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                                                                    EXHIBIT 10.4



                               THOMAS GROUP, INC.

                             1997 STOCK OPTION PLAN


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                                TABLE OF CONTENTS

     ARTICLE 1        PURPOSE
     ARTICLE 2        DEFINITIONS
     ARTICLE 3        ADMINISTRATION
     ARTICLE 4        ELIGIBILITY
     ARTICLE 5        SHARES SUBJECT TO PLAN
     ARTICLE 6        GRANT OF AWARDS
         6.1          In General
         6.2          Maximum ISO Grants
     ARTICLE 7        OPTION PRICE
     ARTICLE 8        AWARD PERIOD; VESTING
         8.1          Award Period
         8.2          Vesting
     ARTICLE 9        TERMINATION OF SERVICE
         9.1          Death
         9.2          Retirement
         9.3          Disability
         9.4          Leave of Absence
    ARTICLE 10        EXERCISE OF INCENTIVE
        10.1          In General
        10.2          Disqualifying Disposition of ISO
    ARTICLE 11        AMENDMENT OR DISCONTINUANCE
    ARTICLE 12        TERM
    ARTICLE 13        CAPITAL ADJUSTMENTS
    ARTICLE 14        RECAPITALIZATION, MERGER AND CONSOLIDATION; CHANGE IN
                      CONTROL
    ARTICLE 15        LIQUIDATION OR DISSOLUTION
    ARTICLE 16        INCENTIVES IN SUBSTITUTION FOR INCENTIVES GRANTED BY OTHER
                      CORPORATIONS
    ARTICLE 17        MISCELLANEOUS PROVISIONS
        17.1          Investment Intent
        17.2          No Right to Continued Employment
        17.3          Indemnification of Board and Committee
        17.4          Effect of the Plan
        17.5          Compliance With Other Laws and Regulations
        17.6          Tax Requirements
        17.7          Assignability
        17.8          Use of Proceeds


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                               THOMAS GROUP, INC.

                             1997 STOCK OPTION PLAN

    The name of the plan is the THOMAS GROUP, INC. 1997 STOCK OPTION PLAN (the
"PLAN"). The Plan was adopted by the Board of Directors of THOMAS GROUP, INC., a
Delaware corporation (hereinafter called the "COMPANY"), effective as of April
3, 1997.

                                    ARTICLE 1
                                     PURPOSE

    The purpose of the Plan is to attract and retain the services of key
employees of the Company and its Subsidiaries and to provide such persons with a
proprietary interest in the Company through the granting of incentive stock
options and non-qualified stock options that will

        (a) increase the interest of such persons in the Company's welfare;

        (b) furnish an incentive to such persons to continue their services for
the Company; and

        (c) provide a means through which the Company may attract able persons
as employees.

    With respect to Reporting Participants, the Plan and all transactions under
the Plan are intended to comply with all applicable conditions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934 (the "1934 Act"). To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void ab initio, to the extent permitted by law and
deemed advisable by the Committee.

                                    ARTICLE 2
                                   DEFINITIONS

    For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:

    2.1 "AWARD" means the grant of any Incentive Stock Option or Non-qualified
Stock Option, whether granted singly, in combination or in tandem (each
individually referred to herein as an "Incentive").

    2.2 "AWARD AGREEMENT" means a written agreement between a Participant and
the Company which sets out the terms of an Award.

    2.3 "AWARD PERIOD" means the period during which one or more Incentives
granted under an Award may be exercised.

    2.4 "BOARD" means the board of directors of the Company.




