SAPIENT CORP, 10-K, 1999-03-16

SAPIENT CORP
10-K, 1999-03-16
COMPUTER INTEGRATED SYSTEMS DESIGN

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-28074

SAPIENT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

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DELAWARE 04-3130648 04-3130648
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
ONE MEMORIAL DRIVE, CAMBRIDGE, MA 02142
(Address of Principal Executive Offices) (Zip Code)
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(617) 621-0200
Registrant's Telephone Number, Including Area Code

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the Company was approximately $927,045,955 on March 5, 1999 based on the last
reported sale price of the Company's Common Stock on the Nasdaq National Market
System on March 5, 1999. There were 26,843,782 shares of Common Stock
outstanding as of March 5, 1999.
------------------------
DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on June 15, 1999 are incorporated by reference in Items
10, 11, 12 and 13 of Part III of this Report.
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SAPIENT CORPORATION

ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

TABLE OF CONTENTS

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PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 8
Item 3. Legal Proceedings........................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......... 9

PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 10
Item 6. Selected Financial Data..................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results
of Operations............................................... 12
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 21
Item 8. Financial Statements and Supplementary Data................. 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 41

PART III
Item 10. Directors and Executive Officers of the Registrant.......... 41
Item 11. Executive Compensation...................................... 41
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 41
Item 13. Certain Relationships and Related Transactions.............. 41

PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 41
Signatures................................................................. 43
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SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this Annual Report on Form 10-K, including
information with respect to the Company's future business plans, constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes," "plans," "expects" and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the results of the Company to differ materially from those indicated by
such forward-looking statements. These factors include those set forth in Part I
"Business -- Risk Factors."
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PART I

ITEM 1. BUSINESS

GENERAL

Sapient Corporation ("Sapient" or the "Company") is an innovative provider
of integrated management consulting services, Internet commerce solutions and
systems implementation services. Using a proven, fixed-price model designed to
ensure on-budget and on-time delivery, Sapient offers a variety of integrated
services to help clients rapidly achieve their critical business objectives.
Founded in 1991 as a Delaware corporation, Sapient has experienced consistent
revenue growth in each of the last eight years. The Company currently has more
than 1,400 employees in offices in Cambridge, Massachusetts, New York, San
Francisco, Chicago, Atlanta, Dallas, Los Angeles, Portland (Maine) and London,
England.

In August 1998, Sapient acquired Studio Archetype, Inc. ("Studio
Archetype"), a San Francisco-based leader in the integration of brand strategy,
design and interactive technology. Studio Archetype's 10 years of experience in
brand consulting and user-centered design is expected to facilitate the creation
of a best-in-class organization capable of providing a broad range of integrated
Internet consulting services. With the acquisition of Studio Archetype, Sapient
has expanded its Internet and e-business services capabilities to offer Internet
consulting services that integrate technology, integrated brand and business
strategy and user-centered design.

In December 1997, Sapient acquired EXOR Technologies, Inc. ("EXOR"), a
Dallas-based consulting and systems integration firm recognized as a leader in
implementing ERP solutions using Oracle applications. EXOR has driven Sapient's
growth in the implementation of ERP applications and associated systems.

The Company's executive offices are located at One Memorial Drive,
Cambridge, MA 02142, and its telephone number is (617) 621-0200. Its stock is
traded on the Nasdaq National Market under the symbol "SAPE." The Company's
Internet address is http://www.sapient.com.

SERVICES

The Company's services include integrated management consulting, design and
development of Internet commerce solutions, implementation and integration of
packaged software solutions, design and development of custom software
solutions, implementation of ERP systems and production support.

Sapient's integrated management consulting services involve partnering with
clients to accelerate the creation and implementation of business strategies and
solutions that enable them to create value through the use of information
technology and specifically, the Internet. Sapient has assembled a unique
portfolio of integrated, multi-disciplinary talents, approaches, methodologies
and tools that encompass strategy, operational and organizational design and
process innovation.

In the area of technology solutions, specific client projects may involve
writing custom software applications, integrating existing third-party
applications or Sapient-developed solutions, or a combination of both. Recent
examples of solutions designed by the Company include a system that has enabled
a large bank to develop and launch Web-based banking applications for homes and
businesses, making it the first major bank in New England to offer banking
transactions over the Internet, and the creation of a unique, Internet
technology infrastructure for an insurance company that provided a new customer
distribution channel for evaluating and buying insurance from over 50 insurance
carriers.

Sapient began offering ERP implementation services in December 1997
following its acquisition of EXOR. EXOR is a leader in the implementation of
Oracle ERP systems that provide large corporations with infrastructure software
to link functions such as purchasing, human resources, manufacturing and
administration.

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THE QUADD PROCESS

Sapient delivers most of its services using its proprietary discipline
called QUADD (Quality Design and Delivery). QUADD is a highly disciplined,
integrated methodology that involves active client participation and is designed
to rapidly deliver business applications that improve processes and performance.
The QUADD process consists of four stages: RIP workshop, Design, Implementation
and Production. The RIP (Rapid Implementation Plan) workshop is designed to
rapidly identify the client's needs and develop a strategy and action plan to
meet those needs. The Design workshop focuses on outlining the proposed process
changes and required information technology solutions. The Implementation stage
primarily involves the development and testing of the new solution or
enhancements to a third-party packaged software application or existing Sapient-
developed solution. The Production stage primarily involves the maintenance,
enhancement and support of the solution after it is operational. While the QUADD
process is designed as an integrated approach, each stage represents a separate
contractual commitment and concludes with the delivery of a discrete value-added
deliverable. Clients are able to elect at each stage whether to proceed to the
next stage of the process.

The Company believes that QUADD offers the following advantages:

Focus on Improved Business Processes and Information Systems. The
Company's approach facilitates the concurrent definition of business
processes and information systems, which helps ensure that its clients'
business objectives are appropriately addressed by the information systems
that Sapient develops or implements.

Fixed-Price and Fixed-Timeframe. The Company performs its services
primarily on a fixed-price, fixed-timeframe basis, which the Company
believes aligns its objectives with those of its clients.

Project Prioritization. Through the use of visual tools, the QUADD
process enables the Company and its clients to prioritize needed changes in
the clients' business and technology systems. Accurate prioritization helps
clients maximize the return on their fixed-price investment in the
Company's services.

Short Implementation Timeframes. The Company believes that a rapid
time to market for the solutions it develops is important to meet its
clients' business objectives. Through the QUADD process, the Company
divides, structures and manages the project to reduce the time needed to
reach a solution for its clients.

CLIENTS; MARKETS; COMPETITION

During 1998, Sapient focused its business development efforts on clients in
the following key industries: Financial Services, Energy Services,
Communications, Healthcare, Manufacturing and Government. Many large
organizations in these industries have moved to client/server and Web-enabled
computing over the past several years and require the type of services provided
by the Company. Within these industries, the Company has targeted clients who
are determined to gain a competitive advantage and increase value for their
clients through the creation of new products, services and business models
facilitated by integrated business and technology solutions.

The markets for the Company's services are highly competitive. The Company
believes that it currently competes principally with consulting and software
integration firms, application software vendors and internal information systems
groups. Many of these companies have significantly greater financial, technical
and marketing resources than the Company and generate greater revenues and have
greater name recognition than Sapient. In addition, there are relatively low
barriers to entry into the Company's markets and the Company has faced, and
expects to continue to face, additional competition from new entrants into its
markets.

The Company believes that the principal competitive factors in its markets
include quality of service, speed of development and implementation, price,
project management capability and integrated technical and
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business expertise. The Company believes it competes favorably with respect to
these factors and that its disciplined methodology and process, focus on
providing high-quality solutions, Internet expertise and fixed-price,
fixed-timeframe contracting practices distinguish it from its competitors. In
addition, the Company believes that its ability to compete depends in part on a
number of competitive factors outside its control, including the ability of its
competitors to hire, retain and motivate project managers and other senior
technical staff.

SELLING AND MARKETING

During 1998, the Company's dedicated business development team, which
consisted of 49 employees at December 31, 1998, concentrated its efforts on key
industries targeted by the Company. The Company believes that focusing on
selected key industries will broaden its knowledge and expertise in these
industries and generate additional client engagements. A variety of marketing
activities support the business development team in deploying this approach,
including attendance at targeted conferences and trade shows, private briefings
with individual companies, events which demonstrate the Company's unique
expertise, and partnerships with other industry players. In addition, a
significant amount of the Company's business comes from additional business from
existing clients.

The Company's services typically require a substantial financial commitment
by clients. Sales cycles typically range from two to six months from the time
the Company initially meets with a prospective client until the client decides
whether to authorize commencement of an engagement. The Company often encounters
longer sales cycles with clients in certain industries such as Government.

The Company generally enters into written commitment letters with its
clients at or around the time it commences work on a project. These commitment
letters generally contemplate that Sapient and the client will subsequently
enter into a more detailed agreement. These written commitments and contracts
contain varying terms and conditions and the Company does not generally believe
it is appropriate to characterize them as consisting of backlog. In addition,
because these written commitments and contracts often provide that the
arrangement can be terminated with limited advance notice or penalty, the
Company does not believe that the projects in process at any one time are a
reliable indicator or measure of expected future revenues.

EMPLOYEES

Management believes that certain key values, namely, client-focused
delivery, leadership, long-term relationships, openness, and professional
growth, are critical to attaining success and has developed a strong corporate
culture around these values. To encourage the achievement of these values,
Sapient rewards teamwork and promotes individuals who demonstrate these values.
Also, the Company has an intensive orientation program for new employees and an
internal team dedicated to defining, tracking and promoting these core values.
The Company believes that its growth and success are attributable in large part
to the high caliber of its employees and the Company's commitment to maintain
the values on which its success has been based. The Company believes that it has
been successful in its efforts to attract and retain the number and quality of
professionals needed to support present operations and anticipated growth, in
part because of its emphasis on training and its QUADD methodology, which allows
employees to progress with one client through multiple phases of a project. The
Company intends to continue to recruit, hire and promote employees who share the
Company's values.

There is significant competition for employees with the skills required to
perform the services the Company offers. Qualified project managers and senior
technical staff are in great demand and are likely to remain a limited resource
for the foreseeable future.

As of December 31, 1998, the Company had 1,450 full-time employees,
comprised of 1,153 project personnel, 248 employees in finance and
administration and 49 employees in business development. None of the Company's
employees is subject to a collective bargaining agreement. The Company believes
that its relations with its employees are good.

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INTELLECTUAL PROPERTY RIGHTS

The Company relies upon a combination of trade secret, nondisclosure and
other contractual arrangements, and copyright and trademark laws, to protect its
proprietary rights. The Company enters into confidentiality agreements with its
employees, generally requires that its consultants and clients enter into such
agreements, and limits access to and distribution of its proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to deter misappropriation of its proprietary
information or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights.

A portion of the Company's business involves the development of software
applications for specific client engagements. Ownership of such software is the
subject of negotiation and is frequently assigned to the client, with the
Company frequently retaining a license for certain uses. Certain clients have
prohibited the Company from marketing the applications developed for them for
specified periods of time or to specified third parties and there can be no
assurance that clients will not continue to demand similar or other restrictions
in the future. Issues relating to the ownership of and rights to use software
applications can be complicated and there can be no assurance that disputes will
not arise that affect the Company's ability to resell or reuse such
applications.

In connection with projects which use previously developed Sapient
solutions, the Company may, in certain cases, obtain a license fee from the
client for use of the Sapient solution and a development fee from such client
for any required additional customization. A portion of the license fee will
generally be paid as a royalty to the client for which the original Sapient
solution was developed pursuant to such original client's agreement with the
Company.

RISK FACTORS

The following important factors, among others, could cause actual results
to differ materially from those contained in forward-looking statements made in
this Annual Report on Form 10-K or presented elsewhere by management from time
to time.

MANAGEMENT OF GROWTH

The Company's growth has placed significant demands on its management and
other resources. The Company's revenues increased approximately 77% in 1998 from
approximately $90.3 million in 1997 to approximately $160.3 million in 1998. Its
staff increased from 817 full-time employees at December 31, 1997 to 1,450 at
December 31, 1998. The Company's future success will depend on its ability to
manage its growth effectively, including by:

- developing and improving its operational, financial and other internal
systems,

- improving its business development capabilities,

- continuing to train, motivate and manage its employees,

- continuing to set fixed-price fees accurately,

- maintaining high rates of employee utilization, and

- maintaining project quality.

The Company's management has limited experience managing a business of Sapient's
size. If Sapient is unable to manage its growth and projects effectively, such
inability could have a material adverse effect on the quality of its services
and products, its ability to retain key personnel and its business, financial
condition and results of operations.

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INTEGRATION OF ACQUISITIONS

In December 1997, the Company completed its acquisition of EXOR and in
August 1998, the Company completed its acquisition of Studio Archetype. The
anticipated benefits from these and future acquisition, may not be achieved
unless the operations of the acquired business are successfully combined with
those of Sapient in a timely manner. The integration of acquisitions requires
substantial attention from management. The diversion of the attention of
management, and any difficulties encountered in the transition process, could
have an adverse impact on the Company's business, financial condition and
results of operations. In addition, the process of integrating various
businesses could cause the interruption of, or a loss of momentum in, the
activities of some or all of these businesses, which could have an adverse
effect on the Company's business, financial condition and results of operations.

NEED TO ATTRACT AND RETAIN PROFESSIONAL STAFF

The Company's business is labor intensive and its success will depend in
large part upon its ability to attract, retain, train and motivate
highly-skilled employees. There is significant competition for employees with
the skills required to perform the services Sapient offers. There can be no
assurance that Sapient will be successful in attracting a sufficient number of
highly skilled employees in the future, or that Sapient will be successful in
retaining, training and motivating the employees it is able to attract. Any
inability to retain, train and motivate employees could impair the Company's
ability to adequately manage and complete its existing projects and to bid for
or obtain new projects. If the Company's employees are unable to achieve
expected performance levels, its business, financial condition and results of
operations could be adversely affected.

COMMON STOCK FLUCTUATIONS

The trading price of the Company's common stock could be subject to wide
fluctuations in response to quarterly variations in:

- operating results,

- changes in earnings estimates by analysts,

- announcements of new contracts or service offerings by the Company or its
competitors,

- general economic or stock market conditions unrelated to the Company's
operating performance, and

- other events or factors.

SUSCEPTIBILITY TO GENERAL ECONOMIC CONDITIONS

The Company's revenues and results of operations are likely to be
influenced by general economic conditions. In the event of a general economic
downturn or a recession in the United States, Europe or Asia, Sapient's clients
and potential clients may substantially reduce their information technology and
related budgets. Such an economic downturn may materially and adversely affect
the Company's business, financial condition and results of operations.

CUSTOMER CONCENTRATION

The Company has derived, and believes that it will continue to derive, a
significant portion of its revenues from a limited number of large clients. In
1998, the Company's five largest clients accounted for approximately 30% of its
revenues, with four clients each accounting for more than 5% of such revenues.
The volume of work performed for specific clients is likely to vary from year to
year, and a major client in one year may not use the Company's services in a
subsequent year. The loss of any large client could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, revenues from a large client may constitute a significant portion
of the Company's total revenues in a particular quarter.

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DEPENDENCE ON LARGE PROJECTS

Most of the Company's fixed-price contracts are terminable by the client
following limited notice and without significant penalty. The cancellation or a
significant reduction in the scope of a large project could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, while the QUADD process is designed as an integrated
approach, each stage of the QUADD process represents a separate contractual
commitment at the end of which the client may elect not to proceed to the next
stage. A decision by any large client not to proceed with a project to the stage
that the Company anticipated could have a material adverse effect on the
Company's business, financial condition and results of operations.

