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As filed with the Securities and Exchange Commission on June 6, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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SYNTEL, INC.
(Exact name of Registrant as specified in its charter)
Michigan
(State or other jurisdiction of
incorporation or organization)
7371
(Primary Standard Industrial
Classification Code Number)
38-2312018
(I.R.S. Employer
Identification No.)
2800 Livernois--Suite 400
Troy, Michigan 48083
(248) 619-2800
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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BHARAT DESAI
President and Chief Executive Officer
2800 Livernois--Suite 400
Troy, Michigan 48083
(248) 619-2800
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
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COPIES TO:
D. RICHARD McDONALD, ESQ.
Dykema Gossett PLLC
1577 North Woodward Avenue--Suite 300
Bloomfield Hills, Michigan 48304
(248) 203-0859
DANIEL M. MOORE, ESQ.
Syntel, Inc.
2800 Livernois--Suite 400
Troy, Michigan 48083
(248) 619-3508
KEVIN F. BLATCHFORD, ESQ.
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603-2279
(312) 853-2076
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) FEE
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Common Stock, no par value............... 3,450,000 $11.00 $37,950,000 $11,500
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(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(o) under the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
- ----------
3,000,000 SHARES
[SYNTEL LOGO]
COMMON STOCK
All of the 3,000,000 shares of Common Stock offered hereby are being sold
by Syntel,(R) Inc. ("Syntel" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $9.00 and
$11.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company will
apply to have the Common Stock approved for quotation on the Nasdaq National
Market under the symbol SYNT.
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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
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Per Share.................. $ $ $
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Total (3).................. $ $ $
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(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company, estimated at $600,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 450,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to the Public, Underwriting Discount and Proceeds to the Company will be
$ , $ , and $ , respectively. See "Underwriting."
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The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1997, at the office of the agent of
Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST
PRUDENTIAL SECURITIES INCORPORATED
ROBERTSON, STEPHENS & COMPANY
, 1997
<PAGE> 3
[A diagram on this page includes the following:
Syntel corporate logo ("Syntel") and two branded Company icons
("TeamSourcing" and "IntelliSourcing")
Beneath each logo a description of the Company's services
- TeamSourcing: "Professional IT Staffing Services and Systems
Specification, Design, Development, Implementation and Maintenance."
- IntelliSourcing: "Outsourcing Services for Ongoing Applications
Management, Development and Maintenance of Customer Systems, Access to
Best Practice Solutions, Availability of IT Personnel, Flexibility and
Responsive Service Delivery Tailored for Each Customer and Year 2000
Compliance Services."
Several photographs intended to represent Company employees at work.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
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Syntel(R) is a registered trademark, and Method2000(sm) is a registered
service mark, of the Company. All other trademarks, service marks and trade
names referred to in this Prospectus are the property of their respective
owners.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements, including the Notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information
contained in this Prospectus: (i) assumes no exercise of the Underwriters'
over-allotment option; and (ii) has been adjusted to give retroactive effect to
a 22,000-for-1 split of the shares of the Company's common stock (the "Common
Stock"). See "Description of Capital Stock" and "Underwriting." Unless otherwise
indicated, references herein to the "Company" or "Syntel" refer to Syntel, Inc.
and its affiliated corporation, Syntel Software Private Limited ("Syntel
India"), which the Company will acquire upon consummation of this offering.
Unless otherwise indicated, references to historical financial information of
the Company refer only to the historical financial information of Syntel, Inc.
See "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Syntel India Acquisition" and "Certain
Transactions." The Common Stock offered hereby involves a high degree of risk.
See "Risk Factors."
THE COMPANY
Syntel is a worldwide provider of professional information technology
("IT") staffing and outsourcing services to Fortune 1000 companies, as well as
to government entities. The Company's service offerings include TeamSourcing,
consisting of professional IT staffing services, and IntelliSourcing, consisting
of outsourcing services for ongoing management, development and maintenance of
business applications, including Year 2000 compliance services. Syntel believes
that its service offerings are distinguished by its Global Service Delivery
Model, a corporate culture focused on customer service and responsiveness, and
its own internally developed "intellectual capital" based on a proven set of
methodologies, practices and tools for managing the IT functions of its
customers.
Through TeamSourcing, Syntel provides professional IT staffing services
directly to customers. TeamSourcing services include systems specification,
design, development, implementation and maintenance of complex IT applications
involving diverse computer hardware, software, data and networking technologies
and practices. TeamSourcing services are provided by individual professionals
and teams of professionals dedicated to assisting customer IT departments with
systems projects and ongoing functions. For the year ended December 31, 1996 and
for the three months ended March 31, 1997, TeamSourcing accounted for
approximately 64% and 56% of revenues, respectively.
Through IntelliSourcing, Syntel provides higher-value outsourcing services
for ongoing management, development and maintenance of customers' business
applications. Syntel assumes responsibility for and manages selected application
support functions of the customer. Utilizing its developed methodology of
activities, processes and tools, known as IntelliTransfer, the Company is able
to assimilate the business process knowledge of its customers to develop and
deliver services specifically tailored for that customer. The Company also
provides Year 2000 compliance services to customers using its proprietary
Method2000(sm) solution. For the year ended December 31, 1996 and for the three
months ended March 31, 1997, IntelliSourcing accounted for approximately 36% and
44% of revenues, respectively.
The Company's Global Service Delivery Model provides Syntel with
flexibility to deliver to each customer a unique mix of services on-site at the
customer's location, off-site at its U.S. locations and offshore at its Mumbai
(formerly Bombay), India location. The benefits to the customer from this
customized service approach include responsive delivery based on an in-depth
understanding of the specific processes and needs of the customer, quick
turnaround, access to the most knowledgeable personnel and best practices,
resource depth, 24-hour support seven days a week and cost-effectiveness. By
linking each of its service locations together through a dedicated data and
voice network, Syntel provides a seamless service capability to its customers
around the world largely unconstrained by geographies, time zones and cultures.
The Company is expanding its Global Development Center in Mumbai, India and is
establishing a new Global Development Center in Chennai (formerly Madras),
India.
3
<PAGE> 5
Syntel provides its services to a broad range of Fortune 1000 companies
principally in the financial services, manufacturing, retail, transportation and
information/communications industries, as well as to government entities.
Principal customers include American International Group, Inc., Ford Motor Co.,
AT&T Corp., Dayton Hudson Corp., Chrysler Corporation and the State of New
Mexico. The Company has been chosen as a preferred vendor by several of its
customers and has been recognized for its quality and responsiveness. The
Company has a focused sales effort that includes a strategy of migrating
existing TeamSourcing customers to higher-value IntelliSourcing services. The
Company recently realigned its resources to focus on the development, marketing
and sales of its IntelliSourcing services.
The Company believes its human resources are its most valuable asset and
invests significantly in programs to recruit, train and retain IT professionals.
The Company recruits globally through its worldwide recruiting network, trains
recent college graduates and other recruits and maintains a broad package of
employee support programs. Syntel believes that its management structure and
human resources organization is designed to maximize the Company's ability to
rapidly and efficiently expand its IT professional staff in response to customer
needs. This scalable business model has enabled the Company to grow
significantly in recent years. The Company's revenues increased from $29.7
million in 1992 to $92.2 million in 1996. As of June 1, 1997, Syntel's worldwide
billable headcount consisted of 1,402 IT professionals.
THE OFFERING
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Common Stock offered by the Company......................... 3,000,000 shares
Common Stock to be outstanding after the offering........... 25,000,000 shares(1)
Use of proceeds............................................. Purchase of Syntel India; payment of
undistributed S corporation taxable
income; and general corporate
purposes, including working capital
and possible future acquisitions.
Proposed Nasdaq National Market symbol...................... SYNT
</TABLE>
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(1) Excludes (i) 2,000,000 shares of Common Stock reserved for issuance under
the Company's Stock Option Plan, which include options outstanding on the
date hereof to purchase 608,750 shares at a weighted average exercise price
of $5.85 per share and options to purchase approximately 42,000 additional
shares which will be granted upon the consummation of this offering at an
exercise price equal to the initial offering price of the Common Stock
offered hereby, and (ii) 1,000,000 shares of Common Stock reserved for
issuance under the Company's Employee Stock Purchase Plan. See
"Capitalization," "Management--Stock Option Plan" and "-- Employee Stock
Purchase Plan" and "Shares Eligible for Future Sale."
4
<PAGE> 6
AFFILIATE TRANSACTIONS
Bharat Desai and Neerja Sethi are the Company's President and Chief
Executive Officer and the Company's Vice President, Corporate Affairs,
respectively, and together they beneficially own substantially all of the
outstanding Common Stock of the Company. Mr. Desai and Ms. Sethi are husband and
wife. See "Management" and "Principal Shareholders."
Mr. Desai and Ms. Sethi also own all of the outstanding capital stock of
Syntel Software Private Limited ("Syntel India"), a corporation organized under
the laws of India. Syntel India provides offshore software development services
to the Company and derives substantially all of its revenues from the Company.
Upon the consummation of this offering, the Company will acquire all of the
outstanding capital stock of Syntel India for $7.0 million. The purchase price
will be paid from a portion of the net proceeds of this offering. See "Use of
Proceeds" and "Certain Transactions."
The Company has elected to be treated as an S corporation and, as a result,
the income of the Company has been taxed for federal and state tax purposes
directly to the Company's shareholders, rather than to the Company. Prior to
completion of this offering, the Company will terminate its S corporation
status, and, thereafter, will be subject to federal and state income taxes on
its earnings. The Company's taxable income through the date of termination will
be taxed directly to the Company's shareholders. Accordingly, prior to
completion of this offering, the Company will declare a distribution to Mr.
Desai, Ms. Sethi and the Company's other shareholders in an amount equal to the
Company's undistributed S corporation taxable income through the date
immediately preceding the date of termination, which the Company estimates will
be approximately $3.5 million (the "S Corporation Distribution"). The S
Corporation Distribution will be paid from a portion of the net proceeds of this
offering. The Company distributed $7.0 million in the aggregate to Mr. Desai and
Ms. Sethi from cash in the second quarter of 1997 relating to undistributed S
corporation taxable income through December 31, 1996. See "Use of Proceeds,"
"Prior S Corporation Status and Distribution" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
The Company was incorporated under the laws of the State of Michigan in
1980. The Company maintains its principal executive offices at 2800 Livernois,
Suite 400, Troy, Michigan 48083, and its telephone number is (248) 619-2800. The
Company's web site is http://www.syntelinc.com. The Company's web site is not a
part of this Prospectus.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in the Prospectus, the words
"anticipates," "believes," "estimates," "expects," and similar expressions as
they relate to the Company or its management are intended to identify such
forward-looking statements. The Company's actual results, performance or
achievement could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or contribute to
such differences include those discussed under the caption "Risk Factors."
5
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SUMMARY FINANCIAL INFORMATION
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THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
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1992 1993 1994 1995 1996 1996 1997
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF INCOME
DATA:
Revenues...................... $29,717 $45,345 $67,247 $90,326 $92,237 $21,862 $26,262
Gross profit.................. 6,920 6,336 11,310 18,788 22,454 5,116 6,368
Income from operations........ 721 1,122 3,101 5,479 4,193 1,041 1,308
Net income(1)................. $ 935 $ 1,021 $ 3,032 $ 5,237 $ 4,171 $ 1,165 $ 1,383
Pro forma net income(2)....... $ 2,775 $ 854
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Pro forma net income per
share(2).................... $ 0.13 $ 0.04
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Pro forma weighted average
common shares
outstanding(2).............. 22,135 22,197
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PRO FORMA CONSOLIDATED STATEMENT OF
INCOME DATA(3):
Revenues...................... $92,330 $26,294
Gross profit.................. 25,247 7,402
Income from operations........ 5,934 1,986
Net income.................... $ 4,354 $ 1,575
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Net income per share.......... $ 0.17 $ 0.06
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Weighted average common shares
outstanding................. 25,135 25,197
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MARCH 31, 1997
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ACTUAL AS ADJUSTED(4)
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(IN THOUSANDS)
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BALANCE SHEET DATA:
Working capital........................................ $ 8,014 $29,919
Total assets........................................... 32,403 55,770
Long-term debt......................................... -- --
Total shareholders' equity............................. 11,288 30,922
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(1) For all periods shown, the Company elected to be treated as an S corporation
and, as a result, the income of the Company has been taxed for federal and
state purposes (with exceptions under certain state income tax laws)
directly to the Company's shareholders rather than to the Company. See
"Prior S Corporation Status and Distribution."
(2) Historical pro forma data reflect income tax provisions of $1.4 million and
$0.5 million for the year ended December 31, 1996 and the three months ended
March 31, 1997, respectively, for federal and additional state income taxes
as if the Company had been taxed as a C corporation since January 1, 1996.
(3) Pro forma consolidated statement of income data reflect: (i) income tax
provisions of $1.4 million and $0.5 million for the year ended December 31,
1996 and the three months ended March 31, 1997, respectively, for federal
and additional state income taxes as if the Company had been taxed as a C
corporation since January 1, 1996, (ii) the results of operations of Syntel,
India, as if the acquisition of Syntel India had occurred as of January 1,
1996 and (iii) the compensation component associated with the granting on
April 1, 1997 of options to purchase 140,000 shares, as if such options had
been granted on January 1, 1996. See "Pro Forma Consolidated Financial
Statements."
(4) As adjusted to give effect to: (i) the sale by the Company of 3,000,000
shares of Common Stock offered hereby at an assumed public offering price of
$10.00 per share and the application of the estimated net proceeds
therefrom; (ii) the recording of $4.6 million, or $0.18 per share, of
deferred tax liability as a result of the termination of the Company's S
corporation election as if terminated on March 31, 1997 (the Company
estimates that this deferred tax liability will be approximately $3.3
million, or $0.13 per share, at the time of consummation of this offering);
(iii) the distribution to the Company's shareholders of undistributed S
corporation taxable income (while there was no undistributed S corporation
taxable income as of March 31, 1997, the Company estimates that
undistributed S corporation taxable income will be approximately $3.5
million at the time of consummation of this offering); and (iv) the
acquisition of Syntel India for $7.0 million and the elimination of the
intercompany balance between the Company and Syntel India. See "Use of
Proceeds," "Prior S Corporation Status and Distribution," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Syntel India Acquisition," "--Net Charge Resulting from S
Corporation Termination" and "-- Liquidity and Capital Resources" and
"Certain Transactions."
6
<PAGE> 8
RISK FACTORS
In addition to the other information contained in this Prospectus,
investors should consider carefully the following factors in evaluating an
investment in the shares of the Common Stock offered hereby.
Recruitment and Retention of IT Professionals. The Company's business of
delivering professional IT services is labor intensive, and, accordingly, its
success depends upon its ability to attract, develop, motivate, retain and
effectively utilize highly-skilled IT professionals. The Company believes that
both in the United States and in India there is a growing shortage of, and
significant competition for, IT professionals who possess the technical skills
and experience necessary to deliver the Company's services, and that such IT
professionals are likely to remain a limited resource for the foreseeable
future. The Company believes that, as a result of these factors, it operates
within an industry that experiences a significant rate of annual turnover of IT
personnel. The Company's business plans are based on hiring and training a
significant number of additional IT professionals each year to meet anticipated
turnover and increased staffing needs. The Company's ability to maintain and
renew existing engagements and to obtain new business depends, in large part, on
its ability to hire and retain qualified IT professionals. Historically, the
Company has performed a significant portion of its employee recruiting in
foreign countries, particularly in India. Any perception among the Company's
recruits or foreign IT professionals, whether or not well-founded, that the
Company's ability to assist them in obtaining permanent residency status in the
United States has been diminished could result in increased recruiting and
personnel costs or lead to significant employee attrition or both. There can be
no assurance that the Company will be able to recruit and train a sufficient
number of qualified IT professionals or that the Company will be successful in
retaining current or future employees. Failure to hire and train or retain
qualified IT professionals in sufficient numbers could have a material adverse
effect on the Company's business, results of operations and financial condition.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business --Human Resources" and "--Competition."
Government Regulation of Immigration. The Company recruits its IT
professionals on a global basis and, therefore, must comply with the immigration
laws in the countries in which it operates, particularly the United States. As
of June 1, 1997, approximately 59% of Syntel's U.S. workforce (42% of Syntel's
worldwide workforce) worked under H-1B visas (permitting temporary residence
while employed in the U.S.). Pursuant to United States federal law, the
Department of Immigration and Naturalization Services (the "INS") limits the
number of new H-1B visas to be approved in any government fiscal year. In years
in which this limit is reached, the Company may be unable to obtain enough H-1B
visas to bring a sufficient number of foreign employees to the U.S. If the
Company were unable to obtain sufficient H-1B employees, the Company's business,
results of operations and financial condition could be materially and adversely
affected. Furthermore, Congress and administrative agencies have periodically
expressed concerns over the levels of legal immigration into the U.S. These
concerns have often resulted in proposed legislation, rules and regulations
aimed at reducing the number of work visas, including H-1B visas, that may be
issued. Since September 29, 1995, the Company has been subject to a consent
decree with the U.S. Department of Labor relating to its H-1B employees. As a
result of the consent decree, the Company did not seek any new H-1B visas during
the fourth quarter of 1995, significantly curtailed its H-1B hiring from April
1995 through September 1996, and significantly increased its U.S. domestic
recruiting and hiring efforts throughout 1996. While the Company believes that
these steps adversely affected revenue growth in 1995 and 1996, the Company
believes that it has fully complied with the consent decree and that continued
compliance through the expiration of the decree in September 1997 will not have
a material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview" and
"Business--Human Resources--DOL Consent Decree." The failure of the Company to
comply with applicable laws and regulations, any changes in the interpretation
of existing laws and regulations or the adoption of new laws and regulations
making it more difficult to hire foreign nationals, or limiting the ability of
the Company to retain foreign employees, could have a material adverse effect on
the Company's business, results of operations and financial condition.
7
<PAGE> 9
Variability of Quarterly Operating Results. The Company has experienced and
expects to continue to experience fluctuations in revenues and operating results
from quarter to quarter due to a number of factors, including: the timing,
number and scope of customer engagements commenced and completed during the
quarter; progress on fixed-price engagements; timing and cost associated with
expansion of the Company's facilities; changes in IT professional wage rates;
the accuracy of estimates of resources and time frames required to complete
pending assignments; the number of working days in a quarter; employee hiring,
attrition and utilization rates; the mix of services performed on-site, off-site
and offshore; termination of engagements; start-up expenses for new engagements;
longer sales cycles for IntelliSourcing engagements; customers' budget cycles;
and investment time for training. Because a significant percentage of the
Company's selling, general and administrative expenses are relatively fixed,
variations in revenues may cause significant variations in operating results.
Although fixed-price engagements have not contributed significantly to revenues
and earnings to date, operating results may be adversely affected in the future
by cost overruns on fixed-price engagements. In addition, it is possible that in
some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock would likely be materially adversely affected. No
assurance can be given that quarterly results will not fluctuate causing a
material adverse effect on the Company's financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Selected Quarterly Results of Operations."
Customer Concentration; Risk of Termination. The Company has in the past
derived, and believes it will continue to derive, a significant portion of its
revenues from a limited number of large, corporate customers. The Company's ten
largest customers represented approximately 81%, 78% and 77% of revenues for the
year ended December 31, 1995 and 1996 and for the three months ended March 31,
1997, respectively. The Company's largest customer is American Home Assurance
Company and certain other subsidiaries of American International Group Inc.
(collectively, "AIG"). AIG accounted for approximately 38%, 34% and 31% of
revenues for the year ended December 31, 1995 and 1996 and for the three months
ended March 31, 1997, respectively. Ford Motor Company ("Ford"), the Company's
next largest customer, accounted for approximately 14%, 12% and 10% of revenues
for the year ended December 31, 1995 and 1996 and for the three months ended
March 31, 1997, respectively. The volume of work performed for specific
customers is likely to vary from year to year, and a significant customer in one
year may not provide the same level of revenues in any subsequent year. Because
many of its engagements involve functions that are critical to the operations of
its customer's businesses, any failure by Syntel to meet a customer's
expectations could result in cancellation or nonrenewal of the engagement and
could damage Syntel's reputation and adversely affect its ability to attract new
business. Most of the Company's contracts are terminable by the customer with
limited notice and without penalty. An unanticipated termination of a
significant engagement could result in the loss of substantial anticipated
revenues and could require the Company to either maintain or terminate a
significant number of unassigned IT professionals. The loss of any significant
customer or engagement could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Customers."
Exposure to Regulatory and General Economic Conditions in India. A
significant element of the Company's business strategy is to continue to develop
and expand offshore Global Development Centers in India. As of June 1, 1997, the
Company had approximately 29% of its workforce in India, and anticipates that
this percentage will increase over time. While wage costs in India are
significantly lower than in the U.S. and other industrialized countries for
comparably skilled IT professionals, wages in India are increasing at a faster
rate than in the U.S., and could result in the Company incurring increased costs
for IT professionals. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview" and "-- Results of Operations
- -- Syntel India." In the past, India has experienced significant inflation and
shortages of foreign exchange, and has been subject to civil unrest. No
assurance can be given that the Company will not be adversely affected by
changes in inflation, interest rates, taxation, social stability or other
political, economic or diplomatic
8
<PAGE> 10
developments in or affecting India in the future. In addition, the Indian
government is significantly involved in and exerts significant influence over
its economy. In the recent past, the Indian government has provided significant
tax incentives and relaxed certain regulatory restrictions in order to encourage
foreign investment in certain sectors of the economy, including the technology
industry. Certain of these benefits that directly benefitted the Company
included, among others, tax holidays, liberalized import and export duties and
preferential rules on foreign investment. After acquiring Syntel India, the
Company plans to treat any Syntel India earnings as permanently invested in
India. If the Company decides to repatriate any earnings of Syntel India, it
will incur a "border" tax, currently 10%, under Indian tax law and be required
to pay U.S. corporate income taxes on such earnings. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Income Tax Matters." Changes in the business or regulatory climate of India
could have a material adverse effect on the Company's business, results of
operations and financial condition.
Intense Competition. The IT services industry is intensely competitive,
highly fragmented and subject to rapid change and evolving industry standards.
The Company competes with a variety of other companies, depending on the IT
services it offers. The Company's primary competitors for professional IT
staffing engagements include participants from a variety of market segments,
including "Big Six" accounting firms, systems consulting and implementation
firms, applications software development and maintenance firms, service groups
of computer equipment companies and temporary staffing firms. In applications
outsourcing services, the Company competes primarily with Electronic Data
Systems Corp., IBM Global Solutions (ISSC), Andersen Consulting and Computer
Sciences Corporation. The Company's principal competitors for Year 2000
compliance engagements include IBM Global Solutions (ISSC), Cap Gemini and
Andersen Consulting. Many of the Company's competitors have substantially
greater financial, technical and marketing resources and greater name
recognition than the Company. As a result, they may be able to compete more
aggressively on pricing, respond more quickly to new or emerging technologies
and changes in customer requirements, or devote greater resources to the
development and promotion of IT services than the Company. In addition, there
are relatively few barriers to entry into the Company's markets and the Company
has faced, and expects to continue to face, additional competition from new IT
service providers. Further, there is a risk that the Company's customers may
elect to increase their internal resources to satisfy their IT services needs as
opposed to relying on a third-party vendor such as the Company. The IT services
industry is also undergoing consolidation which may result in increased
competition in the Company's target markets. Increased competition could result
in price reductions, reduced operating margins and loss of market share, any of
which could have a material adverse effect on the Company. The Company also
faces significant competition in recruiting and retaining IT professionals which
could result in higher labor costs or shortages. There can be no assurance that
the Company will compete successfully with existing or new competitors or that
competitive pressures faced by the Company will not materially adversely affect
its business, results of operations or financial condition. See
"Business--Competition."
Ability to Manage Growth. The Company's business has experienced rapid
growth over the years that has placed significant demands on the Company's
managerial, administrative and operational resources. Revenues have increased
from $29.7 million in 1992 to $92.2 million in 1996, and the number of worldwide
billable employees has increased from 481 as of December 31, 1992 to 1,402 as of
June 1, 1997. The Company established a sales office in London, England in 1996,
opened a sales and service office in Singapore in May 1997, is expanding its
Global Development Center in Mumbai, India and is establishing a new Global
Development Center in Chennai, India. See "Business--Global Service Delivery
Model." The Company's future growth depends on recruiting, hiring and training
IT professionals, increasing its international operations, expanding its U.S.
and offshore capabilities, adding effective sales and management staff and
adding service offerings. Effective management of these and other growth
initiatives will require the Company to continue to improve its operational,
financial and other management processes and systems. Failure to manage growth
effectively could have a material adverse effect on the quality of the Company's
services and engagements, its ability to attract and retain IT professionals,
its business prospects, and its results of operations and financial
9
<PAGE> 11
condition. The Company has historically derived most of its revenues from
professional IT staffing services. In the second half of 1996, the Company
realigned personnel and resources to focus more attention on outsourcing
services for ongoing applications management, development and maintenance and
Year 2000 compliance services. A key factor in the Company's growth strategy is
to substantially increase outsourcing service engagements with new and existing
customers. The Company is less experienced in marketing, developing and
performing such outsourcing services, which have a longer sales cycle (up to 12
months) and generally require approval by more senior levels of management
within the customer's organization, as compared to more traditional IT staffing
services. There can be no assurance that the Company's increased focus on
outsourcing services will be successful, and any failure of such strategy could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "Business--Strategies."
Fixed-Price Engagements. The Company undertakes, from time to time, certain
engagements billed on a fixed-price basis, as distinguished from the Company's
principal method of billing on a time-and-materials basis. In addition, the
Company offers its Year 2000 compliance services on a fixed-price basis in
contrast to most other compliance service providers who charge customers on a
time-and-materials basis. Furthermore, the Company has a strategy to increase
its percentage of revenue from fixed-price outsourcing. The Company's failure to
estimate accurately the resources and time required for an engagement or its
failure to complete fixed-price engagements within budget, on time and to the
required quality levels would expose the Company to risks associated with cost
overruns and, in certain cases, penalties, any of which could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" and "Business--Services--IntelliSourcing."
Potential Liability to Customers. Many of the Company's engagements involve
IT services that are critical to the operations of its customers' businesses.
The Company's failure or inability to meet a customer's expectations in the
performance of its services could result in a claim for substantial damages
against the Company, regardless of the Company's responsibility for such
failure. Although the Company attempts to limit contractually its liability for
damages arising from negligent acts, errors, mistakes or omissions in rendering
its IT services, there can be no assurance the limitations of liability set
forth in its service contracts will be enforceable in all instances or would
otherwise protect the Company from liability for damages. Although the Company
maintains general liability insurance coverage, including coverage for errors
and omissions, there can be no assurance that such coverage will continue to be
available on reasonable terms or will be available in sufficient amounts to
cover one or more large claims, or that the insurer will not disclaim coverage
as to any future claim. The successful assertion of one or more large claims
against the Company that are uninsured, exceed available insurance coverage or
result in changes to the Company's insurance policies, including premium
increases or the imposition of large deductible or co-insurance requirements,
could adversely affect the Company's business, results of operations and
financial condition.
Dependence on Principal. The success of the Company is highly dependent on
the efforts and abilities of Bharat Desai, the Company's founder, Chief
Executive Officer and President. Mr. Desai is subject to an employment agreement
with the Company with a term ending December 31, 1999, which contains
noncompetition, nonsolicitation and nondisclosure covenants during the term of
the agreement and for two years following termination of employment. The loss of
the services of this key executive for any reason could have a material adverse
effect on the Company's business, operating results and financial condition. See
"Management--Executive Officers and Directors."
Control by and Benefits to Existing Shareholders. Upon completion of this
offering, Bharat Desai and Neerja Sethi, who are husband and wife, will
beneficially own in the aggregate approximately 88% of the Company's Common
Stock (approximately 86% if the Underwriters' over-allotment is exercised in
full). As a result, Mr. Desai and Ms. Sethi will be able to elect the entire
Board of Directors, and will retain the voting power to control all matters
requiring shareholder approval, including approval of significant corporate
transactions, provided that they vote together on such matters. Such a
concentration of ownership may have the effect of delaying or preventing a
change in control of the Company,
10
<PAGE> 12
and may also impede or preclude transactions in which shareholders might
otherwise receive a premium for their shares over then-current market prices. In
addition, Mr. Desai and Ms. Sethi will receive material benefits in connection
with this offering, including dedication of a portion of the net proceeds to the
payment of the $7.0 million purchase price for Syntel India and payment of an
estimated $3.5 million of undistributed S corporation taxable income through the
date of termination of the Company's S corporation status. This offering will
establish a public market for the Common Stock and provide significantly
increased liquidity to Mr. Desai and Ms. Sethi for the shares of Common Stock
they will own after this offering. See "Use of Proceeds," "Dilution,"
"Management--Executive Officers and Directors," "Principal Shareholders" and
"Certain Transactions."
Risks Related to Possible Acquisitions. The Company may expand its
operations through the acquisition of additional businesses. Financing of any
future acquisition could require the incurrence of indebtedness, the issuance of
equity (common or preferred) or a combination thereof. There can be no assurance
that the Company will be able to identify, acquire or profitably manage
additional businesses or successfully integrate any acquired businesses into the
Company without substantial expense, delays or other operational or financial
risks and problems. Furthermore, acquisitions may involve a number of special
risks, including diversion of management's attention, failure to retain key
acquired personnel, unanticipated events or legal liabilities and amortization
of acquired intangible assets, any of which could have a material adverse effect
on the Company's business, results of operations and financial condition.
Customer satisfaction or performance problems within an acquired firm could have
a material adverse impact on the reputation of the Company as a whole. In
addition, there can be no assurance that acquired businesses, if any, will
achieve anticipated revenues and earnings. While the Company from time to time
considers acquisition opportunities, it has never acquired a business, and as of
the date of this Prospectus, has no existing agreements, understandings or
commitments to effect any acquisitions, with the exception of the acquisition of
Syntel India. The failure of the Company to manage its acquisition strategy
successfully could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business--Strategies" and
"Certain Transactions."
Limited Intellectual Property Protection. The Company's success depends in
part upon certain methodologies, practices, tools and technical expertise it
utilizes in designing, developing, implementing and maintaining applications and
other proprietary intellectual property rights. The Company is also developing
proprietary conversion tools specifically tailored to address the Year 2000
problem. In order to protect its proprietary rights in these various
intellectual properties, the Company relies upon a combination of nondisclosure
and other contractual arrangements and trade secret, copyright and trademark
laws which afford only limited protection. The Company also generally enters
into confidentiality agreements with its employees, consultants, customers and
potential customers and limits access to and distribution of its proprietary
information. India is a member of the Berne Convention, an international treaty,
and has agreed to recognize protections on intellectual property rights
conferred under the laws of foreign countries, including the laws of the U.S.
The Company believes that laws, rules, regulations and treaties in effect in the
U.S. and India are adequate to protect it from misappropriation or unauthorized
use of its intellectual property. However, there can be no assurance that such
laws will not change and, in particular, that the laws of India will not change
in ways that may prevent or restrict the transfer of software components,
libraries and toolsets from India to the U.S. There can be no assurance that the
steps taken by the Company will be adequate to deter misappropriation of its
intellectual property, or that the Company will be able to detect unauthorized
use and take appropriate steps to enforce its rights. Although the Company
believes that its intellectual property rights do not infringe on the
intellectual property rights of others, there can be no assurance that such a
claim will not be asserted against the Company in the future or what impact any
such claim, would have on the Company's business, results of operation or
financial condition. The Company presently holds no patents or registered
copyrights, trademarks or servicemarks other than Syntel(R) and Method2000(sm).
The Company has submitted federal trademark applications to register certain
names for its service offerings, including the IntelliSourcing and TeamSourcing
names. There can be no
11
<PAGE> 13
assurance, however, that the Company will be successful in obtaining federal
trademarks for these trade names. See "Business--Intellectual Property Rights."
No Prior Market; Possible Volatility of Stock Price. Prior to this
offering, there has been no public market for the Common Stock of the Company.
The initial public offering price per share of the Common Stock will be
determined by negotiations between management of the Company and the
representatives of the Underwriters and may bear no relationship to the market
price of the Common Stock after the offering. Although the Company expects that
the Common Stock will be approved for quotation on the Nasdaq National Market,
there can be no assurance that an active public market in the Company's Common
Stock will develop or be sustained. The prices at which the Common Stock trades
will be determined by the marketplace and influenced by many factors, including
the Company's operating and financial performance, the depth and liquidity of
the market for the Common Stock, future sales of Common Stock, including sales
by Mr. Desai and Ms. Sethi, investor perceptions of the Company and its
prospects, the Company's dividend policy and general economic conditions. The
stock market has from time to time experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of particular companies. In addition, factors such as announcements
of technological innovations, new products or services or new customer
engagements by the Company or its competitors or third parties, as well as
market conditions in the IT services industry, may have a significant impact on
the market price of the Company's Common Stock. See "Underwriting."
Anti-Takeover Provisions. The Company's Restated Articles of Incorporation
(the "Articles") and Bylaws and the Michigan Business Corporation Act ("MBCA")
include provisions that may be deemed to have anti-takeover effects; may delay,
deter or prevent a takeover attempt that shareholders might consider in their
best interests; and will effectively make it more difficult for a third party to
acquire control of the Company by means of a tender offer or a proxy contest for
the election of directors or otherwise. The Articles provide for 5,000,000
authorized shares of Preferred Stock ("Preferred Stock"), the rights,
preferences, qualifications, limitations and restrictions of which may be fixed
by the Board of Directors without any vote or action by the shareholders. The
rights of the holders of the Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. Preferred Stock, if issued, may be senior in rights to
dividends and liquidation preferences to holders of Common Stock and could have
voting rights that may substantially dilute the voting rights of Common Stock
holders. The Company has no present plans to issue any shares of Preferred
Stock. The Articles provide for a classified Board of Directors consisting of
three classes selected to serve staggered three year terms, and members of the
Board of Directors may be removed only for cause upon the affirmative vote of
holders of a majority of shares entitled to vote. In addition, the number of
directors which constitutes the whole Board of Directors may be changed only by
the vote of at least two-thirds of the directors then in office. The Company's
Bylaws reserve the authority to call a special shareholders meeting to the Board
of Directors, the Chairman of the Board, or the President, and require advance
notice by a shareholder of a proposal or director nomination which such
shareholder desires to present at any annual or special meeting of shareholders.
Chapter 7A of the MBCA provides, with certain exceptions, that business
combinations between a Michigan corporation and an "interested shareholder"
generally require the approval of 90% of the votes of each class of stock
entitled to vote, and not less than 2/3 of the votes of each class of stock
entitled to vote, excluding shares owned by such interested shareholder. An
"interested shareholder" is a person directly or indirectly owning 10% or more
of the corporation's outstanding voting power, or an affiliate of the
corporation who at any time within two years prior to the date in question
directly or indirectly owned 10% or more of such voting power. Chapter 7B of the
MBCA provides that "control shares" of the Company acquired in a control share
acquisition have no rights except as granted by the shareholders of the Company.
Control shares are shares that, when added to shares previously owned by a
shareholder, increase such shareholder's ownership of voting stock to at least
20%, at least 33 1/3% or a majority of the outstanding voting power of the
Company. With certain exceptions, a control share acquisition must be approved
by a majority of the votes cast by holders of stock entitled to vote excluding
shares owned by the acquiror and certain officers and directors. These
12
<PAGE> 14
factors may have the effect of delaying or preventing a change in control of the
Company without action by the shareholders, may discourage bids for the Common
Stock at a premium over the market price and may deter efforts to obtain control
of the Company, each of which could adversely affect the market price of the
Common Stock. See "Description of Capital Stock."
Shares Eligible for Future Sale. Sales of substantial amounts of the
Company's Common Stock in the public market following this offering could
adversely affect the market price of the Common Stock. Immediately after
completion of this offering, the Company will have 25,000,000 shares of Common
Stock outstanding, of which 3,000,000 shares sold pursuant to this offering will
be freely tradable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), except those shares
held by affiliates of the Company. The Company and its current shareholders have
agreed not to offer, sell, or otherwise dispose of any shares of Common Stock,
options, or warrants to acquire shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock during the 180-day
period following the date of this Prospectus. However, Hambrecht & Quist, LLC,
in its sole discretion, may release the shareholders from these lock-up
agreements, in whole or in part, at any time and without notice. Following the
180-day lock-up period, all of the restricted securities will become eligible
for sale, subject to the manner of sale, volume, notice and information
requirements of Rule 144 of the Securities Act. Promptly following consummation
of this offering, the Company expects to file a registration statement on Form
S-8 with the Securities and Exchange Commission registering 2,000,000 shares of
Common Stock reserved for issuance under the Company's Stock Option Plan. The
Company granted options to purchase 140,000 shares on April 1, 1997, 468,750
shares on June 2, 1997 and, upon consummation of this offering, intends to grant
options to its employees to purchase in the aggregate approximately 42,000
additional shares. Such options vest in increments of 10%, 20%, 30% and 40% of
the shares subject to the option on the first, second, third and fourth
anniversaries, respectively, of the grant date of the option. Promptly following
consummation of the offering, the Company also intends to file a registration
statement on Form S-8 with the Commission registering 1,000,000 shares of Common
Stock reserved for issuance under the Company's Employee Stock Purchase Plan.
Sales of substantial amounts of such shares in the public market or the
availability of such shares for future sales could adversely affect the market
price of the shares of Common Stock and the Company's ability to raise
additional capital at a price favorable to the Company. See "Shares Eligible for
Future Sale" and "Underwriting."
Immediate and Substantial Dilution. The initial public offering price per
share of Common Stock is substantially higher than the net tangible book value
per share of the Common Stock. At an assumed initial public offering price of
$10.00 per share, purchasers of shares of Common Stock in this offering will
experience immediate and substantial dilution of $8.76 in the pro forma net
tangible book value per share of Common Stock. See "Dilution."
Management Discretion as to Use of Unallocated Net Proceeds. A substantial
portion of the anticipated net proceeds of this offering will be allocated to
general corporate purposes and working capital and have not been designated for
specific uses. Therefore, the Board of Directors will have broad discretion with
respect to the use of a substantial portion of the net proceeds of this
offering. See "Risk Factors--Risks Related to Possible Acquisitions," and "Use
of Proceeds."
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby, after deducting the underwriting discount and
estimated offering expenses payable by the Company, are estimated to be
approximately $27,300,000 (approximately $31,485,000 if the Underwriters'
overallotment option is exercised in full), assuming an initial offering price
of $10.00 per share.
The Company expects to use the net proceeds from this offering for: (i)
payment of approximately $7.0 million in the aggregate to Bharat Desai and
Neerja Sethi for the acquisition of Syntel India; (ii) payment to Mr. Desai, Ms.
Sethi and the Company's other shareholders of undistributed S corporation
taxable income through the date of termination of the Company's S corporation
election, estimated to be approximately $3.5 million; and (iii) general
corporate purposes, including working capital and possible future acquisitions.
See "Prior S Corporation Status and Distribution," "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Syntel India
Acquisition" and "Certain Transactions."
The Company may use a portion of the net proceeds from this offering to
make one or more acquisitions of, or investments in, businesses and technologies
that are complementary to those offered by the Company. Except for the
acquisition of Syntel India described in this Prospectus, the Company has no
specific agreements, understandings or commitments with respect to any such
acquisition. See "Risk Factors--Risks Related to Possible Acquisitions" and
"Business--Strategies."
Pending such uses, the Company intends to invest the remaining net proceeds
from this offering in short-term, investment grade, interest-bearing
instruments.
PRIOR S CORPORATION STATUS AND DISTRIBUTION
The Company has elected to operate under Subchapter S of the Internal
Revenue Code of 1986, as amended (the "Code"), and comparable provisions of
certain state income tax laws. An S corporation generally is not subject to
income tax at the corporate level (with exceptions under certain state income
tax laws). Instead, the S corporation's income generally passes through to the
shareholders and is taxed on their personal income tax returns. Prior to
completion of this offering, the Company will terminate its S corporation
status. The Company's earnings through the date of termination of the Company's
S corporation status will continue to be taxed for federal and state income tax
purposes, with certain exceptions, directly to the Company's shareholders.
Subsequent to the termination of its S corporation status, the Company will be
subject to federal and state income taxes on its earnings.
Prior to the completion of this offering, the Company will declare a
distribution to Mr. Desai, Ms. Sethi and the Company's other shareholders in an
amount equal to the Company's undistributed S corporation taxable income through
the date of termination of the Company's S corporation election (the "S
Corporation Distribution"). The amount of the S Corporation Distribution is
estimated to be approximately $3.5 million. The S Corporation Distribution will
be paid from a portion of the net proceeds of this offering. The Company
distributed $7.0 million in the aggregate to Mr. Desai and Ms. Sethi from cash
in the second quarter of 1997 relating to undistributed S corporation taxable
income through December 31, 1996. See "Risk Factors--Benefits of Offering to
Existing Shareholders," "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Certain Transactions."
Prior to the consummation of this offering, the Company will enter into an
S corporation termination, tax allocation and indemnification agreement with its
shareholders relating to the distribution of undistributed S corporation taxable
income to the shareholders and to the mutual indemnification arrangements among
such shareholders and the Company for certain tax liabilities. See "Certain
Transactions."
In connection with the termination of its S corporation status, the Company
will be required by the Code to change its method of accounting for tax
reporting purposes from the cash method to the
14
<PAGE> 16
accrual method, resulting in a net charge to earnings which the Company
estimates will be approximately $3.3 million ($4.6 million at March 31, 1997).
This charge will be recognized in the quarter in which this offering is
consummated, but will be paid in four equal annual installments. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Net Charge Resulting from S Corporation Termination."
DIVIDEND POLICY
Other than the S Corporation Distribution, the Company does not intend to
declare or pay cash dividends in the foreseeable future. Management anticipates
that future earnings will be retained to fund the growth and development of its
business. The payment of future dividends, if any, will be at the discretion of
the Company's Board of Directors and will depend on various factors, including
the Company's operating results, current and anticipated cash needs for working
capital and capital expenditures, general financial condition, restrictions
imposed by financing agreements, if any, and any other factors the Company's
Board of Directors deems relevant.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth at March 31, 1997: (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the Company
after giving effect to the deferred tax liability resulting from the termination
of the S corporation election; and (iii) the pro forma capitalization of the
Company as further adjusted to reflect the issuance and sale by the Company of
3,000,000 shares of Common Stock offered hereby at an assumed offering price of
$10.00 per share and the application of the estimated net proceeds therefrom.
See "Use of Proceeds." This table should be read in conjunction with the
Company's Financial Statements, including the Notes thereto.
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt...................................... $ -- $ -- $ --
------- ------ -------
Shareholders' equity:
Preferred stock, no par value; no shares
authorized or issued (actual and pro forma);
5,000,000 shares authorized, no shares issued
(as adjusted)(1)............................... -- -- --
Common stock, $1.00 par value; 1,000 shares
authorized, 1,000 shares issued (actual);
40,000,000 shares authorized, 25,000,000 shares
issued (pro forma and as adjusted)(1)(2)....... 1 1 1
Additional paid-in capital.......................... -- 6,651 30,921
Retained earnings................................... 11,287 -- --
------- ------ -------
Total shareholders' equity........................ 11,288 6,652 30,922
------- ------ -------
Total capitalization........................... $11,288 $6,652 $30,922
======= ====== =======
</TABLE>
- ------------------------------
(1) In May 1997, the Company amended its Articles of Incorporation to, among
other things: (i) increase the number of authorized shares of Common Stock
to 40,000,000; (ii) split each existing share of Common Stock into 22,000
shares of Common Stock; and (iii) create a class of preferred stock and
authorized 5,000,000 shares of such class. See "Description of Capital
Stock."
(2) Shares issued excludes (i) 2,000,000 shares of Common Stock reserved for
issuance under the Stock Option Plan, which include options outstanding on
the date hereof to purchase 608,750 shares at a weighted average exercise
price of $5.85 per share and options to purchase approximately 42,000
additional shares which will be granted upon consummation of this offering
at an exercise price equal to the initial offering price of the Common Stock
offered hereby, and (ii) 1,000,000 shares of Common Stock reserved for
issuance under the Company's Employee Stock Purchase Plan. See
"Management--Stock Option Plan," "--Employee Stock Purchase Plan," and
"--Director Compensation."
(3) Pro forma data give effect to: (i) deferred income taxes of $4.6 million
recorded as a result of the termination of the S corporation election as if
terminated on March 31, 1997 (the Company estimates that this deferred tax
liability will actually be approximately $3.3 million at the time of
consummation of this offering); (ii) a distribution to the Company's
shareholders of undistributed S corporation taxable income (while there was
no undistributed S corporation taxable income as of March 31, 1997, the
Company estimates that undistributed S corporation taxable income will be
approximately $3.5 million at the time of consummation of this offering);
and (iii) reclassification of remaining accumulated earnings to additional
paid-in capital.
(4) As adjusted data give effect to: (i) the issuance and sale by the Company of
the 3,000,000 shares of Common Stock offered hereby, after deducting
estimated underwriting discount and offering expenses; and (ii) payment of
approximately $7.0 million to Bharat Desai and Neerja Sethi in conjunction
with the Syntel India acquisition, which will be accounted for on the
carryover basis of accounting, resulting in a $3.0 million reduction in
equity. See "Use of Proceeds" and "Certain Transactions."
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<PAGE> 18
DILUTION
As of March 31, 1997, the pro forma net tangible book value of the Company
was approximately $6,652,000 or $0.31 per share of Common Stock. Pro forma net
tangible book value per share represents the amount of the Company's total
tangible assets less total liabilities on a pro forma basis to give effect to
the termination of the S corporation election and distribution to the Company's
shareholders of undistributed S corporation taxable income, divided by the
aggregate number of shares of Common Stock outstanding. After giving effect to
the sale by the Company of the 3,000,000 shares of Common Stock offered hereby
at an assumed initial public offering price of $10.00 per share and the
application of the estimated net proceeds therefrom, the adjusted pro forma net
tangible book value of the Company at March 31, 1997, would have been
$30,922,000 or $1.24 per share of Common Stock. This amount represents an
immediate increase in such pro forma net tangible book value of $0.93 per share
of Common Stock to existing shareholders and an immediate dilution in pro forma
net tangible book value of $8.76 per share to new investors. The following table
illustrates this per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
Pro forma net tangible book value per share as of March
31, 1997.............................................. $0.31
Increase in pro forma net tangible book value per share
attributable to new investors(1)...................... $0.93
-----
Adjusted pro forma net tangible book value per share after
the offering(2)........................................... $ 1.24
------
Dilution per share to new investors......................... $ 8.76
======
</TABLE>
- ------------------------------
(1) Includes a reduction in equity of $3.0 million in connection with the
acquisition of Syntel India.
(2) Does not include earnings subsequent to March 31, 1997, nor does it reflect
the related S corporation distribution of taxable income to the Company's
shareholders, which is estimated to be $3.5 million at the date of
consummation of this offering.
The dilution table set forth above does not include the effect of (i)
2,000,000 shares of Common Stock reserved for issuance under the Company's Stock
Option Plan, of which options to purchase (a) 140,000 shares were granted on
April 1, 1997 at an exercise price of $2.00 per share, (b) 468,750 shares were
granted on June 2, 1997 at an exercise price of $7.00 per share, and (c)
approximately 42,000 shares will be granted upon the consummation of this
offering at an exercise price equal to the initial offering price of the Common
Stock offered hereby, and (ii) 1,000,000 shares of Common Stock reserved for
issuance under the Company's Employee Stock Purchase Plan.
17
<PAGE> 19
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Financial Statements, including the Notes thereto,
appearing elsewhere in this Prospectus. The financial data for each of the four
years ended December 31, 1996 are derived from the Company's audited Financial
Statements, which are included elsewhere in this Prospectus. Financial data for
the year ended December 31, 1992 and for the three months ended March 31, 1997
are derived from unaudited financial statements which, in the opinion of
management, have been prepared on the same basis as the audited financial
statements and include all adjustments (all of which are of a normal recurring
nature) that are necessary for a fair presentation of the results for the year.
Except as noted, the following selected financial data does not reflect
financial data for Syntel India.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................... $29,717 $45,345 $67,247 $90,326 $92,237 $21,862 $26,262
Cost of revenues........................... 22,797 39,009 55,937 71,538 69,783 16,746 19,894
------- ------- ------- ------- ------- ------- -------
Gross profit............................... 6,920 6,336 11,310 18,788 22,454 5,116 6,368
Selling, general and administrative
expenses................................. 6,199 5,214 8,209 13,309 18,261 4,075 5,060
------- ------- ------- ------- ------- ------- -------
Income from operations..................... 721 1,122 3,101 5,479 4,193 1,041 1,308
Other income (expense), net................ 214 (101) (69) 186 299 124 75
------- ------- ------- ------- ------- ------- -------
Income before income taxes................. 935 1,021 3,032 5,665 4,492 1,165 1,383
State income taxes......................... -- -- -- 428 321 -- --
------- ------- ------- ------- ------- ------- -------
Net income(1).............................. $ 935 $ 1,021 $ 3,032 $ 5,237 $ 4,171 $ 1,165 $ 1,383
======= ======= ======= ======= ======= ======= =======
Pro forma net income(2).................... $ 2,775 $ 854
======= =======
Pro forma net income per share(2).......... $ 0.13 $ 0.04
======= =======
Pro forma weighted average common shares
outstanding.............................. 22,135 22,197
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, AS ADJUSTED
--------------------------------------------------- MARCH 31, MARCH 31,
1992 1993 1994 1995 1996 1997 1997(3)
------- ------- ------- ------- ------- --------- -----------
(IN THOUSANDS, EXCEPT OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................. $ 8,228 $ 8,948 $11,638 $14,785 $ 6,544 $ 8,014 $29,919
Total assets..................... 11,821 15,974 22,190 27,878 29,649 32,403 55,770
Long-term debt................... -- -- -- -- -- -- --
Total shareholders' equity....... 8,443 9,465 12,497 17,734 9,905 11,288 30,922
OTHER DATA:
Billable headcount in U.S. ...... 454 670 1,097 1,029 1,103 1,083
Billable headcount in India...... 37 19 83 107 190 263
------- ------- ------- ------- ------- -------
Total billable headcount......... 491 689 1,180 1,136 1,293 1,346
======= ======= ======= ======= ======= =======
</TABLE>
- ------------------------------
(1) For all periods shown, the Company elected to be treated as an S corporation
and, as a result, the income of the Company has been taxed for federal and
state purposes (with exceptions under certain state income tax laws)
directly to the Company's shareholders rather than to the Company. See
"Prior S Corporation Status and Distribution."
(2) Pro forma data reflect income tax provisions of $1.4 million and $0.5
million for the year ended December 31, 1996 and for the three months ended
March 31, 1997, respectively, for federal and additional state income taxes
as if the Company had been taxed as a C corporation since January 1, 1996.
See "Prior S Corporation Status and Distribution."
(3) As adjusted to give effect to: (i) the sale by the Company of 3,000,000
shares of Common Stock offered hereby at an assumed public offering price of
$10.00 per share and the application of the estimated net proceeds
therefrom; (ii) the recording of $4.6 million, or $0.18 per share, of
deferred tax liability as a result of the termination of the Company's S
corporation election as if terminated on March 31, 1997 (the Company
estimates that this deferred tax liability will be approximately $3.3
million, or $0.13 per share, at the time of consummation of this offering);
(iii) the distribution to the Company's shareholders of undistributed S
corporation taxable income (while there was no undistributed S corporation
taxable income as of March 31, 1997, the Company estimates that
undistributed S corporation taxable income will be approximately $3.5
million at the time of consummation of this offering); and (iv) the
acquisition of Syntel India for $7.0 million and the elimination of the
intercompany balance between the Company and Syntel India. See "Use of
Proceeds," "Prior S Corporation Status and Distribution", "Management's
Discussion and Analysis of Financial Condition and Results of
Operation--Syntel India Acquisition," "--Net Charge resulting from S
Corporation Termination" and "-- Liquidity and Capital Resources" and
"Certain Transactions."
18
<PAGE> 20
PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
The following unaudited Pro Forma Consolidated Statement of Income Data
give effect to the acquisition of Syntel India and the Company's conversion from
an S corporation to a C corporation for federal and state income tax purposes.
Such data are derived from the Company's audited Financial Statements, for the
year ended December 31, 1996, which are included elsewhere in this Prospectus,
and from Syntel India's Financial Statements, including the Notes thereto, which
have been audited by Rajkamal Shah & Co., Mumbai, India, independent chartered
accountants and from the unaudited financial statements for the three months
ended March 31, 1997 for the Company and Syntel India which in the opinion of
management, have been prepared on the same basis as the audited financial
statements and include all adjustments (all of which are of a normal recurring
nature) that are necessary for a fair presentation. The Consolidated Pro Forma
Statement of Income Data are presented for informational purposes only and may
not be indicative of the results of operations had the acquisition occurred on
January 1, 1996 and had the Company been subject to corporate income taxes in
1996 and 1997, nor do they purport to indicate the future results of operations
of the Company. The following Consolidated Pro Forma Statement of Income Data
should be read in conjunction with the Pro Forma Consolidated Financial
Statements, appearing elsewhere in this Prospectus. Management believes that all
adjustments necessary to present fairly such Pro Forma Consolidated Statement of
Income Data have been made.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 THREE MONTHS ENDED MARCH 31, 1997
--------------------------------------------- ------------------------------------------------
SYNTEL, SYNTEL PRO FORMA SYNTEL, SYNTEL PRO FORMA
INC. INDIA ADJUSTMENTS CONSOLIDATED INC. INDIA ADJUSTMENTS CONSOLIDATED
------- ------ ----------- ------------ ------- ------ ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $92,237 $4,159 $(4,066) (1) $92,330 $26,262 $1,505 $(1,473)(1) $26,294
Cost of revenues.......... 69,783 1,366 (4,066) (1) 67,083 19,894 471 (1,473)(1) 18,892
------- ------ ------- ------- ------- ------ ------- -------
Gross profit.............. 22,454 2,793 -- 25,247 6,368 1,034 -- 7,402
Selling, general and
administrative
expenses................ 18,261 1,010 42 (2) 19,313 5,060 335 21 (2) 5,416
------- ------ ------- ------- ------- ------ ------- -------
Income from operations.... 4,193 1,783 (42) 5,934 1,308 699 (21) 1,986
Other income (expense),
net..................... 299 (150) -- 149 75 46 -- 121
------- ------ ------- ------- ------- ------ ------- -------
Income before
income taxes............ 4,492 1,633 (42) 6,083 1,383 745 (21) 2,107
Income taxes.............. 321 29 1,379 (3) 1,729 12 520 (3) 532
------- ------ ------- ------- ------- ------ ------- -------
Net income................ $ 4,171 $1,604 $(1,421) $ 4,354(4) $ 1,383 $ 733 $ (541) $ 1,575(4)
======= ====== ======= ======= ======= ====== ======= =======
Net income per share...... $ 0.17 $ 0.06
======= =======
Pro forma weighted average
common shares
outstanding............. 25,135 25,197
======= =======
</TABLE>
- ------------------------------
(1) Reflects the elimination of the intercompany transactions between the
Company and Syntel India.
(2) Reflects the compensation component associated with the granting of stock
options to purchase 140,000 shares granted on April 1, 1997. See "Management
-- Stock Option Plan."
(3) Reflects income tax provisions of $1.4 million and $0.5 million for the year
ended December 31, 1996 and for the three months ended March 31, 1997,
respectively, for federal and additional state income taxes as if the
Company had been taxed as a C corporation since January 1, 1996. See "Prior
S Corporation Status and Distribution."
(4) After acquiring Syntel India, the Company plans to treat any Syntel India
earnings as permanently invested in India. Accordingly, pro forma
consolidated net income does not reflect any additional income taxes
attributable to the earnings of Syntel India. If the Company decides to
repatriate any earnings of Syntel India, it will incur a "border" tax,
currently 10%, under Indian tax law and be required to pay U.S. corporate
income taxes on such earnings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Income Tax Matters."
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Financial Statements, including the
Notes thereto, included elsewhere in this Prospectus. Except for information
relating to Syntel India included under the captions "Syntel India Acquisition"
and "Results of Operations - Syntel India," references to "Syntel" or the
"Company" in the following discussion and analysis refer only to Syntel, Inc.
Except for the historical information contained herein, the discussion in this
Prospectus contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.
OVERVIEW
Syntel is a worldwide provider of professional IT staffing and outsourcing
services to Fortune 1000 companies, as well as to government entities. The
Company's service offerings include TeamSourcing, consisting of professional IT
staffing services, and IntelliSourcing, consisting of outsourcing services for
ongoing management, development and maintenance of business applications,
including Year 2000 compliance services.
The Company's revenues are generated from professional services fees
provided through TeamSourcing and IntelliSourcing engagements. For the year
ended December 31, 1996 and the three months ended March 31, 1997, the
percentage of revenues generated by TeamSourcing engagements was 64% and 56%,
respectively. Historically, the majority of the Company's revenues have been
generated from TeamSourcing engagements. On TeamSourcing engagements, Syntel's
professional services typically are provided at the customer's site and under
the direct supervision of the customer. TeamSourcing revenues generally are
recognized on a time-and-materials basis as services are performed. The Company
has invested significantly in developing its ability to sell and deliver
IntelliSourcing services, and is seeking to shift a larger portion of its
business to IntelliSourcing engagements which the Company believes have higher
gross margin potential. For the year ended December 31, 1996 and for the three
months ended March 31, 1997, the percentage of revenues generated by
IntelliSourcing engagements was 36% and 44%, respectively. On IntelliSourcing
engagements, the Company typically assumes responsibility for engagement
management and generally is able to allocate certain portions of the engagement
to on-site, off-site and offshore personnel. Syntel may bill the customer on
either a time-and-materials or fixed-price basis, although a significant portion
of IntelliSourcing engagements have been historically on a time-and-materials
basis. Syntel recognizes revenues from fixed-price engagements on the percentage
of completion method. See "Risk Factors--Fixed Price Engagements."
The Company's most significant cost is personnel cost, which consists of
compensation, benefits and other related costs for its IT professionals. The
Company strives to maintain its gross margin by controlling engagement costs and
offsetting increases in salaries and benefits with increases in billing rates.
The Company has established a human resource allocation team whose purpose is to
staff IT professionals on engagements that efficiently utilize their technical
skills and allow for optimal billing rates. Approximately $4.1 million, or 5.9%,
and $1.5 million, or 7.5% of the Company's cost of revenues for the year ended
December 31, 1996 and for the three months ended March 31, 1997, respectively,
consisted of the cost of services provided by Syntel India. Syntel India derives
substantially all of its revenues from providing software development services
to the Company from Mumbai, India, where salaries of IT professionals are
comparatively lower than in the U.S. The Company will acquire all of the
outstanding equity of Syntel India upon consummation of the offering. See
"--Syntel India Acquisition." Upon consummation of the acquisition, Syntel India
will be a wholly-owned subsidiary of the Company, and its results of operations
will be consolidated with those of the Company.
20
<PAGE> 22
The Company has performed a significant portion of its employee recruiting
in other countries. As of June 1, 1997, approximately 59% of Syntel's U.S.
workforce (42% of Syntel's worldwide workforce) worked under H-1B temporary work
visas in the U.S. To resolve a 1994 investigation of the Company by the U.S.
Department of Labor ("DOL") for failing to meet prevailing wage requirements for
certain H-1B employees, the Company voluntarily entered into a two-year consent
decree with the DOL. In response to the consent decree, the Company did not seek
any new H-1B visas during the fourth quarter of 1995, significantly curtailed
its H-1B hiring from April 1995 through September 1996, and significantly
increased its U.S. domestic recruiting and hiring efforts throughout 1996. As a
result, the Company believes that it was unable to increase billable IT
personnel during 1995 and 1996 to levels that it would have otherwise expected
in the absence of these factors. Because the Company's revenues are closely
related to the number of billable IT professionals it employs, the Company
believes that these developments adversely affected revenue growth in 1995 and
1996. From June 30, 1995, to June 30, 1996, the total number of U.S. billable IT
personnel declined from 1,137 to 1,019, but the Company has increased billable
IT personnel significantly beginning in the fourth quarter of 1996. As of June
1, 1997, total billable U.S. headcount had increased to 1,123. The Company
believes that it has fully complied with the consent decree and that continued
compliance through the expiration of the decree in September 1997 will not have
a material adverse effect on the Company. See "Risk Factors--Government
Regulation of Immigration" and "Business--Human Resources--DOL Consent Decree."
The Company has made substantial investments in infrastructure since 1995,
including: (i) establishing the Company's Global Development Center in Cary,
North Carolina to support up to 400 IT professionals; (ii) establishing a
dedicated telecommunications link between the Company's United States operations
and those in Mumbai, India; (iii) relocating the Company's headquarters to
larger offices in Troy, Michigan; (iv) increasing IntelliSourcing sales and
delivery capabilities through significant expansion of the IntelliSourcing sales
force and the Technical Services Group, which develops and formalizes
proprietary methodologies, practices and tools for the entire Syntel
organization; (v) hiring additional experienced senior management; and (vi)
expanding global recruiting and training capabilities.
Through its strong relationships with customers, the Company has been able
to generate recurring revenues from repeat business. For the year ended December
31, 1995 and 1996 and for the three months ended March 31, 1997, over 90% of
Syntel's revenues were derived from customers served in the prior period. These
strong relationships also have resulted in the Company generating a significant
percentage of revenues from key customers. The Company's top ten customers
accounted for approximately 81%, 78% and 77% of revenues for the year ended
December 31, 1995 and 1996 and for the three months ended March 31, 1997. The
Company's top two customers are AIG and Ford. AIG accounted for approximately
38%, 34% and 31% of revenues for the year ended December 31, 1995 and 1996 and
for the three months ended March 31, 1997. Ford accounted for approximately 14%,
12% and 10% of revenues for the year ended December 31, 1995 and 1996 and for
the three months ended March 31, 1997.
SYNTEL INDIA ACQUISITION
Bharat Desai and Neerja Sethi are the sole beneficial shareholders of
Syntel India. Syntel India provides offshore software development services to
the Company and derives substantially all of its revenues from the Company.
Prior to the offering, the Company will enter into an agreement pursuant to
which the Company will acquire Mr. Desai and Ms. Sethi's combined 100% ownership
interest in Syntel India for $7.0 million in cash. The $7.0 million purchase
price is based on a valuation performed by independent chartered accountants in
India pursuant to guidelines established by the Reserve Bank of India for
acquisitions of Indian corporations. The purchase price will be paid from a
portion of the net proceeds of this offering. This acquisition will be closed
upon consummation of this offering, and the portion of the purchase price in
excess of the carrying value of the net assets acquired ($3.0 million) will be
accounted for as a reduction in shareholders' equity. See "Certain
Transactions."
21
<PAGE> 23
INCOME TAX MATTERS
The Company has elected to operate as an S corporation under the Code. An S
corporation generally is not subject to income taxes at the corporate level
(with exceptions under certain state income tax laws). Prior to completion of
this offering, the Company will terminate its S corporation status and,
thereafter, will be subject to federal and state income taxes on its earnings.
See "Prior S Corporation Status and Distribution."
Syntel India is eligible for certain favorable tax provisions provided
under Indian tax law including: (i) an exemption from payment of corporate
income taxes for a period of five consecutive years in the first eight years of
operation (the "Tax Holiday"); or (ii) an exemption from income taxes on the
profits derived from exporting computer software services from India (the
"Export Exemption"). The Export Exemption remains available after expiration of
the Tax Holiday. After the Company acquires Syntel India, the Company plans to
treat any Syntel India earnings as permanently invested in India and does not
anticipate repatriating any of these earnings to the U.S. If the Company decides
to repatriate any earnings of Syntel India, it will incur a "border" tax,
currently 10%, under Indian tax law and will be required to pay U.S. corporate
income taxes on such earnings. See "Risk Factors--Exposure to Regulatory and
General Economic Conditions in India."
NET CHARGE RESULTING FROM S CORPORATION TERMINATION
In connection with the termination of its S corporation status, the Company
is required by the Code to change its method of accounting for tax reporting
purposes from the cash method to the accrual method. This change will result in
a net charge to earnings in the quarter in which this offering closes resulting
from differences in the tax treatment of certain of the Company's assets and
liabilities under the cash and accrual methods of accounting and will be
reflected through an increase in current and deferred income tax liabilities.
Based upon current estimates, the Company anticipates the net charge to earnings
as a provision for current and deferred income taxes will be approximately $3.3
million. The actual net charge to earnings could be greater, depending upon the
Company's results of operations and financial condition through and as of the
date of termination of the Company's S corporation status. This tax liability
will be recognized in the quarter in which this offering is consummated, but
will be paid in four equal annual installments. See "Prior S Corporation Status
and Distribution" and "Use of Proceeds."
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated selected income
statement data as a percentage of the Company's total revenues. The percentages
set forth below do not reflect the results of operations of Syntel India. See
"--Syntel India Acquisition."
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-------------------------------------------------------------
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------- -------------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues...................... 83.2 79.2 75.7 76.6 75.8
----- ----- ----- ----- -----
Gross profit.......................... 16.8 20.8 24.3 23.4 24.2
Selling, general and
administrative expenses............. 12.2 14.7 19.8 18.6 19.3
----- ----- ----- ----- -----
Income from operations................ 4.6% 6.1% 4.5% 4.8% 4.9%
</TABLE>
22
<PAGE> 24
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Revenues. The Company's revenues consist of fees derived from its
TeamSourcing and IntelliSourcing business units. Total revenues increased to
$26.3 million for the three months ended March 31, 1997, representing an
increase of 20.1% over revenues of $21.9 million for the three months ended
March 31, 1996.
TeamSourcing Revenues. For the three months ended March 31, 1997,
TeamSourcing revenues increased to $14.8 million, or 56% of total revenues, from
$13.2 million, or 60% of total revenues for the three months ended March 31,
1996. The increase in the TeamSourcing revenues was primarily attributable to an
increase in average billing rates per person of approximately 8% for the first
quarter of 1997 as compared to the first quarter of 1996.
IntelliSourcing Revenues. For the three months ended March 31, 1997,
IntelliSourcing revenues increased to $11.5 million, or 44% of total revenues,
compared to $8.6 million, or 40% of total revenues, for the three months ended
March 31, 1996. The increase in revenues was primarily attributable to the
addition of ten new IntelliSourcing engagements, of which six were added in the
three months ended March 31, 1997.
The worldwide billable headcount, including personnel employed by Syntel
India, as of March 31, 1997 increased to 1,346 compared to 1,125 as of March 31,
1996.
Cost of Revenues. Cost of revenues consist primarily of salaries, payroll
taxes, benefits, relocation costs, immigration costs, finders fees, trainee
compensation and payments for offshore services. Cost of revenues were $19.9
million for the three months ended March 31, 1997, representing 75.8% of
revenues, compared to $16.7 million or 76.6% of revenues for the three months
ended March 31, 1996. The decrease in the cost of revenues as a percentage of
total revenues was primarily attributable to increased TeamSourcing average
billing rates relative to compensation increases and, to a lesser degree,
improved margins on new IntelliSourcing engagements.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of salaries, payroll taxes and
benefits for sales, finance, administrative and corporate staff, travel,
telecommunications, business promotions, marketing and various facility costs
for the company's Global Development Centers. Selling, general and
administrative expenses for the three months ended March 31, 1997 increased to
$5.0 million, or 19.3% of total revenues, from $4.0 million, or 18.6% of total
revenues, for three months ended March 31, 1996. The $1.0 million increase in
selling, general and administrative expenses was the result of increased
personnel costs of $0.3 million for IntelliSourcing sales, marketing, training,
solutions development and legal staff, as well as field and corporate office
facility and related infrastructure costs of an additional $0.3 million. To a
lesser extent, the increase was attributable to additional marketing costs and
annual compensation increases.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 AND 1995
Revenues. Total revenues increased to $92.2 million in 1996 from $90.3
million in 1995. The primary cause of this growth was an increase in
TeamSourcing revenues, which offset a decline in IntelliSourcing revenues. The
Company believes that actions taken in 1995 and 1996 in response to the DOL
consent decree adversely affected revenue growth in the last quarter of 1995 and
in 1996. See "Risk Factors--Government Regulation of Immigration," "--Overview"
and "Business--Human Resources--DOL Consent Decree."
TeamSourcing Revenues. TeamSourcing revenues in 1996 increased to $59.0
million, or 64.0% of total revenues, from $53.6 million, or 59.3% of total
revenues in 1995. The increase in TeamSourcing revenues was primarily
attributable to a substantial increase in the scope of services provided to two
of the Company's largest customers, including maintenance services and the
development of new applications. The increase in TeamSourcing revenues was also
the result of an increase in the average billing rates for IT professionals.
23
<PAGE> 25
IntelliSourcing Revenues. IntelliSourcing revenues in 1996 decreased to
$33.3 million, or 36.0% of total revenues, from $36.8 million, or 40.7% of total
revenues in 1995, despite an increase in the number of IntelliSourcing
customers. The number of the Company's IntelliSourcing customers increased to
five in 1996 from two in 1995, but the Company recorded minimal revenues from
these new engagements as they commenced in the fourth quarter of 1996.
Approximately $1.9 million of the $3.5 million decrease in the Company's
IntelliSourcing revenues was attributable to a significant reduction in the
funding for a state government project. The remainder of the decrease was the
result of the Company increasing the efficiency of services provided under a
time-and-materials based contract to its largest customer, which enabled the
Company to maintain the customer's applications with fewer employees.
The Company's total revenues were less dependent upon its largest customers
in 1996 as compared to 1995. The top two customers accounted for 45% of total
revenues in 1996, down from 52% of total revenues in 1995.
The worldwide billable headcount, including personnel employed by Syntel
India, as of December 31, 1996 increased to 1,293 compared to 1,136 as of
December 31, 1995.
Cost of Revenues. Cost of revenues in 1996 decreased to $69.8 million, or
75.7% of revenues, from $71.5 million, or 79.2% of revenues in 1995. The
decrease in cost of revenues was primarily attributable to reduced health
benefit costs resulting from a self-insurance program the Company instituted in
the second half of 1995, and to an increase in the billing rates of certain IT
professionals performing IntelliSourcing services for a major customer which
occurred in the second half of 1995. To a lesser extent, the decrease in cost of
revenues was attributable to the migration of work to the Company's offshore
facility in India where the salaries of IT professionals are lower as a
percentage of professional service fees. The number of billable IT professionals
in India increased to 190 at December 31, 1996, compared to 107 at December 31,
1995. In addition, the Company incurred one-time costs of approximately $0.5
million for the relocation of employees to its Cary, North Carolina Global
Development Center in 1995 which did not recur in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1996 increased to $18.3 million, or 19.8% of
revenues, from $13.3 million, or 14.7% of revenues in 1995.
The $5.0 million increase in selling, general and administrative expenses
resulted primarily from $2.1 million in additional personnel cost to strengthen
the IntelliSourcing sales and support staff and $0.9 million to develop the
Company's proprietary Method2000(sm) solution for its Year 2000 compliance
service offering, reflecting the Company's focus on increasing revenues from its
IntelliSourcing business unit. In addition, the increase in selling, general and
administrative expenses was attributable to $1.5 million in additional personnel
cost to strengthen the TeamSourcing sales and support staff and $0.5 million
increased facilities costs.
The $3.6 million aggregate personnel cost to build the TeamSourcing and
IntelliSourcing sales and support staff consisted primarily of hiring additional
sales executives, account executives, recruiting personnel and operational
support personnel.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 AND 1994
Revenues. Total revenues in 1995 increased to $90.3 million from $67.2
million in 1994. This increase in total revenues was principally the result of a
significant IntelliSourcing engagement with the Company's largest customer that
commenced in late 1994. The Company believes that actions taken in 1995 in
response to the DOL consent decree adversely affected revenue growth in 1995.
See "Risk Factors -- Government Regulation of Immigration," "-- Overview" and
"Business -- Human Resources -- DOL Consent Decree."
TeamSourcing Revenues. The Company's TeamSourcing revenues in 1995
decreased to $53.6 million, or 59.3% of total revenues, from $59.4 million, or
88.4% of total revenues in 1994. This decline was attributable to the Company's
characterization of revenues for services performed for the Company's
24
<PAGE> 26
largest customer as IntelliSourcing revenues in 1995, versus TeamSourcing
revenues in 1994. This change in the characterization of revenue was the result
of changes in the contractual terms, scope and manner of delivering services to
this customer which occurred in the later part of 1994.
IntelliSourcing Revenues. IntelliSourcing revenues in 1995 increased to
$36.8 million, or 40.8% of total revenues, from $7.8 million, or 11.6% of total
revenues in 1994. This increase in revenues was attributable to work performed
under the terms of a contract signed in September 1994 with the Company's
largest customer.
The Company's total revenues were more dependent upon its largest customers
in 1995 as compared to 1994. The top two customers accounted for 52% of total
revenues in 1995, up from 39% of total revenues in 1994.
The worldwide billable headcount, including personnel employed by Syntel
India, as of December 1995 decreased to 1,136 compared to 1,180 as of December
1994.
Cost of Revenues. Cost of revenues in 1995 increased to $71.5 million, or
79.2% of revenues, from $55.9 million, or 83.2% of revenues in 1994. The
decrease in cost of revenues as a percentage of revenues was primarily
attributable to an increase in average billing rates, relative to compensation
rate increases, for IT professionals performing both TeamSourcing and
IntelliSourcing services. The decrease in cost of revenues as a percentage of
revenues was also attributable to the Company's ability to migrate an increased
percentage of work to the Company's Global Development Center in India, where
salaries of IT professionals are comparatively lower than in the U.S. The hiring
of entry-level IT professionals throughout 1995, with a correspondingly lower
compensation cost, also contributed to the decreased percentage. A $0.5 million
one-time charge to relocate employees to the Company's Cary, North Carolina
Global Development Center partially offset this decreased percentage.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses in 1995 increased to $13.3 million, or 14.7%
of total revenues, from $8.2 million, or 12.2% of revenues in 1994. This
increase in selling, general and administrative expenses primarily was the
result of the expansion of the Company's sales and support staff and increased
facilities and equipment expenses at the Cary, North Carolina Global Development
Center. In addition, the Company incurred additional compensation expenses as a
result of strengthening senior management by hiring a chief financial officer,
vice president of marketing, vice president of human resources and three
assistant vice presidents, all of whom were hired in late 1994 or in 1995.
RESULTS OF OPERATIONS--SYNTEL INDIA
Syntel India provides offshore software development services to the Company
and derives substantially all of its revenues from the Company. Syntel India's
revenues are the result of negotiated intercompany billing rates between Syntel
India and the Company based upon competitive market rates, demand for services
and volume considerations. These intercompany billing rates are dollar
denominated, whereas operating expenses of Syntel India are paid in local
currency.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996--SYNTEL INDIA
Revenues. Syntel India's revenues for the three months ended March 31, 1997
increased to $1.5 million from $0.7 million for the three months ended March 31,
1996. The increase in revenues was primarily attributable to the transfer of
additional work to Syntel India by the Company. Billable headcount for Syntel
India increased to 263 as of March 31, 1997 compared to 97 as of March 31, 1996.
Increases in intercompany billing rates also contributed to the increase in the
revenues.
Cost of Revenues. Syntel India's cost of revenues consists primarily of
compensation expenses and benefits for its IT professionals and is affected
primarily by increases in wage rates in India. Cost of revenues increased to
$0.5 million, or 31.2%, of revenues for the three months ended March 31, 1997
compared to $0.3 million, or 36.7%, of revenues for the three months ended March
31, 1996. The decrease in the cost of revenues as a percentage of revenues was
mainly attributable to improvement
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<PAGE> 27
in the utilization rate of billable personnel during the three months ended
March 31, 1997 to 62%, compared to 42% during the three months ended March 31,
1996. This improvement was partially offset by an increase in compensation
expenses.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of salaries and benefits for finance,
administration and corporate staff, travel, telecommunications and various
facilities costs. Selling, general and administrative expenses as a percentage
of revenues decreased to 22.3% during the three months ended March 31, 1997 from
28.8% during the three months ended March 31, 1996. This overall decrease was
primarily due to the fact that the increase in the revenues for the period did
not require a corresponding increase in facility costs.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 AND 1995--SYNTEL INDIA
Revenues. Syntel India's revenues in 1996 increased to $4.2 million from
$2.5 million in 1995. The increase in Syntel India's revenues was primarily
attributable to the transfer of additional work to Syntel India by the Company,
which resulted in an increase in Syntel India's billable headcount to 190 at
December 31, 1996 compared to 107 at December 31, 1995.
Cost of Revenues. Cost of revenues increased to $1.4 million, or 33% of
revenues, in 1996, from $1.0 million, or 40% of revenues, in 1995. The decrease
in cost of revenues as a percentage of revenues was attributable to the
improvement in utilization rate of billable personnel in 1996 to 54% from 47% in
1995, partially offset by increases in compensation expenses. The average
increase in compensation for existing employees was 36% in 1996 compared to 33%
in 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of revenues in both years ended December
31, 1996 and 1995 were approximately 24%.
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<PAGE> 28
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly income statement
data for each of the nine quarters beginning January 1, 1995 and ended March 31,
1997, and the percentage of the Company's total revenues represented by each
item in the respective quarter. Results of operations shown below do not reflect
the operations of Syntel India. See "--Syntel India Acquisition." In the opinion
of management, this information has been presented on the same basis as the
Company's Financial Statements appearing elsewhere in this Prospectus and all
necessary adjustments (consisting only of normal recurring adjustments) have
been included in the amounts stated below to present fairly the unaudited
quarterly results, when read in conjunction with the Financial Statements of the
Company, including the Notes thereto, contained elsewhere in this Prospectus.
The results of operations for any quarter are not necessarily indicative of the
results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
1995 1996 1997
-------------------------------------- -------------------------------------- -------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31
------- ------- -------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $22,646 $22,709 $22,915 $22,056 $21,862 $22,696 $23,433 $24,246 $26,262
Cost of revenues..... 18,540 18,880 17,491 16,627 16,746 17,002 17,760 18,275 19,894
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit......... 4,106 3,829 5,424 5,429 5,116 5,694 5,673 5,971 6,368
Selling, general and
administrative
expenses........... 2,407 2,618 3,726 4,558 4,075 4,612 4,790 4,784 5,060
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from
operations......... 1,699 1,211 1,698 871 1,041 1,082 883 1,187 1,308
Other income
(expense), net..... (11) (20) 54 163 124 69 16 90 75
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes.............. 1,688 1,191 1,752 1,034 1,165 1,151 899 1,277 1,383
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues..... 81.9 83.1 76.3 75.4 76.6 74.9 75.8 75.4 75.8
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit......... 18.1 16.9 23.7 24.6 23.4 25.1 24.2 24.6 24.2
Selling, general and
administrative
expense............ 10.6 11.5 16.3 20.7 18.6 20.3 20.4 19.7 19.3
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from
operations......... 7.5 5.4 7.4 3.9 4.8 4.8 3.8 4.9 4.9
Other income
(expense), net..... 0.0 (0.1) 0.2 0.7 0.6 0.3 0.0 0.4 0.3
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes.............. 7.5% 5.3% 7.6% 4.6% 5.4% 5.1% 3.8% 5.3% 5.2%
</TABLE>
The Company's quarterly revenues and results of operations have fluctuated
from quarter to quarter in the past and will likely fluctuate in the future.
Various factors causing such fluctuations include: the timing, number and scope
of customer engagements commenced and completed during the quarter; progress on
fixed-price engagements; timing and cost associated with expansion of the
Company's facilities; changes in IT professional wage rates; the accuracy of
estimates of resources and time frames required to complete pending assignments;
the number of working days in a quarter; employee hiring and training, attrition
and utilization rates; the mix of services performed on-site, off-site and
offshore; termination of engagements; start-up expenses for new engagements;
longer sales cycles for IntelliSourcing engagements; customers' budget cycles
and investment time for training.
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<PAGE> 29
Because a significant percentage of the Company's selling, general and
administrative expenses are relatively fixed, variations in revenues may cause
significant variations in operating results. Although fixed-price engagements
have not contributed significantly to revenues and earnings to date, operating
results may be adversely affected in the future by cost overruns on fixed-price
engagements. See "Risk Factors--Fixed-Price Engagements." In addition, it is
possible that in some future quarter the Company's operating results will be
below the expectations of public market analysts and investors. In such event,
the price of the Company's Common Stock could potentially be materially
adversely affected. No assurance can be given that quarterly results will not
fluctuate causing a material adverse effect on the Company's financial
condition. See "Risk Factors--Variability of Quarterly Operating Results."
LIQUIDITY AND CAPITAL RESOURCES
The Company generally has financed its working capital needs through
operations, occasionally supplemented by borrowings under a line of credit with
a commercial bank.
Net cash provided by operating activities was $0.4 million, $11.0 million
and $4.2 million and ($1.1) million for the year ended December 31, 1994, 1995
and 1996 and for the three months ended March 31, 1997, respectively. Net cash
provided by operating activities in 1994 was affected by a $7.1 million increase
in accounts receivable due from the Company's largest customer. The increase in
net cash provided by operating activities in 1995 over 1994 primarily reflected
a net $4.3 million reduction in accounts receivable from this customer. The
decrease in net cash provided by operating activities in 1996 over 1995 was
attributable to a $3.9 million increase in accounts receivable due to revenue
growth in the fourth quarter of 1996, as compared to the fourth quarter of 1995,
and advance billings of $1.3 million. The negative net cash generated by
operating activities in the three months ended March 31, 1997 was primarily due
to a one-time transition from monthly to twice a month payroll payments to
employees and, to a lesser extent, to the payment of annual performance bonuses
and unused vacation time which the Company pays in the first quarter of each
year. In 1997, the Company began billing in advance on certain fixed-price
contracts, resulting in advance billings of approximately $3.3 million as of
March 31, 1997.