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    2.5 "CHANGE OF CONTROL" means any of the following: (i) any consolidation,
merger or share exchange of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company's
Common Stock would be converted into cash, securities or other property, other
than a consolidation, merger or share exchange of the Company in which the
holders of the Company's Common Stock immediately prior to such transaction have
the same proportionate ownership of Common Stock of the surviving corporation
immediately after such transaction; (ii) any sale, lease, exchange or other
transfer (excluding transfer by way of pledge or hypothecation) in one
transaction or a series of related transactions, of all or substantially all of
the assets of the Company; (iii) the stockholders of the Company approve any
plan or proposal for the liquidation or dissolution of the Company; (iv) the
cessation of control (by virtue of their not constituting a majority of
directors) of the Board by the individuals (the "CONTINUING DIRECTORS") who (x)
at the date of this Plan were directors or (y) become directors after the date
of this Plan and whose election or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the directors
then in office who were directors at the date of this Plan or whose election or
nomination for election was previously so approved; (v) the acquisition of
beneficial ownership (within the meaning of Rule 13d-3 under the 1934 Act) of an
aggregate of twenty percent (20%) of the voting power of the Company's
outstanding voting securities by any person or group (as such term is used in
Rule 13d-5 under the 1934 Act) who beneficially owned less than 15% of the
voting power of the Company's outstanding voting securities on the date of this
Plan, or the acquisition of beneficial ownership of an additional 5% of the
voting power of the Company's outstanding voting securities by any person or
group who beneficially owned at least 15% of the voting power of the Company's
outstanding voting securities on the date of this Plan, provided, however, that
notwithstanding the foregoing, an acquisition shall not constitute a Change of
Control hereunder if the acquirer is (x) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company and acting in such
capacity, (y) a Subsidiary of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of voting securities of the Company or (z) any
other person whose acquisition of shares of voting securities is approved in
advance by a majority of the Continuing Directors; or (vi) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7.

    2.6 "CODE" means the Internal Revenue Code of 1986, as amended.

    2.7 "COMMITTEE" means the Compensation and Stock Option Committee or another
committee appointed or designated by the Board to administer the Plan.

    2.8 "COMMON STOCK" means the common stock, par value $.01 per share, which
the Company is currently authorized to issue or may in the future be authorized
to issue.

    2.9 "COMPANY" means THOMAS GROUP, INC., a Delaware corporation, and any
successor entity.

    2.10 "DATE OF GRANT" means the effective date on which an Award is made to a
Participant as set forth in the applicable Award Agreement; provided, however,
that solely for purposes of


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Section 16 of the 1934 Act and the rules and regulations promulgated thereunder,
the Date of Grant of an Award shall be the date of stockholder approval of the
Plan if such date is later than the effective date of such Award as set forth in
the Award Agreement.

    2.11 "EMPLOYEE" means common law employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company or any Subsidiary of the Company.

    2.12 "FAIR MARKET VALUE" of a share of Common Stock is the mean of the
highest and lowest prices per share on the New York Stock Exchange Consolidated
Tape, or such reporting service as the Committee may select, on the appropriate
date, or in the absence of reported sales on such day, the most recent previous
day for which sales were reported.

    2.13 "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.

    2.14 "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
Employee and who satisfies the requirements of Rule 16b-3(b)(3) promulgated
under the 1934 Act or any successor provision.

    2.15 "NON-QUALIFIED STOCK OPTION" or "NQSO" means a non-qualified stock
option granted pursuant to this Plan.

    2.16 "OPTION PRICE" means the price which must be paid by a Participant upon
exercise of a Stock Option to purchase a share of Common Stock.

    2.17 "PARTICIPANT" shall mean an Employee of the Company or a Subsidiary to
whom an Award is granted under this Plan.

    2.18 "PLAN" means this THOMAS GROUP, INC. 1997 Stock Option Plan, as amended
from time to time.

    2.19 "REPORTING PARTICIPANT" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.

    2.20 "RETIREMENT" means any Termination of Service solely due to retirement
upon attainment of age 60, or permitted early retirement as determined by the
Committee.

    2.21 "STOCK OPTION" means a Non-qualified Stock Option or an Incentive Stock
Option.