FIXED-PRICE CONTRACTS

An important element of the Company's strategy is to enter into
fixed-price, fixed-timeframe contracts, rather than contracts in which payment
is determined on a time and materials basis. Consistent with this strategy, the
Company currently provides its enterprise resource planning system
implementation services, which historically have been provided by EXOR on a time
and materials basis, on a fixed-price, fixed-timeframe basis. The Company's
failure to accurately estimate the resources required for a project (including
an enterprise resource planning system implementation, with respect to which the
Company has limited experience) or the Company's failure to complete its
contractual obligations in a manner consistent with the project plan upon which
its fixed-price, fixed-timeframe contract was based would adversely affect the
Company's overall profitability and could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
has been required to commit unanticipated additional resources to complete
certain projects, which has resulted in losses on certain contracts. The Company
recognizes that it will experience similar situations in the future. In
addition, for certain projects the Company may fix the price before the design
specifications are finalized, which could result in a fixed price that turns out
to be too low and therefore adversely affect the Company's profitability.

MARKETS SUBJECT TO RAPID CHANGE

The Company has derived a significant portion of its revenues from projects
based primarily on client/server and Web-based architectures. These markets are
continuing to develop and are subject to rapid change. The Company's near-term
success is dependent in part on the continued acceptance of information
processing systems using client/server and Web-based architectures. Any factors
negatively affecting the acceptance of such technology could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's success will also depend in part on its ability to
develop information technology solutions, which keep pace with continuing
changes in technology, evolving industry standards and changing client
preferences. There can be no assurance that the Company will be successful in
addressing these developments on a timely basis or that if addressed we will be
successful in the marketplace. The Company's failure to address these
developments could have a material adverse effect on its business, financial
condition and results of operations.

COMPETITION

The markets for the services the Company provides are highly competitive.
The Company believes that it currently competes principally with consulting and
software integration firms, application software vendors and internal
information systems groups. Many of these companies have significantly greater
financial, technical and marketing resources than the Company and generate
greater revenues and have greater name recognition than the Company. In
addition, there are relatively low barriers to entry into the Company's markets
and the Company has faced, and expects to continue to face, additional
competition from new entrants into its markets.

The Company believes that the principal competitive factors in its markets
include:

- quality of service and deliverables,

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- speed of development and implementation,

- price,

- project management capability, and

- technical and business expertise.

The Company believes that its ability to compete also depends in part on a
number of competitive factors outside its control, including:

- the ability of its competitors to hire, retain and motivate project
managers and other senior technical staff,

- the development by others of software that is competitive with its
products and services, and

- the extent of its competitors' responsiveness to client needs.

There can be no assurance that the Company will be able to compete
successfully with its competitors.

EFFECTS OF YEAR 2000 ISSUE

The purchasing patterns of clients or potential clients may be affected by
year 2000 issues as companies expend significant resources to ensure that their
current systems are year 2000 compliant. These expenditures may result in
reduced funds being available to purchase services offered by Sapient which
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, although the Company does not
believe that year 2000 issues will have a significant impact on its internal
operations or on solutions developed for clients where the Company has provided
an express warranty regarding the year 2000 issue, there can be no assurance
that the Company will not experience interruptions of operations because of year
2000 problems or become involved in disputes with clients regarding year 2000
problems involving solutions that the Company developed or implemented or the
interaction of such solutions with other applications. Year 2000 problems could
require Sapient to incur unanticipated expenses, and such expenses could have a
material adverse effect on the Company's business, financial condition and
results of operations.

SIGNIFICANT FIXED OPERATING COSTS

A high percentage of the Company's operating expenses, particularly
personnel and rent, are fixed in advance of any particular quarter. As a result,
unanticipated variations in the number, or progress toward completion, of its
projects or in employee utilization rates may cause significant variations in
operating results in any particular quarter and could result in losses for such
quarter.

An unanticipated termination of a major project, a client's decision not to
proceed to the stage of a project the Company anticipated or the completion
during a quarter of several major client projects, could require the Company to
maintain underutilized employees and could therefore have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company's revenues and earnings may also fluctuate from quarter to quarter
based on such factors as:

- the contractual terms and degree of completion of such projects,

- any delays incurred in connection with projects,

- the adequacy of provisions for losses,

- the accuracy of estimates of resources required to complete ongoing
projects, and

- general economic conditions.

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INTELLECTUAL PROPERTY

The Company's success depends, in part, upon its proprietary QUADD
methodology and other intellectual property rights. The Company relies upon a
combination of trade secret, nondisclosure and other contractual arrangements,
and copyright and trademark laws to protect its proprietary rights. The Company
enters into confidentiality agreements with its employees, generally requires
that its consultants and clients enter into such agreements, and limits access
to and distribution of its proprietary information. There can be no assurance
that the steps taken by the Company in this regard will be adequate to deter
misappropriation of its proprietary information or that the Company will be able
to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights. In addition, although the Company believes that
its services and products do not infringe on the intellectual property rights of
others, there can be no assurance that such a claim will not be asserted against
the Company in the future, or that if asserted any such claim will be
successfully defended. A successful claim against the Company could materially
and adversely affect its business, financial condition and results of
operations.

ABILITY TO RESELL OR REUSE APPLICATIONS

CONCENTRATION OF CONTROL

Messrs. Greenberg and Moore, the Company's co-Chairmen of the Board of
Directors and co-Chief Executive Officers, beneficially own approximately 42% of
Sapient's outstanding Common Stock. As a result, these stockholders have the
ability to substantially influence and may effectively control, the outcome of
corporate actions requiring stockholder approval, including the election of
directors. This concentration of ownership may have the effect of delaying or
preventing a change in control of Sapient.

DEPENDENCE ON KEY PERSONNEL

The Company's success will depend in large part upon the continued services
of a number of key employees, including Sapient's founders and co-Chairmen of
the Board of Directors and co-Chief Executive Officers, Jerry A. Greenberg and
J. Stuart Moore. The employment contracts with Messrs. Greenberg and Moore and
with the Company's other key personnel provide that employment is terminable at
will by either party. The loss of the services of either of Messrs. Greenberg or
Moore or of one or more of the Company's other key personnel could have a
material adverse effect on Sapient. In addition, if one or more of Sapient's key
employees resigns from Sapient to join a competitor or to form a competing
company, the loss of such personnel and any resulting loss of existing or
potential clients to any such competitor could have a material adverse effect on
the Company's business, financial condition and results of operations. In the
event of the loss of any such personnel, there can be no assurance that the
Company would be able to prevent the unauthorized disclosure or use of its
technical knowledge, practices or procedures by such personnel.

ITEM 2. PROPERTIES

The Company's headquarters and principal administrative, finance, selling
and marketing operations are located in approximately 88,000 square feet of
leased office space in Cambridge, Massachusetts. The Company also leases office
space of approximately 75,000 square feet in metropolitan New York, 64,000
square feet in San Francisco, California, 49,000 square feet in Atlanta, Georgia
and 40,000 square feet in Chicago, Illinois. In addition, the Company maintains
smaller offices in Dallas, Los Angeles, Portland, Maine and London, England.

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ITEM 3. LEGAL PROCEEDINGS

Except as set forth below, the Company is not a party to any material
pending legal proceedings. The Company is in arbitration with John Adler, a
former employee of the Company (the "Plaintiff"), who alleges, among other
things, wrongful termination of his employment. In addition to seeking
unspecified damages, the Plaintiff is demanding that the Company issue to him
60,000 shares of the Company's Common Stock pursuant to certain stock options
that had previously been granted to him. In addition, one month after filing his
original complaint, the Plaintiff informed the Company that he believed he is
owed additional shares of Common Stock pursuant to a purported oral option
agreement for fully vested shares. Management denies that it breached any
obligations or duties to the Plaintiff and believes that the Company has
meritorious defenses (including that a substantial number of the 60,000 shares
subject to the stock options that were granted to the Plaintiff had not vested
in accordance with their terms at the time the Plaintiff's employment was
terminated by the Company). Mr. Adler commenced suit against the Company and
certain of its executive officers, both individually and in their capacities as
officers of the Company, in Middlesex Superior Court, Commonwealth of
Massachusetts in April 1996. In August 1996, the court allowed the Company's
motion to compel arbitration of the Plaintiff's claims. In connection with the
arbitration, the Plaintiff agreed to dismiss certain of his claims. The
arbitration hearing commenced in January 1999 and is expected to conclude in
April 1999. The Company is vigorously defending itself against the Plaintiff's
claims. Although the Company does not expect this case to have a material
adverse effect on the Company's business, operating income or financial
condition, an adverse judgment or settlement could have a material adverse
effect on the operating results reported by the Company for the period in which
any such adverse judgment or settlement occurs.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

EXECUTIVE OFFICERS OF SAPIENT

Below is the name, age and principal occupations for the last five years of
each current executive officer of Sapient. All such persons have been elected to
serve until their successors are elected and qualified or until their earlier
resignation or removal.

<TABLE>
<S> <C> <C>
Preston B. Bradford......... 42 Mr. Bradford joined Sapient in 1994, became a Vice
President in April 1995 and a Senior Vice President in
March 1998.
Christopher R. Davey........ 34 Mr. Davey joined Sapient in February 1993, became a Vice
President in September 1994 and a Senior Vice President in
March 1998.
Sheeroy D. Desai............ 32 Mr. Desai joined Sapient in September 1991 and has served
as Executive Vice President since September 1994.
Paul DiGiammarino........... 44 Mr. DiGiammarino joined Sapient in August 1998 as Senior
Vice President of Global Financial Services. Prior to
joining Sapient, Mr. DiGiammarino was Co-Manager of
Financial Services for American Management Systems. Mr.
DiGiammarino was employed by American Management Systems
from 1979 until August 1998.
Jerry A. Greenberg.......... 33 Mr. Greenberg co-founded Sapient in 1991 and has served as
Co-Chairman of the Board of Directors and Co-Chief
Executive Officer and as a director since Sapient's
inception.
Susan D. Johnson............ 33 Ms. Johnson joined Sapient as Chief Financial Officer in
February 1994. From April 1991 to February 1994, Ms.
Johnson was employed by Bitstream, Inc., a software
company, where she served in various finance positions
prior to becoming Chief Financial Officer.
J. Stuart Moore............. 37 Mr. Moore co-founded Sapient in 1991 and has served as Co-
Chairman of the Board of Directors and Co-Chief Executive
Officer and as a director since Sapient's inception.
Desmond P. Varady........... 33 Mr. Varady joined Sapient in October 1993 and became a
Vice President in September 1994 and a Senior Vice
President in March 1998.
</TABLE>

9
<PAGE> 12

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)(1) Market Price of Common Stock

Sapient's Common Stock is quoted on the Nasdaq National Market System under
the symbol "SAPE". The following table sets forth for the periods indicated the
high and low sale prices for Sapient's Common Stock, and has been adjusted to
reflect the two-for-one stock split effected as a 100 percent stock dividend
paid on March 9, 1998.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997
First Quarter........................................ $24.88 $15.56
Second Quarter....................................... $24.75 $15.00
Third Quarter........................................ $30.50 $24.25
Fourth Quarter....................................... $31.38 $23.88
1998
First Quarter........................................ $47.38 $29.13
Second Quarter....................................... $56.13 $37.00
Third Quarter........................................ $60.88 $32.00
Fourth Quarter....................................... $63.63 $24.50
</TABLE>

On March 5, 1999, the last reported sale price of Sapient's Common Stock
was $64.125 per share. As of March 5, 1999, there were approximately 280 holders
of record of the Common Stock.

(a)(2) Recent Sales of Unregistered Securities

In connection with the Company's acquisition of EXOR, the Company issued a
total of 611,738 shares of its Common Stock on December 15, 1997 to four former
stockholders of EXOR as consideration for all of the outstanding capital stock
of EXOR. This transaction was exempt from registration requirements pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act")
because it did not involve a public offering of securities.

In connection with the Company's acquisition of Studio Archetype, the
Company issued a total of 498,314 shares of its Common Stock on August 25, 1998
to the former stockholders of Studio Archetype in exchange for all of the
outstanding shares of capital stock of Studio Archetype. The issuance of such
shares was exempt from registration requirements pursuant to Section 4(2) of the
Securities Act because it did not involve a public offering of securities.

(b) Use of Proceeds. There has been no change to the information
previously provided by the Company on Form SR for the period ended July 3, 1996,
as amended to date, relating to securities sold by the Company pursuant to
Registration Statements on Form S-1 (Registration Nos. 333-1586 and 333-3204),
both of which were declared effective on April 3, 1996.

10
<PAGE> 13

ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Annual Report on Form 10-K. The Balance
Sheet Data at December 31, 1998, 1997, 1996, 1995 and 1994 and the Statement of
Income Data for the years ended December 31, 1998, 1997, 1996, 1995 and 1994
have been derived from the Consolidated Financial Statements for such years,
which have been audited by KPMG Peat Marwick LLP, independent auditors.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA(1):
Revenues................................... $160,372 $90,360 $49,009 $24,481 $11,796
Operating expenses:
Project personnel costs.................. 77,565 43,816 22,985 11,723 4,434
Selling and marketing.................... 11,129 5,893 2,422 1,129 269
General and administrative............... 41,176 22,108 14,294 6,733 4,634
Charge for in-process research and
development........................... 11,100 -- -- -- --
Acquisition costs........................ -- 560 -- -- --
-------- ------- ------- ------- -------
Total operating expenses......... 140,970 72,377 39,701 19,585 9,337
-------- ------- ------- ------- -------
Income from operations..................... 19,402 17,983 9,308 4,896 2,459
Interest income............................ 2,957 2,078 1,098 13 9
-------- ------- ------- ------- -------
Income before income taxes................. 22,359 20,061 10,406 4,909 2,468
Income taxes............................... 8,660 7,703 3,936 1,995 879
-------- ------- ------- ------- -------
Net income................................. $ 13,699 $12,358 $ 6,470 $ 2,914 $ 1,589
======== ======= ======= ======= =======
Basic net income per share................. $ 0.54 $ 0.52 $ 0.30 $ 0.16 $ 0.08
======== ======= ======= ======= =======
Diluted net income per share............... $ 0.49 $ 0.47 $ 0.27 $ 0.14 $ 0.08
======== ======= ======= ======= =======
Weighted average common shares............. 25,323 23,996 21,631 18,275 18,777
Weighted average common share
equivalents.............................. 2,578 2,083 2,425 2,851 2,065
-------- ------- ------- ------- -------
Weighted average common shares and common
share equivalents........................ 27,901 26,079 24,056 21,126 20,842
======== ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................ $122,266 $76,385 $66,201 $ 5,785 $ 1,894
Total assets............................... 184,912 98,013 79,687 12,893 6,898
Long-term debt, less current portion....... -- -- -- 189 132
Total stockholders' equity(2).............. 154,381 81,999 66,793 5,595 2,663
</TABLE>

- ---------------
(1) This selected consolidated financial data gives retroactive effect to
Sapient's acquisition of EXOR in December 1997, which has been accounted for
as a pooling of interests. As a result of this business combination, the
financial information shown above has been restated to include the accounts
and results of operations of EXOR for all periods presented. See Note 13 of
Notes to Consolidated Financial Statements.

(2) Sapient has never declared or paid any cash dividends.

11
<PAGE> 14

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

Sapient delivers most of its services using its proprietary discipline
called QUADD (Quality Design and Delivery).QUADD is a highly disciplined,
integrated methodology that involves active client participation and is designed
to rapidly deliver business applications that improve processes and performance.
The QUADD process consists of four stages: RIP workshop, Design, Implementation
and Production. The RIP (Rapid Implementation Plan) workshop is designed to
rapidly identify the client's needs and develop a strategy and action plan to
meet those needs. The Design workshop focuses on outlining the proposed process
changes and required information technology solutions. The Implementation stage
primarily involves the development and testing of the new solution or
enhancements to a third-party packaged software application or existing Sapient-
developed solution. The Production stage primarily involves the maintenance,
enhancement and support of the solution after it is operational. While the QUADD
process is designed as an integrated approach, each stage represents a separate
contractual commitment and concludes with the delivery of a discrete value-added
deliverable. Clients are able to elect at each stage whether to proceed to the
next stage of the process.

