KEANE INC, DEF 14A, 1997-04-18

KEANE INC
DEF 14A, 1997-04-18
COMPUTER PROGRAMMING SERVICES

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<PAGE>

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
- --------------------------------------------------------------------------------

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-2

Keane, Inc.
(Name of Registrant as Specified In Its Charter)

____
__________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

4) Proposed maximum aggregate value of transaction:
5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.

1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>

KEANE, INC.
TEN CITY SQUARE
BOSTON, MASSACHUSETTS 02129

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1997

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

The Annual Meeting of Stockholders of Keane, Inc. (the "Company") will be
held on Wednesday, May 28, 1997 at 4:30 p.m., Boston Time, at the Hale and
Dorr LLP Conference Center, 26th Floor, 60 State Street, Boston,
Massachusetts, to consider and act upon the following matters:

1. To fix the number of directors at five and to elect a Board of
Directors for the ensuing year;

2. To approve an amendment to the Company's Articles of Organization
increasing the number of shares of Common Stock which the Company is
authorized to issue from 50,000,000 to 100,000,000;

3. To approve an amendment to the Company's 1992 Stock Option Plan;

4. To approve an amendment to the Company's 1992 Employee Stock Purchase
Plan;

5. To ratify and approve the selection by the Board of Directors of
Coopers & Lybrand L.L.P. as the Company's independent accountants for the
current year; and

6. To transact such other business as may properly come before the
meeting or any adjournment of the meeting.

Stockholders of record at the close of business on April 1, 1997 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
The stock transfer books of the Company will remain open.

All stockholders are cordially invited to attend the meeting.

By Order of the Board of Directors

Norman B. Asher, Clerk

April 18, 1997

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED
IN THE UNITED STATES.
<PAGE>

KEANE, INC.
TEN CITY SQUARE
BOSTON, MASSACHUSETTS 02129

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

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1997

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

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Keane, Inc. (the "Company") for use at
the Annual Meeting of Stockholders to be held on May 28, 1997, and at any
adjournment of that meeting. All proxies will be voted in accordance with the
instructions contained therein, and if no choice is specified, the proxies
will be voted in favor of the proposals set forth in the accompanying Notice
of Meeting. Any proxy may be revoked by a stockholder at any time before it is
exercised by giving written notice to that effect to the Clerk of the Company.

The Board of Directors has fixed April 1, 1997 as the record date for
determining stockholders who are entitled to vote at the meeting. At the close
of business on April 1, 1997, there were outstanding and entitled to vote
32,619,062 shares of Common Stock of the Company, $.10 par value per share
("Common Stock"), and 287,237 shares of Class B Common Stock of the Company,
$.10 par value per share ("Class B Common Stock"). Each share of Common Stock
is entitled to one vote, and each share of Class B Common Stock is entitled to
ten votes.

THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1996 IS BEING
MAILED TO THE COMPANY'S STOCKHOLDERS WITH THIS NOTICE AND PROXY STATEMENT ON
OR ABOUT APRIL 18, 1997. THE COMPANY WILL, UPON WRITTEN REQUEST OF ANY
STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE ADDRESS ALL SUCH REQUESTS TO THE
COMPANY, ATTENTION OF WALLACE A. CATALDO, VICE PRESIDENT--FINANCE AND
ADMINISTRATION, TEN CITY SQUARE, BOSTON, MASSACHUSETTS 02129. EXHIBITS WILL BE
PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.

As used in this Proxy Statement, the terms "Keane" and the "Company" refer
to Keane, Inc. and its wholly-owned and majority-owned subsidiaries, unless
the context otherwise requires.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of February 1, 1997, the beneficial
ownership of the Company's outstanding Common Stock and Class B Common Stock
of (i) each person known by the Company to own beneficially more than 5% of
the Company's outstanding Common Stock and Class B Common Stock, (ii) each
executive officer named in the Summary Compensation Table under the heading
"Executive Compensation" below, and (iii) all current directors and executive
officers as a group:
<PAGE>

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
--------------------------------------------------
SHARES PERCENTAGE
SHARES PERCENTAGE OF OF CLASS B
OF OF COMMON CLASS B COMMON PERCENTAGE
NAME AND ADDRESS OF COMMON STOCK OUT- COMMON STOCK OUT- OF TOTAL
BENEFICIAL OWNER STOCK STANDING STOCK STANDING VOTES
- ------------------- --------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
John F. Keane(2)............ 4,120,424 12.6% 127,800 44.4% 15.2%
c/o Keane, Inc.
Ten City Square
Boston, MA 02129
Putnam Investments, Inc.(3). 2,496,484 7.6% -- -- 7.0%
One Post Office Square
Boston, MA 02109
John Francis Keane
Irrevocable Children's
Trusts(4)................... 1,817,500 5.6% 140,000 48.7% 9.1%
c/o Keane, Inc.
Ten City Square
Boston, MA 02129
Albert O. Nicholas
Nicholas Company, Inc.
Nicholas II, Inc.(5)........ 3,561,400 10.9% -- -- 10.0%
700 North Water St.
Milwaukee, WI 53202
Janus Capital Corporation
Thomas H. Bailey
Janus Venture Fund(6)....... 2,080,150 6.4% -- -- 5.9%
100 Fillmore Street
Suite 300
Denver, CO 80206-4923
FMR Corp. .................. 3,566,500 10.9% -- -- 10.0%
82 Devonshire Street
Boston, MA 02109(7)
Edward Longo(8)............. 38,186 * -- -- *
c/o Keane, Inc.
Ten City Square
Boston, MA 02129
Raymond W. Paris(9)......... 160,000 * -- -- *
c/o Keane, Inc.
Ten City Square
Boston, MA 02129
Wallace Cataldo(10)......... 147,772 * -- -- *
c/o Keane, Inc.
Ten City Square
Boston, MA 02129
Brian T. Keane(11).......... 1,923,140 5.9% 141,554 49.1% 10.2%
c/o Keane, Inc.
Ten City Square
Boston, MA 02129
All directors and officers
as a group (10 per-
sons)(12).................. 5,924,335 18.1% 224,242 78.0% 22.9%
</TABLE>

2
<PAGE>

- --------
* Less than 1% of outstanding stock of the respective class, or less than 1%
of aggregate voting power, as the case may be.
(1) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or
shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days of February 1, 1997
through the exercise of any stock option or other right. The inclusion
herein of such shares, however, does not constitute an admission that the
named stockholder is a direct or indirect beneficial owner of such
shares. Unless otherwise indicated, each person or entity named in the
table has sole voting power and investment power (or shares such power
with his spouse) with respect to all shares of capital stock listed as
owned by such person or entity.
(2) Does not include 1,817,500 shares of Common Stock or 140,000 shares of
Class B Common Stock (approximately 9.1% of the aggregate voting power)
held of record by Mr. Keane's wife and one other individual as trustees
of three trusts of which Mr. Keane's children are the beneficiaries. With
regard to these shares, Mrs. Keane and the other trustee have sole voting
and investment power, but disclaim any beneficial interest in such
shares. Subsequent to February 1, 1997, Mr. Keane (i) transferred
1,850,000 shares of Common Stock to a trust of which he and his wife are
each a trustee and his wife is a beneficiary, and (ii) transferred
1,850,000 shares of Common Stock to his wife, which shares were
immediately transferred to a trust of which Mr. Keane and his wife are
each a trustee and his wife is a beneficiary. Mr. Keane disclaims
beneficial ownership of the shares held by the trust referred to in
clause (ii) above.
(3) The information reported is based on a Schedule 13G, dated January 31,
1997, filed with the Securities and Exchange Commission by Putnam
Investments, Inc.
(4) The trustees have sole voting and investment power with respect to these
shares, but disclaim any beneficial interest in such shares.
(5) The information reported is based on a Schedule 13G, dated February 13,
1997, filed with the Securities and Exchange Commission by Albert O.
Nicholas, Nicholas Company, Inc. and Nicholas II, Inc. Mr. Nicholas is
the president, a director and majority shareholder of Nicholas Company,
Inc., in which capacity he exercises dispositive power over the shares
reported by Nicholas Company, Inc. and Nicholas II, Inc. Mr. Nicholas
disclaims any beneficial interest in such shares.
(6) The information reported is based on a Schedule 13G, dated February 13,
1997, filed with the Securities and Exchange Commission by Janus Capital
Corporation, Thomas H. Bailey and Janus Venture Fund.
(7) The information reported is based on a Schedule 13G, dated February 7,
1997, filed with the Securities and Exchange Commission by FMR Corp.
(8) Includes options to purchase, within 60 days following February 1, 1997,
38,186 shares of Common Stock held by Mr. Longo.
(9) Includes options to purchase, within 60 days following February 1, 1997,
33,000 shares of Common Stock held by Mr. Paris.
(10) Includes options to purchase, within 60 days following February 1, 1997,
27,500 shares of Common Stock held by Mr. Cataldo.
(11) Includes options to purchase, within 60 days following February 1, 1997,
30,834 shares of Common Stock held by Mr. Brian Keane. Also includes
1,817,500 shares of Common Stock and 140,000 shares of Class B Common
Stock held by the John Francis Keane Irrevocable Children's Trusts, of
which Mr. Brian Keane is a beneficiary. Mr. Brian Keane disclaims
beneficial ownership of the shares held by the John Francis Keane
Irrevocable Children's Trust, except to the extent of his pecuniary
interest therein.
(12) Includes options to purchase, within 60 days following February 1, 1997,
144,114 shares of Common Stock held by all directors and officers as a
group.

VOTES REQUIRED

The affirmative vote of the holders of a majority of the aggregate voting
power represented by the shares of Common Stock and Class B Common Stock,
voting together as a single class, present or represented at the meeting is
required for the election of directors. The affirmative vote of the holders of
a majority of the aggregate voting power of the shares of Common Stock and
Class B Common Stock outstanding is required for the approval of the proposed
amendment to the Company's Articles of Organization. The affirmative vote of
the

3
<PAGE>

holders of a majority of the aggregate voting power represented by the shares
of Common Stock and Class B Common Stock, voting together as a single class,
present or represented at the meeting is required for the approval of each of
the other matters which are to be submitted to the stockholders at the
meeting.