    2.22 "SUBSIDIARY" means (i) any corporation or limited liability company in
an unbroken chain of corporations or limited liability companies beginning with
the Company, if each of the corporations or limited liability companies other
than the last corporation or limited liability company in the unbroken chain
owns equity securities possessing a majority of the total combined voting power
of all classes of equity securities in one of the other corporations or


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limited liability companies in the chain, and (ii) any limited partnership, if
the Company or any corporation or limited liability company described in item
(i) above owns a majority of the general partnership interest and a majority of
the limited partnership interests entitled to vote on the removal and
replacement of the general partner. "SUBSIDIARIES"means more than one of any
such corporations, limited partnerships or limited liability companies.

    2.23 "TERMINATION OF SERVICE" occurs when a Participant who is an Employee
of the Company or any Subsidiary shall cease to serve as an Employee of the
Company and its Subsidiaries, for any reason.

    2.24 "DISABILITY" shall have the meaning given it in the employment
agreement of the Participant; provided, however, that if that Participant has no
employment agreement, "Disability" shall mean a physical or mental impairment of
sufficient severity that, in the opinion of the Company, either the Participant
is unable to continue performing the duties he performed before such impairment
or the Participant's condition entitles him to disability benefits under any
insurance or employee benefit plan of the Company or its Subsidiaries and that
impairment or condition is cited by the Company as the reason for termination of
the Participant's employment; provided, however, with respect to any Incentive
Stock Option, Disability shall have the meaning given it under the rules
governing Incentive Stock Options under the Code.

                                    ARTICLE 3
                                 ADMINISTRATION

    The Plan shall be administered by the Committee appointed by the Board. The
Committee shall consist of not fewer than two persons. Any member of the
Committee may be removed at any time, with or without cause, by resolution of
the Board. Any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board.

    Membership on the Committee shall be limited to those members of the Board
who are Non-employee Directors and who are "OUTSIDE DIRECTORS" under Section
162(m) of the Code. The Committee shall select one of its members to act as its
Chairman. A majority of the Committee shall constitute a quorum, and the act of
a majority of the members of the Committee present at a meeting at which a
quorum is present shall be the act of the Committee.

    The Committee shall determine and designate from time to time the eligible
persons to whom Awards will be granted and shall set forth in each related Award
Agreement the Award Period, the Date of Grant, and such other terms, provisions,
limitations, and performance requirements, as are approved by the Committee, but
not inconsistent with the Plan. The Committee shall determine whether an Award
shall include one type of Incentive, or two or more Incentives granted in
combination.

    The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in 


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the administration of the Plan. Any interpretation, determination, or other
action made or taken by the Committee shall be final, binding, and conclusive on
all interested parties.

    With respect to restrictions in the Plan that are based on the requirements
of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the Code, Section
162(m) of the Code, the rules of any exchange or inter-dealer quotation system
upon which the Company's securities are listed or quoted, or any other
applicable law, rule or restriction (collectively, "APPLICABLE LAW"), to the
extent that any such restrictions are no longer required by applicable law, the
Committee shall have the sole discretion and authority to grant Awards that are
not subject to such mandated restrictions and/or to waive any such mandated
restrictions with respect to outstanding Awards.

                                    ARTICLE 4
                                   ELIGIBILITY

    Any Employee (including an Employee who is also a director or an officer)
whose judgment, initiative, and efforts contributed or may be expected to
contribute to the successful performance of the Company is eligible to
participate in the Plan; provided that only Employees shall be eligible to
receive Incentive Stock Options. The Committee, upon its own action, may grant,
but shall not be required to grant, an Award to any Employee of the Company or
any Subsidiary. Awards may be granted by the Committee at any time and from time
to time to new Participants, or to then Participants, or to a greater or lesser
number of Participants, and may include or exclude previous Participants, as the
Committee shall determine. Except as required by this Plan, Awards granted at
different times need not contain similar provisions. The Committee's
determinations under the Plan (including without limitation determinations of
which Employees, if any, are to receive Awards, the form, amount and timing of
such Awards, the terms and provisions of such Awards and the agreements
evidencing same) need not be uniform and may be made by it selectively among
Employees who receive, or are eligible to receive, Awards under the Plan.

