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                                                                    EXHIBIT 10.4

                       TERMINATION OF INITIAL EMPLOYMENT
                       ----------------------------------
                          AGREEMENT AND ESTABLISHMENT
                          ---------------------------
                        OF REVISED EMPLOYMENT AGREEMENT
                        -------------------------------


     WHEREAS, LHS Group Inc. ("Employer") and Dr. Wolf Gaede ("Employee")
entered into an Employment Agreement dated September 26, 1996 ("Initial
Employment Agreement"); and

     WHEREAS, Employer and Employee wish to terminate the Initial Employment
Agreement and enter into this Revised Employment Agreement; and

     IN CONSIDERATION OF the mutual payments, covenants and agreements described
below, and in consideration of other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Employer and Employee
agree as follows:

     1.   Termination of Employee's Initial Employment Agreement: Employer and
          ------------------------------------------------------              
Employee agree to terminate Employee's Initial Employment Agreement and enter
into this Revised Employment Agreement pursuant to Paragraph 8 of the Initial
Employment Agreement, effective January 1, 1999.  Employee further agrees to
resign his position as General Counsel effective March 31, 1999.  After March
31, 1999, the General Counsel will report to the undersigned as CLO.  Employee
understands that, as a consequence of the termination of his Initial Employment
Agreement, he has forfeited any and all rights to receive any future
compensation, consideration and benefits thereunder, except as specifically
provided for in this Revised Employment Agreement.  Employer agrees that
Employee has no further obligations to Employer pursuant to the Initial
Employment Agreement, except as specifically provided in this Revised Employment
Agreement.

     Revised Employment Agreement: Employer agrees to continue to employ
     ----------------------------                                       
Employee as Chief Legal Officer ("CLO") and Executive Vice President from
January 1, 1999 through December 31, 1999 ("Employment Period").  During the
Employment Period, Employee will only perform such duties as are specifically
assigned to Employee by the Chief Executive Officer from time to time.  Employee
accepts employment with Employer during the Employment Period under the terms
and conditions set forth in this Revised Employment Agreement. Employee agrees
to resign his employment with Employer, effective at the conclusion of the
Employment Period.

     Employee will be given access to an office at Employer's Atlanta, Georgia
headquarters through June 30, 1999.  After June 30, 1999, Employee shall no
longer have access to an assigned office at Employer's Atlanta, Georgia
headquarters or other locations. After June 30, 1999, Employee shall perform any
assigned duties at such location or locations as are determined by the Chief
Executive Officer.
 
     Nothing in this Revised Employment Agreement is intended to affect
Employee's status as a Director of Employer. Employee shall continue to hold
office as a Director of Employer until a successor is elected and qualified, or
until his death, resignation, or

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removal in accordance with the Certificate of Incorporation and By-Laws of LHS
Group Inc.
 
     3.   Compensation and Benefits:
          ----------------------------

          (a) Salary: From January 1999 through December 1999, Employee shall
              ------
be paid $29,166.67 per month, payable at the end of each month, subject to
applicable deductions and withholdings as directed by Employee or required by
law.

          (b) Stock Options: During the Employment Period, Employee shall be
              -------------                                                 
entitled to continue to vest in remaining unvested stock options in accordance
with the March 1, 1998, Vesting Schedule Amendment between Employer and
Employee, and shall be entitled to exercise such stock options in accordance
with his Employee Non-Qualified Stock Option Agreement and the LHS Group Inc.
Stock Incentive Plan 1996.

          (c) Employee Benefits: During the Employment Period, Employee shall be
              -----------------                                                 
entitled to continue to participate in Employer's employee welfare and benefit
plans to the same extent and under the same conditions as other employees of
Employer.

          (d) Vacation Pay:  Employee shall not be entitled to any vacation pay
              ------------                                                     
during the Employment Period.
 
     4.   Confidentiality: Except as required by law, the parties agree to
          ---------------                                                 
maintain as confidential, and to not disclose, discuss, or communicate or
publish in any manner, the terms or conditions of this Revised Employment
Agreement.

     5.   Employer's Confidential Information: Employee hereby acknowledges that
          ------------------------------------                                  
his employment will require access to the trade secrets and other proprietary
and confidential information of Employer ("Confidential Information"), and that
such Confidential Information constitutes a valuable, special and unique asset
of Employer.  Employee agrees that during the term of this Revised Employment
Agreement, and for a period of two (2) years thereafter, he shall not use,
divulge, publish or otherwise reveal, directly or indirectly, the Confidential
Information of Employer, without Employer's prior written approval.

     6.   Miscellaneous Provisions:
          ------------------------ 

          (a) Waiver:  The waiver by any party to this Revised Employment
              ------                                                     
Agreement of a breach of any of the provisions contained herein shall not
operate or be construed as a waiver of any subsequent breach.

          (b) Severability:  The invalidity or unenforceability of any 
              ------------         
particular provision of this Revised Employment Agreement shall not affect the
other provisions of this Revised Employment Agreement, and this Revised
Employment Agreement shall be
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construed in all respects as if such invalid or unenforceable provision was
omitted ab initio.
 
          (c) Governing Law: This Revised Employment Agreement shall be governed
              -------------                                                     
by the substantive laws of Germany.

          (d) Notice:  Any notice provided for in this Revised Employment
              ------                                                     
Agreement shall be delivered to Employee at the most recent address of Employee
listed in Employer's then current employment records.  Notice to Employer shall
be delivered to the following address:  Attn: Chief Executive Officer, 6
Concourse Parkway, Suite 2700, Atlanta, Georgia 30328.

          (e)  Entire Agreement and Amendment:  This Revised Employment
               ------------------------------                          
Agreement constitutes the entire understanding between the parties with respect
to the employment of Employee by Employer and shall supersede any prior
agreements and understandings between the parties with respect to such subject
matter.  This Agreement may not be modified or amended except in writing signed
by all of the parties hereto.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the 6th
day of January 1999.

   LHS GROUP INC.                      EMPLOYEE



By: /s/ Hartmut Lademacher             By:  /s/ Dr. Wolf J. Gaede
   -----------------------------            ---------------------
   Hartmut Lademacher                       Dr. Wolf J. Gaede
   Chairman of the Board and CEO

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