Shares of Common Stock and Class B Common Stock represented by executed
proxies received by the Company will be counted for purposes of establishing a
quorum at the meeting, regardless of how or whether such shares are voted on
any specific proposal. With respect to the required vote on any particular
matter, abstentions will be treated as shares present and represented, while
votes withheld by nominee recordholders who did not receive specific
instructions from the beneficial owners of such shares (so called "broker non-
votes") will not be treated as shares present or represented.

ELECTION OF DIRECTORS

The persons named in the enclosed proxy (John F. Keane and Norman B. Asher)
will vote to fix the number of directors at five and to elect as directors the
five nominees named below, unless authority to vote for the election of
directors is withheld by marking the proxy to that effect or the proxy is
marked with the name of nominees as to whom authority to vote is withheld. The
proxy may not be voted for more than five directors. All of the nominees are
currently directors of the Company.

Each director will be elected to hold office until the next annual meeting
of stockholders and until his successor is duly elected and qualified. If a
nominee becomes unavailable, the persons acting under the proxy may vote the
proxy for the election of a substitute. The Company does not anticipate that
any of the nominees will be unavailable.

The following table sets forth the name of each nominee for director and
each current director, the positions and offices held by him, his age, the
year in which he became a director of the Company, his principal occupation(s)
and business experience for the past five years, the number of shares of
Common Stock and Class B Common Stock of the Company owned by him at February
1, 1997, and the percentage of all outstanding shares of Common Stock and
Class B Common Stock owned by him on such date:

AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)(2)

4
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL
OCCUPATION, BUSINESS PERCENTAGE SHARES OF PERCENTAGE
EXPERIENCE AND YEAR SHARES OF OF COMMON CLASS B OF CLASS B PERCENTAGE
IN WHICH HE FIRST COMMON STOCK COMMON COMMON STOCK OF TOTAL
BECAME A DIRECTOR STOCK OUTSTANDING STOCK OUTSTANDING VOTES
-------------------- --------- ----------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Winston Hindle.......... 2,000 * -- -- *
Age 66. Mr. Hindle is
currently retired. From
September 1962 to July
1994, Mr. Hindle served
as a Vice President
and, subsequently,
Senior Vice President
of Digital Equipment
Corporation, a computer
systems and services
firm. Mr. Hindle has
served as a director of
the Company since
February 1995. (1995)
John F. Rockart(4)...... 21,801 * -- -- *
Age 65. Dr. Rockart is
a Senior Lecturer of
the Center for
Information Systems
Research at the Alfred
J. Sloan School of
Management of the
Massachusetts Institute
of Technology. Dr.
Rockart became a Senior
Lecturer at the Center
in 1974 and was named
as the Director in
1976. Dr. Rockart has
served as a director of
the Company since its
incorporation. (1967)
Robert A. Shafto........ -- -- -- -- --
Age 61. Mr. Shafto is
the Chairman, Chief
Executive Officer and
President of New
England Life Insurance
Company, an insurance
and investment firm,
which he joined in
1972. Mr. Shafto has
served as a director of
the Company since
February 1994. (1994)
</TABLE>
- --------
* Less than 1% of outstanding stock of the respective class, or less than 1%
of aggregate voting power, as the case may be.
(1) Mr. Hindle serves as a director of CP Clare Corporation and Mestek, Inc.
Dr. Rockart serves as a director of ComShare, Inc. and Renaissance
Solutions, Inc. and Mr. Shafto serves as a director of New England Life
Insurance Company and Fleet Bank of Massachusetts, N.A.
(2) Except as otherwise indicated, each nominee or director has sole voting
and investment power with respect to the shares of Common Stock and Class
B Common Stock listed.
(3) Does not include 1,817,500 shares of Common Stock or 140,000 shares of
Class B Common Stock (approximately 9.1% of the aggregate voting power)
held of record by Mr. Keane's wife and one other individual as trustees of
three trusts of which Mr. Keane's children are the beneficiaries. With
regard to these shares, Mrs. Keane and the other trustee have sole voting
and investment power, but disclaim any beneficial interest in such shares.
Subsequent to February 1, 1997, Mr. Keane (i) transferred 1,850,000 shares
of Common Stock to a trust of which he and his wife are each a trustee and
his wife is a beneficiary, and (ii) transferred 1,850,000 shares of Common
Stock to his wife, which shares were immediately transferred to a trust of
which Mr. Keane and his wife are each a trustee and his wife is a
beneficiary. Mr. Keane disclaims beneficial ownership of the shares held
by the trust referred to in clause (ii) above.
(4) Includes 15,340 shares of Common Stock (less than 1% of the aggregate
voting power) held of record by Dr. Rockart's wife. Dr. Rockart disclaims
any beneficial interest in such shares.

5
<PAGE>

The Company has a standing Audit Committee comprised of Messrs. Keane,
Harkins, Hindle and Shafto and Dr. Rockart which held one meeting during the
year ended December 31, 1996. The Audit Committee makes recommendations to the
Board of Directors relative to the appointment of the independent auditors,
reviews the scope and results of the independent audit, and establishes and
monitors policy relative to non-audit services provided by the independent
auditors in order to ensure that the auditors are in fact independent.

The Company has a standing Compensation Committee comprised of Messrs.
Harkins, Hindle and Shafto and Dr. Rockart. The Compensation Committee held
three meetings during the year ended December 31, 1996. The Compensation
Committee annually reviews and approves the compensation of the Company's
senior executives and administers the Company's 1992 Stock Option Plan and
1992 Employee Stock Purchase Plan.

The Company does not have a standing nominating committee.

During the year ended December 31, 1996, the Board of Directors of the
Company held eight meetings, including written actions in lieu of meetings.
Each of the directors attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors and (ii) the total number of
meetings held by all committees of the Board on which he served, in each case
during the periods that he served.

DIRECTORS' COMPENSATION

Compensation of the Company's non-employee directors currently consists of
an annual director's fee of $4,000 plus $1,000 and expenses for each meeting
of the Board of Directors attended. Directors who are officers or employees of
the Company do not receive any additional compensation for their services as
directors.

6
<PAGE>

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's Chief Executive Officer and
each of the four other most highly compensated executive officers of the
Company for the three years ended December 31, 1996 (such executive officers
are sometimes collectively referred to herein as the "named executive
officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------- ---------------------------------
AWARDS PAYOUTS
------------------------- -------
SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) AWARDS($)(1) (#)(2) ($) ($)(3)
--------- ---- ------- ------ ------------ ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John F. Keane........... 1996 363,850 -- -- -- -- -- 750
President and Chief 1995 341,641 -- -- -- -- -- 2,329
Executive Officer 1994 303,020 -- -- -- -- -- 3,160
Edward Longo............ 1996 283,988 62,500 -- -- 16,000 -- 750
Senior Vice President 1995 257,402 -- -- 20,650 24,000 -- 3,078
1994 223,156 -- -- -- -- -- 3,212
Raymond W. Paris........ 1996 223,369 -- -- -- 10,000 -- 750
Vice President 1995 198,117 -- -- -- 18,000 -- 2,917
Healthcare
Services Division 1994 182,527 -- -- -- -- -- 2,922
Wallace A. Cataldo...... 1996 186,690 25,000 -- -- 10,000 -- 750
Vice President--Finance 1995 177,524 -- -- -- 15,000 -- 2,892
and Administration 1994 157,584 -- -- -- -- -- 2,215
Brian T. Keane.......... 1996 180,488 50,000 -- -- 10,000 -- 750
Senior Vice President 1995 160,201 -- -- 20,650 10,000 -- 2,310
1994 130,141 -- -- -- 7,500 -- 2,309
</TABLE>
- --------
(1) Shares of restricted stock vest in three equal annual installments
commencing on the first anniversary of the date of grant. As of December
31, 1996, the value of all such shares (whether vested or unvested) held
by each of Messrs. Longo and Brian Keane was $63,500.
(2) Options become exercisable in three equal annual installments commencing
on the second anniversary of the date of grant.
(3) "All Other Compensation" consists of contributions to the Company's 401(k)
Plan on behalf of each of the named executive officers.

7
<PAGE>

OPTION GRANTS DURING 1996

The following table sets forth the number of shares of the Company's Common
Stock underlying options granted, the exercise price per share and the
expiration date of all options granted to each of the named executive officers
during 1996:

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT ANNUAL RATES OF
NUMBER OF OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE OR APPRECIATION
UNDERLYING GRANTED TO BASE PRICE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION ---------------------
EXECUTIVE OFFICER GRANTED(#)(1) FISCAL YEAR $/SH DATE 5% ($) 10% ($)
- ----------------- ------------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John F. Keane........... -- -- -- -- -- --
Edward Longo............ 16,000 4.7% 12.00 2/20/01 140,480 310,560
Raymond W. Paris........ 10,000 2.9% 12.00 2/20/01 87,800 194,100
Wallace Cataldo......... 10,000 2.9% 12.00 2/20/01 87,800 194,100
Brian T. Keane.......... 10,000 2.9% 12.00 2/20/01 87,800 194,100
</TABLE>
- --------
(1) Options become exercisable in three equal installments commencing on the
second anniversary of the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
options if exercised at the end of the option terms. These gains are based
on assumed rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted. Actual gains, if any,
on stock option exercises will depend on the future performance of the
Common Stock and the date on which the options are exercised.