                                    ARTICLE 5
                             SHARES SUBJECT TO PLAN

    Subject to adjustment as provided in ARTICLES 13 AND 14, the maximum number
of shares of Common Stock that may be delivered pursuant to Awards granted under
the Plan is (a) one hundred twenty-five thousand (125,000) shares; plus (b)
shares of Common Stock previously subject to Awards which are forfeited,
terminated, or expired unexercised; plus (c) without duplication for shares
counted under the immediately preceding clause, a number of shares of Common
Stock equal to the number of shares repurchased by the Company in the open
market or otherwise and having an aggregate repurchase price no greater than the
amount of cash proceeds received by the Company from the sale of shares of
Common Stock under the Plan; plus (d) any shares of Common Stock surrendered to
the Company in payment of the exercise price of options issued under the Plan.

    Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the 


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Company on the open market or otherwise. During the term of this Plan, the
Company will at all times reserve and keep available the number of shares of
Common Stock that shall be sufficient to satisfy the requirements of this Plan.

                                    ARTICLE 6
                                 GRANT OF AWARDS

    6.1 IN GENERAL. The grant of an Award shall be authorized by the Committee
and shall be evidenced by an Award Agreement setting forth the Incentive or
Incentives being granted, the total number of shares of Common Stock subject to
the Incentive(s), the Option Price (if applicable), the Award Period, the Date
of Grant, and such other terms, provisions, limitations, and performance
objectives, as are approved by the Committee, but not inconsistent with the
Plan. The Company shall execute an Award Agreement with a Participant after the
Committee approves the issuance of an Award. Any Award granted pursuant to this
Plan must be granted within ten (10) years of the date of adoption of this Plan.
The Plan shall be submitted to the Company's stockholders for approval; however,
the Committee may grant Awards under the Plan prior to the time of stockholder
approval. Any such Award granted prior to such stockholder approval shall be
made subject to such stockholder approval. The grant of an Award to a
Participant shall not be deemed either to entitle the Participant to, or to
disqualify the Participant from, receipt of any other Award under the Plan.

    6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock Options
under the Plan to any Employee which would permit the aggregate Fair Market
Value (determined on the Date of Grant) of the Common Stock with respect to
which Incentive Stock Options (under this and any other plan of the Company and
its Subsidiaries) are exercisable for the first time by such Employee during any
calendar year to exceed $100,000. To the extent any Stock Option granted under
this Plan which is designated as an Incentive Stock Option exceeds this limit or
otherwise fails to qualify as an Incentive Stock Option, such Stock Option shall
be a Non-qualified Stock Option.

                                    ARTICLE 7
                                  OPTION PRICE

    The Option Price for any share of Common Stock which may be purchased under
a Stock Option shall be at least one hundred percent (100%) of the Fair Market
Value of the share on the Date of Grant. If an Incentive Stock Option is granted
to an Employee who owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than ten percent (10%) of the combined
voting power of all classes of stock of the Company (or any parent or
Subsidiary), the Option Price shall be at least one hundred and ten percent
(110%) of the Fair Market Value of the Common Stock on the Date of Grant.




<PAGE>   9

                                    ARTICLE 8
                              AWARD PERIOD; VESTING

    8.1 AWARD PERIOD. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be exercised
in whole or in part for any period or periods of time or beyond any date
specified in the Award Agreement. Except as provided in the Award Agreement, an
Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of
Service in accordance with this ARTICLE 8 AND ARTICLE 9. No Incentive granted
under the Plan may be exercised at any time after the end of its Award Period.
No portion of any Incentive may be exercised after the expiration of ten (10)
years from its Date of Grant. However, if an Employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company (or any parent or Subsidiary) and an Incentive Stock Option is granted
to such Employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five (5) years
from the Date of Grant.