Net cash used in investing activities was $0.6 million, $3.0 million and
$1.6 million and $0.3 million for the year ended December 31, 1994, 1995 and
1996 and for the three months ended March 31, 1997, respectively. Cash used in
investing activities in 1995 included $2.7 million to establish the Company's
Cary, North Carolina Global Development Center. Cash used in investing
activities in 1996 included $0.9 million for the relocation of the Company's
worldwide headquarters to the Troy, Michigan Global Development Center and $0.5
million invested in recruiting and training software.
Net cash used in financing activities was $0.1 million, $0.3 million, and
$5.0 million in 1994, 1995 and 1996, respectively. Net cash used in financing
activities in 1994 and 1995 reflects net payments on the bank's line of credit.
Net cash used in financing activities in 1996 reflects a dividend paid to the
Company's shareholders. In addition, the Company distributed $7.0 million to the
Company's shareholders from cash in the second quarter of 1997 relating to
undistributed S corporation taxable income through December 31, 1996. See "Prior
S Corporation Status and Distribution."
The Company has a line of credit with NBD Bank with a commitment in an
amount equal to the lesser of $20.0 million or 80% of eligible accounts
receivable. The line of credit matures on August 31, 1997. The Company intends
to renew or replace this facility prior to the maturity date. The line of credit
contains covenants restricting the Company from, among other things, incurring
additional debt, issuing guarantees and creating liens on the Company's
property, without the prior consent of the bank. The line of credit also
requires the Company to maintain certain tangible net worth levels and leverage
ratios. Borrowings under the line of credit are short-term and are
collateralized by the Company's eligible accounts receivable. At June 1, 1997,
there was no indebtedness outstanding under the line of credit. Borrowings under
the line of credit bear interest at the lower of the Eurodollar rate
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<PAGE> 30
plus the applicable Eurodollar margin, the bank's prime rate or a negotiated
rate established by the bank at the time of borrowing.
In addition to the bank line of credit, the Company has a $10.0 million
facility with NBD Bank to finance acquisitions which terminates on August 31,
1997. The Company intends to renew or replace this facility prior to the
maturity date. The Company has not borrowed any amounts under this facility.
The Company believes that the combination of proceeds from this offering,
present cash balances and future operating cash flows will be sufficient to meet
the Company's currently anticipated cash requirements for at least the next 12
months.
29
<PAGE> 31
BUSINESS
OVERVIEW
Syntel is a worldwide provider of professional information technology
("IT") staffing and outsourcing services to Fortune 1000 companies, as well as
to government entities. The Company's service offerings include TeamSourcing,
consisting of professional IT staffing services, and IntelliSourcing, consisting
of outsourcing services for ongoing management, development and maintenance of
business applications, including Year 2000 compliance services. Syntel believes
that its service offerings are distinguished by its Global Service Delivery
Model, a corporate culture focused on customer service and responsiveness and
its own internally developed "intellectual capital" based on a proven set of
methodologies, practices and tools for managing the IT functions of its
customers.
Through TeamSourcing, Syntel provides professional IT staffing services
directly to customers. TeamSourcing services include systems specification,
design, development, implementation and maintenance of complex IT applications
involving diverse computer hardware, software, data and networking technologies
and practices. TeamSourcing services are provided by individual professionals
and teams of professionals dedicated to assisting customer IT departments with
systems projects and ongoing functions. TeamSourcing accounted for approximately
64% and 56% of revenues, for the year ended December 31, 1996 and the three
months ended March 31, 1997, respectively.
Through IntelliSourcing, Syntel provides higher-value outsourcing services
for ongoing management, development and maintenance of customers' business
applications. Syntel assumes responsibility for and manages selected application
support functions of the customer. Utilizing its developed methodologies,
processes and tools, known as IntelliTransfer, the Company is able to assimilate
the business process knowledge of its customers to develop and deliver services
specifically tailored for that customer. The Company also provides Year 2000
compliance services to customers using its proprietary Method2000(sm) solution.
IntelliSourcing accounted for approximately 36% and 44% of revenues, for the
year ended December 31, 1996 and the three months ended March 31, 1997,
respectively.
The Company's Global Service Delivery Model provides Syntel with
flexibility to deliver to each customer a unique mix of services on-site at the
customer's location, off-site at its U.S. locations and offshore at its Mumbai,
India location. The benefits to the customer from this customized service
approach include responsive delivery based on an in-depth understanding of the
specific processes and needs of the customer, quick turnaround, access to the
most knowledgeable personnel and best practices, resource depth, 24-hour support
seven days a week and cost-effectiveness. By linking each of its service
locations together through a dedicated data and voice network, Syntel provides a
seamless service capability to its customers around the world largely
unconstrained by geographies, time zones and cultures. The Company is expanding
its Global Development Center in Mumbai, India and is establishing a new Global
Development Center in Chennai, India.
Syntel provides its services to a broad range of Fortune 1000 companies
principally in the financial services, manufacturing, retail, transportation and
information/communications industries, as well as to government entities.
Principal customers include American International Group, Inc., Ford Motor Co.,
AT&T Corp., Dayton Hudson Corp., Chrysler Corporation and the State of New
Mexico. The Company has been chosen as a preferred vendor by several of its
customers and has been recognized for its quality and responsiveness. The
Company has a focused sales effort that includes a strategy of migrating
existing TeamSourcing customers to higher-value IntelliSourcing services. The
Company recently realigned its resources to focus on the development, marketing
and sales of its IntelliSourcing services.
The Company believes its human resources are its most valuable asset and
invests significantly in programs to recruit, train and retain IT professionals.
The Company recruits globally through its worldwide recruiting network, trains
recent college graduates and other recruits and maintains a broad package of
employee support programs. Syntel believes that its management structure and
human
30
<PAGE> 32
resources organization is designed to maximize the Company's ability to
efficiently expand its IT professional staff in response to customer needs. This
scalable business model has enabled the Company to grow significantly in recent
years. The Company's revenues increased from $29.7 million in 1992 to $92.2
million in 1996. As of June 1, 1997, Syntel's worldwide billable headcount
consisted of 1,402 IT professionals.
INDUSTRY BACKGROUND
Increasing globalization, technological innovation and deregulation are
creating an increasingly competitive business environment that is requiring
companies to change fundamentally their business processes. This change is
driven by increasing demand from customers for increased quality, lower costs,
faster turnaround, and highly responsive and personalized service. To effect
these changes and adequately address these needs, companies are focusing on
their core competencies and cost-effectively utilizing IT solutions to improve
productivity, lower costs and manage operations more effectively.
Designing, developing, implementing and maintaining IT solutions requires
highly skilled individuals trained in diverse technologies. However, there is a
growing shortage of these individuals and many companies are reluctant to expand
their IT departments through additional staffing, particularly at a time when
they are attempting to minimize their fixed costs and reduce workforces. The
Company believes that many organizations are concluding that using outside
specialists to address their IT requirements enables them to develop better
solutions in shorter time frames and to reduce implementation risks and ongoing
maintenance costs. Those outside specialists best positioned to benefit from
these trends have access to a pool of skilled technical professionals, have
demonstrated the ability to manage IT resources effectively, have low-cost
offshore software development facilities, and can efficiently expand operations
to meet customer demands.
Demand for IT services has grown significantly as companies seek ways to
outsource not only specific projects for the design, development and integration
of new technologies, but also ongoing management, development and maintenance of
existing IT systems. According to Gartner Group, the worldwide market for
professional IT services, excluding Year 2000 compliance services, was $118
billion in 1995 and is projected to grow to $258 billion by the year 2000. In
addition, many organizations face a significant challenge because many of their
existing computer systems run software programs which cannot properly process
dates after 1999. Without a resolution of this Year 2000 problem, these software
programs will fail due to an inability to correctly interpret dates in the year
2000 and thereafter.
The Company believes that outsourcing the ongoing management, development
and maintenance of IT applications is becoming increasingly critical to business
enterprises. The difficulties of IT planning, budgeting and execution in the
face of technological innovations and uncertainties, the focus on cost cutting,
and a growing shortage of skilled personnel are driving senior corporate
management to strategically pursue outsourcing of critical internal IT
functions. Organizations are seeking an experienced IT services outsourcing
provider that not only has the expertise and knowledge to address the
complexities of rapidly changing technologies, but also possesses the capability
to understand and automate the business processes and knowledge base of the
organization. In addition, the IT provider must be able to develop customized
solutions to problems unique to the organization. This involves maintaining
on-site professionals who know the customer's IT processes, providing access to
a wide range of expertise and best practices, providing responsiveness and
accountability to allow internal IT departments to meet organization goals, and
providing low cost, value-added services to stay within the organization's IT
budget constraints.
In this environment, large organizations are increasingly finding that full
facilities management outsourcing providers who own and manage an organization's
entire IT function do not permit the organization to retain control over, or
permit flexible reallocation of, its IT resources. At the same time, IT service
providers focused on project oriented professional services, with a finite
beginning and end,
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<PAGE> 33
or "deliverables," do not typically provide ongoing maintenance services and
management of IT functions. As a result, the Company believes there is a
significant opportunity to provide outsourcing services to customers for ongoing
IT management, development and maintenance of their business applications.
SYNTEL SOLUTION
Syntel provides TeamSourcing services consisting of professional IT
staffing services, and IntelliSourcing services consisting of outsourcing
services for ongoing management, development and maintenance of business
applications, including Year 2000 compliance services. The Company believes that
its IntelliSourcing approach to IT services outsourcing, which involves assuming
responsibility for management of selected applications rather than taking over
an entire IT department or providing facilities management, provides significant
differentiation from its competitors in the IT services market. Syntel believes
that its TeamSourcing and IntelliSourcing service offerings are distinguished by
its Global Service Delivery Model, a corporate culture focused on customer
service and responsiveness and its internally developed "intellectual capital,"
comprised of a proven set of methodologies, practices and tools for managing the
IT functions of its customers.
Global Service Delivery Model. Syntel performs its services on-site at the
customer's location, off-site at Syntel's U.S. locations and offshore at its
Indian location. By linking each of its service locations together through a
dedicated data and voice network, Syntel provides a seamless service capability
to its customers around the world, largely unconstrained by geographies, time
zones and cultures. This Global Service Delivery Model gives the Company the
flexibility to deliver to each customer a unique mix of on-site, off-site and
offshore services to meet varying customer needs for direct interaction with
Syntel personnel, access to technical expertise, resource availability and
cost-effective delivery. The benefits to the customer from this customized
service include responsive delivery based on an in-depth understanding of the
specific processes and needs of the customer, quick turnaround, access to the
most knowledgeable personnel and best practices, resource depth, 24-hour support
seven days a week, and cost-effectiveness. To support its Global Service
Delivery Model, the Company currently has two primary Global Development Centers
located in Cary, North Carolina and Mumbai, India, and two additional Global
Development Centers located in Troy, Michigan and Santa Fe, New Mexico. The
Company is establishing another Global Development Center in Chennai, India,
which is anticipated to be active by the end of 1997. See "Risk Factors --
Exposure to Regulatory and General Economic Conditions in India."
Focus on Customer Service. The Syntel corporate culture reflects a
"customer for life" philosophy which emphasizes flexibility, responsiveness,
cost-consciousness and a tradition of excellence. The Company recognizes that
its best source for new business opportunities comes from existing customers and
believes its customer service is a significant factor in Syntel's high rate of
repeat business. For the year ended December 31, 1995 and 1996 and for the three
months ended March 31, 1997, over 90% of the Company's annual revenues were from
customers for whom the Company provided services during the previous period. See
"Risk Factors -- Customer Concentration; Risk of Termination." At engagement
initiation, Syntel's services are typically based on expertise in the software
life-cycle and underlying technologies. Over time, however, as Syntel develops
an in-depth knowledge of a customer's business processes, IT applications and
industry, Syntel gains a competitive advantage to perform higher-value IT
services for that customer.
Proven Intellectual Capital. Over its 17-year history, Syntel has developed
a proven set of methodologies, practices, tools and technical expertise for the
development and management of its customers' information systems. This
"intellectual capital" of Syntel includes methodologies for the selection of
appropriate customer IT functions for management by Syntel, tools for the
transfer to Syntel of the systems knowledge of the customer, and techniques for
providing systems support improvements to the customer. Syntel also offers to
its customers well-trained personnel backed by a proven, extensive employee
training and continuing development program. The Company believes its
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<PAGE> 34
intellectual capital enhances its ability to understand customer needs, design
customized solutions and provide quality services on a timely and cost-effective
basis.
SYNTEL STRATEGY
The Company's objective is to become a strategic partner with its customers
in the ongoing management, development and maintenance of their IT systems by
utilizing its Global Service Delivery Model, intellectual capital and customer
service orientation. The Company plans to continue to pursue the following
strategies to achieve this objective:
Leverage Global Service Delivery Model. The ability to deliver a seamless
service capability virtually anywhere in the world from its domestic and
offshore facilities gives the Company an effective ability to meet customer
needs for technical expertise, best practice IT solutions, resource
availability, responsive turnaround and cost-effective delivery. The Company
strives to leverage this capability to provide reliable and cost-effective
services to its existing customers, expand services to existing customers and to
attract new customers. Moreover, the flexibility and capacity of the Global
Service Delivery Model and the Company's worldwide recruitment and training
programs enhance the ability of the Company to expand its business as the number
of customers grows and their IT demands increase. The Company intends to expand
the capacity of its Global Development Centers worldwide.
Focus Resources on IntelliSourcing Services. Through IntelliSourcing, the
Company markets its higher value outsourcing services for ongoing applications
management, development, maintenance and Year 2000 compliance functions. In
recent years, the Company has significantly increased its investment in
IntelliSourcing Services. The Company recently realigned its resources to focus
on the development, marketing and sales of its IntelliSourcing services,
including the hiring of additional salespeople and senior managers, redirecting
personnel experienced in the sale of higher value contracts, developing
proprietary methodologies, such as Year 2000 offerings and services, increasing
marketing efforts, and redirecting organizational support in the areas of
finance and administration, human resources and legal. As a result, the Company
has increased its IntelliSourcing opportunities.
Expand Customer Base and Role with Current Customers. The Company's sales
efforts focus on its strategy of migrating existing TeamSourcing customers to
higher value IntelliSourcing services. Traditionally, the Company has formed
strong relationships with customers through its high quality and responsive
TeamSourcing services. The Company's emphasis on customer service and long-term
relationships has enabled the Company to generate recurring revenues from
existing customers. These long-term relationships also provide the opportunity
for the Company to cross-sell IntelliSourcing services which, in some cases,
represent a natural extension of work initially performed under the TeamSourcing
engagement. The Company also seeks to expand its customer base by leveraging its
expertise in providing services to the financial services, manufacturing,
retail, transportation and information/communications industries, as well as to
government entities. With the expansion of the Company's Indian operations, the
Company also intends to increase its marketing efforts in other parts of the
world, particularly in Asia.
Enhance Proprietary Knowledge Base and Expertise. The Company believes that
its "intellectual capital" of methodologies, practices, tools and technical
expertise is an important part of its competitive advantage. The Company strives
to continually enhance this knowledge base by creating competencies in emerging
technical fields such as Internet/intranet applications, client/server
applications and object-oriented software. The Company continually develops new
methodologies and toolsets such as its package of Year 2000 services, building
skills in enterprise resource planning (ERP), and acquiring a broad knowledge
and expertise in the IT functions of specific industries. Through these efforts,
the Company becomes more valuable to the customer, is often able to expand the
scope of its work to existing customers, and is able to offer industry-specific
expertise.
Attract and Retain Highly Skilled IT Professionals. The Company believes
that its human resources are its most valuable asset. Accordingly, its success
depends in large part upon its ability to attract, develop, motivate, retain and
effectively utilize highly skilled IT professionals. Over the years, the
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<PAGE> 35
Company has developed a worldwide recruiting network, logistical expertise to
relocate its personnel, and programs for human resource retention and
development. The Company (i) employs 17 professional recruiters who recruit
qualified professionals throughout the U.S. and in India, Canada, Europe,
Singapore, the Philippines, Australia and New Zealand, (ii) trains recent
college graduates and other recruits through its four training centers, three of
which are located in the U.S. and one of which is located in India, and (iii)
maintains a broad range of employee support programs, including relocation
assistance, a comprehensive benefits package, career planning and incentive
plans. The Company believes that its management structure and human resources
organization is designed to maximize the Company's ability to efficiently expand
its professional IT staff in response to customer needs. See "Risk Factors --
Recruitment and Retention of IT Professionals" and "-- Ability to Manage
Growth."
Pursue Selective Acquisition Opportunities. Given the highly fragmented
nature of the IT services market, the Company believes that opportunities exist
to expand through the selective acquisitions of smaller regional IT services
firms with established customers. The Company may also consider potential
acquisition candidates to augment its technical expertise. While the Company
from time to time considers acquisition opportunities, it currently has no
agreements, understandings or commitments to effect any acquisitions, except for
the acquisition of Syntel India. See "Risk Factors -- Risks Related to Possible
Acquisitions."
SERVICES
Syntel provides a broad range of IT services through its TeamSourcing and
IntelliSourcing service offerings. Through TeamSourcing, the Company provides
professional IT staffing services. Through IntelliSourcing, the Company provides
outsourcing services for ongoing management, development and maintenance of
customer applications, including Year 2000 compliance services. The Company
believes that its established TeamSourcing customers represent an attractive
base from which to grow its IntelliSourcing services and, as such, has recently
increased the personnel and resources dedicated to the development, marketing
and sales of its IntelliSourcing services. TeamSourcing and IntelliSourcing
services are based on Syntel's methodologies and technical expertise, which the
Company continues to develop on an ongoing basis in order to further enhance the
value of its services to customers. For the year ended December 31, 1996 and the
three months ended March 31, 1997, TeamSourcing accounted for approximately 64%
and 56%, respectively, of the Company's revenues and IntelliSourcing represented
approximately 36% and 44%, respectively, of the Company's revenues.
TeamSourcing
Syntel offers professional IT staffing services directly to its customers
and, to a lesser degree, in partnership with other service providers. The
professional IT staffing services include individual professionals and teams of
professionals dedicated to assisting customer systems projects and ongoing IT
functions. This service responds to the demand from internal IT departments for
additional expertise, technical skills and personnel. The Company's wide range
of TeamSourcing services include IT applications systems specification, design,
development, implementation and maintenance, which involve diverse computer
hardware, software, data and networking technologies and practices. Syntel also
provides professional IT staffing services to state governments, principally in
the area of state welfare automation services. Services to state governments are
provided directly by Syntel and in partnership with Deloitte & Touche and with
Unisys.
In providing its TeamSourcing services, Syntel utilizes its Global Service
Delivery Model, primarily through international recruiting, training and
relocation, to meet customer needs for resource depth, expertise,
responsiveness, 24-hour support seven days a week and cost-effective delivery.
Through its flexible service delivery, Syntel is able not only to deliver more
effective services to the customer, but also to more efficiently utilize its IT
professionals.
By focusing on customer satisfaction and the delivery of quality services
to TeamSourcing customers, the Company believes it is able to generate
opportunities to provide its TeamSourcing
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customers with higher value application outsourcing services and Year 2000
compliance services. The Company has recently realigned its TeamSourcing sales
people on an account basis within each sales region in an effort to further
enhance customer relationships and marketing to larger, more complex businesses.
The effectiveness of its TeamSourcing services and its focus on customer service
is evidenced by the high level of repeat business from existing customers and
the quality awards its customers have bestowed on Syntel. During 1996, Syntel
received the Q-1 rating from Ford Motor Company, became a Preferred Supplier to
Chrysler Corporation and was rated first in customer service among all Chrysler
vendors in its service category. The Company is also a Microsoft Certified
Solution Partner. For the year ended December 31, 1995 and 1996 and the three
months ended March 31, 1997, over 90% of Syntel's annual revenues were from
customers for whom the Company provided services during the previous period.
In order to continue to enhance its TeamSourcing services expertise, Syntel
has enhanced its capabilities in enterprise resource planning (ERP), including
the implementation of software packages from SAP and Oracle. The Company has
also developed expertise in emerging technologies such as Internet/intranet
applications, client/server applications and object-oriented software.
IntelliSourcing
Syntel also provides higher-value outsourcing services for ongoing
management, development and maintenance of business applications, including Year
2000 compliance services. Over the last 18 months, the Company has made
significant investments in IntelliSourcing, including the hiring of additional
sales people and senior managers, redirecting personnel experienced in the sale
of higher-value contracts, developing proprietary methodologies, including a
package of Year 2000 offerings and services, increasing marketing efforts, and
realigning organizational support in the areas of finance, administration, human
resources and legal. See "Risk Factors -- Ability to Manage Growth." The Global
Service Delivery Model is central to Syntel's delivery of IntelliSourcing
services. It enables the Company to respond to customers' needs for ongoing
service and flexibility and has provided the capability to become productive
quickly on a cost-effective basis to meet timing and resource demands for
mission critical applications.
Business Applications Outsourcing. Through IntelliSourcing, Syntel assumes
responsibility for and manages selected application support functions of the
customer. Rather than being responsible for an entire IT department, including
computers, other hardware, networks and all IT functions, IntelliSourcing
focuses solely on providing professional services for selected IT applications.
IntelliSourcing is fundamentally different than facilities management, which is
cost-intensive and involves the ownership of hardware. IntelliSourcing is a more
flexible alternative to traditional full-scale outsourcing, as it permits the
customer to maintain control of its IT resources and establish priorities.
IntelliSourcing permits the customer to select the applications best-suited to
remain managed in-house, while still benefiting from Syntel's expertise and
resource availability. The benefits of IntelliSourcing also include reliable
maintenance and up-keep of systems on which the business depends, reduced
operating costs, availability of IT personnel and access to best-practice
solutions, while allowing the customer to focus on its core competencies.
Syntel has developed methodologies, processes and tools to effectively
integrate and execute IntelliSourcing engagements. Referred to as
"IntelliTransfer," this methodology is implemented in three stages of planning,
transition and launch. Syntel first focuses on the customer's personnel,
processes, technology and culture to develop a plan to effectively assimilate
the business process knowledge of the customer. Syntel then begins to learn the
business processes of the customer, and, finally, seeks to assume responsibility
for performance of a particular customer application system or systems. As the
Company develops an in-depth knowledge of the customer's personnel, processes,
technology and culture, Syntel acquires a competitive advantage to pursue more
value-added services. The Company believes its approach to providing these
services results in a long-term customer relationship involving a key Syntel
role in the business processes and applications of the customer.
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At engagement initiation, Syntel's services are based on its expertise in
the software life-cycle and underlying technologies, and are thus focused on
technical solutions. For most new engagements, the Company starts by performing
functions primarily revolving around production control, application systems
maintenance, development of new and changed systems functionality, and 24-hour
help desk support. As IntelliSourcing engagements progress, the Company
typically provides an increasing proportion of software development services
offshore, allowing Syntel to reduce its overall cost of service and improve
responsiveness.
Because providing IntelliSourcing services typically involves close
participation in the IT strategy of a customer's organization, Syntel adjusts
the manner in which it delivers these services to meet the specific needs of
each customer. For example, if the customer's business requires fast delivery of
a mission-critical application update, Syntel will combine its on-site
professionals, who have knowledge of the customer's business processes and
applications, together with its global infrastructure to deliver
around-the-clock resources. If the customer's need is for cost reduction, Syntel
may increase the portion of work performed at its offshore Global Development
Center, which has significantly lower costs. The Company believes that its
ability to provide flexible service delivery and access to resources permits
responsiveness to customer needs and are important factors that distinguish its
IntelliSourcing services from other outsourcing services.
Year 2000 Compliance Services. As a component of its IntelliSourcing
services, the Company has invested substantial resources in developing a package
of Year 2000 offerings and services. The Company intends to use its Year 2000
capabilities to expand its role with existing TeamSourcing customers, gain new
customers and market its IntelliSourcing services. All of Syntel's Year 2000
service packages are based on Method2000(sm), a proprietary solution developed
by Syntel. Method2000(sm) is a second generation solution aimed at innovative
business processes, methodologies, techniques and tools, and maximizing the use
of lower-cost offshore resources.
The Method2000(sm) service packages are: Pilot2000, Implement2000 and
Recover2000. Using the Pilot2000 service package, Syntel identifies a small
representative portion of the customer's application systems portfolio, and
executes an entire Year 2000 compliance project on the representative sample. In
addition to constituting an effective "proof of concept," this provides specific
customer environment knowledge to Syntel. With this specific knowledge, Syntel
seeks to offer fixed-price solutions for additional applications beyond the
pilot using the offering Implement2000. See "Risk Factors--Fixed-Price
Engagements." The Company is also marketing a Recover2000 service package in
which Syntel assumes responsibility for in-progress Year 2000 compliance
projects previously performed by the customer or another IT service provider.
Syntel markets its applications outsourcing services as a follow-on to its
Year 2000 compliance services. The Company believes that such follow-on services
will be an attractive offering in the coming years based on the current trend of
most Year 2000 service providers not to provide warranties or services to fix
any Year 2000 failures that may result from limitations, if any, of their
services. Syntel believes that the most efficient way for customers to achieve
Year 2000 compliance is to have key team members from the Year 2000 compliance
project fully employed in ongoing maintenance and development of the same
applications portfolio.
Technical Services Group
The Company seeks to gain a competitive advantage through its
methodologies, tools and technical expertise. The Company employs a team of
professionals in its Technical Services Group whose mission is to develop and
formalize Syntel's "intellectual capital" for use by the entire Syntel
organization. The Technical Services Group focuses on monitoring industry
trends, creating competencies in emerging technical fields, developing new
methodologies, techniques and tools such as IntelliTransfer and Method2000(sm),
creating reusable software components to enhance quality and value on customer
assignments, and educating Syntel's personnel to improve marketing, sales and
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delivery effectiveness. The Technical Services Group consists of senior
technical personnel located in both the U.S. and India.
CUSTOMERS
Syntel provides its services to a broad range of Fortune 1000 companies
principally in the financial services, manufacturing, retail, transportation and
information/communications industries, as well as to government entities. During
1996, the Company provided services to over 100 customers, principally in the
U.S. The Company also provides services to customers in Europe and Southeast
Asia, many of whom are subsidiaries or affiliates of its U.S. customers.
Representative customers include:
<TABLE>
<CAPTION>
FINANCIAL SERVICES MANUFACTURING RETAIL
------------------ ------------- ------
<S> <C> <C>
American International Ford Motor Co. Dayton Hudson Corp.
Group, Inc. Chrysler Corporation Safeway, Inc.
World Bank International Business Mervyn's
Colonial Management Machines Corp. Kmart Corp.
CitiBank Unisys Corp. Lucky Stores
CIGNA Corp. New Venture Gear
First Union Corp. Meldisco
NationsBank Corp. Hewlett-Packard Corp.
Xerox Corp.
Westinghouse Electric
Corp.
</TABLE>
<TABLE>
<CAPTION>
INFORMATION/
TRANSPORTATION COMMUNICATIONS GOVERNMENT
-------------- -------------- ----------
<S> <C> <C>
Norfolk Southern Corp. AT&T Corp. New Mexico
Allied Van Lines Consolidated Communication New York
Burlington Northern, Inc. Directories Malta
Yellow Technologies Intellisoft West Virginia
Northwest Airlines Corp. McDonnell Douglas Illinois
Information Systems
LM Ericsson Telephone Co.
</TABLE>
For the year ended December 31, 1995 and 1996 and for the three months
ended March 31, 1997, the Company's top ten customers accounted for
approximately 81%, 78% and 77% of the Company's revenues, respectively. American
International Group, Inc. and Ford Motor Co., the Company's largest customers,
represented approximately 38% and 14% of revenue for the year ended December 31,
1995, respectively, approximately 34% and 12% of revenue for the year ended
December 31, 1996, respectively, and 31% and 10% of revenues for the three
months ended March 31, 1997, respectively. The Company recently entered into
outsourcing contracts with Ford Motor Co. and Norfolk Southern Corp. The Company
also recently entered into Year 2000 engagements with American International
Group, Inc., Northwest Airlines Corp., Yellow Technologies and Norfolk Southern
Corp. Most of the Company's contracts are terminable by the customer with
limited notice and without penalty. See "Risk Factors -- Customer Concentration;
Risk of Termination."
American International Group. The Company's largest customer is American
Home Assurance Company, and certain other subsidiaries of American International
Group, Inc. (collectively, "AIG"). This customer relationship began with the
placement of a single IT professional in 1989 and has grown to over 450 Syntel
professionals as of June 1, 1997. The Company supports AIG systems throughout
the U.S. and in selected countries around the world. Both the Company's Cary,
North Carolina and Mumbai, India Global Development Centers were initially
established to support AIG. As the Company has become more knowledgeable about
AIG's personnel, processes, technology and culture, it has had the opportunity
to expand the range of its services beyond contract minimums and to play an
increasingly valuable role in project management and systems design.
Currently, the Company provides applications development and maintenance
services in support of various AIG subsidiaries. Its applications development
services focus on providing customized solutions and applications in support of
policy underwriting, claims management and financial reporting and encompass
both mainframe and client/server environments. The Company also provides Year
2000 conversion services to AIG on a fixed-price basis. The Company's
applications maintenance
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services focus on enhancing existing business systems, including 24-hour
management of data processing functions and a 24 hour customer assistance
center. The Company is responsible for complete production support, maintenance
and related activities for over 250 applications. Through its long-term
relationship with AIG, Syntel has enabled AIG to better control and manage its
IT resource allocation and simplified management of AIG's IT functions. Syntel
has also delivered to AIG greater resource availability, 24-hour support, fast
turnaround and the capacity to address AIG enterprise needs in other parts of
the world. The Company has a four-year contract with AIG which commenced in 1994
and expires in December 1998. It may be terminated by AIG in 1997 upon payment
of a monetary penalty and in 1998 without penalty.
Syntel's service delivery to AIG is an integrated effort involving on-site,
off-site and offshore service teams. Initially, the on-site team gained
knowledge of the particular AIG applications and systems to be supported.
Management support of these applications and systems was then shifted to the
off-site team at the Company's Cary, North Carolina Global Development Center
with certain underlying work functions ultimately migrating to the offshore team
at the Company's Mumbai, India Global Development Center. Currently, Syntel
coordinates the AIG customer relationship using a number of on-site project
management teams which interface with AIG management teams at the AIG location
for each principal IT support function. As a result, AIG maintains management
control of its IT planning and priorities while at the same time benefiting from
Syntel's expertise, practices and resource availability for the cost-efficient
execution of AIG plans and priorities.
GLOBAL SERVICE DELIVERY MODEL
Syntel's Global Service Delivery Model gives the Company the flexibility
and resources to perform services on-site at the customer's location, off-site
at the Company's U.S. locations and offshore at the Company's Indian locations.
By linking each of its service locations together through a dedicated data and
voice network, Syntel provides a seamless service capability to its customers.
The Global Service Delivery Model gives the Company the flexibility to deliver
to each customer a customized mix of integrated on-site, off-site and offshore
services to meet varying customer needs for direct interaction with Syntel
personnel, access to technical expertise and best practices, resource
availability and cost-effective delivery.
[A diagram on this page represents a map of the world with the Company's
offices and facilities indicated.
Footnote: The Company has leased space for a new Global Development Center
in Chennai, India. The Company has already begun staffing the Chennai Center and
will continue to incrementally increase staffing over time in response to
customer needs.]
Through on-site service delivery at the customer's location, the Company is
able to gain comprehensive knowledge concerning the customer's personnel,
processes, technology and culture, and maintain direct customer contact to
facilitate project management, problem solving and integration of Syntel
services. Off-site service delivery at the Company's U.S. locations provides the
customer with access to the diverse skill base and technical expertise resident
at different regional centers, availability of resources, and cost-effective
delivery due to the savings in transportation, facilities and relocation costs
associated with on-site work. Offshore service delivery at the Company's Indian
location provides the customer with the capacity to receive around the clock
attention to applications maintenance and project development for faster
turnaround, greater availability of resources, expertise resident in India and
more cost-effective delivery than the Company's off-site services.
The Company has developed global recruiting and training programs which
have efficiently provided skilled IT professionals to meet customer needs. In
addition, the Company's sales, solutions and delivery functions are closely
integrated in the Global Service Delivery Model so that appropriate resources
can be provided to the customer at the right time and at the most advantageous
location. Each customer is tracked and serviced through a multi-stage customer
care process. Weekly meetings
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are held with key project management, sales, technical, legal and finance
personnel to monitor progress, identify issues and discuss solutions. As
engagements evolve and customer needs change, the Company can reallocate
resources responsively from among these locations as necessary.
The Company's two primary Global Development Centers located in Cary, North
Carolina and Mumbai, India, two additional Global Development Centers located in
Troy, Michigan and Santa Fe, New Mexico, and the Global Development Center being
established in Chennai, India support the Company's Global Service Delivery
Model.
The Cary, North Carolina Global Development Center, which employs over 350
persons, serves as the hub for the Company's telecommunications, project
management, technical training and professional development programs. Its
support functions include administration of a dedicated data and voice network,
a 24-hour customer assistance center which coordinates problem resolution
worldwide, and a development center for the sharing of knowledge and expertise
among IT professionals. Moreover, due to its proximity to a large number of
major universities, the Cary, North Carolina Global Development Center has
access to a relatively large talent pool.
The Mumbai, India Global Development Center, which employed over 525
persons as of June 1, 1997, serves as the hub of the Company's Indian
operations. This Global Development Center provides substantial resource depth
to meet customer needs around the world, low-cost service delivery, a 24-hour
customer assistance center and development of technical solutions and expertise.
Mumbai also serves as a principal recruiting and training center for the Company
due to the large resource pool of skilled IT professionals and college
graduates.
The Company is in the process of expanding its operations in India. The
Company believes that it has developed considerable skill in the operation of
offshore facilities and expects its Indian expansion to significantly increase
its offshore capabilities. The Mumbai Center, which has been in operation for
four years, is being expanded to accommodate an additional 300 persons. Such
expansion is expected to be completed by the end of 1997. The Company also has
leased space for a new Global Development Center in Chennai, India. This Center
is intended to provide additional resources and will include a training and
development center. The Company has already begun staffing the Chennai Center
and will continue to incrementally increase staffing over time in response to
customer needs. Once fully developed and operational, the Chennai Center will be
able to accommodate up to 600 persons. See "Risk Factors -- Exposure to
Regulatory and General Economic Conditions in India."
The Troy, Michigan Global Development Center serves as the Company's world
headquarters, sales and marketing center, training and development center, and
is the hub of its Southeastern Michigan operations, which employs over 300
people. The Santa Fe, New Mexico Global Development Center, which employs 29
people, serves as a training and development center.
SALES AND MARKETING
The Company markets and sells its services directly through its
professional salespeople and senior management operating principally from the
Company's offices in Chicago, Illinois; Dallas, Texas; Durham, North Carolina;
Fremont, California; Minneapolis, Minnesota; New York, New York; Troy, Michigan;
Woodbridge, New Jersey; and London, England. The Company recently realigned its
sales staff into two sales forces, one for TeamSourcing services and one for
IntelliSourcing services. Each sales region has a separate TeamSourcing and
IntelliSourcing sales staff with specific sales executives assigned to each
account.
The TeamSourcing sales organization consists of approximately 18 account
executives. The sales cycle for TeamSourcing engagements, from initial contact
to execution of an agreement, varies by type of service and account size, but is
typically completed within 30 days. A significant amount of TeamSourcing
engagements are developed from existing customers. During 1996, over 90% of
TeamSourcing revenues were from customers who received services during 1995.
TeamSourcing account executives are paid a base salary plus quarterly incentive
compensation based upon specified profit targets.
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Syntel's IntelliSourcing sales organization consists of 10 sales
executives. Since 1995, when it had four sales executives, Syntel has increased
its professional salespeople in IntelliSourcing both by dedicating internal
sales professionals to this service offering and through outside hiring of
professionals experienced in marketing outsourcing engagements. The sales cycle
for IntelliSourcing engagements ranges from 3 to 12 months depending on the
complexity of the engagement. Due to this longer sales cycle, IntelliSourcing
sales executives follow an integrated sales process for the development of
engagement proposals and solutions, and receive ongoing input from the Company's
technical services, delivery, finance and legal departments throughout the sales
process. The IntelliSourcing sales process also typically involves a greater
number of customer personnel at more senior levels of management than the
TeamSourcing sales process. IntelliSourcing account executives are paid a base
salary plus quarterly incentive compensation based on reaching specified profit
targets on closed contracts.
Syntel's marketing organization seeks to promote brand identities for its
TeamSourcing, IntelliSourcing and Method2000(sm) services and to generate sales
leads. The Company's current marketing efforts consist of direct mail, trade
shows, publications and public relations campaigns targeted to CEOs, CFOs and
CIOs of Fortune 500 organizations and CIOs of government agencies. In addition,
Syntel maintains relationships with key industry research groups such as the
Gartner Group, Meta Group, Giga Group, and the Information Technology
Association of America.
HUMAN RESOURCES
The Company believes that its human resources are its most valuable asset.
Accordingly, the Company's success depends in large part upon its ability to
attract, develop, motivate, retain and effectively utilize highly skilled IT
professionals. The Company has developed a number of processes, methodologies,
technologies and tools for the recruitment, training, development and retention
of its employees. As of June 1, 1997, the Company employed in its U.S.
operations 1,318 persons, including 1,179 IT professionals, 28 in sales and
marketing, and 111 in general and administrative positions. Of these, 523 were
U.S. citizens and permanent residents, 776 held H-1B visas (permitting temporary
residency in the U.S.), 5 held F-1 visas (permitting foreign students to work in
the U.S.) and 14 held TN visas (permitting Canadians to work in the U.S.). As of
June 1, 1997, the Company employed in its Indian operations 529 persons,
including 461 IT professionals, 2 in sales and marketing, and 66 in general and
administrative positions.
A majority of the Company's professional employees have a Bachelor of
Science degree or its equivalent, or higher degrees in computer science,
engineering disciplines, management, finance and other areas. Their experience
level ranges from entry-level programmers to engagement managers and senior
consultants with over 20 years of IT experience. The Company has personnel who
are experienced in mainframe, client/server and open systems technologies, and
proficient in a variety of computer programming languages, software tools,
database management systems, networks, processes, methodologies, techniques and
standards.
The Company has implemented a management structure and human resources
organization intended to maximize the Company's ability to efficiently expand
its professional staff. Although the Company believes that it has the capability
to meet its anticipated future needs for IT professionals through its
established recruiting and training programs, there can be no assurance that the
Company will be able to hire, train or retain qualified IT professionals in
sufficient numbers to meet anticipated staffing needs. See "Risk Factors --
Recruitment and Retention of IT Professionals" and "-- Ability to Manage
Growth."
Recruiting. The Company has developed a recruiting methodology and
organization which is a core competency. The Company has a 15-person U.S.-based
recruiting team, 10 of whom primarily recruit from across the U.S., and 5 of
whom primarily recruit international candidates from India, Canada, Europe,
Singapore, the Philippines, Australia and New Zealand. The Company also has a 4-
person India-based recruiting team in Mumbai which primarily recruits for the
Company's needs in
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India, although that team also from time to time recruits for the Company's U.S.
operations. The Company uses a standardized global selection process that
includes interviews and reference checks.
Among the Company's other recruiting techniques are the placement of
advertisements on its web site, in newspapers and trade magazines, providing
bonuses to its employees who refer qualified applicants, participating in job
fairs and recruiting on university campuses. In addition, the Company has
developed a proprietary database of talent utilizing the Resumix database
system, which is an automated tool for managing all phases of recruiting. This
system directly downloads resumes from the Internet, directly loads faxed
resumes and currently stores approximately 40,000 resumes. This system enhances
the ability of the Company's recruiters to select appropriate candidates and can
distribute resumes directly to the recruiters.
Training. The Company uses a number of established training delivery
mechanisms in its efforts to provide a consistent and reliable source for
qualified IT professionals. Recent college graduates and other recruits selected
by the Company participate in Syntel's Technical and Professional Development
("TPD") program. The TPD program consists of 8-13 weeks of training programs,
including classroom lectures, hands-on experience, exercises, projects and
tests. Another entry-level training program is the Syntel Management Trainee
Program. As part of this program, Syntel selects graduates from leading
universities who are suited for corporate and regional positions within Syntel
in account management, sales, recruiting and other management areas. Syntel also
maintains a comprehensive Computer Based Training program ("CBT"), with over 200
training modules, which Syntel employees can use at their convenience. The CBT
topics cover the latest client/server areas, local-area and wide-area networks,
relational data base management systems, object-oriented systems, Microsoft
products, in addition to a number of management and related developmental areas.
The Company has been accepted as a Microsoft solution provider partner and
sponsors the Microsoft Certification Program at its Cary, North Carolina Global
Development Center, and provides opportunities for cross-training of its
professionals in emerging technologies.
Support and Retention. The Company seeks to provide meaningful support to
its employees which the Company believes leads to improved employee retention
and better quality services to its customers. Traditionally, a significant
percentage of the Company's employees have been recruited from outside the U.S.
and relocated to the U.S. This has resulted in the need to provide a higher
level of initial support to its employees than is common for U.S.-based
employees. As a result of these activities, Syntel has developed a significant
knowledge base in making foreign professionals comfortable and quickly
productive in the U.S. and Europe. The Company also conducts regular career
planning sessions with its employees, and seeks to meet their career goals over
a long-term planning horizon. As part of its retention strategy, the Company
strives to provide a competitive compensation and benefits package, including
relocation reimbursement and support, health insurance, auto insurance, 24-hour
on-call nurse consulting, a 401(K) plan, life insurance, dental options, a
vision eye-care program, long-term disability coverage, short-term disability
options, tuition subsidy plan, PC purchase plan and an employee referral plan.
The Company intends to offer stock options to substantially all of its employees
under the Stock Option Plan upon consummation of the offering, and to offer
substantially all of its employees an opportunity to purchase the Company's
Common Stock at a discount to fair market value under the Employee Stock
Purchase Plan. See "Management--Stock Option Plan" and "--Employee Stock
Purchase Plan."
DOL Consent Decree. To resolve an investigation of the Company by the U.S.
Department of Labor for failure to meet prevailing wage requirements for certain
H-1B employees, the Company voluntarily entered into a two-year consent decree
with the DOL on September 29, 1995. Under the consent decree, the Company agreed
not to file any new H-1B petitions for 90 days after the date of the decree, to
invest an additional $1 million to train its U.S. domestic employees as IT
professionals, to increase by ten percentage points its proportion of U.S.
domestic workers employed in positions in which H-1B workers are used, and to
interview and offer employment to all qualified displaced workers whenever the
Company places 25 or more employees at a facility where H-1B workers may be
used. While the Company believes that the steps taken to comply with the consent
decree adversely
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affected revenue growth during 1995 and 1996, the Company believes that it has
fully complied with the decree and that continued compliance with the decree
through its expiration in September 1997 will not have a material adverse effect
on the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview."
COMPETITION
The IT services industry is intensely competitive, highly fragmented and
subject to rapid change and evolving industry standards. The Company competes
with a variety of other companies, depending on the IT services it offers. The
Company's primary competitors for professional IT staffing engagements include
participants from a variety of market segments, including "Big Six" accounting
firms, systems consulting and implementation firms, applications software
development and maintenance firms, service groups of computer equipment
companies and temporary staffing firms. In applications outsourcing services,
the Company competes primarily with Electronic Data Systems Corp., IBM Global
Solutions (ISSC), Andersen Consulting and Computer Sciences Corporation. The
Company's principal competitors for Year 2000 compliance engagements include IBM
Global Solutions (ISSC), Cap Gemini and Andersen Consulting. Many of the
Company's competitors have substantially greater financial, technical and
marketing resources and greater name recognition than the Company. As a result,
they may be able to compete more aggressively on pricing, respond more quickly
to new or emerging technologies and changes in customer requirements, or devote
greater resources to the development and promotion of IT services than the
Company. In addition, there are relatively few barriers to entry into the
Company's markets and the Company has faced, and expects to continue to face,
additional competition from new IT service providers. Further, there is a risk
that the Company's customers may elect to increase their internal resources to
satisfy their IT services needs as opposed to relying on a third-party vendor
such as the Company. The IT services industry is also undergoing consolidation
which may result in increased competition in the Company's target markets.
Increased competition could result in price reductions, reduced operating
margins and loss of market share, any of which could have a material adverse
effect on the Company. The Company also faces significant competition in
recruiting and retaining IT professionals which could result in higher labor
costs or shortages. There can be no assurance that the Company will compete
successfully with existing or new competitors or that competitive pressures
faced by the Company will not materially adversely affect its business, results
of operations or financial condition. See "Risk Factors--Intense Competition."
INTELLECTUAL PROPERTY
The Company's business includes the development of custom software
applications and other deliverables in connection with specific customer
engagements. Ownership of such software and associated deliverables created for
customers is generally retained by or assigned to the customer. The Company also
develops software components and libraries that can be reused in application
software development, and certain software toolsets and proprietary
methodologies, most of which remain the property of the Company.
In order to protect its proprietary rights in these various intellectual
properties, the Company relies upon a combination of trade secret, nondisclosure
and other contractual arrangements, and copyright and trademark laws. The
Company generally enters into confidentiality agreements with its employees,
consultants, customers and potential customers and limits access to and
distribution of its proprietary information. India is a member of the Berne
Convention, and has agreed to recognize protection on intellectual property
rights conferred under the laws of other member countries, including the U.S.
The Company believes that the laws, rules, regulations and treaties in effect in
the U.S. and India are adequate to protect it from misappropriation or
unauthorized use of its intellectual property. However, there can be no
assurance that such laws will not change and, in particular, that the laws of
India will not change in ways that may prevent or restrict the transfer of
software components, libraries and toolsets from India to the U.S. There can be
no assurance that the steps
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taken by the Company will be adequate to deter misappropriation of its
intellectual property or that the Company will be able to detect unauthorized
use and take appropriate steps to enforce its rights.
Although the Company believes that its services and products do not
infringe on the intellectual property rights of others, there can be no
assurance that such a claim will not be asserted against the Company in the
future. See "Risk Factors -- Limited Intellectual Property Protection."
FACILITIES
The Company's headquarters and principal administrative, sales and
marketing, and system development operations are located in approximately 24,900
square feet of leased space in Troy, Michigan. The Company occupies these
premises under a lease expiring on November 30, 2001. The Company's primary
training and development center is located in approximately 50,240 square feet
of leased space in Cary, North Carolina, under a lease which expires March 31,
1999. The Company also leases regional office facilities in Dallas, Texas;
Fremont, California; Oakbrook, Illinois; Minneapolis, Minnesota; Durham, North
Carolina; Santa Fe, New Mexico; Woodbridge, New Jersey; and London, England.
Syntel India leases approximately 20,210 square feet of office space in
Mumbai, India, under four leases expiring on various dates from October 14, 1997
to September 30, 1998, each of which is expected to be renewed for a period of
five years upon expiration. This leased space is in the process of being
expanded by approximately 13,000 square feet. Syntel India's IT professionals,
as well as its senior management, administrative personnel, human resources and
sales and marketing functions are housed in this facility. Syntel has leased
substantially all of an office building in Chennai, India consisting of
approximately 33,000 square feet. The lease terms expire May 2003, subject to
the Company's option to renew for an additional period of three years.
The Company believes that these facilities are adequate for its currently
anticipated future needs.
LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings or
governmental investigation and is not aware of any threatened litigation or
governmental investigation.
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<PAGE> 45
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers, directors and prospective directors, who
have agreed to serve as directors upon consummation of this offering, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Bharat Desai..................... 44 President, Chief Executive Officer and Director
Neerja Sethi..................... 42 Vice President, Corporate Affairs and Director
John Andary...................... 47 Chief Financial Officer and Treasurer
Ken Kenjale...................... 47 Chief Technology Officer
Daniel M. Moore.................. 43 General Counsel, Secretary and Acting Vice
President, Human Resources
Richard Baldyga.................. 36 Vice President, Global Delivery Services
John Kennedy..................... 56 Vice President, Sales and Relationship
Management
Jay Clark........................ 34 Assistant Vice President, Outsourcing Solutions
Venkat Mallya.................... 36 Assistant Vice President, TeamSourcing
Paritosh K. Choksi............... 44 Prospective Director
Douglas Van Houweling............ 53 Prospective Director
</TABLE>
- ------------------------------
Bharat Desai is a co-founder of the Company and has served as its
President, Chief Executive Officer and Director since its formation in 1980. Mr.
Desai holds an M.B.A. in Systems and Finance from the University of Michigan and
a Bachelor of Technology degree in Electrical Engineering from the Indian
Institute of Technology in Mumbai, India. Mr. Desai is the spouse of Ms. Sethi.
Neerja Sethi is a co-founder of the Company and has served as a Vice
President, Corporate Affairs and Director since its formation in 1980 and as
Secretary and Treasurer from 1980 to March 1996. Ms. Sethi holds an M.S. in
Computer Science from Oakland University, an M.B.A. in Operations Research from
Delhi University, and a B.S. in Mathematics from Delhi University. Ms. Sethi is
the spouse of Mr. Desai.
John Andary has served the Company as Chief Financial Officer since August
1994 and as Treasurer since March 1996. From October 1992 to April 1994, Mr.
Andary was a General Manager of Automatic Data Processing and from May 1987 to
October 1992 he was one of its Division Controllers. Mr. Andary has a B.A. in
Accountancy from Walsh College and is a Certified Public Accountant.
Ken Kenjale has served the Company as Chief Technology Officer since July
1995. From April 1988 to July 1995, Mr. Kenjale served in various positions with
the Company. Mr. Kenjale holds a Bachelor of Engineering degree and a Master of
Technology degree in Computer Science from the Indian Institute of Technology in
Kanpur, India.
Daniel M. Moore has served the Company as General Counsel and Secretary
since March 1996 and Acting Vice President, Human Resources since July 1996.
From June 1992 to March 1996, Mr. Moore served as Vice President and Senior
Corporate Counsel with Comerica Incorporated, and he was Vice President and
Managing Commercial Counsel with Manufacturers National Corporation prior to its
merger with Comerica Incorporated. Mr. Moore has a B.A. in Accounting from
Michigan State University and a J.D. from the Detroit College of Law.
Richard Baldyga has served the Company as Vice President, Global Delivery
since February 1997. From July 1994 to February 1997, Mr. Baldyga served as the
Company's Vice President, Operations. From 1984 to July 1994, Mr. Baldyga served
in various positions at EDS. Mr. Baldyga holds a B.S. in Engineering Technology
from the New Jersey Institute of Technology.
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<PAGE> 46
John Kennedy has served the Company as Vice President, Sales and
Relationship Management of the Company since February 1997. From August 1995 to
February 1997, Mr. Kennedy served as the Company's Assistant Vice President,
National Accounts and Sales. From April 1993 to August 1995, Mr. Kennedy served
as Director of Corporate Accounts at Kelly Services, Inc. From July 1981 to
March 1993, Mr. Kennedy served as a Business Unit Executive at IBM Corporation.
Mr. Kennedy holds a B.S. in Mechanical Engineering, an M.B.A. in Business
Administration, and a Certificate of Advanced Engineering Study, all from
Cornell University.
Jay Clark has served the Company as Assistant Vice President, Outsourcing
Solutions of the Company since August 1994. From January 1985 to August 1994,
Mr. Clark served in various positions at EDS. Mr. Clark holds a degree in
Management Information Systems from Tennessee Technological University.
Venkat Mallya has served the Company as Assistant Vice President,
TeamSourcing of the Company since February 1997. From June 1992 through February
1997, Mr. Mallya served in various positions with the Company, most recently as
a Branch Manager and a Director, Sales. From 1990 to 1992, Mr. Mallya served as
Group Marketing Manager for Onward Technology Group. Mr. Mallya holds a Masters
in Commerce and Finance and an M.B.A. in Marketing/Management, both from Bombay
University.
Paritosh K. Choksi has been associated with the Phoenix American group of
companies since 1977 and is currently Phoenix American's Senior Vice President,
Chief Financial Officer and Treasurer and a director. He has significant
experience in corporate finance, debt and equity placements and mergers and
acquisitions. Mr. Choksi has an M.B.A. from the University of California,
Berkeley in Finance and Marketing, and a Bachelor of Technology degree in
Mechanical Engineering from Indian Institute of Technology in Mumbai, India.
Douglas E. Van Houweling has served as Dean for Academic Outreach since
1995, and as Vice Provost for Information and Technology since 1984, at the
University of Michigan. As Vice Provost for Information and Technology, Dr. Van
Houweling is responsible for the University's strategic direction in the
information technology arena. At the University, Dr. Van Houweling holds
professorial appointments in the School of Information, the Business School and
the Department of Political Science in the College of Literature, Science and
the Arts. Dr. Van Houweling holds an undergraduate degree from Iowa State
University and a Ph.D in Government from Indiana University.
The Company's Board of Directors currently consists of two members. Upon
completion of this offering, the Board of Directors will be increased to five
members. The Board is divided into three classes, each of whose members serve
for staggered three-year terms. Mr. Desai is a Class III Director and will serve
an initial three-year term. Ms. Sethi is a Class II Director and will serve an
initial two-year term. The Class I directorship, which will be for an initial
one-year term, is currently vacant. There are also vacancies for one Class II
Director and one Class III Director. The three vacancies on the Board will be
filled by appointment by the current Board of Directors, with Mr. Choksi serving
as a Class III Director, and Mr. Van Houweling serving as a Class II Director.
The vacancy in the Class I directorship will be filled after completion of this
offering. At each annual meeting of shareholders after this offering, the
appropriate number of directors will be elected for a three-year term to succeed
the directors of the same class whose terms are then expiring.
BOARD COMMITTEES
In the past, the Company has not maintained any committees of the Board of
Directors. Upon completion of this offering, the Board of Directors will
establish an Audit Committee and a Compensation Committee.
The Audit Committee will be responsible for reviewing with management the
financial controls and accounting and reporting activities of the Company. The
Audit Committee will review the qualifications of the Company's independent
auditors, make recommendations to the Board of
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<PAGE> 47
Directors regarding the selection of independent auditors, review the scope,
fees and results of any audit and review non-audit services and related fees.
The members of the Audit Committee have not yet been appointed. All members of
the Audit Committee will be non-employee directors.
The Compensation Committee will be responsible for the administration of
all salary and incentive compensation plans for the officers and key employees
of the Company, including bonuses. The Compensation Committee will also
administer the Company's Stock Option and Incentive Plan. The members of the
Compensation Committee have not yet been appointed. All members of the
Compensation Committee will be non-employee directors.
The Board of Directors does not have a Nominating Committee. The selection
of nominees to the Board of Directors will be made by the entire Board of
Directors.
DIRECTOR COMPENSATION
Directors who are not employees of the Company will be paid $2,000 per
Board meeting and $500 per Committee meeting, and all directors will be
reimbursed for travel expenses incurred in connection with attending Board and
Committee meetings. Each non-employee director will be granted an option to
purchase 1,000 shares of the Company's Common Stock under the Stock Option Plan
at the first Board meeting that he or she attends, which will vest on the first
anniversary of the grant date, and thereafter will be granted an annual option
to purchase 1,000 shares of the Company's Common Stock at the first Board
meeting of the year he or she attends.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee prior to this offering.
Accordingly, Mr. Desai and Ms. Sethi, the Company's President and Chief
Executive Officer and Vice President, Corporate Affairs, respectively, had
responsibility for all decisions with respect to executive officer compensation.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid for the year ended December 31, 1996 to the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers whose total salary plus bonus exceeded $100,000 for the year ended
December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)
- -------------------------------------------------- ------------ --------
<S> <C> <C>
Bharat Desai, President and Chief Executive
Officer......................................... $420,000 $350,000
Neerja Sethi, Vice President, Corporate Affairs... $360,000 $250,000
Richard Baldyga, Vice President, Global Delivery
Services........................................ $180,000 $ 20,000
Jay Clark, Assistant Vice President, Outsourcing
Solutions....................................... $145,000 $ 17,500
John Kennedy, Vice President, Sales and
Relationship Management......................... $140,000 $ 14,000
</TABLE>
46
<PAGE> 48
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with Mr. Desai and Ms.
Sethi through December 31, 1999, pursuant to which they will continue to serve
the Company in their current positions, at initial salaries of $300,000 and
$96,000, respectively. Salaries during calendar year 1999 will be determined by
the Compensation Committee of the Board of Directors, as will annual bonuses
throughout the employment term. The agreements provide that upon termination of
employment by the Company for reasons other than for cause (as defined in the
agreements), or death, disability or incapacity, the Company shall pay the
executive for his or her then salary for the remaining term of the agreement,
without reduction for any compensation received from other sources. Under the
agreements, Mr. Desai and Ms. Sethi are subject to noncompetition,
nonsolicitation and nondisclosure covenants during the employment term and for
two years following termination of employment.
STOCK OPTION PLAN
The Company's Stock Option and Incentive Plan (the "Stock Option Plan")
became effective on April 1, 1997. The aggregate number of shares reserved for
issuance under the Stock Option Plan is 2,000,000 shares. Options granted under
the Stock Option Plan typically vest in increments of 10%, 20%, 30%, and 40% of
the shares subject to the option on the first, second, third and fourth
anniversaries, respectively, of the grant date of the option. The purpose of the
Stock Option Plan is to provide incentives for employees and non-employee
directors to promote the success of the Company, and to enhance the Company's
ability to attract and retain the services of such persons. Options granted
under the Stock Option Plan may be either: (i) options intended to qualify as
"incentive stock options" under Section 422 of the Code; or (ii) non-qualified
stock options. The Stock Option Plan also permits the grant of stock
appreciation rights in connection with the grant of stock options, and the grant
of restricted stock awards, performance shares and annual incentive awards.
Stock options and stock awards may be granted under the Stock Option Plan to all
employees and non-employee directors of the Company, or of any present or future
subsidiary or parent of the Company.
The Stock Option Plan is administered by the Board of Directors, which may,
and is expected to, delegate administrative responsibility for the Stock Option
Plan to the Compensation Committee. The Compensation Committee has the authority
to determine exercise prices applicable to the option, the eligible officers,
directors or employees to whom options may be granted, the number of shares of
the Company's Common Stock subject to each option and the extent to which
options may be exercisable. The Compensation Committee also has the authority to
determine the recipients and the terms of grants of stock appreciation rights,
restricted stock awards, performance share awards and annual incentive awards
under the Stock Option Plan. The Compensation Committee is empowered to
interpret the Stock Option Plan and to prescribe, amend and rescind the rules
and regulations pertaining to the Stock Option Plan. No option is transferable
by the optionee other than by will or the laws of descent and distribution, and
each option is exercisable, during the lifetime of the optionee, only by such
optionee.
Any incentive stock option that is granted under the Stock Option Plan may
not be granted at a price less than the fair market value of the Company's
Common Stock on the date of grant (or less than 110% of fair market value in the
case of holders of 10% or more of the total combined voting power of all classes
of stock of the Company or a subsidiary or parent of the Company). Non-qualified
stock options may be granted at the exercise price established by the
Compensation Committee, which may be less than the fair market value of the
Company's Common Stock on the date of grant. The annual incentive awards are
based on pre-established objective performance goals. Non-qualified stock
options, stock appreciation rights and annual incentive awards are intended to
comply with the requirements of Section 162(m) of the Code to ensure that such
incentive compensation is fully tax deductible.
Each option granted under the Stock Option Plan is exercisable for a period
not to exceed ten years from the date of grant (or five years in the case of a
holder of more than 10% of the total
47
<PAGE> 49
combined power of all classes of stock of the Company or of a subsidiary or
parent of the Company) and shall lapse upon expiration of such period, or
earlier upon termination of the recipient's employment with the Company, or as
determined by the Compensation Committee.
Options to purchase 608,750 shares are outstanding under the Stock Option
Plan, of which 140,000 options were granted at an exercise price of $2.00 per
share on April 1, 1997 and 468,750 options were granted at an exercise price of
$7.00 per share on June 2, 1997. Of these options, 10,000 were granted to each
of Mr. Baldyga, Mr. Clark and Mr. Kennedy at exercise prices of $2.00 per share.
In addition, upon consummation of the offering, the Company intends to grant
options to substantially all other employees to purchase in the aggregate
approximately 42,000 additional shares at an exercise price equal to the initial
offering price of Common Stock offered hereby. Prior to this offering no shares
of Common Stock will have been issued upon exercise of options granted under the
Stock Option Plan.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Stock Purchase Plan") will
become effective upon consummation of the offering. A total of 1,000,000 shares
of the Company's Common Stock have been reserved for issuance under the Stock
Purchase Plan. The Stock Purchase Plan is intended to qualify under Section 423
of the Code. An employee electing to participate in the Stock Purchase Plan must
authorize a stated dollar amount or percentage of the employee's regular pay to
be deducted by the Company from the employee's pay for the purpose of purchasing
shares of Common Stock over a period of six months. The price at which employees
may purchase Common Stock will be set by the Compensation Committee of the Board
of Directors at not less than the lesser of 85% of the fair market value of the
Common Stock on the Nasdaq National Market on the first day of the purchase
period or 85% of the fair market value of the Common Stock on the last day of
the purchase period. Employees of the Company who have completed six full months
of service with the Company and whose customary employment is more than 20 hours
per week and five or more months per calendar year are eligible to participate
in the Stock Purchase Plan. An employee may not be granted an option under the
Stock Purchase Plan if after the granting of the option such employee would be
deemed to own 5% or more of the combined voting power of value of all classes of
stock of the Company. No employee may be granted an option which, together with
options granted under all stock purchase plans of the Company and its
subsidiaries, permits the employee to accrue option rights in excess of $25,000
of the fair market value of such shares for any calendar year in which an option
is outstanding. The maximum number of shares of Common Stock an employee may
purchase during a purchase period shall be determined by the Compensation
Committee, but may not exceed 30% of the employee's cash compensation during any
purchase period. As of June 1, 1997, approximately 1,318 employees were eligible
to participate in the Stock Purchase Plan. The Stock Purchase Plan will be
administered by the Compensation Committee.
CERTAIN TRANSACTIONS
Syntel India is an Indian corporation that the Company has engaged as a
subcontractor to perform offshore software development projects. Mr. Desai and
Ms. Sethi, the President and Vice President, Corporate Affairs, respectively,
and majority shareholders of the Company, own 100% of the capital stock of
Syntel India. Syntel India derives substantially all of its revenues from the
Company. For the year ended December 31, 1995 and 1996 and for the three month
period ended March 31, 1997, the Company purchased services from Syntel India in
the amounts of approximately $2,674,000, $4,066,000 and $1,473,000,
respectively.
Prior to the offering, the Company will enter into a Stock Purchase
Agreement to purchase all of the shares of Syntel India from Mr. Desai and Ms.
Sethi for $7.0 million in cash. The $7.0 million purchase price is based on a
valuation performed by independent chartered accountants in India pursuant to
guidelines established by the Reserve Bank of India for acquisitions of Indian
corporations. The purchase price for this acquisition will be paid from a
portion of the net proceeds of this offering.
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<PAGE> 50
This acquisition will be completed upon consummation of this offering. Upon
consummation of the acquisition, Syntel India will become a wholly-owned
subsidiary of the Company. See "Use of Proceeds" and "Management's Discussion
and Analysis of Results of Operations and Financial Condition--Syntel India
Acquisition".
Prior to the consummation of this offering, the Company, Mr. Desai, Ms.
Sethi and the Company's other shareholders will enter into a mutual
indemnification agreement relating to income tax liabilities of the Company and
the shareholders in connection with the termination of the Company's S
corporation status. The agreement provides that the shareholders, severally
(according to their relative percentage ownership of the Common Stock) and not
jointly, will indemnify the Company against any unpaid income tax liability of
the Company attributable to the period prior to the termination of the Company's
S corporation status. The agreement also provides that the Company will
indemnify the shareholders against any income tax liability they may incur as a
result of a final adjustment to the taxable income of the Company for any period
ending after the termination date of the Company's S corporation status which
results in a decrease for any period in the Company's taxable income and a
corresponding increase in the taxable income of the shareholders.
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of June 1, 1997, and as adjusted to
reflect the sale of the shares offered by this Prospectus, by Mr. Desai and Ms.
Sethi, who each beneficially own in excess of 5% of the outstanding Common Stock
of the Company, Mr. Choksi, who will become a director upon the consummation of
this offering, and by all executive officers and directors of the Company as a
group.
<TABLE>
<CAPTION>
PERCENT OF SHARES
BENEFICIALLY
NUMBER OF OWNED(1)
SHARES ----------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNERS OWNED OFFERING OFFERING
----------------- ------------ -------- ----------
<S> <C> <C> <C>
Neerja Sethi........................................ 13,187,500(2) 60% 13,187,500(2)
Bharat Desai........................................ 8,787,500(3) 40% 8,787,500(3)
Paritosh K. Choksi.................................. 25,000(4) * 25,000(4)
All directors and executive officers as a group (9
persons).......................................... 22,000,000 100% 22,000,000
</TABLE>
- ------------------------------
* Less than 1%.
(1) Assumes no exercise of the Underwriters' over-allotment option.
(2) Includes 7,100,000 shares of Common Stock held in several trusts for the
benefit of Ms. Sethi and her descendants, of which trusts Ms. Sethi is a
trustee. Ms. Sethi disclaims beneficial ownership of shares held by her
spouse, Mr. Desai. The business address of Ms. Sethi is Suite 400, 2800
Livernois, Troy, Michigan 48083.
(3) Includes 100,000 shares of Common Stock held in several trusts for the
benefit of Mr. Desai's descendants, of which trusts Mr. Desai is a trustee.
Mr. Desai disclaims beneficial ownership of shares held by his spouse, Ms.
Sethi. The business address of Mr. Desai is Suite 400, 2800 Livernois, Troy,
Michigan 48083.
(4) Includes 5,000 shares owned by Mr. Choksi's spouse, of which he disclaims
beneficial ownership.
49
<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock. As of the consummation of
this offering, the Company will have outstanding 25,000,000 shares of Common
Stock (25,450,000 if the Underwriters' overallotment option is exercised in
full). In addition, the Company has reserved 2,000,000 shares under its Stock
Option Plan, of which 140,000 were granted at an exercise price of $2.00 per
share on April 1, 1997 and of which 468,750 were granted at an exercise price of
$7.00 per share on June 2, 1997. The Company intends to grant options to
substantially all of its employees to purchase in the aggregate approximately
42,000 additional shares at an exercise price equal to the initial offering
price of the Company's Common Stock offered hereby. Further, the Company has
reserved 1,000,000 shares of issuance under the Employee Stock Purchase Plan. No
shares of Preferred Stock have been designated or issued. The following
description of the capital stock of the Company is a summary and is qualified in
its entirety by the provisions of the Company's Articles of Incorporation
("Articles") and Bylaws, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
COMMON STOCK
Subject to the rights of any holder of Preferred Stock, each holder of
Common Stock is entitled to one vote per share for the election of directors as
well as on other matters, to dividends as, when, and if declared by the
Company's Board of Directors, and upon liquidation to share in the net assets of
the Company pro rata in accordance with such shareholder's holdings. The Common
Stock has no preemptive, redemption, conversion or subscription rights, and all
outstanding shares of Common Stock are, and the shares of Common Stock offered
by the Company hereby will be, duly authorized, validly issued and fully paid
and nonassessable.
PREFERRED STOCK
The Articles authorize the issuance of Preferred Stock. The Board of
Directors has the power, without further action by the shareholders, to divide
any and all shares of Preferred Stock into series and to fix and determine the
relative rights and preferences of the Preferred Stock, such as the designation
of series and the number of shares constituting such series, dividend rights,
redemption and sinking fund provisions, liquidation and dissolution preferences,
conversion or exchange rights and voting rights, if any. Issuances of Preferred
Stock by the Board of Directors may result in such shares having senior dividend
and/or liquidation preferences to the holders of shares of Common Stock and may
dilute the voting rights of such holders. Issuances of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could, among other things, adversely affect the voting
rights of holders of the Common Stock. In addition, the issuance of Preferred
Stock could make it more difficult for a third party to acquire a majority of
the outstanding voting stock. Accordingly, the issuance of Preferred Stock may
be used as an "anti-takeover" device without further action on the part of the
shareholders of the Company. The Company has no present plans to issue any
shares of Preferred Stock. See "Risk Factors--Anti-Takeover Provisions."
CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
Indemnification. The Articles and Bylaws provide that directors and
officers of the Company will be indemnified by the Company to the fullest extent
authorized by Michigan law against all expenses and liabilities reasonably
incurred in connection with service for or on behalf of the Company.
Limitation of Liability. The Articles provide that directors of the Company
will not be personally liable for monetary damages to the Company for certain
breaches of their fiduciary duty as directors, unless they violated their duty
of loyalty to the Company or its shareholders, acted in bad faith, knowingly or
intentionally violated the law, authorized illegal dividends or redemptions or
derived an improper personal benefit from their actions as directors. This
provision would have no effect on the availability of equitable remedies or
nonmonetary relief, such an injunction or rescission for breach of
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<PAGE> 52
the duty of care. In addition, the provision applies only to claims against a
director arising out of his role as a director and not in any other capacity
(such as an officer or employee of the Company). Further, liability of a
director for violations of the federal securities laws will not be limited by
this provision.
Classified Board; Removal for Cause. The Company's Restated Articles of
Incorporation provide that the directors of the Company shall be divided into
three classes and serve staggered three-year terms. As a result, approximately
one-third of the Board of Directors will be elected each year. Classification of
the Board of Directors expands the time required to change the composition of a
majority of Directors and may tend to discourage a proxy contest or other
takeover bid for the Company. In addition, the Company's Bylaws provide that
members of the Board of Directors may be removed by a majority of the
shareholders only for cause at a special meeting called for such purpose.
Special Meetings; Advance Notice. The Company's Bylaws reserve the
authority to call a special shareholder's meeting to the Board of Directors, the
Chairman of the Board or the President. In addition, the Company's Bylaws
establish an advance notice procedure for the nomination of candidates for
election as directors, as well as for other shareholder proposals to be
considered at annual shareholders meetings, notice of shareholder proposals and
director nominations must be given timely in writing to the Secretary of the
Company. Such notice, to be timely, must be received at the principal executive
offices of the Company not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting; however, in the event
that the date of the annual meeting is advanced by more than 30 days or delayed
by more than 60 days from such anniversary date, notice by the shareholder to be
timely must be so delivered not earlier than the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made.
ANTI-TAKEOVER STATUTES
Upon the effectiveness of this offering, the Company will be subject to the
provisions of Chapter 7A and 7B of the Michigan Business Corporation Act
("MBCA"). Chapter 7A provides that business combinations between a Michigan
corporation which is subject to Chapter 7A and a beneficial owner of 10% or more
of the voting power of such corporation generally require the approval of 90% of
the votes of each class of stock entitled to be cast, and at least 2/3 of the
votes of each class of stock entitled to be cast other than shares owned by such
10% owner. Such requirements will not apply if: (i) the corporation's board of
directors approves the transaction prior to the time the 10% owner becomes such;
or (ii) the transaction satisfies certain fairness standards, certain other
conditions are met and the 10% owner has been such for at least five years.
Chapter 7B of the MBCA provides that "control shares" of a corporation
acquired in a control share acquisition have no rights except as granted by the
shareholders of the corporation. Control shares are shares that, when added to
shares previously owned by a shareholder, increase such shareholder's ownership
of voting stock to at least 20%, at least 33 1/3% or a majority of the
outstanding voting power of a corporation. A control share acquisition must be
approved by a majority of the votes cast by holders of stock entitled to vote
excluding shares owned by the acquiror and certain officers and directors. No
such approval is required, however, for gifts or acquisitions pursuant to a
merger to which the corporation is a party. If a corporation's articles of
incorporation or bylaws so provide, control shares acquired in a control share
acquisition with respect to which no acquiring person statement has been filed
may be redeemed at "fair value" by the corporation at any time during the period
ending 60 days after the last control share acquisition. In addition, if a
corporation's articles of incorporation or bylaws so provide, control shares may
be redeemed at fair value after an acquiring person statement has been filed and
after the meeting at which the voting rights of the control shares are submitted
to shareholders if the control shares are not accorded full voting rights. In
the event control shares acquired in a control share acquisition are accorded
full voting rights and the acquiring person has acquired a majority of all
voting power of the corporation, the shareholders of the
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<PAGE> 53
corporation, other than the acquiring person, have dissenters' rights. Fair
value means a value not less than the highest price paid per share by the
acquiring person in the control share acquisition.
TRANSFER AGENT
Harris Trust and Savings Bank of Chicago, Illinois will be the Transfer
Agent for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, there will be 25,000,000 shares of Common
Stock outstanding. The 3,000,000 shares (or up to 3,450,000 shares if the
Underwriters' over-allotment option is exercised in full) of Common Stock issued
and sold in this offering will be freely tradeable (other than by an "affiliate"
of the Company as such term is defined in the Securities Act) without
restriction under the Securities Act. The remaining shares of Common Stock then
outstanding will be deemed "restricted securities" within the meaning of Rule
144 under the Securities Act (the "Restricted Shares") and may be resold only in
compliance with the registration provisions of the Securities Act or an
exemption thereunder.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
Restricted Shares for at least one year from the later of the date such
Restricted Shares were acquired from the Company or (if applicable) from an
affiliate or the date on which they were fully paid, is entitled to sell within
any three-month period a number of shares that does not exceed the greater of 1%
of the then-outstanding shares of Common Stock or the average weekly trading
volume in the public market as reported through the Nasdaq National Market
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain requirements as to the manner and notice of sale and the
availability of public information concerning the Company.
Restricted Shares held by affiliates of the Company are subject to the
foregoing volume limitations, holding period and other restrictions under Rule
144. Affiliates may sell shares other than Restricted Shares in accordance with
the foregoing volume limitations and other restrictions, but without regard to
any holding period.
Further, under Rule 144(k), if a period of at least two years has elapsed
since the later of the date Restricted Shares were acquired from the Company or
from an affiliate of the Company or the date on which they were fully paid, a
holder of such Restricted Shares who is not an affiliate of the Company at the
time of the sale, and has not been an affiliate of the Company for at least
three months prior to the sale, would be entitled to sell the shares immediately
without regard to volume limitations and the other conditions described above.
Prior to this offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that market sales of shares
or the availability of such shares for sale will have on the market price of the
Common Stock from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market could have an adverse impact on such market
price and the Company's ability to raise additional equity capital.
The holders of all of the shares of Common Stock currently outstanding and
the Company have agreed that for a period of 180 days after the date of this
Prospectus they will not offer, sell or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock or
securities exchangeable for or convertible into Common Stock, during the 180-day
period following the date of this Prospectus. However, Hambrecht & Quist, LLC,
in its sole discretion, may release the shareholders from these lock-up
agreements, in whole or in part, at any time without notice. Following the
180-day lock-up period, all of the restricted securities will become eligible
for sale, subject to the manner of sale, volume, notice and information
requirements of Rule 144 of the Securities Act. See "Risk Factors -- Shares
Eligible for Future Sale."
52
<PAGE> 54
UNDERWRITING
Subject to certain terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom Hambrecht & Quist LLC,
Prudential Securities Incorporated and Robertson, Stephens & Company LLC are
acting as representatives (the "Representatives"), have severally agreed to
purchase from the Company the following respective number of shares of Common
Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Hambrecht & Quist LLC.......................................
Prudential Securities Incorporated..........................
Robertson, Stephens & Company LLC...........................
---------
Total.................................................. 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may reallow
a concession not in excess of $ per share to certain other dealers. After the
initial public offering of the shares, the offering price and other selling
terms may be changed by the Representatives. The Representatives have informed
the Company that the Underwriters do not intend to confirm sales to any accounts
over which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 450,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
that the number of shares of Common Stock to be purchased by it shown in the
table above bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company's shareholders have agreed that they will not, without the
prior written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable for or convertible into shares
53
<PAGE> 55
of Common Stock owned by them during the 180-day period following the date of
this Prospectus. The Company has agreed that it will not, without the prior
written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of
any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities or exchangeable for or convertible into shares of Common
Stock during the 180-day period following the date of this Prospectus, except
that the Company may grant options pursuant to the Company's Stock Option Plan
provided that, without the prior written consent of Hambrecht & Quist LLC, such
options shall not be exercisable during such period.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, revenues and earnings of the Company, market
valuations of other companies engaged in activities similar to the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, the Company's management and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover of this Prospectus is subject to change as a result of market
conditions and other factors.
Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the
Nasdaq Stock Market, in the over-the-counter market, or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby and certain other
legal matters will be passed upon for the Company by Dykema Gossett PLLC,
Bloomfield Hills, Michigan. Certain legal matters will be passed upon for the
Underwriters by Sidley & Austin, Chicago, Illinois.
EXPERTS
The balance sheets as of December 31, 1996 and 1995 and the statements of
income, shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1996 of Syntel, Inc. included in this Prospectus, have
been included herein in reliance upon the report of Coopers & Lybrand, L.L.P.,
independent accountants, given on the authority of that firm as experts in
auditing and accounting.
The balance sheet as of December 31, 1996, and the statements of income,
stockholders' equity and cash flows for the year ended December 31, 1996 of
Syntel India included in this Prospectus, have been included herein in reliance
upon the report of Rajkamal Shah & Co., Mumbai, India, independent chartered
accountants, given on the authority of that firm as experts in auditing and
accounting.
54
<PAGE> 56
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules thereto. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the principal office of the Commission, 450 Fifth Street,
N.W., Washington, DC 20549, the New York Regional Office located at 7 World
Trade Center, Suite 1300, New York, New York 10048, and the Chicago Regional
Office located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and copies of all or any part thereof may be obtained at prescribed rates from
the Commission's Public Reference Section at its principal office. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's World Wide
Web site is http://www.sec.gov.
55
<PAGE> 57
INDEX TO FINANCIAL STATEMENTS
SYNTEL, INC. AND SYNTEL SOFTWARE PRIVATE LIMITED
<TABLE>
<CAPTION>
PAGES
-----------
<S> <C>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation.................................. F-2
Pro Forma Consolidated Balance Sheet................... F-3
Pro Forma Consolidated Statement of Income............. F-4
Notes to Pro Forma Consolidated Financial Statements... F-4
FINANCIAL STATEMENTS
Report of Independent Accountants on the financial
statements of Syntel, Inc. as of December 31, 1995 and
1996 and for each of the three years in the period ended
December 31, 1996......................................... F-5
Syntel, Inc. Balance Sheets as of December 31, 1995,
1996 and March 31, 1997............................... F-6
Syntel, Inc. Statement of Income for the year ended
December 31, 1994, 1995,
1996 and for three months ended March 31, 1996 and
1997.................................................. F-7
Syntel, Inc. Statement of Shareholders' Equity for the
year ended December 31, 1994, 1995, 1996 and for three
months ended March 31, 1997........................... F-8
Syntel, Inc. Statement of Cash Flows for the year ended
December 31, 1994, 1995 and 1996 and for the three
months ended March 31, 1996 and 1997.................. F-9
Syntel, Inc. Notes to Financial Statements............. F-10
Report of Independent Chartered Accountants on the financial
statements of Syntel Software Private Limited as of and
for the year ended December 31, 1996...................... F-13
Syntel Software Private Limited Balance Sheet as of
December 31, 1996 and March 31, 1997.................. F-14
Syntel Software Private Limited Statement of Income for
the year ended December 31, 1996 and for the three
months ended March 31, 1997........................... F-15
Syntel Software Private Limited Statement of
Stockholders' Equity for the year ended December 31,
1996 and the three months ended March 31, 1997........ F-16
Syntel Software Private Limited Statement of Cash Flows
for the year ended December 31, 1996 and for the three
months ended March 31, 1997........................... F-17
Syntel Software Private Limited Notes Forming Part of
Accounts.............................................. F-18
</TABLE>
F-1
<PAGE> 58
SYNTEL, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The following Pro Forma Consolidated Balance Sheet as of March 31, 1997 and
the Pro Forma Consolidated Statement of Income for the year ended December 31,
1996 and the three months ended March 31, 1997 give effect to the issuance and
sale by the Company of 3,000,000 shares of Common Stock, the application of
estimated net proceeds therefrom, including the Syntel India acquisition, and
the Company's conversion from an S corporation to a C corporation for U.S.
federal and state income tax purposes. The Pro Forma Consolidated Balance Sheet
as of March 31, 1997 is presented as if the application of estimated net
proceeds including the Syntel India acquisition and the conversion from an S
corporation to a C corporation for U.S. federal and state income tax purposes
had taken place on January 1, 1996. The Pro Forma Consolidated Statement of
Income for the year ended December 31, 1996 and three months ended March 31,
1997 presents the pro forma results of operations assuming the above described
transactions had occurred January 1, 1996.
The unaudited Pro Forma Consolidated Financial Statements have been
prepared based upon the historical financial statements of Syntel, Inc. and
Syntel India for the periods stated above. Such pro forma statements are
presented for informational purposes only and may not be indicative of the
results that would have occurred if the Syntel India acquisition and the
conversion from an S corporation to a C corporation for U.S. federal and state
income tax purposes had been consummated on the dates indicated, or of the
operating results that may be achieved in the future. The pro forma statements
should be read in conjunction with the financial statements and notes to
financial statements contained elsewhere herein.