OPTION EXERCISES DURING 1996 AND YEAR END OPTION VALUES

The following table sets forth the aggregate dollar value of all options
exercised and the total number of unexercised options held, on December 31,
1996, by each of the named executive officers:

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT OPTIONS/SARS
FISCAL YEAR END(#) AT FISCAL YEAR END ($)
SHARES ACQUIRED VALUE ------------------------------- ----------------------------
EXECUTIVE OFFICER ON EXERCISE(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
- ----------------- --------------- -------------- ------------------------------- ----------------------------
<S> <C> <C> <C> <C>
John F. Keane........... -- -- --/-- --/--
Edward Longo............ 18,000 244,440 --/58,000 --/1,300,300
Raymond W. Paris........ 36,000 538,200 13,500/41,500 353,565/935,725
Wallace Cataldo......... 27,000 440,910 15,000/32,500 392,850/714,475
Brian T. Keane.......... 13,500 211,950 17,500/32,500 449,100/720,125
</TABLE>
- --------
(1) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise multiplied by the number of shares to which the exercise relates.
(2) The closing price for the Company's Common Stock as reported by the
American Stock Exchange on December 31, 1996 (the last day of trading in
1996) was $31.75. Value is calculated on the basis of the difference
between the option exercise price and $31.75, multiplied by the number of
shares of Common Stock underlying the option.

8
<PAGE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Company is not aware of any executive officer, director or principal
stockholder who failed to comply with filing requirements under Section 16 of
the Securities Exchange Act of 1934 (the "Exchange Act") during the year ended
December 31, 1996, except that the Annual Statement of Changes in Beneficial
Ownership on Form 5 relating to certain transactions by Dr. Rockart was filed
late.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee is comprised of Messrs. Harkins, Hindle and
Shafto and Dr. Rockart. Mr. Harkins was an officer of the Company from August
1981 to July 1988.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION

The Company's compensation policy for executive officers has been to offer
competitive compensation based on the individual's performance as well as the
overall performance of the Company. The Company's compensation program is
intended to attract and retain executives whose abilities are critical to the
long-term success and competitiveness of the Company.

The compensation of the Company's senior executives (other than the Chief
Executive Officer) is reviewed and approved annually by the Compensation
Committee based upon the recommendations of the Chief Executive Officer and
the evaluation of the members of the Compensation Committee. Each of the named
executives regularly makes presentations to the Board of Directors. As a
result, the members of the Compensation Committee are personally familiar with
the performance of each senior executive. The key components of executive
compensation are salary, which is based on factors such as the individual's
level of responsibility in comparison to similar positions in comparable
companies in the industry, and stock option awards, which are intended to
align the interest of such individual with the Company's long-term success as
measured by the Company's share price and book value per share.

The compensation of the Company's Chief Executive Officer is determined
annually by the Compensation Committee. The Chief Executive Officer's salary
in 1996 was based on a variety of factors including those described above and
a comparison of the compensation of the chief executive officers of comparable
companies in the industry. Mr. Keane did not participate in any decisions
regarding his own compensation. The Compensation Committee believes that,
although the compensation of the Chief Executive Officer is not directly
related to financial performance, his compensation may be more modest than
that paid to comparable industry executives. In addition, the Compensation
Committee did not award any equity-based incentive compensation to the Chief
Executive Officer, recognizing that the size of the stock interest in the
Company controlled directly and indirectly by Mr. Keane and his wife provides
sufficient motivation.

In 1996, the Compensation Committee obtained information about compensation
levels in businesses similar to those of the Company in size and scope. The
Compensation Committee expects that compensation levels will continue to
depend primarily on each individual's personal performance as well as on the
overall performance of the Company.

Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), enacted in 1993, generally disallows a tax deduction to public
companies for compensation over $1 million paid to the corporation's Chief
Executive Officer and four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. The Board of Directors has voted,
subject to stockholder approval, to structure the Company's 1992 Stock Option

9
<PAGE>

Plan (the "1992 Stock Option Plan") in a manner that complies with Section
162(m) of the Code (see "APPROVAL OF AMENDMENT TO 1992 STOCK OPTION PLAN"
below), and is currently considering whether to structure other compensation
arrangements in a manner that complies with the statute.

Philip J. Winston R. John F. Rockart Robert A.
Harkins Hindle, Jr. Shafto

STOCK PERFORMANCE CHART

The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the five years
ended December 31, 1996 with the cumulative total return on (i) the Standard &
Poor's 500 Composite Index and (ii) a peer group index* selected by the
Company which includes six publicly traded companies within the Company's
industry. The comparison assumes $100 was invested on December 31, 1991 in the
Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.

<TABLE>
<CAPTION>
KEANE PEER BROAD
INC GROUP MARKET
------- ------- --------
<S> <C> <C> <C>
FYE 1991 $100 $100 $100
FYE 1992 $155.55 $108.21 $107.64
FYE 1993 $239.88 $127.75 $118.50
FYE 1994 $316.35 $191.97 $120.06
FYE 1995 $294.70 $287.04 $165.18
FYE 1996 $845.81 $365.07 $203.11
</TABLE>

CERTAIN RELATED PARTY TRANSACTIONS

In February 1985, the Company entered into a lease, which subsequently was
extended to a term of 20 years, with City Square Limited Partnership ("City
Square"), pursuant to which the Company leased approximately 34,000 square
feet of office and development space in a building located in Boston,
Massachusetts. The Company now leases approximately 88% of this building and
the remaining 12% is occupied by other tenants. John F. Keane, Chief Executive
Officer, President and a director of the Company, Wallace A. Cataldo, the Vice
President-Finance and Administration of the Company, and Philip J. Harkins, a
director of the Company, are limited partners of City Square. Based upon its
knowledge of rental payments for comparable facilities in the Boston area, the
Company believes that the rental payments under this lease, which will be
approximately $850,000 per year ($25.00 per square foot) for the remainder of
the lease term (until February 2006), plus

10
<PAGE>

specified percentages of any annual increases in real estate taxes and
operating expenses, were, at the time the Company entered into the lease, as
favorable to the Company as those which could have been obtained from an
independent third party.

INCREASE IN SHARES OF AUTHORIZED COMMON STOCK

On February 20, 1997, the Board of Directors unanimously voted to recommend
to the stockholders that the Company's Articles of Organization be amended in
order to increase the authorized Common Stock from 50,000,000 shares to
100,000,000 shares (the "Amendment"). As of March 15, 1997, the Company had a
total of 32,618,432 shares of Common Stock outstanding, 1,735,334 shares
reserved for issuance pursuant to the Company's stock option and stock benefit
plans and agreements, and 287,367 shares reserved for issuance upon conversion
of the Company's Class B Common Stock.

If the Amendment is approved, the additional authorized shares of Common
Stock would be available for issuance in the future for such corporate
purposes, including, without limitation financings, acquisitions, stock
splits, stock dividends and management incentive and employee benefit plans,
as the Board may deem advisable, without the necessity of further stockholder
action. Holders of the Common Stock and Class B Common Stock have no
preemptive rights with respect to any shares which may be issued in the
future.

The Amendment may also have the effect of discouraging an attempt to obtain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of present management. If the
Amendment is approved, the Board will have additional shares of Common Stock
available to effect a sale of shares (either in public or private
transactions, mergers, consolidations or similar transactions), in which case
the number of the Company's outstanding shares would be increased and would
thereby dilute the interest of a party attempting to obtain control of the
Company.

There are no current plans, arrangements or understandings with regard to
the issuance of the shares to be authorized by the Amendment.

BOARD RECOMMENDATION

The Board of Directors believes that the Amendment is in the best interests
of the Company and its stockholders and therefore recommends that the
stockholders vote FOR the Amendment. The affirmative vote of the holders of a
majority of the aggregate voting power of the shares of Common Stock and Class
B Common Stock outstanding is required for approval of the Amendment.

APPROVAL OF AMENDMENT TO 1992 STOCK OPTION PLAN

Under the terms of the 1992 Stock Option Plan, the Company is authorized to
grant options to purchase up to 1,800,000 shares of Common Stock to employees,
officers or directors of, and consultants or advisors to, the Company and it
subsidiaries. The Company may grant options that are intended to qualify as
incentive stock options within the meaning of Section 422 of the Code
("incentive stock options") or nonstatutory options not intended to qualify as
incentive stock options. The purpose of the 1992 Stock Option Plan is to
ensure that the Company may continue to attract and retain key employees,
officers, directors, consultants and advisors who are expected to contribute
to the Company's growth and success.

11
<PAGE>

Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
corporation's Chief Executive Officer and four other most highly compensated
executive officers. Qualifying performance-based compensation is not subject
to the deduction limit if certain requirements are met. In particular, income
recognized upon the exercise of a stock option is not subject to the deduction
limit if the option was issued under a plan approved by stockholders that
provides a limit to the number of shares that may be issued under the plan to
any individual.

Although the 1992 Stock Option Plan as currently in effect does not include
a limit on the number of shares that may be issued to any participant, options
granted under the 1992 Stock Option Plan to date comply with Section 162(m)
pursuant to a transition rule implementing Section 162(m). The transition rule
expires at the Annual Meeting. To comply with Section 162(m) after the Annual
Meeting, the 1992 Stock Option Plan must be amended to include a limit on the
number of shares that may be issued to any participant and the amendment and
the continuance of the 1992 Stock Option Plan must be approved by
stockholders. Accordingly, on February 20, 1997 the Board of Directors voted,
subject to stockholder approval, (i) to amend the 1992 Stock Option Plan to
comply with the Section 162(m) per participant limit and (ii) to continue the
1992 Stock Option Plan. The 1992 Stock Option Plan, as amended and continued,
provides that the maximum number of shares of Common Stock with respect to
which any option may be granted to any participant shall be 350,000 shares per
calendar year. If the stockholders do not vote to continue the 1992 Stock
Option Plan, the Company will not grant any further options under the 1992
Stock Option Plan.

The following is a summary of the material provisions of the 1992 Stock
Option Plan:

ADMINISTRATION AND ELIGIBILITY

The 1992 Stock Option Plan is administered by the Board of Directors which
may delegate any or all of its power to a committee appointed by the Board.
Subject to the express provisions of the 1992 Stock Option Plan, the Board has
authority to construe the respective option agreements, to prescribe, amend
and rescind rules and regulations relating to the 1992 Stock Option Plan and
to make all other determinations in the judgment of the Board necessary or
desirable for the administration of the 1992 Stock Option Plan.

