were a corporation.

(qq)         “1933 Act” shall mean the Securities Act of 1933, as amended.

(rr)         “1934 Act” shall mean the Securities Exchange Act of 1934, as amended.

(ss)         “Vested” and similar terms shall mean the number of Option Shares which have become nonforfeitable and the portion of an Award on which the Restrictions have lapsed; provided, further, and without limitation, that the lapse of Restrictions based on the attainment of performance objectives may also be a Vesting event to the extent provided in the Award.

(tt)           “10% Person” shall mean a person who owns directly (or indirectly through attribution under Section 424(d) of the Code) at the Date of Grant of an Incentive Stock Option, stock possessing more than 10% of

4

the total combined voting power of all classes of voting stock (as defined in Section 424 of the Code) of the Company on the Date of Grant.

3.             Award of Reserved Shares.

(a)           As of the Effective Date, One Million (1,000,000) Shares shall automatically, and without further action, become Reserved Shares.  To the extent any Award shall terminate, expire or be canceled, the Reserved Shares subject to such Award (or with respect to which the Award is measured), shall remain Reserved Shares.  Where an Award is settled on a basis other than the issuance of Reserved Shares, the Reserved Shares which measured the amount of such Award settlement shall be canceled and no longer considered Reserved Shares.

(b)           Notwithstanding any provision in this Plan to the contrary, in order to insure that Performance Awards are performance-based compensation within the meaning of Section 162(m) of the Code, no person whose compensation may be subject to the limitations on deductibility under Section 162(m) of the Code shall be eligible for a grant during a single calendar year of an Award with respect to, or measured by, more than Seven Hundred Thousand (700,000) Reserved Shares.  The limitation under this Section 3(b) shall be construed so as to comply with the requirements of Section 162(m) of the Code.

4.             Conditions for Grant of Awards.

(a)           Without limiting the generality of the provisions hereof which deal specifically with each form of Award, Awards shall only be granted to such one or more Eligible Persons as shall be selected by the Committee.

(b)           In granting Awards, the Committee shall take into consideration the contribution the Eligible Person has made or may be reasonably expected to make to the success of the Company and such other factors as the Committee shall determine.  The Committee shall also have the authority to consult with and receive recommendations from officers and other personnel of the Company with regard to these matters.  The Committee may from time to time in granting Awards under the Plan prescribe such terms and conditions concerning such Awards as it deems appropriate, including, without limitation, relating an Award to achievement of specific goals established by the Committee or to the continued employment of the Eligible Person for a specified period of time, provided that such terms and conditions are not inconsistent with the provisions of this Plan.

(c)           Incentive Stock Options may be granted only to Employees, and all other Awards may be granted to any Eligible Person.

(d)           The Plan shall not confer upon any Holder any right with respect to continuation of employment by the Company, or any right to provide services to the Company, nor shall it interfere in any way with his or her right or the Company’s right to terminate his or her employment at any time.

(e)           The Awards granted to Eligible Persons shall be in addition to regular salaries, pension, life insurance or other benefits (if any) related to their service to the Company, and nothing herein shall be deemed to limit the ability of the Company to enter into any other compensation arrangements with any Eligible Person.

(f)            The Committee shall determine in each case whether periods of military or government service shall constitute a continuation of employment or service for the purposes of this Plan or any Award.

(g)           Notwithstanding any provision hereof to the contrary, each Award which in whole or in part involves the issuance of Reserved Shares may provide for the issuance of such Reserved Shares for consideration consisting of cash or cash equivalents, or such other consideration as the Committee may determine, including (without limitation) as compensation for past services rendered.

5.             Grant of Options.

(a)           The Committee may grant Options to Eligible Persons from time to time, alone, in addition to, or in tandem with, other Awards granted under the Plan.  An Option granted hereunder shall be either an Incentive Stock Option or a Non-Qualified Stock Option, and shall clearly state whether it is (in whole or in part) an Incentive

5

Stock Option or a Non-Qualified Stock Option; provided, further, that failure of an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option will not affect its validity, and the portion which does not qualify as an Incentive Stock Option shall be a Non-Qualified Stock Option.

(b)           If both Incentive Stock Options and Non-Qualified Stock Options are granted to a Holder, the right to exercise, to the full extent thereof, Options of either type shall not be contingent in whole or in part upon the exercise of, or failure to exercise, Options of the other type.

(c)           The aggregate Fair Market Value (determined as of the Date of Grant) of the Reserved Shares with respect to which any Incentive Stock Option is exercisable for the first time by a Holder during any calendar year under the Plan and all such plans of the Company (as defined in Section 424 of the Code) shall not exceed $100,000; provided, further, without limitation, that any portion of an Option designated as an Incentive Stock Option which exceeds such $100,000 limit will, notwithstanding such designation, be a validly granted Non-Qualified Stock Option.

(d)           The Committee may at any time offer to buy out for a payment in cash, an Option previously granted, based on such terms and conditions as the Committee shall establish and as communicated to the Holder by the Committee at the time that such offer is made.

6.             Option Price.

(a)           The Option Price shall be any price determined by the Committee which is not less than one hundred percent (100%) of the Fair Market Value per Share as determined under the terms of the Plan on the Date of Grant; provided, however, that in the case of an Incentive Stock Option granted to a 10% Person the Option Price shall not be less than 110% of the Fair Market Value per Share as determined under the terms of the Plan on the Date of Grant.  The Committee shall determine the Fair Market Value per Share.

(b)           Unless further limited by the Committee in any Option, the Option Price may be paid in cash, by certified or cashier’s check, by wire transfer, by money order, through a Broker Assisted Exercise, with Shares (but with Shares only if expressly permitted by the terms of the Option), or by a combination of the above; provided, however, that the Committee may accept a personal check in full or partial payment.  If the Option Price is permitted to be, and is, paid in whole or in part with Shares, the value of the Shares surrendered shall be the Shares’ Fair Market Value on the date delivered to the Administrator.

7.             Exercise of Options.  An Option shall be deemed exercised when (i) the Administrator has received written notice of such exercise in accordance with the terms of the Option, and (ii) full payment of the aggregate Option Price plus required withholding tax amounts, if any, described in Section 15, of the Reserved Shares as to which the Option is exercised has been made.  Separate stock certificates shall be issued by the Company for any Reserved Shares acquired as a result of exercising an Incentive Stock Option and a Non-Qualified Stock Option.

8.             Vesting of Award

(a)           Without limitation, each Award shall Vest in whole or in part, and shall expire, according to the terms of the Award.

(b)           The Committee, in its sole discretion, may accelerate the date on which all or any portion of an otherwise unvested Award shall Vest.

9.             Termination of Option Period.

(a)           Unless the terms of an Option expressly provide for a different date of termination, the unexercised portion of an Option shall automatically and without notice terminate and become null and void at the time of the earliest to occur of the following:

6

(1)           on the 90th day following Holder’s Separation for any reason except death, Disability or for Cause; or

(2)           immediately upon Separation as a result, in whole or in material part, of a discharge for Cause; or

(3)           on the one hundred-eightieth (180th) day following a Separation by reason of death or Disability;

(4)           in the case of a 10% Person, on the fifth (5th ) anniversary of the Date of Grant; or

(5)           on the tenth (10th) anniversary of the Date of Grant.