Sapient's revenues and earnings may fluctuate from quarter to quarter based
on the number, size and scope of projects in which the Company is engaged, the
contractual terms and degree of completion of such projects, any delays incurred
in connection with a project, employee utilization rates, the adequacy of
provisions for losses, the accuracy of estimates of resources required to
complete ongoing projects, general economic conditions and other factors. In
addition, revenues from a large client may constitute a significant portion of
the Company's total revenues in a particular quarter.

On August 25, 1998 the Company acquired Studio Archetype for approximately
$25.3 million in stock and cash, including direct acquisition costs of
approximately $2.3 million, pursuant to which the Company issued 498,314 shares
of Sapient Common Stock and paid $250,000 in cash to the former Studio
stockholders. The acquisition was accounted for as a purchase and accordingly,
the purchase price was allocated to the assets acquired and liabilities assumed
based on their respective fair values.

On April 7, 1998, Sapient completed a public offering of Common Stock which
resulted in the issuance of 653,125 shares of Common Stock. Proceeds to Sapient,
net of underwriting discounts and costs of the offering, were approximately
$29.1 million.

On January 29, 1998, Sapient declared a two-for-one stock split effected as
a 100% stock dividend paid on March 9, 1998 to all stockholders of record on
February 20, 1998. Sapient's financial statements have been restated for all
periods presented to reflect the effect of the stock dividend.

On December 15, 1997, Sapient acquired all of the outstanding common stock
of EXOR in exchange for 611,738 shares of Sapient Common Stock. Sapient's
financial statements have been restated for all periods presented to reflect the
acquisition of EXOR, which has been accounted for as a pooling of interests.

In connection with the acquisition of Studio Archetype, in the third
quarter of 1998 Sapient allocated $11.1 million to in-process technology and
recorded a corresponding income tax benefit of $4.2 million. This allocation
represents the estimated fair value of such technology based on risk-adjusted
cash flows related to development of projects that had not reached technological
feasibility at the time of the acquisition and with respect to which the
in-process research and development had no alternative future uses. Accordingly,
these costs were expensed as of the acquisition date.

12
<PAGE> 15

Sapient allocated values to the in-process research and development
projects by identifying significant research projects for which technological
feasibility had not been established, including development, engineering and
testing activities associated with the introduction of Studio Archetype
next-generation enterprise-wide suite of development, scheduling, bug tracking
and content management applications. The integrated solution will be a
comprehensive enterprise scale system, allowing developers and clients to access
prototypes and trial deliverables. It will fully integrate user interface tools
with client server, advanced database and legacy systems.

The value assigned to purchased in-process technology was determined by
estimating the costs to develop the purchased in-process technology into
commercially viable products, estimating the resulting net cash flows from the
projects and discounting the net cash flows to their present value. The revenue
projection used to value the in-process research and development is based on
estimates of relevant market sizes and growth factors, expected trends in
technology and the nature and expected timing of new product introductions by
Studio Archetype and its competitors. The estimated revenues for the projects
are expected to be realized over a six year period through 2004 when other new
products are expected to enter the market. Studio Archetype projected revenues
are dependent upon successful introduction of the in-process projects.

The nature of the efforts to develop the acquired in-process technology
into commercially viable products and services principally relate to the
completion of all planning, designing, prototyping, verification, and testing
activities that are necessary to establish that the proposed technologies meet
their design specifications including functional, technical, and economic
performance requirements. The efforts to develop the purchased in-process
technology also include testing of the technology for compatibility and
interoperability with other applications. Expenditures on these projects to date
have been approximately $2.5 million, and estimated costs to complete these
projects are expected to total approximately $625,000 through 2001. These
estimates are subject to change, given the uncertainties of the development
process, and no assurance can be given that deviations from these estimates will
not occur. Several milestones have been or are near completion including a
comprehensive needs analysis mapping data, technical and information
architectures and building an integrated prototype.

The rates utilized to discount the net cash flows to their present value
are based on venture capital rates of return. Due to the nature of the forecast
and the risks associated with the projected growth, profitability and
developmental projects, discount rates of 25.0 to 30.0 percent were utilized for
the business enterprise and for the in-process R&D. Sapient believes that these
discount rates are commensurate with Studio Archetype stage of development, the
uncertainties in the economic estimates described above, the inherent
uncertainty surrounding the successful development of the purchased in-process
technology, the useful life of such technology, the profitability levels of such
technology; and, the uncertainty of technological advance that are unknown at
this time.

The forecasts used by Sapient in valuing in-process research and
development were based upon assumptions that the Company believes to be
reasonable but which are inherently uncertain and unpredictable. Sapient's
assumptions may be incomplete or inaccurate, and unanticipated events and
circumstances are likely to occur. For these reasons, actual results may vary
materially from the assumed results and could have a material adverse effect on
Sapient's business, results of operations and financial condition.

Sapient believes that the assumptions used in the forecasts were
reasonable. No assurance can be given, however, that the underlying assumptions
used to estimate expected project sales, development costs or profitability, or
the events associated with such projects, will transpire as estimated. For these
reasons, actual results may vary from the assumed results and could have a
material adverse effect on Sapient's business, results of operations and
financial condition.

Sapient expects to continue its support of these efforts and believes
Studio has a reasonable chance of successfully completing the research and
development programs. However, there is risk associated with the completion of
the projects and there is no assurance that any of the projects will meet with
either technological or commercial success.

13
<PAGE> 16

If these projects are not successfully developed, the sales and
profitability of Studio may be adversely affected in future periods.
Additionally, the value of the other intangible assets acquired may become
impaired. Studio Archetype expects to benefit from the purchased in-process
technology beginning in 1999.

RESULTS OF OPERATIONS

The following table sets forth the percentage of revenues of certain items
included in Sapient's Consolidated Statements of Income and Comprehensive
Income:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenue............................................... 100% 100% 100%
Operating expenses:
Project personnel costs............................. 48 48 47
Selling and marketing............................... 7 7 5
General and administrative.......................... 26 24 29
Charge for in process research and development...... 7 -- --
Acquisition costs................................... -- 1 --
--- --- ---
Total operating expenses.................... 88 80 81
Income from operations................................ 12 20 19
Interest income....................................... 2 2 2
Income taxes.......................................... 5 8 8
--- --- ---
Net income............................................ 9% 14% 13%
=== === ===
</TABLE>

YEARS ENDED DECEMBER 31, 1998 AND 1997

Revenues

Revenues for 1998 increased 77% over revenues for 1997. The increase in
revenues reflected increases in both the size and number of client projects. The
increase in unbilled revenues on contracts from $9.1 million at December 31,
1997 to $10.3 million at December 31, 1998, was primarily a result of increased
volume and the structure of contract billing schedules. In 1998, Sapient's five
largest clients accounted for approximately 30% of its revenues, no client
accounted for more than 10% of such revenues and four clients each accounted for
more than 5% of such revenues. In 1997, Sapient's five largest clients accounted
for approximately 31% of its revenues, no clients accounted for more than 10% of
such revenues and three clients each accounted for more than 5% of such
revenues.

Project Personnel Costs

Project personnel costs consist primarily of salaries and employee benefits
for personnel dedicated to client projects, non-reimbursed direct expenses
incurred to complete projects and third-party project personnel training. These
costs represent the most significant expense Sapient incurs in providing its
services. The increase in project personnel costs for the year ended December
31, 1998 was primarily due to an increase in project personnel from 674 at
December 31, 1997 to 1,153 at December 31, 1998. Project personnel costs
remained constant as a percentage of revenues at 48% in 1998 and 1997.

Selling and Marketing

Selling and marketing costs consist primarily of salaries, employee
benefits and travel expenses of selling and marketing personnel and promotional
costs. Selling and marketing costs as a percentage of revenues remained constant
at 7% for both 1998 and 1997. The dollar increase was mainly due to Sapient's
decision to expand its selling and marketing group through hiring, along with
the addition of Studio Archetype's selling and marketing group. Selling and
marketing personnel grew from 32 employees at December 31, 1997 to 49 employees
at December 31, 1998.

14
<PAGE> 17

General and Administrative

General and administrative costs consist primarily of expenses associated
with Sapient's executive management, finance and administrative groups,
including personnel devoted to recruiting and employee retention, development of
reusable solution frameworks, training project personnel, and occupancy costs.
The increase in general and administrative costs for 1998 compared to 1997 was
primarily due to an increase in the incremental costs associated with the
additional employees hired during 1998. Sapient's total headcount increased from
817 at December 31, 1997 to 1,450 at December 31, 1998. As a percentage of
revenues, general and administrative costs were 26% in 1998, compared to 24% in
1997. The increase as a percentage of revenues in 1998 was a result of
amortization charges associated with the acquisition of Studio Archetype, costs
incurred related to the Company's international expansion, and lower space
utilization during 1998 compared to 1997.

Charge for In-Process Research and Development

In connection with the acquisition of Studio Archetype in the third quarter
of 1998, Sapient allocated $11.1 million to in-process technology and recorded a
corresponding income tax benefit of $4.2 million. This allocation represents the
estimated fair value of such technology based on risk-adjusted cash flows
related to the development of projects that had not reached technological
feasibility at the time of the acquisition and with respect to which the
in-process research and development had no alternative future uses. Accordingly,
these costs were expensed as of the acquisition date.

Interest Income

Interest income for 1998 and 1997 consisted of interest earned on the
proceeds of Sapient's initial and follow-on public offerings of Common Stock,
which were invested primarily in tax-exempt, short term municipal bonds.

Provision for Income Taxes

Income tax expense represents combined federal and state income taxes at an
effective rate of 38.7% for 1998 and 38.4% for 1997. Sapient's effective tax
rate may vary from period to period based on the Company's future expansion into
areas with varying country, state, and local income tax rates.

YEARS ENDED DECEMBER 31, 1997 AND 1996

Revenues

Revenues for 1997 increased 84% over revenues for 1996. The increase in
revenues reflected increases in both the size and number of client projects. The
increase in unbilled revenues on contracts from $4.7 million at December 31,
1996 to $9.1 million at December 31, 1997 was primarily due to the increase in
revenues in 1997. In 1997, Sapient's five largest clients accounted for
approximately 31% of its revenues, no client accounted for more than 10% of such
revenues and three clients each accounted for more than 5% of such revenues. In
1996, Sapient's five largest clients accounted for approximately 52% of its
revenues, two clients each accounted for more than 10% of such revenues and four
clients each accounted for more than 5% of such revenues.

Project Personnel Costs

Project personnel costs consist primarily of salaries and employee benefits
for personnel dedicated to client projects, non-reimbursed direct expenses
incurred to complete projects and third-party project personnel training. These
costs represent the most significant expense Sapient incurs in providing its
services. The increase in project personnel costs for the year ended December
31, 1997 was primarily due to an increase in project personnel from 427 at
December 31, 1996 to 674 at December 31, 1997. Project personnel costs increased
slightly as a percentage of revenues from 47% in 1996 to 48% in 1997. The
increase was mainly due

15
<PAGE> 18

to investments in training and higher non-reimbursable travel and relocation
fees due to the opening of three additional offices in the beginning of 1997.

Selling and Marketing

Selling and marketing costs consist primarily of salaries, employee
benefits and travel expenses of selling and marketing personnel and promotional
costs. Selling and marketing costs as a percentage of revenues increased from 5%
in 1996 to 7% in 1997. This increase, as well as the dollar increase, was mainly
due to Sapient's decision to expand its selling and marketing group, which grew
from 27 employees at December 31, 1996 to 32 employees at December 31, 1997.

General and Administrative

General and administrative costs consist primarily of expenses associated
with Sapient's executive management, finance and administrative groups,
including personnel devoted to recruiting and training project personnel, and
occupancy costs. The increase in general and administrative costs for 1997
compared to 1996 was primarily due to an increase in the incremental costs
associated with the additional employees hired during 1997. Sapient's total
headcount increased from 530 at December 31, 1996 to 817 at December 31, 1997.
As a percentage of revenues, general and administrative costs were 24% in 1997,
compared to 29% in 1996. The decrease as a percentage of revenues in 1997 was
primarily a result of non-cash compensation charges in 1996, lower cash
compensation bonuses paid to EXOR executives in 1997 and improved space
utilization.

Acquisition Costs

Sapient incurred a one-time charge of approximately $560,000 in the fourth
quarter of 1997 for costs associated with the EXOR acquisition.

Interest Income

Interest income for 1997 and 1996 consisted of interest earned on the
proceeds of Sapient's initial and follow-on public offerings of Common Stock,
which were invested primarily in tax-exempt, short term municipal bonds.

Provision for Income Taxes

Income tax expense represents combined federal and state income taxes at an
effective rate of 38.4% for 1997 and 37.8% for 1996. Sapient's effective tax
rate may vary from period to period based on the Company's future expansion into
areas with varying country, state, and local income tax rates.

16
<PAGE> 19

QUARTERLY FINANCIAL RESULTS

The following tables set forth certain unaudited quarterly results of
operations of Sapient for 1998 and 1997. In the opinion of management, this
information has been prepared on the same basis as the audited Consolidated
Financial Statements and all necessary adjustments, consisting only of normal
recurring adjustments, have been included in the amounts stated below to present
fairly the quarterly information when read in conjunction with the audited
Consolidated Financial Statements and Notes thereto included elsewhere in this
Annual Report on Form 10-K. The quarterly operating results are not necessarily
indicative of future results of operations.

<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998
--------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues........................... $30,730 $35,350 $41,837 $52,454
Operating expenses:
Project personnel costs.......... 14,712 16,967 20,449 25,437
Selling and marketing............ 1,815 2,631 2,991 3,691
General and administrative....... 8,015 8,473 10,416 13,583
Amortization of intangibles...... -- -- 128 559
Charge for in-process research
and development............... -- -- 11,100 --
Acquisition costs................ -- -- -- --
------- ------- ------- -------
Total operating expenses...... 24,542 28,071 45,084 43,271
Income (loss) from operations...... 6,188 7,279 (3,247) 9,183
Interest income.................... 578 702 952 724
------- ------- ------- -------
Income (loss) before income
taxes............................ 6,766 7,981 (2,295) 9,907
Income taxes....................... 2,504 2,929 (668) 3,895
------- ------- ------- -------
Net income (loss).................. $ 4,262 $ 5,052 $(1,627) $ 6,012
======= ======= ======= =======
Basic net income (loss) per
share............................ $ 0.18 $ 0.20 $ (0.06) $ 0.23
======= ======= ======= =======
Diluted net income (loss) per
share............................ $ 0.16 $ 0.18 $ (0.06) $ 0.21
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
----------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997
--------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues......................... $18,180 $20,799 $24,416 $26,965
Operating expenses:
Project personnel costs........ 8,674 9,995 12,150 12,997
Selling and marketing.......... 1,121 1,138 1,544 2,090
General and administrative..... 4,576 5,241 5,808 6,483
Amortization of intangibles.... -- -- -- --
Charge for in-process research
and development............. -- -- -- --
Acquisition costs.............. -- -- -- 560
------- ------- ------- -------
Total operating expenses.... 14,371 16,374 19,502 22,130
------- ------- ------- -------
Income from operations........... 3,809 4,425 4,914 4,835
Interest income.................. 517 571 483 507
------- ------- ------- -------
Income before income taxes....... 4,326 4,996 5,397 5,342
Income taxes..................... 1,620 1,900 2,077 2,106
------- ------- ------- -------
Net income....................... $ 2,706 $ 3,096 $ 3,320 $ 3,236
======= ======= ======= =======
Basic net income per share....... $ 0.11 $ 0.13 $ 0.14 $ 0.13
======= ======= ======= =======
Diluted net income per share..... $ 0.10 $ 0.12 $ 0.13 $ 0.12
======= ======= ======= =======
</TABLE>

17
<PAGE> 20

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
---------------------------------------------
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenues............................. 100% 100% 100% 100%
Operating expenses:
Project personnel costs.............. 48 48 49 48
Selling and marketing................ 6 7 7 7
General and administrative........... 26 24 25 26
Amortization of intangibles.......... -- -- -- 1
Charge for in-process research and
development........................ -- -- 27 --
Acquisition costs.................... -- -- -- --
Total operating expenses........ 80 79 108 82
Income (loss) from operations........ 20 21 (8) 18
Interest income...................... 2 2 2 1
--- ---- --- ---
Income (loss) before income taxes.... 22 23 (6) 19
Income taxes......................... 8 8 (2) 7
--- ---- --- ---
Net income (loss).................... 14% 15% (4)% 12%
=== ==== === ===
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
---------------------------------------------
THREE MONTHS ENDED (UNAUDITED)
---------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenues............................. 100% 100% 100% 100%
Operating expenses:
Project personnel costs.............. 48 48 50 48
Selling and marketing................ 6 5 6 8
General and administrative........... 25 26 24 24
Amortization of intangibles.......... -- -- -- --
Charge for in-process research and
development........................ -- -- -- --
Acquisition costs.................... -- -- -- 2
Total operating expenses........ 79 79 80 82
Income from operations............... 21 21 20 18
Interest income...................... 3 3 2 2
--- --- --- ---
Income before income taxes........... 24 24 22 20
Income taxes......................... 9 9 8 8
--- --- --- ---
Net income........................... 15% 15% 14% 12%
=== === === ===
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Sapient has primarily funded its operations from cash flow generated from
operations and the proceeds from its initial and follow-on public offerings. In
addition, Sapient has a bank revolving line of credit providing for borrowings
of up to $5.0 million. Borrowings under this line of credit, which expires on
June 30, 2000, bear interest at the bank's prime rate. The line of credit
includes covenants relating to the maintenance of certain financial ratios and
limits the payment of dividends. At December 31, 1998, the Company had no bank
borrowings outstanding and no material capital commitments.