Options may be granted to persons who are, at the time of grant, employees,
officers or directors of, or consultants or advisors to, the Company; provided
that incentive stock options may be granted only to persons who are eligible
to receive such options under Section 422 of the Code. The granting of options
to directors and officers shall be determined either (a) by the full Board of
Directors, or (b) by a committee composed solely of two or more "non-employee
directors" (as defined in Rule 16b-3 promulgated under the Exchange Act).

NUMBER OF SHARES AND EXERCISE PRICE

Subject to adjustment as provided in the 1992 Stock Option Plan, the maximum
number of shares of Common Stock of the Company which may be issued and sold
under the 1992 Stock Option Plan is 1,800,000 shares. If the amendment and
continuance of the 1992 Stock Option Plan are approved, the maximum number of
shares of Common Stock with respect to which an option may be granted to any
participant under the 1992 Stock Option Plan will be 350,000 per calendar year
(subject to adjustment as provided in the 1992 Stock Option Plan).

The Board of Directors selects the exercise price per share of stock,
provided the exercise price cannot be less than (a) 110% of fair market value
for incentive stock options granted to a holder of more than 10% of the

12
<PAGE>

Company's capital stock, (b) 100% of fair market value for incentive stock
options generally and (c) 50% of fair market value for nonstatutory options.
The option price may be paid in cash or shares of Common Stock owned by the
optionee as provided in the 1992 Stock Option Plan. The Board of Directors
shall also determine the expiration of the option period, provided that (i) in
the case of incentive stock options, the date shall not be later than 10 years
after the date on which the option is granted, (ii) in the case of incentive
stock options granted to a holder of more than 10% of the Company's capital
stock, such date shall not be later than five years after the date on which
the option is granted and (iii) in all cases, options shall be subject to
earlier termination as provided in the 1992 Stock Option Plan.

TERMS OF OPTIONS

Except as the Board of Directors may otherwise determine or provide in the
applicable option agreement, all options are nontransferable other than by
will or the laws of descent and distribution, provided, however, that
nonstatutory options may be transferred by certain persons required to file
reports under Section 16(a) of the Exchange Act pursuant to a qualified
domestic relations order (as defined in Rule 16b-3 promulgated under the
Exchange Act). Holders of incentive stock options may generally exercise such
options up to three months after termination of employment with the Company,
unless termination results from death or disability in which case such options
may be exercised up to one year after termination. Holders of nonstatutory
options may exercise such options after termination of employment with the
Company during the period specified in the applicable option agreement.

The Board of Directors (or its appointed committee) determines when options
granted under the 1992 Stock Option Plan become exercisable (generally in
installments at the rate of 25% per year). The Board of Directors may
accelerate the date on which any option granted may be exercised or extend the
period during which any particular option may be exercised, provided that no
such extension shall be permitted if it would cause the 1992 Stock Option Plan
to fail to comply with Section 422 of the Code, or with Rule 16b-3 promulgated
under the Exchange Act.

The Board of Directors has the authority, with the consent of the effected
optionee, to cancel or amend any outstanding options under the 1992 Stock
Option Plan and to grant in substitution therefor new options covering the
same or a different number of shares of Common Stock and having an exercise
price per share which may be lower or higher than the exercise price per share
of the outstanding options.

Subject to the prior approval of the Board of Directors, an optionee may
elect to satisfy any tax withholding obligations with respect to shares issued
upon exercise of options by causing the Company to withhold shares of Common
Stock otherwise issuable upon the exercise of an option or by delivering to
the Company shares of Common Stock then owned by such optionee. The shares so
delivered or withheld shall have a fair market value equal to such withholding
obligation.

AMENDMENT AND TERMINATION

The Board of Directors may at any modify or amend the 1992 Stock Option Plan
in any respect, except that if at any time the approval of the stockholders of
the Company is required under Section 422 of the Code or any successor
provision with respect to incentive stock options or under Rule 16b-3
promulgated under the Exchange Act with respect to options held by persons who
are required to file reports pursuant to Section 16(a) of the Exchange Act,
the Board of Directors may not effect such modification or amendment without
such approval.

13
<PAGE>

The termination or any amendment of the 1992 Stock Option Plan shall not,
without the consent of an optionee, effect his or her rights under an option
previously granted.

In the event of a consolidation or merger or sale of all or substantially
all of the assets of the Company in which outstanding shares of Common Stock
are exchanged for securities, cash or other property of any other corporation
or business entity or in the event of a liquidation of the Company, the Board
of Directors of the Company or the board of directors of any corporation
assuming the obligations of the Company may, in its discretion, take any one
or more of the following actions as to outstanding options: (a) provide that
such options shall be assumed, or equivalent options shall be substituted, by
the acquiring or succeeding corporation (or an affiliate thereof), (b) provide
that all unexercised options will terminate immediately prior to the
consummation of such transaction unless exercised by the optionee within a
specified period following the date of such notice, (c) if the event involves
a cash payment for each share surrendered in the merger, make or provide for a
cash payment to the optionees equal to the difference between the merger
consideration per share and the exercise price per share for all then
outstanding options and (d) provide that all or any outstanding options shall
become exercisable in full immediately prior to such event.

The 1992 Stock Option Plan shall terminate with respect to incentive stock
options upon the earlier of February 26, 2002, or the date on which all shares
available for issuance under the 1992 Stock Option Plan shall have been issued
pursuant to the exercise or cancellation of options granted thereunder. The
1992 Stock Option Plan shall terminate with respect to nonstatutory options on
February 26, 2002.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the United States federal income tax
consequences that generally will arise with respect to options granted under
the 1992 Stock Option Plan and with respect to the sale of Common Stock
acquired under the 1992 Stock Option Plan.

Incentive Stock Options

In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will
recognize taxable income with respect to an incentive stock option only upon
the sale of Common Stock acquired through the exercise of the option ("ISO
Stock"). The exercise of an incentive stock option may, however, subject the
participant to the alternative minimum tax.

Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least
two years from the date the option was granted (the "Grant Date") and one year
from the date the option was exercised (the "Exercise Date"), then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO Stock over the exercise price.

If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of
the gain recognized by the participant will be ordinary compensation income
and the remaining gain, if any, will be a capital gain. This capital gain will
be a long-term capital gain if the participant has held the ISO Stock for more
than one year prior to the date of sale.

14
<PAGE>

If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a long-
term capital loss if the participant has held the ISO Stock for more than one
year prior to the date of sale.

Nonstatutory Stock Options

As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation
income in an amount equal to the excess of the fair market value of the Common
Stock acquired through the exercise of the option ("NSO Stock") on the
Exercise Date over the exercise price.

With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will
be a long-term gain or loss if the participant has held the NSO stock for more
than one year prior to the date of the sale.

Tax Consequences to the Company

The grant of an option under the 1992 Stock Option Plan will have no tax
consequences to the Company. Moreover, in general, neither the exercise of an
incentive stock option nor the sale of any Common Stock acquired under the
1992 Stock Option Plan will have any tax consequences to the Company. The
Company generally will be entitled to a business-expense deduction, however,
with respect to any ordinary compensation income recognized by a participant
under the 1992 Stock Option Plan, including as a result of the exercise of a
nonstatutory stock option or a Disqualifying Disposition. Any such deduction
will be subject to the limitations of Section 162(m) of the Code. The Company
will have a withholding obligation with respect to ordinary compensation
income recognized by participants with respect to nonstatutory stock options
under the 1992 Stock Option Plan who are employees or otherwise subject to
withholding.

BOARD RECOMMENDATION

The Board of Directors believes that the amendment and continuance of the
1992 Stock Option Plan are in the best interests of the Company and its
stockholders and therefore recommends that the stockholders vote FOR this
proposal.

APPROVAL OF AMENDMENT TO
1992 EMPLOYEE STOCK PURCHASE PLAN

In the opinion of the Board of Directors, the future success of the Company
depends, in large part, on its ability to attract, retain and motivate key
employees with experience and ability. Under the Company's 1992 Employee Stock
Purchase Plan (the "1992 Purchase Plan"), the Company is currently authorized
to offer up to 1,275,000 shares of Common Stock to its employees. On December
31, 1996, 721,782 shares were available for future purchases under the 1992
Purchase Plan.

On February 20, 1997, the Board of Directors adopted, subject to stockholder
approval, an amendment (the "Purchase Plan Amendment") to the 1992 Purchase
Plan providing that the payroll deduction which an

15
<PAGE>

employee may authorize under the 1992 Purchase Plan may not exceed in any
quarter the lesser of (a) 10% of the employee's compensation during the period
within which he or she elects to become a participant in the 1992 Purchase
Plan, or (b) $5,000. The Purchase Plan Amendment also provides that the Board
of Directors may at any time and from time to time amend the 1992 Purchase
Plan, except that (a) if the approval of any such amendment by the
stockholders of the Company is required by Section 423 of the Code or by Rule
16b-3 promulgated under the Exchange Act, such amendment shall not be effected
without such approval, and (b) in no event may any amendment be made which
would cause the 1992 Purchase Plan to fail to comply with Section 16 of the
Exchange Act or Section 423 of the Code.

The following is a summary of the material provisions of the 1992 Purchase
Plan:

ADMINISTRATION AND ELIGIBILITY

The 1992 Purchase Plan is administered by the Board of Directors. Employees
of the Company who have completed one year of continuous service are eligible
to participate. Employees who are directors of the Company, who are
customarily employed for 20 hours or less per week, who are customarily
employed for not more than five months in any calendar year or who own more
than 5% of the voting stock of the Company are not eligible to participate in
the 1992 Purchase Plan.

As of December 31, 1996, a total of 3,293 employees were eligible to
participate in the 1992 Purchase Plan.

PURCHASE PRICE AND TERMS

The price of shares purchased pursuant to the 1992 Purchase Plan is 85% of
the fair market value of the Company's Common Stock on the purchase date.