F-2
<PAGE> 59
SYNTEL, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------------------------
SYNTEL PRO FORMA
SYNTEL, INC. INDIA ADJUSTMENTS CONSOLIDATED
------------ ------ ----------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........... $ 3,942 $1,463 $27,300(a) $25,705
(7,000)(d)
Accounts receivable, net............ 20,741 1,229 (1,222)(e) 20,748
Other current assets................ 4,446 391 -- 4,837
------- ------ ------- -------
Total current assets........... 29,129 3,083 19,078 51,290
Property and equipment................... 6,277 1,905 -- 8,182
Less accumulated depreciation....... 3,003 699 -- 3,702
------- ------ ------- -------
Property and equipment, net.... 3,274 1,206 -- 4,480
------- ------ ------- -------
$32,403 $4,289 $19,078 $55,770
======= ====== ======= =======
Current liabilities:
Accounts payable.................... $ 938 $ 277 $ -- $ 1,215
Accrued payroll and related costs... 5,163 -- -- 5,163
Other accrued liabilities........... 3,286 -- (1,222)(e) 2,064
Dividends payable................... 7,000 -- -- 7,000
Deferred revenue.................... 4,728 -- -- 4,728
Income taxes payable................ -- 42 1,159 (b) 1,201
------- ------ ------- -------
Total current liabilities...... 21,115 319 (63) 21,371
Income taxes payable..................... -- -- 3,477 (b) 3,477
------- ------ ------- -------
Total liabilities.............. 21,115 319 3,414 24,848
------- ------ ------- -------
Common stock............................. 1 160 (160)(d) 1
Additional paid-in capital............... -- -- 27,300 (a) 30,921
11,287 (c)
(3,030)(d)
(4,636)(b)
Retained earnings........................ 11,287 3,959 (11,287)(c) --
(3,959)(d)
Cumulative translation adjustment........ -- (149) 149 (d) --
------- ------ ------- -------
Total shareholders' equity..... 11,288 3,970 15,664 30,922
------- ------ ------- -------
$32,403 $4,289 $19,078 $55,770
======= ====== ======= =======
</TABLE>
- -------------------------
(a) Reflects the sale of shares of Common Stock by the Company and the
application of the estimated net proceeds of $27.3 million therefrom.
(b) Reflects the recording of the net current and deferred tax liabilities upon
termination of the Company's S corporation status.
(c) Reflects the transfer of undistributed accrual basis earnings to additional
paid-in capital.
(d) Reflects the acquisition of Syntel India for $7.0 million accounted for on
the carryover basis of accounting with the excess purchase price $3.0
million treated as a reduction of equity.
(e) Reflects the elimination of the intercompany balances between the Company
and Syntel India.
F-3
<PAGE> 60
SYNTEL, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------
PRO FORMA
SYNTEL, INC. SYNTEL INDIA ADJUSTMENTS CONSOLIDATED
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues................. $92,237 $4,159 $(4,066) (a) $92,330
Cost of revenues......... 69,783 1,366 (4,066) (a) 67,083
------- ------ ------- -------
Gross profit............. 22,454 2,793 25,247
Selling, general and
administrative
expenses................ 18,261 1,010 42 (b) 19,313
------- ------ ------- -------
Income from
operations.............. 4,193 1,783 (42) 5,934
Other income (expense),
net..................... 299 (150) -- 149
------- ------ ------- -------
Income before income
taxes................... 4,492 1,633 (42) 6,083
Income taxes............. 321 29 1,379 (c) 1,729
------- ------ ------- -------
Net income............... $ 4,171 $1,604 $(1,421) $ 4,354
======= ====== ======= =======
Net income per
share(d)................ $ 0.17
=======
Pro forma weighted
average common shares
outstanding............. 25,135
=======
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------------------------
PRO FORMA
SYNTEL, INC. SYNTEL INDIA ADJUSTMENTS CONSOLIDATED
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues................. $26,262 $1,505 $(1,473) (a) $26,294
Cost of revenues......... 19,894 471 (1,473 (a) 18,892
------- ------ ------- -------
Gross profit............. 6,368 1,034 7,402
Selling, general and
administrative
expenses................ 5,060 335 21 (b) 5,416
------- ------ ------- -------
Income from
operations.............. 1,308 699 (21) 1,986
Other income (expense),
net..................... 75 46 -- 121
------- ------ ------- -------
Income before income
taxes................... 1,383 745 (21) 2,107
Income taxes............. -- 12 520 (c) 532
------- ------ ------- -------
Net income............... $ 1,383 $ 733 $ (541) $ 1,575
======= ====== ======= =======
Net income per
share(d)................ $ 0.06
=======
Pro forma weighted
average common shares
outstanding............. 25,197
=======
</TABLE>
- -------------------------
(a) Reflects the elimination of the intercompany transactions between the
Company and Syntel India.
(b) Reflects the compensation component associated with the granting of stock
options on April 1, 1997.
(c) Reflects the provision for federal and state income taxes at the effective
income tax rate as if the Company had been taxed as a C corporation.
The tax provision was computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
<S> <C> <C>
Statutory U.S. federal income tax rate................. 34.0% 34.0%
State income taxes, net of federal tax benefit......... 2.7 2.4
Tax rate impact from foreign earnings, exempt from
foreign taxes........................................ (8.6) (11.3)
Other.................................................. 0.3 0.1
----- ------
28.4% 25.2%
===== ======
</TABLE>
(d) Earnings per share are based on weighted average common shares outstanding
and the impact of unexercised stock options using the treasury stock method
computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Weighted average common shares outstanding........... 25,000 25,000
Dilutive effect assuming exercise of certain stock
options............................................ 135 197
------- -------
Weighted average common shares outstanding........... 25,135 25,197
======= =======
</TABLE>
F-4
<PAGE> 61
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Syntel, Inc.:
We have audited the accompanying balance sheet of Syntel, Inc. as of
December 31, 1996 and 1995, and the related statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Syntel, Inc. as of December
31, 1996 and 1995, and the results of its operations and cash flows for the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Detroit, Michigan
February 28, 1997
F-5
<PAGE> 62
SYNTEL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 7,681,748 $ 5,277,388 $ 3,942,024
Accounts receivable, net......................... 16,838,704 20,588,748 20,741,395
Advance billings................................. -- -- 3,370,334
Employee and other advances...................... 316,614 332,236 982,211
Deposits......................................... 90,812 90,101 93,560
----------- ----------- -----------
Total current assets........................ 24,927,878 26,288,473 29,129,524
Property and equipment................................ 4,413,299 6,001,087 6,276,614
Less accumulated depreciation.................... 1,463,390 2,640,313 3,002,676
----------- ----------- -----------
Property and equipment, net................. 2,949,909 3,360,774 3,273,938
----------- ----------- -----------
$27,877,787 $29,649,247 $32,403,462
=========== =========== ===========
LIABILITIES
Current liabilities:
Accounts payable................................. $ 1,084,574 $ 1,140,510 $ 938,004
Accrued payroll and related costs................ 7,698,352 8,019,218 5,162,630
Other accrued liabilities........................ 1,360,524 2,307,474 3,286,405
Dividends payable................................ -- 7,000,000 7,000,000
Deferred revenue................................. -- 1,276,910 4,728,712
----------- ----------- -----------
Total current liabilities................... 10,143,450 19,744,112 21,115,751
SHAREHOLDERS' EQUITY
Common stock, $1 par value per share, 1,000 shares
authorized, issued and outstanding.................. 1,000 1,000 1,000
Retained earnings..................................... 17,733,337 9,904,135 11,286,711
----------- ----------- -----------
Total shareholders' equity.................. 17,734,337 9,905,135 11,287,711
----------- ----------- -----------
$27,877,787 $29,649,247 $32,403,462
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 63
SYNTEL, INC.
STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues....................... $67,247,016 $90,325,724 $92,236,968 $21,861,696 $26,262,190
Cost of revenues............... 55,936,542 71,537,550 69,783,193 16,746,014 19,893,773
----------- ----------- ----------- ----------- -----------
Gross profit................... 11,310,474 18,788,174 22,453,775 5,115,682 6,368,417
Selling, general and
administrative expenses...... 8,209,000 13,309,366 18,260,622 4,075,240 5,060,488
----------- ----------- ----------- ----------- -----------
Income from operations......... 3,101,474 5,478,808 4,193,153 1,040,442 1,307,929
Other income (expense), net.... (68,966) 186,286 299,122 124,029 74,647
----------- ----------- ----------- ----------- -----------
Income before income taxes..... 3,032,508 5,665,094 4,492,275 1,164,471 1,382,576
State income taxes............. -- 427,877 321,477 -- --
----------- ----------- ----------- ----------- -----------
Net income................ $ 3,032,508 $ 5,237,217 $ 4,170,798 $ 1,164,471 $ 1,382,576
=========== =========== =========== =========== ===========
Pro forma income data
(unaudited)(1):
Income before income taxes..... $ 4,492,275 $ 1,382,576
Pro forma income taxes......... 1,717,000 529,000
----------- -----------
Pro forma net income......... $ 2,775,275 $ 853,576
=========== ===========
Pro forma net income per
share........................ $ 0.13 $ 0.04
=========== ===========
Pro forma weighted average
common shares outstanding.... 22,134,830 22,197,489
=========== ===========
</TABLE>
- -------------------------
(1) Presentation as if the Company was a C corporation during the periods
presented.
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 64
SYNTEL, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1994, 1995 AND 1996
AND FOR THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK
--------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ ----------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994....................... 1,000 $1,000 $ 9,463,612 $ 9,464,612
Net income..................................... -- -- 3,032,508 3,032,508
----- ------ ----------- -----------
Balance, December 31, 1994..................... 1,000 1,000 12,496,120 12,497,120
Net income..................................... -- -- 5,237,217 5,237,217
----- ------ ----------- -----------
Balance, December 31, 1995..................... 1,000 1,000 17,733,337 17,734,337
Net income..................................... -- -- 4,170,798 4,170,798
Dividends declared............................. -- -- 12,000,000 12,000,000
----- ------ ----------- -----------
Balance, December 31, 1996..................... 1,000 1,000 9,904,135 9,905,135
----- ------ ----------- -----------
Net income for three months ended March 31,
1997 (unaudited)............................. -- -- 1,382,576 1,382,576
----- ------ ----------- -----------
Balance, March 31, 1997 (unaudited)............ 1,000 $1,000 $11,286,711 $11,287,711
===== ====== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE> 65
SYNTEL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 3,032,508 $ 5,237,217 $ 4,170,798 $ 1,164,471 $ 1,382,576
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation..................... 231,524 904,084 1,176,923 266,052 362,363
Changes in assets and
liabilities:
Accounts receivable, net..... (5,518,029) 3,338,475 (3,750,044) 1,804,182 (829,427)
Advance billings............. -- -- -- -- (3,370,334)
Employee and other
advances................... (414,271) 658,041 (15,622) (109,727) 26,805
Deposits..................... (167,499) 88,332 711 (37,573) (3,459)
Accounts payable............. 1,310,076 (621,930) 55,936 (460,123) (202,506)
Accrued payroll and related
costs...................... 2,631,099 425,093 320,866 (1,484,618) (2,886,956)
Deferred revenue............. (766,856) 30,000 1,276,910 46,442 3,451,802
Other accrued liabilities.... 68,952 957,449 946,950 934,640 1,009,299
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities..................... 407,504 11,016,761 4,183,428 2,123,746 (1,059,837)
Cash flows used in investing activities,
property and equipment expenditures..... (574,168) (2,995,013) (1,587,788) (148,241) (275,527)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Net payments on bank line of credit... (60,000) (340,000) -- -- --
Dividend payments..................... -- -- (5,000,000) -- --
----------- ----------- ----------- ----------- -----------
Net cash used in financing
activities..................... (60,000) (340,000) (5,000,000) -- --
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................. (226,664) 7,681,748 (2,404,360) 1,975,505 (1,335,364)
Cash and cash equivalents, beginning of
year.................................... 226,664 -- 7,681,748 7,681,748 5,277,388
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of year.... -- $ 7,681,748 $ 5,277,388 $ 9,657,253 $ 3,942,024
=========== =========== =========== =========== ===========
Cash paid during the year for interest.... $ 69,918 $ 37,784 $ 928 -- --
=========== =========== =========== =========== ===========
Cash paid during the year for income
taxes................................... -- -- $ 723,003 -- --
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE> 66
SYNTEL, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS:
Syntel, Inc. (the "Company") provides professional information technology
staffing and outsourcing services. The Company provides services to customers
primarily in the financial, manufacturing, transportation, retail and
information/communications industries, as well as to government entities. While
contracts with customers are generally terminable by the customer without
penalty, the Company's largest customer is currently under contract. In
addition, the Company has a history of repeat business among its customer base.
During the year ended December 31, 1994, 1995 and 1996, there were sales to
two major customers that exceeded 10 percent of total revenues. Sales to these
customers approximated: 1994 Customer A, $12,018,000 (17.9 percent), Customer B,
$14,202,000 (21.1 percent); 1995 Customer A, $34,084,000 (37.7 percent),
Customer B, $12,455,000 (13.8 percent) and 1996 Customer A, $30,980,000 (33.6
percent), Customer B, $10,757,000 (11.7 percent). At December 31, 1995 and 1996,
approximately 31 and 30 percent of accounts receivable, net were from these two
customers, respectively. Although management does not believe the Company will
lose a significant customer, the loss of any significant customer could have a
material adverse affect on the Company's business, operating results and
financial condition.
2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES:
a. Interim Financial Information: The unaudited interim financial
statements as of March 31, 1997 and 1996 and for each of the three months then
ended include, in the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the Company's
financial position, results of operations, and cash flows. Operating results for
the three months ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997.
b. Revenue Recognition: The Company recognizes revenues from time and
material contracts as services are rendered and costs are incurred.
Revenues from fixed-price contracts are recognized on the
percentage-of-completion method, measured by the percentage of cost incurred to
date to the estimated total cost at completion. The cumulative impact of any
revision in estimates of the percentage complete or losses on contracts is
reflected in the year in which the changes become known.
c. Cash and Cash Equivalents: For the purpose of reporting cash and cash
equivalents, the Company considers all liquid investments purchased with a
maturity of three months or less to be cash equivalents.
d. Financial Instruments: The carrying amount of cash equivalents, trade
receivables, trade payables and line-of-credit borrowings approximate fair value
because of the short-term nature of these instruments.
e. Property and Equipment: Property and equipment are stated at cost.
Maintenance and repairs are charged to expense when incurred. Depreciation is
computed primarily using the straight-line method over the estimated useful
lives of the assets ranging from three to five years.
Upon sale or retirement, the cost of assets and related accumulated
depreciation is eliminated from the respective accounts, and the resulting gain
or loss is included in operations.
f. Income Taxes: In January 1990 the Company elected to be taxed as an S
Corporation under Section 1361 of the Internal Revenue Code. Accordingly,
federal and certain state income taxes are not
F-10
<PAGE> 67
SYNTEL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
reflected in the financial statements since the tax attributes of the Company
flow directly to the shareholders and are included in their individual tax
returns.
g. Estimates: Use of estimates, as determined by management, are required
in the preparation of financial statements in conformity with generally accepted
accounting principles. Actual results could differ from estimates.
3. PROPERTY AND EQUIPMENT:
Cost of property and equipment at December 31, 1995 and 1996 is summarized
as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Computer equipment and software............................. $2,613,672 $3,508,776
Furniture and equipment..................................... 1,718,814 2,462,341
Leasehold improvements...................................... 80,813 29,970
---------- ----------
4,413,299 6,001,087
Accumulated depreciation.................................... 1,463,390 2,640,313
---------- ----------
$2,949,909 $3,360,774
========== ==========
</TABLE>
4. LINE OF CREDIT:
The Company has a line of credit with a bank which will expire August 31,
1997 which provides for borrowings up to the lesser of $20,000,000 or 80 percent
of certain accounts receivable. Borrowings under the line of credit are
collateralized by accounts receivable. Interest is computed on the basis of the
Company's option at (i) the Eurodollar Rate plus the applicable Eurodollar
Margin, (ii) the bank's prime rate or (iii) a negotiated rate, as defined. The
Company also has a line of credit with a bank which will expire August 31, 1997
which provides for borrowings up to $10,000,000 to finance acquisitions.
5. LEASES:
The Company leases certain facilities and equipment under operating leases.
Current operating lease obligations are expected to be renewed or replaced upon
expiration. Future minimum payments under noncancelable leases as of December
31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................ $1,571,567
1998........................................................ 1,541,580
1999........................................................ 851,112
2000........................................................ 539,440
2001........................................................ 445,118
----------
$4,948,817
==========
</TABLE>
Total rent expense charged to operations amounted to approximately
$385,000, $1,207,000 and $1,342,000 for the year ended December 31, 1994, 1995
and 1996, respectively.
6. RELATED PARTY:
The Company purchases services from Syntel Software Private Limited, an
affiliated company through common ownership located in Mumbai, India ("Syntel
India"). The Company purchased approximately $1,410,000, $2,674,000, $4,066,000
of services from Syntel India for the year ended December 31, 1994, 1995 and
1996, respectively. The amount payable to this affiliate at December 31, 1996
was $179,695. There were no amounts due to the affiliate at December 31, 1995.
F-11
<PAGE> 68
SYNTEL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. SUBSEQUENT EVENTS (UNAUDITED):
The Company is in the process of preparing an initial public offering
registration statement for the purpose of selling common stock securities.
In connection with the offering, related transactions will include the
acquisition of Syntel India, adoption of incentive stock plans (which will be
accounted for in accordance with APB No. 25 with appropriate disclosures being
made in accordance with SFAS No. 123) and the termination of the Company's S
corporation status.
F-12
<PAGE> 69
<TABLE>
<S> <C>
RAJKAMAL R. SHAH RAJKAMAL SHAH & CO.
B. Com. (Hons.) LL.B., F.C.A. CHARTERED ACCOUNTANTS
- ------------------------------------------------------------ 311 BHAVESHWAR MARKET,
M. G. ROAD GHATKOPAR (EAST),
BOMBAY-400 077,
Tel.: 512 72 56
Tel./Fax: 514 37 28
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Syntel Software Private Limited:
We have audited the accompanying balance sheet of Syntel Software Private
Limited as on December 31, 1996 and the related statements of income,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Syntel Software Private
Limited as on December 31, 1996 and the results of its operations and cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
For Rajkamal Shah & Co.
Rajkamal Shah
Proprietor,
Mumbai, India
March 20, 1997
F-13
<PAGE> 70
SYNTEL SOFTWARE PRIVATE LIMITED
BALANCE SHEET
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $2,055,193 $1,462,883
Accounts receivable................................ 343,038 1,228,665
Employee and other advances........................ 165,084 224,626
Deposits and interest accrued...................... 17,893 166,565
---------- ----------
Total current assets............................. 2,581,208 3,082,739
Property and equipment: 1,549,771 1,905,387
Less accumulated depreciation...................... 607,579 699,137
---------- ----------
Property and equipment, net...................... 942,192 1,206,250
---------- ----------
$3,523,400 $4,288,989
========== ==========
LIABILITIES
Current liabilities:
Accounts payable................................... $ 242,715 $ 277,254
Accrued income tax................................. 30,960 42,026
Advance from customer.............................. 9,771 --
---------- ----------
Total current liabilities........................ 283,446 319,280
STOCKHOLDERS' EQUITY
Common stock, 500,000 shares issued, subscribed and paid
up.................................................... 160,411 160,411
Retained earnings....................................... 3,225,928 3,959,275
Accumulated translation adjustments..................... (146,385) (149,977)
---------- ----------
Total stockholders' equity......................... 3,239,954 3,969,709
---------- ----------
$3,523,400 $4,288,989
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE> 71
SYNTEL SOFTWARE PRIVATE LIMITED
STATEMENT OF INCOME
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Revenues.................................. $4,158,719 $1,505,144
Cost of revenues.......................... 1,366,191 470,587
---------- ----------
Gross profit.............................. 2,792,528 1,034,557
Selling, general and administrative
expenses................................ 1,010,078 335,429
---------- ----------
Income from operations.................... 1,782,450 699,128
Other income (expense):
Interest income...................... 71,200 23,403
Miscellaneous income (expense)....... (2,836) 22,433
Income tax expense................... (28,888) (11,617)
Provision for doubtful loan.......... (217,681) --
---------- ----------
Net income........................... $1,604,245 $ 733,347
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE> 72
SYNTEL SOFTWARE PRIVATE LIMITED
STATEMENT OF STOCKHOLDERS' EQUITY
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996....................... 500,000 $160,411 $1,474,590 $1,635,001
Net income..................................... -- -- 1,604,245 1,604,245
Translation adjustments........................ -- -- 708 708
------- -------- ---------- ----------
Balance, December 31, 1996..................... 500,000 $160,411 $3,079,543 $3,239,954
======= ======== ========== ==========
Net income for three months ended March 31,
1997......................................... -- -- $ 733,347 $ 733,347
Translation adjustments........................ -- -- (3,592) (3,592)
------- -------- ---------- ----------
Balance, March 31, 1997 (unaudited)............ 500,000 $160,411 $3,809,298 $3,969,709
======= ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE> 73
SYNTEL SOFTWARE PRIVATE LIMITED
STATEMENT OF CASH FLOWS
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................... $1,604,245 $ 733,347
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation charges, net............... 264,590 91,558
Changes in assets and liabilities:
Accounts receivable................ (343,038) (885,627)
Employee and other advances, net... (6,464) (59,542)
Deposits and interest accrued...... 1,016 (148,672)
Accounts payable................... 193,062 34,539
Accrued income tax................. 29,478 11,066
Advance from customer.............. 4,299 (9,771)
Translation adjustment............................ 708 (3,592)
---------- ----------
Net cash provided by operating activities:........ 1,747,896 (236,694)
Cash flow used in investing activities, purchases
of property and equipment....................... (549,718) (355,616)
---------- ----------
Net increase in cash.............................. 1,198,178 (592,310)
Cash and cash equivalents, beginning of year...... 857,015 2,055,193
---------- ----------
Cash and cash equivalents, end of period.......... $2,055,193 $1,462,883
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE> 74
SYNTEL SOFTWARE PRIVATE LIMITED
NOTES FORMING PART OF ACCOUNTS AS ON DECEMBER 31, 1996
1. BUSINESS:
Syntel Software Private Limited ("Syntel India") is engaged in the business
of software development, maintenance, support, conversion and consultancy
services. Substantially all of the revenues of Syntel India, are attributable to
Syntel, Inc., an affiliated company through common ownership.
2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES:
a. The unaudited interim financial statements as of March 31, 1997 and 1996
and for each of the three months then ended include, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary to present fairly Syntel India's financial position, results of
operations, and cash flows. Operating results for the three months ended March
31, 1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997.
b. Syntel India's software development center is located in a free trade
zone in India. Syntel India is, therefore, entitled to claim tax holiday for a
period of five years from April 1, 1995 through March 31, 2000, in respect of
its export profits. Income Tax expenses in respect of income from non-export
activities is accounted as per Indian Income Tax Laws.
c. Revenue from software exports is recognized based on contractual
obligations and as services are rendered and approved by customers.
d. Depreciation is charged to revenue using straight line method over
estimated useful life of the assets as follows.
- Computer Equipment and Software -- 3 years
- Furniture and Fixture -- 7 years
- Transport Equipment -- 3 years
- Leasehold Improvement comprise capital expenditure on renovating
leasehold premises, and are amortized proportionately over extended
leasehold option period which is 10 years.
e. Property and equipments are stated at cost and do not include equipment
received from Syntel, Inc. for execution of projects on no charge basis which
amounted to US $315,536 as on December 31, 1996. Upon sale or retirement, the
cost of assets and related accumulated depreciation is eliminated from the
respective accounts, and resulting gain or loss is included in general expenses.
f. Income from software exports is accounted at exchange rate at which
remittances are received.
g. For the purpose of translation from functional currency (Indian Rupees)
to reporting currency the weighted average rate ($1.00 = Rs.36.59) is used for
translating revenues and expenses and the year end rate ($1.00 = Rs.35.82) is
used for translating assets and liabilities. The common stock and retained
earnings are translated at historical rates.
F-18
<PAGE> 75
SYNTEL SOFTWARE PRIVATE LIMITED
NOTES FORMING PART OF ACCOUNTS AS ON DECEMBER 31, 1996 -- (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Cost of property and equipment at December 31, 1996 is summarized as
follows:
<TABLE>
<CAPTION>
US$
----------
<S> <C>
Computer equipment and software............................. $ 574,268
Furniture and fixture and other equipment................... 667,463
Leasehold improvement....................................... 269,610
Transport equipment......................................... 38,430
----------
Total....................................................... 1,549,771
Accumulated depreciation.................................... 607,579
----------
Balance..................................................... $ 942,192
==========
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Syntel India exports software to Syntel, Inc., an affiliated company
through common ownership. The software exports to Syntel, Inc. for the year
ended December 31, 1996 amounted to US$4,065,514. The net amount receivable from
Syntel, Inc. in respect of software exports was US$179,695 as on December 31,
1996.
5. LEASES:
Syntel India has acquired premises measuring 1,919 square metres on leases
for a period of five years each, which are expected to be renewed upon
expiration, for further period of five years. Lease rental expenses charged to
operations amount to US$16,636 for the year ended December 31, 1996. The dates
of expiry of present leases are as follows.
<TABLE>
<CAPTION>
UNIT NO. AREA SQUARE METRES LEASE EXPIRY DATES
- -------- ------------------ ------------------
<C> <C> <C>
76A 320 October 14, 1997
76B 320 December 31, 1997
69 751 September 8, 1998
96 528 September 30, 1998
</TABLE>
6. Syntel India has paid contributions to the Employee Provident Fund amounting
to US$19,145 for the year ended December 31, 1996 into the Government Provident
Fund Account. Provision for the other retirement benefits are not yet applicable
to the company as per Indian Laws. The same will be provided out of revenue as
and when they become applicable.
F-19
<PAGE> 76
============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............... 3
Risk Factors..................... 7
Use of Proceeds.................. 14
Prior S Corporation Status and
Distribution................... 14
Dividend Policy.................. 15
Capitalization................... 16
Dilution......................... 17
Selected Financial Data.......... 18
Pro Forma Consolidated Statement
of Income Data................. 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 20
Business......................... 30
Management....................... 44
Certain Transactions............. 48
Principal Shareholders........... 49
Description of Capital Stock..... 50
Shares Eligible for Future
Sale........................... 52
Underwriting..................... 53
Legal Matters.................... 54
Experts.......................... 54
Additional Information........... 55
Index to Financial Statements.... F-1
</TABLE>
------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
============================================================
============================================================
3,000,000 SHARES
SYNTEL LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
HAMBRECHT & QUIST
PRUDENTIAL SECURITIES INCORPORATED
ROBERTSON, STEPHENS & COMPANY
, 1997
============================================================
<PAGE> 77
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses and costs (other than
underwriting discounts) expected to be incurred by the Company in connection
with the issuance and distribution of the securities being registered under this
registration statement. Except for the Securities and Exchange Commission, NASD
and Nasdaq fees, all expenses have been estimated and are subject to future
contingencies.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 11,500
NASD Fee.................................................... 4,295
Nasdaq National Market Listing Fee.......................... 50,000
Printing and engraving expenses............................. 175,000
Legal fees and expenses..................................... 135,000
Accounting fees and expenses................................ 100,000
Blue Sky fees and expenses.................................. 5,000
Transfer agent and registrar fees and expenses.............. 5,000
Miscellaneous............................................... 114,205
--------
Total.................................................. $600,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 561 through 571 of the Michigan Business Corporation Act (the
"MBCA") govern the indemnification of officers, directors and other persons. In
this regard, the MBCA provides for indemnification of directors and officers
acting in good faith and in a manner they reasonably believe to be in, or not
opposed to, the best interest of the Company or its shareholders (and, with
respect to a criminal proceeding, if they have no reasonable cause to believe
their conduct to be unlawful). Such indemnification may be made against (a)
expenses (including attorneys' fees), judgments, penalties, fines and amounts
paid in settlement actually and reasonably incurred in connection with any
threatened, pending or completed action, suit or proceeding (other than an
action by, or in the right of, the Company) arising by reason of the fact that
they were serving as a director, officer, employee or agent of the Company (or
some other entity at the Company's request), and (b) expenses (including
attorneys' fees) and amounts paid in settlement actually and reasonably incurred
in connection with a threatened, pending or completed action or suit by, or in
the right of, the Company, unless the director or officer is found liable to the
Company and an appropriate court does not determine that he or she is
nevertheless fairly and reasonably entitled to indemnification. The MBCA
requires indemnification for expenses to the extent that a director or officer
is successful in defending against any such action, suit or proceeding, and
otherwise required in general that the indemnification provided for in (a) and
(b) above be made only on a determination by a majority vote of a quorum of the
Board of Directors comprised of members who were not parties to or threatened to
be made parties to such action. In certain circumstances, the MBCA further
permits advances to cover such expenses before a final determination that
indemnification is permissible, upon receipt of (i) a written standard by the
director or officer of his or her good faith belief that he or she has met the
applicable affirmation of conduct set forth in the MBCA, and (ii) a written
undertaking by or on behalf of the director or officer to repay such amounts
unless it shall ultimately be determined that he or she is entitled to
indemnification and a determination that the facts then known to those making
the advance would not preclude indemnification. The Company's Articles of
Incorporation provide the same indemnification rights at the MBCA.
Subject to the exceptions recited in the following sentence, the Company's
Articles of Incorporation provide that no director shall be personally liable to
the Company or its shareholders for damages for breach of his or her duty as a
director. Such exculpatory language does not, however, eliminate or
II-1
<PAGE> 78
limit the liability of a director for (a) breach of the duty of loyalty, (b)
acts or omissions that are not in good faith or involve intentional misconduct
or a knowing violation of the law, (c) certain other violations of the Michigan
Business Corporation Act, or (d) responsibility in respect of any transaction
from which the director has derived an improper personal benefit.
The MBCA permits the Company to purchase insurance on behalf of its
directors and officers against liabilities arising out of their positions with
the Company, whether or not such liabilities would be within the indemnification
provisions of the MBCA. Under an insurance policy maintained by the Company, the
directors and officers of the Company are insured, within the limits and subject
to the limitations of the policy, against certain expenses in connection with
the defense of certain claims, actions, suits or proceedings, and certain
liabilities which might be imposed as a result of such claims, actions, suits or
proceedings, which may be brought against them by reason of being or having
served as directors and officers of the Company of certain other entities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to officers and directors pursuant to the foregoing provisions,
the Company has been informed that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
The Underwriting Agreement provides for indemnification of directors and
officers of the Company by the Underwriters against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company granted options to purchase 140,000 shares of Common Stock at
an exercise price of $2.00 per share on April 1, 1997, and options to purchase
468,750 shares at an exercise price of $7.00 per share on June 2, 1997, to its
employees under the Stock Option Plan. The Company relied upon Rule 701 under
the Securities Act of 1933, as amended, in issuing such options.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1 *Underwriting Agreement.
3.1 Restated Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.2 *Specimen Stock Certificate representing the Common Stock.
5.1 *Opinion of Dykema Gossett PLLC regarding the legality of
the securities being registered.
10.1 Credit Authorization Agreement, dated September 13, 1996,
between the Company and NBD Bank.
10.2 Letter Agreement between the Company and NBD Bank dated
March 11, 1997 amending Credit Authorization Agreement.
10.3 Letter Agreement between the Company and NBD Bank dated
March 25, 1997 amending Credit Authorization Agreement.
10.4 Form of Stock Purchase Agreement between the Company and the
stockholders of Syntel Software Private Limited.
10.5 Lease, dated August 22, 1996, between WRC Properties, Inc.
and the Company.
10.6 Lease Agreement, dated November 30, 1994, between the
Company and NationsBank of North Carolina, N.A., as Trustee
for the Public Employees Retirement System of Ohio.
10.7 Lease Agreement, dated June 7, 1995, between the Company and
Office Court Development Ltd. Co., a New Mexico General
Partnership.
</TABLE>
II-2
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.8 Indentures of Lease entered into between the President of
India and Syntel Software Pvt. Ltd. on the dates and for the
square footage indicated below for the Mumbai Global
Development Center:
- October 11, 1993; 7,825 sq. ft.
- January 18, 1993; 3,443 sq. ft.
- November 2, 1992; 3,443 sq. ft.
- October 11, 1993; 5,502 sq. ft.
10.9 Rental Agreement, dated February 24, 1997, between Syntel
Software Pvt. Ltd. and the Landlords for the Chennai Global
Development Center.
10.10 **Agreement for Software Programming Services, dated as of
September 6, 1994, between the Company and American Home
Assurance Company.
10.11 **PeopleNet Supplier Contract, effective as of April 1,
1996, between the Company and Geometric Results,
Incorporated (d/b/a "PeopleNet").
10.12 Form of 1997 Stock Option and Incentive Plan.
10.13 Company Employee Stock Purchase Plan.
10.14 Employment Agreement dated June 5, 1997, between the Company
and Bharat Desai.
10.15 Employment Agreement dated June 5, 1997, between the Company
and Neerja Sethi.
10.16 Form of S Corporation Revocation, Tax Allocation and
Indemnification Agreement (the "Agreement"), between the
Company and the shareholders of the Company on the date of
the Agreement.
23.1 Consent of Coopers & Lybrand, L.L.P.
23.2 Consent of Rajkamal Shah & Co.
23.3 Consent of Dykema Gossett PLLC (contained in the opinion
filed as Exhibit 5.1 hereto).
23.4 Consent of Paritosh Choksi.
23.5 Consent of Douglas Van Houweling.
24.1 Powers of Attorney (contained on the signature page hereto).
27 Financial Data Schedule.
</TABLE>
- ------------------------------
* To be filed by amendment.
** Portions of this document have been redacted pursuant to the Company's
request to the Secretary of the Commission for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933, as amended.
(B) FINANCIAL STATEMENT SCHEDULES:
The following financial statement schedule is included in Part II of this
Registration Statement and should be read in conjunction with the Financial
Statements and Notes thereto included elsewhere herein:
Schedule II -- Valuation and Qualifying Account and Reserves
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense any action, suit
or proceeding) is
II-3
<PAGE> 80
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser, (2) that for purposes
of determining any liability under the Securities Act, the information omitted
from the form of prospectus filed as part of a registration statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective; and (3) that for the purpose of determining any liability
under the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Troy,
State of Michigan, on June 6, 1997.
SYNTEL, INC.
By: /s/ BHARAT DESAI
------------------------------------
Bharat Desai, President
POWER OF ATTORNEY
Each of the undersigned whose signature appears below hereby constitutes
and appoints Bharat Desai, John Andary and Daniel Moore, and each of them acting
alone, his or her true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on June 6, 1997.
<TABLE>
<CAPTION>
TITLE
-----------------------------------------------------
<S> <C>
/s/ BHARAT DESAI President and Director
- ----------------------------------------------------- (principal executive officer)
Bharat Desai
/s/ NEERJA SETHI Vice President and Director
- -----------------------------------------------------
Neerja Sethi
/s/ JOHN ANDARY Chief Financial Officer and Treasurer
- ----------------------------------------------------- (principal financial and principal accounting
John Andary officer)
</TABLE>
II-5
<PAGE> 82
In connection with our audits of the financial statements of Syntel, Inc.
as of December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996, which financial statements are included in the
Prospectus, we have also audited the financial statement schedule listed in Item
II herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND, L.L.P.
Detroit, Michigan
February 28, 1997
<PAGE> 83
SYNTEL, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------- ---------- ---------- ---------- ----------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for possible losses on accounts
receivable............................ $112,000 $416,290 $115,497 $412,793
======== ======== ======== ========
Year ended December 31, 1995:
Allowance for possible losses on accounts
receivable............................ $112,000 $ -- $ -- $112,000
======== ======== ======== ========
Year ended December 31, 1994:
Allowance for possible losses on accounts
receivable............................ $82,000 $ 30,000 $ -- $112,000
======== ======== ======== ========
</TABLE>
<PAGE> 1
C&S 510 (Rev. 7/96) EXHIBIT 3.1
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
Date Received (FOR BUREAU USE ONLY)
Name
D. Richard McDonald - Dykema Gossett PLLC
- ----------------------------------------------
Address
Suite 300 - 1577 North Woodward Avenue
- ----------------------------------------------
City State Zip Code
Bloomfield Hills Michigan 48304 EFFECTIVE DATE:
- ----------------------------------------------
Document will be returned to the name and address you enter above
CID Number: 202 - 412
---------
RESTATED ARTICLES OF INCORPORATION
For use by domestic profit corporations
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following Articles:
1. The present name of the corporation is: Syntel, Inc.
2. The corporation identification number
(CID) assigned by the Bureau is: 202-412
3. All former names of the corporation are: Systems International, Inc.
4. The date of filing the original
Articles of Incorporation was: April 15, 1980.
The following Restated Articles of Incorporation supersede the Articles of
Incorporation as amended and shall be the Articles of Incorporation for the
corporation:
ARTICLE I
The name of the corporation is Syntel, Inc.
ARTICLE II
The purposes for which the corporation is organized is to engage in any
activity within the purposes for which corporations may be organized under the
Business Corporation Act of Michigan, as it exists on the date hereof and as it
may be amended from time to time hereafter (the "Michigan Business Corporation
Act").
<PAGE> 2
ARTICLE III
The total authorized capital stock of the corporation is as follows:
(i) 40,000,000 shares of Common Stock; and
(ii) 5,000,000 shares of Preferred Stock.
A statement of the designations, relative rights, preferences and
limitations of the shares of each class is as follows:
Preferred Stock
Subject to the limitations and restrictions set forth in this Article III,
and without action or approval by the shareholders, the Board of Directors is
authorized and empowered at any time, and from time to time, to designate and
issue any authorized and unissued shares of Preferred Stock (whether or not
previously designated as shares of a particular series, and including Preferred
Stock of any series issued and thereafter acquired by the corporation) as
shares of one or more series, hereby or hereafter to be designated. Each
different series of Preferred Stock may vary as to dividend rate, redemption
price, liquidation price, voting rights and conversion rights, if any, all of
which shall be fixed as hereinafter provided. Each series of Preferred Stock
issued hereunder shall be so designated as to distinguish the shares thereof
from the shares of the other series and classes. All shares of Preferred Stock
of any one series shall be alike in every particular.
The rights, qualifications, limitations or restrictions of each series of
Preferred Stock shall be as stated and expressed in the resolution or
resolutions adopted by the Board of Directors which provides for the issuance
of such series, which resolutions shall determine, fix or alter the following:
(1) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board of
Directors in creating such series) be increased or decreased (but not
below the number of shares then outstanding) from time to time by action
of the Board of Directors;
(2) The rate of the annual dividends thereon and the relation which such
dividends shall bear to the dividends payable on any other class of
capital stock or on any other series of Preferred Stock, the terms and
conditions upon which and the periods in respect of which dividends shall
be payable, whether and upon what conditions such dividends shall be
cumulative and if cumulative, the date or dates from which dividends
shall accumulate;
(3) The amount per share, if any, which the holders of Preferred Stock of
such series shall be entitled to receive, in addition to any dividends
accrued and unpaid thereon, (a) upon the redemption thereof, plus the
premium payable upon redemption, if any; or (b) upon the
2
<PAGE> 3
voluntary liquidation, dissolution or winding up of the corporation; or
(c) upon the involuntary liquidation, dissolution or winding up of the
corporation;
(4) The conversion or exchange rights, if any, of such series, including
without limitation, the price or prices, rate or rates, provisions for
the adjustment thereof (including provisions for protection against the
dilution or impairment of such rights), and all other terms and
conditions upon which Preferred Stock constituting such series may be
convertible into, or exchangeable for shares of any other class or
classes or series;
(5) Whether the shares of such series shall be redeemable, and, if
redeemable, whether redeemable for cash, property or rights, including
securities of any other corporation, at the option of either the holder
or the corporation or upon the happening of a specified event, the
limitations and restrictions with respect to such redemption, the time or
times when, the price or prices or rate or rates at which, the
adjustments with which and the manner in which such shares shall be
redeemable, including the manner of selecting shares of such series for
redemption if less than all shares are to be redeemed;
(6) Whether the shares of such series shall be subject to the operation
of a purchase, retirement, or sinking fund, and, if so, whether and upon
what conditions such purchase, retirement or sinking fund shall be
cumulative or noncumulative, the extent to which and the manner in which
such fund shall be applied to the purchase or redemption of the shares of
such series for retirement or to other corporate purposes and the terms
and provisions relative to the operation thereof;
(7) The voting rights per share, if any, of each such series, and whether
and under what conditions the shares of such series (alone or together
with the shares of one or more other series) shall be entitled to vote
separately as a single class;
(8) Whether the issuance of any additional shares of such series, or of
any shares of any other series shall be subject to restrictions as to
issuance or as to the power, preferences or rights of any such other
series; and
(9) Any other preferences, privileges and powers and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of such series, as the Board of Directors may
deem advisable and as shall not be inconsistent with the provisions of
these Articles of Incorporation.
Any resolution of the Board of Directors establishing and designating a
series of Preferred Stock and fixing and determining the relevant rights and
preferences thereof shall be appropriately filed with the State of Michigan as
an amendment to the Articles of Incorporation.
3
<PAGE> 4
Common Stock
None of the Common Stock shall be entitled to any preferences, and each
share of Common Stock shall be equal to every other share of such class of
stock in every respect.
After payment or declaration of full cumulative dividends on all shares
having priority over the Common Stock as to dividends, and after making all
sinking or retirement fund payments on all series of Preferred Stock and on any
other stock of the corporation ranking as to dividends or assets prior to the
Common Stock providing for the same, dividends on the Common Stock may be
declared and paid, but only when and as determined by the Board of Directors.
On any dissolution, liquidation or winding up of the corporation, after
there shall have been paid to or set aside for the holders of all shares having
priority over the Common Stock the full preferential amounts to which they are
respectively entitled, the holders of the Common Stock shall be entitled to
receive pro rata all the remaining assets of the corporation available for
distribution to its shareholders.
At all meetings of shareholders of the corporation, the holders of the
Common Stock shall be entitled to one vote for each share of Common Stock held
by them of record.
ARTICLE IV
The address and the mailing address of the current registered office of
the corporation is 2800 Livernois, Suite 400, Troy, Michigan 48083. The name
of the resident agent at the registered office is Daniel M. Moore.
ARTICLE V
When a compromise or arrangement or a plan or reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them,
a court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number, and
representing three-fourths in value of claims, of the creditors or class of
creditors, or if the shareholders or class of shareholders to be affected by
the proposed compromise or arrangement or a reorganization representing
three-fourths of such shares, agree to a compromise or arrangement or a
reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if
sanctioned by the court to which the application has been made, shall be
binding on all the creditors or class of creditors, or on all the shareholders
or class of shareholders and also on this corporation.
4
<PAGE> 5
ARTICLE VI
At the effective date of these Restated Articles of Incorporation, the
Board of Directors shall be divided into three classes as nearly equal in
number as possible, with the term of office of one class expiring each year.
The Board of Directors shall by resolution designate the directors for each
class, and directors in the first class (Class I) shall hold office for a term
expiring at the annual meeting of shareholders in 1998, directors of the second
class (Class II) shall hold office for a term expiring at the next succeeding
annual meeting, and directors of the third class (Class III) shall be elected
to hold office for a term expiring at the third succeeding annual meeting. The
number of directors which shall constitute the whole Board of Directors shall
be the number from time to time fixed by the Board of Directors, and such
number of directors so fixed may be changed only by the affirmative vote of at
least two-thirds of the directors then in office. During the intervals between
annual meetings of shareholders, any vacancy occurring in the Board of
Directors caused by resignation, removal, death or incapacity, and any newly
created directorships resulting from an increase in the number of directors,
shall be filled only by a majority vote of the directors then in office,
whether or not a quorum. Each director chosen to fill a vacancy shall hold
office for the unexpired term of the Class in which such vacancy occurred.
Each director chosen to fill a newly created directorship shall hold office
until the next election of the Class for which such director shall have been
chosen. When the number of directors is changed, any newly created
directorships or any decrease in directorships shall be so apportioned among
the Classes as to make all Classes as nearly equal in number as possible. No
decrease in the number of directors shall have the effect of shortening the
term of any incumbent director. Any director may be removed from office as a
director at any time, but only for cause, by the affirmative vote of
shareholders of record holding a majority of the outstanding shares of stock of
the corporation entitled to vote in elections of directors given at a meeting
of the shareholders specifically called for that purpose.
ARTICLE VII
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, provided that the foregoing shall not eliminate or limit
the liability of a director for any of the following: (i) a breach of the
director's duty of loyalty to the corporation or its shareholders; (ii) acts or
omissions not in good faith or that involve intentional misconduct or knowing
violation of law; (iii) a violation of Section 551(1) of the Michigan Business
Corporation Act; or (iv) any transaction from which the director derived an
improper personal benefit. If the Michigan Business Corporation Act hereafter
is amended to authorize the further elimination or limitation of the liability
of directors, then the liability of a director of the corporation, in addition
to the limitation on personal liability contained herein, shall be eliminated
or limited to the fullest extent permitted by the Michigan Business Corporation
Act as so amended. No amendment or repeal of this Article VIII shall apply to
or have any effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to the effective date of any such amendment or repeal.
5
<PAGE> 6
ARTICLE VIII
Directors and officers of the corporation shall be indemnified in
connection with any actual or threatened action or proceeding (including civil,
criminal, administrative or investigative proceedings) arising out of their
service to the corporation or to another organization at the corporation's
request, and shall be paid expenses incurred in defending any such proceeding
in advance of its final disposition to the fullest extent permitted by law.
Persons who are not directors or officers of the corporation may be similarly
indemnified in respect of such service to the extent authorized at any time by
the Board of Directors or the Bylaws of the corporation. The provisions of
this Article shall be applicable to actions or proceedings commenced after the
adoption hereof, whether arising from acts or omissions occurring before or
after the adoption hereof, and to persons who have ceased to be directors,
officers or employees, and shall inure to the benefit of their heirs, executors
and administrators. The right to indemnification and advancement of expenses
conferred hereunder shall be a contract right which may not be modified
retroactively without the written consent of the director or officer and shall
not be deemed exclusive of any other rights to indemnification or advancement
of expenses such person may have or to which such person may be entitled.
If a claim under this Article VIII is not paid in full by the corporation
with thirty days after a written claim has been received by the corporation,
the indemnitee may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit or in a suit brought by the corporation to recover advance, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such claim. In any action brought by the indemnitee to enforce a
right hereunder (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking has been tendered to the corporation) it shall be a
defense that, and in any action brought by the corporation to recover advances
the corporation shall be entitled to recover such advances if, the indemnitee
has not met the applicable standard of conduct set forth in the Michigan
Business Corporation Act. Neither the failure of the corporation (including
its Board of Directors, a committee of its Board of Directors, independent
legal counsel, or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Michigan Business Corporation Act, nor an actual
determination by the corporation (including its Board of Directors, a committee
of its Board of Directors, independent legal counsel or its shareholders) that
the indemnitee has not met such applicable standard of conduct, shall be a
defense to an action brought by the indemnitee or create a presumption that the
indemnitee has not met the applicable standard of conduct. In any action
brought by the indemnitee to enforce a right hereunder or by the corporation to
recover payments by the corporation of advances, the burden of proof shall be
on the corporation.
6
<PAGE> 7
ARTICLE IX
Notwithstanding any other provisions of these Restated Articles of
Incorporation, no amendment to these Restated Articles of Incorporation shall
amend or repeal any or all of the provisions of Articles VI, VII, VIII or this
Article IX of these Restated Articles of Incorporation, and the shareholders of
the corporation shall not have the right to amend or repeal any or all
provisions of the Bylaws of the corporation, unless so adopted by the
affirmative vote of the holders of not less than three-fourths of the
outstanding shares of stock of the corporation generally entitled to vote in
the election of directors, considered for purposes of this Article IX as a
class; provided, however, that in the event the Board of Directors of the
corporation shall recommend to the shareholders the adoption of any such
amendment of a nature described in this Article IX, the shareholders of record
holding a majority of the outstanding shares of stock of the corporation
entitled to vote in elections of directors, considered for the purposes of this
Article IX as a class, may amend, modify or repeal any or all of such
provisions.
* * * * * *
These Restated Articles of Incorporation were duly adopted on the ____ day
of ____, 1997, in accordance with the provisions of Section 642 of the Michigan
Business Corporation Act and were duly adopted by the written consent of all
the shareholders entitled to vote in accordance with Section 407(2).
Signed this ___ day of ____, 1997.
By: _______________________________
Name of person or organization Preparer's name and business
remitting fees: telephone number:
Dykema Gossett PLLC D. Richard McDonald
(248) 203-0859
7
BH\113306.1
ID\ DRM
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
SYNTEL, INC.
ARTICLE I
OFFICES
1.01 PRINCIPAL OFFICE. The principal office of the corporation shall be
at such place within or outside the State of Michigan as the Board of Directors
shall determine from time to time.
1.02 OTHER OFFICES. The corporation also may have offices at such other
places as the Board of Directors from time to time determines or the business of
the corporation requires.
ARTICLE II
SEAL
2.01 SEAL. The corporation may have a seal in such form as the Board of
Directors may from time to time determine. The seal may be used by causing it
or a facsimile to be impressed, affixed, reproduced or otherwise.
ARTICLE III
CAPITAL STOCK
3.01 ISSUANCE OF SHARES. The shares of capital stock of the corporation
shall be issued in such amounts, at such times, for such consideration and on
such terms and conditions as the Board shall deem advisable, subject to the
provisions of the Articles of Incorporation of the Corporation and the further
provisions of these Bylaws, and subject also to any requirements of the laws of
the State of Michigan.
3.02 CERTIFICATES FOR SHARES. The shares of the corporation shall be
represented by certificates signed by the Chairman of the Board, Vice Chairman
of the Board, President or a Vice President of the corporation, and may be
sealed with the seal of the corporation or a facsimile thereof. A certificate
representing shares shall state upon its face that the corporation is formed
under the laws of the State of Michigan, the name of the person to whom it is
issued, the number and class of shares, and the designation of the series, if
any, which the certificate represents and such other provisions as may be
required by the laws of the State of Michigan.
<PAGE> 2
3.03 TRANSFER OF SHARES. The shares of the capital stock of the
corporation are transferable only on the books of the corporation upon surrender
of the certificate therefor, properly endorsed for transfer, and the
presentation of such evidences of ownership and validity of the assignment as
the corporation may require.
3.04 REGISTERED SHAREHOLDERS. The corporation shall be entitled to treat
the person in whose name any share of stock is registered as the owner thereof
for purposes of dividends and other distributions in the course of business, or
in the course of recapitalization, consolidation, merger, reorganization, sale
of assets, liquidation or otherwise and for the purpose of votes, approvals and
consents by shareholders, and for the purpose of notices to shareholders, and
for all other purposes whatever, and shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any other
person, whether or not the corporation shall have notice thereof, save as
expressly required by the laws of the State of Michigan.
3.05 LOST OR DESTROYED CERTIFICATES. Upon the presentation to the
corporation of a proper affidavit attesting the loss, destruction or mutilation
of any certificate or certificates for shares of stock of the corporation, the
Board of Directors shall direct the issuance of a new certificate or
certificates to replace the certificates so alleged to be lost, destroyed or
mutilated. The Board of Directors may require as a condition precedent to the
issuance of new certificates a bond or agreement of indemnity, in such form and
amount and with such sureties, or without sureties, as the Board of Directors
may direct or approve.
ARTICLE IV
SHAREHOLDERS AND MEETINGS OF SHAREHOLDERS
4.01 PLACE OF MEETINGS. All meetings of shareholders shall be held at the
principal office of the corporation or at such other place as shall be
determined by the Board of Directors and stated in the notice of meeting.
4.02 ANNUAL MEETING. The annual meeting of the shareholders of the
corporation shall be held on the last Monday of the fifth calendar month after
the end of the corporation's fiscal year at 2 o'clock in the afternoon, or on
such other date and at such other time as may be determined by the Board of
Directors. Directors shall be elected at each annual meeting and such other
business transacted as may come before the meeting.
4.03 SPECIAL MEETINGS. Special meetings of shareholders may be called by
the Board of Directors, the Chairman of the Board (if such office is filled) or
the President. At any special meeting of shareholders, the business which may
be transacted shall be limited to that which was specifically stated in the
notice of such special meeting provided to shareholders.
2
<PAGE> 3
4.04 NOTICE OF MEETINGS. Except as otherwise provided by statute, written
notice of the time, place and purposes of a meeting of shareholders shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each shareholder of record entitled to vote at the meeting, either personally or
by mailing such notice to his last address as it appears on the books of the
corporation. No notice need be given of an adjourned meeting of the
shareholders provided the time and place to which such meeting is adjourned are
announced at the meeting at which the adjournment is taken and at the adjourned
meeting only such business is transacted as might have been transacted at the
original meeting. However, if after the adjournment a new record date is fixed
for the adjourned meeting a notice of the adjourned meeting shall be given to
each shareholder of record on the new record date entitled to notice as provided
in this Bylaw.
4.05 RECORD DATES. The Board of Directors may fix in advance a date as
the record date for the purpose of determining shareholders entitled to notice
of and to vote at a meeting of shareholders or an adjournment thereof, or to
express consent or to dissent from a proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of a dividend or
allotment of a right, or for the purpose of any other action. The date fixed
shall not be more than 60 nor less than 10 days before the date of the meeting,
nor more than 60 days before any other action. In such case only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to notice of and to vote at such meeting or adjournment thereof, or to
express consent or to dissent from such proposal, or to receive payment of such
dividend or to receive such allotment of rights, or to participate in any other
action, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation, or otherwise, after any such record date. Nothing in
this Bylaw shall affect the rights of a shareholder and his transferee or
transferor as between themselves.
4.06 LIST OF SHAREHOLDERS. The Secretary of the corporation or the agent
of the corporation having charge of the stock transfer records for shares of the
corporation shall make and certify a complete list of the shareholders entitled
to vote at a shareholders' meeting or any adjournment thereof. The list shall
be arranged alphabetically within each class and series, with the address of,
and the number of shares held by, each shareholder; be produced at the time and
place of the meeting; be subject to inspection by any shareholder during the
whole time of the meeting; and be prima facie evidence as to who are the
shareholders entitled to examine the list or vote at the meeting.
4.07 QUORUM. Unless a greater or lesser quorum is required in the
Articles of Incorporation or by the laws of the State of Michigan, the
shareholders present at a meeting in person or by proxy who, as of the record
date for such meeting, were holders of a majority of the outstanding shares of
the corporation entitled to vote at the meeting shall constitute a quorum at the
meeting. Whether or not a quorum is present, a meeting of shareholders may be
adjourned by a vote of the shares present in person or by proxy. When the
holders of a class or series of shares are entitled to vote separately on an
item of business, this Bylaw applies in determining the presence of a quorum of
such class or series for transaction of such item of business.
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4.08 PROXIES. A shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize other persons
to act for the shareholder by proxy. A proxy shall be signed by the shareholder
or the shareholder's authorized agent or representative and shall not be valid
after the expiration of three years from its date unless otherwise provided in
the proxy. A proxy is revocable at the pleasure of the shareholder executing it
except as otherwise provided by the laws of the State of Michigan.
4.09 VOTING. Each outstanding share is entitled to one vote on each
matter submitted to a vote, unless otherwise provided in the Articles of
Incorporation. Votes shall be cast in writing and signed by the shareholder or
the shareholder's proxy. When an action, other than the election of directors,
is to be taken by a vote of the shareholders, it shall be authorized by a
majority of the votes cast by the holders of shares entitled to vote thereon,
unless a greater vote is required by the Articles of Incorporation or by the
laws of the State of Michigan. Except as otherwise provided by the Articles of
Incorporation, directors shall be elected by a plurality of the votes cast at
any election.
4.10 MEETINGS OF SHAREHOLDERS.
(A) Annual Meetings of Shareholders. (1) Nominations of persons for
election to the Board of Directors of the corporation and the proposal of
business to be considered by the shareholders may be made at an annual meeting
of shareholders (a) pursuant to the corporation's notice of meeting, (b) by or
at the direction of the Board of Directors or (c) by any shareholder of the
corporation who was a shareholder of record at the time of giving of notice
provided for in this Bylaw, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Bylaw.
(2) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to clause (c) of paragraph (A)( 1) of
this Bylaw, the shareholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive offices of the corporation
not less than 60 days nor more than 90 days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date, notice by the shareholder to be
timely must be so delivered not earlier than the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or reelection as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (b) as to
any other business that the shareholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting
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and any material interest in such business of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is made; (c) as to the
shareholder giving the notice and beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such shareholder, as
they appear on the corporation's books, and of such beneficial owner and (ii)
the class and number of shares of the corporation which are owned beneficially
and of record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of
this Bylaw to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
shareholder's notice required by this Bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive offices of the
corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the corporation.
(B) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of shareholders at which directors are to be elected pursuant to the
corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) by any shareholder of the corporation who is a shareholder of
record at the time of giving of notice provided hereunder, who shall be entitled
to vote at the meeting and who complies with the notice procedures set forth in
this Bylaw. Nominations by shareholders of persons for election to the Board of
Directors may be made at such a special meeting of shareholders if the
shareholder's notice required by paragraph (A)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the corporation
not earlier than the 90th day prior to such special meeting and not later than
the close of business on the later of the 60th day prior to such special meeting
or the 10th day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(C) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this Bylaw shall be eligible to serve as directors
and only such business shall be conducted at a meeting of shareholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Bylaw. The Chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in this Bylaw and,
if any proposed nomination or business is not in compliance with this Bylaw, to
declare that such defective proposal shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news
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service or in a document publicly filed by the corporation with the Securities
and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange
Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a shareholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
Bylaw. Nothing in this Bylaw shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE V
DIRECTORS
5.01 NUMBER. The business and affairs of the corporation shall be managed
by a Board of not less than three nor more than twelve directors as shall be
fixed from time to time by the Board of Directors. The directors need not be
residents of Michigan or shareholders of the corporation.
5.02 ELECTION, RESIGNATION AND REMOVAL. Directors shall be elected at
each annual meeting of the shareholders, each to hold office for the term
specified in the Articles of Incorporation and until the director's successor is
elected and qualified, or until the director's resignation or removal. A
director may resign by written notice to the corporation. The resignation is
effective upon its receipt by the corporation or a subsequent time as set forth
in the notice of resignation. A director or the entire Board of Directors may
be removed, with cause, by the affirmative vote of the holders of a majority of
the outstanding shares entitled to vote at an election of directors given at a
meeting specifically called for that purpose.
5.03 VACANCIES. Vacancies in the Board of Directors occurring by reason
of death, resignation, removal, increase in the number of directors or otherwise
shall be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. Each person so elected
shall be a director for a term of office continuing until the next election of
the class of directors for which such director was elected.
5.04 ANNUAL MEETING. The Board of Directors shall meet each year
immediately after the annual meeting of the shareholders, or within three (3)
days of such time excluding Sundays and legal holidays if such later time is
deemed advisable, at the place where such meeting of the shareholders has been
held or such other place as the Board may determine, for the purpose of election
of officers and consideration of such business that may properly be brought
before the meeting; provided, that if less than a majority of the directors
appear for an annual meeting of the Board of Directors the holding of such
annual meeting shall not be required and the matters which might have been taken
up therein may be taken up at any later special or annual meeting, or by consent
resolution.
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5.05 REGULAR AND SPECIAL MEETINGS. Regular meetings of the Board of
Directors may be held at such times and places as the majority of the directors
may from time to time determine at a prior meeting or as shall be directed or
approved by the vote or written consent of all the directors. Special meetings
of the Board may be called by the Chairman of the Board (if such office is
filled) or the President and shall be called by the President or Secretary upon
the written request of any two directors.
5.06 NOTICES. No notice shall be required for annual or regular meetings
of the Board or for adjourned meetings, whether regular or special. Twenty-four
hours written notice shall be given for special meetings of the Board, and such
notice shall state the time, place and purpose or purposes of the meeting.
5.07 QUORUM. A majority of the Board of Directors then in office, or of
the members of a committee thereof, constitutes a quorum for the transaction of
business. The vote of a majority of the directors present at any meeting at
which there is a quorum shall be the acts of the Board or of the committee,
except as a larger vote may be required by the laws of the State of Michigan. A
member of the Board or of a committee designated by the Board may participate in
a meeting by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can communicate with
the other participants. Participation in a meeting in this manner constitutes
presence in person at the meeting.
5.08 EXECUTIVE AND OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board, appoint three or more
members of the Board as an executive committee to exercise all powers and
authorities of the Board in management of the business and affairs of the
corporation, except that the committee shall not have power or authority to (a)
amend the Articles of Incorporation; (b) adopt an agreement of merger or
consolidation; (c) recommend to shareholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets; (d) recommend to
shareholders a dissolution of the corporation or revocation of a dissolution;
(e) amend these Bylaws; (f) fill vacancies in the Board; or (g) unless expressly
authorized by the Board, declare a dividend or authorize the issuance of stock.
The Board of Directors from time to time may, by like resolution, appoint
such other committees of one or more directors to have such authority as shall
be specified by the Board in the resolution making such appointments. The Board
of Directors may designate one or more directors as alternate members of any
committee who may replace an absent or disqualified member at any meeting
thereof.
5.09 DISSENTS. A director who is present at a meeting of the Board of
Directors, or a committee thereof of which the director is a member, at which
action on a corporate matter is taken is presumed to have concurred in that
action unless the director's dissent is entered in the minutes of the meeting or
unless the director files a written dissent to the action with the person acting
as secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the corporation promptly after
the adjournment of the meeting. Such right
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to dissent does not apply to a director who voted in favor of such action.
A director who is absent from a meeting of the Board, or a committee thereof
of which the director is a member, at which any such action is taken is
presumed to have concurred in the action unless the director files a written
dissent with the Secretary of the corporation within a reasonable time after
the director has knowledge of the action.
5.10 COMPENSATION. Except as provided in the Articles of Incorporation,
the Board of Directors, by affirmative vote of a majority of directors in office
and irrespective of any personal interest of any of them, may establish
reasonable compensation of directors for services to the corporation as
directors or officers.
ARTICLE VI
NOTICES, WAIVERS OF NOTICE AND MANNER OF ACTING
6.01 NOTICES. All notices of meetings required to be given to
shareholders, directors or any committee of directors may be given by mail,
telecopy, telegram, radiogram or cablegram to any shareholder, director or
committee member at his last address as it appears on the books of the
corporation. Such notice shall be deemed to be given at the time when the same
shall be mailed or otherwise dispatched.
6.02 WAIVER OF NOTICE. Notice of the time, place and purpose of any
meeting of shareholders, directors or committee of directors may be waived by
telecopy, telegram, radiogram, cablegram or other writing, either before or
after the meeting, or in such other manner as may be permitted by the laws of
the State of Michigan. Attendance of a person at any meeting of shareholders,
in person or by proxy, or at any meeting of directors or of a committee of
directors, constitutes a waiver of notice of the meeting except when the person
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
6.03 ACTION WITHOUT A MEETING. Any action required or permitted at any
meeting of shareholders or directors or committee of directors may be taken
without a meeting, without prior notice and without a vote, if all of the
shareholders or directors or committee members entitled to vote thereon consent
thereto in writing.
ARTICLE VII
OFFICERS
7.01 NUMBER. The Board of Directors shall elect or appoint a President, a
Secretary and a Treasurer, and may select a Chairman of the Board, and one or
more Vice Presidents, Assistant
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Secretaries or Assistant Treasurers. Any two or more of the above offices,
except those of President and Vice President, may be held by the same person.
No officer shall execute, acknowledge or verify an instrument in more than one
capacity if the instrument is required by law, the Articles of Incorporation or
these Bylaws to be executed, acknowledged, or verified by one or more officers.
7.02 TERM OF OFFICE, RESIGNATION AND REMOVAL. An officer shall hold
office for the term for which he is elected or appointed and until his successor
is elected or appointed and qualified, or until his resignation or removal. An
officer may resign by written notice to the corporation. The resignation is
effective upon its receipt by the corporation or at a subsequent time specified
in the notice of resignation. An officer may be removed by the Board with or
without cause. The removal of an officer shall be without prejudice to his
contract rights, if any. The election or appointment of an officer does not of
itself create contract rights.
7.03 VACANCIES. The Board of Directors may fill any vacancies in any
office occurring for whatever reason.
7.04 AUTHORITY. All officers, employees and agents of the corporation
shall have such authority and perform such duties in the conduct and management
of the business and affairs of the corporation as may be designated by the Board
of Directors and these Bylaws.
ARTICLE VIII
DUTIES OF OFFICERS
8.01 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at
all meetings of the shareholders and of the Board of Directors at which the
Chairman is present. The Chairman shall be the Chief Executive Officer of the
corporation. The Chairman shall see that all orders and resolutions of the
Board are carried into effect and the Chairman shall have the general powers of
supervision and management usually vested in the chief executive officer of a
corporation, including the authority to vote all securities of other
corporations and organizations held by the corporation.
8.02 VICE CHAIRMAN. The Vice Chairman, if such position is filled, shall,
in the absence or disability of the Chairman, perform the duties and exercise
the powers of the Chairman of the Board and shall perform such other duties as
the Board of Directors or the Chairman of the Board may from time to time
prescribe.
8.03 PRESIDENT. The President shall be the Chief Operating Officer of the
corporation and shall have the general powers of supervision and management over
the day-to-day operations of the corporation. The President shall see that all
orders and resolutions of the Board are carried into effect and shall be ex
officio a member of all management committees. He may execute any
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documents in the name of the corporation and shall have such other powers and
duties as may be prescribed by the Board.
8.04 VICE PRESIDENTS. The Vice Presidents, in order of their seniority,
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties as the
Board of Directors or the President may from time to time prescribe.
8.05 SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and of shareholders and shall record all votes and minutes of all
proceedings in a book to be kept for that purpose, shall give or cause to be
given notice of all meetings of the shareholders and of the Board of Directors,
and shall keep in safe custody the seal of the corporation and, when authorized
by the Board, affix the same to any instrument requiring it, and when so affixed
it shall be attested by the signature of the Secretary, or by the signature of
the Treasurer or an Assistant Secretary. The Secretary may delegate any of the
duties, powers and authorities of the Secretary to one or more Assistant
Secretaries, unless such delegation is disapproved by the Board.
8.06 TREASURER. The Treasurer shall have the custody of the corporate
funds and securities; shall keep full and accurate accounts of receipts and
disbursements in books of the corporation; and shall deposit all moneys and
other valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors. The Treasurer
shall render to the President and directors, whenever they may require it, an
account of his or her transactions as Treasurer and of the financial condition
of the corporation. The Treasurer may delegate any of his or her duties, powers
and authorities to one or more Assistant Treasurers unless such delegation is
disapproved by the Board of Directors.
8.07 ASSISTANT SECRETARIES AND TREASURERS. The Assistant Secretaries, in
order of their seniority, shall perform the duties and exercise the powers and
authorities of the Secretary in case of the Secretary's absence or disability.
The Assistant Treasurers, in the order of their seniority, shall perform the
duties and exercise the powers and authorities of the Treasurer in case of the
Treasurer's absence or disability. The Assistant Secretaries and Assistant
Treasurers shall also perform such duties as may be delegated to them by the
Secretary and Treasurer, respectively, and also such duties as the Board of
Directors may prescribe.
ARTICLE IX
SPECIAL CORPORATE ACTS
9.01 ORDERS FOR PAYMENT OF MONEY. All checks, drafts, notes, bonds, bills
of exchange and orders for payment of money of the corporation shall be signed
by such officer or officers or such other person or persons as the Board of
Directors may from time to time designate.
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9.02 CONTRACTS AND CONVEYANCES. The Board of Directors of the corporation
may in any instance designate the officer and/or agent who shall have authority
to execute any contract, conveyance, mortgage or other instrument on behalf of
the corporation, or may ratify or confirm any execution. When the execution of
any instrument has been authorized without specification of the executing
officers or agents, the Chairman of the Board, the President or any Vice
President, and the Secretary or Assistant Secretary or Treasurer or Assistant
Treasurer, may execute the same in the name and on behalf of this corporation
and may affix the corporate seal thereto.
ARTICLE X
BOOKS AND RECORDS
10.01 MAINTENANCE OF BOOKS AND RECORDS. The proper officers and agents of
the corporation shall keep and maintain such books, records and accounts of the
corporation's business and affairs, minutes of the proceedings of its
shareholders, Board and committees, if any, and such stock ledgers and lists of
shareholders, as the Board of Directors shall deem advisable, and as shall be
required by the laws of the State of Michigan and other states or jurisdictions
empowered to impose such requirements. Books, records and minutes may be kept
within or without the State of Michigan in a place which the Board shall
determine.
10.02 RELIANCE ON BOOKS AND RECORDS. In discharging his or her duties, a
director or an officer of the corporation is entitled to rely on information,
opinions, reports, or statements, including financial statements and other
financial data, if prepared or presented by any of the following: (a) one or
more directors, officers, or employees of the corporation, or of a business
organization under joint control or common control whom the director or officer
reasonably believes to be reliable and competent in the matters presented, (b)
legal counsel, public accountants, engineers, or other persons as to matters the
director or officer reasonably believes are within the person's professional or
expert competence, or (c) a committee of the Board of Directors of which he or
she is not a member if the director or officer reasonably believes the Committee
merits confidence. A director or officer is not entitled to rely on such
information if he or she has knowledge concerning the matter in question that
makes such reliance unwarranted.
ARTICLE XI
INDEMNIFICATION
11.01 NON-DERIVATIVE ACTIONS. Subject to all of the other provisions of
this Article XI, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (other than an action by or in the
right of the corporation), by reason of the fact that the person is or was a
director or officer of the
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corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorneys' fees),
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and with respect to any criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the best interests of the corporation or its shareholders,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
11.02 DERIVATIVE ACTIONS. Subject to all of the provisions of this
Article XI, the corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that the person is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorneys' fees) and
amounts paid in settlement incurred by the person in connection with such action
or suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation or its
shareholders. However, indemnification shall not be made for any claim, issue
or matter in which such person has been found liable to the corporation unless
and only to the extent that the court in which such action or suit was brought
has determined upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnification for the expenses which the court considers proper.
11.03 EXPENSES OF SUCCESSFUL DEFENSE. To the extent that a person has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 11.01 or 11.02 of these Bylaws, or in defense
of any claim, issue or matter in the action, suit or proceeding, the person
shall be indemnified against expenses (including attorneys' fees) incurred by
such person in connection with the action, suit or proceeding and any action,
suit or proceeding brought to enforce the mandatory indemnification provided by
this Section 11.03.
11.04 DEFINITIONS. For the purposes of Sections 11.01 and 11.02, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
"serving at the request of the corporation" shall include any service as a
director, officer, employee, or agent of the corporation which imposes duties
on, or involves services by, the director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner the person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall
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be considered to have acted in a manner "not opposed to the best interests
of the corporation or its shareholders" as referred to in Sections 11.01 and
11.02.
11.05 CONTRACT RIGHT; LIMITATION ON INDEMNITY. The right to
indemnification conferred in this Article XI shall be a contract right, and
shall apply to services of a director or officer as an employee or agent of the
corporation as well as in such person's capacity as a director or officer.
Except as provided in Section 11.03 of these Bylaws, the corporation shall have
no obligations under this Article XI to indemnify any person in connection with
any proceeding, or part thereof, initiated by such person without authorization
by the Board of Directors.
11.06 DETERMINATION THAT INDEMNIFICATION IS PROPER. Any indemnification
under Section 11.01 or 11.02 of these Bylaws (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the person is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
Section 11.01 or 11.02, whichever is applicable. Such determination shall be
made in any of the following ways:
(i) By a majority vote of a quorum of the Board
consisting of directors who were not parties to such
action, suit or proceeding.
(ii) If the quorum described in clause (i) above is
not obtainable, then by a committee of directors who are
not parties to the action, suit or proceeding. The
committee shall consist of not less than two
disinterested directors.
(iii) By independent legal counsel in a written
opinion. Legal counsel for this purpose shall be chosen
by the Board or its committee prescribed in clauses (i)
or (ii), or if a quorum of the Board cannot be obtained
under clause (i) and a committee cannot be designated
under clause (ii), by the Board.
(iv) By the shareholders. Shares held by directors
or officers who are parties or threatened to be made
parties to the action, suit or proceeding may not be
voted.
11.07 PROPORTIONATE INDEMNITY. If a person is entitled to indemnification
under Section 11.01 or 11.02 of these Bylaws for a portion of expenses,
including attorneys' fees, judgments, penalties, fines, and amounts paid in
settlement, but not for the total amount thereof, the corporation shall
indemnify the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is entitled to be
indemnified.
11.08 EXPENSE ADVANCE. Expenses incurred in defending a civil or criminal
action, suit or proceeding described in Section 11.01 or 11.02 of these Bylaws
shall be paid by the
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corporation in advance of the final disposition of such action, suit or
proceeding if the corporation receives from the person requesting such
advance the following: (i) a written affirmation of the person's good faith
belief that the person has met the applicable standard of conduct in
Section 11.01 or 11.02 and (ii) a written undertaking by or on behalf of
the person to repay the expenses if it is ultimately determined that the
person is not entitled to be indemnified by the corporation. The
undertaking shall be an unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
11.09 NON-EXCLUSIVITY OF RIGHTS. The indemnification or advancement of
expenses provided under this Article XI is not exclusive of other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under a contractual arrangement with the corporation. However, the
total amount of expenses advanced or indemnified from all sources combined shall
not exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
11.10 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the corporation to the fullest extent of the provisions
of this Article XI with respect to the indemnification and advancement of
expenses of directors and officers of the corporation.
11.11 FORMER DIRECTORS AND OFFICERS. The indemnification provided in this
Article XI continues as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such person.
11.12 INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against the
person and incurred by him or her in any such capacity or arising out of his or
her status as such, whether or not the corporation would have power to indemnify
the person against such liability under these Bylaws or the laws of the State of
Michigan.
11.13 CHANGES IN MICHIGAN LAW. In the event of any change of the Michigan
statutory provisions applicable to the corporation relating to the subject
matter of this Article XI, then the indemnification to which any person shall be
entitled hereunder shall be determined by such changed provisions, but only to
the extent that any such change permits the corporation to provide broader
indemnification rights than such provisions permitted the corporation to provide
prior to any such change. Subject to Section 11.14, the Board of Directors is
authorized to amend these Bylaws to conform to any such changed statutory
provisions.
11.14 AMENDMENT OR REPEAL OF ARTICLE XI. No amendment or repeal of this
Article XI shall apply to or have any effect on any director or officer of the
corporation for or with
14
<PAGE> 15
respect to any acts or omissions of such director or officer occurring
prior to such amendment or repeal.
ARTICLE XII
AMENDMENTS
12.01 AMENDMENTS. Subject to Section 11.14, the Bylaws of the corporation
may be amended, altered or repealed, in whole or in part, by a majority vote of
the Board of Directors at any meeting duly held in accordance with these Bylaws,
provided that notice of the meeting includes notice of the proposed amendment,
alteration or repeal.
ARTICLE XIII
CONTROL SHARES AND
CONTROL SHARE ACQUISITIONS
13.01 CONTROL SHARE ACQUISITIONS. The corporation is subject to Chapter
7B, "Control Share Acquisitions," of the Michigan Business Corporation Act,
effective on the first day on which the corporation has 100 or more shareholders
of record. As long as the corporation is subject to Chapter 7B, shares of
capital stock of the corporation constituting "control shares" acquired in
"control share acquisitions" (as defined in Chapter 7B) have the same voting
rights as were accorded the shares before the "control share acquisition" only
to the extent granted by resolution approved by the shareholders of the Company
in accordance with Chapter 7B.
13.02 REDEMPTION OF CONTROL SHARES. Control shares as to which all of the
following conditions are met may be redeemed by the corporation, upon approval
by the Board of Directors, at any time after such conditions have been met:
(a) (i) An acquiring person statement has been filed with the
corporation, a meeting of the shareholders of the corporation has
been held at which the voting rights of the control shares have
been submitted to the shareholders for a vote, and the
shareholders do not grant full voting rights to the control
shares; or
(ii) If an "acquiring person statement" (as such term appears in
Section 795 of the Michigan Business Corporation Act) has not
been filed with the corporation with respect to a control share
acquisition and the redemption is completed during the period
ending 60 days after the last acquisition of control shares, or
the power to direct the exercise of voting power of control
shares, by the acquiring persons; and
15
<PAGE> 16
(b) The consideration to be paid for the control shares
consists of cash, property or securities of the corporation, or
any combination thereof, including shares of capital stock of
the corporation or debt obligations of the corporation; and
(c) The price to be paid for the control shares does not
exceed the fair value of the shares, as determined by the Board
of Directors, which value shall not be less than the highest
price paid per share by the acquiring person in the control
share acquisition.
13.03 PROCEDURES. The Board of Directors may, by resolution, adopt
procedures for the giving of notice of such redemption to the "acquiring person"
and for the delivery of certificates representing the control shares to be
acquired in exchange for the corporation's payment of fair value therefor.
BH/115413.2
ID/DRM
16
<PAGE> 1
EXHIBIT 10.1
[NBD LOGO] CREDIT AUTHORIZATION AGREEMENT
================================================================================
NBD Bank (the "Bank"), 611 Woodward Avenue, Detroit, Michigan 48226-3947, has
approved the credit facilities listed below (collectively, the "Credit
Facilities," and, individually, as designated below) to:
Syntel, Inc. (the "Borrower"),
- ----------------------------------------------------------------
(Borrower's Name)
5700 Crooks Road, Suite 301, Troy, MI 48098
- -------------------------------------------------------------------------------.
(Borrower's Name)
subject to the terms and conditions set forth in this agreement.
1.0 CREDIT FACILITIES. (Check and complete applicable sections)
1.1 UNCOMMITTED CREDIT AUTHORIZATIONS. The Bank has approved the
uncommitted credit authorization listed below (collectively, the "Credit
Authorizations," and, individually, as designated below) subject to the terms
and conditions of this agreement and the Bank's continuing satisfaction with
the Borrower's financial status. Disbursements under the Credit Authorizations
are solely at the Bank's discretion. Any disbursement on one or more occasions
shall not commit the Bank to make any subsequent disbursement.
/ / A. FACILITY A. The Bank has approved an uncommitted Credit
Authorization to the Borrower in the principal sum not to exceed
$____________________ in the aggregate at any one time outstanding
("Facility A"). Credit under Facility A shall be in the form of
disbursements evidenced by credits to the Borrower's accounts and shall
be repayable as set forth in a Master Demand Note executed
concurrently (referred to in this agreement both singularly and
together with any other promissory notes referenced in this Section 1
as the "Notes"). The proceeds of Facility A shall be used for the
following purpose:__________________________________________, Facility
A shall expire on __________________________________, 199__ unless
earlier withdrawn.
/X/ B. FACILITY B (INCLUDING LETTERS OF CREDIT). The Bank has approved an
uncommitted Credit Authorization to the Borrower in the principal sum
not to exceed $15,000,000.00 in the aggregate at any one time
outstanding ("Facility B"). Facility B shall include the issuance of
[commercial/standby] letters of credit not exceeding $750,000.00 in
the aggregate at any one time outstanding, expiring not later than
April 14, 1998 [which shall include time drafts expiring not later
than ** *** ** *** *** *** **, 199 __] (the "Letters of Credit").
(Strike bracketed words if inapplicable.) Each Letter of Credit shall
be in form acceptable to the Bank and shall bear a fee of 1% per year
of the face amount of each standby Letter of Credit plus an issuance
fee of $150.00 upon issuance of each Letter of Credit. (If no fee is
listed, the Letter of Credit shall bear a fee to be agreed upon by
the Bank and the Borrower). Credit under Facility B shall be in the
form of disbursements evidenced by credits to the Borrower's account
and shall be repayable as set forth in a Master Demand Note executed
concurrently (referred to in this agreement both singularly and
together with any other promissory notes referenced in this Section 1
as the "Notes") or by issuance of a Letter of Credit upon completion
of an application acceptable to the Bank. The proceeds of Facility B
shall be used for the following purpose: working capital. Facility B
shall expire on August 31, 1997 unless earlier withdrawn.
/X/ C. FACILITY C (PURCHASE MONEY TERM LOANS). The Bank has approved an
uncommitted credit authorization to the Borrower in the principal sum
not to exceed $10,000,000.00 in the aggregate at any one time
outstanding ("Facility C"). Facility C shall be in the form of loans
evidenced by the Borrower's notes on the Bank's form (referred to in
this agreement both singularly and together with any other promissory
notes referenced in this Section I as the "Notes"), the proceeds of
which shall be used to purchase the following: acquisition of
companies. Interest on each loan shall accrue at a rate to be agreed
upon by the Bank and the Borrower at the time the loan is made. The
maturity of each note shall note shall not exceed 18 months from the
note date. Facility C shall expire on August 31, 1997 unless earlier
withdrawn.
/ / 1.2 TERM LOANS. The Bank agrees to extend credit to the Borrower in
the form of term loans(s) (whether one or more, the "Term Loans") in
the principal sum(s) of ____________________________________________
respectively, bearing interest and payable as set forth in the Term
Note(s) executed concurrently (referred to in this agreement both
singularly and together with any other promissory notes referenced in
this Section 1 as the "Notes"). The proceeds of the Term Loans shall
be used for the following purpose: ___________________________________
_____________________________________________________________________ .
2.0 CONDITIONS PRECEDENT.
2.1 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. Before the
first extension of credit under this agreement, whether by disbursement
of a loan, issuance of a letter of credit, or otherwise, the Borrower
shall deliver to the Bank, in form and substance satisfactory to the Bank:
<PAGE> 2
A. LOAN DOCUMENTS. The Notes; the letter of credit applications required by
Section 1.2; the security agreements, financing statements, mortgages and other
documents required by Section 5.1; the guaranties required by Section 6.0; the
subordination agreements required by Section 7.0; and any other loan documents
which the Bank may resonably require to give effect to the transactions
contemplated by this agreement;
B. EVIDENCE OF DUE ORGANIZATION AND GOOD STANDING. Evidence satisfactory to
the Bank of the due organization and good standing of the Borrower and every
other business entity that is a party to this agreement or any other loan
doucment required by this agreement; and
C. EVIDENCE OF AUTHORITY TO ENTER INTO LOAN DOUCMENTS. Evidence satisfactory
to the Bank that (i) each party to this agreement or any other loan document
required by this agreement is authorized to enter into the transactions
contemplated by this agreement and the other loan documents, and (ii) the
person signing on behalf of each such party is authorized to do so.