(b)           Notwithstanding any provision of the Plan to the contrary, in the event of the proposed dissolution or liquidation of the Company, or in the event of a proposed sale of all or substantially all of the assets of the Company, or the proposed merger of the Company with or into another corporation (collectively, the “Transaction”), unless otherwise expressly provided (by express reference to this Section 9(b)) in the terms of an Option, after the public announcement of the Transaction, the Committee may, in its sole discretion, deliver a written notice (“Cancellation Notice”) to any Holder of an Option, canceling the unexercised Vested portion (including the portion which becomes Vested by reason of acceleration), if any, of such Option, effective on the date specified in the Cancellation Notice (“Cancellation Date”).  Notwithstanding the forgoing, the Cancellation Date may not be earlier than the last to occur of (i) the 15th day following delivery of the Cancellation Notice, and (ii) the 60th day prior to the proposed date for the consummation of the Transaction (“Proposed Date”).  Without limitation, the Cancellation Notice will provide that, unless the Holder elects in writing to waive, in whole or in part, a Conditional Exercise, the exercise of the Option will be a Conditional Exercise.  A “Conditional Exercise” shall mean that in the event the Transaction does not occur within 180 days of the Proposed Date, the exercising Holder shall be refunded any amounts paid to exercise such Holder’s Option, such Option will be reissued, and the purported exercise of such Option shall be null and void ab intitio.

10.          Acceleration.  In the event of a Change in Control, in the sole discretion of the Committee, the Committee may provide that an Award will become fully or partially exercisable, Vested, or the Restricted Period shall terminate, as the case may be (hereafter, in this Section 10, such Award shall be “accelerated”), and (ii) thereafter, in the sole discretion of the Committee, the value of some or all Vested Awards may be cashed out on the basis of the Change in Control Price, at any time during the 60-day period immediately preceding any bona fide transaction related to a Change in Control; provided, further, that if a date prior to such occurrence is selected for a cash out, any subsequent increase in the Change in Control Price shall be computed with respect to such Awards which have been cashed out and will be paid to each Holder on the date of such occurrence, or as soon thereafter as reasonably possible.

11.          Adjustment of Reserved Shares.

(a)           If at any time while the Plan is in effect or Awards with respect to Reserved Shares are outstanding, there shall be any increase or decrease in the number of issued and outstanding Shares through the declaration of a stock dividend or through any recapitalization resulting in a stock split up, combination or exchange of Shares, then and in such event:

(i)            appropriate adjustment shall be made in the maximum number of Reserved Shares which may be granted under Section 3, and equitably in the Reserved Shares which are then subject to each Award, so that the same proportion of the Company’s issued and outstanding Common Stock shall continue to be subject to grant under Section 3, and to such Award, and

(ii)           in addition, and without limitation, in the case of each Award (including, without limitation, Options) which requires the payment of consideration by the Holder in order to acquire Reserved Shares, an appropriate equitable adjustment shall be made in the consideration (including, without limitation the Option Price) required to be paid to acquire the each Reserved Share, so that (i) the aggregate consideration to acquire all of the Reserved Shares subject to the Award remains the same and,

7

(ii) so far as possible, (and without disqualifying an Incentive Stock Option) the relative cost of acquiring each Reserved Share subject to such Award remains the same; and

(iii)          in addition, shall make appropriate adjustment in the Performance Measures for each Performance Award so as to reasonably insure that the same level of performance will result in the same Vesting and other material rights and benefits under the Performance Award.

All such determinations shall be made by the Board in its sole discretion.

(b)           The Committee may change, or may direct the Administrator to change, the terms of Awards outstanding under this Plan when, in the Committee’s judgment, such adjustments become appropriate by reason of a corporate transaction (as defined in Treasury Regulation § 1.424 1(a)(1)(ii)); provided, however, that if by reason of such corporate transaction an Incentive Stock Option is assumed or a new Incentive Stock Option is substituted therefor, the Committee, or at the direction of the Committee, the Administrator, may only change the terms of such Incentive Stock Option such that (i) the excess of the aggregate Fair Market Value of the Reserved Shares subject to the substituted Incentive Stock Option immediately after the substitution or assumption, over the aggregate Option Price of such Reserved Shares at such time, is not more than the excess of the aggregate Fair Market Value of all Reserved Shares subject to the Incentive Stock Option immediately before such substitution or assumption over the aggregate Option Price of such Reserved Shares at such time, and (ii) the substituted Incentive Stock Option, or the assumption of the original Incentive Stock Option does not give the Holder additional benefits which such Holder did not have under the original Incentive Stock Option.  Without limiting the generality of any other provisions hereof, including, without limitation, Section 21, except to the minimum extent, if any, required by Section 424(a) of the Code with respect to Incentive Stock Options, no change made under the authority of this Section 11(b) in the terms of an Award shall alter such Award’s material provisions in a way that makes such Award less valuable to its Holder.

(c)           Except as otherwise expressly provided herein, the issuance by the Company of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with direct sale for adequate consideration, or upon the exercise of rights or warrants to subscribe therefore, or upon conversion of Shares or obligations of the Company convertible into such Shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, Reserved Shares subject to Awards granted under the Plan; provided, further, that such issuance shall require the Committee to make such adjustments as are required under Section 11(a)(iii).

(d)           Without limiting the generality of the foregoing, except for making the adjustments required under Section 11(a)(iii), the existence of outstanding Awards with respect to Reserved Shares granted under the Plan shall not affect in any manner the right or power of the Company to make, authorize or consummate (1) any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; (2) any merger or consolidation of the Company; (3) any issue by the Company of debt securities, or preferred or preference stock which would rank above the Reserved Shares subject to outstanding Awards; (4) the dissolution or liquidation of the Company; (5) any sale, transfer or assignment of all or any part of the assets or business of the Company; or (6) any other corporate act or proceeding, whether of a similar character or otherwise.

12.          Transferability of Awards.  Each Award which is an Incentive Stock Option shall not be transferable by the Holder otherwise than (i) by will or the laws of descent and distribution, or (ii) pursuant to a domestic relations order as that term is defined in section 414(p)(1)(B) of the Internal Revenue Code, provided that such order satisfies Section 414(p)(1)(A) of the Internal Revenue Code; and in the case of each other Award, subject to the same transfer restrictions in (i) and (ii) except that, if expressly provided in the Award, it is transferable, in whole or in part, without payment of consideration (i) to members of the Holder’s Immediate Family, (ii) to trusts for such Immediate Family members, or (iii) to partnerships whose only partners are such Immediately Family members, or (iv) except as prohibited by Rule 16b-3, to a person or other entity for which the Holder is entitled to a deduction for a “charitable contribution” under Section 170(a)(i) of the Code (provided, in each such case that no further transfer by any such permitted transferee(s) shall be permitted); provided, further that, except for the right to exercise an Award which is subject to exercise, the Holder retains all of the rights, duties and obligations under the Award (including, without limitation, satisfaction of the Vesting requirements and the payment of withholding.)

8

13.          Issuance of Reserved Shares.  No Holder shall be, or have any of the rights or privileges of, the owner of Reserved Shares subject to an Award unless and until certificates representing such Shares shall have been issued and delivered to such Holder or, where Vested Shares are held by the Company to ensure compliance with specific requirements of an Award, to the extent expressly provided in the Award.  As a condition of any issuance of Shares, the Administrator may obtain such agreements or undertakings, if any, as the Administrator may deem necessary or advisable to assure compliance with any such law or regulation or Shareholder agreement including, but not limited to, a representation, warranty or agreement to be bound by any legends that are, in the opinion of the Administrator, necessary or appropriate to comply with the provisions of any securities law deemed by the Administrator to be applicable to the issuance of the Reserved Shares and which are endorsed upon the Share certificates.