In order to exercise an option to purchase shares of Common Stock under the
1992 Purchase Plan, an employee must complete a "Payroll Deduction
Authorization for Purchase of Stock" form which indicates the amount to be
deducted from his or her salary and applied to the purchase of Common Stock on
the last business day of each month (the "Purchase Date"). Under the 1992
Purchase Plan as currently in effect, the payroll deduction may not exceed in
any year the lesser of (a) 10% of the employee's compensation during the
period within which he or she elects to become a participant in the 1992
Purchase Plan or (b) $5,000. If the Purchase Plan Amendment is approved, such
limits will apply on a quarterly basis. So long as the form is in effect, the
aggregate number of shares which the amount deducted will pay for on the last
business day of each month will automatically be purchased on such date and
issued in multiples of five.

AMENDMENT AND TERMINATION

As it is currently in effect, the 1992 Purchase Plan may at any time or from
time to time be terminated, modified or amended by a majority vote of the
stockholders of the Company. The Board of Directors may at any time or from
time to time amend the 1992 Purchase Plan, except that, without the approval
of a majority of the shares of stock of the Company then issued and
outstanding and entitled to vote, no amendment may (a) materially increase the
benefits accruing to participants under the 1992 Purchase Plan, (b) materially
increase the number of shares which may be issued under the 1992 Purchase
Plan, or (c) materially modify the requirements as to eligibility for
participation under the 1992 Purchase Plan. The Purchase Plan Amendment, if
approved, would allow the Board of Directors to amend the 1992 Purchase Plan
at any time and from time to time, except that (a) if the approval of any such
amendment by the stockholders of the Company is required by

16
<PAGE>

Section 423 of the Code or by Rule 16b-3 promulgated under the Exchange Act,
such amendment shall not be effected without such approval, and (b) in no
event may any amendment be made which would cause the 1992 Purchase Plan to
fail to comply with Section 16 of the Exchange Act or Section 423 of the Code.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the United States federal income tax
consequences that generally will arise with respect to participation in the
1992 Purchase Plan and with respect to the sale of Common Stock acquired under
the 1992 Purchase Plan.

The 1992 Purchase Plan is intended to qualify as an "Employee Stock Purchase
Plan" within the meaning of Section 423 of the Code.

Tax Consequences to Participants

In general, a participant will not recognize taxable income upon enrolling
in the 1992 Purchase Plan or upon purchasing shares of Common Stock at the end
of an offering. Instead, if a participant sells Common Stock acquired under
the 1992 Purchase Plan at a sale price that exceeds the price at which the
participant purchased the Common Stock, then the participant will recognize
taxable income. A portion of that taxable income will be ordinary income, and
a portion may be capital gain.

If the participant sells the Common Stock more than one year after acquiring
it and more than two years after the date on which the offering commenced (the
"Grant Date"), then the participant will be taxed as follows. If the sale
price of the Common Stock is higher than the price at which the participant
purchased the Common Stock, then the participant will recognize ordinary
compensation income in an amount equal to the lesser of:

(i) the excess of the fair market value of the Common Stock on the Grant
Date over the price at which the participant purchased the Common Stock;
and

(ii) the excess of the sale price of the Common Stock over the price at
which the participant purchased the Common Stock.

Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.

If the participant sells the Common Stock within one year after acquiring it
or within two years after the Grant Date (a "Disqualifying Disposition"), then
the participant will recognize ordinary compensation income in an amount equal
to the excess of the fair market value of the Common Stock on the date that it
was purchased over the price at which the participant purchased the Common
Stock. The participant will also recognize capital gain in an amount equal to
the excess of the sale price of the Common Stock over the fair market value of
the Common Stock on the date that it was purchased, or capital loss in an
amount equal to the excess of the fair market value of the Common Stock on the
date that it was purchased over the sale price of the Common Stock. This
capital gain or loss will be a long-term capital gain or loss if the
participant has held the Common Stock for more than one year prior to the date
of the sale and will be a short-term capital gain or loss if the participant
has held the Common Stock for a shorter period.

17
<PAGE>

Tax Consequences to the Company

The offering of Common Stock under the 1992 Purchase Plan will have no tax
consequences to the Company. Moreover, in general, neither the purchase nor
the sale of Common Stock acquired under the 1992 Purchase Plan will have any
tax consequences to the Company except that the Company will be entitled to a
business-expense deduction with respect to any ordinary compensation income
recognized by a participant upon making a Disqualifying Disposition. Any such
deduction will be subject to the limitations of Section 162(m) of the Code.

STOCK PURCHASED UNDER THE 1992 PURCHASE PLAN

During 1996, a total of 128,888 shares of the Company's Common Stock were
purchased under the 1992 Purchase Plan at prices ranging from $12.70 to
$26.99.

BOARD RECOMMENDATION

The Board of Directors believes that the Purchase Plan Amendment is in the
best interest of the Company and its stockholders and recommends a vote FOR
this proposal.

SELECTION OF INDEPENDENT ACCOUNTANTS

Subject to ratification by the stockholders, the Board of Directors has
selected the firm of Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as the
Company's independent accountants for the year ending December 31, 1997. If
the stockholders do not ratify the selection of Coopers & Lybrand, the Board
of Directors will reconsider the matter.

On October 24, 1996, the Company dismissed Coopers & Lybrand as its
independent auditors and engaged Ernst & Young LLP ("Ernst & Young") to fill
such position. The decision to change accountants was made by the Board of
Directors of the Company. None of the reports of Coopers & Lybrand on the
financial statements of the Company for either of the past two fiscal years
contained an adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainly, audit scope or accounting principles. During the
Company's two most recent fiscal years and the subsequent interim period
immediately preceding the date of the dismissal of Coopers & Lybrand, the
Company had no disagreements with Coopers & Lybrand on any matter of
accounting principles of practices, financial statement disclosure or auditing
scope or procedure, which disagreement(s), if not resolved to the satisfaction
of Coopers & Lybrand, would have caused Coopers & Lybrand to make a reference
to the subject matter of the disagreement in connection with its reports on
the financial statements of the Company. None of the reportable events listed
in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act occurred with
respect to the Company's two most recent fiscal years or the subsequent
interim period preceding the dismissal of Coopers & Lybrand.

Prior to making the decision to retain Ernst & Young, the Company had
consulted with Ernst & Young concerning certain tax matters. However, neither
the Company nor anyone on its behalf consulted Ernst & Young regarding the
application of accounting principles to a specific completed or contemplated
transaction, or the type of audit opinion that might be rendered on the
Company's financial statements, and no written or oral advice concerning the
same was provided to the Company that was an important factor considered by
the Company in reaching a decision as to any accounting, auditing or financial
reporting issue.

18
<PAGE>

On December 16, 1996, Ernst & Young informed the Company that it was
resigning as the Company's independent auditors, and the Company engaged
Coopers & Lybrand to fill such position. The reason given by Ernst & Young for
its resignation was the existence of certain mutual business opportunities on
which both Ernst & Young and the Company desire to collaborate which would
affect Ernst & Young's independence with respect to the Company. The decision
to engage Coopers & Lybrand was made by the Board of Directors of the Company.

During the period in which Ernst & Young served as the Company's independent
auditors, Ernst & Young issued no reports on the financial statements of the
Company. During the Company's two most recent fiscal years and the subsequent
interim period immediately preceding the date of the resignation of Ernst &
Young, the Company had no disagreements with Ernst & Young on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreement(s), if not resolved to the satisfaction
of Ernst & Young, would have caused Ernst & Young to make a reference to the
subject matter of the disagreement in connection with any report on the
financial statements of the Company had any report been issued. None of the
reportable events listed in Item 304(a)(1)(v) of Regulation S-K under the
Exchange Act occurred during the period Ernst & Young served as the Company's
auditors.

During the period in which Ernst & Young served as the Company's independent
auditors, neither the Company nor anyone on its behalf consulted Coopers &
Lybrand regarding the application of accounting principles to a specific
completed or contemplated transaction, or the type of audit opinion that might
be rendered on the Company's financial statements, and no written or oral
advice concerning the same was provided to the Company that was an important
factor considered by the Company in reaching a decision as to any accounting,
auditing or financial reporting issue.

Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting of Stockholders. They will have an opportunity to make a
statement if they desire to do so, and will also be available to respond to
appropriate questions from stockholders.

OTHER MATTERS

The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to
the meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.

All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and the Company will reimburse them for
reasonable out-of-pocket expenses in connection with the distribution of proxy
solicitation material.

19
<PAGE>

DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS

Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Boston, Massachusetts not later than December 19, 1997 for inclusion
in the proxy statement for that meeting.

By order of the Board of Directors,

Norman B. Asher,
Clerk

April 18, 1997

THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. YOUR PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING, AND WE APPRECIATE YOUR
COOPERATION.

20
<PAGE>

0901-PS-97
<PAGE>

Appendix A
----------

KEANE, INC.

1992 STOCK OPTION PLAN

ADOPTED BY THE BOARD OF DIRECTORS ON FEBRUARY 27, 1992

1. Purpose.
-------

The purpose of this plan (the "Plan") is to secure for Keane, Inc. (the
"Company") and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company and its parent and subsidiary corporations who are expected to
contribute to the Company's future growth and success. Except where the context
otherwise requires, the term "Company" shall include the parent and all present
and future subsidiaries of the Company as defined in Sections 424(e) and 424(f)
of the Internal Revenue Code of 1986, as amended or replaced from time to time
(the "Code"). Those provisions of the Plan which make express reference to
Section 422 shall apply only to Incentive Stock Options (as that term is defined
in the Plan).

2. Type of Options and Administration.
----------------------------------

(a) Types of Options. Options granted pursuant to the Plan shall be
----------------
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the Code
or non-statutory options which are not intended to meet the requirements of
Section 422 of the Code.

(b) Administration. The Plan will be administered by the Board of
--------------
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors
may in its sole discretion grant options to purchase shares of the Company's
Common Stock ("Common Stock") and issue shares upon exercise of such options as
provided in the Plan. The Board shall have authority, subject to the express
provisions of the Plan, to construe the respective option agreements and the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective option agreements,
which need not be identical, and to make all other determinations in the
judgment of the Board of Directors necessary or desirable for the administration
of the Plan. The Board of Directors may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
in the manner and to the extent it shall deem expedient to carry the
<PAGE>

Plan into effect and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board of
Directors shall be liable for any action or determination under the Plan made in
good faith. The Board of Directors may, to the full extent permitted by or
consistent with applicable laws or regulations (including, without limitation,
applicable state law and Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3")),
delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.