Cash and cash equivalents decreased to $38.7 million at December 31, 1998,
from $47.3 million at December 31, 1997. The net cash provided by operating
activities of $4.6 million for the year ended December 31, 1998 was offset with
investments in property and equipment of $8.8 million. Additionally, as of
December 31, 1998 Sapient had invested $52.5 million in tax-exempt, short-term
municipal bonds.

18
<PAGE> 21

Sapient believes that the cash provided from operations, borrowings
available under its revolving line of credit and the Company's existing cash,
cash equivalents and marketable securities will be sufficient to meet the
Company's working capital and capital expenditure requirements for at least the
next 18 months.

YEAR 2000 READINESS

The following disclosure shall be considered year 2000 Readiness Disclosure
to the maximum extent allowed under the Year 2000 Information and Readiness
Disclosure Act.

Sapient has developed a phased Year 2000 readiness plan to help it identify
and resolve Year 2000 issues associated with Sapient's internal systems and the
services provided by Sapient. The plan includes development of corporate
awareness, assessment, implementation (including remediation and upgrading of
certain product versions), validation testing and contingency planning. Since
Sapient has installed nearly all of its internal hardware and software systems
since January 1997, the Company is not confronted with the task of having to
replace obsolete or legacy systems. Primarily, Sapient's task is to install
upgrades and patches to its internally used software and hardware to make such
systems and equipment Year 2000 compliant.

Sapient created a Company-wide Year 2000 team to oversee its Year 2000
program. Sapient has completed its assessment of its internal and third party
computer systems and its internal non-IT systems (such as building security,
voice mail, telephone and other systems containing embedded microprocessors).
Sapient's material internal IT systems consist principally of financial,
accounting and human resources application software created by third parties,
and internally developed sales forecasting and project management software
applications. All of Sapient's internally developed applications are Year 2000
compliant. With respect to the third-party software applications, Sapient
believes that, based on oral statements made by manufacturers and/or statements
published on manufacturers' web sites, that such products will be Year 2000
compliant. At the manufacturer's recommendation, Sapient recently installed
patches in its versions of the Windows 95 and Windows NT operating systems in
order for those operating systems to become Year 2000 compliant. The
manufacturers of Sapient's computer hardware platforms, principally servers,
have indicated that the versions currently used by the Company are Year 2000
compliant. Sapient is in the process of obtaining written assurances from each
of the third party vendors that their systems (both IT and non-IT) are Year 2000
compliant.

Sapient believes that it is 60% complete in installing patches and upgrades
to its third party software and hardware and expects to be completed with the
implementation stage of its Year 2000 program by the end of the second quarter
of 1999. Sapient also expects to have completed testing of all internally used
software and hardware by the second quarter of 1999. Based on currently
available information, Sapient believes the expense associated with these
efforts will be approximately $25,000. However, if compliance efforts are not
completed on time, or additional compliance efforts are required of which
Sapient is not currently aware, or the cost of any required updating or
modification of our IT systems exceeds our estimates, the Year 2000 issue could
have a material adverse effect on Sapient's business, results of operations and
financial condition.

Sapient has not yet developed a comprehensive contingency plan to address
the situations that may result if it is unable to achieve Year 2000 readiness of
the Company's major IT and non-IT systems. Sapient intends to devise contingency
plans by the end of the second quarter of 1999 to mitigate the effects on the
conduct of the Company's business in the event the Year 2000 issue results in
the unavailability of any material IT or non-IT systems. There can be no
assurance that any contingency plans developed by Sapient will prevent any such
service interruption.

In addition to Sapient's internal systems, the Company relies on third
party relationships in the conduct of its business. For example, Sapient relies
on the services of the landlords of its facilities, telecommunication companies,
banks, utilities, and commercial airlines. Sapient is currently seeking
assurances from its landlords and material vendors regarding their Year 2000
readiness, and to the extent such assurances are not given, the Company intends
to devise contingency plans to ameliorate the negative effects on Sapient in the
event the Year 2000 issue results in the unavailability of services. There can
be no assurance that any contingency plans developed by Sapient will prevent any
such service interruption on the part of one or more of the Company's third
party vendors or suppliers from having a material adverse effect on Sapient's
business, results of

19
<PAGE> 22

operations or financial condition. In addition, the failure on the part of the
accounting systems of Sapient's clients due to the Year 2000 issue could result
in a delay in the payment of invoices issued by Sapient for services and
expenses. A failure of the accounting systems of a significant number of
Sapient's clients would have a material adverse effect on Sapient's business,
results of operations and financial condition.

Sapient's business involves designing, developing and implementing mission
critical software applications for its clients. In addition, Sapient has
recommended, implemented and customized various third-party software packages
for its clients, certain of which may not be Year 2000 compliant. Former,
present and future clients may assert that certain services performed by Sapient
involved or are affected by the Year 2000 issue. Because Sapient has designed,
developed and implemented software and systems for a large number of clients
since 1991, there can be no way of assuring that all such software programs and
systems will be Year 2000 compliant. This uncertainty is magnified by the fact
that in many cases Sapient's clients retain the right to maintain, alter and
modify the systems developed and implemented by Sapient after the completion of
an engagement. Due to the potential significance of the Year 2000 issue upon
client operations, upon any failure of critical client systems or processes that
may be directly or indirectly connected or related to systems or software
analyzed, designed, developed, or implemented by Sapient, Sapient may be
subjected to claims regardless of whether the failure is related to the services
provided by Sapient. If asserted, such claims (and the associated defense costs)
could have a material adverse effect on the Sapient's business, results of
operations and financial condition.

Sapient's policy has been to attempt to include provisions in its client
contracts that, among other things, disclaim implied warranties, limit the
duration of express warranties, limit Sapient's liability to the amount of fees
paid by the client to Sapient in connection with the project, and disclaim any
liability arising from third-party software that is implemented, customized or
installed by Sapient. There can be no assurance that Sapient will be able to
obtain these contractual protections in agreements concerning future projects,
or that any contractual provisions governing current and completed projects,
will prevent clients from asserting claims against Sapient with respect to the
Year 2000 issue. There also can be no assurance that the contractual
protections, if any, obtained by Sapient will effectively operate to protect the
Company from, or limit the amount of, any liability arising from claims asserted
against Sapient.

The foregoing discussion of Sapient's Year 2000 readiness contains forward
looking statements including estimates of the timeframes and costs for
addressing the known Year 2000 issues confronting Sapient and is based on
management's current estimates, which were derived using numerous assumptions.
There can be no assurance that these estimates will be achieved and actual
events and results could differ materially from those anticipated. Specific
factors that might cause such material differences include, but are not limited
to, the ability of Sapient to identify and correct all Year 2000 problems and
the success of third parties with whom Sapient does business in addressing their
Year 2000 issues.

NEW ACCOUNTING PRONOUNCEMENTS

During 1998, Sapient adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income"("SFAS 130"). SFAS 130 establishes
standards for reporting comprehensive income and its components in the body of
the financial statements. Comprehensive income includes net income as currently
reported under Generally Accepted Accounting Principles and also considers the
effect of additional economic events that are not required to be recorded in
determining net income but are rather reported as a separate component of
stockholders' equity. The adoption of SFAS 130 did not have a material impact on
Sapient's financial condition or results of operations (See Note 9 to
Consolidated Financial Statements).

During 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 establishes standards for reporting
information about operating segments in annual and interim financial statements
issued to shareholders. This Statement also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS 131 did not have a material impact on Sapient's financial
condition or results of operations (See Note 9 to Consolidated Financial
Statements).

20
<PAGE> 23

In March, 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants, issued SOP 98-1, "Accounting
for the Cost of Computer Software Developed or Obtained for Internal Use," ("SOP
98-1") which requires the capitalization of certain internal costs related to
the implementation of computer software obtained for internal use. Sapient is
required to adopt this standard in the first quarter of 1999. Sapient expects
that the adoption of SOP 98-1 will not have a material impact on Sapient's
financial position or results of operations.

In June, 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities.
SFAS 133 requires the recognition of all derivatives as either assets or
liabilities in the statement of financial position and the measurement of those
instruments at fair value. Sapient is required to adopt this standard in the
first quarter of 2000. Sapient expects that the adoption of SFAS 133 will not
have a material impact on Sapient's financial position or results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not believe that there is any material market risk
exposure with respect to derivative or other financial instruments which would
require disclosure under this item.

21
<PAGE> 24

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SAPIENT CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report................................ 23
Consolidated Balance Sheets................................. 24
Consolidated Statements of Income and Comprehensive
Income.................................................... 25
Consolidated Statements of Stockholders' Equity............. 26
Consolidated Statements of Cash Flows....................... 27
Notes to Consolidated Financial Statements.................. 28
</TABLE>

22
<PAGE> 25

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Sapient Corporation:

We have audited the accompanying consolidated balance sheets of Sapient
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income and comprehensive income, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sapient
Corporation and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998 in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Boston, Massachusetts
January 22, 1999

23
<PAGE> 26

SAPIENT CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31,
1998 1997
-------------- --------------
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 38,760 $47,314
Short term investments................................. 52,500 17,092
Accounts receivable, less allowance for doubtful
accounts of $550 and $350 for 1998 and 1997,
respectively.......................................... 41,533 16,217
Unbilled revenues on contracts......................... 10,306 9,071
Prepaid expenses....................................... 393 680
Other current assets................................... 3,296 959
Deferred income taxes.................................. 3,973 35
-------- -------
Total current assets.............................. 150,761 91,368
Property and equipment, net................................. 13,620 6,315
Deferred income taxes....................................... 5,702 --
Intangible assets........................................... 13,729 --
Due from shareholders....................................... 764 --
Other assets................................................ 336 330
-------- -------
Total assets...................................... $184,912 $98,013
======== =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank.................................. $ -- $ 208
Accounts payable....................................... 774 15
Accrued expenses....................................... 3,034 1,924
Accrued compensation................................... 8,470 3,453
Income taxes payable................................... 2,217 1,255
Deferred income taxes.................................. 4,170 1,820
Deferred revenues on contracts......................... 9,830 6,308
-------- -------
Total current liabilities......................... 28,495 14,983
Deferred income taxes....................................... 773 121
Other long term liabilities................................. 1,263 910
-------- -------
Total liabilities................................. 30,531 16,014
-------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.01 per share; 5,000,000
shares authorized and none outstanding at December 31,
1998 and 1997......................................... -- --
Common stock, par value $0.01 per share, 100,000,000
shares authorized, 26,315,619 shares issued and
outstanding at December 31, 1998; 24,206,570 shares
issued and outstanding at December 31, 1997........... 263 242
Additional paid-in capital............................. 116,115 57,479
Accumulated other comprehensive income................. 26 --
Retained earnings...................................... 37,977 24,278
-------- -------
Total stockholders' equity........................ 154,381 81,999
-------- -------
Total liabilities and stockholders' equity........ $184,912 $98,013
======== =======
</TABLE>

See accompanying Notes to Consolidated Financial
Statements
24
<PAGE> 27

SAPIENT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues.................................................... $160,372 $90,360 $49,009
Operating expenses:
Project personnel costs................................... 77,565 43,816 22,985
Selling and marketing..................................... 11,129 5,893 2,422
General and administrative................................ 41,176 22,108 14,294
Charge for in-process research and development............ 11,100 -- --
Acquisition costs......................................... -- 560 --
-------- ------- -------
Total operating expenses............................... 140,970 72,377 39,701
-------- ------- -------
Income from operations.................................... 19,402 17,983 9,308
Interest income............................................. 2,957 2,078 1,098
-------- ------- -------
Income before income taxes................................ 22,359 20,061 10,406
Income taxes................................................ 8,660 7,703 3,936
-------- ------- -------
Net Income............................................. $ 13,699 $12,358 $ 6,470
======== ======= =======
Comprehensive Income
Foreign currency translation gain...................... 26 -- --
-------- ------- -------
Comprehensive income........................................ $ 13,725 $12,358 $ 6,470
======== ======= =======
Basic net income per share.................................. $ 0.54 $ 0.52 $ 0.30
======== ======= =======
Diluted net income per share................................ $ 0.49 $ 0.47 $ 0.27
======== ======= =======
Weighted average common shares.............................. 25,323 23,996 21,631
Weighted average common share equivalents................... 2,578 2,083 2,425
-------- ------- -------
Weighted average common shares and common share
equivalents............................................... 27,901 26,079 24,056
======== ======= =======
</TABLE>

See accompanying Notes to Consolidated Financial Statements
25
<PAGE> 28

SAPIENT CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
VOTING NON-VOTING ACCUMULATED
COMMON STOCK COMMON STOCK ADDITIONAL OTHER
--------------- --------------- PAID-IN COMPREHENSIVE RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME EARNINGS
------ ------ ------ ------ ---------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995....................... 10,581 $106 7,664 $ 77 $ 37 $-- $ 5,450
Notes repaid from
stockholders............. -- -- -- -- -- -- --
Exercised stock options.... 932 9 -- -- 204 -- --
Proceeds from public
offerings................ 4,390 44 -- -- 54,053 -- --
Conversion of non-voting
shares to voting
shares................... 7,664 77 (7,664) (77) -- -- --
Tax benefit of
disqualifying
dispositions of stock
options.................. -- -- -- -- 108 -- --
Stock based compensation... 31 -- -- -- 260 -- --
Net income................. -- -- -- -- -- -- 6,470
------ ---- ------ ---- -------- --- -------
Balance at December 31,
1996....................... 23,598 236 -- -- 54,662 -- 11,920
Notes repaid from
stockholders............. -- -- -- -- -- -- --
Exercised stock options.... 608 6 -- -- 1,783 -- --
Tax benefit of
disqualifying
dispositions of stock
options.................. -- -- -- -- 1,034 -- --
Net income................. -- -- -- -- -- -- 12,358
------ ---- ------ ---- -------- --- -------
Balance at December 31,
1997....................... 24,206 $242 -- $ -- $ 57,479 -- $24,278
Exercised stock options.... 958 9 -- -- 5,103 -- --
Translation gain........... -- -- -- -- -- 26 --
Proceeds from public
offering................. 653 9 -- -- 29,084 -- --
Common stock issued for
acquisition of Studio
Archetype................ 498 5 -- -- 22,795 -- --
Tax benefit of
disqualifying
dispositions of stock
options.................. -- -- -- -- 1,654 -- --
Net income................. -- -- -- -- -- -- 13,699
------ ---- ------ ---- -------- --- -------
Balance at December 31,
1998....................... 26,315 $263 -- $ -- $116,115 $26 $37,977
====== ==== ====== ==== ======== === =======