Share certificates issued to the Holder receiving such Reserved Shares who is a party to any Shareholders agreement, voting trust, or any similar agreement shall bear the legends contained in such agreements.  Notwithstanding any provision hereof to the contrary, no Reserved Shares shall be required to be issued with respect to an Award unless counsel for theCompany shall be reasonably satisfied that such issuance will be in compliance with applicable federal or state securities laws.

In no event shall the Company be required to sell or issue Reserved Shares under any Award if the sale or issuance thereof would constitute a violation of applicable federal or state securities law or regulation or a violation of any other law or regulation of any governmental authority or any national securities exchange.  As a condition to any sale or issuance of Reserved Shares, the Company may place legends on Reserved Shares, issue stop transfer orders, and require such agreements or undertakings as the Company may deem necessary or advisable to assure compliance with any such law or regulation.

Without limitation, the Company shall use its best efforts to register the Reserved Shares with the Securities and Exchange Commission.

14.          Exercise of Discretion and Administration of the Plan.

(a)           The Plan shall be administered by the Administrator and, except for the powers expressly reserved to the Board and the Committee, the Administrator shall have all of the administrative powers under Plan.  Notwithstanding the forgoing, except as provided in Section 13, the Administrator shall only exercise nondiscretionary and purely ministerial authority hereunder.

(b)           The Administrator, from time to time, may adopt rules and regulations for carrying out the administrative purposes of the Plan.  The determinations under, and the interpretations of, any provision of the Plan or an Award by the Committee (or the Administrator in the exercise of its administrative authority) shall, in all cases, be in its sole discretion, and shall be final and conclusive.

(c)           Any and all determinations and interpretations of the Committee (and the Administrator solely in the exercise of administrative authority) shall be made either (i) by a majority vote of the members at a meeting duly called, with at least 2 days prior notice, or (ii) without a meeting, by the written approval of all members.

(d)           No member of the Committee, or the Administrator, shall be liable for any action taken or omitted to be taken by such member or by any other member of the Committee or by the Administrator with respect to the Plan, and to the extent of liabilities not otherwise insured under a policy purchased by the Company, the Company does hereby indemnify and agree to defend and save harmless any member of the Committee, and the Administrator, with respect to any liabilities asserted or incurred in connection with the exercise and performance of their powers and duties hereunder, unless such liabilities are judicially determined to have arisen out of such person’s gross negligence, fraud or bad faith.  Such indemnification shall include attorney’s fees and all other costs and expenses reasonably incurred in defense of any action arising from such act of commission or omission.  Nothing herein shall be deemed to limit the Company’s ability to insure itself with respect to its obligations hereunder.

(e)           In particular, and without limitation, except for the authority granted to the Administrator under Section 13, the Committee shall have the sole authority, consistent with the terms of the Plan:

9

(i)            to determine whether and to what extent Awards are to be granted hereunder to one or more Eligible Persons;

(ii)           to determine the number of Reserved Shares to be covered by each such Award granted hereunder;

(iii)          to determine the terms and conditions of any Award granted hereunder, and to amend or waive any such terms and conditions except to the extent, if any, expressly prohibited by the Plan;

(iv)          to determine whether and under what circumstances an Option may be settled in Restricted Shares instead of Reserved Shares;

(v)           to determine whether, to what extent, and under what circumstances Awards under the Plan are to be made, and operate, on a tandem basis vis-a-vis other Awards under the Plan; and

(vi)          to determine (or to delegate to the Administrator the authority to determine) whether to permit payment of tax withholding requirements in Reserved Shares.

(f)            Without limitation, Committee, and the Administrator solely with respect to its ministerial duties, shall have the authority to adopt, alter, and repeal any or all of its rules, guidelines, and practices with respect to the Plan, and all questions of interpretation, with respect to the Plan or any Award shall be decided by the Committee or, if purely ministerial, by the Administrator, as the case maybe, whose decision shall be final, conclusive and binding upon the Company and each other affected party.

(g)           Without limitation, the Committee in its sole discretion may limit the ministerial authority granted hereunder to the Administrator by notifying the Administrator in writing of such limitation.

15.          Tax Withholding.  On or immediately prior to the date on which a payment is made to a Holder hereunder or, if earlier, the date on which an amount is required to be included in the income of the Holder as a result of the lapse of a restriction on an Award, the Holder shall be required to pay to the Company, in cash, or in Shares (but in Shares or Reserved Shares only if expressly permitted in the Award, or by written authorization of the Administrator, and then only in the minimum amount required to satisfy the minimum withholding requirements with respect to such Award), the amount (if any) which the Company reasonably determines to be necessary in order for the Company to comply with applicable federal or state tax withholding requirements, and the collection of employment taxes; provided, further, without limitation, that the Committee may require that such payment be made in cash.

16.          Restricted Share Awards.

(a)           The Committee may grant Awards of Restricted Shares to any Eligible Person, for no cash consideration, for such minimum consideration as may be required by applicable law, or for such other consideration as may be specified in the grant.  The terms and conditions of Restricted Shares shall be specified in the Award.  The Committee, in its sole discretion, shall determine what rights, if any, the person to whom an Award of Restricted Shares is made shall have in the Restricted Shares during the Restriction Period and the Restrictions applicable to the particular Award, including whether the holder of the Restricted Shares shall have the right to vote the Restricted Shares and the extent, if any, of Holder’s right to receive Restricted Share Distributions.  Unless otherwise provided in the Restricted Share Award, upon the expiration of Restrictions, the Restricted Shares shall cease to be Restricted Shares.

(b)           The Restrictions on Restricted Shares shall lapse in whole, or in installments, over whatever Restricted Period shall be selected by the Committee.

(c)           Without limitations, the Committee may accelerate the date on which Restrictions lapse with respect to any Restricted Shares.

10

(d)           During the Restricted Period, the certificates representing the Restricted Shares, and any Restricted Share Distributions, shall be registered in the Holder’s name and bear a restrictive legend disclosing the Restrictions, the existence of the Plan, and the existence of such Restricted Share Award.  Such certificates shall be deposited by the Holder with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which will permit the transfer to the Company of all or any portion of the Restricted Shares, and any assets constituting Restricted Share Distributions, which shall be forfeited in accordance with the terms of such Restricted Share Award.  Restricted Shares shall constitute issued and outstanding Common Stock for all corporate purposes and the Holder shall have all rights, powers and privileges of a holder of unrestricted Shares except those that are expressly excluded under the terms of the Restricted Share Award, and Holder will not be entitled to delivery of the stock certificates until all Restrictions shall have terminated and after such period, for any additional period specified in the Award, and the Company will retain custody of all related Restricted Share Distributions (which will be subject to the same Restrictions, terms, and conditions as the related Restricted Shares) until the conclusion of the Restricted Period with respect to the related Restricted Shares or for such additional period as may be provided in the Award; and provided, further, that any Restricted Share Distributions shall not bear interest or be segregated into a separate account but shall remain a general asset of the Company, subject to the claims of the Company’s creditors, until the date of their distribution; and provided, finally, that any material breach of any terms of the Restricted Share Award, as reasonably determined by the Committee, will cause a forfeiture of both Restricted Shares and Restricted Share Distributions.

17.          Performance Awards.

(a)           Performance Awards during a Plan Year may be granted to any Eligible Persons.

(b)           Without limitation, the Committee’s grant of Performance Awards may, in its sole discretion, be made in Reserved Shares, or in cash, or in a combination of Reserved Shares and cash, but the cash portion of each such Award granted to each Eligible Person may not exceed $1,000,000 in a Plan Year.