(c) Applicability of Rule 16b-3. Those provisions of the Plan which make
---------------------------
express reference to Rule 16b-3 shall apply only to such persons as are required
to file reports under Section 16(a) of the Exchange Act (a "Reporting Person").

3. Eligibility.
-----------

(a) General. Options may be granted to persons who are, at the time of
-------
grant, employees, officers or directors of, or consultants or advisors to, the
Company; provided, that the class of employees to whom Incentive Stock Options
--------
may be granted shall be limited to all employees of the Company. A person who
has been granted an option may, if he or she is otherwise eligible, be granted
additional options if the Board of Directors shall so determine.

(b) Grant of Options to Directors and Officers. From and after the
------------------------------------------
registration of the Common Stock of the Company under the Exchange Act, the
selection of a director or an officer (as the terms "director" and "officer" are
defined for purposes of Rule 16b-3) as a recipient of an option, the timing of
the option grant, the exercise price of the option and the number of shares
subject to the option shall be determined either (i) by the Board of Directors,
of which all members shall be "disinterested persons" (as hereinafter defined),
or (ii) by two or more directors having full authority to act in the matter,
each of whom shall be a "disinterested person." For the purposes of the Plan, a
director shall be deemed to be a "disinterested person" only if such person
qualifies as a "disinterested person" within the meaning of Rule 16b-3, as such
term is interpreted from time to time.

4. Stock Subject to Plan.
---------------------

Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock of the Company which may be issued and sold under the
Plan is 400,000 shares. If an option granted under the Plan shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject to such option shall again be available for subsequent option
grants under the Plan. If shares issued upon exercise of an option under the
Plan are tendered to the

-2-
<PAGE>

Company in payment of the exercise price of an option granted under the Plan,
such tendered shares shall again be available for subsequent option grants under
the Plan; provided, that in no event shall (i) the total number of shares issued
pursuant to the exercise of Incentive Stock Options under the Plan, on a
cumulative basis, exceed the maximum number of shares authorized for issuance
under the Plan exclusive of shares made available for issuance pursuant to this
exercise of options, on a cumulative basis, exceed the maximum number of shares
authorized for issuance under the Plan exclusive of shares made available for
issuance pursuant to this sentence.

5. Forms of Option Agreements.
--------------------------

As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.

6. Purchase Price.
--------------

(a) General. The purchase price per share of stock deliverable upon the
-------
exercise of an option shall be determined by the Board of Directors, provided,
--------
however, that (i) in the case of an Incentive Stock Option, the exercise price
- -------
shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
Section 11(b), and (ii) in the case of a non-statutory option, the exercise
price shall not be less than 50% of the fairm market value of such stock, as
determined by the Board of Directors at the time of grant of such options.

(b) Payment of Purchase Price. Options granted under the Plan may provide
-------------------------
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, (ii) by any other means (including, without limitation,
by delivery of a promissory note of the optionee payable on such terms as are
specified by the Board of Directors) which the Board of Directors determines are
consistent with the purpose of the Plan and with applicable laws and regulations
(including, without limitation, the provisions of Rule 16b-3 and Regulation T
promulgated by the Federal Reserve Board) or (iii) by any combination of such
methods of payment. The fair market value of any shares of the Company's Common
Stock or other non-cash consideration which may be delivered upon exercise of an
option shall be determined by the Board of Directors.

-3-
<PAGE>

7. Option Period.
-------------

Each option and all rights thereunder shall expire on such date as shall be
set forth in the applicable option agreement, except that, in the case of an
Incentive Stock Option, such date shall not be later than ten years after the
date on which the option is granted and, in all cases, options shall be subject
to earlier termination as provided in the Plan.

8. Exercise of Options.
-------------------

Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.

9. Nontransferability of Options.
-----------------------------

Incentive Stock Options, and all options granted to Reporting Persons,
shall not be assignable or transferable 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 lift of the optionee, shall be exercisable
only by the optionee; provided, however, that non-statutory options may be
transferred pursuant to a qualified domestic relations order (as defined in Rule
16b-3).

10. Effect of Termination of Employment or Other Relationship.
---------------------------------------------------------

Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors shall
determine the period of time during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the agreement evidencing such option.

11. Incentive Stock Options.
-----------------------

Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:

(a) Express Designation. All Incentive Stock Options granted under the
-------------------
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.

(b) 10% Shareholder. If a any employee to whom an Incentive Stock Option
---------------
is to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all

-4-
<PAGE>

classes of stock of the Company (after taking into account the attribution of
stock ownership rules of Section 424(d) of the Code), then the following special
provisions shall be applicable to the Incentive Stock Option granted to such
individual

(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market value of
one share of Common Stock at the time of grant; and

(ii) The option exercise period shall not exceed five years from the date
of grant.

(c) Dollar Limitation. For so long as the Code shall so provide, options
-----------------
granted to any employee under the Plan (and any other incentive stock option
plans of the company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.

(d) Termination of Employment, Death or Disability. No Incentive Stock
----------------------------------------------
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:

(i) an Incentive Stock Option may be exercised within the period of
three months after the date the optionee ceases to be an employee of the Company
(or within such lesser period as may be specified in the applicable option
agreement), provided, that the agreement with respect to such option may
--------
designate a longer exercise period and that the exercises after such three-month
period shall be treated as the exercise of a non-statutory option under the
Plan;

(ii) if the optionee dies while in the employ of the Company, or within
three months after the optionee ceases to be such an employee, the Incentive
Stock Option may be exercised by the person to whom it is transferred by will or
the laws of descent and distribution within the period of one year after the
date of death (or within such lesser period as may be specified in the
application option agreement); and

(iii) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while in the employ of
the Company, the Incentive Stock Option may be exercised within the period of
one year after the date the optionee ceases to be such an employee because of
such

-5-
<PAGE>

disability (or within such lesser period as may be specified in the applicable
option agreement).

For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.

12. Additional Provisions.
---------------------

(a) Additional Option Provisions. The Board of Directors may, in its sole
----------------------------
discretion, include additional provisions in option agreements covering options
granted under the Plan, including without limitation restrictions on transfer,
repurchase rights, commitments to pay cash bonuses, to make, arrange for or
guaranty loans or to transfer other property to optionees upon exercise of
options, or such other provisions as shall be determined by the Board of
Directors; provided that such additional provisions shall not be inconsistent
-------- ----
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.

(b) Acceleration, Extension, Etc. The Board of Directors may, in its sole
-----------------------------
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised; provided, however, that no such extension shall be
-------- -------
permitted if it would cause the Plan to fail to comply with Section 422 of the
code or with Rule 16b-3.

13. General Restrictions.
--------------------

(a) Investment Representations. The Company may require any person to whom
--------------------------
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.

(b) Compliance With Securities Laws. Each option shall be subject to the
-------------------------------
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of

-6-
<PAGE>

any governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, disqualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration or qualification, or to
satisfy such condition.

14. Rights as a Shareholder.
-----------------------

The holder of an option shall have no rights as a shareholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares.
No adjustment shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is issued.

15. Adjustment Provisions for Recapitalizations and Related Transactions.
--------------------------------------------------------------------

(a) General. If, through or as a result of any merger, consolidation, sale
-------
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number of kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding options
under the Plan, without changing the aggregate purchase price as to which such
options remain exercisable. Notwithstanding the foregoing, no adjustment shall
be made pursuant to this Section 15 if such adjustment would cause the Plan to
fail to comply with Section 422 of the Code or with Rule 16b-3.

(b) Board Authority to Make Adjustments. Any adjustments under this
-----------------------------------
Section 15 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.

16. Merger, Consolidation, Asset Sale, Liquidation, etc.
----------------------------------------------------

-7-
<PAGE>

(a) General. In the event of a consolidation or merger or sale of all or
-------
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options: (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such options substituted for Incentive Stock Options
--------
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice, (iii)
in the event of a merger under the terms of which holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the merger (the "Merger Price"), make or provide for a cash
payment to the optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such outstanding options
(to the extent then exercisable at prices not in excess of the Merger Price) and
(B) the aggregate exercise price of all such outstanding options in exchange for
the termination of such options, and (iv) provide that all or any outstanding
options shall become exercisable in full immediately prior to such event.

(b) Substitute Options. The Company may grant options under the Plan in
------------------
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.

17. No Special Employment Rights.
----------------------------

Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment to increase or decrease the compensation of the
optionee.

18. Other Employee Benefits.
-----------------------

Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon

-8-
<PAGE>

such exercise will not constitute compensation with respect to which any other
employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.

19. Amendment of the Plan.
---------------------

(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
shareholders of the Company is required under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options, or under Rule 16b-
3, the Board of Directors may not effect such modification or amendment without
such approval.

(b) The termination or any modification or amendment of the Plan shall not,
without the consent of an optioned, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected,
the Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to
amend or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.

20. Withholding.
-----------

(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 20(a)
may only satisfy his or her withholding obligation with shares of

-9-
<PAGE>

Common Stock which are not subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements.

(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3.

21. Cancellation and New Grant of Options, Etc.
-------------------------------------------

The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.

22. Effective Date and Duration of the Plan.
---------------------------------------

(a) Effective Date. The Plan shall become effective when adopted by the
--------------
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive Stock Options
and no Incentive Stock Options shall be granted thereafter. Amendments to the
Plan not requiring shareholder approval shall become effective when adopted by
the Board of Directors; amendments requiring shareholder approval (as provided
in Section 19) shall become effective when adopted by the Board of Directors,
but no Incentive Stock Option granted after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan was required
to enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Incentive Stock
Options granted on or after the date of such amendment shall terminate to the
extent that such amendment to the Plan was required to enable the company to
grant such option to a particular optionee. Subject to this limitation, options
may be granted under the Plan at any time after the effective date and before
the date fixed for termination of the Plan.