2.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. Before any extension of
credit under this agreement, whether by disbursement of a loan, issuance of a
letter of credit, or otherwise, the following conditions shall have been
satisfied:
A. REPRESENTATIONS. The representations contained in Section 10 shall be true
on and as of the date of the extension of credit;
B. NO EVENT OF ACCELERATION. No event of acceleration shall have occurred and
be continuing or would result from the extension of credit.
C. CONTINUED SATISFACTION. The Bank shall have remained satisfied with the
Borrower's managerial and financial status;
D. ADDITIONAL APPROVALS, OPINIONS, AND DOCUMENTS. The Bank shall have
received such other approvals, opinions and documents as it may reasonably
request; and
E. OTHER CONDITIONS. For Facility C. satisfactory receipt and review of
----------------------------------------------------
acquisition candidate financial statements and borrower's pro forma verifying
- -----------------------------------------------------------------------------
covenant complian
- -----------------
- -----------------------------------------------------------------------------
3.0 BORROWING BASE/ANNUAL PAY DOWN.
3.1 BORROWING BASE. (complete if applicable) Notwithstanding any other
provision of this agreement, the aggregate principal amount outstanding at any
one time under (check applicable clauses)
[ ] Facility A
[X] Facility B
shall not exceed the lesser of the Borrowing Base or $ 15,000,000.00 .
Borrowing Base means: ----------------
(Check and complete applicable clauses)
[X] A. 75% of the Borrower's trade accounts receivable in which the Bank has
a perfected, first priority, security interest, excluding accounts more than 90
days past due from the date of invoice, accounts subject to offset or defense,
government, bonded, affiliate and foreign accounts, and accounts otherwise
unacceptable to the Bank, plus
[ ] B. Inventory of the Borrower in which the Bank has a perfected, first
priority, security interest, valued at the lower of cost or market, but not
exceeding $_______________ in aggregate, as follows:
[] (1)___________% of aggregate inventory; or
[] (1)___________% of raw material inventory; and
[] (2)___________% of work-in-process inventory; and
[] (3)___________% of finished goods inventory, plus
[ ] C. ____% of the ________ value of the Borrower's machinery and equipment
in which the Bank has a perfected, first priority, security interest, but
not exceeding $_________________, plus
[ ] D. Additional Borrowing Base provisions are contained in the attached
addedum.
3.2 ANNUAL PAY DOWN. (complete if applicable) Notwithstanding any other
provision of this agreement, there shall be no debt outstanding
under ___________________________________for a period of ______________________
(Facility A, Facility B, etc.)
consecutive months during each fiscal year of the Borrower.
4.0 FEES AND EXPENSES. (complete if applicable)
4.1 FEES. The Borrower shall pay the Bank the following fees, all of which
the Borrower acknowledges have been earned by the Bank: 1/4% of amounts
advanced under Facility C. ---------------
- --------------------------
4.2 OUT-OF POCKET EXPENSES. In addition to any fee set forth in Section 4.1
above, the Borrower shall reimburse the Bank for its out-of-pocket expenses and
reasonable attorney's fees (including the fees of in-house counsel) allocated
to the Credit Facilities.
5.0 SECURITY.
5.1 Payment of all amounts owing under the Credit Facilities shall be secured
by the Borrower's grant of a continuing first security interest and/or real
estate mortgage, as the case may be, covering its interest in the following
property and all its additions, substitutions, increments, proceeds and
products, present and future, whether now owned or later acquired. (the
"Collateral"):
<PAGE> 3
(check and complete applicable clauses)
[x] A. Accounts Receivable. All of the Borrower's accounts,
chattel paper, general intangibles, instruments, and documents (as those terms
are defined in the Uniform Commercial Code), rights to refunds of taxes paid at
any time to any governmental entity, and any letters of credit and drafts under
them given in support of the foregoing, wherever located. The Borrower shall
deliver to the Bank executed security agreements and financing statements in
form and substance satisfactory to the Bank.
[ ] B. Inventory. All of the Borrower's inventory, wherever
located. The Borrower shall deliver to the Bank executed security agreements
and financing statements in form and substance satisfactory to the Bank.
[ ] C. Equipment. All of the Borrower's equipment, wherever
located. The Borrower shall deliver to the Bank executed security agreements
and financing statements in form and substance satisfactory to the Bank.
[ ] D. Real Estate. The real property, including improvements,
located at __________________________________________________________________.
The Borrower shall deliver to the Bank an executed mortgage ALTA mortgage title
insurance policy without exceptions with mortgage survey certified to the Bank
and the title company, and, where applicable, an assignment of rents,
subordinations of leases and assignments of land contracts, all in form and
substance satisfactory to the Bank.
[ ] E. _________________________________________________________
_____________________________________________________________________________
5.2 No forbearance or extension of time granted any subsequent
owner of the Collateral shall release the Borrower from liability.
5.3 Additional Collateral/Setoff. To further secure payment of all
amounts owing under the Credit Facilities and all of the Borrower's other
liabilities to the Bank, the Borrower grants to the Bank a continuing security
interest in: (i) all securities and other property of the Borrower in the
custody, possession or control of the Bank (other than property held by the
Bank solely in a fiduciary capacity), and (ii) all balances of deposit accounts
of the Borrower with the Bank. The Bank shall have the right at any time to
apply its own debt or liability to the Borrower, or to any other party liable
for payment of the Credit Facilities, inn whole or partial payment of the
Credit Facilities or other present or future liabilities, without any
requirement of mutual maturity.
5.4 Cross Lien. Any of the Borrower's other property in which the
Bank has a security interest to secure payment of any other debt, whether
absolute, contingent, direct or indirect, including the Borrower's guaranties
of the debts of others, shall also secure payment of and be part of the
Collateral for the Credit Facilities.
6.0 Guaranties. (complete if applicable)
Payment of the Borrower's liabilities under the Credit Facilities shall
be guaranteed by______________________________________________________________,
by execution of the Bank's form of guaranty agreement. The liability of the
guarantors, if more than one, shall be joint and several.
7.0 Subordination. (complete if applicable)
The Credit Facilities shall be supported by the subordination of debt
owing from the Borrower to ___________________________________________________,
including without limitation debt currently owing in the amount of
$_____________________, in manner and by agreement satisfactory to the Bank.
8.0 Affirmative covenants. So long as any debt remains outstanding
under the Credit Facilities, the Borrower, and each of its subsidiaries, if
any, shall:
8.1 Insurance. Maintain insurance with financially sound and
reputable insurers covering its properties and business against those
casualties and contingencies and in the types and amounts as shall be in
accordance with sound business and industry practices.
8.2 Existence. Maintain its existence and business operations as
presently in effect in accordance with all applicable laws and regulations, pay
its debts and obligations when due under normal terms, and pay on or before
their due date all taxes, assessments, fees and other governmental monetary
obligations, except as they may be contested in good faith if they have been
properly reflected on its books and, at the Bank's request, adequate funds or
security has been pledged to insure payment.
8.3 Financial Records. Maintain proper books and records of
account, in accordance with generally accepted accounting principles where
applicable, and consistent with financial statements previously submitted to
the Bank.
8.4 Notice. Give prompt notice to the Bank of the occurance of (i)
any event of acceleration, and (ii) any other development, financial or
otherwise, which would affect the Borrower's business, properties or affairs in
a materially adverse manner.
8.5 Collateral Audits. (complete if applicable) Permit the Bank or
its agents to perform___________________________________________
(monthly, annual, etc.)
audits of the Collateral. The Borrower shall compensate the Bank for those
audits in accordance with the Bank's schedule of fees as may be amended from
time to time. Whether or not this section has been completed, the Bank shall
retain the right to inspect the Collateral and business records related to it
at such times and at such intervals as the Bank may reasonably require.
<PAGE> 4
8.6 MANAGEMENT, (complete if applicable) Maintain __________________________
as ____________________________________________________________________________.
8.7 FINANCIAL REPORTS. Furnish to the Bank whatever information, books and
records the Bank may reasonably request, including at a minimum: (Check and
complete applicable clauses. If the Borrower has subsidiaries, all financial
statements required will be provided on a consolidated and on a separate
basis.)
A. Within 45 days after each quarterly period, a balance sheet
-----------------
(Monthly/quarterly)
as of the end of that period and statements of income, retained earnings,
and cash flows from the beginning of that fiscal year to the end of that
period, certified as correct by one of its authorized agents.
B. Within 180 days after and as of the end of each of its fiscal
years, a detailed audit
---------------------------
(audit/financial statement)
including a balance sheet and statements of income, retained earnings, and
cash flows certified
----------------------------
(reviewed/compiled/certified)
by an independent certified public accountant of recognized standing.
C. Within 25 days after and as of the end of each calendar month, the
following lists, each certified as correct by one of its authorized agents:
/X/ (1) a list of accounts receivable, aged from date of
invoice;
/ / (2) a list of accounts payable, aged from date of
receipt;
/ / (3) a list of inventory, valued at the lower of cost or
market.
/ / D. Within _______ days after and as of the end of each calendar year,
the signed personal financial statement of ________________________________.
(Borrower/Guarantor/other)
E. Within 5 days after filing, a signed copy of the annual tax
return, with exhibits, of Syntel, Inc.
____________________________________________________________________________
(Borrower/Guarantor/other)
/ / F. An Environmental Certificate on the Bank's form on and as of due
of this agreement, and thereafter as required by the Environmental
Certificate.
/ / G. __________________________________________________________________
____________________________________________________________________________
___________________________________________________________________________.
9.0 NEGATIVE COVENANTS.
9.1 DEFINITIONS. As used in this agreement, the following terms have the
following respective meanings:
A. "Subordinated Debt" means debt subordinated to the Bank in manner and by
agreement satisfactory to the Bank.
B. "Tangible Net Worth" means total assets less intangible assets and total
liabilities. Intangible assets include goodwill, patents, copyrights,
mailing lists, catalogs, trademarks, bond discount and underwriting expenses,
organization expenses, and all other intangibles.
9.2 Unless otherwise noted, the financial requirements set forth in this
section shall be computed in accordance with generally accepted accounting
principles applied on a basis consistent with financial statements previously
submitted by the Borrower to the Bank.
9.3 Without the written consent of the Bank, so long as any debt remains
outstanding under the Credit Facilities, the Borrower shall not: (where
appropriate, covenants shall apply on a consolidated basis - clauses H0 apply
only if completed.)
A. DIVIDENDS. Acquire or retire any of its shares of capital stock, or
declare or pay dividends or make any other distributions upon any of its
shares of capital stock, except dividends payable in its capital stock, and
dividends payable to "Subchapter S" corporation shareholders, in amounts
sufficient to pay the shareholder(s) income tax obligations related to the
Borrower's taxable income.
B. SALE OF SHARES. Issue, sell or otherwise dispose of any shares of its
capital stock or other securities, or rights, warrants or options to purchase
or acquire any such shares or securities.
C. DEBT. Incur, or permit to remain outstanding, debt for borrowed money
or installment obligations, except debt reflected in the latest financial
statement of the Borrower furnished to the Bank prior to execution of this
agreement and not to be paid with proceeds of borrowings under the Credit
Facilities. For purposes of this covenant, the sale of any accounts
receivable shall be deemed the incurring of debt for borrowed money.
D. GUARANTIES. Guarantee or otherwise become or remain secondarily liable
on the undertaking of another, except for endorsement of drafts for deposit
and collection in the ordinary course of business.
E. LIENS. Create or permit to exist any of its property, real or
personal, except: existing liens known to the Bank; liens to the Bank; liens
incurred in the ordinary course of business securing current nondelinquent
liabilities for taxes, worker's compensation, unemployment insurance, social
security and pension liabilities; and liens for taxes being contested in
good faith.
F. ADVANCES AND INVESTMENTS. Purchase or acquire any securities of, or
make any loans or advances to, or investments in, any person, firm or
corporation, except obligations of the United States Government, open market
commercial paper rated one of the top two ratings by a rating agency of
recognized standing, or certificates of deposit in insured financial
institutions.
<PAGE> 5
G. USE OF PROCEEDS. Use, or permit any proceeds of the Credit
Facilities to be used, directly or indirectly, for the purpose of
"purchasing or carrying any margin stock" within the meaning of Federal
Reserve Board Regulation U. At the Banks request, the Borrower shall
furnish to the Bank a completed Federal Reserve Board Form U-1.
H. WORKING CAPITAL. Permit the difference between its current assets
[less all sums owing from stockholders, members or partners, as the case may
be, and from officers, managers and directors] and current liabilities [plus
all sums (other than Subordinated Debt) owing to stockholders, members or
partners, as the case may be, and to officers, managers and directors] to be
less than $____________________. (Strike bracketed words if not applicable.)
I. TANGIBLE NET WORTH [Plus Subordinated Debt]. Permit its Tangible
Net Worth to be less than $14,000,000.00. Increasing annually by 50% net
income after sub-s tax distributions.
J. CURRENT RATION. Permit the ratio of its current liabilities to be
less than __________________________________to 1.00.
K. LEVERAGE RATIO. Permit the ratio of its total liabilities to its
Tangible Net Worth to exceed 1.00 to 1.00. (Strike bracketed words if not
applicable).
L. FIXED ASSETS. Expend for, contract for, lease, rent, or otherwise
acquire fixed assets, of the expense to the Borrower, and all subsidiaries,
if any, shall exceed $___________________________ in the aggregate of any
one fiscal year.
M. LEASES. Contract for or assume in any manner, lease obligations if
the aggregate of all payments shall exceed $______________________ in any
one fiscal year.
N. COMPENSATION. Pay, or award compensation of any kind, in any one
fiscal year, to___________________________________exceeding $______________.
**(T/N/W defined as total assets less intangible assets, investments in
related entities, sums owing from stockholders, officers, directors, and
employees, less total liabilities).
10.0 REPRESENTATIONS BY BORROWER. Each Borrower represents that: (a) the
execution and delivery of this agreement and the Notes and the performance of
the obligations they impose do not violate any law, conflict with any agreement
by which it is bound, or require the consent or approval of any governmental
authority or any third party; (b) this agreement and the Notes are valid and
binding agreements, enforceable according to their terms; and (c) all balance
sheets, income statements, and other financial statements furnished to the Bank
are accurate and fairly reflect the financial condition of the organizations
and persons to which they apply on their effective dates, including contingent
liabilities of every type, which financial condition has not changed materially
and adversely since those dates. Each Borrower, if other than a natural
person, further represents that: (a) it is duly organized, existing and in good
standing under the laws of the jurisdiction under which it was organized; and
(b) the execution and delivery of this agreement and the Notes and the
performance of the obligations they impose (i) are within its powers; (ii) and
have been duly authorized by all necessary action of its governing body, and
(iii) do not contravene the terms of its articles of incorporation or
organization, its by laws, or any partnership, operating or other agreements
governing its affairs.
11.0 ACCELERATION.
11.1 EVENTS OF ACCELERATION. If any of the following events occur, the
Credit Facilities shall terminate and all borrowings under them shall become
due immediately, without notice, at the Bank's option, whether or not the Bank
has made demand.
A. The Borrower or any guarantor of any of the Credit Facilities
("Guarantor") fails to pay when due any amount payable under the Credit
Facilities or under any agreement or instrument evidencing debt to any
creditor.
B. The Borrower or any Guarantor (a) fails to observe or perform
any other term of this agreement or the Notes; (b) makes any materially
incorrect or misleading representation, warranty or certificate to the Bank;
(c) makes any materially incorrect or misleading representation in any
financial statement or other information delivered to the Bank; or (d)
defaults under the terms of any agreement or instrument relating to any debt
for borrowed money (other than borrowings under the Credit Facilities) such
that the creditor declares the debt due before its maturity.
C. There is a default under the terms of any loan agreement,
mortgage, security agreement or any other document executed as part of the
Credit Facilities, or any guaranty of the liabilities under the Credit
Facilities becomes unenforceable in whole or in part or any Guarantor fails to
promptly perform under its guaranty.
D. A "reportable event" (as defined in the Employee Retirement
Income Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of the
Borrower or any affiliate the Borrower.
E. The Borrower or any guarantor becomes insolvent or unable to pay
its debts as they become due.
F. The Borrower or any Guarantor (a) makes an assignment for the
benefit of creditors; (b) consents to the appointment of a custodian, receiver
or trustee for it or for a substantial part of its assets; or (c) commences any
proceeding under any bankruptcy, reorganization, liquidation or similar laws of
any jurisdiction.
G. A custodian, receiver or trustee is appointed for the Borrower or
any Guarantor or for a substantial part of its assets without its consent and
is not removed within 60 days after the appointment.
H. Proceedings are commenced against the Borrower or any Guarantor
under any bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and those proceedings remain undismissed for 60 days after
commencement; or the Borrower or Guarantor consents to the commencement of the
proceedings.
I. Any judgment is entered against the Borrower or any Guarantor, or
any attachment, levy or garnishment is issued against any property of the
Borrower or any Guarantor.
J. The Borrower or any Guarantor dies.
<PAGE> 6
K. The Borrower or any Guarantor, without the Bank's written
consent, (a) is dissolved, (b) merges or consolidates with any third party, (c)
leases, sells or otherwise conveys a material part of its assets or business
outside the ordinary course of business, (d) leases, purchases, or otherwise
aquires a material part of the assets of any other corporation or business
entity, except in the ordinary course of business, or (e) agrees to do any of
the foregoing (notwighstanding the foregoing, any subsidiary may merge or
consolidate with any other subsidiary, or with the Borrower, so long as the
Borrower is the survivor).
L. The loan-to-value ratio of any pledged securities at any
time exceeds ______%, and such excess continues for five (5) days after notice
from the Bank to the Borrower.
M. There is a substantial change in the existing or
prospective financial conditionof the Borrower or any Guarantor which the Bank
in good faith determines to be materially adverse.
N. The Bank in good faith shall deem itself insecure.
11.2 REMEDIES. If the amounts owing under the Credit Facilities are
not paid at maturity, whether by demand, acceleration, or otherwise, the Bank
shall have all of the rights and remedies provided by any law or agreement.
Any requirement of reasonable notice shall be met if the Bank sends the notice
to the borrower at least seven (7) days prior to the date of sale, disposition
or other event giving rise to the required notice. the Bank is authorized to
cause all or any part of the Collateral to be transferred to or registered in
its name or in the name of any other person, firm or corporation, with or
without designation of the capacity of such nominee. The Borrower shall be
liable for any deficiency remaining after disposition of any collateral. The
borrower is liable to the Bank for all reasonable costs and expenses of every
kind incurred in the making or collection of the Credit Facilities, including,
without limitation, reasonable attorneys' fees and court costs (whether
attributable to the Bank's in-house or outside counsel.) These costs and
expenses shall include, without limitation, any costs or expenses incurred by
SCHEDULE 3.02(l)(ii)
Union Contractsff
Carlisle, PA UNITE (formerly ACTWU)
Lewistown, PA UNITE (formerly ACTWU)
Carlisle, PA IUOE
Mississauga, Ont. UNITE (formerly ACTWU)
Organizing Attempts in past 5 years
Sidney, Ohio Teamsters (vote taken and turned down)
Lebanon, Ohio UAW and United Food and Commercial Workers Union
the Bank in any bankruptcy, reorganization, insolvency or other similar
proceeding.
12.0 MISCELLANEOUS.
12.1 Notice from one party to another relating to this agreement shall
be deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or fax number set forth
under its name below by any of the following means: (a) hand delivery, (b)
registered or certified mail, postage prepaid, with return receipt requested,
(c) first class or express mail, postage prepaid, (d) Federal Express, or like
overnight courier service, or (e) fax, telex or other wire transmission with
request for assurance of receipt in a manner typical with respect to
communication of that type. Notice made in accordance with this section shall
be deemed delivered upon receipt kf delivered by hand or wire transmission,
three (3) business days after mailing if mailed by first class, registered or
certified mail, or one business day after mailing or deposit with an overnight
courier service if delivered by express mail or overnight courier.
12.2 No delay on the part of the Bank in the execise of any right or
remedy shall operate as a waiver. No single or partial exercise by the bank of
any right or remedy shall preclude any other future exercise of it or the
exercise of any other right or remedy. No waiver or indulgence by the Bank of
any default shall be effective unless in writing and signed by the Bank, nor
shall a waiver on one occasion be construed as a bar to or waiver of that right
on any future occassion.
12.3 This agreement, the Notes, and any related loan doucments embody
the entire agreement and understanding between the Borrower and the Bank and
supersede all prior agreements and understandings relating to their subject
matter. If any one or more of the obligations of the Borrower under this
agreement or the Notes shall be invalid, illegal or uneforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
obligations of the Borrower shall not in any way be affected or impaired, and
such validity, illegality or unenforceability in one jurisdiction shall not
affect the validity, legality or enforceability of the obligations of the
borrower under this agreement or the Notes in any other jurisdiction.
12.4 The Borrower, if more than one, shall be jointly and severally
liable.
12.5 This agreement is delivered in the State of Michigan and governed
by Michigan law. This agreement is binding on the Borrower and its successors,
and shall inure to the benefit of the Bank, its successors and assigns.
12.6 Section headings are for convenience of reference only and shall
not affect the interpretation of this agreement.
13.0 WAIVER OF JURY TRIAL. The Bank and Borrower, after consulting or
having had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in any
litigation based upon or arising out of this agreement or any related
instrument or agreement, or any of the transactions contemplated by this
agreement, or any course of conduct, dealing, statements (whether oral or
written), or actions of either of them. Neither the Bank nor the Borrower
shall seek to consolidate, by counterclaim or otherwise, any action in which a
jury trial has been waived with any other action in which a jury trial canot be
or has not been waived. These provisions shall not be deemed to have been
modified in any respect or relinquished by either the Bank or the Borrower
except by a written instrument executed by both of them.
Executed by the parties on: Sept. 13, 1996.
-----------------
(Date)
"BANK": "BORROWER":
NBD Bank Syntel, Inc.
- -------------------------- --------------------------
- -------------------------- --------------------------
BY: MARY ANN LIEVOIS BY: X
- -------------------------- --------------------------
Mary Ann Lievois Bharat Desai, President
- -------------------------- --------------------------
ADDRESS FOR NOTICES: ADDRESS FOR NOTICE:
2155 W. Big Beaver 5700 Crooks Road, Suite 301
- -------------------------- ---------------------------
Troy, MI 48084 Troy, MI 48098-2809
- -------------------------- ---------------------------
- -------------------------- ---------------------------
Fax/Telex No. 810-816-0233 Fax/Telex No.
------------- --------------
<PAGE> 1
EXHIBIT 10.2
[NBD LETTERHEAD]
March 11, 1997
Mr. Bharat Desai
President
Syntel, Inc.
2800 Livernois, Suite 400
Troy, MI 48083
Dear Bharat:
We are pleased to inform you that NBD Bank has increased the uncommitted credit
authorization described in Section 1.1 of the Credit Authorization Agreement
executed by you and the Bank on September 13, 1996 from $15,000,000 to
$20,000,000. In conjunction with this increase, Section 3.1 BORROWING BASE A.
is increased from 75% to 80% of the Borrower's trade accounts receivable.
The requirements of Section 9.3(I) TANGIBLE NET WORTH and (K) LEVERAGE RATIO
remain in place, however NBD Bank hereby waives compliance with these terms
through December 31, 1996.
Except as modified by this letter, all of the terms and conditions of the
Credit Authorization Agreement remain in effect. Please sign on the following
page to confirm these changes.
<PAGE> 2
[NBD LETTERHEAD]
Sincerely,
NBD Bank
By: Mary Ann Lievois By: Rebecca Smith
-------------------------- -------------------------
Mary Ann Lievois Rebecca Smith
Its: Vice President Its: Senior Vice President
------------------------- ------------------------
Accepted and Agreed to this day of , .
----- -------------------- ------
Syntel, Inc.
By: Neerja Jethi
------------------------
Neerja Jethi
Its: V. President
-----------------------
<PAGE> 1
EXHIBIT 10.3
[NBD LETTERHEAD]
March 25, 1997
Mr. R.S. Ramdas
Sr. Director Internal Audit, Tax & Treasury
Syntel, Inc.
2800 Livernois
Suite 400
Troy, MI 48083
Dear Ramdas:
NBD Bank hereby removes items 9.3A Dividends and 9.3B Sale of Shares under the
terms and conditions of the Credit Authorization Agreement dated September 13,
1996 between NBD Bank and Syntel, Inc. All other terms and conditions remain
the same as referenced in the addendum letter dated March 11, 1997. Please sign
below to acknowledge your acceptance and confirmation.
Sincerely,
NBD Bank
By: Mary Ann Lievois
-----------------------
Mary Ann Lievois
Its: Vice President
---------------------
Accepted and Agreed to this 25th day of March 1997.
Syntel, Inc.
By: R. S. Ramdas
-----------------------------------
R. S. Ramdas
Its: Sr. Director Internal Audit, Tax &
Treasury
-----------------------------------
<PAGE> 1
EXHIBIT 10.4
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made on _______, 1997,
between Syntel, Inc., a Michigan corporation ("Buyer"), and Bharat Desai and
Neerja Sethi (each a "Stockholder" and, collectively, the "Stockholders"), the
stockholders of Syntel Software Private Limited, a corporation organized under
the laws of India (the "Company").
The Stockholders are the beneficial and registered owners of all of the
issued and outstanding capital stock (the "Shares") of the Company. The
Stockholders desire to sell to Buyer and Buyer desires to purchase from the
Stockholders all of the Shares for the price, upon the terms and subject to the
conditions hereinafter set forth. Capitalized terms not otherwise defined at
the time of usage shall have the meanings designated in Section 8.8 hereof.
In consideration of the premises and of the respective covenants and
agreements contained herein, the parties agree as follows:
ARTICLE I
Purchase and Sale of Shares; Closing
1.1 Purchase and Sale. On the terms and subject to the conditions set
forth in this Agreement, the Stockholders shall sell and transfer to Buyer, and
Buyer shall purchase and accept from the Stockholders, all of the outstanding
Shares.
1.2 Purchase Price. Buyer agrees to pay to the Stockholders at the
Closing the aggregate sum of $7,000,000 (the "Purchase Price") by wire transfer
of immediately available federal funds to such accounts as the Stockholders
shall designate. The Purchase Price shall be allocated among the Stockholders
in proportion to their respective holdings of the Shares as set forth on Annex
A hereto.
1.3 Closing. Subject to the conditions set forth in this Agreement, the
purchase and sale of the Shares pursuant to this Agreement (the "Closing")
shall take place upon consummation of the public offering of Buyer's Common
Stock (the "Public Offering") pursuant to the Registration Statement on Form
S-1 filed with the Securities and Exchange Commission on June 6, 1997 (the
"Closing Date").
1.4 Deliveries at the Closing. At the Closing, the Stockholders shall
deliver to Buyer certificates representing all the Shares, endorsed in blank in
proper form for transfer, and Buyer shall deliver the Purchase Price to the
Stockholders in proportion to their respective holdings of the Shares as set
forth in Annex A hereto.
<PAGE> 2
ARTICLE II
Representations and Warranties of the Stockholders
The Stockholders jointly and severally represent and warrant to the Buyer
that the following representations and warranties are true and correct on the
date hereof and will be true and correct as of the Closing Date in all material
respects.
2.1 Authority. The Stockholders have the authority to enter into this
Agreement and to carry out the transactions contemplated hereby. This
Agreement has been duly executed by the Stockholders and constitutes a valid
and binding agreement of the Stockholders, enforceable against the Stockholders
in accordance with its terms.
2.2 Consents and Approvals; No Violation. To the knowledge of the
Stockholders, neither the execution and delivery of this Agreement by the
Stockholders nor the consummation of the transactions contemplated hereby will
(a) result in any breach of any provision of the charter or Bylaws (or other
similar governing documents) of the Company,(b) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be
bound, or (c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, any of its subsidiaries or any of their
properties or assets, except in the case of (b) and (c) for violations,
breaches or defaults which would not individually or in the aggregate, have a
Material Adverse Effect on the Company and its subsidiaries taken as a whole.
2.3 Organization of Company; Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
country of India, and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
2.4 No Encumbrances; Capitalization.
(a) The Shares are free all Liens and the Stockholders have full
authority to transfer the Shares pursuant to this Agreement.
(b) The issued and outstanding common stock of the Company consists of
500,000 shares US $0.32 per share. All such outstanding shares of the
Company's capital stock are validly issued, subscribed and paid up. There is
no security, option, warrant, right, call, subscription, agreement, commitment
or understanding of any nature whatsoever, fixed or contingent, that directly
or indirectly (i) calls for the issuance, sale, pledge or other disposition of
any shares of stock of the Company or any securities convertible into, or
exchangeable for, or other rights to acquire, any shares of stock of the
Company, or (ii) obligates the Company to grant, offer or enter into any of the
2
<PAGE> 3
foregoing. There are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any outstanding shares of its capital
stock. There are no agreements or understandings to which the Company is a
party with respect to the (A) voting of capital stock or other securities of
the Company, (B) dividends or distributions on account of such capital stock or
(C) the transfer or disposition of such capital stock.
(c) Upon delivery of the Shares to Buyer and full payment therefor as
contemplated by this Agreement, Buyer shall acquire good and valid title to all
of the Shares free and clear of all Liens.
2.5 Financial Statements. The Stockholders have previously furnished to
Buyer (a) an unaudited balance sheet of the Company as of March 31, 1997 and
related statement of income of the Company for the period then ended, (b)
audited balance sheet of the Company as of December 31, 1996 and (c) the
related audited statement of income, statement of stockholders' equity and
statement of cash flows for the fiscal year then ended together with the
related notes thereto and the report thereon of Rajkamal Shah & Co., chartered
accountants. The balance sheet of the Company as of March 31, 1997, is
hereafter referred to as the "1997 Balance Sheet". All such financial
statements are in accordance with the books and records of the Company and have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved. The balance sheets
included in the financial statements referred to in this Section 2.5 (including
the related notes thereto) present fairly the financial position of the Company
as of their respective dates, and each of the related statements of income and
(where applicable) stockholders' equity and cash flows included therein
(including the related notes thereto) present fairly the results of operations
and (where applicable) cash flows for the fiscal years or periods then ended.
2.6 Absence of Certain Changes. Since March 31, 1997, there has not been
any Material Adverse Effect and the Stockholders are not aware of any
condition, development or contingency existing which, so far as reasonably can
be foreseen at this time, may reasonably be expected to result in any Material
Adverse Effect.
2.7 Properties; Title.
(a) The Company does not own any real property, but leases property in
Mumbai, India and Chennai, India. True and correct copies of such leases have
been delivered to Buyer. Each lease is in full force and effect and there is
no default thereunder.
(b) The Company has (i) good, valid and marketable title to the
tangible property and all of the other assets reflected on the 1997 Balance
Sheet, except as disposed of in the ordinary course of business, and (ii) a
valid leasehold interest in its leased real property, in each case with
respect to subsections (i) and (ii) above, free and clear of all Liens other
than (A) Liens for current taxes, assessments or governmental charges not yet
due and delinquent, or (B) Liens which do not,
3
<PAGE> 4
individually or in the aggregate, materially interfere with the use of the real
properties or materially detract from their value.
2.8 Legal Compliance, Licenses and Authorizations.
(a) To the knowledge of the Stockholders, the Company has complied in
all material respects with all applicable laws, statutes, rules, regulations and
orders, of federal, state, local and foreign governments (and all agencies
thereof), including, without limitation, all environmental laws and no action,
proceeding, complaint, claim, demand or notice has been filed or commenced
against it alleging any failure so to comply.
(b) To the knowledge of the Stockholders, the Company holds all
material licenses and other permits and authorizations necessary for the
operation of the business of the Company as presently conducted. There is not
now pending or threatened any action by the grantor of any such license, permit
or authorization to revoke, cancel or refuse to renew any such license, permit
or authorization.
2.9 Labor Matters. The Company is not a party to or subject to any labor
union or collective bargaining agreement. The Company is in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged in any unfair
labor practice except where the failure to be in compliance would not
reasonably be expected to have a Material Adverse Effect.
2.10 Material Contracts. No material default or alleged material default
exists under any of the Material Contracts. Each of the Material Contracts is
now valid, in full force and effect and enforceable in accordance with its
terms and the Company has fulfilled in all respects, or taken all action
reasonably necessary to enable it to fulfill when due, all its obligations
under such contracts, except where the failure to fulfill such obligations
would not reasonably be expected to have a Material Adverse Effect.
2.11 Legal Proceedings. There is no claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened in
writing against the Company before any court or governmental or regulatory
authority or body wherein a result adverse to the Company's interests would
have a Material Adverse Effect, or would prevent or delay the transactions
contemplated in this Agreement. The Company is not subject to any outstanding
order, writ, injunction or decree which would have a Material Adverse Effect or
would prevent or delay the transactions contemplated in this Agreement.
2.12 Taxes. The Company has duly filed (or caused to be filed) all
returns of Taxes (as defined below) required to be filed by it, and has paid or
provided for all Taxes shown to be due on such returns. No action or
proceeding for the assessment or collection of any Taxes is pending or proposed
in writing against the Company, and no deficiency, assessment or other claim in
writing for any Taxes has been asserted or made against the Company that has
not been fully paid or finally
4
<PAGE> 5
settled. To the knowledge of the Stockholders, all Taxes which the Company has
been required to collect or withhold have been duly withheld or collected and,
to the extent required, have been paid to the proper taxing authority. As used
herein, "Taxes" shall mean all taxes, charges, fees, levies or other
assessments including, without limitation, income, excise, property, transfer,
payroll, withholding, employment, value added, capital, net worth, estimated,
sales, use and franchise taxes, imposed by any government or subdivision or
agency thereof, and including any interest, penalties or additions attributable
thereto.
ARTICLE III
Representations and Warranties of Buyer
Buyer represents and warrants to the Company that the following
representations and warranties are true and correct on the date hereof and will
be true and correct as of the Closing Date in all material respects.
3.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Michigan.
3.2 Authority Relative to this Agreement. Buyer has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of Buyer, and
no other corporate proceedings on the part of Buyer are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby or
thereby. This Agreement has been duly and validly executed and delivered by
Buyer and constitutes a valid and binding agreement of Buyer, enforceable
against Buyer in accordance with its terms.
3.3 Consents and Approvals; No Violation. To the knowledge of Buyer,
neither the execution and delivery of this Agreement by Buyer nor the
consummation of the transactions contemplated hereby will (a) result in any
breach of any provision of the Articles of Incorporation or Bylaws (or other
similar governing documents) of Buyer, (b) result in a violation or breach of,
or constitute a default under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation to which Buyer is a party or by which Buyer or
any of its properties or assets may be bound, or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer, any of its
subsidiaries or any of their properties or assets, except in the case of (b)
and (c) for violations, breaches or defaults which would not individually or in
the aggregate, have a Material Adverse Effect on Buyer.
5
<PAGE> 6
ARTICLE IV
Covenants of the Parties
4.1 Conduct of Business. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Closing Date, the
Stockholders will cause the Company to conduct its business and operations
according to its ordinary and usual course of business and consistent with past
practices.
4.2 Consents. Buyer and Stockholders will use their respective best
efforts to obtain consents of all persons and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement, including the consent of the Reserve Bank of India.
4.3 Additional Agreements. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the parties
hereto, the Company, as applicable, shall take all such necessary action.
4.4 Notification of Certain Matters. Between the date hereof and the
Closing, the Stockholders shall give prompt notice in writing to Buyer of: (a)
the occurrence of any event which will result in a Material Adverse Effect or
in the failure to satisfy a condition specified in Article V hereof; and (b)
any notice or other communication from any third person alleging that the
consent of such third person is or may be required in connection with the
transactions contemplated by this Agreement.
4.5 Tax Returns. All Tax returns required to be filed after the date
hereof but prior to the Closing shall be prepared, and any elections with
respect to such returns shall be made, to the extent permitted by law, in a
manner consistent with prior practice with respect to the Company.
ARTICLE V
Conditions To Obligations Of Buyer
The obligations of Buyer required to be performed by it at the Closing
shall be subject to the satisfaction, at or prior to the Closing, of each of
the following conditions, each of which may be waived by Buyer as provided
herein except as otherwise required by applicable law:
5.1 Representations and Warranties; Performance of Obligations. Each of
the representations and warranties of the Stockholders contained in this
Agreement shall be true in all material respects at and as of the Closing;
provided that a breach of any representation or warranty shall not constitute a
failure of the condition contained in this Section 5.1 if such breach, either
6
<PAGE> 7
alone, or in conjunction with all other breaches, has not had, and would not
reasonably be expected to have, a Material Adverse Effect.
5.2 Authorization; Consents. All notices to, and declarations, filings
and registrations with, and consents, authorizations, approvals and waivers
from, governmental and regulatory bodies and any third parties required to
consummate the transactions contemplated hereby, and all other governmental,
regulatory or third party consents or waivers which, either individually or in
the aggregate, if not made or obtained, would have a Material Adverse Effect
shall have been made or obtained.
ARTICLE VI
Conditions To Obligations Of The Stockholders
The obligations of the Stockholders required to be performed by them at
the Closing shall be subject to the satisfaction, at or prior to the Closing,
of each of the following conditions, each of which may be waived by the
Stockholders as provided herein except as otherwise required by applicable law:
6.1 Representations and Warranties; Performance of Obligations. Each of
the representations and warranties of the Buyer contained in this Agreement
shall be true in all material respects at and as of the Closing; provided that
a breach of any representation or warranty shall not constitute a failure of
the condition contained in this Section 6.1 if such breach, either alone, or in
conjunction with all other breaches, has not had, and would not reasonably be
expected to have, a Material Adverse Effect.
6.2 Authorization; Consents. All notices to, and declarations, filings
and registrations with, and consents, authorizations, approvals and waivers
from, governmental and regulatory bodies and any third parties required to
consummate the transactions contemplated hereby, and all other governmental,
regulatory or third party consents or waivers which, either individually or in
the aggregate, if not made or obtained, would have a Material Adverse Effect
shall have been made or obtained.
ARTICLE VII
Indemnification
7.1 Indemnification. The Stockholders jointly and severally agree to
indemnify and hold Buyer harmless from and against any and all liabilities,
losses, damages, deficiencies, judgments, fines, costs and expenses, including
reasonable counsel fees ("Losses"), incurred or sustained by Buyer that result
from, relate to or arise out of:
(a) any material breach of any representation or warranty or material
nonfulfillment of any agreement or covenant on the part of the Stockholders
under this Agreement; and
7
<PAGE> 8
(b) any and all actions, suits, claims or proceedings incident to any of
the foregoing or to the enforcement of this Section 7.1;
provided, however that (i) the Stockholders shall not have any obligation to
indemnify Buyer under this Section 7.1 until Buyer has suffered Losses in
excess of $350,000 (after which point the Stockholders will be obligated to
indemnify Buyer only from and against further such Losses), and (ii) the
obligation of the Stockholders to indemnify Buyer from and against Losses
under this Section 7.1 shall not exceed the Purchase Price.
ARTICLE VIII
Miscellaneous
8.1 Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing for a period of one year.
8.2 Headings. Section headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
8.3 Notices. All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if delivered
by hand (including by courier), mailed by registered or certified mail, postage
prepaid (return receipt requested), or sent by facsimile:
Notice to the Stockholders shall be made at 2800 Livernois, Suite 400,
Troy, Michigan 48083; Attention: Bharat Desai, and notices to the Buyer shall
be made at 2800 Livernois, Suite 400, Troy, Michigan 48083, Attention: Daniel
M. Moore, or such other address as shall be furnished in writing by such party.
8.4 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that neither
this Agreement nor any of the rights, interests, or obligations hereunder may
be assigned by any of the parties hereto without the prior written consent of
the other parties.
8.5 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersedes all prior or contemporaneous written or oral commitments,
arrangements or understandings with respect thereto. There are no
restrictions, agreements, promises, warranties, covenants or undertakings with
respect to the transactions contemplated hereby other than those expressly set
forth herein.
8.6 Modifications, Amendments and Waivers. At any time prior to the
Closing, to the extent permitted by law, (a) Buyer and the Stockholders may, by
written agreement, modify, amend
8
<PAGE> 9
or supplement any term or provision of this Agreement and (b) any term or
provision of this Agreement may be waived in writing by the party which is
entitled to the benefits thereof.
8.7 Governing Law. This Agreement shall be governed by the laws of the
State of Michigan (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters including, but not limited
to, matters of validity, construction, effect and performance.
8.8 Certain Definitions. For purposes of this Agreement:
"Lien" shall mean any pledge, lien (including without limitation any
tax lien), charge, claim, encumbrance, security interest, mortgage,
option, restriction on transfer (including without limitation any
buy-sell agreement or right of first refusal or offer), forfeiture,
penalty, equity or other right of another person of every nature and
description whatsoever.
"Material Adverse Effect" shall mean a loss, expense or cost to the
Company which is, or with reasonable probability might be, materially
adverse to the business, operations, assets, properties, results of
operations or financial condition of the Company taken as a whole, it
being understood that a loss, expense or cost to the Company shall be
rendered materially adverse only if the present value of such loss,
expense or cost to the Buyer, calculated at a discount rate of 10% per
annum, after taking into account all tax effects, exceeds $350,000.
"Material Contract" shall mean a contract which: (i) involves the
payment of an amount in excess of $100,000 in the aggregate or $50,000
per annum ; and (ii) is not subject to cancellation without penalty upon
60 days written notice.
"Person" or "person" shall mean an individual or any corporation,
partnership, joint venture, association, limited liability company,
trust, unincorporated organization, or other legal entity or a government
or governmental entity.
"To the knowledge," or "known," and words of similar import shall
mean actual knowledge of a person.
8.9 Severability. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
or enforceability of the remaining provisions of this Agreement shall not be
affected thereby and this Agreement will be construed and enforced as if such
invalid, illegal or unenforceable provisions had not been included herein. To
the extent permitted by applicable law, each party waives any provision of law
which renders any provision of this Agreement invalid, illegal or unenforceable
in any respect.
* * * * *
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SYNTEL, INC.
By:__________________________
Bharat Desai
Its: President
__________________________
Bharat Desai
__________________________
Neerja Sethi
10
<PAGE> 11
ANNEX A
Bharat Desai
Neerja Sethi
BH/106782.4
ID/DRM
11
<PAGE> 1
EXHIBIT 10.5
- ------------------------------------------------------------------------------
LEASE
Between
WRC PROPERTIES, INC.,
AS Landlord
And
SYNTEL, INC.,
as Tenant
- ------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. BASIC LEASE PROVISIONS.......................................... 1
SECTION 2. THE PREMISES.................................................... 2
SECTION 3. THE TERM........................................................ 2
SECTION 4. THE BASE RENT................................................... 3
SECTION 5. LATE CHARGES AND INTEREST....................................... 3
SECTION 6. OPERATING EXPENSES, UTILITIES, AND TAXES........................ 3
SECTION 7. USE OF PREMISES................................................. 6
SECTION 8. INSURANCE....................................................... 8
SECTION 9. DAMAGE BY FIRE OR OTHER CASUALTY................................ 9
SECTION 10. REPAIRS, RENOVATIONS AND ALTERATIONS.......................... 10
SECTION 11. LEINS......................................................... 11
SECTION 12. EMINENT DOMAIN................................................ 11
SECTION 13. ASSIGNMENT OR SUBLETTING...................................... 12
SECTION 14. INSPECTION OF PREMISES........................................ 13
SECTION 15. FIXTURES AND EQUIPMENT........................................ 13
SECTION 16. PARKING AREAS................................................. 13
SECTION 17. NOTICE OR DEMANDS............................................. 14
SECTION 18. BREACH; INSOLVENCY; RE-ENTRY.................................. 14
SECTION 19. SURRENDER OF PREMISES ON TERMINATION.......................... 16
SECTION 20. PERFORMANCE BY LANDLORD OF THE COVENANTS OF TENANT............ 16
SECTION 21. SUBORDINATION; ESTOPPEL CERTIFICATES.......................... 16
SECTION 22. QUIET ENJOYMENT............................................... 17
SECTION 23. HOLDING OVER.................................................. 17
SECTION 24. REMEDIES NOT EXCLUSIVE; WAIVER................................ 17
SECTION 25. WAIVER OF SUBROGATION......................................... 18
SECTION 26. RIGHT TO SHOW PREMISES........................................ 18
SECTION 27. INDEMNIFICATION............................................... 18
SECTION 28. DEFINITION OF LANDLORD; LANDLORD'S LIABILITY.................. 19
SECTION 29. SECURITY DEPOSIT AND SECURITY INTEREST........................ 19
SECTION 30. RULES AND REGULATIONS......................................... 20
SECTION 31. SIGNS AND ADVERTISING......................................... 20
SECTION 32. GENERAL....................................................... 20
EXHIBIT A SPACE PLAN...................................................... 23
EXHIBIT B RULES AND REGULATIONS OF THE PROJECT............................ 24
EXHIBIT C DAILY JANITORIAL SERVICE........................................ 27
EXHIBIT D SPECIAL PROVISIONS.............................................. 28
D1 EXCESS TENANT IMPROVEMENT COST. ..................................... 28
D2 MOVING ALLOWANCE. ................................................... 28
D3 OPTION TERM.......................................................... 28
D4 TENANT AUDIT RIGHT. ................................................. 28
D5 TENANT'S RIGHT TO CURE. ............................................. 28
D6 NON-DISTURBANCE. .................................................... 29
<PAGE> 3
LEASE
-----
THIS LEASE is made entered into as of August 22, 1996, by and between
WRC Properties, Inc. (the "Landlord"), a Deleware Corporation having its
principal office at 730 Third Avenue, New York, New York 10017, and Tenant
named below who agree as follows:
SECTION 1.
BASIC LEASE PROVISIONS
1.01 The following basic lease provisions are an integral part of
this Lease and are referred to in other Sections of this Lease.
<TABLE>
<S> <C> <C> <C>
(a) Tenant's name and jurisdiction of formation:
SYNTEL, INC., a Michigan Corporation
--------------------------------------------
Tenant Social Security/Taxpayer Indentification Number: 38-2312018
----------
Tenant Standard Industrial Classification (SIC) Code Number: 7371
----------
(b) Tenant's Address: 5700 Crooks Road
-------------------------
Suite 301
-------------------------
Troy, Michigan 48098
-------------------------
Attn: Daniel Moore, Esq.
-------------------------
(c) Manager's Name Apex Management, Inc.
and Address: 20500 Civic Center Drive
Suite 3000
Southfield, Michigan 48076
(d) Project Name: Troy Officentre A - D
------------------------
Building Name: Troy Officentre D
------------------------
Building Address: 2800 Livernois
------------------------
Troy, Michigan 48083
------------------------
(e) Premises: Floor: 4th Floor
-------------------------------------------
Suite Number: 400
-------------------------------------------
Square Feet: 23,328 usable / 24,900 rentable square feet
-------------------------------------------
(f) Term:
Scheduled Occupancy Date: December 1, 1996
------------------
Scheduled Expiration Date of Initial Term: November 30, 2001
------------------
Initial Term: Five (5) years
------------------
(g) Base Rent:
Monthly $ 32,681.25
-------------
Annual $ 392,175.00
-------------
Aggregate $1,960,875.00
-------------
(h) Tenant's Proportionate Share:
24,900 Rentable square feet in the Premises diveded by
-------
140,590 Rentable square feet in the Building = 17.711%
------- ------
(i) Number of Exclusive Parking Spaces: None at an initial increase of additional rent of $ -0-
---- ---
(j) Security Deposit: None
----
(k) Tenant Improvement Allowance: See Exhibit D
(l) Base Year: 1997
--------
(m) Permitted Use: General Office and training of staff personnel
----------------------------------------------
</TABLE>
<PAGE> 4
SECTION 2.
THE PREMISES
2.01 Landlord, in consideration of the rents to be paid and the
covenants and agreements to be performed by Tenant, hereby leases to Tenant the
premises set forth in Section 1.01(e) (the "Premises") in the building(s) (the
"Building") described in Section 1.01 (d), together with the right to use the
parking and common areas and facilities which may be furnished from time to
time by Landlord (collectively the "Common Areas"), including, without
limitation, all common elevators, hallways and stairwells located within the
Building, and all common parking facilities, driveways and sidewalks, in common
with Landlord and with the tenants and occupants of the Project, their agents,
employees, customers, clients and invitees. Tenant agrees that the Premises
and the Building shall be deemed to include the number of rentable square feet
set forth in Section 1.01 (h) and in no event shall Tenant have the right to
challenge, demand, request or receive any change in the base rent or other sums
due hereunder as a result of any claimed or actual error or omission in the
rentable or usable square footage of the Premises, the Building or the Project.
Landlord reserves the right at any time and from time to time to make
alterations or additions to the Building or the Common Areas, and to demolish
improvements on and to build additional improvements on the land surrounding
the Building and to add or change the name of the Building from time to time,
in its sole discretion without the consent of Tenant and the same shall not be
construed as a breach of this Lease. The Building, the other buildings listed
in Section 1.01(d), the Common Areas and the land surrounding the Building and
the Common Areas are hereinafter collectively referred to as the "Project".
2.02 Landlord agrees to construct the improvements to the Premises
(the "Tenant Improvements") in accordance with the space plan(s) (as it may be
amended by approved change orders, the "Plans"), attached as Exhibit "A". All
material changes from the Plans which Landlord determines are necessary during
construction shall be submitted to Tenant for Tenant's approval or rejection.
If Tenant fails to notify Landlord of Tenant's approval or rejection of such
changes within five (5) days of receipt thereof, Tenant shall be conclusively
deemed to have approved such changes. Landlord's approval of the Plans shall
not constitute a representation, warranty or agreement (and Landlord shall have
no responsibility or liability for) the completeness or design sufficiency of
the Plans or the Tenant Improvements, or the compliance of the Plans or Tenant
Improvements with any laws, rules or regulations of any governmental or other
authority.
2.03 The provisions of Exhibit D, special provisions, shall govern
the cost of constructing Tenant Improvements.
2.04 Landlord intends to construct the Tenant Improvements and
deliver the Premises "ready for occupancy" (as defined below) to Tenant on the
Scheduled Occupancy Date set forth in Paragraph 1.01(f). The Premises will be
conclusively deemed "ready for occupancy" on the earlier to occur of when: (i)
the work to be done under this Paragraph has been substantially completed and
after the issuance of a conditional or temporary certificate of occupancy for
the Premises by the appropriate government agency within whose jurisdiction the
Building is located, or (ii) when Tenant takes possession of the Premises. The
Premises will not be considered unready or incomplete if only minor or
insubstantial details of construction, decoration or mechanical adjustments
remain to be done within the Premises or Common Areas of the Building, or if
only landscaping or exterior trim remains to be done outside the Premises, or
if the delay in the availability of the Premises for Tenant's occupancy is
caused in whole or in material part by Tenant. By occupying the premises,
Tenant will be deemed to have accepted the Premises and to have acknowledged
that they are in the condition called for in this Lease, subject only to "punch
list" items (as the term "punch list" is customarily used in the construction
industry in the area where the Project is located) identified by Tenant by
written notice delivered to Landlord within thirty (30) days after the
date Landlord tenders possession of the Premises to Tenant. If in good faith
Landlord is delayed or hindered in construction by any labor dispute, strike,
lockout, fire, unavailability of material, severe weather, acts of God,
restrictive governmental laws or regulations, riots, insurrection, war or other
casualty or events of a similar nature beyond its reasonable control ("Force
Majeure"), the date for the delivery of the Premises to Tenant "ready for
occupancy" shall be extended for the period of delay caused by the Force
Majeure. If Landlord is delayed or hindered in construction as a result of
change orders or other requests by, or acts of, Tenant ("Tenant Delay") the
date for the delivery of the Premises to Tenant "ready for occupancy" shall be
accelerated by the number of days of delay caused by Tenant Delay. The
Scheduled Occupancy Date as extended or accelerated as a result of the
occurrence of a Force Majeure or Tenant Delay or with the consent of Tenant, is
herein referred to as the Occupancy Date.
SECTION 3.
THE TERM
3.01 The initial term of this Lease (the "Initial Term or "Term")
will commence (the "Commencement Date") on the earlier of: (i) the date Tenant
takes possession of the Premises; or (II) the Occupancy Date; or (iii) the date
the Occupancy Date would have occurred in the absence of Tenant
2
<PAGE> 5
Delay. Unless sooner terminated or extended in accordance with the
terms hereof, the Lease will terminate the number of Lease Years and Months set
forth in Paragraph 1.01(f) after the Commencement Date. If the Commencement
Date is other than the first day of a calendar month, the first Lease Year
shall begin on the first day of the first full calendar month following the
Commencement Date. Upon request by Landlord, Tenant will execute a written
instrument confirming the Commencement Date and the expiration date of the
Initial Term.
SECTION 4.
THE BASE RENT
4.01 From and after the Commencement Date, Tenant agrees to pay to
Landlord, as minimum net rental for the Initial Term and Option Terms of this
Lease, the sum(s) set forth In Paragraph 1.01(g) (the "Base Rent"). The term
"Lease Year" as used herein shall be defined to mean a period of twelve (12)
consecutive calendar months. The first Lease Year shall begin on the date
determined in accordance with Section 3.01. Each succeeding Lease Year shall
commence on the anniversary date of the first Lease Year.
4.02 Base Rent and other sums due Landlord hereunder shall be paid
by Tenant to Landlord in equal monthly installments (except as otherwise
provided herein), in advance, without demand and without any setoffs or
deductions whatsoever, except as otherwise provided in this Lease, on the first
day of each and every calendar month (the "Rent Day") during the Initial Term
and Option Terms, if any, at the office of Manager as set forth in Section 1.01
(c), or at such other place as Landlord from time to time may designate in
writing. In the event the Commencement Date is other than the first day of a
calendar month, the Base Rent for the partial first calendar month of the
Initial Term will be prorated on a daily basis based on the number of days in
the calendar month and will be paid in addition to the rent provided in
Paragraph 4.01 above. Base Rent for such partial calendar month and for the
first full calendar month of the first Lease Year shall be paid upon the
execution of this Lease by Tenant.
SECTION 5.
LATE CHARGES AND INTEREST
5.01 Any rent or other sums payable by Tenant to Landlord under this
Lease which are not paid within five (5) days after they are due will be
subject to a late charge of ten (10%) percent of the amount due. Such late
charges will be due and payable as additional rent on or before the next Rent
Day.
5.02 Any rent, late charges or other sums payable by Tenant to
Landlord under this Lease not paid within ten (10) days after the same are due
will bear interest at a per annum rate equal to the lower of: (i) City Bank
Prime Rate plus five percent (5%) per annum, or (ii) the highest rate permitted
by law. Such interest will be due and payable as additional rent on or before
the next Rent Day, and will accrue from the date that such rent, late charges
or other sums are payable under the provisions of this Lease until actually
paid by Tenant.
5.03 Any default in the payment of rent, late charges or other sums
will not be considered cured unless and until the late charges and interest due
hereunder are paid by Tenant to Landlord. If Tenant defaults in paying such
late charges and/or interest, Landlord will have the same remedies as Landlord
would have if Tenant had defaulted in the payment of rent. The obligation
hereunder to pay late charges and interest will exist in addition to, and not
in the place of, the other default provisions of this Lease.
SECTION 6.
OPERATING EXPENSES, UTILITIES, AND TAXES
6.01 In the event that Operating Expenses for the Project, in any
calendar year, exceed the Operating Expenses for the Base Year (as defined in
Paragraph 1.01 (I)), Tenant shall pay to Landlord, as additional rent, Tenant's
Proportionate Share (as defined in Paragraph 1.01(h)) of any such excess.
Tenant's obligations hereunder shall be pro-rated for any calendar year in
which Tenant is obligated to pay rent for only a portion thereof. For the
purposes of this Section, the term "Operating Expenses" shall mean and include
those expenses paid or incurred by Landlord for: maintaining, operating,
owning, and repairing the Project, providing electricity, steam, water, sewer,
fuel, heating, lighting, air conditioning, window cleaning, janitorial service,
personal property taxes, insurance (including, but not limited to, fire,
extended coverage, liability, workers compensation, elevator, boiler and
machinery, war risk, or any other insurance carried in good faith by Landlord
and applicable to the Project); painting, uniforms, management fees, supplies,
sundries, sales, or use taxes on supplies or services; wages and salaries of
all persons engaged in the operation, maintenance and repair of the Project,
and so-called fringe benefits, including social security taxes, unemployment
insurance taxes, providing coverage for disability benefits, pension,
hospitalization, welfare or retirement plans, or any other similar or like
expenses
3
<PAGE> 6
incurred under the provisions of any collective bargaining agreement, or any
other similar or like expenses which Landlord pays or incurs to provide
benefits for employees so engaged in the operation, maintenance and repair of
the Project; the charges of any independent contractor who, under contract with
Landlord or its representatives, does any of the work of operating, maintaining
or repairing the Project; capital expenditures required under any governmental
law or regulation; legal and accounting expenses including, but not limited to,
such expenses as relate to seeking or obtaining reductions in, and refunds of,
real estate taxes; or any other expenses or charges, whether or not
hereinbefore mentioned, which in accordance with generally accepted accounting
and management principles would be considered as an expense of maintaining,
operating, owning or repairing the Project.
6.02 The term "Operating Expenses" shall not include the following items:
(a) costs of a capital nature under generally accepted accounting
principles consistently applied, including, but not limited to: (1) rentals and
other related expenses in leasing capital items, and (2) replacements of
capital items except capital expenditures not required to be made under this
Lease by Landlord and made at the specific request of Tenant.
(b) resale costs incurred by Landlord with respect to goods and/or
services to the extent that is entitled to reimbursement for such costs by
others:
(c) depreciation of the Building and equipment;
(d) amortization payments on mortgages or deeds of trust and any
ground lease rental;
(e) expenses of leasing other premises within the Building
(including without limitation attorneys' fees, accounting fees and real
estate brokerage commissions);
(f) advertising, promotions and public relations attributable to
Landlord's efforts to increase or maintain the occupancy rate in the Building;
(g) the cost of tenant improvements incurred in leasing other
premises within the Building;
(h) expenses performed as a special service for another tenant that
are not standard too all tenants; and
(i) any fines or penalties incurred because Landlord violated any
governmental rule or authority.
6.03 If the Project is not fully rented during all or a portion of
any year, then Landlord shall may elect to make an appropriate adjustment of
the Operating Expenses and Real Estate Taxes (as defined below) for such year
and for the Base Year employing sound accounting and management principles, to
determine the amount of Operating Expenses and Real Estate Taxes that would
have been paid or incurred by Landlord had the Project been fully rented; and
the amount so determined shall be deemed to have been the amount of Operating
Expenses and Real Estate Taxes for such year. If any expenses relating to the
Project, though paid in one year, relate to more than one calendar year, at the
option of Landlord such expense will proportionately allocated among such
related calendar years. In addition, in the event any Operating Expense or
Real Estate Tax applies to only some portion of the Project or is partially
allocable to other buildings or projects, Landlord shall allocate such
expense among such buildings and projects in accordance with sound accounting
and management principles to determine the amount of Operating Expenses and
Real Estate Taxes for the Project and the Building.
6.04 In the event that Real Estate Taxes (as hereinafter defined) for
the Project, In any calendar year, exceed the Real Estate Taxes for the Base
Year, Tenant shall pay to Landlord, as additional rent, Tenant's Proportionate
Share of any such excess over and above the Base Real Estate Taxes (as
hereinafter defined). The "Base Real Estate Taxes" shall be the Real Estate
Taxes shown on the bills for which the "due date" occurs in the Base Year.
"Real Estate Taxes" as used herein shall mean real estate taxes, assessments
(general, special, ordinary or extraordinary) sewer rents, rates and charges,
taxes based upon the receipt of rent, and any other federal, state or local
charge (general, special, ordinary or extraordinary) which may now or hereafter
be imposed, levied or assessed against the Project or any part thereof, or on
any building or improvements at any time situated thereon. In the event the
State of Michigan or any political subdivision thereof having taxing authority
shall modify, repeal or abolish the ad valorem tax on real property, or impose
a tax or assessment of any kind or nature upon, against, or with respect to the
Project or the rents payable by Tenant or on the income derived from the
Project, or with respect to Landlord's ownership interest in the Project, which
tax is assessed or imposed by way of substitution for or in addition to all or
any part of the Real Estate Taxes, then such tax or assessment shall be
included within the definitions of "Real Estate Taxes"; provided, however,
nothing herein contained shall impose an obligation on Tenant to pay the
general income tax or
4
<PAGE> 7
Michigan Single Business Tax liabilities of Landlord, except to the
extent such a tax is being used to fund governmental functions presently or
previously funded by ad valorem taxes on real properly.
6.05 At any time and from time to time, Landlord may reasonably
estimate the amount by which current Real Estate Taxes and Operating Expenses
are expected to exceed the Real Estate Taxes and Operating Expenses for the
Base Year (the "Estimated Excess Expenses"). Tenant shall pay its
Proportionate Share of the Estimated Excess Expenses by depositing with
Landlord on each Rent Day during the term hereof an amount equal to one-twelfth
(1/12) of its annual share of the Estimated Excess Expenses. Landlord shall
deliver to Tenant, within a reasonable period of time after the close of each
calendar year, an annual statement indicating the amount by which the Real
Estate Taxes and Operating Expenses actually incurred in that calendar year
exceed the Real Estate Taxes and Operating Expenses for the Base Year (the
"Actual Excess Expenses"). In the event that the Actual Excess Expenses exceed
the Estimated Excess Expenses, Tenant shall pay Tenant's Proportionate Share of
the difference to Landlord within fifteen (15) days of delivery of the annual
statement. In the event that Estimated Excess Expenses exceed Actual Excess
Expenses, then at Landlord's option Tenant shall either be reimbursed to the
extent that Tenant's payments toward Tenant's share of the Estimated Excess
Expenses exceed Tenant's Proportionate Share of the Actual Excess Expenses, or
Tenant shall be granted a corresponding credit against the Base Rent or other
sums next due Landlord hereunder.
6.06 Tenant shall be responsible for and pay before delinquent all
municipal, county, and state taxes assessed, levied or imposed during the term
of this Lease, and all extensions thereof, upon the leasehold interest and all
furniture, fixtures, machinery, equipment, apparatus, systems and all other
personal properly of any kind whatsoever located at, placed in or used in
connection with the Premises.
6.07 Landlord agrees with Tenant that Landlord will furnish heat
and air conditioning during normal business hours (8:00 a.m. to 6:00 p.m.
Monday through Friday and Saturday 9:00 a.m. to 2:00 p.m., excluding Building
holidays), usual and customary janitorial services, as set forth in Exhibit
"C", and provide water and sewer service to the Premises and hot and cold water
for ordinary lavatory purposes in the common area restrooms. However, if
Tenant uses or consumes water for any other purpose or in unusual quantities
(of which fact Landlord shall be the sole judge) Landlord may install a water
meter at Tenant's expense which Tenant shall thereafter maintain at Tenant's
expense in good working order and repair, to register such water consumption.
Tenant shall pay for the quantity of water shown on said meter, together with
the sewer rents, debt service and other charges made by the local utilities for
water and sewer service, as additional rent, at the secondary rate per gallon
(general service rate) established by the applicable governmental authority or
the applicable utility company providing the water. Whenever machines or
equipment which generate heat are used in the Premises which affect the
temperature otherwise maintained by the air-conditioning system, Landlord
reserves the right to install supplementary air-conditioning equipment in the
Premises, and the cost thereof, and the expense of operation and maintenance
thereof, shall be paid by Tenant to Landlord. Although Landlord will provide
air-conditioning and/or heat upon the prior request of Tenant in accordance
with Building practices for hours other than regular business hours, Tenant
will pay Landlord's charges for providing such service. Said charges shall
include a cost equal to the cost to operate the equipment for Tenant's expanded
business hours and days, and Landlord's maintenance, equipment amortization and
other appropriate charges which Landlord determines are attributable to
operating the equipment for periods in excess of the normal business hours
described above.
6.08 Tenant shall pay all charges made against the Premises for
electricity used upon or furnished to the Premises as and when due during the
continuance of this Lease and electricity shall be separately metered for the
Premises. Whether or not metered, Tenant shall pay for the electricity
at the secondary rate (general service rate) established by the applicable
governmental authority or the applicable utility company providing the
electricity. Tenant shall also pay for fluorescent or other electric light
bulbs or tubes and electric equipment used in the leased premises.
6.09 Notwithstanding anything to the contrary contained in this
Section 6, in the event that the Operating Expenses excluding insurance and all
utilities (the "Adjusted Operating Expenses"), in any calendar year of the
Initial Term, exceed the Operating Expenses excluding insurance and all
utilities for the Base Year (the "Adjusted Base Year Operating Expenses"),
Tenant shall pay Landlord Tenant's Proportionate Share of such excess (the
"Adjusted Operating Expense Escalation") which shall in no event exceed the
escalation cap (the "Escalation Cap"). The Escalation Cap shall be based on
the increase in the cost of living Plus ten percent (10%) in accordance with
the following formula:.
(i) The increase, if any, in the cost of living shall be determined,
using as a basis for computation the Revised Consumer's Price Index for
Urban Wage Earners and Clerical Workers for the Detroit Area, published by the
Bureau of Labor Statistics of the United States Department of Labor (1982-1984
equals 100) (the "Index").
5
<PAGE> 8
(ii) The Index in the column entitled "All Items" for the first
calendar month of the first calendar year of the Initial Term of this Lease (the
"Base Lease Year") shall be the base index (the Base Index") and the
corresponding Index for the first month in each succeeding calendar year shall
be the current index (the "Current Index").
(iii) The annual increase in the cost of living, if any, shall be
determined by annually dividing the Current Index by the Base Index or the
previous year's Current Index in succeeding years.
(iv) Annually the quotient derived by the computation provided in
subsection (iii) plus ten percent (10%) shall be multiplied by Adjusted
Operating Expenses Escalation for the preceding calendar year, and such
computation shall be the Escalation Cap, provided, however, in no event shall
the adjustment cause the Base Rent to be reduced.
(v) Appropriate adjustments shall be made in the event there is a
published amendment to the Index figures upon which the above computation is
based. If the publication of the Index is discontinued, Landlord and Tenant
shall accept comparable statistics on the cost of living for the nearest
metropolitan area to the location of the Premises, as computed and published by
an agency of the United States or a responsible financial periodical or
recognized authority selected by both Landlord and Tenant.
SECTION 7.
USE OF PREMISES
7.01 Tenant shall occupy and use the Premises during the Term for the
purposes set forth in Section 1.01(m) only, and for no other purpose without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Tenant agrees that it will not use or permit any person to
use the Premises or any part thereof for any use or purpose in violation of the
laws of the United States, the laws, ordinances or other regulations of the
State or municipality in which the Premises are located, or of any other lawful
authorities, or any building and use restrictions, now or hereafter affecting
the Premises or any part thereof.
7.02 Tenant will not do or permit any act or thing to be done in or to
the Premises or the Project which will invalidate or be in conflict with any
terms or conditions required to be contained in any property or casualty
insurance policy authorized to be issued in the State of Michigan or any term or
condition of the Insurance Services Office's (ISO) Commercial Property Insurance
and/or Commercial General Liability Insurance Conditions or any different or
additional terms and conditions of any insurance policy in effect on the
Premises or the Project from time to time (collectively the *Building
Insurance"), Nor shall Tenant do nor permit any other act or thing to be done in
or to the Premises or the Project which shall or might subject Landlord to any
liability or responsibility to any person or for property damage, nor shall
Tenant use the Premises or keep anything on or in the Project except as now or
hereafter permitted by the fire regulations, the fire department or zoning,
health, safety, land use or other regulations. Tenant, at Tenant's sole cost
and expense, shall comply with all requirements and recommendations set forth by
any property or casualty insurer or reinsurer providing coverage for the
Premises or the Project or by any person or entity engaged by Landlord or
Manager to perform any loss control, analysis or assessment for the Premises or
the Project. Tenant shall not do or permit anything to be done in or upon the
Premises or the Project or bring or keep anything therein or use the Premises or
the Project in a manner which increases the rate of premium for any Building
insurance or any property or equipment located therein over the rate in effect
at the commencement of the Term of this Lease. In addition, Tenant agrees to
pay Landlord the amount of any increase in premiums for insurance which may be
charged during the term of this Lease resulting from the act or omissions of
Tenant or the character or nature of its occupancy or use of the Project or the
Premises, whether or not Landlord has consented to the same. Any scheduled or
"make-up" of any insurance rate for the Premises, the Building or the Project
issued by any insurance company establishing insurance premium rates for the
Premises, Building or the Project shall be prima facie evidence of the facts
therein stated and of the several items and charges in the insurance premium
rates then applicable to the Premises, the Building or the Project. Tenant shall
give Landlord notice promptly after Tenant learns of any accident, emergency, or
occurrence for which Landlord is or may be liable, or any fire or other casualty
or damage or defects to the Premises, the Building or the Project which Landlord
is or may be responsible or which constitutes the property of Landlord.
7.03 Tenant shall not perform acts or carry on any activities or engage
in any practices which may injure the Premises or any portion of the Project or
which may be a nuisance or menace to other persons on or in the Project. Tenant
shall pay all costs, expenses, fines, penalties, or damages which may be imposed
upon Landlord by reason of Tenant's failure to comply with the provisions of
this Section.
6
<PAGE> 9
7.04 Tenant will not place any load upon any floor of the Premises
exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Landlord reserves the right to prescribe the weight
and position of all safes, business machines and mechanical equipment. Such
items shall be placed and maintained by Tenant, at Tenant's expense, in settings
sufficient in Landlord's judgment, to absorb and prevent vibration, noise and
annoyance. If at any time any windows of the Premises are temporarily or
permanently closed, darkened or covered for any reason whatsoever, including
Landlord's own acts, Landlord shall not be liable for any damage Tenant may
sustain thereby, and the same shall not be considered a default under this Lease
and Tenant shall not be entitled to any compensation therefore nor abatement of
any Base Rent or any other sums due hereunder, nor shall the same release Tenant
from its obligations hereunder nor constitute an eviction, construction, actual
or otherwise.
7.05 During the term hereof, and consistent with janitorial services
provided by Landlord, Tenant will keep the Premises in a clean and wholesome
condition, will use the same in a careful and proper manner, and generally will
comply with all laws, ordinances, orders and regulations affecting the Premises
and the cleanliness, safety, occupancy and use thereof. Tenant will not commit
waste in or on the Premises, and will use the Premises in accordance with the
Rules and Regulations of the Project, as set forth in Exhibit B, attached hereto
and made a part hereof.
7.06 As between Landlord and Tenant, Tenant shall be responsible for any
alterations, changes or improvements to the Premises which may be necessary in
order for the Premises and Tenant's use thereof to be in compliance with the
Americans with Disabilities Act of 1990 and its state and local counterparts or
equivalents (the "Disabilities Act") during the term of this Lease.
7.07 For the purposes of this Lease, the term "Hazardous Materials"
shall mean, collectively, (i) any biological materials, chemicals, materials,
substances or wastes which are now or hereafter become defined as or included in
the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar import, under any
applicable Environmental Law (as defined below) and (ii) any petroleum or
petroleum products and asbestos in any form that is or could become friable.
7.08 For the purposes of this Lease, the term "Environmental Laws" shall
mean all federal, state, and local laws, statutes, ordinances, regulations,
criteria, guidelines and rules of common law now or hereafter in effect, and in
each case as amended, and any judicial or administrative interpretation thereof,
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases or Hazardous Materials or otherwise
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials. Environmental Laws
include but are not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended; the Resource Conservation
and Recovery Act, as amended; the Clean Air Act, as amended; the Clean Water
Act, as amended; and their state and local counterparts or equivalents.
7.09 Tenant shall not (either with or without negligence) cause or
permit the escape, disposal or release of any Hazardous Materials. Tenant shall
not allow the storage or use of such Hazardous Materials on the Premises or the
Project in any manner prohibited by the Environmental Laws or by the
highest standards prevailing the industry for the storage and use of
such Hazardous Materials, nor allow to be brought into the Premises or the
Project any such Hazardous Materials except to use in the ordinary course of
Tenant's business, and then only after written notice is given to Landlord of
the identity of such Hazardous Materials and Landlord consents in writing to the
use of such materials. Landlord shall have the right at any times during the
term of this Lease to perform assessments of the environmental condition of the
Premises and of Tenant's compliance with this Section 7.09. In
connection with any such assessment, Landlord shall have the right to enter and
inspect the Premises and perform tests (including physically invasive tests),
provided such tests are performed in a manner that minimizes disruption to
Tenant. Tenant will cooperate with Landlord in connection with any such
assessment by, among other things, responding to inquires and providing relevant
documentation and records. Tenant will accept custody and arrange for the
disposal of any Hazardous Materials that are required to be disposed of as a
result of those tests, provided that those Hazardous Materials were disposed of
or released by Tenant or otherwise resulted from Tenant's operations. Landlord
shall have no liability or responsibility to Tenant with respect to any such
assessment or test or with respect to results of any such assessment or test.
If any lender or governmental agency shall ever require testing to ascertain
whether or not there has been any release of Hazardous Materials, then the
reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand
as additional charges if such requirement applies to the Premises or Tenant's
activities on the Project and it is determined that such Hazardous Materials
were released by Tenant, Tenant's servants, employees, agents, clients,
customers. licensees, invitees, visitors, and contractors in violation of this
Section 7.09 and are the reason for such testing. If any inspection indicates
any (i) non-compliance with any Environmental Law or the highest standards
prevailing in the industry for the storage and use of Hazardous Materials; (ii)
damage; or (iii) contamination, Tenant shall, at its cost and expense, remedy
such non-compliance, damage or
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contamination. In addition, Tenant shall execute affidavits, representations
and the like from time to time at Landlord's request concerning Tenant's best
knowledge and belief regarding the presence of Hazardous Materials on the
Premises. Irrespective of whether Landlord elects to inspect the Premises, if
Hazardous Materials are found on or about the Premises, Landlord shall have no
responsibility, liability or obligation whatsoever with respect to the
existence, removal or transportation of the Hazardous Material or the
restoration and remediation of the Premises. Further, Landlord shall have the
right to require Tenant to immediately terminate the conduct of any activity in
violation of the Environmental Law, the highest standards prevailing in the
industry for the storage and use of Hazardous Materials or, if none exist, the
standards determined by Landlord.
7.10 Tenant further agrees that it will not, by either action or
inaction, invite or otherwise cause agents or representatives of any federal,
state or local governmental agency to enter onto the Premises or the Project
and/or investigate the Premises or the Project. Tenant may invite agents or
representatives of any federal, state or local governmental agency to enter onto
the Premises or the Project if doing so within the normal course of Tenant
business. This agreement does not allow Tenant to obstruct any such entry or
investigation and the mere fact of a regulatory agency entry or investigation
without Tenant's involvement either by action or inaction shall not be deemed a
breach of this lease. Nothing set forth in this paragraph shall prohibit Tenant
from reporting any fact or condition which Tenant has been advised it has a
legal obligation to report provided Tenant first notifies Landlord of such fact
or condition and Tenant's intention to report the fact or condition.
7.11 Tenant shall indemnify, hold harmless and defend Landlord, its
licensees, servants, agents, employees and contractors for any loss, damage,
claim, liability or expense (including reasonable attorney's fees) arising out
of any violation of any Environmental Law(s) or the Disabilities Act which
exists or occurs after the date hereof. Tenant shall notify Landlord as soon as
possible after Tenant learns of the existence of or potential for any such loss,
damage, claim, liability or expense arising out of any violation or suspected
violation of any Environmental Law(s) or the Disabilities Act. In the event
Tenant refuses to address such violation or suspected violation within five (5)
days of such notice or another notice from Landlord, and, thereafter, to
investigate such violation or suspected violation, and promptly commence and
diligently pursue any action required to address such violation or suspected
violation, Landlord shall have the right, in addition to every other right and
remedy it may have hereunder, to terminate this Lease by giving ten (10) days
prior written notice thereof to Tenant, and upon the expiration of such ten (10)
days, this Lease shall terminate. The covenants set forth herein shall survive
the expiration or earlier termination of this Lease.
SECTION 8.
INSURANCE
8.01 Commencing on the Commencement Date, Tenant shall, during the Term
of this Lease, maintain in full force and effect policies of commercial general
liability insurance (including premises, operation, bodily injury, personal
injury, death, independent contractors, products and completed operations, broad
form contractual liability and broad form property damage coverage), in a
combined single limit amount of not less than Two Million Dollars ($2,000,000),
per occurrence (exclusive of defense costs), against all claims, demands or
actions with respect to damage, injury or death made by or on behalf of any
person or entity, arising from or relating to the conduct and operation of
Tenant's business in, on, or about the Premises (which shall Include Tenant's
signs, if any), or arising from or related to any act or omission of Tenant or
of Tenant's principals, officers, agents, contractors, servants, employees,
licensees and invitees. Whenever, in Landlord's reasonable judgment, good
business practice and changing conditions indicate a need for additional
amounts or different types of insurance coverage, Tenant shall, within ten (10)
days after Landlord's request, obtain such insurance coverage, at Tenant's sole
cost and expense.
8.02 Commencing on the Commencement Date, Tenant shall obtain and
maintain policies of workers' compensation and employers' liability insurance
which shall provide for statutory workers' compensation benefits and employers'
liability limits of not less than that required by law.
8.03 Commencing on the Commencement Date, Tenant shall obtain and
maintain Insurance protecting and indemnifying Tenant against any and all damage
to or loss of any personal property, fixtures, leasehold improvements,
alterations, decorations, installations, repairs, additions, replacements or
other physical changes in or about the Premises, including but not limited to
the Tenant Improvements, and all claims and liabilities relating thereto, for
their full replacement value without deduction or depreciation. In addition, if
Tenant shall install or maintain one or more pressure vessels to serve Tenant's
operations on the Premises, Tenant shall, at Tenant's sole cost and expense,
obtain, maintain and keep in full force and effect appropriate boiler or other
insurance coverage therefore in an amount not less than One Million and No/100
Dollars ($1,000,000.00) (it being understood and agreed, however, that the
foregoing shall not be deemed a consent by Landlord to the installation and/or
maintenance of any such pressure vessels in the Premises, which installation
and/or maintenance shall at all times be subject to the prior written consent of
Landlord). All insurance policies required pursuant to this Paragraph 8.03
shall be written on a so-called "all risk" form and shall be carried in
sufficient
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amount so as to avoid the imposition of any co-insurance penalty in the event of
a loss. Such Insurance shall provide the broadest coverage then available,
including coverage for loss of profits or business income or reimbursement for
extra expense incurred as the result of damage or destruction to all or a part
of the Premises.
8.04 All insurance policies which Tenant shall be required to maintain
pursuant to this Section 8 shall, in addition to any of the foregoing: be
written by insurers which have an A.M. Best & Company rating of "A", Class "X",
or better and who are authorized to write such business in the State of Michigan
and are otherwise satisfactory to Landlord; be written as "occurrence" policy;
be written as primary policy coverage and not contributing with or in excess of
any coverage which Landlord or any ground or building lessor may carry; name
Landlord, the Manager, and Landlord's mortgagee and ground or building lessor,
if any, as additional insureds; be endorsed to provide that they shall not be
cancelled, failed to be renewed, diminished or materially altered for any reason
except on thirty (30) days prior written notice to Landlord and the other
additional insureds; and provide coverage to Landlord, Landlord's property
management company, and Landlord's mortgagee whether or not the event or
occurrence giving rise to the claim is alleged to have been caused in whole or
in part by the acts or negligence of Landlord, Landlord's property management
company, or Landlord's mortgagee. At Landlord's option, either the original
policies or certified duplicate copies of the original policies will be
delivered by Tenant to Landlord at least ten (10) days prior to their effective
date thereof, together with receipts evidencing payment of the premiums
therefor. Tenant will deliver certificates of renewal for such policies to
Landlord not less than thirty (30) days prior to the expiration dates thereof.
No such policy shall contain a deductible or self insured retention greater than
$5,000.00 per claim, nor shall any such policy be the subject of an
indemnification or other arrangement by which any insured is obligated to repay
any Insurer with respect to loss occurring on the Premises.
8.05 If Tenant fails to provide all or any of the insurance required by
this Section 8 or subsequently falls to maintain such insurance in accordance
with the requirements hereof, then after giving five (5) business day
written notice to Tenant, Landlord may (but will not be required to) procure or
renew such insurance to protect its own interests only, and any amounts paid by
Landlord for such insurance will be additional rental due and payable on or
before the next Rent Day, together with late charges and interest as provided in
Section 5 hereof. Landlord and Tenant agree that no insurance acquired by
Landlord pursuant hereto shall cover any interest or liability of Tenant and any
procurement by Landlord of any such insurance or the payment of any such
premiums shall not be deemed to waive or release the default of Tenant with
respect thereto.
SECTION 9.