(c)           The Committee shall select the Performance Measures which will be required to be satisfied during the Performance Period in order to earn the Performance Award.  Such Performance Measures, and the duration of any Performance Period, may differ with respect to each Eligible Person, or with respect to separate Performance Awards issued to the same Eligible Person.  The selected Performance Measures, the Performance Period(s), and any other conditions to the Company’s obligation to pay a Performance Award shall be set forth in each Performance Award on or before the first to occur of (i) the 90th day of the selected Performance Period, (ii) the first date on which more than 25% of the Performance Period has elapsed, and (iii) the first date, if any, on which satisfaction of the Performance Measure(s) is no longer substantially uncertain.

(d)           Performance Awards may be payable in a single payment or in installments but may not be paid in whole or in part prior to the date on which the Performance Measures are attained, except that such payment may be accelerated upon the death or Disability of the Eligible Person, or as a result of a Change in Control, it being understood that if such acceleration events occur prior to the attainment of the Performance Measures, the Performance Award will not be exempt from Section 162(m) of the Code.

(e)           The extent to which any applicable performance objective has been achieved shall be conclusively determined by the Committee, but may be specifically delegated to the Administrator.  Without limitation, where an Eligible Person has satisfied the Performance Measures with respect to a Performance Award, if permitted under the terms of such Performance Award, the Committee, in its sole discretion, may reduce the maximum amount payable under such Performance Award.

18.          Stock Appreciation Rights.

(a)           The Committee shall have authority to grant (i) an SAR with respect to Reserved Shares, including, without limitation, Reserved Shares covered by any Option (“Related Option”), or a Performance Award (“Related Performance Award”).  An SAR granted with respect to a Related Option or Related Performance Award must be granted on the Date of Grant of such Related Option or Related Performance Award.

(1)           For the purposes of this Section 18, the following definitions shall apply:

11

(i)          The term “SAR” shall mean a right granted under this Plan, including, without limitation, a right granted in tandem with an Award, that shall entitle the Holder thereof to the number of Reserved Shares which have a Fair Market Value equal to the SAR Spread payable as described in Section 18(a)(ii).

(ii)         The term “SAR Spread” shall mean with respect to each SAR an amount equal to the product of (1) the excess of (A) the Fair Market Value per Share on the date of exercise, over (B) (x) if the SAR is granted in tandem with an Option, then the Option Price per Reserved Share of the Related Option, (y) if the SAR is granted in tandem with a Performance Award, the Agreed Price under the Related Performance Award, or (z) if the SAR is granted by itself with respect to a designated number of Reserved Shares, the Agreed Price which, without limitation, is the Fair Market Value of the Reserved Shares on the Date of Grant, in each case multiplied by (2) the number of Reserved Shares with respect to which such SAR is being exercised; provided, however, without limitation, that with respect to any SAR granted in tandem with an Incentive Stock Option, in no event shall the SAR Spread exceed the amount permitted to be treated as the SAR Spread under applicable Treasury Regulations or other legal authority without disqualifying the Option as an Incentive Stock Option.

(b)           To exercise the SAR the Holder shall:

(i)            Give written notice thereof to the Company, specifying the SAR being exercised and the number or Reserved Shares with respect to which such SAR is being exercised, and

(ii)           If requested by the Company, deliver within a reasonable time the agreement evidencing the SAR being exercised and, if applicable, the Related Option agreement, or Related Performance Award agreement, to the Secretary of the Company who shall endorse or cause to be endorsed thereon a notation of such exercise and return all agreements to the Holder.

(c)           As soon as practicable after the exercise of an SAR, the Company shall transfer to the Holder Reserved Shares having a Fair Market Value on the date the SAR is exercised equal to either the SAR Spread; provided, however, without limiting the generality of Section 15, that the Company, in its sole discretion, may withhold from such transferred Reserved Shares any amount necessary to satisfy the Company’s minimum obligation for federal and state withholding taxes with respect to such exercise.

(d)           An SAR may be exercised only if and to the extent that it is permitted under the terms of the Award which, in the case of a Related Option, shall be only when such Related Option is eligible to be exercised.

(e)           Upon the exercise or termination of a Related Option, or the payment or termination of a Related Performance Award, the SAR with respect to such Related Option or Related Performance Award likewise shall terminate.

(f)            An SAR shall be transferable (i) only to the extent, if any, provided in the agreement evidencing the SAR, or (ii) if granted with respect to a Related Option, or Related Performance Award, only to the extent, if any, that such Related Option, or Related Performance Award, is transferable, and under the same conditions.

(g)           Each SAR shall be on such terms and conditions not inconsistent with this Plan as the Committee may determine.

(h)           The Holder shall have no rights as a stockholder with respect to the related Reserved Shares as a result of the grant of an SAR.

(i)            With respect to a Holder who, on the date of a proposed exercise of an SAR, is an officer (as that term is used in Rule 16a-1 promulgated under the 1934 Act or any similar rule which may subsequently be in effect), such proposed exercise may only occur as permitted by Rule 16b-3, including without limitation paragraph

12

(e)(3)(iii) (or any similar rule which may subsequently be in effect promulgated pursuant to Section 16(b) of the 1934 Act).

19.          Section 83(b) Election.  If as a result of receiving an Award, a Holder receives Restricted Shares, then such Holder may elect under Section 83(b) of the Code to include in his or her gross income, for his or her taxable year in which the Restricted Shares are transferred to such Holder, the excess of the Fair Market Value (determined without regard to any Restriction other than one which by its terms will never lapse), of such Restricted Shares at the Date of Grant, over the amount (if any) paid for the Restricted Shares.  If the Holder makes the Section 83(b) election described above, the Holder shall (i) make such election in a manner that is satisfactory to the Administrator, (ii) provide the Administrator with a copy of such election, (iii) agree to promptly notify the Company if any Internal Revenue Service or state tax agent, on audit or otherwise, questions the validity or correctness of such election or of the amount of income reportable on account of such election, and (iv) agree to pay the withholding amounts described in Section 15.

20.          Interpretation.

(a)           If any provision of the Plan is held invalid for any reason, such holding shall not affect the remaining provisions hereof, but instead the Plan shall be construed and enforced as if such provision had never been included in the Plan.

(b)           THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

(c)           Headings contained in this Agreement are for convenience only and shall in no manner be construed as part of this Plan.

(d)           Any reference to the masculine, feminine, or neuter gender shall be a reference to such other gender as is appropriate.

(e)           Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to Shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

21.          Amendment and Discontinuation of the Plan.  The Board, or the Committee (subject to the prior written authorization of the Board), may from time to time amend the Plan or any Award; provided, however, that (except to the extent provided in Section 9(b)) no such amendment may, without approval by the Shareholders, (a) increase the number of Reserved Shares or change the class of Eligible Persons, (b) permit the granting of Awards which expire beyond the maximum 10-year period described in Section 9(a)(5), or (c) make any change for which applicable law or regulatory authority (including the regulatory authority of the NASDAQ or any other market or exchange on which the Common Stock is traded) would require Shareholder approval or for which Shareholder approval would be required under Section 162(m) of the Code to secure complete deductibility of all compensation paid as a result of Awards; and provided, further, that no amendment or suspension of the Plan or any Award issued hereunder shall, except as specifically permitted in this Plan or under the terms of such Award, substantially impair any Award previously granted to any Holder without the consent of such Holder.

22.          Effective Date and Termination Date.  The Plan shall be effective as of its Effective Date, and shall terminate on the tenth anniversary of such Effective Date; provided, further, without limitation, that unless otherwise expressly provided in an Award, the termination of the Plan shall not terminate an Award which is outstanding on such date.

13

EX-10.2

Exhibit 10.2

Execution Version

Thomas Group, Inc.