<CAPTION>
NOTES
RECEIVABLE TOTAL
FROM STOCKHOLDERS'
STOCKHOLDERS EQUITY
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Balance at December 31,
1995....................... $(75) $ 5,595
Notes repaid from
stockholders............. 50 50
Exercised stock options.... -- 213
Proceeds from public
offerings................ -- 54,097
Conversion of non-voting
shares to voting
shares................... -- --
Tax benefit of
disqualifying
dispositions of stock
options.................. -- 108
Stock based compensation... -- 260
Net income................. -- 6,470
---- --------
Balance at December 31,
1996....................... (25) 66,793
Notes repaid from
stockholders............. 25 25
Exercised stock options.... -- 1,789
Tax benefit of
disqualifying
dispositions of stock
options.................. -- 1,034
Net income................. -- 12,358
---- --------
Balance at December 31,
1997....................... $ -- $ 81,999
Exercised stock options.... -- 5,112
Translation gain........... -- 26
Proceeds from public
offering................. -- 29,091
Common stock issued for
acquisition of Studio
Archetype................ -- 22,800
Tax benefit of
disqualifying
dispositions of stock
options.................. -- 1,654
Net income................. -- 13,699
---- --------
Balance at December 31,
1998....................... $ -- $154,381
==== ========
</TABLE>

See accompanying Notes to Consolidated Financial
Statements
26
<PAGE> 29

SAPIENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1998 1997 1996
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $13,699 $12,358 $ 6,470
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 4,224 2,450 1,244
Charge for in-process research and development.......... 11,100 -- --
Deferred income taxes................................... (6,638) 786 (1,030)
Allowance for doubtful accounts......................... 200 275 --
Stock compensation expense.............................. -- -- 260
Changes in operating assets and liabilities:
Increase in accounts receivable..................... (22,938) (4,748) (4,080)
Increase in unbilled revenues on contracts.......... (606) (4,397) (2,392)
Decrease (increase) in prepaid expenses............. 321 (363) (172)
Increase in other current assets.................... (2,337) (809) (150)
Decrease in income tax receivable................... -- -- 480
Decrease (increase) in other assets................. 94 (262) 49
Increase (decrease) in accounts payable............. 314 (81) (397)
(Decrease) increase in accrued expenses............. (1,950) 355 546
Increase in accrued compensation.................... 4,137 1,172 1,419
Increase in income taxes payable.................... 2,346 738 1,552
Increase in other long term liabilities............. 311 155 717
Increase in deferred revenues on contracts.......... 2,388 1,392 2,541
------- ------- --------
Net cash provided by operating activities....... 4,665 9,021 7,057
------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment...................... (8,741) (6,190) (2,034)
Net cash received from acquisition...................... 561
Sales and maturities of short term investments.......... 21,043 12,190 --
Purchases of short term investments..................... (56,451) (19,742) (9,540)
------- ------- --------
Net cash used in investing activities........... (43,588) (13,742) (11,574)
------- ------- --------
Cash flows from financing activities:
Proceeds from stockholders for notes receivable......... 3,024 25 50
Payments to stockholders for notes receivable........... (3,788) -- --
Exercise of stock options............................... 5,112 1,789 213
Net proceeds from initial public offering............... -- -- 32,403
Net proceeds from follow-on public offering............. 29,091 -- 21,694
Principal payments on notes payable to bank............. (3,070) (80) (49)
------- ------- --------
Net cash provided by financing activities....... 30,369 1,734 54,311
------- ------- --------
(Decrease) increase in cash and cash equivalents............ (8,554) (2,987) 49,794
Cash and cash equivalents, beginning of year................ 47,314 50,301 507
------- ------- --------
Cash and cash equivalents, end of year...................... $38,760 $47,314 $ 50,301
======= ======= ========
Schedule of non-cash financing activities:
Tax benefit of disqualifying dispositions of stock
options................................................. $ 1,654 $ 1,034 $ 108
======= ======= ========
Supplemental disclosures of cash flow information:
Net assets and liabilities recognized upon acquisition of
Studio Archetype:
Cash and cash equivalents............................... $ 811 $ -- $ --
Accounts receivable..................................... 2,578 -- --
Unbilled revenues on contracts.......................... 629 -- --
Prepaid expenses and other current assets............... 34 -- --
Property and equipment.................................. 2,077 -- --
Other assets............................................ 100 -- --
Accounts payable........................................ 445 -- --
Accrued expenses........................................ 725 -- --
Accrued compensation.................................... 880 -- --
Accrued income taxes payable............................ 270 -- --
Deferred revenues on contracts.......................... 1,134 -- --
Notes payable to bank................................... 2,862 -- --
Other long term liabilities............................. 42 -- --
Accrued acquisition costs............................... 2,335 -- --
Supplemental disclosures of non-cash investing activities:
Common stock issued for acquisition of Studio Archetype... $22,800 $ -- $ --
</TABLE>

See accompanying Notes to Consolidated Financial Statements
27
<PAGE> 30

SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

On August 25, 1998 Sapient acquired Studio Archetype, Inc. ("Studio
Archetype") for approximately $25.3 million in stock and cash, including direct
acquisition costs of approximately $2.3 million, pursuant to which Sapient
issued 498,314 shares of Common Stock and paid $250,000 in cash to the former
Studio stockholders. The acquisition was accounted for as a purchase and
accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on their respective fair values.

On December 15, 1997, Sapient acquired all of the outstanding common stock
of EXOR Technologies, Inc. ("EXOR") in exchange for 611,738 shares of Sapient
Common Stock (see Note 13). Sapient's Consolidated Financial Statements have
been restated for all periods presented to reflect the acquisition of EXOR,
which has been accounted for as a pooling of interests.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The Consolidated Financial Statements include the accounts of Sapient
Corporation and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.

(b) Cash and Cash Equivalents

All highly liquid investments with original maturities of three months or
less are considered cash equivalents. Cash and cash equivalent balances consist
of deposits and repurchase agreements with a large U.S. commercial bank and tax
exempt short-term municipal bonds.

Short-term investments are available-for-sale securities, which are
recorded at fair market value. The difference between fair market value and cost
is not material. Realized gains and losses from sales of available-for-sale
securities were not material for any period presented.

(d) Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation and amortization are computed using the straight
line and accelerated methods over the estimated useful lives of the related
assets, which range from three to seven years. Leasehold improvements are
amortized over the lesser of the estimated useful lives of the assets or the
lease term.

(e) Revenue Recognition

Revenues pursuant to fixed-fee contracts are generally recognized as
services are rendered on the percentage-of-completion method of accounting
(based on the ratio of costs incurred to total estimated costs). Revenues
pursuant to time and material contracts are generally recognized as services are
provided. Revenues from maintenance agreements are recognized ratably over the
terms of the agreements.

28
<PAGE> 31
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Provisions for estimated losses on uncompleted contracts are made on a
contract by contract basis and are recognized in the period in which such losses
are determined. Unbilled revenues on contracts are comprised of costs, plus
earnings on certain contracts in excess of contractual billings on such
contracts. Billings in excess of costs plus earnings are classified as deferred
revenues.

(f) Income Taxes

Sapient records income taxes using the asset and liability method. Deferred
income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective income tax bases, operating
loss and tax credit carryforwards. Deferred income tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred income tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.

(g) Financial Instruments and Concentration of Credit Risk

Financial instruments which potentially subject Sapient to a concentration
of credit risk consist of cash and cash equivalents and accounts receivable.

Sapient performs ongoing credit evaluations of its customers and generally
does not require collateral on accounts receivable. Sapient maintains allowances
for potential credit losses and such losses have been within management's
expectations. Write-offs of accounts receivable have not been material for any
of the periods presented.

The fair market values of cash and cash equivalents, accounts receivable
and debt instruments at both December 31, 1998 and 1997 approximate their
carrying amounts.

(h) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(i) Impairment of Long-Lived Assets

In accordance with Financial Accounting Standards Board Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of ", the carrying value of intangible assets and other long-lived
assets is reviewed on a regular basis for the existence of facts or
circumstances, both internally and externally, that may suggest impairment. To
date, no such impairment has been indicated. Should there be an impairment in
the future, Sapient will measure the amount of the impairment based on
undiscounted expected future cash flows from the impaired assets. The cash flow
estimates that will be used will contain management's best estimates, using
appropriate and customary assumptions and projections at the time.

(j) Research and Development Costs

Research and development expenditures are charged to operations as
incurred. To date, substantially all research and development activities of
Sapient have been pursuant to customer contracts and, accordingly, have been
expensed as project costs. Sapient has not capitalized any software development
costs since such costs have neither been significant nor can the future economic
benefit be reasonably determined.
29
<PAGE> 32
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(k) Stock-Based Compensation

Statement of Financial Accounting Standards No. 123 ("SFAS 123") requires
that companies either recognize compensation expense for grants of stock, stock
options, and other equity instruments based on fair value, or provide pro forma
disclosure of net income and net income per share in the notes to the financial
statements. Sapient applies APB Opinion 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
under SFAS 123 for Sapient's stock option plans, and footnote disclosure is
provided in Note 8.

(l) Earnings Per Share

Under Statement of Financial Accounting Standards No. 128, Sapient presents
both basic net income per share and diluted net income per share. Basic net
income per share is based on the weighted average number of shares outstanding
during the period. Diluted net income per share reflects the per share effect of
dilutive stock options and other dilutive common stock equivalents.

On January 29, 1998 the Company declared a two-for-one stock split effected
as a 100 percent stock dividend distributed on March 9, 1998, to all
shareholders of record on February 20, 1998.

(m) Comprehensive Income

During 1998, Sapient adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
standards for reporting comprehensive income and its components in the body of
the financial statements. Comprehensive income includes net income as currently
reported under Generally Accepted Accounting Principles and also considers the
effect of additional economic events that are not required to be recorded in
determining net income but are rather reported as a separate component of
stockholders' equity. Sapient reports foreign currency translation gains and
losses as a component of comprehensive income.

(n) Segment Reporting

During 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 uses a management approach to report
financial and descriptive information about a company's operating segments.
Operating segments are revenue-producing components of the enterprise for which
separate financial information is produced internally for management. Under this
definition, Sapient operated as a single segment for all years presented. The
adoption of SFAS 131 did not have a material impact on Sapient's financial
condition or results of operations.

(o) Goodwill and Other Purchased Intangibles

Goodwill and other purchased intangibles represent the excess of the
purchase price over the fair value of assets acquired. Goodwill and
substantially all other purchased intangibles are being amortized on a straight-
line basis over lives ranging from five to seven years.

(p) Recently Issued Accounting Pronouncements

In March, 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants, issued SOP 98-1, "Accounting
for the Cost of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1") which requires the capitalization of certain internal costs related to
the implementation of computer software obtained for internal use. Sapient is
required to adopt this standard

30
<PAGE> 33
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in the first quarter of 1999. It is expected that the adoption of SOP 98-1 will
not have a material impact on Sapient's financial position or its results of
operations.

In June, 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities.
SFAS 133 requires the recognition of all derivatives as either assets or
liabilities in the statement of financial position and the measurement of those
instruments at fair value. Sapient is required to adopt this standard in the
first quarter of 2000. It is expected that the adoption of SFAS 133 will not
have a material impact on Sapient's financial position or its results of
operations.

(3) PROPERTY AND EQUIPMENT

The cost and accumulated depreciation of property and equipment at December
31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Leasehold improvements.................................. $ 7,322 $ 3,559
Furniture and fixtures.................................. 2,384 904
Office equipment........................................ 2,591 1,714
Computer equipment...................................... 11,304 4,810
------- -------
23,601 10,987
Less accumulated depreciation...................... (9,981) (4,672)
------- -------
Property and equipment, net............................. $13,620 $ 6,315
======= =======
</TABLE>

(4) INTANGIBLE ASSETS

Other assets include certain intangible assets that were acquired as part
of the Studio acquisition in August 1998. The following table summarizes the
cost and accumulated amortization of intangible assets at December 31, 1998:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
(IN THOUSANDS) -----------
<S> <C> <C>
Marketing assets and customer lists........... $ 3,800 7 Years
Assembled work force.......................... 1,600 5-7 Years
Goodwill...................................... 9,015 7 Years
-------
14,415
Less accumulated amortization............... (686)
-------
Intangible assets, net........................ $13,729
=======
</TABLE>

(5) BANK LOAN

Sapient has a $5,000,000 loan facility with a bank which expires on June
30, 2000. Borrowings under this agreement bear interest at the bank's prime
rate. Sapient had no borrowings under this facility at December 31, 1998 or
1997. The facility contains various financial covenants, including limitations
on the payment of cash dividends and maintenance of certain financial ratios.

31
<PAGE> 34
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal, current.............................. $11,768 $5,220 $3,951
State, current................................ 3,529 1,697 1,015
------- ------ ------
15,297 6,917 4,966
Foreign, deferred............................. (382) -- --
Federal, deferred............................. (4,902) 647 (924)
State, deferred............................... (1,353) 139 (106)
------- ------ ------
(6,637) 786 (1,030)
------- ------ ------
Income tax expense............................ $ 8,660 $7,703 $3,936
======= ====== ======
</TABLE>

Income tax expense for the years ended December 31, 1998, 1997 and 1996
differed from the amounts computed by applying the U.S. statutory income tax
rate to pre-tax income as a result of the following:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory income tax rate............................ 35.0% 35.0% 35.0%
State income taxes, net of federal benefit........... 6.3 6.0 5.7
Tax exempt interest.................................. (4.1) (3.3) (2.6)
Other, net........................................... 1.5 0.7 (0.3)
---- ---- ----
Effective income tax rate............................ 38.7% 38.4% 37.8%
==== ==== ====
</TABLE>

At December 31, 1998 and 1997, deferred income tax assets and liabilities
resulted from reporting differences in the recognition of income and expense for
income tax and financial reporting purposes. The sources and tax effects of
these temporary differences are presented below:

<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Deferred revenue................................. $ 2,831 $ 1,855
Allowance for doubtful accounts.................. 223 60
Accrual for compensation......................... -- 390
Other accruals................................... 947 745
Property and equipment........................... 745 548
In-process research and development.............. 4,399 --
Goodwill and other intangibles................... 148 --
Foreign NOL...................................... 382 --
------- -------
Total gross deferred income tax assets...... $ 9,675 $ 3,598
======= =======
Deferred income tax liabilities:
Deferred taxes relating to the use of cash method
of accounting for tax purposes prior to
1996........................................ $ (773) $(1,309)
Unbilled revenue................................. (4,170) (3,652)
Other accruals................................... -- (543)
------- -------
Total gross deferred income tax
liabilities............................... $(4,943) $(5,504)
------- -------
Net deferred income tax
assets/(liabilities)...................... $ 4,732 $(1,906)
======= =======
</TABLE>

In assessing the realizability of deferred income tax assets, Sapient
considers whether it is more likely than not that some portion or all of the
deferred income tax assets will not be realized. Due to the fact that Sapient
has sufficient taxable income in the federal carryback period and anticipates
sufficient future taxable

32
<PAGE> 35
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

income over the periods in which deferred income tax assets are deductible, the
ultimate realization of deferred income tax assets for federal and state income
tax purposes appears more likely than not.

Total income tax expense for the years ended December 31, 1998, 1997 and
1996 was allocated as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes from continuing operations........ $8,660 $7,703 $3,936
Stockholders' equity, for compensation expense
for tax purposes in excess of amounts
recognized for financial statement
purposes..................................... (1,654) (1,034) (108)
------ ------ ------
$7,006 $6,669 $3,828
====== ====== ======
</TABLE>

Total income taxes paid in 1998, 1997 and 1996 were approximately
$12,383,000, $6,179,000 and $2,838,000, respectively.