DAMAGE BY FIRE OR OTHER CASUALTY
9.01 It is understood and agreed that if, during the Term hereof, the
Project and/or the Premises shall be damaged or destroyed in whole or in part by
fire or other casualty, without the fault or neglect of Tenant, Tenant's
servants, employees, agents, visitors, invitees or licensees, which damage is
covered by insurance carried pursuant to Section 8 above, unless Landlord elects
to terminate this Lease as provided in Paragraph 9.02 below, Landlord shall
cause the Project and/or the Premises to be repaired and restored to good,
tenantable condition with reasonable dispatch at its expense; provided, however,
Landlord shall not be obligated to expend for such repair or restoration an
amount in excess of insurance proceeds made available to Landlord for such
purpose, if any. Landlord's obligation hereunder shall be limited
to repairing or restoring the Project and/or the Premises to
substantially the same condition that existed prior to such damage or
destruction.
9.02 If (i) more than fifty (50%) percent of the floor area of the
Premises shall be damaged or destroyed, (ii) more than twenty-five (25%) percent
of the Project shall be damaged or destroyed, or (iii) any material damage or
destruction occurs to the Premises or the Project during the last twelve (12)
months of the Initial Term or Option Term, as the case may be, then Landlord may
elect to either terminate this Lease or repair and rebuild the Premises. In
order to terminate this lease pursuant to this Paragraph, Landlord must give
written notice to Tenant of its election to so terminate, such notice to be
given within ninety (90) days after the occurrence of damage or destruction
fitting the above description, and thereupon the term of this Lease shall expire
by lapse of time ten (10) days after such notice is given and Tenant shall
vacate the Premises and surrender the same to Landlord, without prejudice,
however, to Landlord's rights and remedies against Tenant under the Lease
provisions in effect prior to such termination, and any rent owing shall be paid
up to such date and any payments of rent made by Tenant which were on account of
any period subsequent to such date shall be returned to Tenant. Tenant
acknowledges that Landlord will not carry insurance on Tenant's furniture and/or
furnishings or any fixtures or equipment, improvements, or appurtenances
removable by Tenant and agrees that Landlord will not be obligated to repair any
damage thereto or replace the same.
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9.03 Tenant shall give immediate notice to Landlord in case of fire
or accident at the Premises. If Landlord repairs or restores the Premises as
provided in Paragraph 9.01 above, Tenant shall promptly repair or replace its
trade fixtures, furnishings, equipment, personal property and leasehold
improvements in a manner and to a condition equal to that existing prior to the
occurrence of such damage or destruction.
9.04 If the casualty, or the repairing or rebuilding of the Premises
or Project pursuant to Paragraphs 9.01 and 9.02 above shall render the Premises
or Project untenantable, in whole or in part, a proportionate abatement of the
rent due hereunder shall be allowed from the date when the damage occurred
until the date Landlord completes the repairs on the Premises or Project or, in
the event Landlord elects to terminate this Lease, until the date of
termination. Such abatement shall be computed on the basis of the ratio of the
floor area of the Premises or Project rendered untenantable to the entire floor
area of the Premises or Project.
9.05 Tenant shall not entrust any property to any employee,
contractor, licensee, or invitee of Landlord. Any person to whom any property
is entrusted by or on behalf of Tenant in violation of foregoing prohibition
shall be deemed to be acting as Tenant's agent with respect to such property
and neither Landlord nor its agents shall be liable for any damage to property
of Tenant or of others entrusted to employees of the Project, nor shall
Landlord or its agents be liable for any such damage caused by other tenants or
persons in, upon or about the Project or caused by operations or construction
of any private, public or quasi-public work.
SECTION 10.
REPAIRS, RENOVATIONS AND ALTERATIONS
10.01 Tenant shall, at Tenant's sole expense, keep the interior of
the Premises and the fixtures therein in good condition, reasonable wear and
tear excepted, and will also repair all damage or injury to the Premises and
fixtures resulting from the carelessness, omission, neglect or other action or
inaction of Tenant, its servants, employees, agents, visitors, invitees or
licensees. Such damage shall be promptly repaired or damaged items replaced by
Tenant, at its sole expense, to the satisfaction of Landlord. If Tenant fails
to make such repairs or replacements, Landlord may do so and the cost thereof
shall become collectible as additional rent hereunder and shall be paid by
Tenant within ten (10) days after presentation of statement therefor. Landlord
shall maintain, and shall make all necessary repairs and replacements to, the
Building, the heating, air conditioning and electrical systems located therein,
and the Common Areas, provided that at Landlord's option, (i) Tenant shall make
all repairs and replacements arising from its act, neglect or default and that
of its agents, servants, employees, invitees and licensees, or (ii) Landlord
may make such repairs and replacements and the costs thereof shall become
collectable as additional rent hereunder and shall be paid by Tenant within
five (5) days after presentation of a statement therefore. Tenant shall keep
and maintain the Premises in a clean, sanitary and safe condition, and shall
keep and maintain the interior of the Premises in full compliance with the laws
of the United States and State of Michigan, all directions, rules and
regulations of any health officer, fire marshal, building inspector, or other
proper official of any governmental agency having jurisdiction over the
Premises, and the requirements of Landlord's mortgagee, all at Tenant's full
cost and expense, and Tenant shall comply with all requirements of law,
ordinance and regulation affecting the Premises. Tenant shall make all
non-structural repairs to the Premises as and when needed to preserve them in
good order and condition. All the aforesaid repairs shall be of quality or
class equal to the original construction. Tenant shall give Landlord prompt
written notice of any defective condition in any plumbing, heating system or
electrical lines located in, servicing or passing through the Premises and
following such notice, Landlord shall remedy the condition with due diligence
but at the expense of Tenant if repairs are necessitated by damage or injury
attributable to Tenant, Tenant's servants, agents, employees, invitees or
licensees. There shall be no allowance to Tenant for diminutions of rental
value and no liability on the part of Landlord by reason of inconvenience,
annoyance or injury to business arising from Landlord, Tenant, or others making
or failing to make any repairs, alterations, additions, or improvements in or
to any portion of the Building or the Premises or in and to the fixtures,
appurtenances or equipment thereof. The provisions of this Section 10 with
respect to the making of repairs shall not apply in the case of fire or other
casualty which are dealt with in Section 9 hereof.
10.02 Tenant shall not make any renovations, alterations, additions or
improvements to the Premises without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed. All plans and
specifications for such renovations, alterations, additions or improvements
shall be approved by Landlord prior to commencement of any work. Landlord's
approval of the plans, specifications and working drawings for Tenant's
alterations shall create no responsibility or liability on the part of Landlord
for their completeness, design sufficiency, or compliance with laws, rules and
regulations of governmental agencies or authorities, including but not limited
to the Americans with Disabilities Act, as amended. All renovations,
alterations, additions or improvements made by Tenant upon the Premises, except
for movable office furniture and movable trade fixtures installed at the
expense of Tenant, shall be and shall remain the property of Landlord, and
shall he surrendered with the Premises at the termination of this Lease,
without molestation or injury. In addition, Landlord may designate by written
notice to Tenant at the time of written consent the alterations, additions,
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improvements and fixtures made by or for Tenant, which shall be removed by
Tenant at the expiration or termination of the Lease and Tenant shall
promptly remove the same and repair any damage to the Premises caused by such
removal.
10.03 Tenant agrees that all renovations, alterations, additions and
improvements made by it pursuant to Paragraph 10.02, notwithstanding Landlord's
approval thereof, shall be done in a good and workmanlike manner and in
conformity with all guidelines provided by Landlord and all laws, ordinances
and regulations of all public authorities having jurisdiction, that materials
of good quality shall be employed therein, that the structure of the Premises
shall not be impaired thereby, that the work shall be carried out and completed
in an orderly, clean and safe manner, and that, while the work is being
performed, Tenant shall maintain builder's risk insurance coverage with
Landlord as a named insured, which insurance coverage shall meet the criteria
set forth in Section 8.
10.04 Notwithstanding anything to the contrary set forth in this Lease,
Landlord shall have the right at any time and from time to time during the Term
of this Lease to add an additional building (or buildings) and other
improvements to the northeast side of the Building and, in connection therewith
to (a) cause Tenant to vacate the 3' x 44' section on the northeast side of
each floor of the Premises, (b) to demolish, repair and replace the existing
exterior wall, windows and other structures therein with a new demising wall,
halfway and other features excluding windows which Landlord may deem desirable
and, (c) within twenty-four (24) months after the date Tenant vacates such
space, the 3' x 44' wall section, to repair and restore such portion of the
Premises excluding windows, to substantially the same condition it was in prior
to the construction activity. During the period Landlord requires Tenant to
vacate the 3' x 44' section, the rent and all other sums due hereunder for such
space shall abate proportionately until such area is returned to Tenant "ready
for occupancy". Except for the abatement of the rent pursuant to this Section
10.04, Landlord's construction activity shall not constitute an eviction of
Tenant or a default under this Lease.
SECTION 11.
LIENS
11.01 Tenant will keep the Premises free of liens of any sort and will
hold Landlord harmless from any liens which may be placed on the Premises
except those attributable to debts incurred by Landlord. In the event a
construction or other lien shall be filed against the Building, the Premises or
Tenant's interest therein as a result of any work undertaken by Tenant or its
employees, agents, contractors or subcontractors, or as a result of any repairs
or alterations made by or any other act of Tenant or its employees, agents,
contractors or subcontractors, Tenant shall, within two (2) ten (10) business
days after receiving notice of such lien, discharge such lien either by payment
of the indebtedness due the lien claimant or by filing a bond (as provided by
statute) as security for the discharge of such lien. In the event Tenant shall
fail to discharge such lien, Landlord shall after have the right to procure
such discharge by filing such bond, and Tenant shall pay the cost of such bond
to Landlord as additional rent upon the next Rent Day in accordance with
Section 5 hereof.
SECTION 12.
EMINENT DOMAIN
12.01 If all of the Premises are condemned or taken in any manner
(including without limitation any conveyance in lieu thereof) for any public or
quasi-public use, the term of this Lease shall cease and terminate as of the
date title is vested in the condemning authority. If (i) more than fifty (50%)
percent of the floor area of the Premises shall be condemned or taken in any
manner, or (ii) more than twenty-five (25%) percent of the Building shall be
condemned or taken, or (iii) any material condemnation or taking occurs during
the last twelve (12) months of the Initial Term or Option Term, as the case may
be, or (iv) such a portion of the parking area on the Land is so condemned or
taken that the number of parking spaces remaining are less than the number
required by applicable zoning laws or other building code for the Building,
then Landlord may elect to terminate this Lease. In order to terminate this
Lease pursuant to this Paragraph, Landlord must give Tenant written notice of
its election to so terminate, such notice to be given not later than ninety
(90) days after the completion of such condemnation or taking, and thereupon
the term of this Lease shall expire on the date set forth in such notice, and
Tenant shall vacate the Premises and surrender the same to Landlord, without
prejudice, however, to Landlord's rights and remedies against Tenant under the
Lease provisions in effect prior to such termination, and any rent owing shall
be paid up to such date and any payments of rent made by Tenant which were on
account of any period subsequent to such date shall be returned to Tenant.
12.02 If this Lease is not terminated following such a condemnation or
taking, Landlord, as soon as reasonably practicable after such condemnation or
taking and the determination and payment of Landlord's award on account
thereof, shall expend as much as may be necessary of the net amount which is
awarded to Landlord and released by Landlord's mortgagee, if any, in restoring,
to the extent originally constructed by Landlord (consistent, however, with
zoning laws and building codes then in existence), so much of the Building as
was originally constructed by Landlord to an architectural unit as
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nearly like its condition prior to such taking as shall be practicable;
provided, however, Landlord shall not be obligated to expend for such
restoration an amount in excess of condemnation proceeds made available to
Landlord, if any. Landlord's obligation hereunder shall be limited to restoring
the Building and/or the Premises to substantially the same condition that
existed prior to such condemnation or taking.
12.03 If this Lease is not terminated pursuant to Paragraph 12.01, the
Base Rent and other sums payable by Tenant hereunder, as adjusted as provided
herein, shall be reduced in proportion to the reduction in area of the Premises
by reason of the condemnation or taking. If this Lease is terminated pursuant to
Paragraph 12.01, the minimum net rental and other charges which are the
obligation of Tenant hereunder shall be apportioned and prorated accordingly as
of the date of termination.
12.04 The whole of any award or compensation for any portion of the
Premises taken, condemned or conveyed in lieu of taking or condemnation,
including the value of Tenant's leasehold interest under the Lease, shall be
solely the property of and payable to Landlord. Nothing herein contained shall
be deemed to preclude Tenant from seeking, at its own cost and expense, an award
from the condemning authority for loss of its business, the value of any trade
fixtures or other personal property of Tenant in the Premises or moving
expenses, provided that the award for such claim or claims shall not be in
diminution of the award made to Landlord.
SECTION 13.
ASSIGNMENT OR SUBLETTING
13.01 Tenant agrees not to assign or In any manner transfer this Lease
or any interest in this Lease without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed and not to sublet
the Premises or any part of the Premises or to allow anyone to use or to come
in, through or under the Premises without Landlord's consent, which consent
shall not be unreasonably withheld or delayed. Any attempted subletting or
assignment without Landlord's consent, which consent shall not be unreasonably
withheld or delayed shall be voidable in Landlord's sole discretion and, at
Landlord's option, shall grant Landlord the right to terminate this Lease or to
exercise any of the other rights or remedies it may have hereunder. If consented
to, no assignment or subletting shall be binding upon Landlord unless the
sublessee or assignee shall deliver to Landlord an instrument (in recordable
form, if Landlord so requests) containing an agreement of assumption of all of
Tenant's obligations under this Lease. In no event may Tenant assign, sublet or
otherwise transfer this Lease or any interest in this Lease at any time while an
Event of Default exists hereunder. Landlord may, in its sole discretion, refuse
to give its consent to any proposed subletting or assignment or exercise its
other rights hereunder for any reason, including, but not limited to, the
financial condition, creditworthiness or business reputation of the proposed
sublessee or assignee, the prevailing market or quoted rental rates for space in
the Building or other comparable buildings, and the proposed use of the Premises
by, or business of, the proposed sublessee or assignee. One consent by Landlord
to a subletting or assignment will not be deemed a consent to any subsequent
assignment, subletting, occupation or use by any other person. Neither the
consent to any assignment or subletting nor the acceptance of rent from an
assignee, subtenant or occupant will constitute a release of Tenant from the
further performance of the obligations of Tenant contained in this Lease. A
dissolution, merger, consolidation, or other reorganization of Tenant, and the
issuance or transfer of twenty (20%) percent or more of the voting capital of
Tenant to persons other than shareholders as of the beginning of such period
within any twelve (12) month period, shall each be deemed to be an assignment of
this Lease, and as such, prohibited without Landlord's prior written consent.
Notwithstanding anything in this paragraph or the foregoing to the contrary, the
merger, consolidation, or other reorganization of Tenant and the sale of all or
substantially all of Tenant's assets (the "Permitted Transaction") shall be
permitted hereunder with sixty (60) day prior written notice to Landlord (unless
such notice is prohibited by law in which event Tenant shall give such notice to
Landlord as soon as possible but in no event less than ten (10) days prior to
such transaction), but not prior approval of Landlord, if the resultant entity
(the "Resultant Entity") after such Permitted Transaction has, and has
maintained for each of the two (2) full fiscal years preceding the Permitted
Transaction, an Investment Grade Bond Rating (as hereinafter defined) and a net
worth exceeding Twenty Million Dollars ($20,000,000) determined in accordance
with general accepted accounting principles, consistently applied, and Tenant
furnishes Landlord evidence reasonably acceptable to Landlord of the Investment
Grade Bond Rating and net worth standard. For purposes of this Lease,
"Investment Grade Bond Rating" means either (i) debt instruments issued and
outstanding by the Resultant Entity are rated by either Standard & Poors or
Moody's (or similar rating agency) to be Investment Grade or (ii) the credit of
the Resultant Entity, in the absence of any such outstanding debt instruments,
is determined pursuant to a report issued by Standard & Poors or Moody's (or
such similar rating agency) to be equal to, or greater than, an existing
Standard & Poors rating of BBB or higher, or an existing Moody's rating of BAA
or higher. In addition, an initial public offering (IPO) by the Tenant shall be
permitted hereunder with sixty (60) day prior written notice (unless such notice
is prohibited by law in which event Tenant shall give such notice to Landlord
as soon as possible but in no event less than ten (10) days prior to such
transaction), but not prior approval, of Landlord if the resultant entity after
such transaction has a net
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worth exceeding Twenty Million Dollars ($20,000,000) determined in accordance
with generally accepted accounting principles, consistently applied, and
Tenant furnishes Landlord evidence reasonably acceptable to Landlord of net
worth standard.
13.02 In the event Tenant desires to sublet all or a portion of the
Premises or assign this Lease, Tenant shall give notice to Landlord setting
forth the terms of the proposed subletting or assignment together with such
financial and other information Landlord may request. Landlord shall have the
right, exercisable by written notice to Tenant within sixty (60) days after
receipt of Tenant's notice, (i) to consent or refuse to consent thereto in
accordance with Paragraph 13.01 above, or (ii) to terminate this Lease which
termination may, in Landlord's sole discretion, be conditioned upon Landlord
and the proposed subtenant/assignee entering into a new Lease.
13.03 Upon the occurrence of an Event of Default, as defined under
Section 18, if all or any part of the Premises are then sublet or assigned,
Landlord, in addition to any other remedies provided by this Lease or by law,
may, at its option, collect directly from the sublessee or assignee all rent
becoming due to Landlord by reason of the subletting or assignment. Any
collection by Landlord from the sublessee or assignee shall not be construed to
constitute a waiver or release of Tenant from the further performance of its
obligations under this Lease or the making of a new Lease with such sublessee
or assignee.
13.04 In the event Tenant shall sublet all or a portion of the Premises
or assign this Lease, all of the sums of money or other economic consideration
received by Tenant or its affiliates, directly or indirectly, as a result of
such subletting or assignment, whether denominated as rent or otherwise, which
exceed in the aggregate the total sums which Tenant is obligated to pay
Landlord under this Lease (prorated to reflect obligations allocable to that
portion of the Premises subject to such sublease) shall be payable to Landlord
as additional rent under this Lease without effecting or reducing any other
obligation of Tenant hereunder.
SECTION 14.
INSPECTION OF PREMISES
14.01 With reasonable prior notice, except in the case of an
emergency, Tenant agrees to permit Landlord to enter the Premises for the
purpose of inspecting the same and to show same to prospective purchasers,
tenants or mortgagees of the Project, and to make such repairs, alterations,
improvements or additions as Landlord may deem necessary or desirable, and
Landlord shall be allowed to take all material into and upon the Premises that
may be required therefor without the same constituting an eviction of Tenant in
whole or in part and the rent reserved shall in no way abate while said repairs,
alterations, improvements, or additions are being made, by reason of loss or
interruption of business of Tenant, or otherwise. Landlord will give Tenant
reasonable notice prior to an entry by Landlord pursuant to this Section 14.01,
except in the case of emergencies in which event no notice need be given.
SECTION 15.
FIXTURES AND EQUIPMENT
15.01 All fixtures and equipment paid for by Landlord and all fixtures
which may be paid for and placed on the Premises by Tenant from time to time
but which are so incorporated and affixed to Premises that their removal would
involve damage or structural change to Premises will be and remain the property
of Landlord.
15.02 All tenant furnishings, office equipment and tenant fixtures
(other than those specified in Sections 10.02 and 15.01), which are paid for
and placed on the Premises by Tenant from time to time (other than those which
are replacements for fixtures originally paid for by Landlord) will remain the
property of Tenant.
SECTION 16.
PARKING AREAS
16.01 Tenant and its agents, employees, customers, licensees and
invitees shall have the non-exclusive right to use in common with Landlord and
all other tenants and occupants of the Building and their respective agents,
employees, customers, licensees and invitees, the Common Area parking and
loading dock facilities, if any, on the Land, and all driveways, entrances and
exits located within the Project necessary to provide a means of ingress and
egress to and from the Premises. Such use of parking facilities shall be
subject to, and consistent with, the Rules and Regulations of the Project (as
set forth in Exhibit B), together with such reasonable modifications and
additions as may be made thereto during the term of this Lease. Landlord shall
designate the number of parking spaces set forth in Paragraph 1.01(i) in the
parking lot of the Project for the exclusive use of Tenant. Tenant shall pay
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Landlord, as additional rent on each Rent Day, an amount set forth in Section
1.01(i). Such sums may be increased by Landlord from time to time by the
delivery of thirty (30) days prior written notice to Tenant. Within thirty
(30) days of receipt of such notification, Tenant may: (i) accept such
increase; or (ii) reject such increase for all or any of its exclusive spaces,
in which event Tenant's exclusive parking rights for such spaces shall
terminate. If Tenant accepts such increase or fails to reject such increase
within the thirty (30) day period, then commencing with the next Rent Day
following Landlord's notice, the amount of additional rent payable hereunder
shall be increased accordingly. Notwithstanding anything contained herein to
the contrary, Landlord shall have the right to relocate Tenant's Designated
Parking Spaces within the parking lot of the Project, and Landlord shall have
the right to designate other parking spaces in the parking lot for the
exclusive use of others. Tenant agrees to be bound by parking regulations in
effect at the Project, together with reasonable modifications or additions as
may be necessary during the term of this Lease, as more fully described in
Exhibit "B", attached hereto and made part hereof.
SECTION 17.
NOTICE OR DEMANDS
17.01 All bills, notices, requests, statements, communications, or
demands (collectively, "notices or demands") to or upon Landlord or Tenant
desired or required to be given under any of the provisions hereof must be in
writing. Any such notices or demands from Landlord to Tenant will be deemed to
have been duly and sufficiently given if a copy thereof has been personally
delivered, mailed by United States certified mail, return receipt requested,
postage prepaid, or sent via overnight courier service to Tenant at the address
of the Premises or at such other address as Tenant may have last furnished in
writing to Landlord for such purpose. Any such notices or demands from Tenant
to Landlord will be deemed to have been duly and sufficiently given if
delivered to Landlord in the same manner as provided above at the address set
forth at the heading of this Lease or at the address last furnished by written
notice from Landlord to Tenant. The effective date and the delivery date of
such notice or demand will be deemed to be the time when it is personally
delivered three (3) days after it is mailed or the day after it is sent via
overnight courier as herein provided.
SECTION 18.
BREACH; INSOLVENCY; RE-ENTRY
18.01 Each of the following shall constitute an Event of Default
under this Lease: (i) Tenant's failure to pay rent or any other sum payable
hereunder for more than five (5) business days after written notice of such
failure has been delivered to Tenant (but if one notice has been (given in any
twelve (12) month period, no further notice shall be required during such
twelve (12) month period); (ii) Tenant's failure to perform any of the
non-monetary terms, conditions or covenants of this Lease to be observed or
performed by Tenant for more than ten (10) business days after written
notice of such failure shall have been delivered to Tenant except in connection
with a breach which cannot be remedied or cured within said ten (10) business
day period, in which event the time of Tenant within which to cure such breach
shall be extended for such time as shall be necessary to cure the same, but
only if Tenant, within such ten (10) business day period, shall have commenced
and diligently proceeded to remedy or cure such breach; (iii) if Tenant is
named as the debtor in any bankruptcy proceeding, or similar debtor proceeding,
and any such proceeding, if involuntary, is not dismissed or set aside
within sixty (60) days from the date thereof; (iv) if Tenant makes an
assignment for the benefit of creditors or petitions for or enters into an
arrangement with creditors or if a receiver of any property of Tenant in or
upon the Premises is appointed in any action, suit or proceeding by or against
Tenant, or if Tenant shall admit to any creditor or to Landlord that it is
insolvent, or if the interest of Tenant in the Premises shall be sold under
execution or other legal process; or (v) if Tenant shall abandon the Premises,
vacate the Premises for a period of more than fifteen (15) consecutive days,
or suffer this Lease to be taken under any writ of execution. Upon the
occurrence of any Event of Default and after the delivery of written notice
thereof to the extent required under applicable Michigan law, Landlord, in
addition to any other rights and remedies it may have hereunder or by law,
shall have the immediate right of re-entry, and may remove all persons and
property from the Premises and it shall have the right to abandon or otherwise
dispose of such property in any way it may deem fit which is not in
contravention of applicable law. In addition, Landlord shall have the right,
but not the obligation, to store all or some of the property which may have
been removed in a public warehouse or elsewhere at the cost of, and for the
account of, Tenant, all without service of notice or resort to legal process
and all without being deemed guilty of trespass or becoming liable for any loss
or damage which may be occasioned thereby.
18.02 In the event Landlord shall elect to re-enter the Premises in
accordance with Paragraph 18.01, or should Landlord take possession of Premises
pursuant to legal proceedings or pursuant to any notice provided by law,
Landlord may either terminate this Lease or may from time to time without
terminating this Lease, make such alterations and repairs as Landlord may deem
necessary in order to relet the Premises, and relet the Premises or any part
thereof for any such term or terms (which may be for a term extended beyond the
term of this Lease) and at such rental or rentals, and upon such other terms
and conditions as Landlord may deem advisable.
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18.03 Upon the reletting of the Premises in accordance with Paragraph
18.02, all rentals received by Landlord from such reletting shall be applied in
the following order of priority: (a) to the payment of any additional rent
payable as provided in Section 5 hereof, including interest and late charges;
(b) to the payment of any other indebtedness other than rent due hereunder from
Tenant to Landlord; (c) to the payment of the actual costs and expenses of
obtaining possession, restoring and repairing the Premises and the actual costs
and expenses of reletting, including brokerage and reasonable attorneys' fees;
and (d) to the payment of any rent and other sums due and unpaid under this
Lease. The remainder, if any, shall be held by Landlord and applied in payment
of future rent as the same may become due and payable hereunder. If the rental
received from such reletting during any month is less than that to be paid
during that month by Tenant hereunder, Tenant shall pay any such deficiency to
Landlord monthly. No such re-entry or taking possession of the Premises or any
part thereof by Landlord shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination thereof is decreed by a court of competent
jurisdiction.
18.04 Notwithstanding any reletting of the Premises without termination
in accordance with Paragraph 18.02, Landlord may at any time after the
occurrence of any Event of Default, terminate this Lease and, in addition to
any, other remedies Landlord may have, Landlord may recover from Tenant all
damages it may incur by reason of Tenant's breach, including, without
limitation, the reasonable cost of recovering and reletting the Premises and
reasonable attorneys' fees incidental thereto and the worth at the time of the
termination of the amount of rent and other charges payable hereunder for the
remainder of the Term, all of which amounts shall be immediately due and
payable by Tenant to Landlord.
18.05 In case suit shall be brought or an attorney otherwise
consulted, for recovery of possession of the leased premises, for the recovery
of rent or any other amount due under the provisions of this Lease, or because
of the breach of any other covenant herein contained on the part of Tenant to
be kept and performed, or any other action against Tenant by Landlord, or
because of any claimed breach of this Lease by Landlord or any other action
against Landlord by Tenant, (and Landlord shall be the prevailing party),
Tenant shall pay to Landlord all expenses incurred therefor, including a
reasonable attorneys' fee. In addition, Landlord and Tenant hereby waive trial
by jury in any action, proceeding or counterclaim brought by Landlord or Tenant
against the other on any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord to Tenant, the use or
occupancy of the Premises by Tenant or any person claiming through or under
Tenant, any claim of injury or damage, and any emergency or other statutory
remedies; provided, however, the foregoing waiver shall not apply to any action
for personal injury or property damage.
18.06 Landlord and Tenant shall each use reasonable efforts to
mitigate any damages resulting from a default of the other party under this
Lease. Landlord's obligation to mitigate damages after a default by Tenant
under this Lease shall be satisfied in full if Landlord undertakes to lease the
Premises to another tenant (the "Substitute Tenant") in accordance with the
following criteria:
(i) Landlord shall have no obligation to solicit or
entertain negotiations with any other prospective Substitute Tenant for the
Premises until Landlord obtains full and complete possession of the Premises,
including, without limitation, the absolute right to relet the Premises free of
any claim of Tenant.
(ii) Landlord may give priority to lease any or all available
space(s) in the Project before offering the Premises to a Substitute Tenant.
(iii) Landlord shall not be obligated to lease the Premises to a
Substitute Tenant for a rental less than the current fair market rental then
prevailing for similar space in comparable properties in the same sub-market as
the Building, nor shall Landlord be obligated to enter into a lease under other
terms and conditions that are unacceptable to Landlord under Landlord's then
current leasing policies for comparable space in the Building.
(iv) Landlord shall not be obligated to enter into a lease with any
proposed Substitute Tenant whose use would:
A. Disrupt the tenant mix of the Building;
B. Violate any restriction, covenant, or requirement
contained in the lease of another tenant of the
Building or Project;
C. Adversely affect the reputation of the Building or the
Project; or
D. Be incompatible with the tenancy or use of the Building
as a first class office building.
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(v) Landlord shall not be obligated to enter into a lease with any
proposed Substitute Tenant which does not have, in Landlord's reasonable
opinion. sufficient financial resources to lease the Premises.
(vi) Landlord shall not be required to expend any amount of money to
alter, remodel, or otherwise make the Premises suitable for use by a proposed
Substitute Tenant unless:
A. Tenant pays any such sum to Landlord in advance of
Landlord's execution of a lease with a Substitute Tenant
(which payment shall not be in lieu of any damages or
other sums to which Landlord may be entitled as a result
of Tenant's default under this Lease); or
B. Landlord, in Landlord's reasonable discretion,
determines that any such expenditure is financially
justified in connection with entering into a lease
with such Substitute Tenant.
Upon compliance with the above criteria regarding releasing of the Premises
after a default by Tenant, Landlord shall be deemed to have fully satisfied
Landlord's obligation to mitigate damages under this Lease and under any law or
judicial ruling in effect on the date of this Lease or at the time of Tenant's
default, and Tenant waives and releases, to the fullest extent legally
permissible, any right to assert in any action by Landlord to enforce the terms
of this Lease, any defense, counterclaim, or rights of setoff or recoupment
respecting the mitigation of damages by Landlord, unless and to the extent
Landlord fails to act in accordance the requirements of this section.
SECTION 19.
SURRENDER OF PREMISES ON TERMINATION
19.01 At the expiration (or earlier termination) of the Term hereof,
Tenant will surrender the Premises broom clean and in as good condition and
repair as they were at the time Tenant took possession, subject to insured loss
by casualty under Section 9 and reasonable wear and tear excepted, and promptly
upon surrender will deliver all keys and building security cards for the
Premises to Landlord at the place then fixed for the payment of rent. At the
expiration of the Lease term, Tenant will, at its own cost and expense, repair
or pay the cost of restoration with respect to any damage to the Premises
arising from the removal of any trade fixtures or similar items. Tenant shall
have no rights of removal as to property affixed or otherwise placed on or in
the Premises by or at the expense of Landlord, its predecessors, successors or
assigns. All costs and expenses incurred by Landlord in connection with
repairing or restoring the Premises to the condition called for herein,
together with the costs, if any, of removing any property of Tenant together
with any property designated by Landlord pursuant to Section 10.02, left on the
Premises, shall be paid by Tenant on demand. Tenant shall remove all property
of Tenant and make all repairs necessitated thereby at its own cost, as
directed by Landlord. Tenant's obligation to observe or perform this covenant
shall survive the expiration or other termination of the Term of this Lease.
SECTION 20.
PERFORMANCE BY LANDLORD OF THE COVENANTS OF TENANT
20.01 If Tenant fails to pay any sum of money, other than Base Rent,
required to be paid hereunder or fails to perform any act on its part to be
performed hereunder, including, but not limited to, the performance of all
covenants pertaining to the condition and repair of the Premises pursuant to
Section 10 above, and if such failure shall not otherwise be cured within the
time, if any, provided herein, then upon two (2) days notice Landlord may (but
shall not be required to), without waiving or releasing Tenant from any of
Tenant's obligations, make any such payment or perform any such other act. All
sums so paid or incurred by Landlord and all incidental costs, including, but
not limited to, the cost of repair, maintenance or restoration of the Premises,
shall be deemed additional rental and, together with interest thereon computed
at the rate set forth in Section 5 hereof from the date of payment by Landlord
until the date of repayment by Tenant to Landlord, shall be payable to Landlord
on demand. On default in such payment, Landlord shall have the same remedies
as on default in payment of rent. The rights and remedies granted to Landlord
under this Section 20 shall be in addition to, and not in lieu of, all other
remedies, if any, available to Landlord under this Lease or otherwise, and
nothing contained herein shall be construed to limit such other remedies of
Landlord with respect to any matters covered herein.
SECTION 21.
SUBORDINATION; ESTOPPEL CERTIFICATES
21.01 This Lease is subject and subordinate to all ground leases,
underlying leases, and mortgages, if any, now or hereafter made, which may now
or hereafter affect the Project and to all renewals, modifications,
consolidations, replacements and extensions of any such ground leases,
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underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be necessary. Notwithstanding the
foregoing, Landlord reserves the right to declare this Lease prior to the lien
of any ground lease, underlying lease, or mortgage now or hereinafter placed
upon the real property of which the Premises are a part by recording a written
notice of such priority with the register of deeds. Tenant covenants and
agrees to execute and deliver, within ten (10) days after requested by
Landlord, such further instrument or instruments subordinating this Lease (or
declaring the Lease prior and superior) to any lease or proposed lease or to
the lien of any such mortgage or mortgages as shall reasonably be desired by
Landlord, any lessor or proposed lessor, and any mortgagees or proposed
mortgagees. Such instruments will be commercially reasonable. Landlord
warrants as of the date of signing of this Lease there are no ground leases,
underlying leases or mortgages attached to the Project.
21.02 In the event any proceedings are brought for foreclosure of, or
in the event of the conveyance by deed in lieu of foreclosure of, or in the
event of the exercise of the power of sale under, any mortgage made by Landlord
covering the Premises, Tenant hereby attorns to the new owner, and covenants
and agrees to execute any instrument in writing reasonably satisfactory to the
new owner, whereby Tenant attorns to such successor in interest and recognizes
such successor as Landlord under this Lease.
21.03 Tenant, within ten (10) days after request (at any time or times)
by Landlord, will execute and deliver to Landlord an estoppel certificate, in
form reasonably acceptable to Landlord, certifying: (i) to the Commencement
Date and expiration date of the Term; (ii) that this Lease is unmodified and in
full force and effect, or is in full force and effect as modified, stating the
modifications; (iii) that Tenant does not claim that Landlord is in default in
any way, or listing any such claimed defaults and that Tenant does not claim
any rights of setoff, or listing such rights of setoff; (iv) to the amount of
monthly rent and other sums due hereunder as of the date of the certificate,
the date to which the rent has been paid in advance, and the amount of any
security deposit or prepaid rent; (v) that Tenant agrees to provide any
mortgagee of Landlord with notice of any default by Landlord hereunder and give
such mortgagee the opportunity to cure such default within sixty (60) days of
such mortgagee's receipt of notice of such default; and (vi) such other matters
as may be reasonably requested by Landlord. Any such certificate may be relied
upon by any prospective purchaser, mortgagee or lessor of the Premises or any
part thereof.
SECTION 22.
QUIET ENJOYMENT
22.01 Landlord agrees that at all times when no Event of Default
exists under this Lease, Tenant's quiet and peaceable enjoyment of the
Premises, in accordance with and subject to the terms of this Lease, will not
be disturbed or interfered with by Landlord or any person claiming by, through,
or under Landlord.
SECTION 23.
HOLDING OVER
23.01 If Tenant remains in possession of the Premises after the
expiration of this Lease without executing a new lease, Landlord shall have the
right to deem Tenant to be occupying the Premises as a tenant from month to
month and the Base Rent for each month will be one hundred fifty (150%) percent
of the greater of: (a) the regular monthly installment of Base Rent payable for
the last month of the Term of this Lease; or (b) the then prevailing market
rates of rent for the Project determined by Landlord in its sole and absolute
discretion. This provision shall not preclude Landlord from terminating the
lease or recovering any and all damages Landlord may incur as a result of
Tenant's failure to timely deliver possession of the Premises to Landlord or
from exercising any other right or remedy it may have hereunder.
SECTION 24.
REMEDIES NOT EXCLUSIVE; WAIVER
24.01 Each and every of the rights, remedies and benefits of Landlord
provided by this Lease are cumulative, and are not exclusive of any other of
said rights, remedies and benefits, or of any other rights, remedies and
benefits allowed by law.
24.02 The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease
or of any of the rules or regulations set forth or hereafter adopted by
Landlord, shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a
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waiver of such breach and no provision of this Lease shall be deemed to have
been waived by Landlord unless such waiver be in writing signed by Landlord.
One or more waivers of any covenant or condition by either party shall not be
construed as a waiver of a further or subsequent breach of the same covenant or
condition, and the consent or approval by Landlord to or of any act by Tenant
requiring Landlord's consent or approval will not be deemed to waive or render
unnecessary Landlord's consent or approval to or of any subsequent similar act
by Tenant. No payment by Tenant or receipt by Landlord of a lesser amount than
the monthly rental herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Landlord shall accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy provided in this Lease.
SECTION 25.
WAIVER OF SUBROGATION
25.01 Landlord and Tenant hereby release each other and their respective
agents and employees from any and all liability to each other or anyone claiming
through or under them by way of subrogation or otherwise for any loss or damage
to property caused by or resulting from risks insured against under the property
insurance for loss, damage or destruction by fire or other casualty carried by
the parties hereto and which was in force at the time of any such loss or damage
or which would have been so covered had the insurance required hereunder been
maintained; provided, however, that this release shall be applicable only with
respect to loss or damage occurring during such time as the releasor's policies
of insurance contain a clause or endorsement to the effect that any such release
shall not adversely affect or impair such policies or prejudice the right of the
releasor to recover thereunder. Landlord and Tenant each agrees that it will
require its property insurance carriers to include in its policy such a clause
or endorsement. However, if such endorsement cannot be obtained, or shall be
obtainable only by the payment of an additional premium charge above that which
is charged by companies carrying such insurance without such waiver of
subrogation, then the party undertaking to obtain such waiver shall notify the
other party of such fact and such other party shall have a period of ten (10)
days after the giving of such notice to agree in writing to pay such additional
premium if such policy is obtainable at additional cost (in the case of Tenant,
pro rate in proportion of Tenant's rentable area to the total rentable area
covered by such insurance); and if such other party does not so agree or the
waiver shall not be obtainable, then the provisions of this Section 25.01 shall
be null and void as to the risks covered by such policy for so long as either
such waiver cannot be obtained or the party in whose favor a waiver of
subrogation is desired shall refuse to pay the additional premium. If the
release of either Landlord or Tenant, as set forth in the second sentence of
this Section 25.01, shall contravene any law with respect to exculpatory
agreements, the liability of the party in question shall be deemed not released,
but no action or rights shall be sought or enforced against such party unless
and until all rights and remedies against the other's insurer are exhausted and
the other party shall be unable to collect such insurance proceeds. The waiver
of subrogation referred to above shall extend to the agents and employees of
each party (including, as to Landlord, the Manager), but only if and to the
extent that such waiver can be obtained without additional charge (unless such
party shall pay such charge). Nothing contained in this Section 25.01 shall be
deemed to,relieve either party from any duty imposed elsewhere in this Lease to
repair, restore and rebuild.
SECTION 26.
RIGHT TO SHOW PREMISES
26.01 Landlord may show the Premises to prospective tenants and brokers,
and may display signs about the Project and elsewhere advertising the
availability of the Premises during the last eighteen (18) months of the Lease.
SECTION 27.
INDEMNIFICATION
27.01 Tenant at its expense will defend, indemnify, save and hold
harmless Landlord, its invitees, licensees, servants, agents, employees,
affiliated entities and contractors, from and against any loss, damage, claim of
damage, liability or expense, (including attorney fees) to or for any person or
property, whether based on contract, tort, negligence or otherwise, arising
directly or indirectly out of or in connection with the condition of the
Premises, the occupation, use or misuse thereof by Tenant or any other person,
the acts or omissions of Tenant, its invitees, licensees, servants, agents,
employees or contractors, the failure of Tenant to comply with any provision of
this Lease, or any event on or relating to the Premises, whatever the cause or
any litigation or other proceeding by or against Tenant to which Landlord is
made a party, other than the intentional, willful or malicious act of Landlord
which causes an injury which was either expected or intended by Landlord when it
performed the act in question. The provisions of this Section 27.01 will
survive the expiration or termination of this Lease.
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SECTION 28.
DEFINITION OF LANDLORD; LANDLORD'S LIABILITY
28.01 The term "Landlord" as used in this Lease so far as covenants,
agreements, stipulations or obligations on the part of Landlord are concerned is
limited to mean and include only the owner or owners of the Premises at the time
in question, and in the event of any transfer or transfers of the title to such
fee Landlord herein named (and in case of any subsequent transfers or
conveyances the then grantor) will automatically be freed and relieved from and
after the date of such transfer or conveyance of all personal liability for the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed.
28.02 This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on the part of
Tenant to be performed shall in no way be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease or is
unable to supply or is delayed in supplying any service expressly or impliedly
to be supplied or is unable to make, or is delayed in making any repairs,
additions, alterations or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if Landlord is prevented or delayed from so
doing by reasons of shortages of materials, acts of God, governmental
restrictions, strike or labor troubles or any cause beyond Landlord's reasonable
control including, but not limited to, government preemption in connection with
a national emergency or by reason of any rule, order or regulation of any
department or subdivision thereof of any government agency or by reason of the
conditions of supply and demand which have been or are affected by war or other
emergency.
SECTION 29.
SECURITY DEPOSIT AND SECURITY INTEREST
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SECTION 30.
RULES AND REGULATIONS
30.01 Tenant shall faithfully abide by and observe the rules and
regulations for the Building, a copy of which is attached hereto as Exhibit B
and made a part hereof, and, after notice thereof, all reasonable additions
thereto and modifications thereof of uniform applicability from time to time
promulgated in writing by Landlord.
SECTION 31.
SIGNS AND ADVERTISING
31.01 No signs, lighting, lettering, pictures, notices, advertisements,
shades, awnings or decorations will be displayed, used or installed by Tenant
except as approved in writing by Landlord. All such materials displayed in and
about the Premises will be such only as to advertise the business carried on
upon the Premises and Landlord will control the location, character and size
thereof. Tenant shall not cause or permit to be used any advertising materials
or methods which are reasonably objectionable to Landlord or to other tenants of
the Building, including without limiting the generality of the foregoing:
loudspeakers, mechanical or moving display devices, unusually bright or flashing
lights and similar devices the effect of which may be seen or heard from outside
the Premises. Tenant shall not solicit business, sell or display merchandise,
or distribute hand bills or other advertising matter in the parking area or
other Common Areas.
SECTION 32.
GENERAL
32.01 If, by reason of the occurrence of unavoidable delays due to acts
of God, governmental restrictions, strikes, labor disturbances, shortages of
materials or supplies or for any other cause or event beyond Landlord's
reasonable control, Landlord is unable to furnish or is delayed in furnishing
any service required by Landlord under the provisions of this Lease, or Landlord
is unable to perform or make or is delayed in performing or making any
installations, decorations, repairs, alterations, additions, or improvements,
required to be performed or made under this Lease, or is unable to fulfill or is
delayed in fulfilling any of Landlord's other obligations under this Lease, no
such inability or delay shall constitute an actual or constructive eviction in
whole or in part, or, except as otherwise (expressly provided herein, entitle
Tenant to any abatement or diminution of rental or other charges due hereunder
or otherwise relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord or its agents by reason of inconvenience or
annoyance to Tenant, or injury to or interruption of Tenant's business, or
otherwise.
32.02 This Lease is being entered into and executed in the State of
Michigan, and all questions with respect to the construction of this Agreement
and the rights and liabilities of the parties shall be determined in accordance
with the provisions of the laws of the State of Michigan.
32.03 Many references in this Lease to persons, entities and items have
been generalized for ease of reading. Therefore, references to a single person,
entity or item will also mean more than one person, entity or thing whenever
such usage is appropriate (for example, "Tenant" may include, if appropriate, a
group of persons acting as a single entity, or as tenants-in-common).
Similarly, pronouns of any gender should be considered interchangeable with
pronouns of other genders.
32.04 Section headings appearing in this Lease are for convenience only.
They do not define, limit or construe the contents of any paragraphs or clauses
contained herein.
32.05 Landlord reserves the right to relocate Tenant in other comparable
space In the Building upon not less than sixty (60) days prior written notice to
Tenant. Landlord shall pay the cost of moving Tenant to new space. If Tenant
does not wish to accept such relocation, Tenant may object thereto by written
notice to Landlord within ten (1 0) days after the notice from Landlord. In the
event Tenant fails to object within such ten (10) day period, Tenant shall be
deemed to have accepted the relocation. In the event Tenant so objects,
Landlord may rescind the notice of intention to relocate Tenant or may reaffirm
said intention, in which event Tenant may terminate this Lease by written notice
to Landlord within five (5) days after the affirmation notice from Landlord. In
the event Tenant fails to notify Landlord of its termination within such five
(5) day period, it shall be deemed to have accepted the relocation. If Tenant
terminates this Lease pursuant this paragraph, Tenant must vacate the Premises
within thirty (30) days
20
<PAGE> 23
following Tenant's notice to Landlord of termination. The cost of relocation to
be paid by Landlord shall include the expense of the de-installation and
installation of equipment, facilities, and business communications facilities to
such substitute space. All reimbursements to Tenant shall be made within thirty
(30) days of receipt of the invoice(s) therefor.
32.06 The covenants, conditions and agreements contained in this Lease
shall bind and inure to the benefit of Landlord and Tenant and their respective
heirs, distributees, successors, administrators and executors provided, however,
that no assignment by, from, through, or under Tenant in violation of any of the
provisions hereof shall vest in the assigns any right, title, or Interest
whatsoever. All provisions of this Lease are and will be binding on the
successors and permitted assigns of Landlord and Tenant.
32.07 Time shall be and is of the essence in this Lease and with respect to
the performance of all obligations of Landlord and Tenant hereunder.
32.08 Any services which Landlord is required to furnish pursuant to the
provisions of this Lease may, at Landlord's option, be furnished from time to
time, in whole or in part, by employees of Landlord or by the managing agent of
the Project or by one or more third persons.
32.09 Landlord shall have the right at any time, and from time to time, to
unilaterally amend the provisions of this Lease if Landlord is advised by
counsel that all or any portion of the monies paid by Tenant to Landlord
hereunder are, or may be deemed to be, unrelated business income within the
meaning of the United States Internal Revenue Code or regulation issued
thereunder, and Tenant agrees that it will execute all documents or instruments
necessary to effect such amendment or amendments, provided that no such
amendment shall result in Tenant having to pay in the aggregate more money on
account of its occupancy of the Premises under the term of this Lease as so
amended and provided, further, that no such amendment or amendments shall result
in Tenant receiving under the provisions of this Lease less service than it is
entitled to receive, nor services of a lesser quality.
32.10 Except as otherwise provided herein, neither Landlord nor Landlord's
agents have made any representations or promises with respect to the physical
condition of the Building, the Land or the Premises, or with respect to the
rents, leases, expenses of operation or any other matter or thing affecting or
related to the Premises except as expressly set forth herein; and no rights,
easements or licenses are acquired by Tenant by implication or otherwise except
as expressly set forth in the provisions of this Lease.
32.11 Annually and at any other time, Tenant shall promptly furnish
Landlord financial statements reflecting Tenant's and any Guarantor's current
financial condition. All such financial statements shall be in such form and
contain such detail as Landlord shall reasonably request.
32.12 In case any provision of this Lease or any agreement or instrument
executed in connection herewith shall be invalid, illegal or unenforceable, such
provision shall be enforced to the fullest extent permitted by applicable law,
and the validity, legality and enforceability of the remaining provisions hereof
and thereof shall not in any way be affected or impaired thereby. This Lease
shall not be construed more strictly against one party than against the other,
merely by virtue of the fact that it may have been prepared by counsel for one
of the parties, it being recognized that both Landlord and Tenant have
contributed substantially and materially to the preparation of this Lease.
32.13 This Lease can be modified or amended only by a written agreement
signed by Landlord and Tenant. This Lease and the Exhibits attached hereto and
forming a part hereof set forth all of the covenants, agreements, stipulations,
promises, conditions and understandings between Landlord and Tenant concerning
the Premises, and there are no covenants, agreements, stipulations, promises,
conditions or understanding, either oral or written, between them other than set
forth herein or therein.
32.14 Tenant will not record this Lease or a memorandum hereof, and will
not otherwise disclose the terms of this Lease to anyone other than its
attorneys, accountants or employees who need to know of its contents in order to
perform their duties for Tenant. Any other disclosure will be an Event of
Default under the Lease. Tenant agrees that Landlord shall have the right to
publish a "tombstone" or other promotional description of this Lease.
32.15 Except as disclosed in writing to Landlord, Tenant represents and
warrants to Landlord that there are no claims for brokerage commissions or
finder's fees in connection with this Lease as a result of the contracts,
contacts or actions of Tenant, and Tenant agrees to indemnify Landlord and hold
it harmless from all liabilities arising from any such claim arising from an
alleged agreement or act by Tenant (including, without limitation, the cost of
counsel fees in connection therewith); such agreement to survive the termination
of this Lease.
21
<PAGE> 24
32.16 The matters set forth on Exhibit D, Special Provisions, if any, are
hereby accepted and agreed to between Landlord and Tenant and incorporated
herein by reference.
IN WITNESS WHEREOF Landlord and Tenant have executed this Lease as of the
date and year first above written.
<TABLE>
<S><C>
LANDLORD: TENANT:
WRC PROPERTIES, INC., a Delaware Corporation SYNTEL, INC., a Michigan Corporation
By: Nicholas E. Stolatis By: Bharat Desai
------------------------------------ -------------------------------------
Signature Signature
Printed Name: Nicholas E. Stolatis Printed Name: Bharat Desai
-------------------------- ---------------------------
Its: Assistant Secretary Its: President
----------------------------------- ------------------------------------
Date: Date: August 29, 1996
---------------------------------- -----------------------------------
</TABLE>
22
<PAGE> 25
EXHIBIT A
SPACE PLAN
[FLOOR PLAN]
TROY OFFICENTRE 2
[LOGO] Building - D - 2 - 4
NO SCALE
Approved by Tenant:
SYNTEL, INC., a Michigan Corporation
By: Bharat Desai
-----------------------------------
Signature
Printed Name: Bharat Desai
-------------------------
Its: President
----------------------------------
Date: August 29, 1996
---------------------------------
<PAGE> 26
EXHIBIT B
RULES AND REGULATIONS OF THE PROJECT
Tenant agrees for itself, its employees, agents, clients, customers,
licensees, invitees and guests, to comply fully with the following rules and
regulations and with such reasonable modifications thereof and additions thereto
as Landlord may make for the Project. All rules and regulations set forth in
this Exhibit B shall be in addition to, and shall in no way limit, the
provisions of the Lease.
1 . The Common Areas of the Project shall not be used by Tenant for any
purpose other than those for which they are intended or designated.
2. Landlord has the right to control access to the Project and refuse
admittance to any person or persons without satisfactory identification or a
pass issued by Tenant during hours reasonably determined by Landlord.
3. No person shall disturb other occupants of the Building by making loud
or disturbing noises.
4. Soliciting, peddling and canvassing is prohibited in the Project and
Tenant shall cooperate to prevent the same.
5. All deliveries and removals of furniture, equipment or other bulky
items must take place after notification to Landlord, during such hours and in
such manner as Landlord shall reasonably determine. Tenant shall be responsible
for all damage or injury resulting from the delivery or removal of all articles
into or out of the Project or the Premises. No load shall be placed on the
floors or in elevators in excess of the limits which shall be established by
Landlord.
6. Tenant shall not use any equipment emitting noxious fumes or offensive
odors unless they are properly vented at Tenant's expense.
7. Nothing shall be attached to the interior or exterior of the Building
without the prior written consent of Landlord, except art work and/or the
Syntel, Inc. logo on the walls.
8. No sign or other representation shall be placed on the interior or
exterior of the Building without prior written consent of Landlord.
9. No hazardous articles, bicycles, vehicles or animals of any kind (other
than wheelchairs and seeing-eye dogs) shall be brought into or kept in or about
the Building without the prior consent of Landlord.
10. No marking, painting, drilling, boring, cutting or defacing of the
walls, floors or ceilings of the Building, other than that which is reasonably
necessary for the hanging of art work, diplomas and similar objects which do not
require any material alteration to any wall, floor or ceiling, shall be
permitted without the prior written consent of Landlord.
11. The electrical system and lighting fixtures in the Building shall not
be altered or disturbed in any manner without the prior written consent from
Landlord. Any alterations or additions must be performed by licensed personnel
authorized by Landlord.
12. The toilets and other plumbing fixtures shall not be used for any
purpose other than that for which they are designed. No sweepings, rubbish or
other similar materials or substances shall be deposited therein.
13. Smoking is prohibited in the elevators), hallways, corridors, stairs,
lobbies and other common areas of the Project unless clearly designated to the
contrary by Landlord.
14. Tenant shall not waste electricity, water or air-conditioning, and
shall cooperate fully with Landlord to assure the most effective operation of
the Building's heating and air-conditioning. Tenant shall not adjust any
controls other than room thermostats installed for Tenant's use. Tenant shall
not tie, wedge or otherwise fasten open any water faucet or outlet. Tenant
shall keep all corridor doors closed.
15. Tenant assumes full responsibility for protecting the Premises from
theft, burglary, robbery and pilferage. Except during Tenant's normal business
hours, Tenant shall keep all door's to the Premises locked and other means of
entry to the Premises closed and secured.
16. Tenant or Tenant's employees shall not distribute literature, flyers,
handouts or pamphlets of any kind in any of the common areas of the Project
without the prior written consent of Landlord.
24
<PAGE> 27
17. Tenant shall not sell or prepare any food or beverages in or from
the Premises without Landlord's prior written consent, except for coffee, tea,
soup and microwave foods prepared for consumption by Tenant, Tenant's servants,
employees, agents, clients, customers, licensees, invitees. visitors, and
contractors.
18. Tenant shall not permit the use of any apparatus for sound
production or transmission in such manner that the sound so transmitted or
produced shall be audible or vibrations therefrom shall be detectable beyond the
Premises.
19. Tenant shall keep all electrical and mechanical apparatus free of
vibration, noise and air waves which may be transmitted beyond the Premises.
20. No floor covering shall be affixed to any floor in the Premises by
means of glue or other adhesive without Landlord's prior written consent.
21. Tenant shall not use the name of the Building for any purpose other
than that of the business address of Tenant (which it may do, at its own risk,
in the event the name of the Building changes), and shall not use any picture or
likeness of the Building in any circulars, notices, advertisements or
correspondence.
22. Tenant shall not obstruct sidewalks, entrances, passages, courts,
corridors, vestibules, halls, elevators and stairways in or about the Building,
nor shall Tenant place objects against glass partitions, doors or windows which
would be unsightly from the Building's corridors, or from other areas of the
Building.
23. Tenant shall not make any room-to-room canvass to solicit business
from other tenants of the Building.
24. No additional locks or similar devices shall be attached to any
door and no locks shall be changed without Landlord's prior written consent. A
card access security system may be installed and maintained by Tenant. Upon
termination of this Lease or of Tenant's possession of the Premises, Tenant
shall surrender all keys for door locks and other locks in or about the Premises
and shall make known to Landlord the combination of all locks, safes, cabinets
and vaults which are not removed by Tenant.
25. Tenant shall not install or operate any machinery or mechanical
devices of a nature not directly related to Tenant's ordinary use of the
Premises without Landlord's prior written consent.
26. Tenant shall not employ any person to perform any cleaning,
repairing, janitorial, decorating, painting or other services or work in or
about the Premises, except with the approval of Landlord.
27. Tenant shall ascertain from Landlord the maximum amount of
electrical current which can safely be used in the Premises, taking into
account the capacity of the electric wiring in the Building and the Premises
and the needs of other tenants, and shall not use more than such safe capacity.
Landlord's consent to the installation of electric equipment shall not relieve
Tenant from the obligation not to use more electricity than such safe
capacity.,
28. Tenant shall not overload any floor or elevator and shall not
install any heavy objects, safes, business machines, files or other equipment
without having received Landlord's prior written consent as to size, maximum
weight, routing and locations thereof. Safes, furniture, equipment, machines
and other large or bulky articles shall be brought through the Building and
into and out of the Premises at such times and in such manner as Landlord
shall direct (including the designation of elevator) and at Tenant's sole risk
and responsibility. Prior to Tenant's removal of any such articles from the
Building, Tenant shall obtain written authorization therefore from Landlord.
29. Tenant shall not in any manner deface or damage the Building.
30. Tenant shall not bring into the Building or Premises inflammables
such as gasoline, kerosene, naphtha and benzine, or explosives or any other
articles of intrinsically dangerous nature.
31. Movement into or out of the Building of furniture or office
equipment, or dispatch or receipt by Tenant of any merchandise or materials
other than hand-delivered packages, which requires the use of elevators or
stairways or movement through the Building entrances or lobby, shall be
restricted to the hours designated by Landlord. Tenant assumes all risk of
damage to any and all articles so moved, as well as injury to any person or
property in such movement, and hereby agrees to indemnify Landlord against any
loss resulting therefrom.
25
<PAGE> 28
32. Landlord shall not be responsible for any lost or stolen property,
equipment, money or jewelry from the Premises or the public areas of the
Building regardless of whether such loss occurs when the Premises are locked.
33. The Premises shall not be used for housing, lodging, sleeping or
for any immoral or illegal purpose.
34. The work of the janitor or cleaning personnel shall not be hindered
by Tenant after 5:30 p.m. and the windows may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles to prevent unreasonable
cost to Landlord in discharging its obligations regarding cleaning services.
35. Tenant will refer all contractors or installation technicians
rendering any service for Tenant for supervision and approval of Landlord before
performance of any contractual services.
36. Parking Regulations:
(i) Cars WILL NOT park in the designated "Reserved" spaces.
There will be no parking in any area of the Project other
than those areas clearly marked and defined for parking.
(ii) Parking will be on the basis of first-come, first-served
except for reserved spaces.
(iii) Parkers will be expected to park their cars in an orderly
manner within the marked stalls provided.
(iv) It is recommended that cars be left in a "brakes on, doors
locked" condition at all times.
(v) No car will be allowed to park in any driveway area or
in any manner which will interfere with the normal flow of
traffic.
(vi) Cars parked illegally will be towed at the car owner's
expense.
(vii) Tenant agrees that all its employees have been fully
informed as to the content of these regulations.
(viii) Landlord or Landlord's agents and employees shall not be
liable for and Tenant waives all claims resulting from any
accident or occurrence in and upon the parking area.
(ix) All automobiles parked in the parking areas shall be in
good condition and repair, utilized for personal
transportation, not commercial in nature and driven and
handled at the risk of the owner.
(x) Automobile owner or owner's agents shall not wash, wax
or otherwise clean or prep the interior/exterior of
vehicles or perform any maintenance whatsoever on vehicles
within the parking area or on any part of the parking lot
servicing the Building.
(xi) In the event that automobile owner's use of the parking
area violates any local, county or state law, regulation
or ordinance, automobile owner's right to utilize the
parking area shall immediately cease. In addition, in no
event shall Tenant permit its employees, licensees,
invitees or other occupants to use more than Tenant's
Proportionate Share of the existing parking spaces for the
Project.
(xii) Parking areas shall not be used to store vehicles or for
parking large commercial or recreational vehicles.
Tenant shall be responsible for the observance of all the foregoing rules and
regulations by Tenant's employees, agents, clients, customers, invitees,
licensees and guests. Landlord shall not be responsible for any violation of
the foregoing rules and regulations by other tenants of the Building and shall
have no obligation to enforce the same against other tenants. Landlord shall
have the right to amend these rules and regulations from time to time in
accordance with the terms of the Lease.
Approved by Tenant:
SYNTEL, INC., A MICHIGAN CORPORATION
By: Bharat Desai
--------------------------------
Signature
Printed Name: Bharat Desai
----------------------
Its: President
-------------------------------
Date: August 29, 1996
------------------------------
<PAGE> 29
EXHIBIT C
DAILY JANITORIAL SERVICE
(a) All waste paper baskets and ashtrays are emptied and cleaned.
(b) All furniture and cleared desks are dusted as required.
(c) All carpeting is vacuum cleaned daily as required.
(d) All doors, doorknobs, and glass are wiped down as required.
(e) Walls are spot cleaned as required.
(f) Windows are spot cleaned as required.
(g) All corridors, common areas, common area bathrooms, and
elevators are cleaned daily, which includes washing all tile floors, washing
out the sinks and stalls, vacuum cleaning the hallway carpeting, cleaning out
the drinking fountains and spot cleaning the walls and mirrors where necessary.
Approved by Tenant:
SYNTEL, INC., A MICHIGAN CORPORATION
By: Bharat Desai
-------------------------------
Signature
Printed Name: Bharat Desai
---------------------
Its: President
------------------------------
Date: August 29, 1996
-----------------------------
27
<PAGE> 30
EXHIBIT D
SPECIAL PROVISIONS
D1 EXCESS TENANT IMPROVEMENT COSTS.
Landlord shall construct the Tenant Improvements up to a cost of Four
hundred forty-five thousand three hundred thirty-one dollars and fifty-two
cents ($445,331.52) (the "Tenant Improvement Allowance"). In the event the cost
of completing the Tenant Improvements is less than the Tenant Improvement
Allowance, Landlord shall retain the difference and Tenant shall have no claim
for and not be entitled to receive any such sums. In the event the estimated
cost of completing the Tenant Improvements in accordance with the Plans shall at
anytime exceed one hundred five percent (105%) of the Tenant Improvement
Allowance, Tenant shall pay Landlord, within five (5) days of request for such
payment (which request will come no more than twice monthly), the difference
between the estimated cost of completion and the Tenant Improvement Allowance on
a percentage of completion basis. If the estimated cost of completion of the
Tenant Improvements is less than one hundred five percent (105%) of the Tenant
Improvement Allowance, Tenant shall pay Landlord the difference between the
actual cost of completion and the Tenant Improvement Allowance when the Tenant
Improvements are substantially complete.
D2 MOVING ALLOWANCE.
Landlord shall provide Tenant with a Moving Allowance of up to $1.00 per usable
square foot, Twenty-three thousand three hundred twenty-eight dollars and zero
cents ($23,328.00), to be paid upon presentation of related moving company
invoices. The cost of moving in excess of the $1.00 per usable square foot
provided by the Landlord shall be funded by the Tenant.
D3 OPTION TERM.
Provided that no default exists under this Lease and provided no default shall
have existed within a period of one (1) year prior to the notification hereunder
by Tenant, Tenant shall have the right to extend the Initial Term of this Lease
for one (1) term of five (5) Lease Years (an "Option Term"), provided that
Tenant shall deliver to Landlord written notice of its election to extend the
Term of this Lease at least twelve (12) months prior to the expiration date of
the Initial Term of this Lease or the expiring Option Term, as the case may
be. Except as expressly otherwise provided herein, all the covenants,
agreements, terms and conditions contained herein shall remain in full force
and effect during the Option Term, and the rent shall be adjusted as below.
Base Rent for the Option Term shall be as follows: the rent for the Option Term
shall be at then prevailing market levels for comparable renewal space at the
Building but not, in any event, less than the Base Rent payable at the end of
the then current Term.
D4 TENANT AUDIT RIGHT.
Tenant shall have the right, at its sole cost and expense, to audit Landlord's
records at the Manager's office relating to Real Estate Taxes and Operating
Expenses for the Base Year and any subsequent year solely for the purpose of
determining the amounts paid by Tenant pursuant to Section 6 of this Lease.
However, Tenant may only conduct an audit (i) upon reasonable notice to Landlord
so as to allow landlord sufficient time to compile its records and make them
available to Tenant at Manager's office and upon reimbursement to Landlord for
its costs and expenses incurred in connection with such audit; (ii) not more
than sixty (60) days after Tenant receives the Annual Statement of Real Estate
Taxes and Operating Expenses for the subject year, regardless of whether the
year in question is the Base Year or any subsequent year, and (iii) not more
than once during any Lease Year.
D5 TENANT'S RIGHT TO CURE,
If Landlord shall default in any of its obligations under this Lease, Tenant
shall give written notice of such default to Landlord. Landlord shall cure any
material default within thirty (30) days after the date of such notice or, in
the event that such default is of a character as to require more than thirty
(30) days to cure, Landlord shall commence curing such default within thirty
(30) days and shall diligently pursue such cure. If any material default relates
to a condition that is for the exclusive benefit of the Premises and as a result
thereof Tenant is denied the use of the Premises and Landlord fails to cure such
default in all material respects within the applicable time period, Tenant shall
have the right to cure such default in a good and workmanlike manner and
Landlord shall reimburse Tenant within thirty (30) days of demand for its
reasonable costs in performing such work.
28
<PAGE> 31
D6 NON-DISTURBANCE.
In the event of subordination of this Lease, the subordination shall be
conditioned upon the agreement of the mortgagee or lessor that in the event of
foreclosure or the assertion of any other rights under the mortgage or lease,
this Lease and the rights of Tenant hereunder shall continue in effect and shall
not be terminated or disturbed so long as Tenant continues to perform and no
Event of Default exists under this Lease.
Approved by Tenant:
SYNTEL, INC., A MICHIGAN CORPORATION
BY: Bharat Desai
----------------------------------
Signature
Printed Name: Bharat Desai
------------------------
Its: President
---------------------------------
Date: August 29, 1996
--------------------------------
29
<PAGE> 1
EXHIBIT 10.6
ORIGINAL
LEASE AGREEMENT
BY AND BETWEEN
NATIONSBANK OF NORTH CAROLINA, N.A., AS TRUSTEE
FOR THE PUBLIC EMPLOYEES RETIREMENT SYSTEM OF OHIO
AND
SYNTEL, INC., (AS TENANT)
<PAGE> 2
TABLE OF CONTENTS
PAGE
1. DESCRIPTION OF PREMISES .................. 1
2. TERM ..................................... 1
3. RENTAL ................................... 2
4. DELIVERY OF POSSESSION ................... 7
5. ALTERATIONS AND IMPROVEMENTS BY TENANT ... 8
6. USE OF PREMISES .......................... 8
7. TAXES .................................... 9
8. FIRE AND EXTENDED COVERAGE INSURANCE ..... 9
9. UTILITIES AND SERVICES ................... 9
10. PROPERTY OF TENANT ....................... 11
11. TRADE FIXTURES AND EQUIPMENT ............. 11
12. DAMAGE OR DESTRUCTION OF PREMISES ........ 11
13. GOVERNMENTAL ORDERS ...................... 12
14. MUTUAL WAIVER OF SUBROGATION ............. 12
15. SIGNS AND ADVERTISING .................... 12
16. INDEMNIFICATION AND LIABILITY INSURANCE .. 13
17. LANDLORD'S RIGHT OF ENTRY ................ 14
18. EMINENT DOMAIN ........................... 14
19. EVENTS OF DEFAULT AND REMEDIES ........... 14
20. SUBORDINATION ............................ 15
<PAGE> 3
21. ASSIGNING AND SUBLETTING ................. 16
22. TRANSFER OF LANDLORD'S INTEREST .......... 16
23. COVENANT OF QUIET ENJOYMENT .............. 17
24. ESTOPPEL CERTIFICATES .................... 17
25. PROTECTION AGAINST LIENS ................. 17
26. MEMORANDUM OF LEASE ...................... 17
27. FORCE MAJEURE ............................ 17
28. REMEDIES CUMULATIVE --NONWAIVER .......... 18
29. HOLDING OVER ............................. 18
30. NOTICES .................................. 18
31. LEASING COMMISSION ....................... 19
32. MISCELLANEOUS ............................ 19
33. SEVERABILITY ............................. 21
34. REVIEW OF DOCUMENTS ...................... 21
35. SPECIAL PROVISIONS ....................... 21
<PAGE> 4
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") made and entered into as of the 30th
day of November, 1994, by and between
NATIONSBANK OF NORTH CAROLINA, N.A.,
AS TRUSTEE FOR THE PUBLIC EMPLOYEES RETIREMENT SYSTEM OF OHIO,
hereinafter called "Landlord"; and
SYNTEL, INC.,
a Michigan corporation
hereinafter called "Tenant":
W I T N E S S E T H
In consideration of the mutual covenants and agreements contained herein,
the parties hereto agree for themselves, their successors and assigns, as
follows:
1. DESCRIPTION OF PREMISES.
Landlord hereby leases to Tenant, and Tenant hereby accepts and rents from
Landlord, that certain office space (the "Premises") containing approximately
50,241 rentable square feet (of which approximately 44,343 is usable square
feet) of space located on the second (2nd) floor in a building known as
Crossroads Office Building II, 110 Corning Road, Crossroads Corporate Park,
Cary, North Carolina 27511 (the "Building") on a tract of land more
particularly described on Exhibit "A" attached hereto; together with the
nonexclusive right to use all parking areas, driveways, sidewalks and other
common facilities furnished by Landlord from time to time in and around the
Building. The Premises are shown shaded on the building plan attached hereto
as Exhibit "B". The usable square footage for the Premises has been computed
using the BOMA Method, and the rentable square footage has been computed by
multiplying said usable square footage by 1.133.
2. TERM.
(a) Initial Term. Unless another date is specified for occupancy on an
Exhibit attached hereto, or unless otherwise adjusted as provided pursuant to
Paragraph 4 hereinbelow, the initial term of this Lease (the "Initial Term")
shall commence on March 15, 1995 (the "Commencement Date") and shall end at
midnight on March 31, 1999 (the "Expiration Date"). As used herein, the term
"Lease Year" shall mean each consecutive twelve-month period of the Lease term,
beginning with the Commencement Date (as same may be adjusted as hereinbelow
provided) or any anniversary thereof. Notwithstanding anything herein to the
contrary during the period commencing on the date that Landlord delivers Phase
I (as defined in Exhibit "E" attached hereto and incorporated herein by this
reference) of the Premises to Tenant and ending on the Commencement Date (or
such earlier date that this Lease may be terminated,
<PAGE> 5
as herein provided) (the "Pre-commencement Occupancy Period"), Tenant shall be
entitled to use and occupy Phase I (as defined in Exhibit "E") subject to and
under the terms and conditions of this Lease, excepting only that Tenant shall
not be responsible for the payment of any rentals with respect to such
Pre-commencement Occupancy Period.
(b) Option Period(s). Provided this Lease is still in full force and
effect and Tenant is not in default under any of the terms, provisions or
conditions of this Lease on its part to observe, comply with or fulfill, Tenant
shall have the option to renew the term of this Lease for one (1) period of
four (4) years next succeeding the Initial Term (the "Option Period"). Such
option to renew shall be exercised by written notice to Landlord not less than
nine (9) months prior to the end of the Initial Term. The Option Period, if
exercised by Tenant, shall be on the same terms and conditions as provided in
this Lease except that the annual Minimum Rental during such Option Period
shall be an amount equal to ninety-five percent (95%) of the fair market rental
for the Premises as mutually agreed upon by the parties. The term "fair market
rent" as used herein shall be defined as the annual rental rate regarding the
Premises, negotiated at arms length, that a willing, comparable, new non-equity
tenant would pay and receive and what a willing landlord of a Comparable
Building would accept and give as rent, and taking into consideration, without
limitation, both the size of the Premises and the applicable "Operating Expense
Base Amount" (as defined hereinbelow). In the event the parties cannot agree
upon such mutually acceptable fair market rental on or before the date that is
eight (8) months prior to the expiration of the Initial Term, each party shall
select an MAI appraiser having at least five (5) years of experience with
similar properties in the Raleigh/Cary, North Carolina area and such appraisers
shall select a third MAI appraiser similarly qualified to determine such fair
market rental. The average of the closest two determinations prepared by such
appraisers shall be deemed to be such fair market rental and shall be binding
upon Landlord and Tenant. Each party shall pay the cost of its own appraiser
and the cost of the third appraiser shall be shared equally by Landlord and
Tenant. Notwithstanding anything to the contrary, in no event shall the annual
Minimum Rental for the Premises during said Option Period exceed an amount
equal to Nineteen and No/100 Dollars per rentable square foot of the Premises
or be less than the annual Minimum Rental payable during the final Lease Year
of the Initial Term. Further, there shall be no option to renew except as set
forth in this paragraph. TIME IS OF THE ESSENCE with regard to the exercise of
the option to renew hereunder. As used in this Lease, the word "term" shall
mean not only the Initial Term but also the Option Period, if exercised.
3. RENTAL.
During the full term of this Lease, Tenant shall pay to Landlord, without
notice, demand, reduction (except as may be applicable pursuant to the
paragraph entitled "Damage or Destruction of Premises" or the paragraph
entitled "Eminent Domain" of this Lease), setoff or any defense, a total rental
(the "Annual Rental") consisting of the sum total of the following:
(a) Minimum Rental.
(i) Lease Year One through Lease Year Two. Commencing with the
Commencement Date and continuing through the end of Lease Year Two, Tenant
shall pay a minimum annual rental (the "Minimum Rental") of Seven Hundred
Seventy-eight Thousand Seven Hundred Thirty-five and 56/100 Dollars
($778,735.56) payable in equal monthly installments of Sixty-four Thousand
Eight Hundred
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<PAGE> 6
Ninety-four and 63/100 Dollars ($64,894.63) each in advance on or before the
first day of each month. If the Commencement Date is a date other than the
first day of a calendar month, the Minimum Rental shall be prorated daily from
such date to the first day of the next calendar month and paid on the
Commencement Date.
(ii) Lease Year Three through Lease Year Four. Commencing at the
beginning of Lease Year Three and continuing through the end of Lease Year
Four, Tenant shall pay an annual Minimum Rental of Eight Hundred Thirty-nine
Thousand Twenty-four and 76/100 Dollars ($839,024.76) payable in equal monthly
installments of Sixty-nine Thousand Nine Hundred Eighteen and 73/100 Dollars
($69,918.73) each in advance on or before the first day of each month.
(b) Operating Expenses.
(i) As used in this paragraph 3(b), the following terms shall have the
following meanings:
(A) Annual Payment. Tenant's proportionate share of the increase, if
any, in the Operating Expenses (as hereinbelow defined) paid or incurred
respecting the Building during any applicable calendar year over the
estimated Operating Expenses respecting the Building of Five and No/100
Dollars ($5.00) per rentable square foot (the "Operating Expense Base
Amount"), reduced by the amount, if any, paid by Tenant as the Monthly
Estimate during the applicable calendar year (such calculations to be
annualized respecting any partial calendar year). Landlord represents
that, to the best of Landlord's belief, the Operating Expenses regarding
the Building regarding calendar year 1995 [adjusted, as applicable, in
accordance with the provisions of subparagraphs 3(b)(i)(C) and 3(b)(i)(D)
below] will not exceed Five and No/100 Dollars ($5.00) per rentable square
foot. As used herein, Tenant's "proportionate share" shall be fifty-one
and 04/100ths percent (51.04%) of said increase. Landlord represents that
the Building contains 98,436 rentable square feet of space.
(B) Monthly Estimate. Tenant's proportionate share of the amount
determined by Landlord and payable by Tenant as the estimated increase in
Operating Expenses for the ensuing calendar year over the Operating
Expense Base Amount, which amount is payable in twelve (12) equal monthly
installments.
(C) Operating Expenses. All reasonable costs and expenses paid or
incurred by Landlord (or the applicable agent of Landlord ["Agent"]) each
calendar year in the management, operation, repair and maintenance of the
Premises, the Building and the land described on Exhibit "A" (hereinafter
collectively referred to as the "Project"), including without limitation:
(1) All wages, salaries and compensation (including fringe benefits) paid
or incurred for employees of Landlord or Agent performing any services
in connection with the Project;
(2) The costs of all materials, supplies, equipment and tools (whether
purchased or leased) utilized with respect to the Project;
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<PAGE> 7
(3) The costs of all services rendered by third parties with respect to
the Project; and all costs paid or incurred by Landlord in providing
any of the services to be provided by Landlord pursuant to the terms
of the Lease;
(4) Utility costs and services paid or incurred with respect to the
Project, including, without limitation, costs for electricity, gas,
telephone, sewage, refuse or garbage collection and fire protection
for the Project;
(5) All insurance premiums and policy deductibles paid with respect to the
Project, including, without limitation, fire and extended coverage
insurance, rent loss and public liability insurance coverage;
(6) Management fees (not to exceed competitive market rates for similar
properties) and expenses for the Project;
(7) Taxes, as hereinafter defined;
(8) Accounting and legal costs relating to the Project, except as
hereinbelow excluded;
(9) Common area maintenance charges, if any, levied or assessed against or
payable with respect to the Project; and
(10) Costs of all capital improvements to the Project which are either
required under any governmental law or regulation which was not
applicable to the Project at the time a certificate of occupancy is
issued for the Building or which reduce Operating Expenses; provided
that the costs of any such capital improvements shall be amortized
over a reasonable period (as determined in accordance with generally
accepted accounting principles) with interest thereon at the lower of
10.5% or the prime rate of NationsBank of North Carolina, N.A., in
effect at the time such capital improvements were made.
Operating Expenses shall not include: (i) depreciation or amortization
(except as otherwise provided above), (ii) debt service or interest (paid
or accrued) or ground lease payments, (iii) leasing commissions or
brokerage fees, (iv) repairs to the Building and any demised premises where
the occurrence causing the damage or loss necessitating repair is
reimbursed by insurance carried by Landlord or which would have been
reimbursed by insurance as would normally be carried by a reasonably
prudent operator, (v) renovating space for new tenants or in renovating
space vacated by any tenant, (vi) Landlord's cost of utilities charged to
tenants and Landlord's payroll, material and contract cost of other
services charged to tenants, (vii) costs incurred by Landlord for Tenant's
alterations, (viii) any cost of painting and decorating the premises of
other tenants, (ix) the cost of capital improvements (except as described
above), (x) all expenses of leasing other premises within the Building
(including without limitation attorneys' fees, accounting fees and real
estate brokerage commissions), (xi) all general administrative and office
overhead or related expenses for offices of Landlord located inside or
outside of the Building, (xii) salaries and other compensation and benefits
of Landlord's employees not located full-time at the Project (provided that
a prorata portion of the salary, other compensation and benefits of
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<PAGE> 8
Landlord's employees at or below the level of Building manager
providing services on site to the Project or within the Building shall be
included in the Operating Expenses, (xiii) advertising, promotions and
public relations attributable to Landlord's efforts to increase or maintain
the occupancy rate in the Building, (xiv) state, federal or local income
taxes, excess profits or franchise taxes, and other similar taxes imposed
on, measured by or determined from the gross income of Landlord, (xv)
expenses performed as a special service for another tenant that are not
standard to all tenants, (xvi) any costs, fines or penalties incurred
because Landlord violated any governmental rule or authority, (xvii) costs
incurred to test, survey, cleanup, contain, abate, remove or otherwise
remedy hazardous wastes or asbestos-space containing materials from the
Building or Premises, unless present because of Tenant's negligence or
intentional acts on the Project, or (xviii) costs to repair any defects in
workmanship or materials related to the construction of the Building.
Furthermore, Operating Expenses shall be reduced by reimbursements,
credits, discounts, reductions or other allowances are receivable by
Landlord for items of costs included in Operating Expenses except for
reimbursements to the Landlord by tenants under the Operating
Expenses/Taxes provisions. Operating Expenses for any partial calendar
year of the Term shall be prorated by Landlord. If, in determining the
Operating Expenses in any calendar year, less than ninety-five percent
(95%) of the Building is fully occupied during such calendar year, then
Landlord will adjust, in a commercially reasonable manner, the applicable
items of Operating Expenses which are occupancy dependent for such calendar
year to reflect what the Operating Expenses would have been had the
Building been ninety-five percent (95%) occupied at all times during such
calendar year, and Tenant's "proportionate share" of the cost of such
Operating Expenses shall be based on such adjusted total cost.
(D) Taxes. All real estate taxes, drainage assessments (whether for
drainage, sewage or public improvements), taxes on rent or the occupancy or
use of the Project and similar governmental impositions, whether
general or special, levied, assessed, charged or imposed by federal, state,
county or local governmental authorities against the Project or any part
thereof or the rents therefrom (excluding, however, any income, franchise
or similar tax imposed directly on Landlord or the income derived by
Landlord from the Project unless the same are levied or assessed in lieu of
any of the foregoing), together with all costs reasonably incurred by
Landlord in contesting the same. In the event of any special assessment or
similar charge affecting the Project, Tenant shall only be responsible for
paying its proportionate share of those portions of such charge(s) which
are due and payable during the term of this Lease and under the assumption
that any such charge has been paid over the longest period allowed by law
(and regardless of whether Landlord shall have elected to pay such charge
in a lump sum or other accelerated basis). If, in determining the Taxes in
any calendar year, the Building is not assessed as a fully completed
structure, then Landlord will reasonably adjust the Taxes for such calendar
year to reflect what the Taxes would have been had the Building been
assessed as a fully completed structure and Tenant's "proportionate share"
shall be based on such adjusted amount.