5221 N. O’Connor Boulevard, Suite 500

Irving, Texas 75039-3714

PRIVATE & CONFIDENTIAL

March 4, 2008

Mr. Earle Steinberg

313 Gentilly Place

Houston, TX 77024

                Re:  Terms and Conditions of Employment

Dear Mr. Steinberg:

This letter (this “Employment Letter”) will evidence the terms and conditions relating to your employment by Thomas Group, Inc. (the “Company”) and appointment to the office of President and Chief Executive Officer.  This Employment Letter shall be effective beginning on the date (the “Effective Date”) that is the later of (i) the date that you execute and deliver this Employment Letter to the Company and (ii) the date that this Employment Letter and the terms hereof are approved by the Board of Directors and the Compensation and Corporate Governance Committee of the Board of Directors (the “Compensation Committee”).

1.  Terms of Employment

(a)Appointment as President and Chief Executive Officer.  You are being hired by the Company and being appointed to the offices of President and Chief Executive Officer.  Unless otherwise agreed, the first day of your employment in such capacity will be March 10, 2008 (the “Scheduled Start Date”).

(b)Duties; Reporting.  You will have such duties and responsibilities as are established by the Board of Directors of the Company, commensurate with your position as President and Chief Executive Officer. You shall exercise due diligence and reasonable care in the performance of your duties and responsibilities and shall use your best efforts to maintain and enhance the business and reputation of the Company.  As President and Chief Executive Officer, you will report to the Company’s Executive Chairman and the Board of Directors of the Company and, at least annually, your performance will be reviewed by the Board of Directors or the Compensation Committee.

(c)Time Commitment.  You shall devote substantially your entire business time, energy and skills to your duties as President and Chief Executive Officer while employed by the Company, and you will not accept any directorship or engage in any other business activities without the prior approval of the Board of Directors.

(d)Compensation.  Your base salary shall be $512,000 if annualized, beginning on the Scheduled Start Date, payable in such installments as are determined by the Company, no less frequently than monthly, through the term of your employment hereunder.  Your base salary shall be payable in accordance with the Company’s standard payroll policies and subject to standard

withholdings and deductions.  If your actual start date with the Company is prior to the Scheduled Start Date, the Company shall compensate you pro-rata based on the number of days worked prior the Scheduled Start Date divided by 366.

(e)Employment Status; Termination.  Your employment shall be “at-will.”  Your employment may be terminated by the Company by action of the Board of Directors at any time and for any or no reason upon at least six months prior written notice, or immediately upon written notice if such termination is for Cause.  Notwithstanding any notice period required by the preceding sentence, the Company may terminate your employment by written notice effective immediately or at any time during such six-month notice period and pay you your base salary for the remaining portion of such six-month notice period in lieu of your continued employment through the end of such notice period.  Your employment may be terminated by you with at least three months prior written notice to the Board of Directors.  Upon your termination for any reason, if requested by the Company, you agree to resign from all other positions with the Company and its affiliates, including any director or officer positions that you may hold with the Company or any of its subsidiaries.  As used herein, “Cause” shall mean: (1) your conviction or plea of guilty or nolo contendere to a crime that involves dishonesty, disloyalty, moral turpitude, sexual harassment or discrimination, provides for a term of imprisonment or constitutes a felony; (2) the willful and intentional failure or willful and intentional refusal to follow reasonable and lawful instructions of the Company’s Board of Directors; (3) a material act or omission involving intentional misconduct, malfeasance or gross negligence in performance of duties to the Company or involving neglect of duties in a manner that is materially damaging to the Company or an affiliate of the Company; (4) a material breach or default in the performance of obligations under your employment agreement with the Company; (5) a serious violation of any of the Company’s policies to which officers of the Company are subject; or (6) an act of misappropriation, embezzlement, fraud or similar conduct, whether or not involving the Company.

2.  Share Awards; Bonus and other Benefits

(a)Sign-On Share Award.  Promptly following your first day of employment under this Employment Letter, the Compensation Committee shall cause the Company to issue you an award entitling you to receive 50,000 restricted shares of the Company’s common stock, par value $0.01 per share (the “Sign-on Shares”), upon the terms and subject to the conditions set forth in the Sign-On Share Award agreement governing such award as approved by the Compensation Committee (the “Sign-On Share Award”).  Except as otherwise provided in the Sign-On Share Award, the Sign-On Shares will be issued under the 2005 Omnibus Stock and Incentive Plan of the Company or such other plan as is determined by the Compensation Committee and will vest and become deliverable to you upon the one-year anniversary of your Scheduled Start Date.  As a condition to the issuance of such Sign-On Shares, you agree to make such representations, warranties and undertakings and execute such agreements, instruments and other documents as the Company may deem necessary or advisable to assure compliance with any law or regulation.

(b)Performance Share Award.  Promptly following your first day of employment under this Employment Letter, the Compensation Committee shall cause the Company to issue to you an award entitling you to receive up to 380,000 shares of the Company’s common stock, par value $0.01 per share (the “Performance Shares”), upon the terms and subject to the conditions set forth in the Performance Share Award agreement governing such award as approved by the Compensation Committee (the “Performance Share Award”).  The Performance Shares will be

issued under the 2008 Omnibus Stock and Incentive Plan of the Company or such other plan as is determined by the Compensation Committee.  As a condition to the issuance of such Performance Shares, you agree to make such representations, warranties and undertakings and execute such agreements, instruments and other documents as the Company may deem necessary or advisable to assure compliance with any law or regulation.

(c)Restrictions on Shares.  In addition to any transfer restrictions set forth in the awards referenced above or in any other applicable agreement, you will not be permitted to sell any shares of the Company’s common stock that you receive, except (i) in compliance with Company policies applicable to the Company’s executive officers and (ii) in compliance with applicable securities laws.

(d)Annual Bonus.  For each calendar year that you are employed hereunder, beginning in 2008, you will be eligible to receive an annual performance bonus upon achievement of such performance objectives as are established during the first quarter of the applicable year by the Compensation Committee and communicated to you.  The target amount for your annual performance bonus for calendar year 2008 and for each calendar year thereafter shall be $350,000 (subject to pro rata reduction in 2008 based on the number of days in 2008 after the Scheduled Start Date divided by 366).  The Company agrees that for years after calendar 2008, the Compensation Committee will consider the feasibility of paying bonus payments greater or lesser than the target amount based on proportionate underachievement or overachievement of your performance objectives.  Any bonus payment shall be made in the Company’s sole discretion in accordance with the policies established from time to time by the Compensation Committee and shall be subject to standard withholdings and deductions.

(e)Car Allowance.  The Company shall provide you a monthly car allowance not to exceed $1000, which shall be inclusive of all costs including insurance.

(f)Benefits.  You will be entitled to participate in all employee benefit, fringe and perquisite plans, practices, programs, policies and arrangements generally provided to executives of the Company at a level commensurate with your position.

(g)Business Expenses.  The Company will reimburse you for the travel, entertainment and other business expenses incurred by you in the performance of your duties in accordance with the Company’s policies applicable to senior executives as in effect from time to time.  While you understand that the Company’s headquarters are located in Irving, Texas, and that your services will be provided primarily from such office, you have informed the Company that you intend to maintain your primary residence in Houston, Texas.  The Company acknowledges that you intend to travel by commercial airline between your home in Houston, Texas and Dallas, Texas while employed by the Company and, with respect to such travel, the Company agrees to reimburse you for the actual cost of commercial airline travel, not to exceed a total of $12,000 in any 12-month period.  In addition, the Company agrees to reimburse you for the actual cost of reasonable hotel accommodations in the Dallas, Texas area for a period of two months after your actual start of employment with the Company, not to exceed a total of $4,000.  Reimbursement for such travel and hotel accommodations will be made in accordance with the Company’s regular expense reimbursement processes following presentment of appropriate documentation therefor.