    8.2 VESTING. Except as otherwise provided in the Award, vesting of all
Awards shall be annually, with monthly incremental vesting. The Committee, in
its sole discretion, may determine that an Incentive will be immediately
exercisable, in whole or in part, or that all or any portion may not be
exercised until a date, or dates, subsequent to its Date of Grant, or until the
occurrence of one or more specified events, subject in any case to the terms of
the Plan. Subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of an Incentive may
be exercised.

                                    ARTICLE 9
                             TERMINATION OF SERVICE

    9.1 DEATH. Upon the death of a Participant, then any and all Awards held by
the Participant that are not yet exercisable as of the date of the Participant's
death shall be fully vested as of the date of death, and shall be exercisable by
that Participant's legal representatives, legatees or distributees for a period
of the lesser of (a) the remainder of the term of the Award or (b) 180 days
following the date of the Participant's death. Any portion of an Award not
exercised upon the expiration of the periods specified in (a) or (b) shall be
null and void.

    9.2 RETIREMENT. If a Participant's employment relationship is terminated by
reason of the Participant's Retirement, then the portion, if any, of any and all
Awards held by the Participant that are not yet exercisable as of the date of
that Retirement shall become null and void as of the date of Retirement;
provided, however, that the portion, if any, of any and all Awards held by the
Participant that are exercisable as of the date of that Retirement shall be
exercisable for the lesser of (a) the remainder of the term of the Award or (b)
90 days following the date of Retirement.

    9.3 DISABILITY. If a Participant's employment relationship is terminated by
reason of the Participant's Disability, then the portion, if any, of any and all
Awards held by the Participant that are not yet exercisable as of the date of
that termination for Disability shall become null and void as of the date of
termination; provided, however, that the portion, if any, of any and all Awards
held by the Participant that are exercisable as of the date of that termination
shall survive the termination for the lesser of (a) the original term of the
Award and (b) 180 days following the



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date of termination, and the Award shall be exercisable by the Participant, his
guardian, or his legal representative.

    9.4 LEAVE OF ABSENCE. With respect to an Award, the Committee may, in its
sole discretion, determine that any Participant who is on leave of absence for
any reason will be considered to still be in the employ of the Company for
vesting and other purposes.

                                   ARTICLE 10
                              EXERCISE OF INCENTIVE

    10.1 IN GENERAL. A vested Incentive may be exercised during its Award
Period, subject to limitations and restrictions set forth therein and in ARTICLE
9. A vested Incentive may be exercised at such times and in such amounts as
provided in this Plan and the applicable Award Agreement, subject to the terms,
conditions, and restrictions of the Plan.

    In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares of
Common Stock on a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required under the
circumstances has not been accomplished. No Incentive may be exercised for a
fractional share of Common Stock. The granting of an Incentive shall impose no
obligation upon the Participant to exercise that Incentive.

    STOCK OPTIONS. Subject to such administrative regulations as the Committee
may from time to time adopt, a Stock Option may be exercised by the delivery of
written or telephonic notice to the Company setting forth the number of shares
of Common Stock with respect to which the Stock Option is to be exercised and
the date of exercise thereof (the "EXERCISE DATE"), which shall be at least
three (3) days after giving such notice unless an earlier time shall have been
mutually agreed upon. On the Exercise Date, the Participant shall deliver to the
Company consideration with a value equal to the total Option Price of the shares
to be purchased, payable as follows: (a) cash, check, bank draft, or money order
payable to the order of the Company, (b) Common Stock owned by the Participant
on the Exercise Date, valued at its Fair Market Value on the Exercise Date,
and/or (c) by delivery (including by FAX) to the Company or its designated agent
of an executed irrevocable option exercise form together with irrevocable
instructions from the Participant to a broker or dealer, reasonably acceptable
to the Company, to sell certain of the shares of Common Stock purchased upon
exercise of the Stock Option or to pledge such shares as collateral for a loan
and promptly deliver to the Company the amount of sale or loan proceeds
necessary to pay such purchase price.

    Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be delivered as
directed by the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date. The obligation of the Company to deliver shares of
Common Stock shall, however, be subject to the condition that if at any time the
Committee shall determine in its discretion that the listing, registration, or
qualification of the Stock Option or the Common Stock upon any securities
exchange or inter-dealer quotation system or under any state


<PAGE>   11

or federal law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the Stock
Option or the issuance or purchase of shares of Common Stock thereunder, the
Stock Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.

    10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock acquired
upon exercise of an Incentive Stock Option are disposed of by a Participant
prior to the expiration of either two (2) years from the Date of Grant of such
Stock Option or one (1) year from the transfer of shares of Common Stock to the
Participant pursuant to the exercise of such Stock Option, or in any other
disqualifying disposition within the meaning of Section 422 of the Code, such
Participant shall notify the Company in writing of the date and terms of such
disposition. A disqualifying disposition by a Participant shall not affect the
status of any other Stock Option granted under the Plan as an Incentive Stock
Option within the meaning of Section 422 of the Code.

                                   ARTICLE 11
                           AMENDMENT OR DISCONTINUANCE

    Subject to the limitations set forth in this ARTICLE 11, the Board may at
any time and from time to time, without the consent of the Participants, alter,
amend, revise, suspend, or discontinue the Plan in whole or in part; provided,
however, that no amendment which requires stockholder approval in order for the
Plan and Incentives awarded under the Plan to continue to comply with Section
162(m) of the Code, including any successors to such Section, shall be effective
unless such amendment shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon. Any such amendment shall,
to the extent deemed necessary or advisable by the committee, be applicable to
any outstanding Incentives theretofore granted under the Plan, notwithstanding
any contrary provisions contained in any stock option agreement. Notwithstanding
anything contained in this Plan to the contrary, unless required by law, no
action contemplated or permitted by this ARTICLE 11 shall adversely affect any
rights of Participants or obligations of the Company to Participants with
respect to any Incentive theretofore granted under the Plan without the consent
of the affected Participant.

                                   ARTICLE 12
                                      TERM

    The Plan shall be effective from the date that this Plan is approved by the
Board. Unless sooner terminated by action of the Board, the Plan will terminate
on March 31, 2007, but Incentives granted before that date will continue to be
effective in accordance with their terms and conditions.

                                   ARTICLE 13
                               CAPITAL ADJUSTMENTS

    If at any time while the Plan is in effect, or Incentives are outstanding,
there shall be any increase or decrease in the number of issued and outstanding
shares of Common Stock resulting


<PAGE>   12

from (1) the declaration or payment of a stock dividend, (2) any
recapitalization resulting in a stock split-up, combination, or exchange of
shares of Common Stock, or (3) other increase or decrease in such shares of
Common Stock effected without receipt of consideration by the Company, then and
in such event:

        (i) An appropriate adjustment shall be made in the maximum number of
    shares of Common Stock then subject to being awarded under the Plan and in
    the maximum number of shares of Common Stock that may be awarded to a
    Participant to the end that the same proportion of the Company's issued and
    outstanding shares of Common Stock shall continue to be subject to being so
    awarded.

        (ii) Appropriate adjustments shall be made in the number of shares of
    Common Stock and the Option Price thereof then subject to purchase pursuant
    to each such Stock Option previously granted and unexercised, to the end
    that the same proportion of the Company's issued and outstanding shares of
    Common Stock in each such instance shall remain subject to purchase at the
    same aggregate Option Price.

    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 or
upon the exercise of rights or warrants to subscribe therefor, 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 the number of or Option Price of shares of Common Stock
then subject to outstanding Stock Options granted under the Plan.

    Upon the occurrence of each event requiring an adjustment with respect to
any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.