(ii) In addition to the payment of Minimum Rental, Tenant shall also pay
throughout the term of this Lease, including any applicable extensions
and renewals, the Monthly Estimate and the Annual Payment, which amounts shall
be payable as follows:
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<PAGE> 9
(A) During the final month of each calendar year, or as soon as
possible thereafter, Landlord shall provide Tenant with written notice
of Landlord's estimate of Operating Expenses for the ensuing calendar year
and the amount to be paid by Tenant as the Monthly Estimate. In the event
such estimate indicates that Operating Expenses for the ensuing calendar
year shall exceed the Operating Expense Base Amount, then Tenant shall pay
to Landlord the Monthly Estimate in advance on the first day of each month
during the ensuing calendar year; provided, however, that if such estimate
is not given on or prior to the commencement of the ensuing calendar year,
then (1) Tenant shall continue paying the Monthly Estimate paid during the
prior calendar year until such time as Landlord provides Tenant with such
notice for the then current calendar year and (2) at such time as Tenant is
given the Monthly Estimate for the then current calendar year, Tenant shall
pay any unpaid portion of the new Monthly Estimate payments which has
accrued from the commencement of the then current calendar year through the
date such notice is given;
(B) Within sixty (60) days after the end of each calendar year, or
as soon as possible thereafter, but not later than one hundred twenty
(120) days thereafter, Landlord shall deliver to Tenant a reasonably
detailed statement setting forth (1) the amount of Operating Expenses paid
or incurred in the immediately preceding calendar year in excess of the
Operating Expense Base Amount, (2) the amount paid by Tenant as the Monthly
Estimate during the immediately preceding calendar year and (3) the amount,
if any, owing by Tenant as the Annual Payment. Upon the request of Tenant,
Landlord will promptly provide any supplemental information reasonably
required by Tenant related to any such statement. If the statement
indicates that an Annual Payment is due from Tenant, then Tenant shall pay
such amount in full within thirty (30) days after such statement is given
to Tenant and any applicable Monthly Estimate then being paid by Tenant
shall be increased by an amount equal to one-twelfth (1/12) of the amount
of the Annual Payment then due, which amount shall be payable as provided
in paragraph 3(b)(ii)(A) above. If the statement indicates that the amount
paid by Tenant during the preceding calendar year as the Monthly Estimate
is in excess of Tenant's share of increases in Operating Expenses for the
then applicable calendar year, then the excess shall be applied as a credit
to the Monthly Estimate due from Tenant for the then current calendar year,
and if after the expiration of the Term, reimbursed to Tenant within thirty
(30) days.
Notwithstanding anything provided herein to the contrary, in no event
shall the amount of Annual Rental payable by Tenant in any calendar year,
annualized for any partial calendar year, be less than the Minimum Rental.
(iii) Tenant may review Landlord's books pertaining to the determination
of the Monthly Estimate and the Annual Payment during regular business
hours in Landlord's or Agent's office on or before one (1) year after Landlord
delivers its statement of amounts due from Tenant; provided, however, that all
reasonable expenses incurred by Landlord or Agent in connection with such
review shall be paid by Tenant and such review by Tenant shall not postpone or
alter the liability and obligation of Tenant to pay the Monthly Estimate or
Annual Payment.
(iv) Continuing Obligation. If for any reason the Expiration Date of this
Lease shall be on a day other than the final day of a calendar year,
then the Monthly Estimate shall continue to be paid by
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<PAGE> 10
Tenant through the Expiration Date and upon determination of the actual
Operating Expenses for the calendar year in which the Expiration Date occurs,
Tenant shall pay to Landlord the Annual Payment or Landlord shall refund any
excess amounts paid to Tenant as the Monthly Estimate, as the case may be.
(v) No Annual Payment for 1995. Notwithstanding anything herein to
the contrary, Landlord agrees that Tenant shall not be responsible for the
payment of any Annual Payment or Monthly Estimate payments regarding
calendar year 1995. Tenant shall be responsible for any applicable Annual
Payment and Monthly Estimate payments for all calendar years subsequent to
calendar year 1995.
(c) Late Payment.
If any installment of Minimum Rental, Monthly Estimate or Annual
Payment (if any) or any other sum due and payable pursuant to this Lease
remains due and unpaid ten (10) days after said amount becomes due, Tenant
shall pay as additional rent hereunder a late payment charge equal to the
greater of (i) Fifty and No/100 Dollars ($50.00) or (ii) a sum equal to five
percent (5%) of the unpaid rent or other payment, but not in excess of Two
Hundred Fifty and No/100 Dollars ($250.00). All unpaid rent and other sums of
whatever nature owed by Tenant to Landlord under this Lease shall bear
interest from the tenth (10th) day after the due date thereof until paid, at
the lesser of twelve percent (12%) per annum or the maximum interest rate per
annum allowed by law. Acceptance by Landlord of any payment from Tenant
hereunder in an amount less than that which is currently due shall in no way
affect Landlord's rights under this Lease and shall in no way constitute an
accord and satisfaction.
(d) Documentary Tax.
In the event that any documentary stamp tax, sales tax or any other tax
or similar charge (exclusive of any income tax payable by Landlord as a result
hereof) levied on the rental, leasing or letting of the Premises, whether
local, state or federal, is required to be paid due to the execution hereof or
otherwise with respect to this Lease or the payments due hereunder, to the
extent that same is payable by real property owners as a class the cost thereof
(based upon the Project being the sole property of Landlord) shall be borne by
Tenant and shall be paid promptly and prior to same becoming past due. Tenant
shall provide Landlord with copies of all paid receipts respecting such tax or
charge promptly after payment of same.
4. DELIVERY OF POSSESSION.
Landlord will deliver both Phase I and Phase II (as such phases are
defined in Exhibit "E") of the Premises to Tenant on or before the Commencement
Date, with Landlord's work substantially completed in accordance with the Plans
(as defined in Exhibit "E") to be prepared by Landlord, all as more
particularly set forth in Exhibit "E" attached hereto. Without limiting the
generality of anything herein (or in Exhibit "E"), the Plans will comply with
all applicable laws and ordinances respecting the construction of the Premises
and the "Upfit Work" (as such term is defined in Exhibit "E") will be performed
in a good and workmanlike manner. Landlord and Tenant agree to cooperate in
good faith in the preparation and approval of said Plans, consistent with the
schedule set forth in Exhibit "E" attached hereto. When the Plans have been
completed and approved, a copy of same (or a list of the applicable drawings)
shall be attached to this Lease as Exhibit "C". Such substantial completion of
the
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<PAGE> 11
Premises in accordance with the Plans shall be evidenced by the
certification of Landlord's architect or other designated engineering
representative. If Landlord for any reason whatsoever cannot deliver posses-
sion of the Premises to Tenant on the Commencement Date as above specified,
this Lease shall not be void or voidable nor shall Landlord be liable to Tenant
for any loss or damage resulting therefrom; but in that event, the Commencement
Date shall be adjusted to be the date when Landlord does in fact deliver
possession of the Premises to Tenant. However, in the event the Premises are
not delivered to Tenant on or prior to July 14, 1995, then, as Tenant's sole
and exclusive remedy, Tenant may terminate this Lease by written notice given
to Landlord on or before such date, in which event Tenant shall surrender
possession of any applicable portion(s) of the Premises occupied by Tenant in
the condition set forth in Paragraph 6(c) below. In such event, and if this
Lease is not terminated pursuant to the foregoing sentence, then the
Commencement Date shall be adjusted to the date Landlord delivers the Premises
to Tenant as hereinabove provided.
5. ALTERATIONS AND IMPROVEMENTS BY TENANT.
Tenant shall make no structural changes respecting the Premises or the
Building and shall make no changes of any kind respecting the Premises or the
Building that are visible from the exterior of the Premises. Any other
nonstructural changes or other alterations, additions, or improvements to the
Premises shall be made by or on behalf of Tenant only with the prior written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed. All alterations, additions or improvements including without
limitation all partitions, walls, railings, carpeting, floor and wall coverings
and other fixtures (excluding, however, Tenant's trade fixtures as described in
the paragraph entitled "Trade Fixtures and Equipment" below) made by, for, or
at the direction of Tenant shall, when made, become the property of Landlord,
at Landlord's sole election, and shall, at Landlord's sole election, remain
upon the Premises at the expiration or earlier termination of this Lease.
6. USE OF PREMISES.
(a) Tenant shall use the Premises only for general office space
purposes only (including general ancillary purposes related thereto) and for no
other purposes. Tenant shall comply with all laws, ordinances, orders,
regulations or zoning classifications of any lawful governmental authority,
agency or other public or private regulatory authority (including insurance
underwriters or rating bureaus) having jurisdiction over the Premises. Tenant
shall not do any act or follow any practice relating to the Premises which
shall constitute a nuisance or detract in any way from the reputation of the
Building as a first-class real estate development. Tenant's duties in this
regard shall include allowing no noxious or offensive odors, fumes, gases,
smoke, dust, steam or vapors, or any loud or disturbing noise or vibrations to
originate in or emit from the Premises.
(b) Without limiting the generality of (a) above, the Premises
shall not be used for the treatment, storage, transportation to or from, use or
disposal of toxic or hazardous wastes, materials or substances, or any other
substance that is prohibited, limited or regulated by any governmental or
quasi-governmental authority or that, even if not so regulated, could or does
pose a hazard to health and safety of the occupants of the Building or
surrounding property. Landlord agrees that it shall not knowingly use or
permit the use of the Building or any portion thereof in violation of any
applicable law, ordinance or regulation of any governmental authority having
jurisdiction over the Building.
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<PAGE> 12
(c) Tenant shall exercise due care in its use and occupancy of the
Premises and shall not commit or allow waste to be committed on any portion of
the Premises; and at the expiration or earlier termination of this Lease,
Tenant shall deliver the Premises to Landlord in as good condition as on the
date of the completion of the tenant improvements in the Premises, ordinary
wear and tear, acts of God, damage by casualty, and repairs required to be made
by Landlord hereunder alone excepted.
(d) Tenant shall save Landlord harmless from any claims, liabilities,
penalties, fines, costs, expenses or damages resulting from the failure of
Tenant to comply with the provisions of this numbered paragraph 6. This
indemnification shall survive the termination or expiration of this Lease.
7. TAXES.
(a) Except as may otherwise be required by law, Tenant shall pay
any taxes, documentary stamps or assessments of any nature imposed or assessed
upon this Lease, Tenant's occupancy of the Premises or Tenant's trade fixtures,
equipment, machinery, inventory, merchandise or other personal property located
on the Premises and owned by or in the custody of Tenant as promptly as all
such taxes or assessments may become due and payable without any delinquency.
(b) Landlord shall pay Taxes which are now or hereafter assessed upon the
Project, except as otherwise expressly provided in this Lease.
8. FIRE AND EXTENDED COVERAGE INSURANCE.
Landlord shall maintain and pay for fire insurance, with extended
coverage, covering the Building equal to at least eighty percent (80%) of the
replacement cost thereof. Tenant shall not do or cause to be done or permit on
the Premises or in the Building anything deemed extrahazardous on account of
fire and Tenant shall not use the Premises or the Building in any manner which
will cause an increase in the premium rate for any insurance in effect on the
Building or a part thereof. If, because of anything done, caused to be done,
permitted or omitted by Tenant or its agent(s), contractor(s), employee(s),
invitee(s), licensee(s), servant(s), subcontractor(s) or subtenant(s) the
premium rate for any kind of insurance in effect on the Building or any part
thereof shall be raised, Tenant shall pay Landlord on demand the amount of any
such increase in premium which Landlord shall pay for such insurance and if
Landlord shall demand that Tenant remedy the condition which caused any such
increase in an insurance premium rate, Tenant shall remedy such
condition within five (5) days after receipt of such demand. Tenant shall
maintain and pay for all fire and extended coverage insurance on its
contents in the Premises, including trade fixtures, equipment, machinery,
merchandise or other personal property belonging to or in the custody of
Tenant. Landlord represents that Tenant's contemplated use of the Premises
will not cause any increase in insurance premiums.
9. UTILITIES AND SERVICES.
In accordance with all applicable laws, regulations and ordinances,
Landlord, at its expense, subject to Operating Expenses reimbursement by Tenant
for such services (the utilities and services in this Paragraph 9 described to
be provided by Landlord hereinafter being referred to as the "Services"), shall
provide the Premises with reasonably comfortable heating and air conditioning
(between 68 degrees F and
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78 degrees F, inclusive, from October 1 to April 30, and between 74
degrees F and 78 degrees F, inclusive, from May 1 to September 30, unless
mandated otherwise by law) Monday through Friday from 7:00 a.m. to 6:00 p.m.
and Saturdays from 8:00 a.m. to 1:00 p.m. [exclusive of holidays observed in
Raleigh, North Carolina, by other landlords of similar type properties
("Holidays")]. So long as the Premises are kept in reasonable order by Tenant,
Landlord shall provide the Premises with reasonable janitorial and general
cleaning services as shown on Exhibit "H" from Monday through Friday provided
further, however, that Landlord shall not be obligated to provide such services
on Holidays. Landlord shall, at its expense, subject to Operating Expenses
reimbursement by Tenant for the Services, furnish the Premises with electricity
for routine lighting and the operation of general office machines such as
typewriters, dictating equipment, desk model adding machines, personal
computers, copying machines, and the like which use 110 volt electrical power
and 20 AMP circuits and 220 volt circuits for specific equipment requirements,
all in accordance with the Plans referred to in Exhibit "E". Tenant shall not
use any electrical equipment which in Landlord's reasonable opinion will
overload the Building's electrical circuits or interfere with the reasonable
use thereof by other tenants except as contemplated in the Plans. Tenant shall
not, without Landlord's prior written consent in each instance (which consent
shall not be unreasonably withheld), connect any additional items (such as
electrical heaters or mainframe computer systems) to the Building's electrical
distribution system or make any alteration or addition to such system. In the
event that Landlord shall consent to such alterations or additions, all labor,
material and equipment required therefor shall be provided by Landlord and the
reasonable cost thereof shall be paid by Tenant upon demand by Landlord. If
heat generating machines or equipment shall be used in the Premises by Tenant
which affect the temperature otherwise maintained by the heating and air
conditioning system, Landlord shall have the right to install supplemental air
conditioning units in the Premises and the cost thereof, including the cost of
installation and the cost of operation and maintenance thereof, shall be paid
by Tenant to Landlord upon demand by Landlord. If Tenant shall install any
equipment that (i) uses electrical power requiring other than 110 volt
service, or (II) in any way increases demands for electrical power, water or
gas usually furnished for use in Premises of like size in the Building, Tenant
shall pay Landlord upon demand the cost of any such excess. Landlord shall
furnish elevator service to all floors of the Building at all times. At
Landlord's option, all elevators may be self-service. Landlord shall furnish a
reasonable amount of hot and cold running water to lavatories and toilets in or
appurtenant to the Premises and shall keep all plumbing in working order.
Landlord shall maintain and keep up all elevators, rest rooms and corridors of
the Building. Landlord shall have the right to terminate the furnishing of any
or all of the utilities and Services hereinbefore provided for at and for any
and all such reasonable time or times as Landlord shall deem necessary for
repairs, alterations or improvements. In the event the Premises becomes unfit
for the conduct of Tenant's business operation as a result of Landlord's
failure to provide any of such Services for three (3) consecutive business
days, then the rental hereunder shall abate proportionately for the portion
deemed unfit from and after such third business day. Also, if the Premises
becomes unfit because of Landlord's failure to provide any of such Services
more than once in any twelve (12) consecutive month period, with respect to
each of such instances occurring after the first such failure during any such
twelve (12) consecutive month period which continued beyond such three (3) day
grace period, then the rental hereunder shall abate proportionately to the
portion deemed unfit immediately [i.e., without such three (3) day grace
period] with respect to such subsequent occurrences. Landlord shall have no
liability or responsibility to Tenant for loss or damage in the event the
furnishing of any of the utilities and Services hereinbefore provided for is
prohibited or stopped for repairs, alterations or improvements or by reason of
causes beyond Landlord's reasonable control including,
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without limitation, accidents, strikes, lockouts, or orders or regulations of
any federal, state or municipal authority.
10. PROPERTY OF TENANT.
All property placed on the Premises by, at the direction of or with the
consent of the Tenant, its employees, agents, licensees or invitees, shall be
at the risk of the Tenant or the owner thereof and Landlord shall not be liable
for any loss of or damage to said property resulting from any cause
whatsoever.
11. TRADE FIXTURES AND EQUIPMENT.
So long as Tenant is not in default under this Lease, any trade
fixtures installed in the Premises at Tenant's expense shall remain Tenant's
personal property and Tenant shall have the right at any time during the term
of this Lease to remove such trade fixtures. Upon removal of any trade
fixtures, Tenant shall immediately restore the Premises to substantially the
same condition as they were when received by Tenant, ordinary wear and tear and
acts of God alone excepted. Any trade fixtures not removed by Tenant at the
expiration or an earlier termination of the Lease shall become, at Landlord's
sole election, either (i) the property of Landlord, in which event Landlord
shall be entitled to handle and dispose of same in any manner Landlord deems
fit without any liability or obligation to Tenant or any other third party with
respect thereto, or (ii) subject to Landlord's removing such property from the
Premises and storing same, all at Tenant's expense and without any recourse
against Landlord with respect, thereto. Without limiting the generality of the
foregoing, the following property shall in no event be deemed to be "trade
fixtures" and Tenant shall not remove any such property from the Premises under
any circumstances, regardless of whether installed by Landlord or Tenant: (a)
any air conditioning, air ventilating or heating fixtures or equipment; (b) any
lighting fixtures or equipment; (c) any dock levelers; (d) any carpeting or
other permanent floor coverings; (e) any paneling or other wall coverings; (f)
plumbing fixtures and equipment; or (g) permanent shelving.
12. DAMAGE OR DESTRUCTION OF PREMISES.
If the Premises are damaged by fire or other casualty, but are not
rendered untenantable for Tenant's business, either in whole or in part,
Landlord shall cause such damage to be repaired without unreasonable delay and
the Annual Rental shall not be abated. If by reason of such casualty the
Premises are rendered untenantable in Tenant's business, either in whole or in
part, Landlord shall cause the damage to be repaired or replaced without
unreasonable delay, and, in the interim, the Annual Rental shall be
proportionately reduced as to such portion of the Premises as is rendered
untenantable. Any such abatement of rent shall not, however, create an
extension of the term of this Lease. Provided, however, if by reason of such
casualty, the Premises are rendered untenantable in some material portion, and
the amount of time required to repair the damage using due diligence is in
excess of one hundred twenty (120) days, then either party shall have the right
to terminate this Lease by giving written notice of termination within sixty
(60) days after the date of casualty, and the Annual Rental shall abate as of
the date of such casualty in proportion to the part of the Premises rendered
untenantable. Notwithstanding the other provisions of this paragraph, in the
event there should be a casualty loss to the Premises to the extent of fifty
percent (50%) or more of their replacement value or if the Premises are
rendered untenant-
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able for the conduct of Tenant's business operations during the last
Lease Year of the initial term or any extended term, either party may, at its
option, terminate this Lease by giving written notice within sixty (60) days
after the date of the casualty and rent shall abate as of the date of such
notice. Except as provided herein, Landlord shall have no obligation to
rebuild or repair in case of fire or other casualty, and no termination under
this paragraph shall affect any rights of Landlord or Tenant hereunder because
of prior defaults of the other party. Tenant shall give Landlord immediate
notice of any fire or other casualty in the Premises.
13. GOVERNMENTAL ORDERS.
Except as hereinbelow set forth regarding compliance of the physical
structure of the Premises with the applicable requirements of the
Americans with Disabilities Act and the implementing regulations (the "ADA") as
of the Commencement Date, Tenant agrees, at its own expense, to comply promptly
with all requirements of any legally constituted public authority that may be
in effect from time to time made necessary by reason of Tenant's use or
occupancy of the Premises. Landlord agrees to comply promptly with any such
requirements if not made necessary by reason of Tenant's use or occupancy.
With regard to the physical structure of the Premises, Landlord agrees to use
good faith and due diligence to undertake those actions that are "readily
achievable" (as such term is defined in the ADA) in order to attempt to bring
the physical structure of the Premises in compliance with the applicable
requirements of the ADA in effect as of the Commencement Date. If it is
determined that for any reason Landlord shall have failed to cause the physical
structure of the Premises to be brought into compliance with the ADA as of the
Commencement Date (to at least the minimum extent required under applicable
regulations then in effect), then Landlord, as its sole obligation, will take
the action(s) necessary to cause the physical structure of the Premises to so
comply, and Tenant acknowledges and agrees that Landlord has and shall have no
other obligation or liability whatsoever to Tenant, or to anyone claiming by or
through Tenant, regarding JD any failure of the Premises or the activities
therein to comply with the applicable requirements of the ADA.
14. MUTUAL WAIVER OF SUBROGATION.
For the purpose of waiver of subrogation, the parties mutually release
and waive unto the other all rights to claim damages, costs or expenses for any
injury to persons (including death) or property caused by a casualty of any
type whatsoever in, on or about the Premises if the amount of such damage, cost
or expense has been paid to such damaged party under the terms of any policy of
insurance. All insurance policies carried with respect to this Lease, if
permitted under applicable law, shall contain a provision whereby the insurer
waives, prior to loss, all rights of subrogation against either Landlord or
Tenant.
15. SIGNS AND ADVERTISING.
(a) Landlord will install one tenant identification sign for Tenant
in accordance with Building standards, such sign to be located at or near the
Tenant's front entrance to the Premises. Landlord will further install, at
Landlord's expense, a monument sign for the Building, such monument sign to
contain tenant identification panels, one of which shall identity Tenant.
Tenant's name shall be displayed in the uppermost prominent position on such
monument sign. In the event Landlord, in its sole and absolute
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discretion, ever elects to allow signage on the side(s) of the
Building, Landlord will allow Tenant the first opportunity to place its name on
the Building.
(b) In order to provide architectural control for the Building,
Tenant shall install no other exterior signs, marquees, billboards, outside
lighting fixtures and/or other decorations on the Premises. Landlord shall have
the right to remove any such sign or other decoration and restore fully the
Premises at the cost and expense of Tenant if any such exterior work is done
without Landlord's prior written approval, which approval Landlord shall be
entitled to withhold or deny in its sole discretion. Tenant shall not permit,
allow or cause to be used in, on or about the Premises any sound production
devices, mechanical or moving display devices, bright lights, or other
advertising media, the effect of which would be visible or audible from the
exterior of the Premises.
16. INDEMNIFICATION AND LIABILITY INSURANCE.
(a) Tenant shall indemnify and save Landlord harmless against any
and all claims, suits, demands, actions, fines, damages, and liabilities, and
all costs and expenses thereof (including without limitation reasonable
attorneys' fees) arising out of injury to persons (including death) or property
occurring in, on or about, or arising out of the Premises or other areas in the
Building if caused or occasioned wholly or in part by any act(s) or omission(s)
of Tenant, its agent(s), contractor(s), employee(s), invitee(s), licensee(s),
servant(s), subcontractor(s) or subtenant(s), except if caused by any act or
omission on the part of Landlord. The non-prevailing party shall also pay all
costs, expenses and reasonable attorneys' fees that may be incurred by the
prevailing party in enforcing the agreements of this Lease, whether incurred as
a result of litigation or otherwise. Tenant shall give Landlord immediate
notice of any such happening causing injury to persons or property.
(b) Landlord shall indemnify and save Tenant harmless against any
and all claims, suits, demands, actions, fines, damages, and liabilities, and
all costs and expenses thereof (including without limitation reasonable
attorneys' fees) arising out of injury to persons (including death) or property
occurring in, on or about, or arising out of the Premises or other areas in the
Building if caused or occasioned by any act(s) or omission(s) of Landlord, its
agent(s) or employee(s), except if caused by any act(s) or omission(s) on the
part of Tenant, its agent(s), contractor(s), employee(s), invitee(s),
licensee(s), servant(s), subcontractor(s) or subtenant(s). Provided, however,
Landlord shall not be liable for any damage caused or occasioned by or from
water, snow or ice being upon or coming through the roof, trapdoor, walls,
windows, doors, or otherwise in, upon or about the Premises or the Building, or
from any damage arising from acts or omissions of co-tenants or other occupants
of the Building.
(c) At all times during the term of this Lease, Tenant shall at
its own expense keep in force adequate public liability insurance under the
terms of a commercial general liability policy (occurrence coverage) in the
amount of not less than $1,000,000.00 coverage and with such company(ies)
licensed to do business in the state in which the Premises is located and
naming Landlord as an additional insured. Such insurance shall include, without
limitation, personal injury and contractual liability coverage for the
performance by Tenant of the indemnity agreements set forth in this Lease.
Tenant shall first furnish to Landlord copies of policies or certificates of
insurance evidencing the required coverage prior to the Commencement Date and
thereafter prior to each policy renewal date. All policies required of Tenant
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hereunder shall contain a provision whereby the insurer is not allowed
to cancel or change materially the coverage without first giving thirty (30)
days' written notice to Landlord.
17. LANDLORD'S RIGHT OF ENTRY.
Landlord, and those persons authorized by it, shall have the right to
enter the Premises at all reasonable times and upon reasonable notice for the
purposes of making repairs, making connections, installing utilities, providing
services to the Premises or for any other tenant, making inspections or showing
the same to prospective purchasers and/or lenders, as well as at any time in
the event of emergency involving possible injury to property or persons in or
around the Premises or the Building. Further, during the last six (6) months of
the initial or of any extended term, Landlord and those persons authorized by
it shall have the right at reasonable times and upon reasonable notice to show
the Premises to prospective tenants.
18. EMINENT DOMAIN.
If any substantial portion of the Premises is taken under the power of
eminent domain (including any conveyance made in lieu thereof) or if such
taking shall materially impair the normal operation of Tenant's business, then
either party shall have the right to terminate this Lease by giving written
notice of such termination within thirty (30) days after such taking. If
neither party elects to terminate this Lease, Landlord shall repair and restore
the Premises to the best possible tenantable condition and the Annual Rental
shall be proportionately and equitably reduced. All compensation awarded for
any taking (or the proceeds of a private sale in lieu thereof) shall be the
property of Landlord whether such award is for compensation for damages to the
Landlord's or Tenant's interest in the Premises, and Tenant hereby assigns all
of its interest in any such award to Landlord; provided, however, Landlord
shall not have any interest in any separate award made to Tenant for loss of
business, moving expense or the taking of Tenant's trade fixtures or equipment
if a separate award for such items is made to Tenant and if such separate award
does not reduce the award to Landlord.
19. EVENTS OF DEFAULT AND REMEDIES.
(a) Upon the occurrence of any one or more of the following events
(the "Events of Default," any one an "Event of Default"), the party not
in default shall have the right to exercise any rights or remedies available
in this Lease, at law or in equity. Events of Default shall be:
(i) Tenant's failure to pay when due any rental or other sum of money
payable hereunder and such failure is not cured within ten (10) days
after written notice thereof;
(ii) Failure by either party to perform any other of the terms,
covenants or conditions contained in this Lease if not remedied within
thirty (30) days after receipt of written notice thereof, or if such
default cannot be remedied within such period, such party does not within
thirty (30) days after written notice thereof commence such act or acts as
shall be necessary to remedy the default and shall not thereafter complete
such act or acts within a reasonable time;
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(iii)Tenant shall become bankrupt or insolvent, or file any debt or
proceedings, or file pursuant to any statute a petition in bankruptcy
or insolvency or for reorganization, or file a petition for the appointment
of a receiver or trustee for all or substantially all of Tenant's assets
and such petition or appointment shall not have been set aside within sixty
(60) days from the date of such petition or appointment, or if Tenant makes
an assignment for the benefit of creditors, or petitions for or enters into
an arrangement; or
(iv) Tenant allows its leasehold estate to be taken under any writ of
execution and such writ is not vacated or set aside within thirty (30)
days.
(b) In addition to its other remedies, Landlord, upon an Event of Default
by Tenant, shall have the immediate right, after any applicable grace
period expressed herein, to terminate and cancel this Lease and/or to reenter
and remove all persons and properties from the Premises and dispose of such
property as it deems fit, provided Landlord's actions shall be in accordance
with applicable legal procedures. If Landlord reenters the Premises, it may
either terminate this Lease or, from time to time without terminating this
Lease, make such alterations and repairs as may be necessary or appropriate to
relet the Premises and relet the Premises upon such terms and conditions as
Landlord deems advisable without any responsibility on Landlord whatsoever to
account to Tenant for any surplus rents collected. No retaking of possession of
the Premises by Landlord shall be deemed as an election to terminate this Lease
unless a written notice of such intention is given by Landlord to Tenant at the
time of reentry; but, notwithstanding any such reentry or reletting without
termination, Landlord may at any time thereafter elect to terminate for such
previous default. Landlord will use reasonable efforts to mitigate its damages
in the event of any such Event of Default by Tenant; provided, however, as used
herein, the term "reasonable efforts to mitigate its damages" shall never be
construed to require Landlord to make efforts to mitigate its damages in excess
of the requirement to mitigate damages imposed upon Landlord under applicable
North Carolina law in effect as of the date of this Lease. In the event of an
elected termination by Landlord, whether before or after reentry, Landlord may
recover from Tenant damages, including the costs of recovering the Premises,
and Tenant shall remain liable to Landlord for the total amount of (i) the
Annual Rental as would have been payable by Tenant hereunder for the remainder
of the term, less (ii) the rentals actually received from any applicable
reletting, or less the reasonable rental value of the Premises for the
remainder of the term (which amount may, at Landlord's election, be accelerated
to be due and payable in full, as of the Event of Default and recoverable as
damages in a lump sum, in which event said amount shall be discounted to
present value, using a discount rate equal to the then rate publicly
announced by NationsBank of North Carolina, N.A., as its "prime" rate). In
determining the Annual Rental which would be payable by Tenant subsequent to
default, the Annual Rental for each Lease Year of the unexpired term shall be
equal to the Annual Rental payable by Tenant for the last Lease Year prior to
the default. If any rent owing under this Lease is collected by or through an
attorney, Tenant agrees to pay Landlord's reasonable attorneys' fees to the
extent allowed by applicable law.
20. SUBORDINATION.
Landlord represents and warrants that at the time of execution of this
Lease there is no mortgage, deed of trust or similar lien encumbering
the Building or the Premises. This Lease shall be subject and subordinate to
any and all mortgages or deeds of trust hereafter placed on the property of
which the Premises are a part, and this clause shall be self-operative without
any further instrument necessary to
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effect such subordination; however, if requested by Landlord, Tenant
shall promptly execute and deliver to Landlord any such certificate(s) as
Landlord may reasonably request evidencing subordination of this Lease to or
the assignment of this Lease as additional security for such mortgages or deeds
of trust. Provided, however, it shall be a condition to any such subordination
that in each case the holder of the mortgage or deed of trust shall agree in
writing that this Lease shall not be divested by foreclosure or other default
proceedings thereunder so long as Tenant shall not be in default under the
terms of this Lease beyond any applicable cure period set forth herein. Tenant
shall continue its obligations under this Lease in full force and effect
notwithstanding any such default proceedings under a mortgage or deed of trust
and shall attorn to the mortgagee, trustee or beneficiary of such mortgage or
deed of trust, and their successors or assigns, and to the transferee under any
foreclosure or default proceedings. Tenant will, upon request by Landlord,
execute and deliver to Landlord or to any other person designated by Landlord,
any instrument or instruments required to give effect to the provisions of this
paragraph.
21. ASSIGNING AND SUBLETTING.
Tenant shall not assign, sublet, mortgage, pledge or encumber this
Lease, the Premises, or any interest in the whole or in any portion thereof,
directly or indirectly, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed. If Landlord denies
consent, it must explain in writing, in reasonable detail, its reasons for the
denial. Notwithstanding the foregoing, and provided that there is no change in
use or in the tenant's operations within the Premises, Tenant shall have the
right, without the prior approval of Landlord, but upon written notice to
Landlord, to assign the Lease or sublet all or any portion of the Premises to
any corporation or entity which is controlled by or is under common control
with Tenant, or to any corporation, partnership or other entity resulting from
the merger or consolidation with Tenant or any person or entity which acquires
substantially all of Tenant's assets. If Tenant makes any such assignment,
sublease, mortgage, pledge or encumbrance with or without Landlord's written
consent, Tenant will still remain primarily liable for the performance of all
terms of this Lease and one-half (1/2) of any rental or any fees or charges
received by Tenant (net of Tenant's reasonable costs related to such assignment
or sublease) in excess of the Annual Rental payable to Landlord hereunder shall
be also paid to Landlord as further rental under this Lease. Landlord's
consent to one assignment or sublease will not waive the requirement of its
consent to any subsequent assignment or sublease as required herein.
22. TRANSFER OF LANDLORD'S INTEREST.
If Landlord shall sell, assign or transfer all or any part of its
interest in the Premises or in this Lease to a successor in interest which
expressly assumes the obligations of Landlord hereunder, then Landlord shall
thereupon be released or discharged from all covenants and obligations
hereunder accruing from and after the date of such transfer, and Tenant shall
look solely to such successor in interest for performance of all of Landlord's
obligations accruing from and after the date of such transfer. Tenant's
obligations under this Lease shall in no manner be affected by Landlord's sale,
assignment, or transfer of all or any part of such interest(s) of Landlord, and
Tenant shall thereafter attorn and look solely to such successor in interest as
the Landlord hereunder.
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23. COVENANT OF QUIET ENJOYMENT.
Landlord represents that it has full right and authority to lease the
Premises and Tenant shall peacefully and quietly hold and enjoy the
Premises for the full term hereof so long as Tenant does not default in the
performance of any of the terms hereof.
24. ESTOPPEL CERTIFICATES.
Within ten (10) days after a request by Landlord, Tenant shall deliver
a written estoppel certificate, in form supplied by or acceptable to Landlord,
certifying any facts that are then true with respect to this Lease, including
without limitation that this Lease is in full force and effect, that no default
exists on the part of Landlord or Tenant, that Tenant is in possession, that
Tenant has commenced the payment of rent, and that, to the best of its
knowledge and belief, Tenant claims no defenses or offsets with respect to
payment of rentals under this Lease except as may be otherwise noted.
Likewise, within ten (10) days after a request by Tenant, Landlord shall
deliver to Tenant a similar estoppel certificate covering such matters as are
reasonably required by Tenant.
25. PROTECTION AGAINST LIENS.
Tenant shall do all things necessary to prevent the filing of any
mechanics', materialmen's or other types of liens whatsoever, against all or
any part of the Premises by reason of any claims made by, against, through or
under Tenant. If any such lien is filed against the Premises, Tenant shall
either cause the same to be discharged of record within thirty (30) days after
filing or, if Tenant in its discretion and in good faith determines that such
lien should be contested, it shall furnish such security as may be necessary to
prevent any foreclosure proceedings against the Premises during the pendency of
such contest. If Tenant shall fail to discharge such lien within said time
period or fail to furnish such security, then Landlord may at its election, in
addition to any other right or remedy available to it, discharge the lien by
paying the amount claimed to be due or by procuring the discharge by giving
security or in such other manner as may be allowed by law. If Landlord acts to
discharge or secure the lien then Tenant shall immediately reimburse Landlord
for all sums paid and all costs and expenses (including reasonable attorneys'
fees) incurred by Landlord involving such lien together with interest on the
total expenses and costs at the maximum lawful rate.
26. MEMORANDUM OF LEASE.
If requested by Tenant, Landlord shall execute a recordable
Memorandum or Short Form Lease, prepared at Tenant's expense, specifying the
exact term of this Lease and such other terms as the parties shall mutually
determine.
27. FORCE MAJEURE.
In the event Landlord or Tenant shall be delayed, hindered or prevented
from the performance of any act required hereunder, by reason of governmental
restrictions, scarcity of labor or materials, strikes, fire, or any other
reasons beyond its reasonable control, the performance of such act shall be
excused for the period of delay, and the period for performance of any such act
shall be extended as
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necessary to complete performance after the delay period. However, the
provisions of this paragraph shall in no way be applicable to Tenant's
obligations to pay Annual Rental or any other sums, monies, costs, charges or
expenses required by this Lease.
28. REMEDIES CUMULATIVE - NONWAIVER.
Unless otherwise specified in this Lease, no remedy of Landlord or
Tenant shall be considered exclusive of any other remedy, but each shall be
distinct, separate and cumulative with other available remedies. Each remedy
available under this Lease or at law or in equity may be exercised by Landlord
or Tenant from time to time as often as the need may arise. No course of
dealing between Landlord and Tenant or any delay or omission of Landlord or
Tenant in exercising any right arising from the other party's default shall
impair such right or be construed to be a waiver of a default.
29. HOLDING OVER.
If Tenant remains in possession of the Premises or any part thereof
after the expiration of the term of this Lease, whether with or without
Landlord's acquiescence, Tenant shall be deemed only a tenant at will and there
shall be no renewal of this Lease without a written agreement signed by both
parties specifying such renewal. The "monthly" rental payable by Tenant during
any such tenancy at will period shall be one hundred twenty-five percent (125%)
of the monthly installments of Annual Rental payable during the final year
immediately preceding such expiration. If Tenant retains possession of the
Premises in a holdover situation, without Landlord's written approval, for more
than thirty (30) days, then Tenant shall also remain liable for any and all
damages, direct and consequential, suffered by Landlord as a result of any
holdover without Landlord's unequivocal written acquiescence.
30. NOTICES.
Any notice allowed or required by this Lease shall be deemed to have
been sufficiently served if the same shall be in writing and placed in the
United States mail, via certified mail or registered mail, return receipt
requested, with proper postage prepaid and addressed as follows:
AS TO LANDLORD: c/o NationsBank of North Carolina, N.A.,
Real Estate Investment Services,
Investment Division, Trust Department
One NationsBank Plaza, NCI-002-11-07
Charlotte, North Carolina 28255-0131
Attention: Mr. Floyd T. Boyce
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AS TO TENANT: Syntel, Inc.
Suite 200
110 Coming Road
Cary, North Carolina 27511
Attention: Personnel & Administration Manager
WITH A COPY TO: Syntel, Inc.
Suite 301
5700 Crooks Road
Troy, Michigan 48098
Attention: Financial Controller; and,
VP, Human Resources & Administration
The addresses of Landlord and Tenant and the party, if any, to whose
attention a notice or copy of same shall be directed may be changed or added
from time to time by either party giving notice to the other in the prescribed
manner.
31. LEASING COMMISSION.
Landlord and Tenant represent and warrant each to the other that they
have not dealt with any broker(s) or any other person claiming any entitlement
to any commission in connection with this transaction except Carolantic Realty,
Inc. and Highwoods Properties, Inc. (the "Brokers"). Landlord and Tenant agree
to indemnify and save each other harmless from and against any and all claims,
suits, liabilities, costs, judgments and expenses, including reasonable
attorneys' fees, for any leasing commissions or other commissions, fees,
charges or payments resulting from or arising out of their respective actions
in connection with this Lease except as to Brokers. Landlord agrees to be
responsible for the leasing commission due Brokers pursuant to a separate
written agreement between Landlord and Carolantic Realty, Inc., and to hold
Tenant harmless respecting same.
32. MISCELLANEOUS.
(a) Rules and Regulations.
Landlord shall have the right from time to time to prescribe reasonable
rules and regulations (the "Rules and Regulations") for Tenant's use of the
Premises and the Building. A copy of Landlord's current Rules and Regulations
respecting the Premises and the Building is attached hereto as Exhibit "D".
Tenant shall abide by and actively enforce on all its employees, agents,
invitees and licensees such regulations including without limitation rules
governing parking of vehicles in designated portions of the Building.
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(b) Evidence of Authority.
If requested by Landlord, Tenant shall furnish appropriate legal
documentation evidencing the valid existence and good standing of Tenant and
the authority of any parties signing this Lease to act for Tenant.
(c) Limitation of Landlord's Liability.
If Landlord shall fail to perform any covenant, term or condition of
this Lease upon Landlord's part to be performed, and, as a consequence of such
default, Tenant shall recover a money judgment against Landlord, such judgment
shall be satisfied solely out of the proceeds of sale received upon execution
of such judgment levied thereon against the right, title and interest of
Landlord in the Building as the same may then be encumbered; and neither
Landlord nor, if Landlord be a partnership, any of the partners comprising
Landlord shall have any personal liability for any deficiency. It is
understood and agreed that in no event shall Tenant or any person claiming by
or through Tenant have the right to levy execution against any property of
Landlord other than its interest in the Building as hereinbefore expressly
provided.
(d) Nature and Extent of Agreement.
This Lease, together with all exhibits hereto, contains the complete
agreement of the parties concerning the subject matter, and there are no oral
or written understandings, representations,. or agreements pertaining thereto
which have not been incorporated herein. This Lease creates only the rela-
tionship of landlord and tenant between the parties, and nothing herein shall
impose upon either party any powers, obligations or restrictions not expressed
herein. This Lease shall be construed and governed by the laws of the state in
which the Premises are located.
(e) Binding Effect.
This Lease shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, successors and assigns. This Lease
shall not be binding on Landlord until executed by a Vice President of Landlord
and delivered to Tenant. No amendment or modification to this Lease shall be
binding upon Landlord unless same is in writing and executed by a Vice
President of Landlord.
(f) Captions and Headings.
The captions and headings in this Lease are for convenience and
reference only, and they shall in no way be held to explain, modify, or
construe the meaning of the terms of this Lease.
(g) Lease Review.
The submission of this Lease to Tenant for review does not constitute a
reservation of or option for the Premises, and this Lease shall become
effective as a contract only upon execution and delivery by Landlord and
Tenant.
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(h) Right to Relocate. [Intentionally deleted.]
(i) Security Deposit. Tenant, simultaneously with the delivery of
this Lease executed by Tenant to Landlord, has paid to Landlord the
amount of Sixty-four Thousand Eight Hundred Ninety-four and 63/100 Dollars
($64,894.63) (the "Deposit") as security for Tenant's performance of all
obligations hereunder. The Deposit may be held by Landlord in such manner as
it shall elect and Landlord shall be entitled to any interest which accrues on
the Deposit. In the event of a default by Tenant, Landlord may, at its option,
apply all or any part of the Deposit to cure the default, and thereupon Tenant
shall immediately redeposit with Landlord the amount so applied in order that
Landlord will always have the full Deposit on hand during the term of this
Lease. Upon the termination of this Lease, provided that Tenant is not in
default hereunder, Landlord shall refund to Tenant any of the remaining balance
of the Deposit subject to final adjustments for payment of any rental required
by this Lease. If the Premises is sold, Landlord shall have the right to
transfer the Deposit to the new owner, and upon the new owner's express
assumption of the obligations for the Deposit required by this Lease, Landlord
shall thereupon be released from all liability for such Deposit, and Tenant
thereafter shall look only to the new owner for such Deposit. The terms hereof
shall apply to every transfer of the Deposit.
33. SEVERABILITY.
If any term or provision of this Lease or the application thereof to any
person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and enforced to the fullest extent
permitted by law notwithstanding the invalidity of any other term or provision
hereof.
34. REVIEW OF DOCUMENTS.
If, following the execution of this Lease, either party hereto requests
that the other party execute any document or instrument that is other than (i)
a document or instrument the form of which is attached hereto as an exhibit, or
(ii) a document that solely sets forth facts or circumstances that are then
existing and reasonably ascertainable by the requested party with respect to
the lease, then the party making such request shall be responsible for paying
the out-of-pocket costs and expenses, including without limitation, the
attorneys fees, incurred by the requested party in connection with the review
(and, if applicable, the negotiations) related to such document(s) or
instrument(s), regardless of whether such document(s) or instrument(s) is (are)
ever executed by the requested party. In the event the requesting party is
Tenant, all such costs and expenses incurred by Landlord in connection with its
review and negotiation of any such document(s) or instrument(s) shall be deemed
to be additional rental due hereunder and shall be payable by Tenant promptly
upon demand.
35. SPECIAL PROVISIONS.
The special provisions, if any, contained in Exhibit "E" attached
hereto and initialled by the parties, are incorporated herein by this
reference. In the event of a conflict between the terms and conditions of said
Exhibit "E" and the terms and conditions of the main body of this Lease, the
terms and conditions of Exhibit "E" shall control.
21
<PAGE> 25
IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed
and sealed pursuant to authority duly given as of the day and year first above
written.
"LANDLORD"
NATIONSBANK OF NORTH CAROLINA, N.A., AS
[CORPORATE SEAL] TRUSTEE FOR THE PUBLIC EMPLOYEES RETIREMENT
SYSTEM OF OHIO
ATTEST:
By: ?
? ------------------------------
- ---------------------- Vice President
Assistant Secretary ---------
"TENANT"
SYNTEL, INC.,
[CORPORATE SEAL] a Michigan corporation
ATTEST:
By: ?
? ------------------------------
- ---------------------- President
Secretary ---------
- -----------
22
<PAGE> 26
STATE OF NORTH CAROLINA
COUNTY OF CABARRUS
This 5th day of December, 1994, personally came before me George
Massengale who, being by me duly sworn, says that he is Vice President of
NATIONSBANK OF NORTH CAROLINA, N.A., that the seal affixed to the foregoing
instrument in writing is the corporate seal of said Bank, and that said writing
was signed and sealed by him, in behalf of said Bank by its authority duly
given, and the said Vice President acknowledged the said writing to be the
act and deed of said Bank.
ROBBIE E. CALDWELL
-------------------------
Notary Public
[NOTARIAL SEAL]
My Commission Expires September 11, 1995
STATE OF MICHIGAN
COUNTY OF OAKLAND
This 30 day of November, 1994, personally came before me Bharat Desai,
who, being by me duly sworn, says that he is President of SYNTEL, INC.,
that the seal affixed to the foregoing instrument in writing is the corporate
seal of the Corporation, and that said writing was signed and sealed by him, in
behalf of said Corporation, by its authority duly given, and the said
President acknowledged the said writing to be the act and deed of said
Corporation.
ARLENE M. PAULI
-------------------------------
Notary Public
[NOTARIAL SEAL]
ARLENE M. PAULI
My Commission expires: NOTARY PUBLIC - MACOMB COUNTY, MICH.
MY COMMISSION EXPIRES 1-29-95
01/29/95 ACTING IN OAKLAND COUNTY
- ------------------
<PAGE> 27
EXHIBIT A
Legal Description Of Crossroads II
For: Crossroads 11 Building
Cary, North Carolina
LEGAL DESCRIPTION
CROSSROADS TWO
A certain tract or parcel of realty, lying and being in the Town of Cary,
Wake County, North Carolina, being more fully described as follows, viz:
BEGINNING at an existing iron pipe in the western right of way line of
Corning Road, said pipe marking the southeast corner of the Crossroads One
parcel; thence with the line of Corning Road, a course of S 6 deg 39' 47" W for
a distance of 30.00 feet to a calculated point; thence along the arc of a
circular curve with a radius of 100.00 feet and a delta angle Of 99 deg 28' 31"
for an arc length of 173.62 feet, a chord bearing of S 43 deg 05' 02" E and
chord length of 152.62 feet to a calculated point; thence with the line of
NationsBank as Trustee, a course of S 2 deg 19' 42" E for a distance of 95.62
feet to a calculated point; thence with the line of NationsBank as Trustee, a
course of S 20 deg 09' 46" W for a distance of 370.01 feet to a calculated
point; thence with the line of Margaret Benfield, a course of N 70 deg 19' 37" W
for a distance of 815.00 feet to an existing iron pipe; thence with the line of
Felix Jones and Hex Investments, a course of N 31 deg 47' 08" E for a distance
of 538.62 feet to an existing iron pipe; thence with the line of
Crossroads One, a course of S 60 deg 12' 36" E for a distance of 165.00 feet to
an existing iron pipe; thence with the line of Crossroads One, a course of S 75
deg 00' 40" E for a distance of 125.98 feet to an existing iron pipe; thence
along the arc of a circular curve with a radius of 988.00 feet and a delta angle
of 14 deg 11' 15" for an arc length of 244.65 feet, a chord bearing of S 82 deg
06' 17" E and chord length of 244.02 feet to an existing iron pipe, the point
and place of BEGINNING and containing 8.799 acres, more or less. This
description was prepared 29 March 1994 by James S. Murphy, RLS for the sole
purpose of describing lease limits and in no way is this description to be
used for purposes of sale or conveyance.
* This legal description shall be revised to include an additional
tract of realty if Landlord chooses to develop such additional
tract of realty as part of the Building.
<PAGE> 28
EXHIBIT B - PREMISES
SYNTLE, INC
[PHASE I CONSTRUCTION AND PHASE II CONSTRUCTION FLOORPLAN]
<PAGE> 29
EXHIBIT "C"
PLANS AND SPECIFICATIONS/WORK LETTER IDENTIFICATION LISTING
[TO BE PROVIDED BY LANDLORD UPON COMPLETION]
<PAGE> 30
EXHIBIT "D"
RULES AND REGULATIONS
a. The sidewalks, halls, passages, elevators and stairways shall
not be obstructed by any tenant or used by any tenant for any other purpose than
for ingress and egress from and to their respective offices. The halls,
passages, entrances, elevators, stairways, balconies and roof are not for the
use of the general public and Landlord shall in all cases retain the right to
control and prevent access thereto of all persons whose presence in the
judgement of Landlord, or its employees, shall be prejudicial to the safety,
character, reputation and interest of the Building and its tenants.
b. The floors, skylights, windows, doors and transoms that reflect or
admit light in passageways, or into any place in the Building, shall not be
covered or obstructed by any tenant. The toilet rooms, water closets and other
water apparatus shall not be used for any purpose other than those for which
they were constructed, and no sweepings, rubbish, rags, ashes, chemicals or
refuse or other injurious substances, shall be thrown therein. Any damage
resulting from such misuse or abuse shall be borne and immediately paid by the
tenant by whom or by whose employees it shall have been caused.
c. No sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the outside or inside of said Building unless first
consented to in writing by the Landlord.
d. No additional locks shall be placed upon any doors of the Premises
and no tenant shall permit any duplicate keys to be made, but if more than two
keys for any door or lock shall be desired, the additional number must be
obtained from the Landlord and be paid for by the tenant; each tenant must, upon
the termination of its lease, leave the windows and doors in the demised
Premises in like condition as the date of said lease, and must then surrender
all keys to its premises.
e. No tenant shall cause unnecessary labor by reason of carelessness
and indifference to the preservation of good order and cleanliness in its
Premises and in the Building. In order that the leased premises may be kept in
good state of preservation and cleanliness, each tenant shall, during the
continuance of its lease, permit the janitor of the Landlord to take charge of
and clean the said leased premises.
f. No tenant, shall employ any person or persons other than the janitor
of the Landlord for the purpose of cleaning or taking charge of said premises
without Landlord's prior written consent and it is understood and agreed that
the Landlord shall in no wise be responsible to any tenant for any damage done
to the furniture or other effects of any tenant by the janitor or any of his
employees, or any other person, or for any loss of property of any kind whatever
from leased Premises, however occurring. Tenant will see each day that the doors
to its premises are securely locked before leaving the Building.
g. Tenants, their clerks or servants, shall not make or commit any
improper noises or disturbances of any kind in the Building, smoke in elevators,
or mark or defile the water closets, or toilet rooms, or the walls, windows or
doors of the Building, or interfere in any way with other tenants or those
having business with them.
<PAGE> 31
h. Music, including vocal and instrumental, shall not be permitted at
volumes audible outside the Premises.
i. No tenant shall do or permit anything to be done, in said Premises,
or bring or keep anything therein, which will in any way increase the rate of
fire insurance on said Building, or on property kept therein, or obstruct or
interfere with the rights of other tenants, or in any other way injure or annoy
them or conflict with the laws relating to fires, or with the regulations of the
Fire Department or with any insurance policy upon said Building or any part
thereof, or conflict with any of the rules and ordinances of the Board of
Health.
j. Each tenant shall promptly and at its expense execute and comply
with all laws, rules, order, ordinances and regulations of the city, county,
state or federal government, and of any department or bureau of any of them and
of any other governmental authority having jurisdiction over the said Premises,
affecting the tenant's occupancy of the demised Premises or tenant's business
conducted thereon.
k. Nothing shall be thrown or allowed to drop by the tenants, their
clerks or employees out of the windows or doors, or down the passages or
skylight of the Building, and no tenant shall sweep or throw, or permit to be
swept or thrown from its premises, any dirt or other substances into any of the
corridors or halls, elevators or stairways of said Building.
l. No animals or birds shall be kept in or about any premises or
permitted therein.
m. If tenants desire to introduce signalling, telegraphic, telephonic
or other wires and instruments into their premises, the Landlord will direct the
electricians as to where and how the same are to be placed, and without such
directions no placing, boring or cutting for wires will be permitted. Landlord
shall in all cases retain the right to require the placing and using of
electrical protecting devices to prevent the transmission of excessive currents
of electricity into or through the Building, and to require the changing of
wires and of their placing and arrangements as Landlord may deem necessary, and
further to require compliance on the part of all using or seeking access to such
wires with such rules as Landlord may establish relating thereto, and in event
of non-compliance with such requirements and rules Landlord shall have the right
to immediately cut and prevent the use of such wires.
n. A directory in a conspicuous place on the first floor will be provided
by the Landlord, on which the names of tenants will be placed by the Landlord at
its discretion.
o. Tenants shall not use or keep in the building any explosives,
kerosene, gasoline, benzine, camphene, burning fluid or other flammable
material.
p. No tenant or employees of any tenant shall go upon the roof of said
Building without the written consent of the Landlord.
q. No article shall be fastened to or holes drilled or nails or screws
driven into the walls or partitions, nor shall the walls or partitions be
painted, papered or otherwise covered in such a way as to cause permanent damage
or in any way marked or broken, nor shall any attachment be made to the
<PAGE> 32
electric lighting wires of the Building for storing of electricity, or for the
running of motors or other purpose, nor will machinery of any kind be allowed to
be operated in any premises, nor shall any tenant use any other method of
heating than that provided by Landlord, without the prior written consent of the
Landlord. Tenants desiring to put in telephone junction or control boxes in the
Premises will notify the Landlord who will designate where the same shall be
placed. No mechanics shall be allowed in or about the Building other than those
employed by the Building management without the written consent of the Landlord
first having been obtained.
r. Access may be had by the tenants to the halls, corridors, elevators
and stairways in the Building and to the offices leased by them at any time or
times. Access to the Building may be refused unless the person seeking
admission is known to the watchman in charge, or has a pass or is properly
identified. The Landlord shall in no case be liable in damages for the
admission or exclusion of any person from said Building. In case of invasion,
mob riot, public excitement, or other commotion, the Landlord reserves the right
to prevent access to the Building during continuance of the same by closing the
doors or otherwise for the safety of the tenants and protection of property in
said Building.
s. The Landlord in all cases shall prescribe the method and manner in
which any merchandise, heavy furniture, large packages or safes shall be brought
in or taken out of the Building, and also the hours at which such moving shall
he done. The Landlord shall in all cases retain the right to prescribe the
weight and proper position of such heavy furniture and safes and all damage done
to the Building taking in or out of such merchandise, heavy furniture, large
packages or safes or any damage done to the Building while said property shall
be therein, shall be made good and paid for by the tenant by, through or under
whom the said damage may have been done. All furniture, safes or fixtures shall
be provided with supports, glides or castors that will meet the approval of the
management of the Building.
t. The Landlord reserves the right to rescind any of these rules and
to make such other and further rules and regulations as in Landlord's judgement
may from time to time be needed for the safety, care, maintenance, operation and
cleanliness of the Building, and for the preservation of good order therein,
which, when so made and notice thereof shall have been given to any tenant,
shall have the same force and effect as if originally made a part of the
foregoing Lease, and such, other and further rules, shall not, however, be
inconsistent with the proper and rightful enjoyment by the Tenant under the
foregoing Lease of the Premises therein referred to.
u. If any of these rules and regulations directly contradict the
terms of the foregoing Lease, the terms of said Lease shall prevail.
<PAGE> 33
EXHIBIT "E"
SPECIAL PROVISIONS
1. Improvements Allowance.
(a) Landlord shall contribute (subject to adjustment as provided
hereinbelow in subparagraph 1(b) of this Exhibit "E") Seven Hundred Sixty-One
Thousand One Hundred Fifty-One and 15/100 Dollars ($761,151.15) ("Landlord's
Contribution") toward only the following costs (the "Designated Costs") of the
work performed pursuant to making the Premises ready for Tenant's access, use
and occupancy (the "Upfit Work", it being understood that the term Upfit Work,
as used herein, shall mean both the "Phase I Work" and the "Phase II Work", as
said terms are defined hereinbelow), and for no other purpose (except as
provided in subparagraph 1(b) and in Paragraph 15 of this Exhibit "E" below):
(i) the costs of completing and approving the Layout Plan and Finish Schedule
(as these terms are defined hereinbelow in Paragraph 2 of this Exhibit "E"),
(ii) the costs of the preparation of the Plans (as defined hereinbelow in
Paragraph 3 of this Exhibit "E"), and (iii) the costs of all construction work
performed in accordance with the Plans. Landlord's Contribution represents an
amount equal to Fifteen and 15/100 Dollars ($15.15) multiplied by the rentable
square footage within the Premises.
(b) Except as set forth below in numbered Paragraph 15 of this Exhibit
"E", Landlord's Contribution shall be adjusted according to the following terms:
(i) If the actual aggregate Designated Costs are greater than
$15.15 per rentable square foot, but less than or equal to $15.65 per rentable
square foot, the Designated Costs in excess of $15.15 per rentable square foot
shall be shared equally by Landlord and Tenant. Any amount due from Tenant
pursuant to this subparagraph (i) shall be payable by Tenant promptly upon
demand.
(ii) If the actual aggregate Designated Costs are greater than $15.65
per rentable square foot, but less than or equal to $15.90 per rentable square
foot, the Designated Costs in excess of $15.65 per rentable square foot shall be
at Tenant's sole cost and expense. Any amount due from Tenant pursuant to this
subparagraph (ii) shall be payable by Tenant promptly upon demand.
(iii) If the actual aggregate Designated Costs are greater than $15.90
per rentable square foot, the Designated Costs in excess of $15.90 per rentable
square foot shall be at Landlord's sole cost and expense.
(iv) If the actual aggregate Designated Costs are less than $15.15
per rentable square foot, but greater than or equal to $14.75 per rentable
square foot, the amount of Landlord's Contribution which is not expended on
Designated Costs shall be shared equally by Landlord and Tenant. Any amount due
to Tenant pursuant to this subparagraph (iv) shall be credited against Tenant's
installments of Annual Rental first coming due hereunder.
(v) If the actual aggregate Designated Costs are less than $14.75
per rentable square foot, the amount of Landlord's Contribution which is not
expended on Designated Costs and which is
<PAGE> 34
attributable to Designated Costs having been less than $14.75 per rentable
square foot shall also be credited against Tenant's payments of Annual Rental
first coming due hereunder.
2. Layout Plan and Finish Schedule. On or prior to November 22, 1994,
Tenant and Landlord shall work together in good faith and shall finalize the
Tenant's layout and design plan (the "Layout Plan") for the Premises and
Tenant's finish schedule for the Premises (the "Finish Schedule"). Tenant
agrees that it shall cause Tenant's designated representative timely to meet
with Landlord's architect in Raleigh, North Carolina, regarding same.
3. Plans. On or before November 30, 1994, provided that Tenant and
Landlord have approved and finalized the Layout Plan and the Finish Schedule on
or before November 22, 1994, Landlord shall prepare a complete set of plans and
specifications for the Premises (the "Plans"). Such Plans shall include (i) the
Layout Plan, (ii) the Finish Schedule, and (iii) all other construction
documents (such as mechanical, electrical, lighting and ceiling plans) that are
required to obtain any necessary construction permits for the Upfit Work. The
Plans, once finalized by Landlord, and mutually approved, as hereinbelow
provided, shall then be attached to this Lease as Exhibit "C".
4. Construction of Phase 1. Upon the completion of the Plans and the
final approval of same by Landlord and Tenant, such approval to be provided by
both Landlord and Tenant, negotiating in good faith and with due diligence, on
or before December 2, 1994, Landlord shall submit the Plans for permitting.
Further, on or before November 22, 1994, Landlord shall also submit the portion
of the Plans, though not finalized, related to that certain portion of the
Premises consisting of approximately 12,000 rentable square feet and identified
as "Phase I" on Exhibit "B" ("Phase I") to a general contractor selected by and
satisfactory to Landlord to obtain an estimate for the conduct of the portion of
the Upfit Work attributable to Phase I (the "Phase I Work") in accordance with
the Plans. Such estimate shall be received by Landlord from the selected
general contractor on or before November 30, 1994. The contract for the conduct
of all Phase I Work shall be issued to such general contractor on or before
December 1, 1994, or as soon thereafter as practicable. Such general contractor
shall commence construction on December 2, 1994, or as soon thereafter as
practicable.
5. Substantial Completion of Phase I Work. Landlord intends to have
Phase I ready for Tenant's access, with all Phase I Work substantially complete
(i.e., complete except for punchlist items), on or before January 6, 1995.
Tenant shall provide Landlord with its punchlist items on or before the date
that is thirty (30) days following the date that Landlord informs Tenant that
Phase I is ready for Tenant's access, and Landlord will use good faith and due
diligent efforts to correct said punchlist items within thirty (30) days
following its receipt of said list. Landlord hereby agrees that if Landlord has
Phase I ready for Tenant's access, with all Phase I Work (excepting punchlist
items) substantially complete prior to January 6, 1995, then Landlord will
deliver same to Tenant on such earlier date. Tenant shall be entitled to occupy
and use Phase I during the Pre-Commencement Occupancy Period on the terms and
conditions of this Lease, except that Tenant shall have no obligation to pay any
rentals during said Pre-Commencement Occupancy Period, all as described in
numbered Paragraph 2 of the main body of this Lease.
6. Construction of Phase II. On or before December 2, 1994, Landlord
shall submit the portion of the Plans related to the balance of the Premises
which is not included in Phase I ('Phase II") to two (2)
<PAGE> 35
general contractors selected by and reasonably satisfactory to Landlord to
obtain estimates for the conduct of the portion of the Upfit Work attributable
to Phase II (the "Phase II Work") in accordance with the Plans. Such estimates
shall be received by Landlord from the selected general contractors on or before
December 16, 1994. The two (2) estimates received shall be shared with a
designated representative of the Tenant, and the contract for the conduct of all
Phase II Work shall be issued to the general contractor which submits the lowest
qualified bid (unless Landlord and Tenant mutually agree to issue the contract
to a general contractor that did not submit the lowest bid). A general
contractor shall be selected to perform such Phase II Work on or before December
30, 1994. After the selection of a general contractor to perform the Phase II
Work, such general contractor shall commence construction on January 2, 1995, or
as soon thereafter as practicable.
7. Substantial Completion of Phase II Work. Landlord intends to have
Phase II ready for Tenant's access, with all Phase II Work substantially
complete (i.e., complete except for punchlist items), on or before March 15,
1995. Tenant shall provide Landlord with its punchlist items on or before the
date that is thirty (30) days following the Commencement Date, and Landlord will
use good faith and due diligent efforts to correct said punchlist items within
forty-five (45) days following its receipt of said list. Landlord hereby agrees
that if Landlord has the Premises ready for Tenant's access, with all Phase II
Work (excepting such punchlist items) substantially complete prior to March 15,
1995, then Landlord will deliver same to Tenant on such earlier date, and Tenant
shall be entitled to occupy and use Phase 11 during the period commencing on
such date of delivery by Landlord through the Commencement Date (the "Phase II
Pre-Commencement Occupancy Period") on the terms and conditions of this Lease,
except that Tenant shall have no obligation to pay any rentals during said Phase
II Pre-Commencement Occupancy Period. Further, Landlord will allow Tenant a
period of ten (10) days prior to Landlord's delivery of Phase II to Tenant
during which time Tenant shall be entitled to conduct any work on Phase II that
Tenant deems necessary or appropriate, including (i) wiring for telephone and
computer systems, (ii) installation of furniture and fixtures and (iii) any
other work that Tenant deems necessary or appropriate (provided, however, that
Tenant must coordinate any such work with Landlord's architect). Tenant shall
ensure that any such work performed by Tenant pursuant to the immediately
preceding sentence does not interfere with the general contractor's completion
of the Phase II Work.
8. Tenant's Delays. Notwithstanding anything contained in this Lease
to the contrary, including the provisions of Paragraph 4 of the main body of
this Lease and Paragraphs 5 and 7 of this Exhibit "E", the Commencement Date
shall not be adjusted to the date that Landlord substantially completes the
Upfit Work and provides Tenant with access to the Premises if (and/or to the
extent that) the reason that Landlord cannot substantially complete the Upfit
Work and/or provide Tenant with access to the Premises is due to any delay which
has been caused by Tenant [or any of its agent(s), employee(s) or
contractor(s)], including any failure to meet any of the deadlines set forth in
Paragraphs 2-4 of this Exhibit "E".
9. After-Hours HVAC. In the event Tenant desires HVAC services to the
Premises other than during the Building normal operating hours of
7:00 a.m. - 6:00 p.m. Monday through Friday, 8:00 a.m. - 1:00 p.m. Saturday,
excluding holidays, then Tenant shall pay to Landlord the actual cost to
Landlord of providing such services, such payment to be made within ten (10)
days following receipt by Tenant of the invoice(s) therefor. Without limiting
the generality of the foregoing, Landlord estimates the cost
<PAGE> 36
of providing such additional services to be approximately Twenty-Five and No/100
Dollars ($25.00) per hour.
10. Excess Utilities Costs. In addition to the after-hours HVAC
services costs described in Paragraph 9 of this Exhibit "E" above, in the event
Tenant's use of the Premises results in an electrical demand in excess of seven
(7) watts per rentable square foot of the Premises, Tenant shall also be
responsible for both the costs related to Landlord increasing the capacity of
the electrical system(s) serving the Premises and the additional electricity
costs above and beyond Tenant's proportionate share of Building standard
electrical usage. Such payment shall be made by Tenant to Landlord within ten
(10) days following receipt by Tenant of an invoice therefor.
11. Additional Parking. Landlord agrees, at Landlord's expense, to
expand the Building site by approximately one (1) acre and to construct
additional parking spaces so that there will be a total of at least 500 parking
spaces for the Building, as shown generally on Exhibit "F". Landlord will use
good faith and duly diligent efforts to make such additional spaces available on
or about June 1, 1995. Tenant shall have the right to use up to 300 of such
parking spaces, on a nonexclusive basis with other tenants in the Building. In
the event Tenant expands the Premises, as herein provided, then Tenant shall be
entitled to the nonexclusive use of additional parking spaces computed at the
ratio of four (4) additional parking spaces for each additional 1,000 rentable
square feet of space leased by Tenant. In the event that Landlord ever
determines, in its reasonable discretion, that (a) the overall parking for the
Building is congested, and (b) that Tenant is exceeding its allocated parking
entitlement, as herein described, then Landlord will notify Tenant of same and
Tenant shall promptly take whatever corrective action is required to remedy
same.
12. Interim Space. Landlord shall consent to a subleasing arrangement
which will make available to Tenant, at no cost to Tenant, for a period
commencing on December 1, 1994, and terminating on January 31, 1995,
approximately 3,157 square feet of space on the first floor of the Crossroads
Office Building I (the "Interim Space"), provided Tenant enters into a sublease
with the present tenant in the Interim Space which is reasonably satisfactory to
Landlord.
13. Right of First Refusal. During the Initial Term of this Lease,
provided Tenant is not then in default beyond any applicable cure period under
any of the terms, conditions or provisions of this Lease on its part to observe,
comply with or fulfill, Landlord hereby agrees to work in good faith with Tenant
to make available to Tenant any available space within the Building (or any
other building owned or controlled by Landlord within Crossroads Corporate Park)
under the terms and conditions of this Paragraph 13, as follows:
(a) Notice By Tenant. For Tenant to be granted any right of first
refusal under this Paragraph 13, Tenant must notify Landlord in writing
("Tenant's Notice") that Tenant anticipates needing additional space within
ninety (90) days following the date that Landlord receives Tenant's Notice (such
90-day period beginning on the date Landlord receives Tenant's Notice
hereinafter referred to as the "RFR Period"). Upon receipt by Landlord of
Tenant's Notice, Landlord will inform Tenant of space, if any, that is then (or
that within such RFR Period is scheduled to become) available for leasing in
Crossroads Corporate Park in any Building that at such time is owned or
controlled by Landlord (the "Park"). The applicable space within the Park that
is or later in fact becomes available shall then be
<PAGE> 37
designated the "Expansion Space" for the purposes of this Paragraph 13. Without
limiting the generality of the foregoing, "Expansion Space" shall not be deemed
to include any space which, though scheduled to become available, is
subsequently leased to the existing tenant or existing occupant of such space
(whether pursuant to a renewal or an extension of an existing lease or
otherwise) and consequently does not become vacant and available [except that,
within the Building (as opposed to within other buildings in the Park), only
space renewed pursuant to an enforceable renewal, extension or option provision
in favor of the applicable tenant will be excluded from such "available" space.]
During the RFR Period, Tenant shall have a right of first refusal ("RFR") to
lease the Expansion Space under the terms and conditions of subparagraph 13(b)
below. Notwithstanding anything herein to the contrary, however, in no event
shall Tenant be entitled to lease less than all of any contiguous space that
becomes available in the Park if, in Landlord's reasonable discretion, the
portion(s) remaining of such Expansion Space would be commercially unmarketable
(in the manner and for the purposes in which the Landlord then markets space in
the Park).
(b) Right of First Refusal. If Landlord proposes to lease the Expansion
Space [or, subject to the provisions of the last sentence of subparagraph 13(a)
above, such applicable portion thereof] during the RFR Period to another
prospective tenant on mutually agreeable terms ("Lease Proposal"), then the
space that Landlord proposes to lease pursuant to the Lease Proposal must first
be offered, in writing, to Tenant at the same rental rate and under the same
terms and conditions (or, as applicable, under such rental rate and such terms
and conditions which provide to Landlord the equivalent net economic effect) as
under the terms and conditions of the Lease Proposal which Landlord is prepared
to make (or accept, as applicable) regarding such third party prospective
tenant. Tenant shall have five (5) days following its receipt of such Lease
Proposal to accept such offer. In the event Tenant does not exercise its right
to lease the Expansion Space (or such applicable portion thereof) under the
terms and conditions of the Lease Proposal, then for the remainder of the RFR
Period (i) Tenant's rights under this Paragraph 13 shall automatically expire
without further notice with respect to all Expansion Space, and (ii) Landlord
shall be permitted to lease all or any portion(s) of the Expansion Space to any
party on any terms whatsoever without having to offer such space to Tenant. In
the event Tenant elects to accept an offer and lease any Expansion Space having
less square footage than Tenant needs, Tenant's RFR shall remain open for the
remainder of the applicable RFR Period.
(c) Additional Notices. In the event Tenant shall have given a Tenant's
Notice as described above and Tenant shall have been presented with and failed
to accept a Lease Proposal, such that Tenant's RFR regarding such Tenant's
Notice shall have expired, as set forth in subparagraph 13(b) above, then Tenant
shall not be entitled to give another Tenant's Notice until the end of the
90-day period of such prior RFR Period.
(d) Expiration of Rights of First Refusal. Tenant's rights under this
Paragraph 13 shall terminate on the date of the expiration of the Initial Term.
TIME IS OF THE ESSENCE WITH RESPECT TO TENANT'S EXERCISE OF THIS RIGHT OF FIRST
REFUSAL.
14. Additional Security . As a material inducement for Landlord entering into
this Lease, the performance by Tenant of its obligation to pay Annual Rental
pursuant to the terms of this Lease is secured by an irrevocable standby letter
of credit (together with any applicable extensions or replacements thereto, the
"Letter of Credit") from NBD Bank, N.A. (the "Issuing Bank"), which has been
provided
<PAGE> 38
contemporaneously herewith on behalf of Tenant, and a copy of which is attached
to this Lease as Exhibit "G". Notwithstanding anything herein to the contrary,
including, without limitation, the provisions of Paragraph 19 of the main body
of this Lease, upon the occurrence of an Event of Default by Tenant prior to the
end of the fourth (4th) Lease Year resulting from Tenant's failure to pay any
installment of Annual Rental or any component thereof (i.e., Minimum Rental, the
tax payments due under Paragraph 3(b)(1)(D) of the main body of the Lease, the
Monthly Estimate, or the Annual Payment), Landlord shall be entitled to
liquidated damages according to the following schedule, and shall be entitled to
exercise its rights to such liquidated damages by drawing against the Letter of
Credit:
If the Event of Default occurs: Then, liquidated damages
amount shall be:
1. During Lease Year One: $409,464.18
2. During Lease Year Two: $279,674.92
3. During Lease Year Three: $139,837.46
4. During Lease Year Four: $ 69,918.73
Provided, however, except as provided in the last grammatical paragraph of
this Paragraph 14 of Exhibit "E", Landlord shall not be entitled to exercise its
right to said liquidated damages by drawing against the Letter of Credit until
such time as (i) an Event of Default has occurred under the Lease prior to the
end of the fourth (4th) Lease Year resulting from Tenant's failure to pay any
installment of Annual Rental or any component thereof (a "Rent Default"), (ii)
Landlord has commenced a legal proceeding against Tenant in a court of competent
jurisdiction that alleges that a Rent Default has occurred, and (iii) provided
the Issuing Bank with a statement that a Rent Default has occurred, in
accordance with the provisions in the Letter of Credit regarding such statement.
LANDLORD AND TENANT AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY
DIFFICULT TO ESTABLISH LANDLORD'S DAMAGES BY REASON OF TENANT'S DEFAULT, THAT
THE AMOUNTS SET FORTH ABOVE AS LIQUIDATED DAMAGES ARE REASONABLE ESTIMATES OF
LANDLORD'S DAMAGES, AND THAT LANDLORD SHALL BE ENTITLED UNDER THE CONDITIONS
SET FORTH HEREINABOVE TO DRAW UPON THE LETTER OF CREDIT AND TO RETAIN THE
AMOUNT(S) COLLECTED THEREUNDER AS LANDLORD'S SOLE REMEDY AGAINST TENANT.
LANDLORD AND TENANT FURTHER AGREE THAT SUCH AMOUNTS ARE REASONABLE SUMS FOR
LIQUIDATED DAMAGES AS OF THE DATE OF THIS LEASE. BY PLACING THEIR INITIALS
IMMEDIATELY BELOW, LANDLORD AND TENANT EACH CONFIRM THAT THEY HAVE READ AND
UNDERSTAND AND ACCEPT THIS LIQUIDATED DAMAGES PROVISION.
In addition to the foregoing provisions regarding the Letter of Credit,
Landlord and Tenant recognize that the initial expiration date of the Letter of
Credit is April 15, 1996. The Letter of Credit provides that it will be
automatically extended for three (3) additional consecutive periods of twelve
(12) months each, through April 15, 1999), unless the Issuing Bank notifies
Landlord at least ninety (90) days
<PAGE> 39
(b) Notwithstanding anything in numbered Paragraph 1 of this Exhibit "E"
to the contrary, in the event the total Designated Costs regarding the Upfit
Work, exclusive of the Additional Costs related to Non-Standard Improvements, is
less than the amount of Landlord's Contribution, then so much of said Landlord's
Contribution which is not required for the completion of the balance of such
Upfit Work (i.e., except for the Non-Standard Improvements) (the "Surplus
Allowance") shall be allocable against the total of such Additional Costs, up to
a maximum amount allocable, of Seventy-five Thousand Three Hundred Sixty-one and
50/100 Dollars ($75,361.50)(the "Maximum Allocation"). All amounts in excess of
said Maximum Allocation shall be at the sole cost and expense of Tenant and
shall be payable by Tenant to Landlord promptly upon demand. Further, in the
event the amount of the Additional Costs exceeds any applicable Surplus
Allowance, or, if there is no Surplus Allowance (i.e., the costs to complete
the Upfit Work, exclusive of the Non-standard Improvements equals or exceeds the
amount of Landlord's Contribution), then Tenant shall also be solely responsible
for the entire amount of the Additional Costs not covered by any applicable
Surplus Allowance, which amount shall be payable by Tenant to Landlord promptly
upon demand.
(c) In addition to the payment of any applicable Additional Costs by
Tenant as described above, and notwithstanding anything in the Lease to the
contrary, Tenant shall be solely responsible, at Tenant's sole cost and expense,
for the maintenance, repair and replacement of all Non-Standard Improvements.
Further, the electrical service to the Non-Standard Improvements shall be
submetered, and Tenant shall be solely responsible for the cost thereof. Such
costs shall be invoiced monthly and paid by Tenant promptly upon receipt.
(d) In the event that all of the Additional Costs are paid solely by
Tenant [i.e., no portion of the Landlord's Contribution has been applied towards
such costs as provided in subparagraph 15(b) above], then Tenant shall be
allowed to remove from the Premises upon the expiration or earlier termination
of this Lease those items of the Non-Standard Improvements consisting of any
applicable computer raised flooring, any applicable stand-up HVAC unit located
in the computer room (but not any roof-mounted unit) and any specialized fire
suppression system. Tenant shall cause such items to be removed in a good and
workmanlike manner. Any of such items not removed upon such expiration or
earlier termination of the Lease shall thereupon automatically become the sole
property of Landlord, unless Landlord and Tenant shall have entered into a
separate written agreement regarding same.
<PAGE> 40
EXHIBIT F
CROSSROADS II - Site Plan Depicting 500 Parking Spaces
Additional Acreage to be added
to Site and additional parking
spaces to be constructed
Crossroads I Building Parking
(Not Crossroads II)
<PAGE> 41
Exhibit G Syntel, Inc. Lease, dated 11/30/94 Page 1 of 4
<TABLE>
<S><C>
[NBD NBD Bank, N.A. IN ALL CORRESPONDENCE CABLES: NATIONBANK DET
LOGO] INTERNATIONAL DIVISION QUOTE OUR REFERENCE NO. TELEX: TRT 164177
Letter of Credit Department ITT 4320060
P.O. Box 330116 < BY MAIL BY WIRE > S.W.I.F.T.: NBDD US33
Detroit, Michigan 48232-6116 FAX: (313) 225-1111 Imports/Standby
(313) 225-1000 (313) 225-2505 Exports
</TABLE>
IRREVOCABLE STANDBY PLACE AND DATE OF ISSUE:
LETTER OF CREDIT NO. S135457 DETROIT, MI/DECEMBER 01, 1994
*** B E N E F I C I A R Y *** *** A P P L I C A N T ***
NATIONSBANK OF NORTH CAROLINA NA SYNTEL, INC.
AS TRUSTEE FOR THE PUBLIC 5700 CROOKS ROAD, SUITE 301
EMPLOYEES RETIREMENT SYSTEM OF TROY, MI 48098
OHIO C/O NATIONSBANK OF NORTH
CAROLINA, N.A.
NATIONSBANK REAL ESTATE
INVESTMENT SERVICES
NATIONSBANK PLAZA, 11TH FLOOR
(NC1-002-11-07)
CHARLOTTE, NORTH CAROLINA
28255-0131
ATTN: MR. GEORGE MASSENGALE
VICE PRESIDENT
*** EXPIRY DATE/PLACE *** *** AVAILABLE AT/BY: ***
EXPIRES ON APRIL 14, 1996 OUR OFFICE ONLY BY PRESENTATION
(UNLESS EXTENDED AS PROVIDED OF DOCUMENT(S) REQUIRED AND YOUR
BELOW) FOR PRESENTATION AT OUR DRAFT(S) DRAWN AT SIGHT.
OFFICE.
A M O U N T O F C R E D I T : NOT TO EXCEED, IN THE AGGREGATE 409,464.18
(FOUR HUNDRED NINE THOUSAND FOUR HUNDRED SIXTY FOUR AND 18/100) U.S. DOLLARS.
GENTLEMEN,
AT THE REQUEST AND FOR THE ACCOUNT OF THE ABOVE NAMED APPLICANT, WE HEREBY
ESTABLISH OUR IRREVOCABLE LETTER OF CREDIT IN YOUR FAVOR WHICH IS AVAILABLE AS
INDICATED ABOVE AGAINST PRESENTATION OF YOUR DRAFT(S) DRAWN ON NBD BANK, N.A.,
DETROIT, MICHIGAN, WHEN ACCOMPANIED BY THE FOLLOWING DOCUMENTS:
- - - - - - - - - D O C U M E N T S R E Q U I R E D - - - - - - - - -
A DATED STATEMENT BEARING AN ORIGINAL SIGNATURE PURPORTING TO BE AN AUTHORIZED
SIGNER FOR NATIONSBANK OF NORTH CAROLINA, N.A., AS TRUSTEE FOR THE PUBLIC
EMPLOYEES RETIREMENT SYSTEM OF OHIO, (INDICATING THE NAME AND TITLE/CAPACITY OF
THE SIGNER), READING AS FOLLOWS:
<<< CONTINUED ON NEXT PAGE >>>
<PAGE> 42
Exhibit G Syntel, Inc. Lease dated 11/30/94 Page 2 of 4
<TABLE>
<S><C>
[NBD NBD Bank, N.A. IN ALL CORRESPONDENCE CABLES: NATIONBANK DET
LOGO] INTERNATIONAL DIVISION QUOTE OUR REFERENCE NO. TELEX: TRT 164177
Letter of Credit Department ITT 4320060
P.O. Box 330116 < BY MAIL BY WIRE > S.W.I.F.T.: NBDD US33
Detroit, Michigan 48232-6116 FAX: (313) 225-1111 Imports/Standby
(313) 225-1000 (313) 225-2505 Exports
</TABLE>
OUR REF. NO. S135457 PAGE 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
"WE HEREBY CERTIFY THAT THE AMOUNT OF $ (SPECIFY) DRAWN UNDER NBD BANK, N.A.
LETTER OF CREDIT NO. S135457, AS EVIDENCED BY OUR DRAFT ACCOMPANYING THIS
STATEMENT, IS PAYABLE TO NATIONSBANK OF NORTH CAROLINA, N.A., AS TRUSTEE FOR
THE PUBLIC EMPLOYEES RETIREMENT SYSTEM OF OHIO, BECAUSE AN EVENT OF DEFAULT HAS
OCCURRED BY SYNTEL, INC. UNDER THE TERMS OF THAT CERTAIN LEASE AGREEMENT DATED
NOVEMBER 30, 1994 BETWEEN OURSELVES AND SYNTEL, INC."
- - - - - - - - - - - O T H E R C O N D I T I O N S - - - - - - - - - - -
PARTIAL DRAWINGS ARE PERMITTED.