(h)Amounts Payable Upon Termination Generally.  Upon termination of your employment, the Company will pay you: (i) any earned but unpaid annual base salary through the date of termination, (ii) any earned but unpaid annual bonus for any preceding year, as solely determined in good faith by the Compensation Committee, (iii) any unreimbursed business expenses that are reimbursable hereunder and (iv) any other amounts due under the terms of any of the Company’s benefit plans applicable to you.  All such payments shall be subject to standard withholdings and deductions.

(i)Amounts Payable Upon Termination Following a Change in Control.  If within one year after a Change in Control (as such term is defined in the Performance Share Award) either (A) the Company terminates your employment with the Company without Cause, or (B) you terminate your employment with the Company for Good Reason, then you will be entitled to receive 12 months of base salary payable under paragraph 1(d) (which shall be payable in accordance with paragraph 1(d)).  As used herein, “Good Reason” shall mean the occurrence of either of the following circumstances without your consent: (1) a material reduction in your base salary; or (2) a material diminution of your duties, authority or responsibilities as in effect immediately prior to such diminution.

(j)Amounts Payable Upon Termination Due to Death.  If your employment with the Company is terminated due to your death, your estate will be entitled to receive (i) six months of base salary payable under paragraph 1(d) (which shall be payable in accordance with paragraph 1(d)) and (ii) in the sole discretion of the Compensation Committee, such pro rata portion of the annual bonus, if any, that the Compensation Committee determines should be payable based upon your performance during the applicable year.

(k)Amounts Payable Upon Termination Due to Disability.  You or the Company may terminate your employment by reason of Disability by written notice to the other party to that effect.  Unless otherwise specified in the notice, such termination shall be effective immediately. If your employment is terminated due to Disability, you will be entitled to receive (i) six months of base salary payable under paragraph 1(d) (which shall be payable in accordance with paragraph 1(d)) and (ii) in the sole discretion of the Compensation Committee, such pro rata portion of the annual bonus, if any, that the Compensation Committee determines should be payable based upon your performance during the applicable year.  As used herein, “Disability” shall mean your present incapacity resulting from an injury or illness (either mental or physical) which, in the reasonable opinion of the Compensation Committee based on such medical evidence as it deems necessary, will result in death or can be expected to continue for a period of at least twelve (12) months and will prevent you from performing the normal services required of you by the Company; provided, however, that such disability did not result, in whole or in part:  (i) from chronic alcoholism; (ii) from addiction to narcotics; (ii) from a felonious undertaking; or (iv) from an intentional self inflicted wound.

3.  Miscellaneous Terms

(a)Indemnification and Employee Representations.  The Company will indemnify you to the fullest extent permitted by law and the Company’s Certificate of Incorporation as in effect as of the Effective Date with respect to your activities on behalf of the Company.

It is the policy and practice of the Company to reasonably ensure that the Company and all new employees honor the terms of any reasonable post-employment restrictions contained in agreements with prior employers of such new employees.  Furthermore, you will never be asked to share, utilize or disclose in any way the proprietary or confidential information of a prior employer as part of your duties on behalf of the Company.  You agree to promptly notify the Board of Directors if you find yourself in a position of possibly violating your contractual agreement(s) with prior employers.

You will be covered under the Company’s D&O liability insurance on the same basis as other senior level executives of the Company.

(b)Confidential Information.  In order to assist you with your duties, the Company agrees to provide you with specialized knowledge and training regarding the business in which the Company is involved, and to provide you with initial and ongoing confidential information and trade secrets of the Company (“Confidential Information”).  For purposes of this Employment Letter, Confidential Information includes, but is not limited to, information regarding the use and application of Total Cycle Time methodologies and other information and concepts developed by the Company to improve the business processes of corporations and other organizations; software or other technology developed by the Company and any research data or other documentation related to the development of such software/technology; client lists and prospects lists developed by the Company; information regarding the Company’s clients which you acquire as a result of employment with the Company, including client contracts, work performed for clients, client contacts, client requirements and needs, data used by the Company to formulate client bids, client financial information, and other information regarding the client’s business; information related to the Company’s business, including but not limited to marketing strategies and plans, sales procedures, operating policies and procedures, pricing and pricing strategies, business plans, sales, profits, and other business and financial information of the Company; training materials developed by and utilized by the Company; and any other information which you acquire as a result of your employment with the Company and which you have a reasonable basis to believe the Company would not want disclosed to a business competitor or to the general public.

You understand and acknowledge that such Confidential Information gives the Company a competitive advantage over others who do not have this information, and that the Company would be harmed if the Confidential Information were disclosed.  You agree that you will hold all Confidential Information in trust and will not use the information for any purpose other than the benefit of the Company, or disclose to any person or entity any Confidential Information except as necessary during your employment with the Company to perform services on behalf of the Company. You will also take reasonable steps to safeguard such Confidential Information and prevent its disclosure to unauthorized persons.

(c)Non-Competition.

(i)As used herein, the term “Non-Competition Period” shall mean the period beginning on the Effective Date and continuing until the date that is 12 months after the date of your termination of employment with the Company, regardless of the reason for such termination.

(ii)You and the Company agree that this paragraph 3(c) is ancillary to the Company’s promise to provide you with Confidential Information and your return promise not to use or disclose the Confidential Information.  In consideration and for the protection of the Confidential Information that the Company shall provide to you, during the Non-Competition Period, you shall not (other than for the benefit of the Company or its affiliates pursuant to this Employment Letter) directly or indirectly render services to, assist, participate in the affairs of, or otherwise be connected with any person or enterprise (other than the Company), which person or enterprise is engaged in, or is planning to engage in, and shall not personally engage in any business that is in any respect competitive with the business of the Company, with respect to any services of the Company that were within your management responsibility at any time within the twelve-month period immediately prior to the termination of your employment with the Company, in any capacity which would (i) utilize your services with respect to such business within the United States of America or any country in which the Company was conducting business at any time within such twelve-month period; or (ii) utilize your services in providing any services similar to the services of the Company to any person or entity to which the Company provided or actively attempted to provide such services within the twelve-month period immediately prior to the termination of your employment with the Company (a “Competing Business”).  Notwithstanding the foregoing, the Company agrees that you may own less than 5% of the outstanding voting securities of any publicly traded company that is a Competing Business so long as you do not otherwise participate in such Competing Business in any way prohibited by this paragraph (ii).

(iii)During the Non-Competition Period, you will not, and will not permit any of your affiliates to, directly or indirectly, solicit or induce any customer or client, prospective customer or client, or supplier of the Company to reduce or terminate its business relationship with the Company, otherwise change its relationship with the Company or establish any relationship with you, any of your affiliates, or with a Competing Business that would in any way reduce or diminish the business of the Company.

(iv)During the Non-Competition Period, you will not, and will not permit any of your affiliates to, directly or indirectly, hire, recruit, or otherwise solicit or induce any employee of or contractor to the Company to terminate his or her employment or contractor relationship with the Company, otherwise change his or her relationship with the Company or establish any relationship with you, any of your affiliates, or with a Competing Business for any business purpose deemed competitive with the business of the Company.

(v)You acknowledge that the geographic boundaries, scope of prohibited activities, and time duration described in the foregoing paragraphs of this section are reasonable in nature and are no broader than are necessary to maintain the goodwill of the Company and its affiliates and the confidentiality of their Confidential Information, and to protect the other legitimate business interests of the Company and its affiliates.