(b) Termination. Unless sooner terminated in accordance with Section 16,
-----------
the Plan shall terminate, with respect to Incentive Stock Options, upon the
earlier of

-10-
<PAGE>

(i) the close of business on the day next preceding the tenth anniversary of the
date of its adoption by the Board of Directors, or (ii) the date on which all
shares available for issuance under the Plan shall have been issued pursuant to
the exercise or cancellation of options granted under the Plan. Unless sooner
terminated in accordance with Section 16, the Plan shall terminate with respect
to options which re not Incentive Stock Options on the date specified in (ii)
above. If the date of termination is determined under (i) above, then options
outstanding on such date shall continue to have force and effect in accordance
with the provisions of the instruments evidencing such options.

23. Provision for Foreign Participants.
----------------------------------

The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other materials.

Adopted by the Board of Directors on
February 27, 1992.

Approved by the Stockholders on
April 30, 1992.

-11-
<PAGE>

Appendix B
----------
KEANE, INC.

1992 EMPLOYEE STOCK PURCHASE PLAN

Adopted by the Board of Directors on February 27, 1992

1. Purpose.
-------

The 1992 Employee stock Purchase Plan of Keane, Inc. (the "Plan") is
intended to provide a method whereby employees of Keane, Inc. and any subsidiary
corporation thereof (hereinafter referred to, unless the context otherwise
requires, as the "Company"), will have an opportunity to acquire a proprietary
interest in the Company, $.10 par value (the "Common Stock"). It is the
intention of the Company to have the Plan qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). The provisions of the Plan shall, accordingly, be construed so as to
extend and limit participation in a manner consistent with the requirements of
that Section of the Code.

2. Definitions.
-----------

(a) "employee" means any person who is customarily employed for 20 or more
hours per week and more than five months in a calendar year by (1) the Company
or (2) any subsidiary corporation.

(b) "monetary compensation" means regular straight-time earnings, payments
for overtime, shift differentials, and sales commissions, all prior to deduction
of taxes and other withholding charges, but excludes incentive compensation,
bonuses and other special payments.

(d) "Offering Commencement Date," with respect to an Offering under the
Plan, means the first day of the applicable calendar quarter for such Offering
pursuant to Paragraph 4.

(e) "Offering Termination Date," with respect to an Offering under the
Plan, means the last day of the applicable calendar quarter for such Offering
pursuant to Paragraph 4.

(f) "Plan Administrator" means the Treasurer of the Company.

<PAGE>

(g) "subsidiary" means any corporation which (i) would be a "subsidiary
corporation" as that term is defined in Section 424 of the Code and (ii) is
designated as a participant in the Plan by the board of Directors or the
Committee described in Paragraph 12.

3. Eligibility.
-----------

(a) Any employee who shall have completed one year of service and shall be
employed by the Company or any subsidiary on the date his or her participation
in the Plan is to become effective shall be eligible to participate in the Plan.

(b) Any provision of the Plan to the contrary notwithstanding, no employee
shall be granted an option to participate in the plan:

(i) if, immediately after the grant, such employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company or
of any subsidiary of the Company (for purposes of this paragraph the rules of
Section 424(d) of the Code shall apply in determining stock ownership of any
employee); or

(ii) which permits his or her rights to purchase stock under all
employee stock purchase plans of the Company and its subsidiaries to accrue at a
rate which exceeds $25,000 of the fair market value of the stock (determined at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.

4. Offering Dates.
--------------

Participation in any one or more of the Offerings under the Plan shall
neither limit, nor require, participation in any other Offering.

5. Participation.
-------------

(a) An eligible employee may participate in the Plan by completing an
authorization for payroll deduction on the form provided by the Company (an
"Authorization") and filing it with the office of the Plan Administrator. Each
Authorization shall authorize a regular payroll deduction from the employee's
compensation. Once an employee has filed an Authorization, he or she will

-2-
<PAGE>

automatically participate in subsequent offerings until and unless he or she
withdraws from an Offering pursuant to Paragraph 7(b) or Paragraph 9.

(b) The Company will maintain payroll deduction accounts for all employees
participating in the Plan. An employee may authorize a payroll deduction of a
specified dollar amount per pay period, up to a maximum f 10% of his or her
monetary compensation during the period within which he or she elects to become
a participant in the Plan, but in no event on an annual basis may any employee
authorize a deduction of more than five thousand dollars ($5,000). All payroll
deductions made for a participant shall be credited to his or her account under
the Plan. A participant may not make any separate cash payment into such
account.

(c) Except as provided in Paragraph 7(b) or 9, a participant may not make
any changes to his or her participation during any Offering and, specifically, a
participant may not during an Offering alter the amount of his or her payroll
deductions for such Offering. An employee may make a change in his or her
payroll deduction for a subsequent Offering by filing a new Authorization with
the Plan Administrator prior to the Offering Commencement Date of such Offering.

6. Granting of Option.
------------------

(a) For each of the Offerings, a participating employee shall be deemed to
have been granted an option (the "Option") to purchase, on the applicable
Offering Termination Date, the number of shares of Common Stock determined
as follows: 85% of the market value of a share of Common Stock on the
applicable Offering Termination Date shall be divided into the amount in
such employee's payroll deduction account on such date. The market value of
Common stock shall be determined as provided in subparagraph (b) below.

(b) The purchase price of a share of Common stock purchased with payroll
deductions made during each Offering (the "Option Exercise Price") shall be
85% of the closing price of the Common Stock on the American Stock
Exchange, as published in The Wall Street Journal, on the Offering
-----------------------
Termination Date applicable to such Offering (or on the next regular
business date on which shares of Common stock shall be traded in the event
that no shares of Common Stock shall have been traded on the Offering
Termination Date).

8. Exercise of Option.
------------------

With respect to each Offering during the term of the Plan:

(a) Unless a participant gives written notice of withdrawal to the Company
as hereinafter provided, his or her Option will be deemed to have been
exercised automatically on the Offering Termination Date applicable to such

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<PAGE>

Offering, for the purchase of the number of full shares of Common Stock
which the accumulated payroll deductions in his or her account at that time
will purchase at the applicable Option Exercise Price (but not in excess of
the number of shares for which options have been granted the employee
pursuant to Paragraph 6(a)), and any excess in his or her account at that
time will be returned to him or her.

(b) By written notice to the Plan Administrator at any time prior to the
Offering Termination Date applicable to any such Offering, a participant may
elect to withdraw all the accumulated payroll deduction in his or her
account at such time.

(c) Fractional shares will not be issued under the Plan and any accumulated
payroll deductions which would have been used to purchase fractional shares
shall be carried over and applied to any subsequent Offering or Offerings
unless withdrawn by the employee.

8. Delivery.
--------

As promptly as practicable after the Offering Termination Date of each
Offering, the Company will deliver to each participant, as appropriate, the
certificate or certificates representing the shares of Common Stock purchased
upon the exercise of such participant's Option.

9. Withdrawal.
----------

(a) As provided in Paragraph 7(b), a participant may withdraw payroll
deductions credited to his or her account under any Offering at any time prior
to the applicable Offering Termination Date by giving written notice of
withdrawal to the Plan Administrator of the Company. All of the participant's
payroll deductions credited to his or her account will be paid to the
participant promptly after receipt of such notice of withdrawal and no further
payroll deductions will be made from his or her pay during such Offering. The
Company may, at its option, treat an attempt by an employee to borrow on the
security of accumulated payroll deductions as an election, under Paragraph 7(b),
to withdraw such deductions.

(b) A participant's withdrawal from an Offering will not have any effect
upon his or her eligibility to participate in any succeeding Offering or in any
similar plan which may hereafter be adopted by the Company; provided, however,
-------- -------
that any participant who withdraws from an Offering in accordance with Paragraph
7(b) may not participate in another Offering for a period of at least six months
following such withdrawal.

(c) Upon termination of the participant's employment for any reason,
including retirement but excluding death or disability while in the employ of
the

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<PAGE>

Company or a subsidiary, the payroll deductions credited to his or her account
will be returned to the participant or, in the case of his or her death
subsequent to the termination of employment, to the person or persons entitled
thereto under Paragraph 13.

(d) Upon termination of the participant's employment because of disability
or death, the participant or his or her beneficiary (as defined in Paragraph 13)
shall have the right to elect, by written notice given to the Plan Administrator
prior to the expiration of the period of 30 days commencing with the date of the
disability or death of the participant, either

(i) to withdraw all of the payroll deductions credited to the
participant's account under the Plan; or

(ii) to exercise the participant's option for the purchase of Common
Stock on the Offering Termination Date next following the date of the
participant's disability or death for the purchase of the number of
full shares of Common Stock which the accumulated payroll deductions in
the participant's account at the date of the participant's disability
or death will purchase at the applicable option price, and any excess
in such account will be returned to the participant or said
beneficiary.

In the event that no such written notice of election shall be duly received
by the office of the Plan Administrator, the participant or beneficiary shall
automatically be deemed to have elected to withdraw the payroll deductions
credited to the participant's account at the date of the participant's
disability or death and the same will be paid promptly to the participant or
said beneficiary.

10. Interest.
--------

No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participant employee.

11. Stock.
-----

(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan is 150,000 shares (subject to further
adjustment upon changes in capitalization of the Company as provided in
Paragraph 16). If the total number of shares for which Options are exercised on
any Offering Termination Date in accordance with Paragraph 7 exceeds the number
of shares of Common Stock which remain available for issue under the Plan, the
Company shall make a pro rata allocation of the shares available for delivery
and distribution in as nearly a uniform manner as shall be practicable and as it
shall determine to be equitable, and the balance of payroll deductions credited
to the account of each participant under the

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<PAGE>

Plan shall be returned to him or her as promptly as possible. The Company may
purchase shares on the open market in order to have shares available for
purchase by participants in each Offering.

(b) The participant will have no interest in Common Stock covered by his or
her Option until such Option has been exercised.

(c) Common Stock to be delivered to a participant under the Plan will be
registered in the name of the participant, or, if the participant so directs, by
written notice to the Company prior to the Offering Termination Date applicable
thereto, in the names of the participant and one such other person as may be
designated by the participant, as joint tenants with rights of survivorship, to
the extent permitted by applicable law.