UNLESS EXTENDED AS SET FORTH BELOW, THIS LETTER OF CREDIT SHALL EXPIRE, FOR
PRESENTATION OF YOUR DRAWING HEREUNDER, AT OUR OFFICE AT 645 GRISWOLD, 1950
PENOBSCOT BLDG., DETROIT, MI 48226 ON APRIL 14, 1996 (THE "INITIAL EXPIRY
DATE"). IF EXTENDED AS SET FORTH BELOW, THE EXPIRY DATE OF THIS LETTER OF
CREDIT SHALL BE EACH SUCCEEDING APRIL 14, (THE "EXTENDED EXPIRY DATE(S)"), BUT
IN NO EVENT LATER THAN APRIL 14, 1999 (THE "FINAL EXPIRY DATE"). THE INITIAL
EXPIRY DATE AND THE EXTENDED EXPIRY DATE(S) SHALL BE AUTOMATICALLY EXTENDED
(WITHOUT THE NECESSITY OF A FORMAL AMENDMENT TO THIS LETTER OF CREDIT) FOR AN
ADDITIONAL PERIOD OF ONE YEAR UNTIL APRIL 14 OF THE FOLLOWING CALENDAR YEAR,
BUT IN NO EVENT BEYOND THE FINAL EXPIRY DATE, UNLESS WE SHALL HAVE MAILED TO
YOU BY REGISTERED MAIL RETURN RECEIPT REQUESTED, AT YOUR ADDRESS SHOWN ABOVE
(OR SUCH OTHER ADDRESS AS YOU MAY HAVE SPECIFIED TO US IN WRITING FROM TIME TO
TIME), AT LEAST NINETY (90) DAYS PRIOR TO EACH RESPECTIVE INITIAL OR EXTENDED
EXPIRY DATE(S), WRITTEN NOTICE OF OUR INTENTION NOT TO EXTEND THIS LETTER OF
CREDIT AS PROVIDED HEREIN (THE "NON-EXTENSION NOTICE"). IN THE EVENT WE HAVE
SENT SUCH NON-EXTENSION NOTICE TO YOU, YOU SHALL THEN BE ENTITLED TO DRAW AND
PRESENT YOUR ONE SIGHT DRAFT FOR UP TO THE THEN REMAINING BALANCE OF THIS
LETTER OF CREDIT (THE "NON-EXTENSION DRAWING") WITHOUT BEING REQUIRED TO
PRESENT THE OTHER DOCUMENTATION DETAILED IN THIS LETTER OF CREDIT, IF ANY,
EXCEPT FOR THE ORIGINAL OF THIS LETTER OF CREDIT INSTRUMENT WHICH MUST BE
SURRENDERED WITH YOUR NON-EXTENSION DRAWING. SUCH NON-EXTENSION DRAWING MUST
BE PRESENTED TO OUR OFFICE NOT LATER THAN THE THEN RELEVANT INITIAL OR EXTENDED
EXPIRY DATE.
NOTWITHSTANDING ANY TERM OR PROVISION HEREIN TO THE CONTRARY,
<<< CONTINUED ON NEXT PAGE >>>
<PAGE> 43
Exhibit G Syntel, Inc. Lease dated 11/30/94 Page 3 of 4
<TABLE>
<S><C>
[NBD NBD Bank, N.A. IN ALL CORRESPONDENCE CABLES: NATIONBANK DET
LOGO] INTERNATIONAL DIVISION QUOTE OUR REFERENCE NO. TELEX: TRT 164177
Letter of Credit Department ITT 4320060
P.O. Box 330116 < BY MAIL BY WIRE > S.W.I.F.T.: NBDD US33
Detroit, Michigan 48232-6116 FAX: (313) 225-1111 Imports/Standby
(313) 225-1000 (313) 225-2505 Exports
</TABLE>
OUR REF. NO. S135457 PAGE 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SUBJECT TO BEING EXTENDED FOR SUCH PERIODS AS PROVIDED ABOVE, THE AGGREGATE
AMOUNT OF THIS LETTER OF CREDIT SHALL BE REDUCED AS FOLLOWS DURING THE THREE
(3) EXTENSION TERMS UNDER THIS LETTER OF CREDIT:
- - FROM APRIL 15, 1996, THROUGH APRIL 14, 1997, THE AGGREGATE AMOUNT OF THIS
LETTER OF CREDIT SHALL BE REDUCED TO TWO HUNDRED SEVENTY-NINE THOUSAND SIX
HUNDRED SEVENTY-FOUR AND 92/100 DOLLARS ($279,674.92) MINUS ANY SUMS (IF ANY)
PREVIOUSLY DRAWN BY THE BENEFICIARY HEREUNDER.
- - FROM APRIL 15, 1997, THROUGH APRIL 14, 1998, THE AGGREGATE AMOUNT OF THIS
LETTER OF CREDIT SHALL BE REDUCED TO ONE HUNDRED THIRTY-NINE THOUSAND EIGHT
HUNDRED THIRTY-SEVEN AND 46/100 DOLLARS ($139,837.46) MINUS ANY SUMS (IF ANY)
PREVIOUSLY DRAWN BY THE BENEFICIARY HEREUNDER SINCE THE DATE OF ISSUANCE OF
THIS LETTER OF CREDIT.
- - FROM APRIL 15, 1998, THROUGH APRIL 14, 1999, THE AGGREGATE AMOUNT OF THIS
LETTER OF CREDIT SHALL BE REDUCED TO SIXTY-NINE THOUSAND NINE HUNDRED
EIGHTEEN AND 73/100 DOLLARS ($69,918.73) MINUS ANY SUMS (IF ANY) PREVIOUSLY
DRAWN BY THE BENEFICIARY HEREUNDER, SINCE THE DATE OF ISSUANCE OF THIS LETTER
OF CREDIT.
THE ORIGINAL OF THIS LETTER OF CREDIT MUST BE RETURNED TO US WITH ANY
DRAWING(S) HEREUNDER FOR OUR ENDORSEMENT OF ANY PAYMENT EFFECTED. WE UNDERTAKE
TO RETURN SAID ORIGINAL LETTER OF CREDIT TO YOU (UNLESS FULLY UTILIZED OR
EXPIRED) TOGETHER WITH OUR ADVICE OF SETTLEMENT.
EACH DRAFT DRAWN HEREUNDER MUST BE MARKED "DRAWN UNDER NBD BANK, N.A. LETTER OF
CREDIT NO. (SPECIFY L/C NO.)".
UNLESS OTHERWISE EXPRESSLY STATED HEREIN, THIS LETTER OF CREDIT IS SUBJECT TO
THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, 1993 REVISION, ICC
PUBLICATION NO. 500.
<<< CONTINUED ON NEXT PAGE >>>
<PAGE> 44
Exhibit G Syntel, Inc. Lease dated 11/30/94 Page 4 of 4
<TABLE>
<S><C>
[NBD NBD Bank, N.A. IN ALL CORRESPONDENCE CABLES: NATIONBANK DET
LOGO] INTERNATIONAL DIVISION QUOTE OUR REFERENCE NO. TELEX: TRT 164177
Letter of Credit Department ITT 4320060
P.O. Box 330116 < BY MAIL BY WIRE > S.W.I.F.T.: NBDD US33
Detroit, Michigan 48232-6116 FAX: (313) 225-1111 Imports/Standby
(313) 225-1000 (313) 225-2505 Exports
</TABLE>
OUR REF. NO. S135457 PAGE 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - E N G A G E M E N T - - - - - -
WE HEREBY AGREE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS CREDIT WILL BE DULY HONORED UPON PRESENTATION AND DELIVERY OF THE
DOCUMENTS AS SPECIFIED HEREIN IF PRESENTED TO THIS OFFICE ON OR BEFORE THE
EXPIRY DATE INDICATED ABOVE, AS SAME MAY BE EXTENDED AS HEREIN PROVIDED.
VERY TRULY YOURS,
[SIG] [SIG]
- -------------------------------- ---------------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
<PAGE> 45
EXHIBIT "H"
CLEANING SPECIFICATIONS
AREAS TO BE COVERED
Clean all areas of the building including entrance lobby, basement areas,
loading platforms, public halls, stairwells, lavatories, passageways, elevator
cabs. Areas not normally included are: stores, restaurants, banks,
concessions, garages, elevator shafts or elevator pits.
1. LAVATORIES -- DAILY
a. Wash all mirrors.
b. Wash hand basins and bright work with a non-abrasive cleaner.
c. Wash urinals.
d. Wash toilet seats using disinfectant in water.
e. Wash toilet bowls.
f. Damp mop floor using disinfectant in water.
g. Damp wipe and clean where necessary. Walls and partitions are to be
free of hand prints and dust.
h. Replenish hand soap, towels, tissues, and sanitary napkins.
i. Partition and ventilation louvres to be damp wiped.
j. Machine scrub floors with approved germicidal detergent solution on a
monthly basis.
Toilet bowl brush shall be used on toilet bowls and care shall be given to
clean flush holes under rim of bowls and passage trap. Bowl cleaner shall be
used at least once each month and more often if necessary.
The intent of this specification is that restrooms shall be maintained in a
spotlessly clean and odor free condition at all times.
2. OFFICE AND HALLWAYS (CORRIDORS)
a. Dusting--Daily
All furniture, office equipment and appliances, window sills, etc., will
be dusted daily with a treated cloth or static duster. This shall
include all horizontal surfaces up to 84 inches high and enough vertical
surfaces daily to complete all vertical surfaces within each week. Desks
and tables not cleared of paper and work materials will only be dusted
where desk is exposed. Telephones will be damp wiped.
b. Dust Mopping--Daily
All non-carpeted floor areas will be dust mopped with a treated yarn dust
mop daily with special attention being given to areas under desks and
furniture to prevent accumulation of dust and dirt. Floor dusting will
be done after furniture has been dusted.
c. Wastepaper--Ashtrays--Daily
Wastepaper baskets and ashtrays to be emptied daily and wiped clean.
Wastebaskets shall be damp wiped as necessary. Plastic liners where used
will be changed as needed.
d. Vacuuming--Daily--Weekly
All rugs and carpets in office areas, as well as public spaces, are to be
vacuumed daily in all traffic areas. Hard to reach places, under desks
and chairs shall be vacuumed weekly.
The intent of this specification is to provide a complete vacuuming at
least once a week.
e. Spot Cleaning Carpets--Daily
All carpeted areas will be inspected daily for spots and stains. All
spots and stains will be removed as soon as possible. Where difficult
spots are encountered, a notation should be left with the building
management.
f. Wet Mopping--Daily and as Needed
When floors require wet mopping, they will be left in a streak free
condition. Extreme care shall be exercised in all mopping so as to avoid
splashing walls or furniture. Transporting of water and other liquids
over carpeted areas will be done in such a manner to avoid spillage.
g. Tile Floors--Daily
All tile floors will be refinished, buffed, dept. in scuff/spot free
condition at all times. Since some tile areas require more attention
than others, refinishing and buffing will be done on an as needed basis.
Transporting of floor finish and other liquids over carpeted areas will
be accomplished in such a manner to avoid spillage.
h. Special Floor Coverings--As Necessary
Parquet, quarry, ceramic, raised computer floors, and other special floor
coverings will be treated with appropriate methods and materials.
i. Water Coolers--Daily
Water coolers shall be cleaned and polished daily. The intent of this
specification is that water coolers be maintained in a spotlessly clean
condition at all times.
<PAGE> 46
CLEANING SPECIFICATIONS-CONTINUED
j. Spot Cleaning--Daily--As Needed
All hand prints and spots will be removed from doors and light switches
daily. Walls, woodwork, and interior glass spot cleaned as needed.
k. Cigarette Urns--Daily
Cigarette urns and ash receivers shall be cleaned as necessary, sanitized
and, where required, the same level shall be maintained.
l. High Dusting--Quarterly
Pipes, ledges, ceilings, mouldings, picture frames,
etc. will be cleaned quarterly or more frequently if necessary.
m. Venetian Blinds--Periodic
Venetian blinds will be dusted quarterly and damp wiped annually.
n. Air Conditioning Grills--Monthly
All areas around air conditioning and return air grills will be cleaned
once each month, or more often, if necessary.
3. STAIRWAYS & LANDINGS--WEEKLY DAILY
All stairways and landings will be policed daily. They will be dust mopped
with a treated yarn dust mop weekly. Spot cleaning of walls and doors will
be done weekly. These areas will be damp mopped and scrubbed as necessary.
Hand rails, fire points, and other miscellaneous hardware will be cleaned
periodically. If day personnel are available in building, stairwells and
landings will be policed and dust mopped daily.
The intent of this specification is that stairways be kept in a neat and
clean condition at all times.
4. ENTRANCE LOBBY--DAILY
Entrance lobby will be thoroughly cleaned daily. Lobby glass and metal will
be cleaned and dusted daily. Directory board glass will be damp cleaned
and wiped. Lobby walls will be dusted and kept free from fingermarks,
smudges, etc. Lobby floor and entrance ways are to be thoroughly dust
mopped nightly, damp mopped as needed, and buffed and refinished as
necessary to maintain a clean and lustrous appearance.
5. POLISHING--PERIODICALLY
All door plates, kick plates, brass and metal fixtures within the building
will be wiped weekly and polished periodically.
6. ELEVATORS--DAILY
a. All elevators to be vacuumed nightly.
b. All stainless steel and metal to be cleaned nightly.
c. All elevator tracks to be vacuumed as needed.
d. Elevator button panels and elevator doors to be cleaned nightly.
e. Carpets will be spotted periodically.
f. Ceilings, overhead plexiglass, and/or special light fixtures will be
cleaned periodically and normally through arrangement with building
management.
7. LIGHT FIXTURES--PERIODICALLY
The exterior of all light fixtures will be dusted as needed.
GENERAL
PERSONNEL:
Employees who are to be permanently assigned to your building shall be
carefully interviewed, screened, and bonded. They shall be neat and clean in
appearance and properly identified.
Employees shall not eat, drink, or smoke while on duty. Employees shall not
disturb papers on desks, open drawers or cabinets, use telephones, televisions
or radios.
All employees shall abide by all building regulations and safety rules which
may be promulgated from time to time as they pertain to our operation.
SUPERVISORS:
Competent supervisory personnel shall be employed, and they will, at a
minimum, have completed our 10 week Supervisory Training Course.
Our Supervisor shall arrive and depart approximately one half hour before and
after the cleaning crew.
The Supervisor will report to the building management any conditions such as
leaky faucets, stopped toilets and drains, broken fixtures, etc. The
Supervisor will also report any unusual happenings in the building.
OTHER:
We shall furnish the necessary, appropriate, tested and approved implements,
machinery and cleaning
<PAGE> 47
CLEANING SPECIFICATIONS-CONTINUED
supplies for the satisfactory performance of our services.
Sufficient space in the premises shall be assigned to us for storage of
cleaning materials, implements, and machinery. Adequate utilities will be
provided to Contractor, without charge, for performance of duties.
A communications log book shall be kept in a designated place on the premises,
in which a record shall be made promptly of, any occurrences requiring building
management or contractor's attention.
We shall furnish Workmen's Compensation and Public Liability Insurance,
certification of which shall be forwarded to you.
All office cleaning, where possible, will be done behind locked doors. In
other words, cleaner goes into an office to perform duties, where possible the
office entrance door will be locked behind.
The Building Management may require the dismissal of any employee who is
incompetent, careless, insubordinate, or otherwise objectionable, of whose
continued employment is contrary to consistent and good relationship with
tenants.
Contractor will be responsible for loss or damage caused by his employees and
for conduct of of his employees.
Upon completion of the daily work, the contractor shall insure that all slop
sinks and equipment storage areas are left in a neat and orderly condition; all
lights are extinguished, and all doors are locked.
We shall make reasonable and prompt restitution, by cash, replacement, or
repairs, subject to Building Management approval for any damage for which are
liable.
Regular, periodic inspection of the building shall be performed by our
management staff with the customers representative. This is in addition to the
regular nightly inspection to be performed by the Supervisor.
SCHEDULE OF CLEANING
Nightly cleaning services shall be rendered five nights each week, Monday
through Friday, except on legal holidays.
DAY PERSONNEL SERVICE (IF REQUIRED)
Contractor shall provide uniformed day personnel whose duties will be
coordinated with building management. They shall work eight hours per day,
five days per week, Monday through Friday, excluding legal holidays to perform
the following:
ENTRANCE LOBBY
Police and maintain the lobbies to insure they are kept in a neat and clean
condition. Lobby glass shall be washed and cleaned as necessary. Particular
attention shall be given floor and glass doors during inclement weather.
LAVATORIES
Day personnel shall make periodic checks of lavatories so that they are kept
in a neat and clean condition. Lavatories shall be replenished with supplies.
Fixtures shall be cleaned as necessary, waste cans emptied, etc.
BUILDING EXTERIOR
Entrance of building shall be swept clean of litter and hosed down when
possible. Sidewalk shall be kept clean and free of snow and ice within the
limitation of regular manpower staffing and equipment provided. Police and
maintain loading and driveway areas to insure they are kept neat and clean.
INTERIOR PUBLIC AREAS
Interior public areas will be policed and mopped as necessary.
MISCELLANEOUS
Perform other duties as assigned by Building Management and Contractor.
<PAGE> 1
EXHIBIT 10.7
OFFICE
LEASE AGREEMENT
This Lease Agreement (hereafter "the Lease") is made and entered into
between Landlord and Tenant upon the terms and conditions contained herein.
ARTICLE 1
FUNDAMENTAL LEASE PROVISIONS
Agreement Date: June 7, 1995
Landlord: Office Court Development Ltd. Co. (hereafter "Landlord") a New
Mexico General Partnership
Tenant: Syntel, Inc. - A Michigan based company (hereafter "Tenant").
-------------------------------------------------------------
doing business as same
----
Description of
Premises: 460 St. Michael's Drive, Building 500 (Article II & Exh. A)
--------------------------------------
containing 5328 (gross square feet)
----
Commencement Date: July 1, 1995 or on move-in (Article III)
--------------------------
Base Term Expiration Date: June 30, 1999 (Article III)
Termination: After year one, upon 30 days notice, Tenant shall be given the
right to terminate the lease under the following conditions:
After year one and provided that Lessee is not in default of said lease and
provided the State of New Mexico has terminated their contract, Lessee may
terminate with the following penalties:
Year Two: 12 months rent
Year Three: 9 months rent
Year Four: 6 months rent
Landlord shall use due diligence in releasing the premises, and rent penalties
are to be mitigated by a direct reduction of any proceeds of leasing the space.
Tenant shall be responsible for all costs of releasing.
Date Rent Obligation Begins: July 1 or date of move in, or when Landlord
substantially completes the tenant improvements, whichever is later. Landlord
shall complete improvements within 30 days of signing of lease. (Article IV)
Base Term: Four (4) years. (Article III)
Option Periods (if any). Up to two (2) four (4) year options with 120 day
notice to exercise options. Upon availability of more space in Phase 2, (see
Exhibit C) Tenant shall have the option to expand to 700 s.f. or as much as
6000 s.f... landlord shall update Lessee monthly on additional available space
and Lessee shall have two weeks to respond.
Base Rent: Four hundred ten thousand two hundred fifty six and no/100
Dollars ($410,256.00) payable in equal monthly
installments of Eight thousand five hundred forty seven and no 100 Dollars
($8547.00) during each year of base term (hereafter "Monthly Base Rent").
(Article IV)
Annual Percentage Increase is C.P.I. with a cap of 5% (Article IV) See 4.2
Address for Notices and Payments:
To Landlord: 1660 Old Pecos Trail, Suite A., Santa Fe, N.M. 87505
(Article XVIII)
To Tenant: To the premises and:
5700 Crooks Road, Suite 301
Troy, Michigan 48098
Security Deposit: See 4.4 (Article IV)
Use of Premises: general office use (Article V)
The above Fundamental Lease Provisions include only some of the
provisions of this Lease. This summary is not intended to replace or amend
these other Provisions. References in this Article I to other Articles are for
convenience and designate some of the other Articles where references to the
particular Fundamental Lease Provisions appear. Each reference in this Lease
to any of the Fundamental Lease Provisions contained in this Article I shall be
construed to incorporate all of the terms provided under each such Fundamental
Lease Provision. In the event of any conflict between any Fundamental Lease
Provision and the balance of the Lease, the latter shall control.
AN INDEX TO THE LEASE TERM HEADINGS IS AT THE END OF THIS LEASE.
ARTICLE II
PREMISES
2.1 DESCRIPTION. Landlord, for and in consideration of the covenants
and agreements of Tenant herein contained and upon and subject to terms,
conditions and provisions herein set forth, hereby leases to Tenant, and Tenant
leases and
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accepts, the Premises described in Article I hereof as the Description of
Premises and as described on Exhibit A, which is attached hereto and
incorporated herein by reference upon which the Landlord has constructed the
Building (as defined below), (hereafter "the Premises").
2.2 CONDITION OF PREMISES. Tenant's taking possession of the Premises
shall be conclusive evidence against Tenant that the Premises were then in good
order and satisfactory condition, with the exception of punch list items which
shall be given to Landlord within 30 days of possession or the Lease
Commencement Date, whichever comes first, and except for latent defects. No
promises of Landlord to remodel, improve, decorate or clean the Premises have
been made, and no representation respecting the condition of the Premises or
the Building has been made to Tenant by or on behalf of Landlord except to the
extent expressly set forth herein or in Exhibit "A" attached to this Lease.
2.3 DEFINITIONS.
A. The term "Building" shall mean the entire development,
including any and all structures, (whether reflected in Exhibit "A" or
hereafter incorporated in the compound during the base term of this Lease or
any extension thereof), parking facilities, common facilities and the like
built on the property of the development, as the same may from time to time be
changed or reduced, or as the same from time to time may be increased by the
addition of other land, together with structures and the like thereon which may
from time to time be included by Landlord in its sole discretion in the
development, provided that such rights reserved to the Landlord shall not be
exercised in a manner which materially and adversely affects tenant's use and
enjoyment of the premises or access to the premises.
B. The term "Common Areas" shall mean all areas within the
exterior boundaries of the Building which are now or hereafter made available
for the general use, convenience and benefit of Landlord and other persons
entitled to occupy any part of the Building, as shown on site plan (Exhibit C)
including, but not limited to parking areas, driveways, entrances and exits,
ramps, landscaped areas, exterior stairways, service roads, sidewalks and other
areas constructed or to be constructed for use in common by the Tenant, other
tenants in the Building and their employees and business invitees, subject,
however, to the terms of this Agreement and reasonable rules and regulations
prescribed from time to time by the Landlord. Landlord expressly reserves the
right to change, alter or amend the common areas and building areas at any
time, in its reasonable discretion as long as tenants use or enjoyment of or
access to the premises are not materially and adversely affected.
ARTICLE III
TERM
3.1 BASE TERM. The base term of this Lease and Tenant's obligation to
pay rent hereunder shall commence on the date specified in Article I as the
Commencement Date (hereafter "the Commencement Date") shall continue thereafter
during the Base Term specified in Article I herein and shall end on the last
day of the last lease year of that Base Term, as specified in Article I herein
as Base Term Expiration Date, unless sooner terminated as hereinafter provided
in this Lease.
3.2 LEASE YEAR. The term "lease year" shall mean the twelve (12)
month period beginning on the first day immediately following the commencement
date referred to in Paragraph 3.1 above and each year of the Lease thereafter
measured from such commencement date.
3.3 OPTION FOR EXTENSION OF LEASE. Tenant may elect to extend this
Lease for such additional periods and for such lengths as described in Article
I hereof as Option Periods, beginning with the expiration of the base term.
(If no periods are indicated in Article I, no options are being granted under
this Lease.) Provided, however, that the said options may only be exercised if
this Lease is in force and effect at the time of exercise and Tenant, on that
date, shall have fully complied with all conditions and obligations contained
herein subject to any applicable grace periods. In the event that Tenant
desires to exercise such election the Tenant shall give the Landlord notice in
writing of such election at least the number of days prior to the expiration of
the base term for the first option period and at least the number of days prior
to the expiration of such subsequent option term for the next succeeded Option
Period, as described in Article I hereof as the Option Notice Period. The Base
Rent shall be subject to increase, but not decrease, at the beginning of each
option period in accordance with the provisions for paragraph 4.2 hereof.
Leasing of the Premises to Tenant for each of such option periods shall be upon
and subject to the terms, conditions and provisions contained in this Lease.
The Base Term plus exercised Option periods shall hereafter be the Lease Term.
3.4 POSSESSION. Tenant understands that the Premises may be in the
process of construction and that Landlord makes no representation or agreement
that the Premises will be ready for occupancy on the Commencement Date. In the
event the Premises shall not be completed and ready for occupancy on the
Commencement Date. In the event the Premises shall not be completed and ready
for occupancy on the Commencement Date, this Lease shall nevertheless continue
in full force and effect and no liability shall arise against Landlord by
reason of any such delay beyond the abatement of Base Rent until the Premises
are ready for occupancy; provided, however, that there shall be no abatement of
Base Rent if the Premises are not ready for occupancy because of the failure to
complete the installation of special equipment, fixtures or materials ordered
by Tenant. In the event of any disagreement concerning whether the Premises
are ready for occupancy hereunder, the certification by Landlord's architect
shall be binding upon all parties. Landlord may authorize Tenant to take
possession of all or any part of the Premises prior to the Commencement Date.
If Tenant does take possession pursuant to authority so given, all of the
covenants and conditions of this Lease shall apply to and shall control such
pre-Term occupancy. Rent for such Pre-Term occupancy shall be paid upon
occupancy and on the first day of each calendar month thereafter at the rate
set forth in Article IV. If the Premises are occupied for a fractional month,
Rent shall be prorated on a per diem basis for such fractional month. If
Landlord has not completed build out within 30 days of June 13, 1995, Tenant
may terminate lease.
ARTICLE IV
RENTS
4.1 BASE RENT. The Tenant shall pay the Landlord as Base Rent for the
Premises during the initial term the amount specified in Article I hereof, as
Base Rent (hereafter Base Rent). The rent is due on the first of each calendar
month payable at Landlord's address as indicated in Article I hereof, or such
other place as Landlord may designate from time to time, in equal monthly
installments during each year, in advance. The obligation to pay rent shall
begin on the date specified in Article I hereof as: Date Rent Obligation
Begins. In the event the Tenant's obligation to pay rent does not begin on the
first day of a month, then Tenant shall pay rent for the days from the date
Tenant's obligation to pay rent begins to the first day of the next calendar
month on a pro rata basis calculated on a thirty (30) day month. The Base Rent
shall be increased as provided in Paragraph 4.2 below. All rent shall be
payable in cash, in US currency and without the necessity of prior notice
except as specifically provided herein, and without abatement, deduction,
counterclaim or set-off except as otherwise permitted herein.
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4.2 RENT ADJUSTMENTS PER CONSUMER PRICE INDEX PROCEDURE. The
Minimum Rent shall be subject to increase, but not decrease, on that particular
anniversary of the Commencement Date and on the subsequent anniversaries of the
Commencement Date thereafter during the term of this Lease and any option
periods thereunder indicated in Article I as Rent Adjustment Dates in
accordance with the following provisions (each such date of adjustment being
thereafter referred to as an "Adjustment Date" and the initial period and
succeeding periods indicated in Article II as Rent Adjustment Periods being
hereafter individually refered to as an "Adjustment Period"):
A. The Minimum Rent may be increased on and as of each
Adjustment Date in accordance with and based on the computation prescribed by
the Consumer Price Index Procedure set forth on subparagraph B, below. If
utilization of such procedure for any Adjustment period does not produce an
amount of Minimum Rent greater than the amount of Minimum Rent greater than the
amount of Minimum Rent for the immediately preceding Adjustment Period, the
amount of Minimum Rent then in effect shall not be decreased:
B. Consumer Price Index Procedure. The basis for
computing each adjustment in rent shall be the Consumer Price Index for all
Urban Consumers, All Items, U.S. City Average, utilizing a base of
1982-1984=100, as published for each calendar month by the United States
Department of Labor, Bureau of Labor Statistics, or by its successor agency
(hereafter "the Index" and "the Agency", respectively); provided that if during
the term of this Lease a later base year replaces the base year of
1982-1984=100 then such later base year shall be used in determining the Index.
If the Index is changed so that the base year differs from that
in effect on the Commencement Date, the Index shall be converted in accordance
with the conversion factor published by the Agency, so that the two indices
compared for the purpose of computing any adjustment to the Minimum Rent shall
always utilize the same base year. If the Index is discontinued or materially
revised during the term of this Lease or any renewal hereof, subsequent
adjustments to the Minimum Rent shall be computed base on any replacement index
published by the Agency or, if no replacement index is published, based on any
index published by any nationally recognized governmental or non-governmental
agency or entity which generally measures changes in consumer purchasing power
of the U.S. dollar on a national or national urban basis, as selected by
Landlord in its discretion.
On and as of each Adjustment Date the amount of Minimum Rent
hereunder shall be increased (i) for and during the first Adjustment Period, by
the amount of the percentage increase, if any, in the Index published for the
last calendar month of the first Adjustment Period under this Lease over and
above the Index published for the calendar month immediately preceding the
Commencement Data, and (ii) for and during succeeding Adjustment Periods by the
percentage increase, if any, in the Index published for the last calendar month
of the subsequent Adjustment period over and above the Index published for the
calendar month immediately preceding the Commencement Date of that subsequent
Adjustment Period which shall have ended just prior to the Adjustment Date.
Assume the index for the last calendar month of the adjustment period is 150
and the index for the month before the commencement date 125. The adjustment
would be determined by dividing 125 into 25 (which is XXXXXXXXXXXXXXXXXXX
In the event that the Index figures necessary for computation
of an adjustment of the Minimum Rent are not available on any Adjustment Date.
Tenant shall continue to pay the Minimum Rent then in effect until such Index
figures become available, (at which time such computation shall be made).
Immediately following such computation and if such computation results in an
amount of Minimum Rent on and after such Adjustment Date greater than the
preceding Minimum Rent, then within ten (10) days of written demand by
Landlord, Tenant shall pay to Landlord the amount of additional rent, if any,
which theretofore would have become due and payable if the necessary Index
figures had been available on such Adjustment Date.
Once an adjustment has been made, that amount shall be the
Minimum Rent for the next Adjustment Period, subject to increases in the amount
of Percentage Rent due, and shall be the amount upon which the adjustment for
the next adjustment period shall be based. There shall be a 5% cap on any
yearly adjustment.
4.3 UTILITIES. Tenant shall pay during the Lease Term for all
separately metered utilities, such as gas, electrical power, and telephone,
together with any taxes thereon. It shall be Tenant's responsibility to ensure
that these utilities have been properly billed and paid. Landlord shall be
responsible for water and sewer service and shall pay for same, as provided in
Paragraph 7.2 below.
4.4 SECURITY DEPOSIT. In lieu of a Security Deposit, Tenant agrees to
provide Landlord with complete financials within 5 days of signing of the
lease. Current financial shall be provided to Landlord annually by the
anniversary date.
4.5 CHARGE ON LATE PAYMENT. Because the late payment of any rent due
hereunder results in extraordinary expenses, Landlord reserves the right to
charge a late payment charge equal to ten percent (10%) of Tenant's monthly
rent if any rent is not paid by the tenth (10th) day of any month of the Term.
4.6 HOLDING OVER. Tenant shall pay Landlord for each day Tenant
retains possession of the Premises or any part thereof after the termination of
this Lease for any reason, an amount which is 125% of the amount of Rent per
day, based on the annual rate of the Monthly Base Rent in effect at the time of
such termination, and any applicable additional Rent for such day of the period
in which such retention of possession occurs, and Tenant shall also pay all
damages, consequential as well as direct, sustained by Landlord by reason of
such retention. Nothing in this Section contained, however, shall be construed
or operate as a waiver of Landlord's right of re-entry or any other right or
remedy of Landlord.
ARTICLE V
USE OF PREMISES
5.1 TENANT USE. The Premises shall be used and occupied by Tenant
solely as for the purposes indicated in Article I, hereof and for no other
purpose without Landlord's written consent, which consent shall not be
unreasonably withheld. Tenant
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shall comply with all rules, regulations and laws of any governmental authority
with respect to Tenant's specific use and occupancy. The premises shall not be
used in any manner which creates a public or private nuisance or unreasonably
interferes with the rights of Landlord or other tenants in the use of the
Building.
Tenant may not display or allow aerials, antennae, carts, portable
signs, or any other objects to be stored or to remain outside the defined
exterior walls or roof and permanent doorways of the Premises without first
obtaining, in each instance, the written consent of Landlord, which consent
shall not be unreasonably withheld. Any item so installed without such
written consent shall be subject to removal by landlord without notice at any
time.
This Lease does not grant any rights to light or air over or above
the real property of Landlord. Landlord specifically reserves to itself the
use of any roofs, the exterior portions of the Premises, all rights to the land
and improvements below the improved floor level of the Premises and to such
areas within the Premises required for installation of utility lines and other
installations required to serve any occupants of the Buildings and to maintain
and repair same.
5.2 SIGNS. Tenant shall not place on any exterior door, wall or
window of the Premises any sign or advertising matter which is not within the
building standard for signs and without first obtaining the Landlord's written
approval and consent which approval shall not be unreasonably withheld.
Tenant agrees to maintain such signs or advertising matter as approved by
Landlord in good condition and repair. All signs shall comply with applicable
ordinances or other governmental restrictions and the determination of such
requirements and the prompt compliance therewith shall be the responsibility of
the Tenant.
5.3 FIRE EXTINGUISHERS. Landlord shall provide new fire
extinguishers to the Premises at the Commencement Date. Tenant will be
responsible for all servicing of said fire extinguishers and replacement during
the Lease Term. If Tenant fails to comply with this provision Landlord may
provide this service at Tenant's expense plus an additional charge of fifty
dollars, which sums shall be additional rent due hereunder at the beginning of
the next month following notice by Landlord to Tenant of the incurring of said
expenditure.
5.4 QUIET ENJOYMENT. Landlord agrees that, if the rent is being
paid in the manner and at the time prescribed and the covenants and obligations
of Tenant being all and singular kept, fulfilled and performed, Tenant shall
lawfully and peaceably have, hold, possess, use, occupy and enjoy the Premises
so long as this Lease remains in force, without hindrance, disturbance or
molestation from Landlord, subject to the specific provisions of this Lease.
5.5 RULES AND REGULATIONS. Tenant agrees to observe and not to
interfere with the rights reserved to Landlord contained in Paragraph 7.3
hereof and elsewhere in this Lease, and agrees, for itself, its employees,
agents, invitees, licensees and contractors, to comply with the rules and
regulations set forth in Exhibit B attached to this Lease, and such other rules
and regulations as shall be reasonably adopted by Landlord from time to time.
5.6 SURRENDER OF PREMISES. At the termination of the Lease Term or
any renewal term, the Tenant agrees to deliver the premises in the same
condition as received by it on the Commencement Date, (subject, to the removals
hereinafter required) reasonable wear and tear and less by casualty excepted,
neat and broom clean, and shall surrender all keys for the premises to the
Landlord at the place then fixed for the payment of rent and shall inform
Landlord of all combinations of locks, safes and vaults, if any, in the
premises. If Tenant is not then in default hereunder, Tenant, during the last
thirty (30) days of such term, shall remove all its trade fixtures, and, to the
extent required by the Landlord by written notice, shall remove any other
installations, alterations or improvements made by Tenant provided herein, and
shall repair any damage to the premises caused thereby. Tenant's obligation to
observe or perform this covenant shall survive the expiration or other
termination of the lease term. Any items remaining in the premises on the
termination date of this Lease shall be deemed abandoned for all purposes and
shall become the property of the Landlord and the latter may dispose of the
same without liability of any type or nature.
ARTICLE VI
CONSTRUCTION, MAINTENANCE AND REPAIR
6.1 ALTERATIONS AND ADDITIONS. Tenant shall not, without Landlord's
prior written consent, which shall not be unreasonably withheld, make any
alterations, improvements, additions, or utility installations in, on or about
the Premises, including, but not limited to floor coverings, window coverings,
air lines, power panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing, and fencing. Tenant shall promptly
pay all costs and expenses associated with such alterations, improvements,
additions or utility installations, including, but not limited to, all costs
and expenses associated with compliance with any governmental statutes,
ordinances, rules or regulations required solely by Tenant's alteration,
improvement, addition or utility installation, including all handicapped access
requirements and requirements under the Americans With Disabilities
Act 42 U.S.C. Sections 12181,et.seq. Landlord may require Tenant to provide, at
Tenant's sole cost and expense, a lien and completion bond in an amount equal
to one and one-half (1 1/2) times the estimated cost of such alterations,
improvements, additions or utility installations to insure Landlord against any
liability for mechanic's and materialmen's liens and to insure completion of
the work. Should Tenant make any alterations, improvements, additions or
utility installations without the prior approval of Landlord, Landlord may
require that Tenant remove any or all of the same.
Any alterations, improvements, additions or utility installations in,
or about the Premises that Tenant shall desire to make and which require the
prior written consent of the Landlord shall be presented to Landlord in written
form, with proposed detailed plans. If Landlord shall give its written
consent, its consent shall be deemed conditioned upon Tenant obtaining all
necessary permits to do so from appropriate governmental agencies, the
furnishing of copies thereof to Landlord prior to the commencement of the work
and the compliance by Tenant of all conditions of such plan approval and
permits in a prompt and expeditious manner.
Tenant shall perform all such work in a first class, workmanlike
manner and in compliance with all applicable governmental statutes, ordinances,
rules and regulations.
Tenant shall pay, when due, all claims for labor, and/or equipment
and materials furnished or alleged to have been furnished to or for Tenant at
or for its use in the Premises whether or not such claims may be secured by any
mechanics' or materialmen's lien against the Premises or any interest therein.
Tenant shall give Landlord not less than fifteen (15) days' notice prior to the
commencement of any work in the Premises, and Landlord shall have the right to
post notices of non-responsibility in or on the Premises as provided by law.
If Tenant shall, in good faith, contest the validity of any such lien, claim or
demand, then Tenant shall, at its sole expense, defend itself and Landlord
against the same and shall pay and satisfy any such adverse judgment that may be
rendered thereon before the enforcement thereof against the Landlord or the
Premises, upon the condition that if Landlord shall so require, Tenant shall
furnish to Landlord a surety bond satisfactory to Landlord in an amount equal
to one and one-half (1 1/2) times the amount of such contested lien claim or
demand indemnifying Landlord against liability for the same and holding the
Premises free from the effect of such lien or claim. In addition, Landlord may
require Tenant to pay Landlord's
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attorneys' fees and costs for Landlord's appearing in and in participating in
such action if Landlord shall decide it is to its best interest to so appear
and participate therein through its own counsel.
6.2 TENANT'S DUTY TO REPAIR. During the term of this Lease and any
extensions thereof, Tenant shall:
A. Keep and maintain in good order, condition and repair
(including any replacement and restoration as is required for the purpose) the
following: 1) All lights within the Premises, including all exit signs,
emergency lighting and all light bulbs and ballasts; 2) All signage installed
by Tenant; 3) All fixtures, improvements, alterations, additions, utility
installations and personal property, installed by Tenant; 4) All stopped up or
impeded plumbing within the Premises or from the Premises to the main sewer
line to the extent cause by Tenant; 5) All flooring and carpet within the
Premises, including any damage to carpet caused by a lack of protective mats
under desk chairs or equipment or any other abnormal puncture or wearing of
carpet; 6) All damage to the Premises or the Building caused by the negligence
or intentional acts of Tenant, its employees, agents, invitees, licensees or
contractors, or strike involving the Tenant or its employees. Any charges to
furnish service to the Premises made by any utility company or municipality
shall be paid by the Tenant within the time limit specified by each utility
company. Tenant shall also be responsible for repairing all damage to the
Premises caused by or during the work described in this paragraph. If Tenant
refuses or neglects to commence and to complete repairs promptly and
adequately, Landlord may, but shall not be required to, make and complete said
repairs and Tenant shall pay the cost thereof to Landlord as additional rent on
demand, plus an overhead and service fee of fifteen percent (15%) of the amount
paid by Landlord not withstanding the forgoing, Tenant shall not be obligated
to make any of the above repairs to the extent such repairs are covered by
Landlord's insurance.
B. Tenant shall keep and maintain the Premises in a clean,
sanitary and safe condition, provide all janitorial service, garbage removal
from the Premises and window cleaning in accordance with all uses of the
premises, directions, rules and regulations of the proper officials of the
governmental agencies having jurisdiction, at the sole cost and expense of
tenant, and Tenant shall comply with all requirements of law, by statute,
ordinance or otherwise, affecting the Tenant's specific use of the Premises and
all appurtenances thereto.
6.3 LANDLORD'S DUTY TO REPAIR. Landlord shall keep and maintain in
good order, condition and repair (including any replacement restoration as is
required for that purpose, all portions of the Premises, the Building or the
Common Areas not otherwise required by Tenant to be repaired under Paragraph
6.2 above, except that Landlord shall not be called upon to make any such
repairs occasioned by the act or neglect of Tenant, its agents, employees,
invitees, licesees or contractors, unless covered by Landlord's insurance.
Landlord shall not be called upon to make any other improvements or repairs of
any kind upon the leased Premises and appurtenances except as otherwise provide
in the Lease or unless caused by the act or neglect of Landlord, its agents or
contractors. Any of the foregoing repairs required to be made by reason of the
negligence of Tenant, its agents, employees, invitees, licensees or contractors
as above described, shall be the responsibility of Tenant notwithstanding the
provisions above contained in this paragraph.
Premises, will not in any matter cut or drive nails into or otherwise mutilate
the roof of the Premises and will be responsible for any damage caused to the
roof by any acts of the Tenant, its agents, servants, employees, or contractors
of any type or nature.
6.4 ROOF. Tenant will not cause or permit accumulation of any debris
or extraneous matter on the roof of the Premises, will not in any matter cut or
drive nails into or otherwise mutilate the roof of the Premises and will be
responsible for any damage caused to the roof by any acts of the Tenant, its
agents, servants, employees, or contractors of any type or nature. Tenant may
not put compressors, antennae, microwave, television or other disks, or other
such attachments on the roof without Landlord's prior written consent, which
consent may withheld within Landlord's discretion.
6.5 TRADE FIXTURES. At the expiration of this Lease or renewal
thereof, Tenant shall have the right and obligation to promptly remove any
trade fixtures installed by Tenant on the Premises, and shall repair any
damage to the Premises caused by such removal.
6.6 NON TRADE FIXTURES. All installations, additions, non trade
fixtures and improvements, including floor treatments, whether placed there by
Tenant or Landlord, except movable furniture and equipment belonging to Tenant,
which Tenant shall promptly remove, shall be Landlord's property and shall
remain upon the Premises upon expiration of the Term or sooner termination of
this Lease or Tenant's possession hereunder, all without compensation,
allowance or credit to Tenant.
ARTICLE VII
LANDLORD'S RIGHTS AND RESPONSIBILITIES
AS TO THE OFFICE BUILDING AND PREMISES
7.1 CONTROL OF COMMON AREAS. All Common Areas shall at all times be
subject to the exclusive control and management of Landlord, and Landlord shall
have the right from time to time to establish, modify and enforce reasonable
rules and regulations with respect to use of all such Common Areas in a
non-discriminatory manner. Landlord shall have the right to operate and
maintain the same in such manner as Landlord, in its sole discretion, shall
determine from time to time, including without limitation the right to employ
all personnel and to make all rules and regulations pertaining to and necessary
for the proper operation and maintenance of said Common Areas. Landlord shall
have the exclusive right at any and all times to close any portion of the
Common Areas for the purpose of making repairs, changes or additions thereto
and may change the size, area or arrangement of the Building or parking areas
or the lighting thereof within or adjacent to the existing areas and may enter
into agreements with adjacent owners for cross easements for parking and
ingress and egress, provided that such activities shall not unreasonably
interfere with Tenant's operations. In the event that the lighting controls,
ceiling or roof access for the Common Areas shall be located in the Premises,
then Landlord in such event shall have the right to enter the Premises for the
purpose of adjusting or otherwise dealing with the said controls and/or access
as required.
7.2 SERVICES PROVIDED BY LANDLORD. Landlord, at all times during the
term shall furnish the following services at Landlord's expense:
(a) Air conditioning and heating units and electric current to
the Premises, which shall be properly hooked up to utility services, and which
shall be operable by Tenant. Tenant promptly shall pay directly to the utility
companies all charges
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incurred in connection with the use any of any such unites or service. Tenant
agrees that its use of electric current will not exceed the capacity of the
feeders to the Building or the risers or wiring installed thereon. Tenant may
not, at any time, reduce the heating to the Premises to create any risk that
the pipes in and around the Premises would freeze.
(b) Domestic water and refuse service in common with other
tenants. In the event that Tenant makes greater use of water service or refuse
disposal service than the usual and ordinary office use of such service, then
Landlord may bill Tenant for the additional cost of such increased use.
Failure by Tenant to promptly pay Landlord's proper charges
for excess water or refuse services shall give Landlord, upon not less than ten
(10) days notice, the right, in addition to any other remedies available to
Landlord, to discontinue furnishing the services, and no such discontinuance
shall be deemed an eviction or disturbance of Tenant's use of the Premises or
render Landlord liable for damages or relieve Tenant from performance of
Tenant's obligations under this Lease.
Tenant agrees that Landlord and its employees and agents
shall not be liable in damages, by abatement of Rent or otherwise, unless the
premises are unfit for their intended purpose, for failure to furnish or for
delay in furnishing any service or performing any other term of this Lease when
such failure or delay is occasioned, in whole or in part, by repairs, renewals
or improvements, or by any cause beyond the reasonable control of Landlord.
7.3 RIGHTS RESERVED TO LANDLORD. Landlord reserves the following
rights, exercisable without notice and without any liability to Tenant
whatsoever, and without effecting any eviction or disturbance of Tenant's use
or possession, or giving rise to any claim for set-off or abatement of Rent, or
affecting any of Tenant's obligations under this Lease:
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(a) To change the name or street address of the Building.
(b) To install and maintain signs on the exterior and interior of the
Building.
(c) To prescribe the location and style of the suite number and
identification sign or lettering for the Premises, but not to change the mailing
address.
(d) To retain at all times, and to use in appropriate instances, pass
keys to the Premises.
(e) To grant to any one the right to conduct any business or render
any service in the Building or Project, whether or not it is the same as or
similar to the use expressly permitted to Tenant by Article V.
(f) To exhibit the Premises at reasonable hours, and to decorate,
remodel, repair, alter or otherwise prepare the Premises for re-occupancy at any
time after Tenant vacates or abandons the Premises.
(g) Provided that reasonable access to the Premises shall be
maintained and the business of Tenant shall not be interfered with materially
and unreasonably, to make repairs and alterations, structural or otherwise, in
or to the Building, including the Premises, and any part of the Project, and may
for such purposes erect scaffolding and other structures reasonably required,
and during such operations may enter upon the Premises and interrupt or
temporarily suspend any services or facilities agreed to be furnished by
Landlord, all without the same causing an eviction of Tenant in whole or in
part, and without abatement of Rent by reason of loss or interruption of the
business of Tenant or otherwise.
(h) Landlord reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Landlord deems necessary or
desirable, and to cause the recordation of parcel maps and covenants and
restrictions, so long as such easements, rights, dedications, maps, covenants
and restrictions do not unreasonably interfere with the use of the Premises by
Tenant. Tenant shall sign any of the aforementioned documents upon request of
Landlord and failure to do so shall constitute a material breach of this Lease.
7.4 LANDLORD'S RIGHT OF ENTRY. Landlord reserves the right at all
reasonable times during the term of this Lease for Landlord or Landlord's
agents to enter the Premises for the purpose of inspecting and examining the
same, and to show the same to prospective purchasers or tenants, and to make
such repairs, alterations, improvements or additions as Landlord reasonably may
deem necessary or desirable. During the one hundred twenty (120) days prior to
the expiration of the term of this Lease or any renewal term, Landlord may
exhibit the Premises to prospective tenants or purchasers, and place upon the
Premises the usual notices advertising the Premises for sale or lease, as the
case may be, which notices Tenant shall permit to remain thereon without
molestation. If Tenant shall not be personally present to open and permit an
entry into said Premises and Landlord has tried to contact Tenant, Landlord, or
Landlord's agent, may at any time, when for any reason an entry therein shall
be necessary or permissible, enter the same to the extent permitted by law, by
a master key, or may forcibly enter the same, without rendering Landlord or
such agents liable therefor, and without in any manner affecting the
obligations and covenants of this Lease. If Landlord was unable to contact
Tenant, Landlord shall secure the Premises until Tenant or its agent arrives.
Nothing herein contained, however, shall be deemed or construed to impose upon
Landlord any obligation, responsibility or liability whatsoever for the care,
maintenance or repair of the building or any part thereof, except as otherwise
herein specifically provided. In order to secure Landlord's right of entry
hereunder, Tenant agrees to make no changes in the locks of the Premises and
shall not re-key the present locks without Landlord's prior written consent.
7.5 SECURITY MEASURES. Tenant hereby acknowledges that the rental
payable to Landlord hereunder does not include the cost of guard service or any
other security measures, and that Landlord shall have no obligation whatsoever
to provide same. Tenant assumes all responsibility for the protection of
Tenant, its agents and invitees from acts of third parties.
ARTICLE VIII INDEMNITY AND INSURANCE
8.1 INDEMNIFICATION. Except as provided in the section entitled
"Waiver of Subrogation" each party agrees to exonerate, hold harmless, protect
and indemnify the other party from and against any and all losses, damages,
claims, suits or actions, judgements and costs (including reasonable attorney's
fees) which may arise or grow out of injury or attributable to the negligence
or willful acts or omissions of the indemnifying party, its employees or
agents.
A. The preparation or approval of maps, drawings, opinions, reports,
surveys, change order, designs or specifications by the Landlord, or the agents
or employees of the Landlord; or
B. The giving of or the failure to give directions or instructions by
the Landlord or the agents or employees of the Landlord, where such giving or
failure to give directions or instructions is the primary cause of bodily injury
to persons or damage to property.
8.2 NOTICE OF CLAIM OR SUIT. Tenant agrees to promptly notify Landlord
of any known claim, action, proceeding or suit instituted or threatened against
the Landlord. In the event Landlord is made a party to any action for damages
which Tenant has herewith indemnified Landlord against, then Tenant shall pay
all costs and shall provide counsel in such litigation or shall pay, at
Landlord's option, the reasonable attorney fees and costs incurred in
connection with said litigation by Landlord.
8.3 TENANT'S INSURANCE. During the Lease term and any renewals thereof
Tenant agrees to maintain, at its expense, at all times the following insurance
coverages:
A. Public liability insurance with the broad form comprehensive
general liability endorsement including contractual liability insurance
coverages and with such increases in limits as Landlord may, from time to time
reasonably require, property protecting and indemnifying Landlord and
Landlord's Agent in an amount not less than $1,000,000.00 combined single
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limit for injuries or damages to persons, or such greater limits as the
Landlord may reasonably require during the term of this Lease.
B. "All risk" physical damage insurance including, fire,
sprinkler leakage, vandalism and extended coverage for the full replacement cost
of all additions, improvements and alterations to the Premises (except to the
extent the same are part of building standard work performed by Landlord
pursuant to Exhibit "A," if any, attached hereto) and of all office furniture,
trade fixtures, office equipment, merchandise and all other items of Tenant's
property on the Premises;
8.4 TENANT'S INSURANCE POLICIES. Insurance required hereunder shall
be in companies holding a "General Policyholders Rating" of at least B plus, or
such other rating as may be required by a mortgage lender having a lien on the
Premises, as set forth in the most current issue of "Best's Insurance Guide."
Tenant shall deliver to Landlord prior to occupancy an insurance binder on the
Premises for the coverages provided herein and shall deliver to Landlord or
Landlord's agent prior to occupancy. Tenant shall, thereafter, promptly deliver
to Landlord true copies of all such policies of insurance as required by this
Article, certified by the insurer. No such policy shall be cancelable or
subject to reduction of coverage or other modification except after at least
thirty (30) days' prior written notice to Landlord. Tenant shall, at least
thirty (30) days prior to the expiration of such policies, furnish Landlord
with renewals or renewal "binders" thereof. Tenant shall not do or permit to be
done anything which shall invalidate any of such insurance policies. Insurance
required under Paragraph 8.3 A, D and E shall name Landlord (and Landlord's
lender, if requested by Landlord) and Landlord's Agent as an additional named
insured.
8.5 FAILURE TO PROCURE INSURANCE. In the event Tenant shall fail to
procure insurance required under this Article and fail to maintain the same in
force continuously during the term, Landlord may procure the same and Tenant
shall immediately reimburse Landlord for such premium expense, plus a service
charge of fifteen percent (15%) of the amount paid by Landlord, which amount
shall be payable as additional rent hereunder upon demand by Landlord.
8.6 INCREASE IN FIRE INSURANCE PREMIUM. Tenant agrees not to keep upon
the Premises any articles or goods which may be prohibited by the standard form
of fire insurance policy. It is agreed between the parties that in the event
the insurance rates applicable to fire and extended coverage insurance
covering the Premises shall be increased by reason of any use of the Premises
made by the Tenant, then Tenant shall pay to Landlord such increase in
insurance as shall be occasioned by said use, as additional rent hereunder, due
upon demand by Landlord. Landlord acknowledges that Tenant's use will not cause
an increase.
8.7 PROPERTY OF TENANT. Tenant agrees that all property owned by it,
on or about the Premises shall be maintained at the sole risk and hazard of the
Tenant. Landlord shall not be liable or responsible for any loss or damage to
Tenant, or anyone claiming under or through Tenant, or otherwise, whether
caused by or resulting from a peril required to be insured hereunder, or from
water, steam, gas, leakage, plumbing, electricity or electrical apparatus, pipe
or apparatus of any kind, the elements or other similar or dissimilar causes,
and whether or not originating in the original Premises or elsewhere, provided
such damage or loss is not the result of negligence or an intentional or
willful act of Landlord, its agents, employees or contractors.
8.8 WAIVER OF SUBROGATION. Landlord shall obtain insurance for the
Building of which the Premises are a part, and Tenant shall insure or
self-insure as provided in the Lease. Landlord and Tenant, for themselves and
their respective insurers, agree to and do hereby release each other of and
from any and all claims, demands, actions and causes of action that each may
have claim to have against the other for loss or damage to property, both real
and personal, caused by or resulting from casualties customarily insurable,
notwithstanding that any such loss or damage may be due to or result from the
negligence of either of the parties hereto or their respective employees or
agents.
ARTICLE IX
DESTRUCTION OR DAMAGED PREMISES
9.1 PARTIAL DESTRUCTION. In the event the Premises becomes partially
destroyed by fire or other casualty to the extent that the cost of restoration
or repair is less than one-third (1/3) of the total reasonable costs of
replacement of all improvements included in the Premises (as reasonably
estimated by Landlord), and premises cannot be repaired within 120 days, then
either tenant or Landlord shall have the option (which option shall be
exercised in writing within ten (10) days of the date of loss) to terminate
this Lease and all further obligations of either party hereunder or, within
forty-five (45) days of such loss or damage, to commence repairs of the damage
and restore that part of the Premises owned by the Landlord. If either party
elects to terminate this Lease, all obligations hereunder, including rent,
shall cease as of the date of partial destruction, but shall not affect
obligations prior to partial destruction. If Landlord elects to repair, the
rental hereunder shall abate as hereinafter provided until such time as that
part of the Premises are restored to substantially their previous condition. If
the damage or destruction of such improvements on said Premises is of such
nature that the same can, allowing for all reasonable contingencies, be
repaired or restored to substantially its former condition within one hundred
twenty (120) days after such loss or damage, Landlord shall promptly proceed to
have said repairs made and said Premises so restored at its own expense, and
this Lease shall remain in full force and effect subject only to a
proportionate reduction of the Minimum Rent during the period prior to such
restoration based upon the percentage of that portion of the original Premises
damaged or destroyed (as reasonably determined by the Landlord). Tenant shall
be responsible, at its own expense to do such work as may be necessary to place
that portion of the Premises not so damaged or destroyed in a condition to
permit Tenant to continue to carry on the approved use as of the date of damage
or destruction and Tenant shall continue that use to the extent possible.
Tenant shall not be entitled to any additional abatement or deduction of rent
from any business interruption caused by such damage or destruction or by
the necessity for Tenant to do work on the portion of the Premises not damaged.
9.2 TOTAL OR EXTENSIVE DAMAGE. N/A
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9.3 NO COMPENSATION TO TENANT. In the event of Partial or Total
Damage or Destruction as provided above Tenant shall not be entitled to obtain
a share in any fire or extended coverage insurance proceeds on property owned
by Landlord in any manner, but all such proceeds shall be payable to Landlord
or Landlord's mortgagee as they shall agree between them, provided
Landlord shall not be relieved of its obligation to repair the premises as set
forth in this Article.
ARTICLE X
EMINENT DOMAIN
10.1 DEFINITIONS. For purposes of this paragraph, the following terms
shall have the following meanings:
A. A "taking" shall mean taking by eminent domain which is
either permanent or for a duration of more than three (3) months;
B. "Substantially all the Premises" shall mean a taking,
or a sale under threat of eminent domain, of such portion of the Premises or a
restriction placed on the Premises by other governmental actions such that the
portion not so taken or sold or affected is not reasonably usable by the Tenant
for the uses permitted by this Lease as of the date of taking; and
C. "Date of taking" shall mean the date legal title to, or
the right to possess, the Premises or substantially all the Premises is vested
in the condemning authority.
10.2 TOTAL OR SUBSTANTIAL TAKING. If all or substantially all the
Premises are taken or sold or affected under threat of eminent domain or other
governmental action during the term of this Lease or any renewal thereof, this
Lease will terminate on the date of taking without further liability of
Landlord to Tenant under the Lease and accrual of rent hereunder shall cease on
the date of taking. Any prepaid rental or security deposit shall be rebated to
Tenant within thirty (30) days from Landlord's notice of election provided
Tenant is otherwise in compliance with the terms of this Lease.
10.3 PARTIAL TAKING. If less than substantially all the Premises is
taken or sold under threat of eminent domain or other governmental action during
the term of this Lease or any renewal hereof, this Lease shall nonetheless
continue in force and effect except as to the portion of the Premises so taken
or sold, and the amount of Base Rent payable hereunder from and after the date
of such partial taking shall be reduced by the percentage of that portion of
the original Premises covered by this Lease which was so partially taken or sold
(as reasonably determined by Landlord). Tenant shall be responsible, at its
own expense, to do such work as may be necessary to place that portion of the
Premises not so partially taken or sold in a condition to permit Tenant to
continue to carry on the approved use as of the date of taking. Tenant shall
not be entitled to any additional abatement or deduction of rent for any
business interruption caused by such partial taking or sale or by the necessity
for Tenant to do work on the portion of the Premises not so partially taken or
sold.
10.4 NOTICE OF TENANT. If and when Landlord learns of a threat of a
taking or partial taking, Landlord will immediately notify Tenant of such
threat.
10.5 NO COMPENSATION TO TENANT. In the event of any taking or partial
taking during the term of this Lease or any renewal thereof, Tenant shall not
be entitled to obtain or share in any condemnation award or proceeds of sale
under threat of condemnation, whether or not such taking results in a full
or partial termination of this Lease or the leasehold estate created hereunder
except moving expenses, loss of business and any other award which will not
diminish award payable to the Landlord.
ARTICLE XI
COMPLIANCE WITH HAZARDOUS MATERIALS LAW
11.1 HAZARDOUS MATERIALS. Tenant and Landlord shall not
(either with or without negligence) cause or permit the escape, disposal or
release of any biologically or chemically active or other hazardous substances
or materials on or about the Premises. Tenant and Landlord shall not allow the
storage or use of such substance or materials in any manner not sanctioned by
law or by the highest standards prevailing in the industry for the storage and
use of such substances or materials, nor allow to be brought into the Premises,
any such materials or substances except to use in the ordinary course of
Tenant's or Landlord's business. Without limitation, hazardous substances and
materials shall include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Section 6901 et seq., any applicable state or local laws and the regulations
adopted under these acts. If any lender or governmental agency shall ever
require testing to ascertain whether or not there has been any escape, disposal
or release of hazardous substances or materials, then the reasonable costs
thereof shall be reimbursed by Tenant to Landlord upon demand as additional rent
if such requirement applies to the Premises. In addition, Tenant shall execute
affidavits, representations and the like from time to time at Landlord's request
concerning Tenant's best knowledge and belief regarding the presence, escape,
disposal or release of hazardous substances or materials on the Premises. In
all event, Tenant shall indemnify Landlord in the manner elsewhere provided in
this Lease form any release of hazardous substances or materials on the Premises
occurring while Tenant is in possession,or elsewhere if caused by Tenant or
persons acting under Tenant. Landlord shall likewise indemnify Tenant of same.
The within covenants shall survive the expiration or any earlier termination of
the term of this Lease.
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ARTICLE XII
TRANSFERS OF INTEREST
12.1 RESTRICTION ON TRANSFER. It is agreed that Tenant shall not have
the right to sublease, assign, transfer, mortgage or encumber any part of
Tenant's interest in this Lease without the prior written approval of Landlord,
which said approval shall not be unreasonably withheld. Landlord shall
consider factors including the proposed use, parking requirements and financial
strength of the sublessee or assignee in determining whether to approve a
sublease or assignment. Any attempted or purported change of Tenant's interest
without Landlord's prior written consent shall be void and shall confer no
rights upon any third party. Nothing herein contained shall relieve Tenant or
any Guarantor from its' convenants and obligations under this Lease. Tenant
agrees to reimburse Landlord for Landlord's reasonable attorneys' fees, costs
and expenses incurred in conjunction with the processing and documentation of
any such requested change of Tenant's interest.
12.2 FORM OF TRANSFER. Each change of Tenant's interest to which
there has been consent shall be by an instrument in writing in form reasonably
satisfactory to Landlord, and shall be executed by the transferor, assignor,
sublessor, licensor, concessionaire, hypothecator or mortgagor and the
transferee, assignee, sublessee, licensee, concessionee or mortgagee shall
agree in writing for the benefit of the Landlord herein to assume, to be bound
by, and to perform the terms, convenants and conditions of this Lease to be
done, kept and performed by Tenant, including the payment of all amounts due or
to become due under this Lease directly to Landlord. One executed copy of such
written instrument shall be delivered to Landlord. Failure to first obtain in
writing Landlord's consent or failure to comply with the provisions of this
Article shall operate to prevent any such change of Tenant's interest from
becoming effective. Consent by Landlord to one change of Tenant's interest
shall constitute a waiver of Landlord's right to consent to subsequent changes
of Tenant's interest.
12.3 RENT UPON TRANSFER. N/A
12.4 TRANSFER OF STOCK INTEREST. N/A
12.5 BANKRUPTCY. Neither this Lease, not any interest therein, nor
any estate created hereby, shall pass to any trustee or receiver in bankruptcy,
or to any other receiver or assignee for the benefit of creditors or otherwise
by operation of law. In the event of bankruptcy or assignment for the benefit
of creditors, Landlord shall be entitled to retain the security deposit and
shall be deemed a secured creditor as to the next six months' rental to the
extent permitted by the applicable federal or state laws unless a tenant paying
at least the amount due from Tenant shall be procured in said period in which
case the actual rent collected during that six (6) month period shall reduce
the amount of secured debt. As to any additional loss of rent, Landlord shall
be entitled to file as a general creditor. The rights herein are cumulative of
and in addition to any other rights provided by law.
12.6 SALE OF PREMISES BY LANDLORD. In the event of any sale or
exchange of the Premises by Landlord and assignment by Landlord of this Lease,
Landlord shall be and is hereby entirely freed and relieved of all liability
under any and all of its covenants and obligations contained in or derived from
this Lease arising out of any act, occurrence or omission relating to the
Premises or this Lease occurring after the consummation of such sale or exchange
and assignment, provided such purchaser or assignee shall expressly assume said
covenants and obligations of Landlord.
12.7 PERMITTED TRANSFER. Tenant must have the right to assign the
lease in the event of the sale of the company.
ARTICLE XIII
DEFAULTS BY TENANT
13.1 LANDLORD'S ELECTIONS UPON DEFAULT. Should Tenant at any time be
in default with respect to any rental payments or other charges payable by
Tenant, and should such default continue for a period of five (5) days after
written notice from Landlord to Tenant; or should Tenant be in default in the
prompt and full performance of any other of its promises, covenants or
agreements herein contained and should such default or breach of performance
continue for a period of twenty (20) days after written notice thereof from
Landlord to Tenant specifying the particulars of such default or breach of
performance, (Provided, however, if Landlord is required to send more than two
(2) written notices of default of any kind in any lease year, then Tenant shall
be in default under this Lease notwithstanding any attempts to cure after the
third failure by Tenant to timely perform) or should Tenant vacate or abandon
the Premises; the Landlord may treat the occurrence of any one or more of the
foregoing events as a breach of this Lease, and in addition to any or all other
rights or remedies of Landlord and by law provided, it shall be, at the option
of Landlord, without further notice or demand of any kind to Tenant or any
other person:
(a) The right of Landlord to declare the term hereof ended,
to terminate this Lease and to reenter the Premises and take possession thereof
and remove all persons therefrom, and Tenant shall have no further claim
thereon or hereunder; or
(b) The right of Landlord without declaring this Lease
ended to reenter the Premises and occupy the whole or any part thereof for and
on account of Tenant and to collect any unpaid rentals and other charges, which
have become payable, or which may thereafter become payable; or
(c) The right of the Landlord, even though it may have
reentered the Premises, to thereafter elect to terminate this Lease and all of
the rights of Tenant in or to the Premises.
13.2 ELECTION TO REENTER. Should Landlord have reentered the Premises
under the provisions of subparagraph (b) above, Landlord shall not be deemed to
have terminated this Lease, or the liability of Tenant to pay any rental or
other charges thereafter accruing, or to have terminated Tenant's liability for
damages under any of the provisions hereof, by any such reentry or by any
action, in unlawful detainer or otherwise, to obtain possession of the
Premises, unless Landlord shall have notified Tenant in writing that it has so
elected to terminate this Lease, and Tenant further covenants that the service
by Landlord of any notice pursuant to the unlawful detainer statutes of the
State of New Mexico and the surrender of possession pursuant to such notice
shall not (unless Landlord elects to the contrary at the time of or at any time
subsequent to the serving of such notices and such election
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is evidenced by a written notice to Tenant) be deemed to be a termination of
this Lease. In the event of any entry or taking possession of the Premises as
aforesaid, Landlord shall have the right, but not the obligation, to remove
therefrom all or any part of the personal property located therein and may place
the same in storage at a public warehouse at the expense and risk of Tenant.
13. ELECTION TO TERMINATE. Should Landlord elect to terminate this
Lease pursuant to the provisions of subparagraph (a) or (c) above, Landlord may
recover from Tenant as damages, the following:
(i) The worth at the time of award of any unpaid rental which
had been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rental which would have been earned after termination until the
time award exceeds the amount of such rental loss Tenant proves could
have been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid rental for the balance of the term after the time of the award
exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including, but not limited to any
costs or expenses incurred by Landlord in (a) in retaking possession of
the Premises, including reasonable attorney's fees therefor, (b)
maintaining or preserving the Premises after such default,
(v) at Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by the
laws of the State of New Mexico.
As used in subparagraphs (i) and (ii) above, the "worth at the time of
award" is computed by allowing interest at the rate of twelve percent (12%) per
annum. As used in subparagraph (iii) above, the "worth at the time of award"
is computed by discounting such amount at the discount rate of the Federal
Reserve Bank for New Mexico at the time of the award, plus one percent (1%).
For all purposes of this Article XIII, the term "rental" shall be
deemed to be the Base Rental and all other sums required to be paid by Tenant
pursuant to the terms of this Lease. All such sums, other than the Base Rent,
shall be computed on the basis of the average monthly amount thereof accruing
during the immediately preceding sixty (60) month period, except that if it
becomes necessary to compute such rental before such a sixty (60) month period
has occurred then such rental shall be computed on the basis of the average
monthly amount hereof accruing during such shorter period.
13.4 USE OF TENANT'S PROPERTY. In the event of default, and in
addition to other rights of Landlord hereunder, all of Tenant's fixtures,
furniture, equipment, improvements, additions, alterations, and other personal
property shall remain on the Premises and in that event, and continuing during
the length of said default, Landlord shall have the right to take the exclusive
possession of same and to use same, rent or charge free, until all defaults are
cured or, at its option, at any time during the term of this Lease, to require
Tenant to forthwith remove same.
13.5 NONMONETARY DEFAULT PERIOD FOR REMEDY. Notwithstanding any other
provisions of this Article, Landlord agrees that if the default complained of,
other than for the payment of monies, is of such a nature that the same cannot
be rectified or cured within the period requiring such rectification or curing
as specified in the written notice relating thereto, then such default shall be
deemed to be rectified or cured if Tenant within such period shall have
commenced the rectification and curing thereof and shall continue thereafter
with all due diligence to cause such rectification and curing and does so
complete the same with the use of such diligence as aforesaid.
13.6 SUPPLEMENTAL REMEDIES. The remedies given to Landlord in this
Article shall be in addition and supplemental to all other rights or remedies
which Landlord may have under laws then in force.
13.7 NON-WAIVER BY LANDLORD. The failure by Landlord to enforce any
breach of any term, covenant or condition herein contained shall not be deemed
to be a waiver of such term, covenant or condition or of any subsequent breach
of the same or any other term, covenant condition herein contained. The
subsequent acceptance of rental hereunder by Landlord shall not be deemed to be
a waiver of any preceding breach by Tenant of any term, covenant or condition
of this Lease, other than the failure of Tenant to pay the particular rental so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rental. No covenant, term, or condition of this
lease shall be deemed to have been waived by Landlord unless such waiver be in
writing signed by Landlord.
13.8 RELETTING THE PREMISES. Upon entering and taking possession of
the Premises without terminating the Lease and, without prejudice or waiver of
its rights to sue and collect unpaid rent and any other damages from Tenant,
Landlord may relet the Premises in the name of Landlord and for such term and
on such conditions and provisions as Landlord shall determine in its discretion
(including the granting of reasonable amounts of free rent and other
concessions reasonably required to effect such reletting) and may collect and
receive the rents from such reletting. Such reletting may be for a term
greater than the term then remaining under this Lease but in any event shall
operate to preempt Tenant from any right to repossess the Premises. Landlord
shall also not be liable or responsible to Tenant for any failure to collect
rent payable upon reletting by Landlord. The proceeds of any such reletting,
less all costs and expenses of reletting (including any attorneys' fees) shall
be applied to unpaid rents, damages and other sums due and payable by Tenant to
Landlord for Tenant's breaches of Lease and other wrongful conduct,
notwithstanding anything contained herein to the contract, Landlord agrees to
exercise reasonable effects to mitigate damages.
13.9 LANDLORD'S OPTION TO REMEDY. Landlord at its option may, but in
no event shall be obligated to, advance and pay any sums and do such other
things, which may include entering into the Premises to do such other things,
which may be necessary to cure, discharge or satisfy any monetary or
nonmonetary defaults of Tenant under this Lease. Should Landlord elect to do
so, all sums advanced and paid by Landlord in connection therewith (including
attorneys' fees), together with interest thereon until repaid to Landlord at
the rate of twelve percent (12%) per annum, shall be considered as additional
rent payable hereunder and shall be due and payable by Tenant upon demand of
Landlord to Tenant.
13.10 OPTIONAL ARBITRATION. In the event of any dispute between the
parties hereto as to any matter in controversy under the Lease the both Parties
shall have the option (but not the obligation) to submit the dispute to binding
arbitration by delivering to each other a written demand therefor. Said
arbitration shall take place before an arbitrator chosen by the parties, or if
they are unable to agree within fifteen (15) days of the date of the written
demand for arbitration, by the Chief Judge of the First Judicial District court
of New Mexico. The cost of the arbitrator shall be split evenly by the
parties. The arbitration shall take place within sixty (60) days of the date
of the written demand therefor except that the arbitrator may grant minimal
continuances as justice requires. There shall be only such discovery allowed
by the arbitrator which would not postpone the date
-11-
<PAGE> 12
of arbitration. The arbitration shall be controlled by the Rules of Civil
Procedure and the Rules of Evidence of the State of New Mexico except as
specifically provided for herein. The decision of the arbitrator shall be final
and unappealable. The arbitrator shall decide all factual and legal issues. The
prevailing party shall be entitled to an award of attorneys fees, expenses and
costs.
13.11 ALLOCATION OF PAYMENTS. Any payment received from Tenant may be
applied by Landlord at any time against any obligation due and owing by Tenant
under this Lease, notwithstanding any statement appearing on or referred to in
any remittance from Tenant or any prior application of such payment.
13.12 DEFAULT UNDER OTHER LEASES. N/A
ARTICLE XV
SUBORDINATION & ESTOPPEL
15.1 SUBORDINATION. Upon request of Landlord, Tenant shall attorn to
any lender in a form satisfactory to such lender or subordinate its rights
hereunder to the lien of any mortgage or mortgages, or the lien resulting from
any other method of financing now or hereafter in force against the real estate
and/or Buildings of which the Premises are a part or against any Building
hereafter placed upon said real estate of which the premises are a part.
15.2 ESTOPPEL CERTIFICATE. Tenant shall at any time upon not less
than (10) days' prior written notice from Landlord execute, acknowledge and
deliver to Landlord a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or
specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser of or existing or
prospective lender on the security of the Premises.
At Landlord's option, Tenant's failure to deliver such statement within
such time shall be a material breach of this Lease or shall be conclusive upon
Tenant (i) that this Lease is in full force and effect, without modification
except as may be represented by Landlord, (ii) that there are no uncured
defaults in Landlord's performance, and (iii) that no rent has been paid in
advance except as may be represented by Landlord.
If Landlord desires to finance, refinance, or sell the Premises, or any
part thereof, Tenant hereby agrees to deliver to any prospective lender or
purchaser designated by Landlord such financial statements of Tenant as may be
reasonably required by such lender or purchaser. Such statements shall include
the past three (3) years' financial statements of Tenant. Such financial
statements shall be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant, shall be audited by
an independent certified public accountant. All such financial statements shall
be received by Landlord and such prospective lender or purchaser in confidence
and shall be used only for the purposes herein set forth. Notwithstanding the
foregoing, tenant's obligation under this article are conditioned on Landlord's
providing with a subordination, non-disturbance and attornment agreement in
term and substance reasonably satisfactory to Landlord, Tenant and Landlord's
lender.
-12-
<PAGE> 13
ARTICLE XVI
GENERAL PROVISIONS
16.1 TIME IS OF THE ESSENCE. Time is of the essence in respect to the
performance by Tenant of all its monetary and non-monetary obligations
hereunder and also in respect to Tenant's exercise of any options or rights
granted to Tenant hereunder, including but not limited to options and rights to
renew or to terminate this Lease.
16.2 NOTICES. All notices by either party to the other shall be made
to the locations indicated in Article I hereof or at such other address as the
party may from time to time designate in writing to the other Party to this
Lease, by depositing such notices in the certified mail of the United States of
America, and such notice shall be deemed to have been served on the date of
such depositing in the certified mail unless otherwise provided.
16.3 ATTORNEYS' FEES.
16.4 NO PARTNERSHIP. It is understood that Landlord does not in any
way or purpose become a partner or joint venturer with Tenant in the conduct of
Tenant's business.
16.5 AUTHORITY. If Tenant is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of said entity.
16.6 INTEREST ON AMOUNTS DUE. Unless otherwise specifically provided,
all amounts owed by Tenant to Landlord pursuant to any provision of this Lease
shall bear interest from the date due until paid at the annual rate equal to
three percentage points in excess of the rate of interest announced from time
to time by the First National Bank of Chicago at Chicago, Illinois, or any
successor thereto, as its corporate base rate, changing as and when said
corporate base rate changes, unless a lesser rate shall then be the maximum
rate permissible by law with respect thereto, in which event said lesser rate
shall be charged.
16.7 PARTIAL INVALIDITY. If any term or condition of this lease or
the application thereof to any person or events shall to any extent be invalid
and unenforceable, the remainder of this Lease or the application of such term,
covenant or condition to persons or events other than those to which it is held
invalid or unenforceable, shall not be affected and each term, covenant and
condition of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
16.8 SUCCESSORS. The provisions, covenants and conditions of this
Lease shall bind and inure to the benefit of the legal representatives,
successors and assigns of each of the parties, except that no assignment or
subletting by Tenant without the written consent of Landlord shall vest any
right in the assignee or sublessee of Tenant.
16.9 ENTIRE AGREEMENT - AMENDMENT. This agreement constitutes the
entire agreement between the parties. Oral agreements in conflict with any of
the terms of this Lease shall be without force and effect, all amendments to be
in writing, executed by the parties or their respective successors in interest.
16.10 MISCELLANEOUS.
A. If the Tenant is more than one person, the obligations of
Tenant shall be joint and several obligations of such persons.
B. In construing this Lease, "Landlord" and "Tenant" shall
include the plural as well as singular, and the neuter gender shall include the
masculine and/or feminine, when the context so requires.
C. Each party agrees to execute and deliver any instruments in
writing which may be necessary and appropriate to carry out the terms,
conditions, provisions and purposes of this Lease when requested by the other
party.
D. The paragraph and sub-paragraph headings contained in this
Lease are for convenience only and shall not be relied on in construing this
Lease.
E. This Lease shall be construed and enforced in accordance
with the laws of New Mexico.
F. Any rights, reserved or granted to Landlord hereunder may
be exercised by Landlord, or the manager or agent for the Project or their
respective agents, employees, contractors or designees.
LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH
RESPECT TO THE PREMISES.
This Lease consisting of ___ pages, including the page on which
these signatures appear, and Exhibit(s) ____ attached hereto, entered into this
__ day of ____________, 19__.
-13-
<PAGE> 14
LANDLORD:
By: ?
-----------------------------
Its: Member
--------------------------
TENANT:
By: ?
-----------------------------
Its: Chief Financial Officer
--------------------------
By:
-----------------------------
Its:
---------------------------
By:
-----------------------------
Its:
---------------------------
-14-
<PAGE> 15
INDEX
ARTICLE I - FUNDAMENTAL LEASE PROVISIONS.................................... 1
ARTICLE II - PREMISES....................................................... 1
2.1 DESCRIPTION..................................................... 1
2.2 CONDITION OF PREMISES........................................... 1
2.3 DEFINITIONS..................................................... 2
ARTICLE III - TERM.......................................................... 2
3.1 BASE TERM....................................................... 2
3.2 LEASE YEAR...................................................... 2
3.3 OPTION FOR EXTENSION OF LEASE................................... 2
3.4 POSSESSION...................................................... 2
ARTICLE IV - RENTS.......................................................... 2
4.1 BASE RENT....................................................... 2
4.2 ADDITIONAL RENT................................................. 2
4.3 UTILITIES....................................................... 3
4.4 SECURITY DEPOSIT................................................ 3
4.5 CHARGE ON LATE PAYMENT.......................................... 3
4.6 HOLDING OVER.................................................... 3
ARTICLE V - USE OF PREMISES................................................. 3
5.1 TENANT USE...................................................... 3
5.2 SIGNS........................................................... 3
5.3 FIRE EXTINGUISHERS.............................................. 3
5.4 QUIET ENJOYMENT................................................. 3
5.5 RULES AND REGULATIONS........................................... 4
5.6 SURRENDER OF PREMISES........................................... 4
ARTICLE VI - CONSTRUCTION, MAINTENANCE AND REPAIR........................... 4
6.1 ALTERATIONS AND ADDITIONS....................................... 4
6.2 TENANT'S DUTY TO REPAIR......................................... 4
6.3 LANDLORD'S DUTY TO REPAIR....................................... 4
6.4 ROOF............................................................ 5
6.5 TRADE FIXTURES.................................................. 5
6.6 NON TRADE FIXTURES.............................................. 5
ARTICLE VII - LANDLORD'S RIGHTS AND RESPONSIBILITIES AS TO THE OFFICE
BUILDING AND PREMISES...................................................... 5
7.1 CONTROL OF COMMON AREAS......................................... 5
7.2 SERVICES PROVIDED BY LANDLORD................................... 5
7.3 RIGHTS RESERVED TO LANDLORD..................................... 5
7.4 LANDLORD'S RIGHT OF ENTRY....................................... 6
7.5 SECURITY MEASURES............................................... 6
8.1 INDEMNITY OF LANDLORD........................................... 6
-15-
<PAGE> 16
8.2 NOTICE OF CLAIM OR SUIT......................................... 6
8.3 TENANT'S INSURANCE.............................................. 6
8.4 TENANT'S INSURANCE POLICIES..................................... 7
8.5 FAILURE TO PRODUCE INSURANCE.................................... 7
8.6 INCREASE IN FIRE INSURANCE PREMIUM.............................. 7
8.7 PROPERTY OF TENANT.............................................. 7
8.8 WAIVER OF SUBROGATION........................................... 7
ARTICLE IX - DESTRUCTION OR DAMAGED PREMISES................................ 7
9.1 PARTIAL DESTRUCTION............................................. 7
9.2 TOTAL OR EXTENSIVE DAMAGE....................................... 7
9.3 NO COMPENSATION TO TENANT....................................... 8
ARTICLE X - EMINENT DOMAIN.................................................. 8
10.1 DEFINITIONS..................................................... 8
10.2 TOTAL OR SUBSTANTIAL TAKING..................................... 8
10.3 PARTIAL TAKING.................................................. 8
10.4 NOTICE OF TENANT................................................ 8
10.5 NO COMPENSATION TO TENANT....................................... 8
ARTICLE XI - COMPLIANCE WITH HAZARDOUS MATERIALS LAW........................ 8
11.1 HAZARDOUS MATERIALS............................................. 8
ARTICLE XII - TRANSFERS OF INTEREST......................................... 9
12.1 RESTRICTION OF TRANSFER......................................... 9
12.2 FORM OF TRANSFER................................................ 9
12.3 RENT UPON TRANSFER.............................................. 9
12.4 TRANSFER OF STOCK INTEREST...................................... 9
12.5 BANKRUPTCY...................................................... 9
12.6 SALE OF PREMISES BY LANDLORD.................................... 9
ARTICLE XIII - DEFAULTS BY TENANT........................................... 9
13.1 LANDLORD'S ELECTION UPON DEFAULT................................ 9
13.2 ELECTION TO REENTER............................................. 9
13.3 ELECTION TO TERMINATE........................................... 10
13.4 USE OF TENANT'S PROPERTY........................................ 10
13.5 NONMONETARY DEFAULT PERIOD FOR REMEDY........................... 10
13.6 SUPPLEMENTAL REMEDIES........................................... 10
13.7 NON-WAIVER BY LANDLORD.......................................... 10
13.8 RELETTING THE PREMISES.......................................... 10
13.9 LANDLORD'S OPTION TO REMEDY..................................... 10
13.10 OPTIONAL ARBITRATION........................................... 10
13.11 ALLOCATION OF PAYMENTS......................................... 11
13.12 DEFAULT UNDER OTHER LEASES..................................... 11
ARTICLE XIV - SECURITY FOR TENANT'S PERFORMANCE............................. 11
ARTICLE XV - SUBORDINATION & ESTOPPEL....................................... 11
-16-
<PAGE> 17
15.1 SUBORDINATION.................................................... 11
ARTICLE XII - GENERAL PROVISIONS............................................. 12
16.1 TIME IS OF THE ESSENCE........................................... 12
16.2 NOTICES.......................................................... 12
16.3 ATTORNEY'S FEES.................................................. 12
16.4 NO PARTNERSHIP................................................... 12
16.5 AUTHORITY........................................................ 12
16.6 INTEREST ON AMOUNTS DUE.......................................... 12
16.7 PARTIAL INVALIDITY............................................... 12
16.8 SUCCESSORS....................................................... 12
16.9 ENTIRE AGREEMENT - AMENDMENT..................................... 12
16.10 MISCELLANEOUS................................................... 12
-17-
<PAGE> 18
EXHIBIT A
[MAIN FACILITY WALL BUILDOUT PLAN]
6. OBSTRUCTION OF PUBLIC AREAS: Tenant shall not, whether temporarily,
accidentally or otherwise, allow anything to remain in, place or store anything,
in, or obstruct in any way, any sidewalk, court, passageway, entrance, exit,
loading or shipping area. Tenant shall lend its full cooperation to keep such
areas free from all obstruction and in a clean and sightly condition, and
1
<PAGE> 19
EXHIBIT A
[MAIN FACILITY FURNITURE CONFIGURATION GRAPHIC]
<PAGE> 20
EXHIBIT B
RULES AND REGULATIONS
1. Building Directory: The directory of the Building shall display
Tenant's name which shall fit on one line of the directory and will be provided
at the expense of Landlord. Any additional names other than Tenant's name
requested by Tenant to be displayed in the directory must be approved by
Landlord in writing, and, if so approved, will be provided at the sole expense
of the Tenant.