                                   ARTICLE 14
                          RECAPITALIZATION, MERGER AND
                        CONSOLIDATION; CHANGE IN CONTROL

        (a) The existence of this Plan and Incentives granted hereunder shall
    not affect in any way the right or power of the Company or its stockholders
    to make or authorize any or all adjustments, recapitalizations,
    reorganizations, or other changes in the Company's capital structure and its
    business, or any merger or consolidation of the Company, or any issue of
    bonds, debentures, preferred or preference stocks ranking prior to or
    otherwise affecting the Common Stock or the rights thereof (or any rights,
    options, or warrants to purchase same), or the dissolution or liquidation of
    the Company, or any sale or transfer of all or any part of its assets or
    business, or any other corporate act or proceeding, whether of a similar
    character or otherwise.

        (b) Subject to any required action by the stockholders, if the Company
    shall be the surviving or resulting corporation in any merger, consolidation
    or share exchange, any 


<PAGE>   13

    Incentive granted hereunder shall pertain to and apply to the securities or
    rights (including cash, property, or assets) to which a holder of the number
    of shares of Common Stock subject to the Incentive would have been entitled.

        (c) In the event of any merger, consolidation or share exchange pursuant
    to which the Company is not the surviving or resulting corporation, there
    shall be substituted for each share of Common Stock subject to the
    unexercised portions of such outstanding Incentives, that number of shares
    of each class of stock or other securities or that amount of cash, property,
    or assets of the surviving, resulting or consolidated company which were
    distributed or distributable to the stockholders of the Company in respect
    to each share of Common Stock held by them, such outstanding Incentives to
    be thereafter exercisable for such stock, securities, cash, or property in
    accordance with their terms. Notwithstanding the foregoing, however, all
    such Incentives may be canceled by the Company as of the effective date of
    any such reorganization, merger, consolidation, share exchange or any
    dissolution or liquidation of the Company by giving notice to each holder
    thereof or his personal representative of its intention to do so and by
    permitting the purchase during the thirty (30) day period next preceding
    such effective date of all of the shares of Common Stock subject to such
    outstanding Incentives.

        (d) In the event of a Change of Control, then, notwithstanding any other
    provision in this Plan to the contrary, all unmatured installments of
    Incentives outstanding shall thereupon automatically be accelerated and
    exercisable in full. The determination of the Committee that any of the
    foregoing conditions has been met shall be binding and conclusive on all
    parties.

                                   ARTICLE 15
                           LIQUIDATION OR DISSOLUTION

    In case the Company shall, at any time while any Incentive under this Plan
shall be in force and remain unexpired, (i) sell all or substantially all of its
property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices then in effect with respect to each
Stock Option shall be reduced, on the payment date of such distribution, in
proportion to the percentage reduction in the tangible book value of the shares
of the Company's Common Stock (determined in accordance with generally accepted
accounting principles) resulting by reason of such distribution.




<PAGE>   14

                                   ARTICLE 16
                         INCENTIVES IN SUBSTITUTION FOR
                    INCENTIVES GRANTED BY OTHER CORPORATIONS

    Incentives may be granted under the Plan from time to time in substitution
for similar instruments held by employees of a corporation who become or are
about to become management Employees of the Company or any Subsidiary as a
result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of stock of the employing corporation.
The terms and conditions of the substitute Incentives so granted may vary from
the terms and conditions set forth in this Plan to such extent as the Board at
the time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the Incentives in substitution for which they are granted.

                                   ARTICLE 17
                            MISCELLANEOUS PROVISIONS

    17.1 INVESTMENT INTENT. The Company may require that there be presented to
and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.

    17.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any Incentive
granted under the Plan shall confer upon any Participant any right with respect
to continuance of employment by the Company or any Subsidiary.

    17.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or the
Committee, nor any officer or Employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.

    17.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any action of
the Board or the Committee shall be deemed to give any person any right to be
granted an Award or any other rights except as may be evidenced by an Award
Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.