(7) COMMITMENTS AND CONTINGENCIES

Sapient maintains its executive office in Massachusetts and operating
offices in several locations throughout the United States and abroad. Sapient
also leases office equipment under various operating leases. Future minimum
rental commitments under all noncancelable operating leases with initial or
remaining terms in excess of one year were as follows at December 31, 1998:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1999........................................................ $11,193
2000........................................................ 11,458
2001........................................................ 11,402
2002........................................................ 11,292
2003........................................................ 11,479
Thereafter.................................................. 26,110
</TABLE>

Rent expense for the years ended December 31, 1998, 1997 and 1996 was
approximately $8,843,000, $3,996,000, and $3,144,000, respectively.

Sapient has issued letters of credit with a bank in the aggregate amount of
$975,000 as security deposits for certain of its lease commitments.

Sapient has certain contingent liabilities that arise in the ordinary
course of its business activities. Sapient accrues contingent liabilities when
it is probable that future expenditures will be made and such expenditures can
be reasonably estimated.

Sapient is in arbitration with a former employee who alleges breach of
certain contractual and other violations resulting from his termination as an
employee. Management denies that it breached any obligations or duties to this
former employee, and believes that Sapient has meritorious defenses. Sapient is
vigorously contesting these claims. Although Sapient does not expect the claims
to have a material adverse effect on its business, results of operations or
financial condition, an adverse judgment or settlement could have a material
adverse effect on the operating results reported by Sapient for the period in
which any such adverse judgment or settlement occurs.

33
<PAGE> 36
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) STOCK PLANS

(a) 1992 Stock Option Plan

During 1992, Sapient approved the 1992 Stock Plan (the "1992 Plan") for its
employees. The 1992 Plan provided for the Board of Directors to grant stock
options, stock purchase authorizations and stock bonus awards up to an aggregate
of 5,000,000 shares of non-voting Common Stock. Since consummation of its
initial public offering of Common Stock in April 1996, no further grants or
awards may be made pursuant to the 1992 Stock Plan (but previously outstanding
awards remain outstanding but are exercisable for voting Common Stock).

Most stock options granted under the 1992 Plan qualify as Incentive Stock
Options ("ISO") under Section 422 of the Internal Revenue Code. The price at
which shares may be purchased with an option was specified by the Board at the
date the option was granted, but in the case of an ISO, was not less than the
fair market value of Sapient's Common Stock on the date of grant. The duration
of any option was specified by the Board, but no option designated as an ISO can
be exercised beyond ten years from the date of grant. Stock options granted
under the 1992 Plan generally become exercisable over a four-year period, are
nontransferable, and expire six years after the date of grant (subject to
earlier termination in the event of the termination of the optionee's employment
or other relationship with Sapient).

(b) 1996 Equity Stock Incentive Plan

Sapient's 1996 Equity Stock Incentive Plan (the "1996 Plan") authorizes the
Company to grant options to purchase Common Stock, to make awards of restricted
Common Stock, and to issue certain other equity-related awards to employees and
directors of, and consultants to, Sapient. The total number of shares of Common
Stock which may be issued under the 1996 Plan is 4,800,000 shares. The 1996 Plan
is administered by the Compensation Committee of the Board of Directors, which
selects the persons to whom stock options and other awards are granted and
determines the number of shares, the exercise or purchase prices, the vesting
terms and the expiration dates of options granted. Non-qualified stock options
may be granted at exercise prices which are above, equal to or below the grant
date fair market value of the Common Stock. The exercise price of options
qualifying as Incentive Stock Options may not be less than the grant date fair
market value of the Common Stock. Stock options granted under the 1996 Plan are
nontransferable, generally become exercisable over a four-year period and expire
ten years after the date of grant (subject to earlier termination in the event
of the termination of the optionee's employment or other relationship with
Sapient).

Sapient's 1996 Employee Stock Purchase Plan (the "Purchase Plan")
authorizes the issuance of up to 660,000 shares of Common Stock to participating
employees through a series of semi-annual offerings. The maximum number of
shares available in each offering is 50,000 shares (plus any unpurchased shares
available from previous offerings) for the first six offerings, and 60,000
shares (plus any unpurchased shares available from previous offerings) for the
next six offerings. An employee becomes eligible to participate in the Purchase
Plan when he or she is regularly employed by Sapient for at least 20 hours a
week and for more than five months in a calendar year on the first day of the
applicable offering. The price at which employees may purchase Common Stock in
an offering is 85 percent of the closing price of the Common Stock on the Nasdaq
National Market on the day the offering commences or on the day the offering
terminates, whichever is lower. Approximately 61 percent of eligible employees
participated in the two offerings under the Purchase Plan during the year ended
December 31, 1998. Approximately 57 percent of eligible employees participated
in the two offerings under the Purchase Plan during the year ended December 31,
1997. Approximately 70 percent of eligible employees participated in the first
offering under the Purchase Plan, which terminated on December 31, 1996. Under
the Purchase Plan, Sapient sold 105,634, 93,628 and 33,830 shares of Common
Stock in 1998, 1997 and 1996, respectively.

34
<PAGE> 37
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(d) 1996 Directors Stock Option Plan

Sapient's 1996 Directors Stock Option Plan (the "Directors Plan")
authorizes the issuance of 60,000 shares of Common Stock. Each non-employee
director elected to the Board of Directors after the adoption of the Directors
Plan will, upon his or her election, automatically be granted an option to
purchase 10,000 shares of Common Stock at an exercise price equal to the grant
date fair market value of Sapient's Common Stock. Options granted pursuant to
the Directors Plan vest in four equal annual installments commencing on the
first anniversary of the date of grant and generally expire ten years after the
date of grant. As of December 31, 1998 and 1997, no options had been granted
under the Directors Plan.

(e) 1998 Stock Incentive Plan

Sapient's 1998 Equity Stock Incentive Plan (the "1998 Plan") authorizes
Sapient to grant options to purchase Common Stock, to make awards of restricted
Common Stock, and to issue certain other equity-related awards to employees and
directors of, and consultants to, Sapient. The total number of shares of Common
Stock which may be issued under the 1998 Plan is 2,000,000 shares. The 1998 Plan
is administered by the Compensation Committee of the Board of Directors, which
selects the persons to whom stock options and other awards are granted and
determines the number of shares, the exercise or purchase prices, the vesting
terms and the expiration date. Non-qualified stock options may be granted at
exercise prices which are above, equal to or below the grant date fair market
value of the Common Stock. The exercise price of options qualifying as Incentive
Stock Options may not be less than the grant date fair market value of the
Common Stock. Stock options granted under the 1998 Plan are nontransferable,
generally become exercisable over a four-year period and expire ten years after
the date of grant (subject to earlier termination in the event of the
termination of the optionee's employment or other relationship with Sapient). As
of December 31, 1998, no options had been granted under the 1998 Plan.

A summary of the status of Sapient's four fixed stock option plans as of
December 31, 1998, 1997 and 1996 and changes during the years then ended is
presented below:

<TABLE>
<CAPTION>
1998 1997 1996
----------------- ------------------ -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
- --------------------------------------------- ------ -------- ------ --------- ------ --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year............. 4,383 $14.49 2,982 $ 5.14 3,018 $ 0.75
Granted...................................... 2,422 $39.95 2,098 $23.59 1,066 $13.18
Exercised.................................... (958) $ 6.65 (608) $ 0.63 (932) $ 0.25
Forfeited.................................... (35) $23.63 (89) $12.27 (170) $ 3.41
------ ------ ------ ------ ------ ------
Outstanding at end of year................... 5,812 $25.70 4,383 $14.49 2,982 $ 5.14
====== ====== ======
Options exercisable at year end.............. 942 755 722
====== ====== ======
Weighted average grant date fair market value
of options granted during the year......... $28.41 $12.67 $ 7.16
====== ====== ======
</TABLE>

35
<PAGE> 38
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about fixed stock options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------- ------------------------------------------------- -------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
- ----------------------------- ---------------- ------------------ --------- ---------------- ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$0.00 to $2.50............... 807 2.8 years $ 1.40 418 $ 1.13
$2.51 to $7.00............... 361 3.0 years $ 5.78 77 $ 5.73
$7.01 to $20.00.............. 330 8.0 years $17.31 118 $17.62
$20.01 to $25.00............. 1,092 8.3 years $22.76 294 $22.37
$25.01 to $30.00............. 1,052 8.8 years $26.16 35 $25.90
$30.01 to $35.00............. 181 9.7 years $33.48 -- --
$35.01 to $40.00 844 9.5 years $37.87 -- --
$40.01 to $45.00 871 9.4 years $42.00 -- --
$45.01 to $50.00 186 9.5 years $46.62 -- --
$50.01 to $77.38 88 9.4 years $54.31 -- --
----- ---
$0.00 to $77.38.............. 5,812 7.7 years $25.70 942 $11.14
</TABLE>

Sapient has five stock-based compensation plans, which are described above.
Sapient applies APB Opinion 25 and related interpretations in accounting for its
plans. No compensation has been recognized relative to grants under these plans.
Had compensation cost for the awards under those plans been determined based on
the grant date fair values for awards under those plans consistent with the
method required under SFAS 123, Sapient's net income and net income per share
would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- ------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Net income
As reported............................... $ 13,699 $12,358 $6,470
Pro forma................................. $(11,449) $ 5,274 $5,021
Basic net income per share
As reported............................... $ 0.54 $ 0.52 $ 0.30
Pro forma................................. $ (0.45) $ 0.22 $ 0.23
Diluted net income per share
As reported............................... $ 0.49 $ 0.47 $ 0.27
Pro forma................................. $ (0.45) $ 0.20 $ 0.21
</TABLE>

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1998, 1997 and 1996, respectively: dividend yield
of 0.0 percent for each year, expected volatility of 0.0 percent for the 1992
Plan options and 136.8, 64.8 and 104.9 percent in 1998, 1997 and 1996,
respectively, for the 1996 Plan options, risk free interest rates ranging from
5.0 to 5.25 percent for the 1992 Plan options and 5.0 to 5.7 percent for the
1996 Plan options, and expected lives of 4 years for the 1992 Plan and the 1996
Plan options.

Pro-forma compensation cost related to the Purchase Plan is recognized for
the fair value of the employees' purchase rights, which was estimated using the
Black-Scholes model with the following assumptions for the years ended December
31, 1998, 1997 and 1996: dividend yield of 0.0 percent, expected volatility of
136.8, 64.8 and 67.5 percent, respectively, risk free interest rate ranging from
5.7 to 5.0 percent and expected life of 6 months.

Pro forma net income derived as a result of applying SFAS 123 may not be
representative of the effects on reported net income for future years.

36
<PAGE> 39
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) SEGMENT REPORTING AND SIGNIFICANT CUSTOMERS

Sapient engages in business activities in one operating segment which
provides integrated management consulting services, Internet commerce solutions
and systems implementation services on a fixed-fee, fixed time-frame basis. The
chief operating decision-makers are provided information about the revenues
generated in key client industries. The resources needed to deliver Sapient's
services are not separately reported by industry. Sapient's services are
delivered to clients primarily in North America, and Sapient's long-lived assets
are located primarily in North America.

No customer accounted for greater than 10 percent of total revenues in 1998
or 1997. One customer accounted for 15 percent of accounts receivable at
December 31, 1998. No customer accounted for greater than 10 percent of accounts
receivable at December 31, 1997. Two clients accounted for 19 percent and 15
percent respectively, of total revenues in 1996 and 10 percent of accounts
receivable at December 31, 1996.

(10) RETIREMENT PLANS

Sapient established a 401(k) retirement savings plan for employees in June
1994. Under the provisions of the plan, Sapient matches 25 percent of an
employee's contribution, up to a maximum of $1,250 per employee per year. Total
Sapient contributions in 1998, 1997 and 1996 were approximately $957,000,
$520,000 and $356,000, respectively.

(11) PUBLIC OFFERINGS

Sapient completed its initial public offering (IPO) of Common Stock on
April 10, 1996. The IPO resulted in the issuance of 3,390,000 shares of Common
Stock. Proceeds to Sapient, net of underwriting discounts and costs of the
offering, were approximately $32.4 million.

Sapient completed a follow-on public offering of Common Stock on October
29, 1996 which resulted in the issuance of 1,000,000 shares of Common Stock.
Proceeds to Sapient, net of underwriting discounts and costs of the offering,
were approximately $21.7 million.

Sapient completed a follow-on public offering of Common Stock on April 7,
1998 which resulted in the issuance of 653,125 shares of Common Stock. Proceeds
to Sapient, net of underwriting discounts and costs of the offering, were
approximately $29.1 million.

(12) CAPITAL STOCK

(a) Increase in Authorized Common Stock; Conversion of Non-Voting Common

On February 13, 1996, Sapient's Board of Directors authorized an increase
in the authorized number of shares of voting Common Stock to 30,000,000 and
non-voting Common Stock to 10,000,000 and provided that, upon the closing of an
IPO, all shares of non-voting Common Stock then outstanding would be converted
automatically into an equal number of shares of voting Common Stock and the
authorized capitalization of Sapient will consist of 40,000,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock.

At Sapient's Annual Meeting of Stockholders held on May 8, 1998, the
stockholders voted to approve an amendment to Sapient's Amended and Restated
Certificate of Incorporation which increased the number of authorized shares of
Common Stock from 40,000,000 to 100,000,000.

(b) Preferred Stock

On February 13, 1996, the Board of Directors authorized an amendment to
Sapient's Certificate of Incorporation giving the Board the authority to issue
up to 5,000,000 shares, $0.01 par value, of Preferred Stock with terms to be
established by the Board at the time of issuance.

37
<PAGE> 40
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(13) ACQUISITIONS

Sapient allocated values to the in-process research and development
projects by identifying significant research projects for which technological
feasibility had not been established, including development, engineering and
testing activities associated with the introduction of Studio's Archetype
next-generation enterprise-wide suite of development, scheduling, bug tracking
and content management applications. The integrated solution will be a
comprehensive enterprise scale system, allowing developers and clients to access
prototypes and trial deliverables. It will fully integrate user interface tools
with client server, advanced database and legacy systems.

The rates utilized to discount the net cash flows to their present value
are based on venture capital rates of return. Due to the nature of the forecast
and the risks associated with the projected growth, profitability and
developmental projects, discount rates of 25.0 to 30.0 percent were utilized for
the business enterprise and for the in-process research and development. Sapient
believes that these discount rates are commensurate with Studio's stage of
development, the uncertainties in the economic estimates described above, the
inherent uncertainty surrounding the successful development of the purchased
in-process technology, the useful life of such technology, the profitability
levels of such technology, and, the uncertainty of technological advances that
are unknown at this time.

38
<PAGE> 41
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Sapient expects to continue its support of these efforts and believes
Studio Archetype has a reasonable chance of successfully completing the research
and development programs. However, there is risk associated with the completion
of the projects and there is no assurance that any of the projects will meet
with either technological or commercial success.

If these projects are not successfully developed, the sales and
profitability of Studio Archetype may be adversely affected in future periods.
Additionally, the value of the other intangible assets acquired may become
impaired. Studio expects to benefit from the purchased in-process technology
beginning in 1999.

Other intangible assets of $14.4 million is comprised of $3.8 million for
marketing assets, $1.6 million for assembled work force and approximately $9.0
million of goodwill comprising the reputation of Studio Archetype, all of which
have estimated useful lives of approximately 7 years. However there are no
assurances that the value of these intangible assets acquired will not become
impaired.

Below are the pro forma results of operations for Sapient and Studio
Archetype, assuming that the acquisition of Studio occurred at the beginning of
the twelve-month period ended December 31, 1997.
<TABLE>
<CAPTION>
1998 1997
---------- -----------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)

<CAPTION>
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Net revenues......................................... $170,471 $100,725
Net income........................................... $ 11,961 $ 11,758
Basic net income per share........................... $ 0.45 $ 0.48
Diluted net income per share......................... $ 0.41 $ 0.44
</TABLE>

On December 15, 1997, Sapient issued 611,738 shares of Sapient Common Stock
for all of the outstanding shares of common stock of EXOR, a provider of ERP
implementation services using Oracle applications. This business combination has
been accounted for as a pooling of interests and, accordingly, the Consolidated
Financial Statements for the periods prior to the combination have been restated
to include the accounts and results of operations of EXOR.