12. Administration.
--------------

The Plan shall be administered by the Compensation Committee appointed by
the Board of Directors of the Company (the "Committee"). The officer of the
Company charged with day-to-day administration of the Plan shall, for matters
involving the Plan, be an ex-officio member of that Committee. The
interpretation and construction of any provision of the Plan and the adoption of
rules and regulations for administering the Plan shall be made by the Committee,
subject, however, at all times to the final jurisdiction which shall rest in the
Board of Directors of the Company. Determinations made by the Committee and
approved by the Board of Directors with respect to any matter or provision
contained in the Plan shall be final, conclusive and binding upon the Company
and upon all participants, their heirs or legal representatives. Any rule or
regulation adopted by the Committee shall remain in full force and effect unless
and until altered, amended, or repealed by the Committee or the Board of
Directors of the Company. The Company shall indemnify Committee members, to the
fullest extent permitted by applicable statute, for any expenses incurred in
defending a civil or criminal action or proceeding, arising out of such member's
actions with respect to such action or proceeding, upon receipt of an
undertaking by the person indemnified to repay such payment if such member shall
be adjudicated not to have acted in good faith in the reasonable belief that
such member's action was the best interest of the Company.

13. Designation of Beneficiary.
--------------------------

A participant may file a written designation of a beneficiary who is to
receive any shares of Common Stock and/or cash in the event of the death of the
participant prior to the delivery of such shares or cash to the participant.
Such designation of beneficiary may be changed by the participant at any time by
written notice to the Plan administrator. Within 30 days after the
participant's death, the beneficiary may, as provided in Paragraph 9(d), elect
to exercise the participant's Option when it

-6-
<PAGE>

becomes exercisable on the Offering Termination Date of the than current
Offering. Upon the death of a participant and upon receipt by the Company of
proof of the identity and existence at the participant's death of a beneficiary
validly designated by the participant under the Plan, and notice of election of
the beneficiary to exercise the Option, the Company shall deliver such stock
and/or cash to such beneficiary. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such stock
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company) the Company, in its discretion, may deliver such stock and/or cash
to the spouse or to any one or more dependents of the participant as the Company
may designate. No beneficiary shall prior to the death of the participant by
whom he has been designated acquire any interest in the stock or cash credited
to the participant under the Plan.

14. Transferability.
---------------

Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive stock under the
Plan may be assigned, transferred, pledged, or otherwise disposed of in any way
by the participant otherwise than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge, or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Paragraph 7(b).

15. Use of Funds.
------------

All payroll deductions received or held by the Company under this Plan may
be used by the Company for any corporate purpose and the Company shall not be
obligated to segregate such payroll deductions.

16. Effect of Changes of Common Stock.
---------------------------------

In the event of any changes of outstanding shares of the Common stock by
reason of stock dividends, subdivisions, combinations and exchanges of shares,
recapitalizations or mergers in which the Company is the surviving corporation,
the aggregate number and class of shares available under this Plan and the
Option Exercise Price per share shall be appropriately adjusted by the Board of
Directors of the Company, whose determination shall be conclusive. Any such
adjustments may provide for the elimination of any fractional shares which would
otherwise become subject to any Options.

17. Amendment or Termination.
------------------------

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<PAGE>

The Board of Directors of the company may at any time terminate or amend
the Plan. Except as hereinafter provided, no such termination can affect
Options previously granted, nor may an amendment make any change in any Option
theretofore granted which would adversely affect the rights of any participant
nor may an amendment be made without the approval of the stockholders of the
Company within twelve months o such amendment if such amendment would (a)
materially increase the benefits accruing to participants under the Plan, (b)
materially increase the number of shares which may be issued under the Plan, or
(c) materially modify the requirements as to eligibility for participation under
the Plan.

18. Notices.
-------

All notices o other communications by a participant to the Company under or
in connection with the Plan shall be deemed to have been duly given when
received by the Plan Administrator.

19. Merger or Consolidation.
-----------------------

If the Company shall at any time merge into or consolidate with another
corporation and the Company is the surviving entity, the holder of each Option
than outstanding will thereafter be entitled to receive at the next Offering
Termination Date upon the exercise of such Option for each share a to which such
Option shall be exercised the securities or property which a holder of one share
of the Common Stock was entitled to upon and at the time of such merger or
consolidation, and the Board of Directors of the Company shall take such steps
in connection with such merger or consolidation as the Board of Directors shall
deem necessary to assure that the provisions of Paragraph 16 shall thereafter be
applicable, as nearly as reasonably may be, in relation to the said securities
or property as to which such holder of such option might thereafter be entitled
to receive thereunder. In the event of a merger or consolidation in which the
Company is not the surviving entity, or of a sale of assets in which the company
is not the surviving entity, the Plan shall terminate, and all payroll
deductions credited to participants' accounts shall be returned to them;
provided, however, that the Board of Directors may, in the event of such merger,
- --------
consolidation or sale, accelerate the Offering Termination Date of the Offering
then in effect and permit participants to purchase shares under the Plan at such
accelerated Offering Termination Date.

20. Approval of Stockholders.
------------------------

The Plan has been adopted by the Board of Directors of the Company, but is
subject to the approval of the stockholders of the Company within twelve months
of the date of adoption of the Plan by the Board of Directors. Notwithstanding
any other provision of the Plan, no Option shall be exercised unless and until
the stockholders of the Company approve the Plan.

-8-
<PAGE>

21. Registration and Qualification of the Plan
------------------------------------------
Under Applicable Securities Laws.
---------------------------------

No Option shall be exercised under the Plan until such time as the Company
has qualified or registered the shares which are subject to the options under
the applicable federal securities laws to the extent required by such laws.

Adopted by the Board of
Directors on February 27, 1992

Approved by the Stockholders
on April 30, 1992

-9-
<PAGE>

KEANE, INC.

AMENDMENT TO 1992 EMPLOYEE STOCK PURCHASE PLAN

Section 4 of Keane, Inc.'s 1992 Employee Stock Purchase Plan

is hereby amended in its entirety to read as follows:

"4. Offering Dates.
--------------

The Plan will be implemented by consecutive quarterly offerings
(referred to herein collectively as "Offerings" and individually as an
"Offering") commencing on July 1, 1992 and continuing until the earlier
of (i) the date on which a total of 337,500 shares of Common Stock
(subject to further adjustment upon changes in capitalization of the
Company as provided in Paragraph 16, and as adjusted to give effect to
(i) the three-for-two split of the outstanding capital stock of the
Company on August 12, 1994 and (ii) the three-for-two split of the
outstanding capital stock of the Company on July 28, 1993) have been
issued under the Plan or (ii) June 30, 1997.

Participation in any one or more of the Offerings under the Plan
shall neither limit, nor require, participation in any other Offering."

This amendment shall become effective as of February 23, 1995, subject

to its approval by the stockholders of Keane, Inc.

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<PAGE>

KEANE, INC.

AMENDMENT TO 1992 EMPLOYEE STOCK PURCHASE PLAN

The first paragraph of Section 4 of Keane, Inc.'s 1992 Employee

Stock Purchase Plan is hereby amended to read as follows:

"The Plan will be implemented by consecutive quarterly offerings
(referred to herein collectively as "Offerings" and individually as an
"Offering") commencing on July 1, 1992 and continuing until the date on
which a total of 637,500 shares of Common Stock (subject to further
adjustment upon changes in capitalization of the Company as provided in
Paragraph 16, and as adjusted to give effect to (i) the three-for-two
split of the outstanding capital stock of the Company on August 12,
1994 and (ii) the three-for-two split of the outstanding capital stock
of the Company on July 28, 1993) have been issued under the Plan."

This amendment shall become effective as of February 20, 1996, subject

to its approval by the Stockholders of Keane, Inc.

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<PAGE>

P KEANE, INC.

R ANNUAL MEETING OF STOCKHOLDERS -- MAY 28, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O

X The undersigned, revoking all prior proxies, hereby appoints John F.
Keane and Norman B. Asher, and each of them, with full power of
Y substitution, as Proxies to represent and vote as designated hereon all
shares of stock of Keane, Inc. (The "Company") which the undesigned would
be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company to be held on Wednesday, May 28, 1997, at
4:30 p.m., Boston Time, at the Hale and Dorr LLP Conference Center, 26th
Floor, 60 State Street, Boston, Massachusetts and at any adjournment
thereof with respect to the matters set forth on the reverse side hereof.

PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE
ENCLOSED POST-PAID RETURN ENVELOPE

See reverse
side
CONTINUED AND TO BE SIGNED ON REVERSE SIDE

[X] Please mark votes as in this example.

If no direction is made, this proxy will be voted in favor of the proposals
set forth below.

1. To fix the number of directors at five and to elect Board of Directors
for the ensuing year.
NOMINEES: John F. Keane, Philip J. Harkins, Winston Hindle,
John F. Rockart and Robert A. Shafto

FOR WITHHELD

[ ] [ ]

[ ]_____________________________________
For all nominees except as noted above

<PAGE>

2. To approve an amendment to the Company's Articles of Organization increasing
the number of shares of Common Stock which the Company is authorized to
issue from 50,000,000 to 100,000,000.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

3. To approve an amendment to the Company's 1992 Stock Option Plan (the "Option
Plan") limiting to 350,000 the number of shares of Common Stock issuable per
calendar year to any participant under the Option Plan and to continue the
Option Plan.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

4. To approve an amendment to the Company's 1992 Employee Stock Purchase Plan
(the "Purchase Plan") increasing the maximum payroll deduction which an
employee may authorize under the Purchase Plan from $5,000 per year to
$5,000 per quarter and providing that the Board of Directors may amend the
Purchase Plan subject to the limitations described in the Proxy Statement
for the 1997 Annual Meeting of stockholders.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.

Please sign exactly as your name appears hereon. If the stock is registered
in the names of two or more persons, each should sign. Executors,
administrators, trustees, guardians, attorneys and corporate officers
should add their titles.

Signature ____________________Date__________

Signature_____________________Date__________

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