    17.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding anything
contained herein to the contrary, the Company shall not be required to sell or
issue shares of Common Stock under any Incentive if the issuance thereof would
constitute a violation by the Participant or the Company of any provisions of
any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of
Common Stock are quoted or traded (including without limitation Section 16 of
the 1934 Act and Section 162(m) of the Code); and, as a condition of any sale or
issuance of shares of Common Stock under an Incentive, the Committee may require
such agreements or undertakings, if any, as the Committee may deem necessary or
advisable to assure compliance with any such 


<PAGE>   15

law or regulation. The Plan, the grant and exercise of Incentives hereunder, and
the obligation of the Company to sell and deliver shares of Common Stock, shall
be subject to all applicable federal and state laws, rules and regulations and
to such approvals by any government or regulatory agency as may be required.

    17.6 TAX REQUIREMENTS. The Company shall have the right to deduct from all
amounts hereunder paid in cash or other form, any Federal, state, or local taxes
required by law to be withheld with respect to such payments. The Participant
receiving shares of Common Stock issued under the Plan shall be required to pay
the Company the amount of any taxes which the Company is required to withhold
with respect to such shares of Common Stock. Notwithstanding the foregoing, in
the event of an assignment of a Non-qualified Stock Option pursuant to Section
17.7, the Participant who assigns the Non-qualified Stock Option shall remain
subject to withholding taxes upon exercise of the Non-qualified Stock Option by
the transferee to the extent required by the Code or the rules and regulations
promulgated thereunder. Such payments shall be required to be made prior to the
delivery of any certificate representing such shares of Common Stock. Such
payment may be made in cash, by check, or through the delivery of shares of
Common Stock owned by the Participant (which may be effected by the actual
delivery of shares of Common Stock by the Participant or by the Company's
withholding a number of shares to be issued upon the exercise of a Stock Option,
if applicable), which shares have an aggregate Fair Market Value equal to the
required minimum withholding payment, or any combination thereof.

    17.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the Participant or the
Participant's legally authorized representative. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock Option.
The Committee may waive or modify any limitation contained in the preceding
sentences of this Section 17.7 that is not required for compliance with Section
422 of the Code. Unless the Committee provides otherwise, all or a portion of a
Non-qualified Stock Option to be granted to a Participant may be transferred by
such Participant to (i) the spouse, children or grandchildren of the Participant
("IMMEDIATE FAMILY MEMBERS"), (ii) a trust or trusts for the exclusive benefit
of such Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, (iv) an entity exempt from federal income
tax pursuant to Section 501(c)(3) of the Code or any successor provision, or (v)
a split interest trust or pooled income fund described in Section 2522(c)(2) of
the Code or any successor provision, provided that (x) there shall be no
consideration for any such transfer, and (y) subsequent transfers of transferred
Non-qualified Stock Options shall be prohibited except those by will or the laws
of descent and distribution or pursuant to a qualified domestic relations order
as defined in the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended. Following transfer, any such Non-qualified Stock Option
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of ARTICLES 10, 11,
13, 15 AND 17 hereof the term "PARTICIPANT" shall be deemed to include the
transferee. The events of Termination of Service shall continue to be applied
with respect to the original Participant, following which the Non-qualified
Stock Options shall be exercisable by the transferee only to the extent and for
the periods specified in the Award Agreement. The Committee and the 


<PAGE>   16

Company shall have no obligation to inform any transferee of a Non-qualified
Stock Option of any expiration, termination, lapse or acceleration of such
Option. The Company shall have no obligation to register with any federal or
state securities commission or agency any Common Stock issuable or issued under
a Non-qualified Stock Option that has been transferred by a Participant under
this Section 17.7.

    17.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.



<PAGE>   17



    A copy of this Plan shall be kept on file in the principal office of the
Company in Dallas, Texas.

                          * * * * * * * * * * * * * * *

    IN WITNESS WHEREOF, the Company has caused this instrument to be executed as
of April 3, 1997 by its duly authorized representative.

                                                THOMAS GROUP, INC.

                                                By:
                                                   --------------------------