(14) RELATED PARTY TRANSACTIONS

The Company has provided technology services to certain start-up companies.
As partial payment for services delivered, Sapient has received non-controlling
equity interests in such start-up companies. Due to the start-up nature of these
entities, Sapient has valued these investments at zero as there is no readily
determinable measure of value based on the underlying operating performance and
future cash flows of the start-up companies. During 1998 Sapient recognized
approximately $2,200,000 in net revenues from consulting services provided to
these companies. In addition, certain members of management of the Company have
provided funding to certain of these companies.

39
<PAGE> 42
SAPIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(15) QUARTERLY FINANCIAL RESULTS

40
<PAGE> 43

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A. Directors

The response to this Item regarding the directors of Sapient and compliance
with Section 16(a) of the Securities Exchange Act of 1934 by Sapient's officers
and directors will be contained in the Proxy Statement for the 1999 Annual
Meeting of Shareholders under the captions "Election of Directors" and "Section
16(a) Beneficial Ownership Reporting Compliance" and is incorporated herein.

B. Executive Officers of Sapient

The response to this Item is contained in Part I, Item 4 herein.

ITEM 11. EXECUTIVE COMPENSATION

The response to this Item will be contained in the Proxy Statement for the
1999 Annual Meeting of Shareholders under the captions "Director Compensation"
and "Compensation of Executive Officers" and is incorporated herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The response to this Item will be contained in the Proxy Statement for the
1999 Annual Meeting of Shareholders under the caption "Security Ownership of
Certain Beneficial Owners and Management" and is incorporated herein.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The response to this Item will be contained in the Proxy Statement for the
1999 Annual Meeting of Shareholders under the caption "Compensation of Executive
Officers" and is incorporated herein.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

14(a)(1) Financial Statements

The Consolidated Financial Statements filed as part of this report are
listed and indexed on page 22. Schedules other than those listed in the index
have been omitted because they are not applicable or the required information
has been included elsewhere in this report.

14(a)(2) Consolidated Financial Statement Schedules

All schedules for which provision is made in the applicable regulations of
the Securities and Exchange Commission have been omitted because the information
is disclosed in the Consolidated Financial Statements or because such schedules
are not required or are not applicable.

14(a)(3) Exhibits

The exhibits filed as part of this Annual Report on Form 10-K are listed in
the Exhibit Index immediately preceding the exhibits. Sapient has identified in
the Exhibit Index each management contract and compensation plan filed as an
exhibit to this Annual Report on Form 10-K in response to Item 14(c) of Form
10-K.

41
<PAGE> 44

14(b) Reports on Form 8-K

On November 4, 1998, Sapient filed an amendment to the Current Report on
Form 8-K that it filed on August 31, 1998 in connection with the acquisition of
Studio Archetype, providing the disclosure required under Item 7 (Financial
Statements, Pro Forma Financial Information and Exhibits). Sapient filed the
following financial statements with the Amended Current Report on Form 8-K:

Report of Independent Accountants

Studio Archetype, Inc. Balance Sheet as of December 31, 1997

Studio Archetype, Inc. Statement of Operations for the year ended December
31, 1997

Studio Archetype, Inc. Statement of Shareholder's Equity for the year ended
December 31, 1997

Studio Archetype, Inc. Statement of Cash Flows for the year ended December
31, 1997

Studio Archetype, Inc. Notes to Financial Statements

Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1998

Pro Forma Condensed Consolidated Statement of Operations for the six months
ended June 30, 1988

Pro Forma Combined Condensed Consolidated Statement of Operations for the
year ended December 31, 1997

Notes to the Pro Forma Combined Condensed Financial Statements

42
<PAGE> 45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

SAPIENT CORPORATION

By: /s/ JERRY A. GREENBERG
------------------------------------
JERRY A. GREENBERG
CO-CHIEF EXECUTIVE OFFICER

Dated: March 10, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the following capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

PRINCIPAL EXECUTIVE OFFICERS:

/s/ JERRY A. GREENBERG Co-Chief Executive Officer and March 10, 1999
- --------------------------------------------------- Secretary
JERRY A. GREENBERG

/s/ J. STUART MOORE Co-Chief Executive Officer March 10, 1999
- ---------------------------------------------------
J. STUART MOORE

PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:

/s/ SUSAN D. JOHNSON Chief Financial Officer and March 10, 1999
- --------------------------------------------------- Treasurer
SUSAN D. JOHNSON

DIRECTORS:

/s/ JERRY A. GREENBERG March 10, 1999
- ---------------------------------------------------
JERRY A. GREENBERG

/s/ J. STUART MOORE March 10, 1999
- ---------------------------------------------------
J. STUART MOORE

/s/ R. STEPHEN CHEHEYL March 10, 1999
- ---------------------------------------------------
R. STEPHEN CHEHEYL

/s/ DARIUS W. GASKINS, JR. March 10, 1999
- ---------------------------------------------------
DARIUS W. GASKINS, JR.

/s/ BRUCE D. PARKER March 10, 1999
- ---------------------------------------------------
BRUCE D. PARKER

/s/ CARL S. SLOANE March 10, 1999
- ---------------------------------------------------
CARL S. SLOANE
</TABLE>

43
<PAGE> 46

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
3.1+ Amended and Restated Certificate of Incorporation
3.2** Certificate of Amendment of the Amended and Restated
Certificate of Incorporation
3.3+ Amended and Restated Bylaws
4.1+ Specimen Certificate for Shares of Common Stock, $.01 par
value, of the Company
10.1++ Second Amendment to Lease dated April 1997 between the
Company and One Memorial Drive Limited Partnership, dated
March 30, 1994, as amended December 5, 1995, for offices at
One Memorial Drive, Cambridge, MA
10.2+ Lease between the Company and S.P.N.W. Management Associates
Limited Partnership, dated November 2, 1995, for offices at
10 Exchange Place, Jersey City, NJ
10.3++++ Stock Purchase Agreement by and among Sapient Corporation
and Mark Hallman, Boyd Scroggins, Carolyn R. Waygood and
Charles M. Waygood dated as of December 4, 1997
10.4+++++ Stock Purchase Agreement by and Among Sapient Corporation,
the Principal Stockholders of Studio Archetype, Inc. and
Clement Mok (as Exchange Agent) dated as of August 25, 1998
10.5++ Assignment and Assumption of 101 California Lease dated as
of December 9, 1996 between the Company and Tri Valley
Growers, for offices at 101 California Street, San
Francisco, CA
10.6++ Sublease dated as of December 20, 1996 between the Company
and Dreman Value Advisors, Inc. for offices located at 10
Exchange Place, Jersey City, NJ
10.7++ Sublease dated August 6, 1997 between the Company and Fleet
Bank, N.A. for offices located at 10 Exchange Place, Jersey
City, NJ
10.8++ Sub-Sublease Agreement between the Company and Metro
Provider Service Corporation dated as of April 1, 1997, for
office space at 200 West Adams, Chicago IL
10.9*+ 1992 Stock Plan
10.10*+ 1996 Equity Stock Incentive Plan
10.11*+ 1996 Director Stock Option Plan
10.12++ 1997 Executive Bonus Plan
10.13*** 1998 Performance Incentive Plan
10.14*** 1998 Stock Incentive Plan
10.15+ Revolving Loan Facility with Fleet Bank of Massachusetts,
N.A., dated July 11, 1994, as amended July 1, 1995 and
February 15, 1996
10.16++ Amendment dated June 30, 1997 to the Revolving Loan Facility
with Fleet Bank of Massachusetts, N.A., dated July 11, 1994,
as amended July 1, 1995 and February 15, 1996
10.17** Amendment dated October 13, 1998 to the Revolving Loan
Facility with Fleet Bank of Massachusetts, N.A., dated July
11, 1994, as amended July 1, 1995, February 15, 1996 and
June 30, 1997
11** Computation of Shares used in Computing Basic and Diluted
Net Income Per Share
21** List of Subsidiaries
23** Consent of KPMG Peat Marwick LLP
27** Financial Data Schedule
</TABLE>

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

* Exhibits previously filed pursuant to Item 14(c) of Form 10-K.

** Exhibits filed herewith.

*** Exhibits filed herewith and pursuant to Item 14(c) of Form 10-K.

+ Incorporated herein by reference to the Company's Registration Statement
on Form S-1 (File No. 333-1586).

++ Incorporated herein by reference to the Company's Form 10-Q for the fiscal
quarter ended September 30, 1997
(File No. 000-28074)

+++ Incorporate herein by reference to the Company Form 10-Q for the fiscal
quarter ended March 31, 1997
(File No. 000-28074)

++++ Incorporated herein by reference to the Company's Form 8-K dated December
15, 1997
(File No. 000-28074)

+++++ Incorporated herein by reference to the Company's Form 8-K dated August
25, 1998
(File No. 000-28074)

<PAGE> 1

Exhibit 3.2

CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SAPIENT CORPORATION

Pursuant to Section 242 of the
General Corporation of Law of
the State of Delaware
------------------------------

SAPIENT CORPORATION (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:

The Board of Directors of the Corporation, pursuant to written action in
lieu of a meeting, duly adopted resolutions, pursuant to Sections 141(f) and 242
of the General Corporation Law, setting forth an amendment to the Amended and
Restated Certificate of Incorporation of the Corporation and declaring said
amendment to be advisable. The stockholders of the Corporation duly approved
said proposed amendment in accordance with Section 242 of the General
Corporation Law at a meeting of stockholders. The resolution setting forth the
amendment is as follows:

RESOLVED: That the first paragraph of Article FOURTH of the Amended and
Restated Certificate of Incorporation of the Corporation be and
hereby is deleted in its entirety and the following new first
paragraph of Article FOURTH shall be inserted in lieu thereof:

"FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is one
hundred five million (105,000,000) shares, consisting of (i) one
hundred million (100,000,000) shares of Common Stock, $.01 par
value per share ("Common Stock"), and (ii) five million
(5,000000) shares of Preferred Stock, $.01 par value per share
("Preferred Stock"), which may be issued from time to time in one
or more series as set forth in Part B of this Article FOURTH."

<PAGE> 2

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by the undersigned duly authorized officer on this 8th
day of May, 1998.

SAPIENT CORPORATION

By: /s/ Jerry A. Greenberg
--------------------------
Name: Jerry A. Greenberg
Co-Chairman, Co-Chief
Executive Officer and
Secretary

<PAGE> 1
EXHIBIT 10.13

SAPIENT CORPORATION

1998 PERFORMANCE INCENTIVE PLAN

The 1998 Performance Incentive Plan (the "Plan") for the executive
officers and other key employees of Sapient Corporation (the "Company") is as
follows:

A. DEFINITIONS.

For purposes of the Plan, the following terms shall have the meanings
ascribed to them in this Section 1:

a. "Executive Officers" shall mean the executive officers of the
Company designated by the Board of Directors of the Company.

b. "Key Employees" shall mean the individuals involved in the
delivery of client projects who are designated by the Co-Chief Executive
Officers of the Company as eligible to participate in the Plan.

c. "Participant" shall mean any Executive Officer or Key
Employee.

B. BONUS PLAN FOR EXECUTIVE OFFICERS AND KEY EMPLOYEES.

1. PARTICIPANTS.

All Executive Officers and Key Employees of the Company are eligible to
receive cash bonus compensation under the Plan.

2. PLAN OBJECTIONS.

The objectives of the Plan are to:

(a) align all members of the leadership team around the same
objectives;

(b) reward teamwork and joint accountability;

(d) where appropriate, provide an opportunity for rewarding the
achievement of personal objectives.

<PAGE> 2

3. ELEMENTS.

Bonus compensation is based on the achievement of Company as well as
individual goals. The Company will measure each Participant's and the Company's
achievement, as the case may be, of specified goals in five key measurement
areas: client satisfaction, market awareness, financial performance,
organizational goals and personal goals.

The weighting of each of the five measurements will vary for each
Participant, depending on his or her role within the Company. In addition,
depending on a Participant's role in the Company, the achievements of certain
goals may be measured on a Company-wide, industry-specific or individual office
basis.

The Compensation Committee of the Board of Directors, in the case of
the Executive Officers, and the Co-Chief Executive Officers of the Company, in
the case of Key Employees, will determine the target base amount of bonus
compensation payable to each Participant for services provided to the Company
during the fiscal year ending December 31, 1998.

Each Participant's actual bonus compensation will be calculated as
follows:

(a) CLIENT SATISFACTION. Depending on a Participant's role in the
Company, zero to forty percent of a Participant's bonus compensation will be
based on the weighted average of the Company's measurements of client
satisfaction. Also depending on a Participant's role in the Company, the client
satisfaction ratings used to calculate a Participant's bonus compensation may be
those received from clients on a regional, industry-specific or Company-wide
basis.
<PAGE> 3

(b) MARKET AWARENESS. Depending on a Participant's role in the
Company, ten to sixty-five percent of a Participant's bonus compensation will be
based on market awareness ratings. Sixty percent of the market rating will be
based on the results of surveys conducted by outside research firms and forty
percent will be based on the development and marketing of Sapient solutions.
Each Participant shall be entitled to receive a specified percentage from zero
to 120% of the bonus compensation allocable to this measurement based on these
ratings.

(c) FINANCIAL PERFORMANCE. Depending on a Participant's role in
the Company, ten to seventy percent of a Participant's bonus compensation will
be based on the Company's satisfaction of financial goals established by the
Company. The Company has established four financial targets, and fifty percent,
twenty-five percent, fifteen percent and ten percent, respectively, of a
Participant's bonus compensation that is based on financial performance will be
based on the Company's satisfaction of these targets. With respect to each of
the four financial targets, each Participant shall be entitled to receive a
specified percentage from zero to 120% of the bonus compensation allocable to
the specific financial goal, depending on the Company's actual financial
achievement.

(d) ORGANIZATIONAL GOALS. Depending on a Participant's role in the
Company, zero to sixty percent of a Participant's bonus compensation will be
based on the achievement of specified organizational goals to be met on a
Company and individual Participant basis. The Company has established four
organizational goals relating to hiring and retention of employees, office
morale and growth and leadership, the

<PAGE> 4

satisfaction of each of which will account for twenty-five percent of a
Participant's bonus compensation based on these factors. With respect to each of
these four organizational goals, each Participant shall be entitled to receive a
specified percentage from zero to 120% of the bonus compensation allocable to
the specific goal, depending on the Company's or the Participant's individual
performance.

(e) PERSONAL GOALS. Depending on a Participant's role in the
Company, zero to sixty percent of a Participant's bonus compensation will be
based on the achievement of personal goals set by the individual and his or her
immediate supervisor at the beginning of the performance cycle.

4. PAYMENT.

Recoverable draws under the Plan may be made each pay period to
Participants in an amount up to 75% of such Participant's target base bonus
divided by 24 (number of pay periods in year). The balance of any payments to be
made to Participants under the Plan will be made in February 1999.

<PAGE> 1
Exhibit 10.14

SAPIENT CORPORATION

1998 STOCK INCENTIVE PLAN

1. PURPOSE

The purpose of this 1998 Stock Incentive Plan (the "Plan") of Sapient
Corporation, a Delaware corporation (the "Company"), is to advance the interests
of the Company's stockholders by enhancing the Company's ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and performance-based incentives and thereby better aligning the
interests of such persons with those of the Company's stockholders. Except where
the context otherwise requires, the term "Company" shall include any present or
future subsidiary corporations of Sapient Corporation as defined in Section
424(f) of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder (the "Code").

2. ELIGIBILITY

All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".