(vi)If any court determines that any portion of this paragraph 3(c) is invalid or unenforceable, the remainder of this paragraph 3(c) shall not thereby be affected and shall be given full effect without regard to the invalid provisions.  If any court construes any of the provisions of this paragraph 3(c), or any part thereof, to be unreasonable because of the

duration or scope of such provision, such court shall have the power to reduce the duration or scope of such provision and to enforce such provision as so reduced.

(vii)You agree that the Company may notify any person or entity employing you or evidencing an intention of employing you of the existence and provisions of this Agreement.

(d)Remedies for Breach of Covenants of Non-Disclosure and Noncompetition.  In the event of a breach or threatened breach of any of the covenants in paragraphs 3(b) and (c), the Company shall have the right to seek monetary damages for any past breach and equitable relief, including specific performance by means of an injunction against you or against your partners, agents, representatives, servants, employers, employees, family members and/or any and all persons acting directly, indirectly, or otherwise in concert with you, to prevent or restrain any such breach.

(e)Intellectual Property.  You acknowledge and agree that all discoveries, inventions, designs, improvements, ideas, writings, copyrights, publications, study protocols, study results, computer data or programs, or other intellectual property, whether or not subject to patent or copyright laws, which you conceive solely or jointly with others, in the course or scope of your employment with the Company or in any way related to the Company’s business, whether during or after working hours, or with the use of the Company’s equipment, materials or facilities (collectively referred to herein as “Intellectual Property”), shall be the sole and exclusive property of the Company without further compensation to you.  For the avoidance of doubt, Intellectual Property shall not include any general industry knowledge acquired or possessed by you prior to the date hereof.  You shall take such steps as are necessary or appropriate to maintain complete and current records of the Intellectual Property conceived by you, and you shall assign to the Company or its designees the entire right, title and interest in said Intellectual Property and shall assist the Company, at the Company’s expense, in obtaining, defending and enforcing the Company’s rights therein. You hereby appoint the Company as your attorney-in-fact to execute on your behalf any assignments or other documents deemed necessary by the Company to protect or perfect its rights to any Intellectual Property.

(f)Non-disparagement.  You agree not to, directly or indirectly, disparage the Company or any of its affiliates or any of their respective stockholders, affiliates, directors, officers, employees, agents or representatives, or any of their financial records or operations, or any of their products or practices, either orally or in writing.

(g)Amendments; Choice of Law.  This Employment Letter can be amended only in writing signed by both you and the Company.  The terms and conditions of this Employment Letter shall be governed by and construed in accordance with the internal laws of the State of Texas.

(h)Notices.  For the purpose of this Employment Letter, notices and all other communications provided for in this Employment Letter shall be in writing and shall be deemed to have been duly given when delivered personally or by overnight service or delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the Company at its executive office or to you at the address on the records of the Company (provided that all notices to the Company shall be directed to the attention of the Chairman of the Compensation

Committee) or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

(i)Survival; Waiver and Counterparts.  If any provision of this Employment Letter or any portion thereof is declared invalid, illegal, or incapable of being enforced by any court of competent jurisdiction, the remainder of such provisions and all of the remaining provisions of this Employment Letter shall continue in full force and effect.  Failure to insist upon strict compliance with any of the terms, covenants, or conditions of this Employment Letter shall not be deemed a waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of, or failure to insist upon strict compliance with, any right or power hereunder at anyone or more times be deemed a waiver or relinquishment of such right or power at any other time or times.  This Employment Letter may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

(j)Successors and Assigns.  The Company may assign its rights and obligations under this Employment Letter without your consent to any successor to all or substantially all the assets of the Company, by merger, stock or asset sale or otherwise, and may assign or encumber this Employment Letter and its rights hereunder as security for indebtedness of the Company and its affiliates.  All representations, warranties, covenants, terms, conditions and provisions of this Employment Letter shall be binding upon and inure to the benefit of, and be enforceable by the respective heirs, legal representatives, successors and permitted assigns of the Company and you.  Neither this Employment Letter nor any rights, interests or obligations hereunder may be assigned by you without the prior written consent of the Company.

(k)Section 409A.  It is intended that this Employment Letter will comply with Section 409A of the Internal Revenue Code and this Employment Letter shall be interpreted in a manner consistent with such intent.  If any provision of this Employment Letter (or of any award of compensation, including deferred compensation or benefits) would cause you to incur any additional tax or interest under Section 409A or any regulations or Treasury guidance promulgated thereunder, the Company shall reform such provision; provided that the Company agrees to maintain, to the maximum extent practicable and without additional cost to the Company, the original intent and economic benefit to you of the applicable provision without violating the provisions of Section 409A; provided, further, in no event shall you be required to defer the date on which you are entitled to receive any payment or benefit hereunder for a period in excess of six months.

(l)Entire Agreement.  The items in this Employment Letter and the other items referred to above represent the Company’s and your entire agreement with respect to the terms and conditions of your employment following the Effective Date.  Any contrary representations that may have been made to you at any time are superseded by this Employment Letter.  By signing below, you agree to the terms and conditions of employment specified in this Employment Letter and the accompanying documents.

***Remainder of this Page Intentionally Left Blank***

If you agree that the foregoing terms and conditions accurately evidence our agreement concerning your employment after the Effective Date, please sign and return this Employment Letter.

Very truly yours,

/s/ Michael E. McGrath
Michael E. McGrath
Executive Chairman
Thomas Group, Inc.
	ACCEPTED:
	/s/ Earle Steinberg
	Earle Steinberg

EX-10.3

Exhibit 10.3

Execution Version

RESTRICTED SHARE AWARD
UNDER THE
2005 OMNIBUS STOCK AND INCENTIVE PLAN
for
THOMAS GROUP, INC.

Effective as of March 1, 2008 (“Date of Grant”), a RESTRICTED SHARE AWARD (“Award”) is granted by Thomas Group, Inc. (the “Company”) to Michael E. McGrath (the “Holder”), provided that this Award is in all respects subject to the terms and provisions of the 2005 Omnibus Stock and Incentive Plan For Thomas Group, Inc. (the “2005 Plan”), all of which are incorporated herein by reference, except to the extent otherwise expressly provided in this Award.  Capitalized terms used herein without definition shall have the respective meanings specified in the 2005 Plan.

WITNESSETH

WHEREAS, the Company desires to grant to the Holder an award of 100,000 Shares;

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

WHEREAS, the terms of the Award are set forth below;

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

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

“Sign-On Shares” shall mean the Shares to be delivered pursuant to this Award.

2.             Sign-On Share Award.  The Company hereby issues to the Holder 100,000 Shares upon the terms and subject to the conditions set forth in this Award.

3.             No Restrictions.  Pursuant to power granted to the Committee in the 2005 Plan, the Committee has determined that the restrictions which otherwise would have been imposed on the Sign-On Shares shall be deemed to have been fully satisfied on the Date of Grant by reason of the Committee’s determination that immediate satisfaction of any restrictions which otherwise would have been imposed on the Sign-On Shares is a necessary action to induce the Holder to enter into employment with the Company.  As a result, the Sign-On Shares are fully Vested on the Date of Grant.

4.             Withholding.  The Holder shall be required to pay to the Company, in cash, the amount which the Company reasonably determines to be necessary in order for the Company to comply with applicable federal or state income tax withholding requirements and the collection of employment taxes, provided that the Holder may elect to offset the amount the Company reasonably determines as necessary to comply with applicable tax requirements from the Sign-On Shares otherwise deliverable to the Holder (valued at their fair market value on the applicable date) and a net number of Sign-On Shares shall thereafter be delivered to the Holder.