3. ADMINISTRATION, DELEGATION

(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by the
Board of Directors of the Company (the "Board"). The Board shall have authority
to grant Awards and to adopt, amend and repeal such administrative rules,
guidelines and practices relating to the Plan as it shall deem advisable. The
Board may correct any defect, supply any omission or reconcile any inconsistency
in the Plan or any Award in the manner and to the extent it shall deem expedient
to carry the Plan into effect and it shall be the sole and final judge of such
expediency. All decisions by the Board shall be made in the Board's sole
discretion and shall be final and binding on all persons having or claiming any
interest in the Plan or in any Award. No director or person acting pursuant to
the authority delegated by the Board shall be liable for any action or
determination relating to or under the Plan made in good faith.

(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by applicable law,
the Board may delegate to one or more executive officers of the Company the

<PAGE> 2

power to make Awards and exercise such other powers under the Plan as the Board
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.

(c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law, the
Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.

4. STOCK AVAILABLE FOR AWARDS

(a) NUMBER OF SHARES. Subject to adjustment under Section 8, Awards may be made
under the Plan for up to 2,000,000 shares of common stock, $0.01 par value per
share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.

(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 8, the maximum
number of shares of Common Stock with respect to which an Award may be granted
to any Participant under the Plan shall be 500,000 per calendar year. The
per-Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.

5. STOCK OPTIONS

(a) GENERAL. The Board may grant options to purchase Common Stock (each, an
"Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".

<PAGE> 3
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.

(c) EXERCISE PRICE. The Board shall establish the exercise price at the time
each Option is granted and specify it in the applicable option agreement.

(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
option agreement; provided, however, that no Option will be granted for a term
in excess of 10 years.

(e) EXERCISE OF OPTION. Options may be exercised by delivery to the Company of a
written notice of exercise signed by the proper person or by any other form of
notice (including electronic notice) approved by the Board together with payment
in full as specified in Section 5(f) for the number of shares for which the
Option is exercised.

(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an Option
granted under the Plan shall be paid for as follows:

(i) in cash or by check, payable to the order of the Company;

(ii) except as the Board may, in its sole discretion, otherwise provide
in an option agreement, (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price, (ii) delivery by the Participant to
the Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price, or (iii) delivery of shares of Common
Stock owned by the Participant valued at their fair market value as determined
by (or in a manner approved by) the Board in good faith ("Fair Market Value"),
which Common Stock was owned by the Participant at least six months prior to
such delivery;

(iii) to the extent permitted by the Board, in its sole discretion (i)
by delivery of a promissory note of the Participant to the Company on terms
determined

<PAGE> 4

by the Board, or (ii) by payment of such other lawful consideration as the Board
may determine; or

(iv) any combination of the above permitted forms of payment.

6. RESTRICTED STOCK

(a) GRANTS. The Board may grant Awards entitling recipients to acquire shares of
Common Stock, subject to the right of the Company to repurchase all or part of
such shares at their issue price or other stated or formula price (or to require
forfeiture of such shares if issued at no cost) from the recipient in the event
that conditions specified by the Board in the applicable Award are not satisfied
prior to the end of the applicable restriction period or periods established by
the Board for such Award (each, "Restricted Stock Award").

(b) TERMS AND CONDITIONS. The Board shall determine the terms and conditions of
any such Restricted Stock Award, including the conditions for repurchase (or
forfeiture) and the issue price, if any. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.

7. OTHER STOCK-BASED AWARDS

The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.

8. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS

(a) CHANGES IN CAPITALIZATION. In the event of any stock split, reverse stock
split, stock dividend, recapitalization, combination of shares, reclassification
of shares, spin-off or other similar change in capitalization or event, or any
distribution to holders of Common Stock other than a normal cash dividend, (i)
the number and class of

<PAGE> 5

securities available under this Plan, (ii) the per-Participant limit set forth
in Section 4(b), (iii) the number and class of securities and exercise price per
share subject to each outstanding Option, (iv) the repurchase price per share
subject to each outstanding Restricted Stock Award, and (v) the terms of each
other outstanding Award shall be appropriately adjusted by the Company (or
substituted Awards may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or substitution) is necessary
and appropriate. If this Section 8(a) applies and Section 8(c) also applies to
any event, Section 8(c) shall be applicable to such event, and this Section 8(a)
shall not be applicable.

(b) LIQUIDATION OR DISSOLUTION. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.

9. ACQUISITION EVENTS

(a) DEFINITION. An "Acquisition Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of which
the Common Stock is converted into or exchanged for the right to receive cash,
securities or other property or (b) any exchange of shares of the Company for
cash, securities or other property pursuant to a statutory share exchange
transaction.

(b) CONSEQUENCES OF AN ACQUISITION EVENT ON OPTIONS. Upon the occurrence of an
Acquisition Event, or the execution by the Company of any agreement with respect
to an Acquisition Event, the Board shall provide that all outstanding Options
shall be assumed, or equivalent options shall be substituted, by the acquiring
or succeeding corporation (or an affiliate thereof), provided that any options
substituted for Incentive Stock Options shall satisfy, in the determination of
the Board, the requirements of Section 424(a) of the Code. Notwithstanding the
foregoing, if the acquiring or succeeding corporation (or an affiliate thereof)
does not agree to assume, or substitute for, such Options, then the Board shall,
upon written notice to the Participants, provide that all then unexercised
Options will become exercisable in full as of a specified time (the
"Acceleration Time") prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by the Participants before the consummation of such Acquisition
Event; provided, however, that in the event of an Acquisition Event under the
terms of

<PAGE> 6

which holders of Common Stock will receive upon consummation thereof a cash
payment for each share of Common Stock surrendered pursuant to such Acquisition
Event (the "Acquisition Price"), then the Board may instead provide that all
outstanding Options shall terminate upon consummation of such Acquisition Event
and that each Participant shall receive, in exchange therefor, a cash payment
equal to the amount (if any) by which (A) the Acquisition Price multiplied by
the number of shares of Common Stock subject to such outstanding Options
(whether or not then exercisable), exceeds (B) the aggregate exercise price of
such Options.

(c) CONSEQUENCES OF AN ACQUISITION EVENT ON RESTRICTED STOCK AWARDS. Upon the
occurrence of an Acquisition Event, the repurchase and other rights of the
Company under each outstanding Restricted Stock Award shall inure to the benefit
of the Company's successor and shall apply to the cash, securities or other
property which the Common Stock was converted into or exchanged for pursuant to
such Acquisition Event in the same manner and to the same extent as they applied
to the Common Stock subject to such Restricted Stock Award.

(d) CONSEQUENCES OF AN ACQUISITION EVENT ON OTHER AWARDS. The Board shall
specify the effect of an Acquisition Event on any other Award granted under the
Plan at the time of the grant of such Award.

10. GENERAL PROVISIONS APPLICABLE TO AWARDS

(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise determine or
provide in an Award, Awards shall not be sold, assigned, transferred, pledged or
otherwise encumbered by the person to whom they are granted, either voluntarily
or by operation of law, except by will or the laws of descent and distribution,
and, during the life of the Participant, shall be exercisable only by the
Participant. References to a Participant, to the extent relevant in the context,
shall include references to authorized transferees.

(b) DOCUMENTATION. Each Award shall be evidenced by a written instrument in such
form as the Board shall determine. Each Award may contain terms and conditions
in addition to those set forth in the Plan.

(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each Award may
be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly.

(d) TERMINATION OF STATUS. The Board shall determine the effect on an Award of
the disability, death, retirement, authorized leave of absence or other change
in

<PAGE> 7

the employment or other status of a Participant and the extent to which, and the
period during which, the Participant, the Participant's legal representative,
conservator, guardian or Designated Beneficiary may exercise rights under the
Award.

(e) WITHHOLDING. Each Participant shall pay to the Company, or make provision
satisfactory to the Board for payment of, any taxes required by law to be
withheld in connection with Awards to such Participant no later than the date of
the event creating the tax liability. Except as the Board may otherwise provide
in an Award, Participants may satisfy such tax obligations in whole or in part
by delivery of shares of Common Stock, including shares retained from the Award
creating the tax obligation, valued at their Fair Market Value. The Company may,
to the extent permitted by law, deduct any such tax obligations from any payment
of any kind otherwise due to a Participant.

(f) AMENDMENT OF AWARD. The Board may amend, modify or terminate any outstanding
Award, including but not limited to, substituting therefor another Award of the
same or a different type, changing the date of exercise or realization, and
converting an Incentive Stock Option to a Nonstatutory Stock Option, provided
that the Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.

(g) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.

(h) ACCELERATION. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of restrictions in full or in part or that any other Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.

11. MISCELLANEOUS

<PAGE> 8

(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim or
right to be granted an Award, and the grant of an Award shall not be construed
as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.

(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable Award,
no Participant or Designated Beneficiary shall have any rights as a stockholder
with respect to any shares of Common Stock to be distributed with respect to an
Award until becoming the record holder of such shares. Notwithstanding the
foregoing, in the event the Company effects a split of the Common Stock by means
of a stock dividend and the exercise price of and the number of shares subject
to such Option are adjusted as of the date of the distribution of the dividend
(rather than as of the record date for such dividend), then an optionee who
exercises an Option between the record date and the distribution date for such
stock dividend shall be entitled to receive, on the distribution date, the stock
dividend with respect to the shares of Common Stock acquired upon such Option
exercise, notwithstanding the fact that such shares were not outstanding as of
the close of business on the record date for such stock dividend.

(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on the date
on which it is adopted by the Company's stockholders. No Awards shall be granted
under the Plan after March 24, 2008, but Awards previously granted may extend
beyond that date.

(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that to the extent required by Section
162(m), no Award granted to a Participant designated as subject to Section
162(m) by the Board after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award (to the extent that such
amendment to the Plan was required to grant such Award to a particular
Participant), unless and until such amendment shall have been approved by the
Company's stockholders as required by Section 162(m) (including the vote
required under Section 162(m)).

(e) GOVERNING LAW. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law.

<PAGE> 1

Exhibit 10.17

[FLEET LETTERHEAD]

October 13th, 1998

Mr. Michael Todisco
Sapient Corporation
One Memorial Drive
Cambridge, MA 02142

Dear Mike:

Reference is hereby made to the Letter Agreement by and between Sapient
Corporation, Inc. ("Sapient" or the "Borrower") and Fleet National Bank (the
"Bank") as successor in interest to Fleet Bank of Massachusetts, N.A. dated July
14, 1994 and amended by the Loan Modification Agreement made as of July 1, 1995,
February 15, 1998, June 30, 1997 and our letter of March 16, 1998.

We are pleased to inform you that Fleet National Bank (the "Bank") has approved
the renewal of the $5,000,000 line of credit to Sapient Corporation (the
"Borrower") through June 30th, 2000 subject to the existing terms and
conditions. Please sign below to indicate your acceptance of these terms. Upon
receipt of your acceptance of this commitment letter and the attached Allonge to
the Promissory Note, these terms shall become effective. This commitment shall
expire unless accepted by October 30th, 1998.

The Borrower represents and warrants that the execution of this commitment
letter has been duly authorized by the Borrower by all necessary corporate and
other action and that the execution will not conflict with, violate the
provisions of, or cause a default or constitute an event which, with passage of
time or giving of notice or both, could cause a default on the part of the
Borrower under its charter documents or by-laws or under any contract,
agreement, law, rule, order, ordinance, franchise, instrument or other document,
or result in the imposition of any lien or encumbrance on any property or asset
of the Borrower. In addition, the statements, representations and warranties
made in the Agreement continue to be correct as of the date hereof and the
Borrower is in compliance with all terms of the Agreement. Except as expressly
affected hereby, the Agreement remains in full force and effect as heretofore.

Sincerely,
Fleet National Bank

/s/ Olaperi Onipede

Olaperi Onipede Agreed and Accepted: /s/ Michael J. Todisco
Vice President -------------------------
High Technology Division by: Michael J. Todisco
title: Director of Finance
date: 10/14/98

<PAGE> 2

ALLONGE TO PROMISSORY NOTE

The maturity date of the attached Promissory Note dated February 16, 1996 for
$5,000,000 is hereby extended to June 30, 2000, from June 30, 1998.

This Allonge will be governed by the terms and conditions of the Letter
Agreement made as of the 14th day of July, 1994 (as amended as of July 1, 1995,
February 16, 1996, June 30, 1997 and March 16, 1998) by and between Sapient
Corporation and Fleet National Bank as successor to Fleet Bank of Massachusetts,
N.A. Nothing herein shall be deemed to constitute a waiver, release or amendment
of any terms of the Agreement.

/s/ /s/ Michael J. Todisco
- ---------------------- --------------------------
Witness Name: Michael J. Todisco
Title: Director of Finance
Sapient Corporation
Date: 10/14/97
-----------

/s/ Olaperi Onipede
- ---------------------- --------------------------
Witness Olaparl Onipade
Vice President
Fleet National Bank,
Date: 10/15/98
-----------

<PAGE> 1
EXHIBIT 11.1

SAPIENT CORPORATION

Article 6.01 of Regulation S-K

COMPUTATION OF SHARES USED IN COMPUTING BASIC AND DILUTED NET INCOME PER SHARE
<TABLE>
<CAPTION>

THREE MONTHS ENDED YEARS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income ............................ $ 6,011,897 $ 3,236,433 $13,699,231 $12,358,483
Basic net income per share:
Weighted average common shares
outstanding .................... 26,151,105 24,175,694 25,323,357 23,996,108
Shares used in computing per share
amount ......................... 26,151,105 24,175,694 25,323,357 23,996,108
----------- ----------- ----------- -----------
Basic net income per share ...... $ 0.23 $ 0.13 $ 0.54 $ 0.52
=========== =========== =========== ===========
Diluted net income per share:
Weighted average common shares
outstanding .................... 26,151,105 24,175,694 25,323,357 23,996,108
Dilutive stock options ........... 2,392,750 2,156,342 2,578,101 2,082,946
----------- ----------- ----------- -----------
Shares used in computing per share
amount ......................... 28,543,855 26,332,036 27,901,458 26,079,054
----------- ----------- ----------- -----------
Diluted net income per share .... $ 0.21 $ 0.12 $ 0.49 $ 0.47
=========== =========== =========== ===========
</TABLE>

<PAGE> 1
EXHIBIT 21

LIST OF SUBSIDIARIES

Exor Technologies, Inc. Texas
Sapient Australia Pty. Ltd. Australia
Sapient Securities Corporation Massachusetts
Sapient Limited United Kingdom
Sapient Services Corporation Delaware
Studio Archetype, Inc. California

<PAGE> 1
Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Sapient Corporation:

We consent to the incorporation by reference on Form 10-K of Sapient
Corporation, of our report dated January 22, 1999, with respect to the
consolidated balance sheets of Sapient Corporation as of December 31, 1998 and
1997, and the related consolidated statements of income and comprehensive
income, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1998, which report appears in the
December 31, 1998 annual report on Form 10-K of Sapient Corporation.

/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP

Boston, Massachusetts
March 16, 1999

<ARTICLE> 5

<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> DEC-31-1998 DEC-31-1998
<CASH> 38,759,584 38,759,584
<SECURITIES> 52,500,357 52,500,357
<RECEIVABLES> 52,389,099 52,389,099
<ALLOWANCES> 550,000 550,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 150,761,504 150,761,504
<PP&E> 23,600,995 23,600,995
<DEPRECIATION> 9,980,941 9,980,941
<TOTAL-ASSETS> 184,912,847 184,912,847
<CURRENT-LIABILITIES> 24,457,744 24,457,744
<BONDS> 0 0
0 0
0 0
<COMMON> 263,160 263,160
<OTHER-SE> 154,118,805 154,118,805
<TOTAL-LIABILITY-AND-EQUITY> 184,912,847 184,912,847
<SALES> 52,453,623 160,371,644
<TOTAL-REVENUES> 52,453,623 160,371,644
<CGS> 25,437,012 77,564,695
<TOTAL-COSTS> 43,271,139 140,969,578
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 724,101 2,956,735
<INCOME-PRETAX> 9,906,585 22,358,801
<INCOME-TAX> 3,894,688 8,659,570
<INCOME-CONTINUING> 6,011,897 13,699,231
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,011,897 13,699,231
<EPS-PRIMARY> 0.23 0.54
<EPS-DILUTED> 0.21 0.49

</TABLE>