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

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

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

6.             Interpretation of the Award Provisions.  The Committee shall have the authority to the full extent provided under the terms of the 2005 Plan to interpret all terms of the 2005 Plan and this Award, and to otherwise supervise the implementation of such terms.

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

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

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

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

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

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

	THOMAS GROUP, INC.
By:	/s/ Edward P. Evans
	Edward P. Evans, Director

ACKNOWLEDGMENT

The Holder agrees to be bound by all the terms of this Award and the 2005 Plan.

/s/ Michael E. McGrath

Michael E. McGrath

EX-10.4

Exhibit 10.4

Execution Version

PERFORMANCE SHARE AWARD
UNDER THE
2008 OMNIBUS STOCK AND INCENTIVE PLAN
for
THOMAS GROUP, INC.

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

WITNESSETH

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2008        107,333

2009        121,333

2010        121,334

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THOMAS GROUP, INC.
By:	/s/ Edward P. Evans
	Edward P. Evans, Director

ACKNOWLEDGMENT

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

/s/ Michael E. McGrath

Michael E. McGrath

EX-99.1

Exhibit 99.1

                                                                                                                                         

News Release

FOR IMMEDIATE RELEASE

Thomas Group Announces Earle Steinberg
as new President & CEO

IRVING, TEXAS — March 5, 2008—Thomas Group, Inc. (NasdaqGM:TGIS), a global consulting firm, announced today that it has appointed Earle Steinberg, as President & CEO, effective today March 10, 2008. Steinberg brings over 30 years of experience in management consulting with a long history of leadership and successful practice building. He has been a Partner in the consulting firms of Touche Ross, Coopers and Lybrand, Booz Allen and AT Kearney. While at AT Kearney, he was the leader of the Americas Operations Practice where, during an eight year period, he won three (3) “Great Client Work” awards, two (2) Intellectual Capital Development awards, two (2) Business Development awards, and in 2005, was awarded the firm’s Distinguished Service Award.

A seasoned executive with a proven ability to drive growth and bring strategic focus and operational excellence to companies, Steinberg has lead operations at both Coopers and Lybrand and AT Kearney. Steinberg’s practices were among the most profitable in each firm and he has consistently been in the top tier of business developers and led successful efforts in both Booz Allen and AT Kearney to develop and commercialize new product offerings in Asset Productivity, Lean Asset Structures, and Network Modeling for Manufacturing and Supply chain.

Steinberg began his consulting career by founding and growing his own consulting business in 1977. He sold the business to Touche Ross and became a partner in Touche Ross & Company becoming part of the Manufacturing/Supply Chain leadership team for the US. While at AT Kearney, Steinberg founded and developed a new business Practice in Procurement and Supply Chain Outsourcing growing it to $45 million in revenues. As president of MRO Services, he managed a customer spend of $1Bn providing leadership and vision through the transfer to EDS and recent ultimate sale to a private owner.

“We are extremely pleased to welcome Earle as our new president and CEO. He has an outstanding track record of entrepreneurial leadership and managing diverse, fast-growing businesses,” said Michael E. McGrath, newly appointed Executive Chairman of the Board. “Earle is an accomplished leader with  significant business and consulting experience. He knows and understands our services and markets and is an excellent fit with the values that have been the cornerstone of Thomas Group for 30 years. We are excited to have someone with his experience and skills lead the company as we celebrate our 30^th year of delivering innovation and value to clients.”

- More -

“I am very pleased to be joining Thomas Group at this important time in the company’s history,” said Earle Steinberg, president and CEO. “Our opportunities are tremendous as we will continue to add value and helping clients expand their businesses.”  The new CEO has attributed his success to “relentless optimism” and feels he has “saved the best for last.”

Steinberg has a BA in Psychology from Boston University and pursued his graduate education at Georgia State University where he obtained an MBA in Operations Management, an MDS in Statistical Theory, and a PhD in Quantitative Methods & Operations Management. He is active in the Houston community and has served as a member of the Executive Committee & Board of Directors of the Houston Symphony. Steinberg also served in the U.S. Army as a Captain, Army Ranger and Paratrooper, receiving numerous decorations including Distinguished Flying Cross and Bronze Star.

About Thomas Group

Thomas Group, Inc. (NasdaqGM:TGIS) is an international, publicly-traded professional services firm specializing in operational improvements. Thomas Group’s unique brand of process improvement and performance management services enable businesses to enhance operations, improve productivity and quality, reduce costs, generate cash, and drive higher profitability. Known for Breakthrough Process Performance, Thomas Group creates and implements customized improvement strategies for sustained performance improvements in all facets of the business enterprise. Thomas Group has offices in Dallas, Detroit, and Hong Kong. For more information, please visit www.thomasgroup.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act

Any statements in this release that are not strictly historical statements, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements, including general economic and business conditions that may impact clients and the Company’s revenues, timing and awarding of customer contracts, revenue recognition, competition and cost factors, as well as other factors detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including the Company’s Form 10-K for the year ended December 31, 2006. These forward-looking statements may be identified by words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “could,” “should,” “may,” “would,” “continue,” “forecast,” and other similar expressions. These forward-looking statements speak only as of the date of this release. Except as required by law, the Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based.

#   #   #

Media Contact

PJ Hoke

Thomas Group, Inc.

pjhoke@thomasgroup.com

972.443.1113

http://www.thomasgroup.com

EX-99.2

		Exhibit 99.2
International Headquarters
5221 North O’Connor Blvd.
Suite 500
Irving, Texas 75039
Phone:	972.869.3400	News Release
Fax:	972.443.1701

FOR IMMEDIATE RELEASE

Thomas Group Announces Intention to Repurchase Stock under an Existing Stock Repurchase Program

Irving, Texas, March 6, 2008 Thomas Group, Inc. (NasdaqGM:TGIS), a leading operations and process improvement firm, announced today that its Board of Directors has reaffirmed the company’s previously existing stock purchase program and authorized the repurchase of shares of its common stock under that program.  A total of 505,450 shares, representing approximately five percent of the company’s shares outstanding, remain subject to repurchase under the program.  This repurchase program was initially announced in January 1999, but no shares have been repurchased under the program since October 2001.  Thomas Group anticipates that purchases under the program will occur from time to time in the open market, subject to market conditions and in accordance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934.  The repurchase program may be suspended or discontinued at any time.

Contact:	Michael Barhydt, Chief Financial Officer
	972-869-3400
	mbarhydt@thomasgroup.com

***

Thomas Group, Inc. (NasdaqGM: TGIS) is an international, publicly-traded professional services firm specializing in operational improvements. Thomas Group’s unique brand of process improvement and performance management services enable businesses to enhance operations, improve productivity and quality, reduce costs, generate cash and drive higher profitability. Known for Breakthrough Process Performance, Thomas Group creates and implements customized improvement strategies for sustained performance improvements in all facets of the business enterprise. Thomas Group has offices in Dallas, Detroit, and Hong Kong. For more information, please visit www.thomasgroup.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act:

Any statements in this release that are not strictly historical statements, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995.  These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements, including general economic and business conditions that may impact clients and the Company’s revenues, timing and awarding of customer contracts, revenue recognition, competition and cost factors as well as other factors detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including the Company’s Form 10-K for the year ended December 31, 2006.  These forward-looking statements may be identified by words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “could,” “should,” “may,” “would,” “continue,” “forecast,” and other similar expressions.  These forward-looking statements speak only as of the date of this release.  Except as required by law, the Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

###