2. Signs: Tenant shall not paint, display, inscribe, maintain
or affix any sign, placard, picture, advertisement, name, notice, lettering or
direction on any part of the outside or inside of the Building, or any part of
the outside of the Premises, or on any part of the inside of the Premises which
can be seen from the outside of the Premises, without the, prior, written
consent of Landlord, and then only such name or names or content and in such
color, size, style, character, material and manner of affixing as may be first
approved by Landlord in writing. Landlord reserves the right to remove at
Tenant's expense all sign matter not consented to or approved by Landlord.
3. Compliance with Laws: Tenant shall comply with all applicable
laws, ordinances, governmental orders and regulations and applicable orders and
directions from any public office or body having jurisdiction, with respect to
the Premises or the Building and the use or occupancy thereof. Tenant shall not
make or permit any use of the Premises or the Building which directly or
indirectly is forbidden by law, ordinance, governmental regulation or order or
direction of applicable public authority, or which may be dangerous to person
or property.
4. Hazardous Materials: Tenant shall not use or permit to be
brought into the Premise or the Building any flammable oils or fluids, or any
explosive or other articles deemed hazardous to persons or property, or do or
permit to be done anything in or upon the Premises, or bring or keep anything
herein, which shall not comply with all rules, orders, regulations or
requirements of any organization, bureau, department, or body having
jurisdiction with respect thereto (and Tenant shall at all times comply with
all such rules, orders, regulations or requirements), or which shall invalidate
or increase the rate of insurance on the Building, its appurtenances, contents
or operation.
5. Defacing and Altering Premises and Overloading: Tenant shall not
place anything or allow anything to be place in the Premises near the glass of
any door, partition, wall or window which may be unsightly from outside the
Premises, and Tenant shall not place or permit to be placed any article of any
kind on any window ledge or on the outside of the exterior walls of the
Premises or the Building. Shades, awnings or other forms of outside window
ventilators or similar devices, shall not be placed in or about the outside
windows in the Premises. No blinds, shades, draperies or other forms of inside
window covering other than those accepted by Landlord may be installed in the
Premises. Tenant shall not deface any part of the Premises or Building.
Tenant shall not overload any floor or part thereof in the Premises in
<PAGE> 21
move all supplies, furniture and equipment as soon as received directly to the
Premises, and shall move all such items and waste that are at any time being
taken from the Premises directly to the areas designated for disposal.
All courts, passageways, entrances, exits, loading or shipping areas, and
roofs are not for the use general public and Landlord shall in all cases retain
the right to control and prevent access thereto by all persons whose presence
in the judgment of Landlord shall be prejudicial to the safety or security of
the Building or its occupants. No tenant and no employee, agent, licensee,
invitee or contractor of Tenant shall enter into areas reserved for the
exclusive use of Landlord or its agents, employees, licensees or invites.
7. Keys and Additional Locks: Tenant shall not attach or permit to
be attached locks or similar devices to any door or window, or change existing
locks or the mechanisms thereof. Upon termination of this Lease or of Tenant's
possession, Tenant shall surrender all keys to the Premises and all keys for
offices which have been furnished to Tenant or which Tenant shall have made,
and in the event of loss of any keys so furnished, Tenant shall pay Landlord
therefor.
8. Toilet Rooms: The toilet rooms, urinals, wash bowls and the other
bathroom apparatus shall not be used for any purpose other than that for which
they were constructed, and no foreign substance of any kind whatsoever
including paper towels or sanitary napkins shall be thrown therein, and the
expense of any breakage, stoppage or damage resulting from the violation of
this rule shall be borne by the Tenant who, or whose employees, agents,
licensees, invitees or contractors, shall have caused it.
9. Nuisances and Certain Other Prohibited Uses: Tenant shall not (i)
install or operate any internal combustion engine, boiler, or machinery, in or
about the Premises; (ii) sell any article, thing or service except those
ordinarily embraced within the permitted use of the premises specified in
Section 4; (iii) use the Premises for housing, lodging or sleeping purposes;
(iv) place any radio or television antennae on the roof or on or in any part of
the inside or outside of the Building other than the inside of the Premises;
(v) operate any electrical device from which may emanate electrical waves which
may interfere with or impair radio or television broadcasting or reception from
or in the Building or elsewhere; (vi) bring or permit to be in the Building any
dog (except in the company of a blind or deaf person) or other animal or bird;
(vii) make or permit any objectionable noise or odor to emanate from the
Premises; (viii) disturb, solicit or canvass any occupant of the Building.
10. Freeze Up: Tenant shall at all, times, whether or not it is
currently using the Premises, leave its heating system on at a temperature
sufficient to prevent freeze up of any water pipes in the Premises or the walls
or ceiling space near the Premises.
<PAGE> 22
EXHIBIT C
[BUILDING LOCATIONS MAP]
<PAGE> 1
EXHIBIT 10.8
DUPLICATE
[SEAL AND CERTIFICATION]
This Indenture made at Bombay on the 11th October, 1993 between the President
of India, hereinafter called "the Land Lord" (which expression shall unless the
context does not so admit include his successors in office and assigns) of the
One Part and SYNTEL SOFTWARE PVT. LTD. hereinafter referred to as "the tenant"
(in which expression are included, unless such inclusion is inconsistent with
the context of meaning thereof its/his/their heirs, executors, administrators
and assigns/its executors and assigns) of the Other Part.
WHEREAS by an Indenture of Lease, made at Bombay on the Twentieth day of
January, 1975 between the Maharashtra Industrial Development Corporation,
therein and hereinafter referred to as the Lessor of the One Part and the
Landlord of the Other Part the Lessor in consideration of the premises and of
the rent therein referred to and of the covenants and agreements on the part
of the Landlord, the Lessor did demise unto the Landlord all that piece of land
known as Plot No. F-1 in the Marol Industrial Area within the village limits of
Vyarawali, Parjapur, Kondivitta and Marol Taluka Andheri, District Bombay
Suburban Sub-Registration No. Sub District and
contd.
<PAGE> 2
[SEAL AND CERTIFICATION]
:: 2 ::
and Registration District Bombay City and Bombay Suburban containing by
admeasurement 375013 square metres or thereabout and more particularly described
in the First Schedule thereunder written for use as Santacruz Electronics Export
Processing Zone, Government of India.
AND WHEREAS the Government of India have constituted a Santacruz Electronics
Export Processing Zone, hereinafter called the SEEPZ in the aforementioned
demised land for the purpose of encouraging the export industries in India and
for earning foreign exchange on the export of various kinds of electronics and
gem and jewellery items from the SEEPZ in the interest of the national economy
by establishing industrial units in the said zone;
AND WHEREAS the landlord has constructed a building known as Standard Design
Factory hereinafter referred to as the said building on a portion of the land
demised to the Landlord under the aforementioned lease for the purpose of
allotting the same to the various entrepreneurs carrying on business of
manufacturing and/or processing articles, things, materials components and
instruments relating to the industries of electronics.
AND WHEREAS the tenant has approached the Landlord for demising to it him/them
a portion of the said building on ground floor, constructed and/or erected on
Plot No. F-1 in the Marol Industrial Area within the village limits of
Vyarawali, Parjapur, Kondivita and Maral Taluka Andheri District Bombay Suburban
Sub-Registration No. Sub District and Registration District Bombay City and
Bombay Suburban containing by admeasurement 375013 square metres of thereabouts
to establish manufacturing/processing establishment for the manufacture of
articles things, materials, components and instruments relating to the
electronics industries on the terms and conditions hereinafter contained and to
grant to it/him/them all facilities and variety of concessions:
Contd. ....3/-.
<PAGE> 3
[SEAL AND CERTIFICATION]
:: 3 ::
AND WHEREAS the Landlord has agreed, to let out a portion of the said building,
admeasuring about 7825 sq. ft. equivalent to 751 sq. metres or thereabout on the
First floor of the said building at the concessional rent of Rs 15,646/- per
month for a terms of five years upon the terms and conditions hereinafter
contained:
AND WHEREAS it has been agreed by and between the parties hereto that the stamp
duty and registration charges shall be borne and paid by the Landlord.
NOW THIS INDENTURE WITNESSETH AS FOLLOWS:
1. In consideration of the premises and of various facilities and a variety
of concessions made available to the Tenant and the concessional rent hereby
reserved and of the covenants and agreements on the part of the Tenant
hereinafter contained, the Landlord doth hereby demise to the Tenant
to HOLD the said premises hereunder expressely demised unto the
Tenant for the term of Five Years computed from the 1st day of Month & year of
possession paying therefor the yearly rental during the said term unto the
Landlord through Central Bank of India, SEEPZ Branch, as may be otherwise
required by the Landlord the said yearly rent of Rs. 1,87,750/- in advance
being the concessional rent by the Landlord without any deductions whatsoever:
The Tenant with intent to bind all persons into whatsoever hands the demised
premises may come doth hereby convenant with the Landlord as follows:
(a) During the said terms hereby created to pay unto the Landlord the said
rent and all other charges that may be fixed from time to time by the
Development Commissioner at the time on the days and in manner hereinbefore
appointed for payment thereof clear of all deductions,
Contd. ...4/-.
<PAGE> 4
[SEAL AND CERTIFICATION]
:: 4 ::
(a) (a) Further, during the said terms, the Landlord may revise the said rent
even during the currency of this indenture on the following grounds:
1) To meet any increase in the maintenance costs.
2) To bring parity with the rents charged in respect of the premises similar
to the demised premises.
3) Any other exigencies which may necessitate the revision of the lease rent
during the currency of this indenture.
b) To pay all existing and future taxes, rates, assessments and outgoings of
every description for the time being payable either by Landlord or tenant or by
the occupier in respect of the demised premises and anything for the time being
thereon.
c) It is hereby agreed to declared that in the event the Landlord insures and
or keeps insured the building including the demised promises the tenant shall
be liable to pay to the Landlord the amount of the premium/premiums in the
proportion to the area of the demised premises within fifteen days of receipt
of notice by the Landlord for payments of the amount of premium/premiums and
that the tenant shall pay the same without objection provided always in the
event of dispute arising between Landlord and Tenant regarding the Liability of
the Tenant to pay the said amount of insurance premium. The decision of the
Development Commissioner shall be final and binding upon the Tenant.
(d) During the said term hereby agreed to manufacture electronic products as
authorised by the Development Commissioner from time to time.
(e) To commence production within two months from the date of taking possession
of premises.
(f) Not to manufacture/process any article things, materials, components and
instruments which do not in anyway relate to the Industry of Electronics.
Contd. ...5/-.
<PAGE> 5
[SEAL AND CERTIFICATION]
:: 5 ::
(g) To export the entire production (whether manufactured/processed) including
seconds to foreign countries in accordance with the provisions of the law
subject to such concessions and facilities as may be given by the Government to
the Tenant in the matter of the Customs duty, routing of applications or import
licenses, etc. and such other concessions as may be notified hereafter from time
to time. The disposal of the Wastes and Scrap material will be made with in the
prior permission and as per the instructions of the Development Commissioner.
(h) To submit from time to time to the Development Commissioner, Santacruz
Electronics Export Processing Zone (hereinafter referred to as the Development
Commissioner) plans and the scheme of the particular industry to be established
together with such other details as may be required.
(i) To furnish a legal undertaking as may be prescribed for the fulfillment of
export obligations set out in their application for setting up industries in
the Zone.
(j) To make exports of items of electronics to the levels indicated in the
phased manufacturing programme projected in the application submitted to the
SEEPZ Board for setting up an industry in the Zone and also to maintain the
value added approved by the Board.
(k) To arrange forwarding/clearance of manufactured/processed goods for export
or import of raw materials, spares and such another materials as are required
for manufacture/processing by the Development Commissioner or agencies
authorised by the Development Commissioner.
(i) Not to allow any of the products hereinafter for brevity's sake referred
to as "Electronics Products) manufactured/processed in SEEPZ produced by the
Tenant to enter or pass into and/or be sold in any market in India or anywhere
in India provided always that the Development Commissioner may permit the
Tenant to sell and/or dispose of the Electronics.
Contd. ...6/-.
<PAGE> 6
[SEAL AND CERTIFICATION]
:: 6 ::
products to enter or pass into and/or be sold in any market in India or
anywhere in India.
(m) To sell or dispose of the electronics products manufactured/processed by
the Tenant in the local markets in India or as may be directed by the
Development Commissioner in the event the Development Commissioner considers
that the said products are essential or necessary for national defence or for
countering natural disaster or considered urgent and necessary for the national
economy upto payment as may be mutually agreed upon and that the Tenant shall
not be entitled to make any other claim for compensation for delivering the
products as aforesaid in any manner whatsoever.
(n) To observe and perform all the terms and conditions of the lease entered
into by the Landlord with the Maharashtra Industrial Development Corporation
with the Landlord dated the 20th day of January, 1975, which terms and
conditions of the said lease immediately aforementioned the Tenant are made
aware of before execution of these presents.
(o) To permit the Development Commissioner or his any officer duly authorised
by him at any time and without any prior notice being given to enter into and
upon the demised premises and to inspect the general state of the demised
premises and also the processing plant and machinery, etc. and the books of
account and other documents and vouchers concerning the electronic products
manufactured by the Tenant.
(p) Not to do or permit anything to be done or stored (except those required
for production of electronic products approved for manufacture in the demised
premises, which may be a nuisance, annoyance or disturbance to the owners,
occupiers or residents of other premises in the vicinity.
(q) To use the demised premises only for the purpose of manufacturing
processing or assembling electronic
Contd. ...7/-
<PAGE> 7
[SEAL AND CERTIFICATION]
:: 7 ::
products for export and other purposes incidental to the same and not to use
the said demised premises or any part thereof for any other purpose.
(r) Not to sublet, assign or part with the possession of the demised premises
or any part thereof without the prior consent in writing of the Development
Commissioner and subject to such terms and conditions as the Development
Commissioner may prescribe in granting the possession to the Tenant for the
transfer of the said demised premises or any part thereof as hereinbefore
mentioned.
(s) To intimate in writing the Development Commissioner within a fortnight of
the changes made or effected in the Corporate structure or the construction of
the Tenant.
(t) To submit the statements of accounts and such other details within such time
as may be stipulated by the Development Commissioner during the terms of these
presents giving all the necessary particulars as may be required by the
Development Commissioner.
(u) To allow the persons and vehicles entering and leaving SEEPZ to be examined
by the Staff of the Development Commissioner for the purpose of checking that
no products or any materials manufactured in the demised premises are removed
in the manner not authorized by these presents.
(v) Not to make any alternations, changes or additions in the demised premises
except with the written previous permission of the Development Commissioner and
in accordance with the directions that the Development Commissioner may
prescribe and in accordance with the plans approved by the Development
Commission and the rules, byelaws and regulations of the Bombay Municipal
Corporation or any other authority prescribed by the law.
(w) Not to cause any annoyance or hindrance to the other tenants of the
Landlord and to so conduct the activities which will imede the other tenants
of the Landlord in manufacturing or processing the electronic products AND in
the event the
Contd. ...8/-
<PAGE> 8
[SEAL AND CERTIFICATION]
:: 8 ::
Tenant experiences or finds any difficulty in conducting its/his/their business
and/or activities connected therewith smoothly and efficiently by reason of the
user of the said building or any portion thereof by the other tenants of the
Building the same shall be referred to the Development Commissioner and any
directions or orders issued by the Development Commissioner in relation thereto
shall be complied by the Tenant.
(x) To observe and perform all rules and regulations prescribed under the
Labour Legislation such as Industrial Dispute Act, Workmen's Compensation Act,
payment of Wages Act, Minimum Wages Act or any other statuttes governing the
relationship of the employees and employer's including the Factories Act and
Fatal Accidents Act.
(y) If the said rent hereby reserved shall be in arrears for the space of 30
days whether the same shall have been legally demanded or not or if within a
period of three months from the date of the commencement of the Tenancy the
entire demised premises are not utilised for the purpose for which the same has
been demised or if the Tenant ceases to manufacture items of electronics
products for a period of six continuous months for whatever cause arising,
including a strike, lock-out or any injunction the Court in any sort of
litigation, if and whenever there shall be a breach of any of the covenants and
conditions herein before set out or referred or if the tenant fails to make
exports to the level projected in the application submitted to the Government
for approval of the project or to maintain the value added approved by the
Government for the project or the Tenant becoming insolvent or is wound up or
amalgamated or merged with other body corporate or otherwise pursuant to the
Court's orders or under the provisions law then in force or under any
agreement entered into by the Tenant, the Landlord may re-enter upon any part
of the demised premises in the name of the whole and thereupon the sub-demise
hereby granted shall absolutely cease and determine and in the case, no
compensation shall be payable to the Tenant on account of any structural
Contd. ...9/-
<PAGE> 9
[SEAL AND CERTIFICATION]
:: 9 ::
Alternations or improvements made or carried out in the said premises PROVIDED
ALWAYS that the Landlord shall in addition to the right of determination of this
Tenancy and to effect re-entry as mentioned aforesaid be entitled to recover as
and by way of compensation such amount as may be considered by the Landlord as
appropriately recoverable from the Tenant in the event the Tenant were not given
or granted all those various concessions and variety of facilities.
(y-2) If the said rent hereby reserved shall be in arrears for a period of 30
days whether the same shall have been legally demanded or not. The Development
Commissioner may take steps to recover the arrears of rent as arrears of land
revenue.
(z) At the expiration or sooner determination of the said term quietly to
deliver upto the Landlord the demised premises after removing the partitions and
fittings and fixtures pertaining thereto any alterations, changes or additions
erected on the demised premises by the Tenant and such removal should
be done without in any way damaging or defacing the premises and such delivery
should be given within a period of Sixty days after the expiration or sooner
determination of the said term PROVIDED ALWAYS that in the event the Tenant
fails to deliver vacant and peaceful possession of the demised premises
as aforesaid, the said partitions and fittings and fixtures and any
alterations, changes or additions as aforesaid on the expiry of the
aforementioned period shall belong to the Landlord and the Tenant shall not be
entitled to claim any compensation or raise any dispute in respect thereof
PROVIDED ALWAYS that in the event the fixtures, etc. as aforesaid, the Landlord
shall pay to the Tenant compensation thereof as may be determined by the
Development Commissioner and the Tenant shall not be entitled to raise any
objection against such retention and/or the valuation determined by the said
Development Commissioner, as aforesaid, PROVIDED ALWAYS that
Contd. ...10/-
<PAGE> 10
[SEAL AND CERTIFICATION]
:: 10 ::
the Tenant shall continue to be liable to pay compensation for the period of
unauthorized occupation of the said premises till the date Tenant hands over
vacant and peaceful possession of the demised premises at such rate as may be
charged by the Landlord.
(a) (a) The Landlord both hereby convenant with the Tenant that the Tenant
paying the rent hereby reserved and performing the covenants hereinbefore on
the Tenant's part contained shall and may peaceable enjoy the demised premises
for the said term hereby granted without any interruption or disturbance from
or by the Landlord or any persons lawfully claiming by from or under Landlord.
(a) (b) All disputes and differences arising out of or in any way touching or
concerning these persents (except as to any matters the decision of which is
left to the sole discretion of the said DEVELOPMENT COMMISSIONER, as specially
provided for in these presents) shall be referred to the arbitration of two
arbitrators, one each to be appointed by the respective parties to these
presents. The arbitrators so appointed shall appoint an Umpire in the manner
provided in the Arbitration Act, 1940. It will be no objection that the person
appointed as Arbitrator on behalf of the Sub-Lessor is or was an employee of
the Govt. that he had to deal with the matters to which the Tenancy herein
relates and/or that in the course of his duties as such employee of the Govt.
he had expressed a view on all or any of the matters in dispute or difference.
In the event of either or both of arbitrators dying, neglecting or refusing to
act or resigning or being unable to act for any reason, the substitute(s) to be
appointed by the concerned parties shall be entitled to proceed with the
reference from the stage at which it was left by the previous
Arbitrator/Arbitrators. The cost in connection with the artibtration shall be
in the discretion of the Arbitrators who may make a suitable provision for the
same in their award. Subject to the aforesaid, the provisions of Arbitration
Act, 1940 and the Rules thereunder and
Contd. ...11/-
<PAGE> 11
[SEAL AND CERTIFICATION]
:: 11 ::
any statutory modifications thereof for the time being in force shall apply to
the arbitration proceedings under this clause.
(a) (c) If the Tenant shall have duly performed and observed the covenants and
conditions on the part of the Tenant herein before contained and shall at the
end of the said term hereby granted by desirous of receiving a new Tenancy of
the demised premises and of such desire shall give notice in writing to the
Landlord before the expiration of the term hereby granted the Landlord shall
and will at the cost and expenses in every respect of the Tenancy grant to the
Tenant a new Tenancy of the demised premises for a futher terms of five years
of payment of yearly rent as may be determined by the Landlord AND WITH
covenants, provisos and stipulations hereinbefore contained expected is
provision for renewal and such new Tenancy shall contain in lieu of this clause
a covenant that at the end of the said renewed term of five years, the Landlord
shall at the like cost and expense grant to the Tenant further renewals and
that every such renewal shall be fore such terms and subject to such covenants,
provisos and stipulations.
The cost of an in connection with arbitration shall be in the discretion of the
Arbitrator who may make a suitable provision for the same in his award.
Subject as aforesaid, the Arbitration Act, 1940, shall apply to the arbitration
proceedings under this clause.
FIRST SCHEDULE
(Description of Land)
All that piece of parcel of land known as Plot No. F-1, in the Marol Industrial
Area within the village limits of Parajapur, Kondivita, Marol and Vyaravali,
Taluka Andheri and now in the Registration Sub-District and District of Bombay
Suburban, containing by a measurement 3,75,013 sq. mtrs. or thereabouts, that
is to say:
Contd. ...12/-
<PAGE> 12
[SEAL AND CERTIFICATION]
:: 12 ::
On or towards the North by Road and Aarey Milk Colony Land.
On or towards the South by Road
On or towards the East Pipe Line and
Aarey Milk Colony land and on or towards the
West by Road.
SIGNED, SEALED AND DELIVERED
BY SHRI S. S. Yadwadkar
Development Commissioner,
Santacruz Electronics Export Processing Zone,
On behalf of President of India in the presence of:
1. [sig]
-----------------------
[sig]
-----------------------
2. [sig]
-----------------------
[sig]
-----------------------
SIGNED, SEALED AND DELIVERED
by the abovenamed Licensee
in the presence of:
1. Signature 2. Signature
------------------------- --------------------
Name Name
------------------------- --------------------
Address Address:
------------------------- --------------------
The common Seal of the abovenamed Licensee was, pursuant to a resolution of its
Board of Directors passed in that behalf of the day of 19
affixed hereto in the presence of:
********
<PAGE> 13
DUPLICATE
Receipt No. 55063 Date 19-1-93
No 41751921908615
General Stamp
Bombay 25-1-93
CERTIFIED under Section 32, clause (2)
of the Bombay Stamp Act. 1935 that
this instrument is exempt from stamp
duty.
[SEAL]
COLLECTION
This Indenture made at Bombay on the 18th January, 1993, between the President
of India, hereinafter called "the Land Lord" (which expression shall unless the
Context does not so admit include his successors in office and assigns) of the
One Part and SYNTEL SOFTWARE PRIVATE LIMITED hereinafter referred to as "the
tenant" (in which expression are included, unless such inclusion is
inconsistent with the context of meaning thereof its/his/their heirs,
executors, administrators and assigns/its executors and assigns) of the Other
Part.
WHEREAS by an Indenture of Lease made at Bombay on the Twentieth day of
January, 1975 between the Maharashtra Industrial Development Corporation,
therein and hereinafter referred to as the Lessor of the One Part and the
Landlord of the Other Part the Lessor in consideration of the premises and of
the rent therein referred to and of the covenants and agreements on the part
of the Landlord, the Lessor did demise unto the Landlord all that piece of
land known as Plot No. F-1 in the Marol Industrial Area within the village
limits of Vyarawali, Parjapur, Kondivitta and Marol Taluka Andheri, District
Bombay Suburban Sub-Registration No. Sub District and
contd.
<PAGE> 14
[SEAL]
:: 2 ::
and Registration District Bombay City and Bombay Suburban containing by
admeasurement 375013 square metres or thereabout and more particularly
described in the First Schedule thereunder written for use as Santacruz
Electronics Export Processing Zone, Government of India.
AND WHEREAS the Government of India have constituted a Santacruz Electronics
Export Processing Zone, hereinafter called the SEEPZ in the aforementioned
demised land for the purpose of encouraging the export industries in India and
for earning foreign exchange on the export of various kinds of electronics and
gem and jewellery items from the SEEPZ in the interest of the national economy
by establishing industrial units in the said zone:
AND WHEREAS the landlord has constructed a building known as Standard Design
Factory hereinafter referred to as the said building on a portion of the land
demised to the Landlord under the aforementioned lease for the purpose of
allotting the same to the various entrepreneurs carrying on business of
manufacturing and/or processing articles, things, materials components and
instruments relating to the industries of electronics.
AND WHEREAS the tenant has approached the Landlord for demising to it him/them
a portion of the said building on ground floor, constructed and/or erected on
Plot No. F-1 in the Marol Industrial Area within the village limits of
Vyarawali, Parjapur, Kondivita and Marol Taluka Andheri District Bombay
Suburban Sub-Registration No. Sub District and Registration District Bombay City
and Bombay Suburban containing by admeasurement 375013 square metres of
thereabouts to establish manufacturing/processing establishment for the
manufacture of articles things, materials, components and instruments relating
to the electronics industries on the terms and conditions hereinafter contained
and to grant to it/him/them all facilities and variety of concessions:
Contd. .....3/-.
<PAGE> 15
[SEAL]
:: 3 ::
AND WHEREAS the Landlord has agreed, to let out a portion of the said building,
admeasuring about 3443 sq. ft. equivalent to 320sq.metres or thereabout on the
2nd floor of the said building at the concessional rent of Rs 6667/- per month
for a terms of five years upon the terms and conditions hereinafter
contained:
AND WHEREAS it has been agreed by and between the parties hereto that the stamp
duty and registration charges shall be borne and paid by the Landlord.
NOW THIS INDENTURE WITNESSETH AS FOLLOWS:
1. In consideration of the premises and of various facilities and a
variety of concessions made available to the Tenant and the concessional rent
hereby reserved and of the covenants and agreements on the part of the Tenant
hereinafter contained, the Landlord doth hereby demise to the Tenant to HOLD
the said premises hereunder expressly demised unto the Tenant for the term of
Five Years computed from the 1st day of Month & year of possession paying
therefor the yearly rental during the said term unto the Landlord through
Central Bank of India. SEEPZ Branch, as may be otherwise required by the
Landlord the said yearly rent of Rs. 40,000/-in advance being the concessional
rent by the Landlord without any deductions whatsoever:
The Tenant with intent to bind all persons into whatsoever hands the demised
premises may come doth hereby covenant with the Landlord as follows:
(a) During the said terms hereby created to pay unto the Landlord the said
rent and all other charges that may be fixed from time to time by the
Development Commissioner at the time on the days and in manner hereinbefore
appointed for payment thereof clear of all deductions,
Contd. ....4/-.
<PAGE> 16
[SEAL]
:: 4 ::
(a) (a) Further, during the said terms, the Landlord may revise the said
rent even during the currency of this indenture on the following grounds:
1) To meet any increase in the maintenance costs.
2) To bring parity with the rents charged in respect of the premises
similar to the demised premises.
3) Any other exigencies which may necessitate the revision of the lease
rent during the currency of this indenture.
b) To pay all existing and future taxes, rates, assessments and outgoings
of every description for the time being payable either by Landlord or tenant or
by the occupier in respect of the demised premises and anything for the time
being thereon.
c) It is hereby agreed to declared that in the event the Landlord insures
and or keeps insured the building including the demised premises the tenant
shall be liable to pay to the Landlord the amount of the premium/premiums in
proportion to the area of the demised premises within fifteen days of receipt
of notice by the Landlord for payments of the amount of premium/premiums and
that the tenant shall pay the same without objection provided always in the
event of dispute arising between Landlord and Tenant regarding the Liability
of the Tenant to pay the said amount of insurance premium. The decision of the
Development Commissioner shall be final and binding upon the Tenant.
(d) During the said term hereby agreed to manufacture electronic products
as authorised by the Development Commissioner from time to time.
(e) To commence production within two months from the date of taking
possession of premises.
(f) Not to manufacture/process any article things, materials, components
and instruments which do not in anyway relate to the Industry of Electronics.
Contd....5/-.
<PAGE> 17
[SEAL]
:: 5 ::
(g) To export the entire production (whether manufactured/processed) including
seconds to foreign countries in accordance with the provisions of the law
subject to such concessions and facilities as may be given by the Government to
the Tenant in the matter of the Customs duty, routing of applications or import
licences, etc. and such other concessions as may be notified hereafter from
time to time. The disposal of the Wastes and Scrap material will be made with
in the prior permission and as per the instructions of the Development
Commissioner.
(h) To submit from time to time to the Development Commissioner, Santacruz
Electronics Export Processing Zone (hereinafter referred to as the Development
Commissioner) plans and the scheme of the particular industry to be established
together with such other details as may be required.
(i) To furnish a legal undertaking as may be prescribed for the
fulfillment of export obligations set out in their application for setting up
industries in the Zone.
(j) To make exports of items of electronics to the levels indicated in the
phased manufacturing programme projected in the application submitted to the
SEEPZ Board for setting up an industry in the Zone and also to maintain the
value added approved by the Board.
(k) To arrange forwarding/clearance of manufactured/processed goods for export
or import of raw materials, spares and such other materials as are required for
manufacture/processing by the Development Commissioner or agencies authorised
by the Development Commissioner.
(i) Not to allow any of the products hereinafter for brevity's sake referred
to as "Electronics Products) manufactured/processed in SEEPZ produced by the
Tenant to enter or pass into and/or be sold in any market in India or anywhere
in India provided always that the Development Commissioner may permit the
Tenant to sell and/or dispose of the Electronics
Contd. ....6/-.
<PAGE> 18
[SEAL]
:: 6 ::
products to enter or pass into and/or be sold in any market in India or
anywhere in India.
(m) To sell or dispose of the electronics products manufactured/processed by
the Tenant in the local markets in India or as may be directed by the
Development Commissioner in the event the Development Commissioner considers
that the said products are essential or necessary for national defence or for
countering natural disaster or considered urgent and necessary for the national
economy upto payment as may be mutually agreed upon and that the Tenant shall
not be entitled to make any other claim for compensation for delivering the
products as aforesaid in any manner whatsoever.
(n) To observe and perform all the terms and conditions of the lease entered
into by the Landlord with the Maharashtra Industrial Development Corporation
with the Landlord dated the 20th day of January, 1975, which terms and
conditions of the said lease immediately aforementioned the Tenant are made
aware of before execution of these presents.
(o) To permit the Development Commissioner or his any officer duly authorised
by him at any time and without any prior notice being given to enter into and
upon the demised premises and to inspect the general state of the demised
premises and also the processing plant and machinery, etc. and the books of
account and other documents and vouchers concerning the electronic products
manufactured by the Tenant.
(p) Not to do or permit anything to be done or stored (except those required
for production of electronic products approved for manufacture in the demised
premises, which may be a nuisance, annoyance or disturbance to the owners,
occupiers or residents of other premises in the vicinity.
(q) To use the demised premises only for the purpose of manufacturing
processing or assemblibng electronic
Contd.......7/-.
<PAGE> 19
[SEAL]
:: 7 ::
products for export and other purposes incidental to the same and not to use
the said demised premises or any part thereof for any other purpose.
(r) Not to sublet, assign or part with the possession of the demised premises
or any part thereof without the prior consent in writing of the Development
Commissioner and subject to such terms and conditions as the Development
Commissioner may prescribe in granting the possession to the Tenant for the
transfer of the said demised premises or any part thereof as hereinbefore
mentioned.
(s) To intimate in writing the Development Commissioner within a fortnight of
the changes made or effected in the Corporate structure or the construction of
the Tenant.
(t) To submit the statments of accounts and such other details within such
time as may be stipulated by the Development Commissioner during the terms of
these presents giving all the necessary particulars as may be required by the
Development Commissioner.
(u) To allow the persons and vehicles entering and leaving SEEPZ to be
examined by the Staff of the Development Commissioner for the purpose of
checking that no products or any materials manufactured in the demised premises
are removed in the manner not authorised by these presents.
(v) Not to make any alterations, changes or additions in the demised premises
except with the written previous permission of the Development Commissioner and
in accordance with the directions that the Development Commissioner may
prescribe plans approved by the Development Commissioner and the rules,
byelaws and regulations of the Bombay Muncipal Corporation or any other
authority prescribed by the law.
(w) Not to cause any annoyance or hindrance to the other tenants of the
Landlord and to so conduct the activities which will impede the other tenants
of the Landlord in manufacturing or processing the electronic products AND in
the event the
Contd. .......8/-.
<PAGE> 20
[SEAL]
:: 8 ::
Tenant experiences or finds any difficulty in conducting its/his/their business
and/or activities connected therewith smoothly and efficiently by reason of the
user of the said building or any portion thereof by the other tenants of the
Building the same shall be referred to the Development Commissioner and any
directions or orders issued by the Development Commissioner in relation thereto
shall be complied by the Tenant.
(x) To observe and perform all rules and regulations prescribed under the
Labour Legislation such as Industiral Dispute Act, Workmen's Compensation Act,
payment of Wages Act, Minimum Wages Act or any other statuttes governing the
relationship of the employees and employers including the Factories Act and
Fatal Accidents Act.
(y) If the said rent hereby reserved shall be in arrears for the space of 30
days whether the same shall have been legally demanded or not or if within a
period of three months from the date of the commencement of the Tenancy the
entire demised premises are not utilised for the purpose for which the same has
been demised or if the Tenant ceases to manufacture items of electronics
products for a period of six continuous months for whatever cause arising,
including a strike, lock-out or any injunction the Court in any sort of
litigation, if and whenever there shall be a breach of any of the covenants and
conditions herein before set out or referred or if the tenant fails to make
exports to the level projected in the application submitted to the Government
for approval of the project or to maintain the value added approved by the
Government for the project or the Tenant becoming insolvent or is wound up or
amalgamated or merged with other body corporate or otherwise pursuant to the
Court's orders or under the provisions law then in force or under any agreement
entered into by the Tenant, the Landlord may re-enter upon any part of the
demised premises in the name of the whole and thereupon the sub-demise hereby
granted shall absolutely cease and determine and in the case, no compensation
shall be payable to the Tenant on account of any structural
Contd.....9/-.
<PAGE> 21
[SEAL]
:: 9 ::
Alternations or improvements made or carried out in the said premises PROVIDED
ALWAYS that the Landlord shall in addition to the right of determination of
this Tenancy and to effect re-entry as mentioned aforesaid be entitled to
recover as and by way of compensation such amount as may be considered by
the Landlord as appropriately recoverable from the Tenant in the event the
Tenant were not given or granted all those various concessions and variety
of facilities.
(y-2) If the said rent hereby reserved shall be in arrears for a period of 30
days whether the same shall have been legally demanded or not, the Development
Commissioner may take steps to recover the arrears of rent as arrears of land
revenue.
(z) At the expiration or sooner determination of the said term quitely to
deliver upto the Landlord the demised premises after removing the partitions
and fittings and fixtures pertaining thereto any alternations, changes or
additions erected on the demised premises by the Tenant and such removal should
be done without in any way damaging or defacing the premises and such delivery
should be given within a period of Sixty days after the expiration or sooner
determination of the said term PROVIDED ALWAYS that in the event the Tenant
fails to deliver vacant and peaceful possession of the demised premises as
aforesaid, the said partitions and fittings and fixtures and any alterations,
changes or additions as aforesaid on the expiry of the aforementioned period
shall belong to the Landlord and the Tenant shall not be entitled to claim any
compensation or raise any dispute in respect thereof PROVIDED ALWAYS that in
the event the Landlord desires to retain the said partitions and fittings and
fixtures, etc. as aforesaid, the Landlord shall pay to the Tenant compensation
thereof as may be determined by the Development Commissioner and the Tenant
shall not be entitled to raise any objection against such retention and/or the
valuation determined by the said Development Commissioner, as aforesaid,
PROVIDED ALWAYS that
Contd. .......10/-.
<PAGE> 22
[SEAL]
:: 10 ::
the Tenant shall continue to be liable to pay compensation for the period of
unauthorised occupation of the said premises till the date Tenant hands over
vacant and peaceful possession of the demised premises at such rate as may be
charged by the Landlord.
(a) (a) The Landlofd both hereby convenant with the Tenant that the Tenant
paying the rent hereby reserved and performing the covenants hereinbefore on
the Tenant's part contained shall and may peaceable enjoy the demised premises
for the said term hereby granted without any interruption or disturbance from
or by the Landlord or any persons lawfully claiming by from or under Landlord.
(a) (b) All disputes and differences arising out of or in any way touching or
concerning these persents (except as to any matters the decision of which is
left to the sole discretion of the said DEVELOPMENT COMMISSIONER, as specially
provided for in these presents) shall be referred to the arbitration of two
arbitrators, one each to be appointed by the respective parties to these
presents. The arbitrators so appointed shall appoint an Umpire in the manner
provided in the Arbitration Act, 1940. It will be no objection that the person
appointed as Arbitrator on behalf of the Sub-Lessor is or was an employee of
the Govt. that he had to deal with the matters to which the Tenancy herein
relates and/or that in the course of his duties as such employee of the Govt.
he had expressed a view on all or any of the matters in dispute or difference.
In the event of either or both of arbitrators dying, neglecting or refusing to
act or resigning or being unable to act for any reason, the substitute(s) to be
appointed by the concerned parties shall be entitled to proceed with the
reference from the stage at which it was left by the previous
Arbitrator/Arbitrators. The cost in connection with the arbitration shall be
in the discretion of the Arbitrators who may make a suitable provision for the
same in their award. Subject to the aforesaid, the provisions of Arbitration
Act, 1940 and the Rules thereunder and
Contd. .....11/-.
<PAGE> 23
[SEAL]
:: 11 ::
any statutory modifications thereof for the time being in force shall apply to
the arbitration proceedings under this clause.
(a) (c) If the Tenant shall have duly performed and observed the covenants and
conditions on the part of the Tenant herein before contained and shall at the
end of the said term hereby granted by desirous of receiving a new Tenancy of
the demised premises and of such desire shall give notice in writting to the
Landlord before the expiration of the term hereby granted the Landlord shall
and will at the cost and expenses in every respect of the Tenancy grant to the
Tenant a new Tenancy of the demised premises for a further terms of five years
on payment of yearly rent as may be determined by the Landlord AND WITH
covenants, provisos and stipulations hereinbefore contained expected is
provision for renewal and such new Tenancy shall contain in lieu of this clause
a covenant that at the end of the said renewed term of five years, the Landlord
shall at the like cost and expense grant to the Tenant further renewals and
that every such renewal shall be for such terms and subject to such covenants,
provisos and stipulations.
The cost of an in connection with arbitration shall be in the discretion of the
Arbitrator who may make a suitable provision for the same in his award.
Subject as aforesaid, the Arbitration Act, 1940, shall apply to the arbitration
proceedings under this clause.
FIRST SCHEDULE
(Description of Land)
All that piece of parcel of land known as Plot No. F-1, in the Marol Industrial
Area within the village limits of Parajapur, Kondivita, Marol and Vyaravali,
Taluka Andheri and now in the Registration Sub-District and District of Bombay
and Bombay Suburban, containing by a measurement 3,75,013 sq. mtrs. or
thereabouts, that is to say:
Contd. .......12/-.
<PAGE> 24
[SEAL]
:: 12 ::
On or towards the North by Road and Aarey Milk Colony Land.
On or towards the South by Road
On or towards the East Pipe Line and
Aarey Milk Colony land and on or towards the
West by Road.
SIGNED, SEALED AND DELIVERED R. M. Premkumar
BY SHRI R.M. PREMKUMAR, R. M. Premkumar IAS
Development Commissioner Development Commissioner
Santacruz Electronics Export SEEPZ, Govt. of India.
Processing Zone, Ministry of Commerce,
On behalf of President of India Andheri (E), Bombay-96.
in the presence of:
1. SMT. V. ABRAHAM,
---------------------------
ESTATE MANAGER
---------------------------
V. Abraham
2. SMT. S.D. SHENDE, Smt. V. ABRAHAM
--------------------------- ESTATE MANAGER
UDC, SEEPZ SDS SEEPZ GOVT. OF INDIA
--------------------------- MINISTRY OF COMMERCE
Andheri (E), Bombay-400 096.
SIGNED, SEALED AND DELIVERED
by the abovenamed Licensee For Syntel Software P. Ltd.
- ----------------------- N Saes
Director
in the presence of:
1. Signature Ropakuman K.A. 2. Signature MI Gushnan
------------------ ---------------
Name Ropakuman K.A. Name Gushnan P.R.
------------------ ---------------
Address: B/6 Si Orndaz Address: No. 7, P.P. BHAGAT BLDG,
Achole Road, Dombivli (E).
Nallasspara (E). Thane Dist.
Thane Dist.
The common Seal of the abovenamed Licensee
was, pursuant to a resolution of its Board
of Directors passed in that behalf of the
day of 19
affixed hereto in the presence of:
********
<PAGE> 25
DUPLICATE
RECEIPT NO. C2889 DATE 2-11-92
NO. 3085/92/6701/S
General Stamp Office
Bombay, 4-11-1992
CERTIFIED under Section 32, clause (2)
of the Bombay Stamp Act, 1935 that this
instrument is exempt from stamp duty.
[SIG]
4/11
[SEAL] COLLECTOR
This Indenture made at Bombay on the 2nd Nov. '92 between the President of
India, hereinafter called "the Land Lord" (which expression shall unless the
context does not so admit include his successors in office and assigns) of the
One Part and SYNTEL SOFTWARE PRIVATE LIMITED hereinafter referred to as "the
tenant" (in which expression are included, unless such inclusion is
inconsistent with the context of meaning thereof its/his/their heirs,
executors, administrators and assigns/its executors and assigns) of the Other
Part.
WHEREAS by an Indenture of Lease made at Bombay on the Twentieth day of
January, 1975 between the Maharashtra Industrial Development Corporation,
therein and hereinafter referred to as the Lessor of the One Part and the
Landlord of the Other Part the Lessor in consideration of the premises and of
the rent therein referred to and of the covenants and agreements on the part of
the Landlord, the Lessor did demise unto the Landlord all that piece of land
known as Plot No. F-1 in the Marol Industrial Area within the village limits of
Vyarawali, Parjapur, Kondivitta and Marol Taluka Andheri, District Bombay
Suburban Sub-Registration No. Sub District and
1
<PAGE> 26
[SEAL]
:: 2 ::
and Registration District Bombay City and Bombay Suburban containing by
admeasurement 375013 square metres or thereabout and more particularly
described in the First Schedule thereunder written for use as Santacruz
Electronics Export Processing Zone, Government of India.
AND WHEREAS the Government of India have constituted a Santacruz Electronics
Export Processing Zone, hereinafter called the SEEPZ in the aforementioned
demised land for the purpose of encouraging the export industries in India and
for earning foreign exchange on the export of various kinds of electronics and
gem and jewellery items from the SEEPZ in the interest of the national economy
by establising industrial units in the said zone:
AND WHEREAS the landlord has constructed a building known as Standard Design
Factory hereinafter referred to as the said building on a portion of the land
demised to the Landlord under the aforementioned lease for the purpose of
allotting the same to the various entrepreneurs carrying on business of
manufacturing and/or processing articles, things, materials components and
instruments relating to the industries of electronics.
AND WHEREAS the tenant has approached the Landlord for demising to it him/them
a portion of the said building on ground floor, constructed and/or erected on
Plot No. F-1 in the Marol Industrial Area within the village limits of
Vyarawali, Parjapur, Kondivita and Marol Taluka Andheri District Bombay
Suburban Sub-Registration No. Sub District and Registration District Bombay
City and Bombay Suburban containing by admeasurement 375013 square metres of
thereabouts to establish manufacturing/processing establishment for the
manufacture of articles things, materials, components and instruments relating
to the electronics industries on the terms and conditions hereinafter contained
and to grant to it/him/them all facilities and variety of concessions:
Contd. ......3/-.
<PAGE> 27
[SEAL]
:: 3 ::
AND WHEREAS the Landlord has agreed, to let out a portion of the said building,
admeasuring about 3443 sq.ft. equivalent to 320sq.metres or thereabout on the
ground floor of the said building at the concessional rent of Rs 6667/- per
month for a terms of five years upon the terms and conditions hereinafter
contained:
AND WHEREAS it has been agreed by and between the parties hereto that the stamp
duty and registration charges shall be borne and paid by the Landlord.
NOW THIS INDENTURE WITNESSETH AS FOLLOWS:
1. In consideration of the premises and of various facilities and a variety of
concessions made available to the Tenant and the concessional rent hereby
reserved and of the covenants and agreements on the part of the Tenant
hereinafter contained, the Landlord doth hereby demise to the Tenant to HOLD
the said premises hereunder expressly demised unto the Tenant for the term of
Five Years computed from the 1st day of Month & year of possession paying
therefor the yearly rental during the said term unto the Landlord through
Central Bank of India, SEEPZ Branch, as may be otherwise required by the
Landlord the said yearly rent of Rs. 80,004/- in advance being the
concessional rent by the Landlord without any deductions whatsoever:
The Tenant with intent to bind all persons into whatsoever hands the demised
premises may come doth hereby convenant with the Landlord as follows:
(a) During the said terms hereby created to pay unto the Landlord the said
rent and all other charges that may be fixed from time to time by the
Development Commissioner at the time on the days and in manner hereinbefore
appointed for payment thereof clear of all deductions,
Contd. ....4/-.
<PAGE> 28
[SEAL]
:: 4 ::
(a) (a) Further, during the said terms, the Landlord may revise the said rent
even during the currency of this indenture on the following gounds:
1) To meet any increase in the maintenance costs.
2) To bring parity with the rents charged in respect of the premises similar
to the demised premises.
3) Any other exigencies which may necessitate the revision of the lease rent
during the currency of this indenture.
b) To pay all existing and future taxes, rates, assessments and outgoings of
every description for the time being payable either by Landlord or tenant or by
the occupier in respect of the demised premises and anything for the time being
thereon.
c) It is hereby agreed to declared that in the event the Landlord insures and
or keeps insured the building including the demised premises the tenant shall
be liable to pay to the Landlord the amount of the premium/premiums in
proportion to the area of the demised premises within fifteen days of receipt
of notice by the Landlord for payments of the amount of premium/premiums and
that the tenant shall pay the same without objection provided always in the
event of dispute arising between Landlord and Tenant regarding the Liability of
the Tenant to pay the said amount of insurance premium. The decision of the
Development Commissioner shall be final and binding upon the Tenant.
(d) During the said term hereby agreed to manufacture electronic products as
authorised by the Development Commissioner from time to time.
(e) To commence production within two months from the date of taking
possession of premises.
(f) Not to manufacture/process any article things, materials, components and
instruments which do not in anyway relate to the Industry of Electronics.
Contd. .....5/-.
<PAGE> 29
[SEAL]
:: 5 ::
(g) To export the entire production (whether manufactured/processed)
including seconds to foreign countries in accordance with the provisions of the
law subject to such concessions and facilities as may be given by the
Government to the Tenant in the matter of the Customs duty, routing of
applications or import licences, etc. and such other concessions as may be
notified hereafter from time to time. The disposal of the Wastes and Scrap
material will be made with in the prior permission and as per the instructions
of the Development Commissioner.
(h) To submit from time to time to the Development Commissioner, Santacruz
Electronics Export Processing Zone (hereinafter referred to as the Development
Commissioner) plans and the scheme of the particualr industry to be established
together with such other details as may be required.
(i) To furnish a legal undertaking as may be prescribed for the fulfillment
of export obligations set out in their application for setting up industries in
the Zone.
(j) To make exports of items of electronics to the levels indicated in the
phased manufacturing programme projected in the application submitted to the
SEEPZ Board for setting up an industry in the Zone and also to maintain the
value added approved by the Board.
(k) To arrange forwarding/clearance of manufactured/processed goods for
export or import of raw materials, spares and such other materials as are
required for manufacture/processing by the Development Commissioner or agencies
authorised by the Development Commissioner.
(i) Not to allow any of the products hereinafter for brevity's sake referred
to as "Electronics Products) manufactured/processed in SEEPZ produced by the
Tenant to enter or pass into and/or be sold in any market in India or anywhere
in India provided always that the Development Commissioner may permit the
Tenant to sell and/or dispose of the Electronics
Contd. ....6/-.
<PAGE> 30
[SEAL]
:: 6 ::
products to enter or pass into and/or be sold in any market in India or
anywhere in India.
(m) To sell or dispose of the electronics products manufactured/processed by
the Tenant in the local markets in India or as may be directed by the
Development Comnmissioner in the event the Development Commissioner considers
that the said products are essential or necessary for national defence or for
countering natural disaster or considered urgent and necessary for the national
economy upto payment as may be mutually agreed upon and that the Tenant shall
not be entitled to make any other claim for compensation for delivering the
products as aforesaid in any manner whatsoever.
(n) To observe and perform all the terms and conditions of the lease entered
into by the Landlord with the Maharashtra Industrial Development Corporation
with the Landlord dated the 20th day of January, 1975, which terms and
conditions of the said lease immediately aforementioned the Tenant are made
aware of before execution of these presents.
(o) To permit the Development Commissioner or his any officer duly authorised
by him at any time and without any prior notice being given to enter into and
upon the demised premises and to inspect the general state of the demised
premises and also the processing plant and machinery, etc. and the books of
account and other documents and vouchers concerning the electronic products
manufactued by the Tenant.
(p) Not to do or permit anything to be done or stored (except those required
for production of electronic products approved for manufacure in the demised
premises, which may be a nuisance, annoyance or disturbance to the owners,
occupiers or residents of other premises in the vicinity.
(q) To use the demised premises only for the purpose of manufacturing
processing or assemblibng electronic
Contd......7/-.
<PAGE> 31
[SEAL]
:: 7 ::
products for export and other purposes incidental to the same and not to use
the said demised premises or any part thereof for any other purpose.
(r) Not to sublet, assign or part with the possession of the demised
premises or any part thereof without the prior consent in writing of the
Development Commissioner and subject to such terms and conditions as the
Development Commissioner may prescribe in granting the possession to the Tenant
for the transfer of the said demised premises or any part thereof as
hereinbefore mentioned.
(s) To intimate in writing the Development Commissioner within a fortnight
of the changes made or effected in the Corporate structure or the construction
of the Tenant.
(t) To submit the statements of accounts and such other details within such
time as may be stipulated by the Development Commissioner during the terms of
these presents giving all the necessary particulars as may be required by the
Development Commissioner.
(u) To allow the persons and vehicles entering and leaving SEEPZ to be
examined by the Staff of the Development Commissioner for the purpose of
checking that no products or any materials manufactured in the demised premises
are removed in the manner not authorised by these presents.
(v) Not to make any alterations, changes or additions in the demised
premises except with the written previous permission of the Development
Commissioner and in accordance with the directions that the Development
Commissioner may prescribe and in accordance with the plans approved by the
Development Commissioner and the rules, byelaws and regulations of the Bombay
Municipal Corporation or any other authority prescribed by the law.
(w) Not to cause any annoyance or hindrance to the other tenants of the
Landlord and to so conduct the activities which will impede the other tenants
of the Landlord in manufacturing or processing the electronic products AND in
the event the
Contd. .......8/-.
<PAGE> 32
[SEAL]
:: 8 ::
Tenant experiences or finds any difficulty in conducting its/his/their business
and/or activities connected therewith smoothly and efficiently by reason of the
user of the said building or any portion thereof by the other tenants of the
Building the same shall be referred to the Development Commissioner and any
directions or orders issued by the Development Commissioner in relation thereto
shall be complied by the Tenant.
(x) To observe and perform all rules and regulations prescribed under the
Labour Legislation such as Industiral Dispute Act, Workmen's Compensation Act,
payment of Wages Act, Minimum Wages Act or any other statuttes governing the
relationship of the employees and employers including the Factories Act and
Fatal Accidents Act.
(y) If the said rent hereby reserved shall be in arrears for the space of
30 days whether the same shall have been legally demanded or not or if within a
period of three months from the date of the commencement of the Tenancy the
entire demised premises are not utilised for the purpose for which the same has
been demised or if the Tenant ceases to manufacture items of electronics
products for a period of six continuous months for whatever cause arising,
including a strike, lock-out or any injunction the Court in any sort of
litigation, if and whenever there shall be a breach of any of the covenants and
conditions herein before set out or referred or if the tenant fails to make
exports to the level projected in the application submitted to the Government
for approval of the project or to maintain the value added approved by the
Government for the project or the Tenant becoming insolvent or is wound up or
amalgamated or merged with other body corporate or otherwise pursuant to the
Court's orders or under the provisions law then in force or under any agreement
entered into by the Tenant, the Landlord may re-enter upon any part of the
demised premises in the name of the whole and thereupon the sub-demise hereby
granted shall absolutely cease and determine and in the case, no compensation
shall be payable to the Tenant on account of any structural
Contd.....9/-.
<PAGE> 33
[SEAL]
:: 9 ::
Alternations or improvements made or carried out in the said premises PROVIDED
ALWAYS that the Landlord shall in addition to the right of determination of
this Tenancy and to effect re-entry as mentioned aforesaid be entitled to
recover as and by way of compensation such amount as may be considered by the
Landlord as appropriately recoverable from the Tenant in the event the Tenant
were not given or granted all those various concessions and variety of
facilities.
(y-2) If the said rent hereby reserved shall be in arrears for a period of 30
days whether the same shall have been legally demanded or not, the Development
Commissioner may take steps to recover the arrears of rent as arrears of land
revenue.
(z) At the expiration or sooner determination of the said term quitely to
deliver upto the Landlord the demised premises after removing the partitions
and fittings and fixtures pertaining thereto any alternations, changes or
additions erected on the demised premises by the Tenant and such removal should
be done without in any way damaging or defacing the premises and such delivery
should be given within a period of Sixty days after the expiration or sooner
determination of the said term PROVIDED ALWAYS that in the event the Tenant
fails to deliver vacant and peaceful possession of the demised premises as
aforesaid, the said partitions and fittings and fixtures and any alterations,
changes or additions as aforesaid on the expiry of the aforementioned period
shall belong to the Landlord and the Tenant shall not be entitled to claim any
compensation or raise any dispute in respect thereof PROVIDED ALWAYS that in
the event the Landlord desires to retain the said partitions and fittings and
fixtures, etc. as aforesaid, the Landlord shall pay to the Tenant compensation
thereof as may be determined by the Development Commissioner and the Tenant
shall not be entitled to raise any objection against such retention and/or the
valuation determined by the said Development Commissioner, as aforesaid,
PROVIDED ALWAYS that
Contd. .....10/-.
<PAGE> 34
[SEAL]
:: 10 ::
the Tenant shall continue to be liable to pay compensation for the period of
unauthorised occupation of the said premises till the date Tenant hands over
vacant and peaceful possession of the demised premises at such rate as may be
charged by the Landlord.
(a) (a) The Landlofd both hereby covenant with the Tenant that the Tenant
paying the rent hereby reserved and performing the covenants hereinbefore on
the Tenant's part contained shall and may peaceable enjoy the demised premises
for the said term hereby granted without any interruption or disturbance from
or by the Landlord or any persons lawfully claiming by from or under Landlord.
(a) (b) All disputes and differences arising out of or in any way touching
or concerning these persents (except as to any matters the decision of which is
left to the sole discretion of the said DEVELOPMENT COMMISSIONER, as specially
provided for in these presents) shall be referred to the arbitration of two
arbitrators, one each to be appointed by the respective parties to these
presents. The arbitrators so appointed shall appoint an Umpire in the manner
provided in the Arbitration Act, 1940. It will be no objection that the person
appointed as Arbitrator on behalf of the Sub-Lessor is or was an employee of
the Govt. that he had to deal with the matters to which the Tenancy herein
relates and/or that in the course of his duties as such employee of the Govt.
he had expressed a view on all or any of the matters in dispute or difference.
In the event of either or both of arbitrators dying, neglecting or refusing to
act or resigning or being unable to act for any reason, the substitute(s)
to be appointed by the concerned parties shall be entitled to proceed with the
reference from the stage at which it was left by the previous
Arbitrator/Arbitrators. The cost in connection with the artibtration shall be
in the discretion of the Arbitrators who may make a suitable provision for the
same in their award. Subject to the aforesaid, the provisions of Arbitration
Act, 1940 and the Rules thereunder and
Contd......11/-.
<PAGE> 35
[SEAL]
:: 11 ::
any statutory modifications thereof for the time being in force shall apply to
the arbitration proceedings under this clause.
(a) (c) If the Tenant shall have duly performed and observed the covenants and
conditions on the part of the Tenant herein before contained and shall at the
end of the said term hereby granted by desirous of receiving a new Tenancy of
the demised premises and of such desire shall give notice in writing to the
Landlord before the expiration of the term hereby granted the Landlord shall
and will at the cost and expenses in every respect of the Tenancy grant to the
Tenant a new Tenancy of the demised premises for a further terms of five years
on payment of yearly rent as may be determined by the Landlord AND WITH
covenants, provisos and stipulations hereinbefore contained expected is
provision for renewal and such new Tenancy shall contain in lieu of this clause
a covenant that at the end of the said renewed term of five years, the Landlord
shall at the like cost and expense grant to the Tenant further renewals and
that every such renewal shall be for such terms and subject to such covenants,
provisos and stipulations.
The cost of an in connection with arbitration shall be in the discretion of the
Arbitrator who may make a suitable provision for the same in his award.
Subject as aforesaid, the Arbitration Act, 1940, shall apply to the arbitration
proceedings under this clause.
FIRST SCHEDULE
(Description of Land)
All that piece of parcel of land known as Plot No. F-1, in the Marol Industrial
Area within the village limits of Parajapur, Kondivita, Marol and Vyaravali,
Taluka Andheri and now in the Registration Sub District and District of Bombay
and Bombay Suburban, containing by a measurement 3,75,013 sq. mtrs. or
thereabouts, that is to say:
Contd.........12/-.
<PAGE> 36
:: 12 ::
On or towards the North by Road and Aarey Milk Colony Land.
On or towards the South by Road
On or towards the East Pipe Line and
Aarey Milk Colony land and on or towards the
West by Road.
SIGNED, SEALED AND DELIVERED /S/ R. M. Premkumar IAS
BY SHRI R. M. PREMKUMAR Development Commissioner
Development Commissioner, SEEPZ, Govt. of India
Santacruz Electronics Export Processing Zone, Ministry of Commerce,
On behalf of President of India in the Andheri (B), Bombay--96
presence of:
1. SMT. V. ABRAHAM /S/ Smt. V. ABRAHAM
--------------------------- ---------------------------
ESTATE MANAGER Smt. V. ABRAHAM
--------------------------- ESTATE MANAGER
SEEPZ GOVT. OF INDIA
MINISTRY OF COMMERCE
2. SMT S. D. SHENDE Andheri (E), Bombay-400 096
---------------------------
UDE, SEEPZ
---------------------------
SIGNED, SEALED AND DELIVERED FOR SYNTEL SOFTWARE PVT. LTD.
by the abovenamed Licensee ?
-----------------------------
- -------------- DIRECTOR/AUTHORIZED SIGNATORY
in the presence of:
1. Signature N. Barg 2. Signature
-------------------- --------------------
Name Name
-------------------- --------------------
Address: Address:
The common Seal of the abovenamed Licensee
was, pursuant to a resolution of its Board
of Directors passed in that behalf of the
day of 2nd Nov 1992
affixed hereto in the presence of:
N. Barg
- -------------------------------
<PAGE> 37
DUPLICATE
Receipt No. 0310332 Date 261093
No. 9257193
General Stamp Office 11716
Bombay, 2-12-93
CERTIFIED under Section 32, clause (2)
of the Bombay Stamp Act, 1958 that this
instrument be exempt from stamp duty.
Exempt under Section ???????
[SEAL]
This Indenture made at Bombay on the 11th October, 1993 between the President of
India, hereinafter called "the Land Lord" (which expression shall unless the
context does not so admit include his successors in office and assigns) of the
One Part and SYNTEL SOFTWARE PVT LTD.,hereinafter. referred to as "the tenant"
(in which expression are included, unless such inclusion is inconsistent with
the context of meaning thereof its/his/their heirs, executors, administrators
and assigns/its executors and assigns) of the Other Part.
WHEREAS by an Indenture of Lease made at Bombay on the Twentieth day of January,
1975 between the Maharashtra Industrial Development Corporation, therein and
hereinafter referred to as the Lessor of the One Part and the Landlord of the
Other Part the Lessor in consideration of the premises and of the rent therein
referred to and of the covenants and agreements on the part of the Landlord, the
Lessor did not demise unto the Landlord all that piece of land known as Plot No.
F-1 in the Marol Industrial Area within the village limits of Vyarawali,
Parjapur, Kondivitta and Marol Taluka Andheri, District Bombay Suburban
Sub-Registration No. Sub District and
contd.
1
<PAGE> 38
:: 2 ::
[SEAL]
and Registration District Bombay City and Bombay Suburban containing by
admeasurement 375013 square metres or thereabout and more particularly described
in the First Schedule thereunder written for use as Santacruz Electronics
Export Processing Zone, Government of India.
AND WHEREAS the Government of India have constituted a Santacruz Electronics
Export Processing Zone, hereinafter called the SEEPZ in the aforementioned
demised land for the purpose of encouraging the export industries in India and
for earning foreign exchange on the export of various kinds of electronics and
gem and jewellery items from the SEEPZ in the interest of the national economy
by establishing industrial units in the said zone:
AND WHEREAS the landlord has constructed a building known as Standard Design
Factory hereinafter referred to as the said building on a portion of the land
demised to the Landlord under the aforementioned lease for the purpose of
allotting the same to the various entrepreneurs carrying on business of
manufacturing and/or processing articles, things, materials components and
instruments relating to the industries of electronics.
AND WHEREAS the tenant has approached the Landlord for demising to it him/them
a portion of the said building on ground floor, constructed and/or erected on
Plot No. F-1 in the Marol Industrial Area within the village limits of
Vyarawali, Parjapur, Kondivita and Marol Taluka Andheri District Bombay
Suburban Sub-Registration No. Sub District and Registration District Bombay
City and Bombay Suburban containing by admeasurement 375013 square metres of
thereabouts to establish manufacturing/processing establishment for the
manufacture of articles things, materials, components and instruments relating
to the electronics industries on the terms and conditions hereinafter contained
and to grant to it/him/them all facilities and variety of concessions:
Contd. ....3/-.
<PAGE> 39
:: 3 ::
AND WHEREAS the Landlord has agreed, to let out a portion of the said building,
admeasuring about 5502 sq.ft. equivalent to 528 sq.metres or thereabout on the
Third floor of the said building at the concessional rent of Rs 11,000/- per
month for a terms of five years upon the terms and conditions hereinafter
contained:
AND WHEREAS it has been agreed by and between the parties hereto that the
stamp duty and registration charges shall be borne and paid by the Landlord.
NOW THIS INDENTURE WITNESSETH AS FOLLOWS:
1. In consideration of the premises and of various facilities and a variety of
concessions made available to the Tenant and the concessional rent hereby
reserved and of the covenants and agreements on the part of the Tenant
hereinafter contained, the Landlord doth hereby demise to the Tenant to HOLD
the said premises hereunder expressly demised unto the Tenant for the term of
Five Years computed from the 1st day of Month & year of possession paying
therefor the yearly rental during the said term unto the Landlord through
Central Bank of India, SEEPZ Branch, as may be otherwise required by the
Landlord the said yearly rent of Rs. 1,32,000/- in advance being the
concessional rent by the Landlord without any deductions whatsoever:
The Tenant with intent to bind all persons into whatsoever hands the demised
premises may come doth hereby convenant with the Landlord as follows:
(a) During the said terms hereby created to pay unto the Landlord the said
rent and all other charges that may be fixed from time to time by the
Development Commissioner at the time on the days and in manner hereinbefore
appointed for payment thereof clear of all deductions,
Contd. ....4/-.
<PAGE> 40
[SEAL]
:: 4 ::
(a) (a) Further, during the said terms, the Landlord may revise the said rent
even during the currency of this indenture on the following grounds:
1) To meet any increase in the maintenance costs.
2) To bring parity with the rents charged in respect of the premises similar
to the demised premises.
3) Any other exigencies which may necessitate the revision of the lease rent
during the currency of this indenture.
b) To pay all existing and future taxes, rates, assessments and outgoings of
every description for the time being payable either by Landlord or tenant or by
the occupier in respect of the demised premises and anything for the time being
thereon.
c) It is hereby agreed to declared that in the event the Landlord insures and
or keeps insured the building including the demised premises the tenant shall be
liable to pay to the Landlord the amount of the premium/premiums in proportion
to the area of the demised premises within fifteen days of receipt of notice by
Landlord for payments of the amount of premium/premiums and that the tenant
shall pay the same without objection provided always in the event of dispute
arising between Landlord and Tenant regarding the Liability of the Tenant to pay
the said amount of insurance premium. The decision of the Development
Commissioner shall be final and binding upon the Tenant.
(d) During the said term hereby agreed to manufacture electronic products as
authorised by the Development Commissioner from time to time.
(e) To commence production within two months from the date of taking possession
of premises.
(f) Not to manufacture/process any article things, materials, components and
instruments which do not in anyway relate to the Industry of Electronics.
Contd.......5/-.
<PAGE> 41
[SEAL]
:: 5 ::
(g) To export the entire production (whether manufactured/processed)
including seconds to foreign countries in accordance with the provisions of the
law subject to such concessions and facilities as may be given by the
Government to the Tenant in the matter of the Customs duty, routing of
applications or import licences, etc. and such other concessions as may be
notified hereafter from time to time. The disposal of the Wastes and Scrap
material will be made with in the prior permission and as per the instructions
of the Development Commissioner.
(h) To submit from time to time to the Development Commissioner,
Santacruz
Electronics Export Processing Zone (hereinafter referred to as the Development
Commissioner) plans and the scheme of the particualr industry to be established
together with such other details as may be required.
(i) To furnish a legal undertaking as may be prescribed for the fulfillment
of export obligations set out in their application for setting up industries in
the Zone.
(j) To make exports of items of electronics to the levels indicated in the
phased manufacturing programme projected in the application submitted to the
SEEPZ Board for setting up an industry in the Zone and also to maintain the
value added approved by the Board.
(k) To arrange forwarding/clearance of manufactured/processed goods for
export or import of raw materials, spares and such other materials as are
required for manufacture/processing by the Development Commissioner or
agencies authorised by the Development Commissioner.
(i) Not to allow any of the products hereinafter for brevity's sake referred
to as "Electronics Products) manufactured/processed in SEEPZ produced by the
Tenant to enter or pass into and/or be sold in any market in India or anywhere
in India provided always that the Development Commissioner may permit the
Tenant to sell and/or dispose of the Electronics
Contd. ....6/-.
<PAGE> 42
[SEAL]
:: 6 ::
products to enter or pass into and/or be sold in any market in India or
anywhere in India.
(m) To sell or dispose of the electronics products manufactured/processed
by the Tenant in the local markets in India or as may be directed by the
Development Commissioner in the event the Development Commissioner considers
that the said products are essential or necessary for national defence or for
countering natural disaster or considered urgent and necessary for the national
economy upto payment as may be mutually agreed upon and that the Tenant shall
not be entitled to make any other claim for compensation for delivering the
products as aforesaid in any manner whatsoever.
(n) To observe and perform all the terms and conditions of the lease entered
into by the Landlord with the Maharashtra Industrial Development Corporation
with the Landlord dated the 20th day of January, 1975, which terms and
conditions of the said lease immediately aforementioned the Tenant are made
aware of before execution of these presents.
(o) To permit the Development Commissioner or his any officer duly authorised
by him at any time and without any prior notice being given to enter into and
upon the demised premises and to inspect the general state of the demised
premises and also the processing plant and machinery, etc. and the books of
account and other documents and vouchers concerning the electronic products
manufactued by the Tenant.
(p) Not to do or permit anything to be done or stored (except those required
for production of electronic products approved for manufacure in the demised
premises, which may be a nuisance, annoyance or disturbance to the owners,
occupiers or residents of other premises in the vicinity.
(q) To use the demised premises only for the purpose of manufacturing
processing or assemblibng electronic
Contd.......7/-.
<PAGE> 43
[SEAL]
:: 7 ::
products for export and other purposes incidental to the same and not to use
the said demised premises or any part thereof for any other purpose.
(r) Not to sublet, assign or part with the possession of the demised premises
or any part thereof without the prior consent in writing of the Development
Commissioner and subject to such terms and conditions as the Development
Commissioner may prescribe in granting the possession to the Tenant for the
transfer of the said demised premises or any part thereof as hereinbefore
mentioned.
(s) To intimate in writing the Development Commissioner within a fortnight of
the changes made or effected in the Corporate structure or the construction of
the Tenant.
(t) To submit the statments of accounts and such other details within such time
as may be stipulated by the Development Commissioner during the terms of these
presents giving all the necessary particulars as may be required by the
Development Commissioner.
(u) To allow the persons and vehicles entering and leaving SEEPZ to be
examined by the Staff of the Development Commissioner for the purpose of
checking that no products or any materials manufactured in the demised premises
are removed in the manner not authorised by these presents.
(v) Not to make any alterations, changes or additions in the demised premises
except with the written previous permission of the Development Commissioner
and in accordance with the directions that the Development Commissioner may
prescribe and in accordance with the plans approved by the Development
Commissioner and the rules, byelaws and regulations of the Bombay Muncipal
Corporation or any other authority prescribed by the law.
(w) Not to cause any annoyance or hindrance to the other tenants of the
Landlord and to so conduct the activities which will impede the other tenants
of the Landlord in manufacturing or processing the electronic products
AND in the event the
Contd. .......8/-.
<PAGE> 44
[SEAL]
:: 8 ::
Tenant experiences or finds any difficulty in conducting its/his/their business
and/or activities connected therewith smoothly and efficiently by reason of the
user of the said building or any portion thereof by the other tenants of the
Building the same shall be referred to the Development Commissioner and any
directions or orders issued by the Development Commissioner in relation thereto
shall be complied by the Tenant.
(x) To observe and perform all rules and regulations prescribed under the
Labour Legislation such as Industiral Dispute Act, Workmen's Compensation Act,
payment of Wages Act, Minimum Wages Act or any other statuttes governing the
relationship of the employees and employers including the Factories Act and
Fatal Accidents Act.
(y) If the said rent hereby reserved shall be in arrears for the space of 30
days whether the same shall have been legally demanded or not or if within a
period of three months from the date of the commencement of the Tenancy the
entire demised premises are not utilised for the purpose for which the same has
been demised or if the Tenant ceases to manufacture items of electronics
products for a period of six continuous months for whatever cause arising,
including a strike, lock-out or any injunction the Court in any sort of
litigation, if and whenever there shall be a breach of any of the covenants and
conditions herein before set out or referred or if the tenant fails to make
exports to the level projected in the application submitted to the Government
for approval of the project or to maintain the value added approved by the
Government for the project or the Tenant becoming insolvent or is wound up or
amalgamated or merged with other body corporate or otherwise pursuant to the
Court's orders or under the provisions law then in force or under any agreement
entered into by the Tenant, the Landlord may re-enter upon any part of the
demised premises in the name of the whole and thereupon the sub-demise hereby
granted shall absolutely cease and determine and in the case, no compensation
shall be payable to the Tenant on account of any structural
Contd.....9/-.
<PAGE> 45
[SEAL]
:: 9 ::
Alterations or improvements made or carried out in the said premises PROVIDED
ALWAYS that the Landlord shall in addition to the right of determination of
this Tenancy and to effect re-entry as mentioned aforesaid be entitled to
recover as and by way of compensation such amount as may be considered by the
Landlord as appropriately recoverable from the Tenant in the event the Tenant
were not given or granted all those various concessions and variety of
facilities.
(y-2) If the said rent hereby reserved shall be in arrears for a period of 30
days whether the same shall have been legally demanded or not, the Development
Commissioner may take steps to recover the arrears of rent as arrears of land
revenue.
(z) At the expiration or sooner determination of the said term quitely to
deliver upto the Landlord the demised premises after removing the partitions
and fittings and fixtures pertaining thereto any alternations, changes or
additions erected on the demised premises by the Tenant and such removal should
be done without in any way damaging or defacing the premises and such delivery
should be given within a period of Sixty days after the expiration or sooner
determination of the said term PROVIDED ALWAYS that in the event the Tenant
fails to deliver vacant and peaceful possession of the demised premises as
aforesaid, the said partitions and fittings and fixtures and any alterations,
changes or additions as aforesaid on the expiry of the aforementioned period
shall belong to the Landlord and the Tenant shall not be entitled to claim any
compensation or raise any dispute in respect thereof PROVIDED ALWAYS that in
the event the Landlord desires to retain the said partitions and fittings and
fixtures, etc. as aforesaid, the Landlord shall pay to the Tenant compensation
thereof as may be determined by the Development Commissioner and the Tenant
shall not be entitled to raise any objection against such retention
and/or the valuation determined by the said Development Commissioner, as
aforesaid, PROVIDED ALWAYS that
Contd. .....10/-.
<PAGE> 46
[SEAL]
:: 10 ::
the Tenant shall continue to be liable to pay compensation for the period of
unauthorised occupation of the said premises till the date Tenant hands over
vacant and peaceful possession of the demised premises at such rate as may be
charged by the Landlord.
(a) (a) The Landlord both hereby convenant with the Tenant that the Tenant
paying the rent hereby reserved and performing the covenants hereinbefore on
the Tenant's part contained shall and may peaceable enjoy the demised premises
for the said term hereby granted without any interruption or disturbance from
or by the Landlord or any persons lawfully claiming by from or under Landlord.
(a) (b) All disputes and differences arising out of or in any way touching or
concerning these persents (except as to any matters the decision of which is
left to the sole discretion of the said DEVELOPMENT COMMISIONER, as specially
provided for in these presents) shall be referred to the arbitration of two
arbitrators, one each to be appointed by the respective parties to these
presents. The arbitrators so appointed shall appoint an Umpire in the manner
provided in the Arbitration Act, 1940. It will be no objection that the person
appointed as Arbitrator on behalf of the Sub-Lessor is or was an employee of
the Govt. that he had to deal with the matters to which the Tenancy herein
relates and/or that in the course of his duties as such employee of the Govt.
he had expressed a view on all or any of the matters in dispute or difference.
In the event of either or both of arbitrators dying, neglecting or refusing to
act or resigning or being unable to act for any reason, the substitute(s) to be
appointed by the concerned parties shall be entitled to proceed with the
reference from the stage at which it was left by the previous
Arbitrator/Arbitrators. The cost in connection with the artibtration shall be
in the discretion of the Arbitrators who may make a suitable provision for the
same in their award. Subject to the aforesaid, the provisions of Arbitration
Act, 1940 and the Rules thereunder and
Contd. .......11/-.
<PAGE> 47
[SEAL]
:: 11 ::
any statutory modifications thereof for the time being in force shall apply
to the arbitration proceedings under this clause.
(a) (c) If the Tenant shall have duly performed and observed the covenants
and conditions on the part of the Tenant herein before contained and shall at
the end of the said term hereby granted by desirous of receiving a new Tenancy
of the demised premises and of such desire shall give notice in writting to the
Landlord before the expiration of the term hereby granted the Landlord shall and
will at the cost and expenses in every respect of the Tenancy grant to the
Tenant a new Tenancy of the demised premises for a further terms of five
years on payment of yearly rent as may be determined by the Landlord AND WITH
covenants, provisos and stipulations hereinbefore contained expected
is provision for renewal and such new Tenancy shall contain in lieu of this
clause a covenant that at the end of the said renewed term of five years, the
Landlord shall at the like cost and expense grant to the Tenant further
renewals and that every such renewal shall be for such terms and subject
to such covenants, provisos and stipulations.
The cost of an in connection with arbitration shall be in the discretion of
the Arbitrator who may make a suitable provision for the same in his award.
Subject as aforesaid, the Arbitration Act, 1940, shall apply to the
arbitration proceedings under this clause.
FIRST SCHEDULE
(Description of Land)
All that piece of parcel of land known as Plot No. F-1, in the Marol
Industrial Area within the village limits of Parajapur, Kondivita, Marol and
Vyaravali, Taluka Andheri and now in the Registration Sub-District and District
of Bombay and Bombay Suburban, containing by a measurement 3,75,013 sq. mtrs.
or thereabouts, that is to say:
Contd. .......12/-.
<PAGE> 48
:: 12 ::
On or towards the North by Road and Aarey Milk Colony Land.
On or towards the South by Road
On or towards the East Pipe Line and
Aarey Milk Colony land and on or towards the
West by Road.
SIGNED, SEALED AND DELIVERED Development Commissioner
BY SHRI S.S. SEEPZ. Govt. of India
Development Commissioner Ministry of Commerce,
Santacruz Electronics Export Processing Andheri (E) Bombay-96.
Zone,
On behalf of President of India in the presence of:
1. Smt. V. Abraham,
----------------
ESTATE MANAGER.
----------------
V. Abraham
2. Smt. S. D. Smt. V. Abraham
------------------ ESTATE MANAGER
UDC, SEEPZ SEEPZ. GOVT. OF INDIA
------------------ MINISTRY OF COMMERCE
Andheri (E), Bombay-400 096
SIGNED, SEALED AND DELIVERED.
by the abovenamed Licensee
- -------------- FOR SYNTEL SOFTWARE GVT. LTD.
in the presence of:
DIRECTOR/AUTHORISED/SIGNATORY
1. Signature 2. Signature
------------------- -----------------------
Name Name
---------------------- -----------------------
Address: Address:
-------------------- -----------------------
The common Seal of the abovenamed Licensee
was, pursuant to a resolution of its Board
of Directors passed in that behalf of the
day of 19
affixed hereto in the presence of:
<PAGE> 1
Exhibit 10.9
10Rs.
[STAMP GRAPHIC]
/s/ Syntel Software P Ltd.
/s/ M.V. Santhanam
M.V. SANTHANAM
Stamp Vendor
5, Arundale Street
Mylapore, Madras 600 004,
Licence: C4/2345/32
RENTAL AGREEMENT
THIS AGREEMENT made this the 24th day of FEBRUARY 1997 BETWEEN
[The Landlords] herein after referred to as the Landlord which
expression shall unless it be repugnant to the context or the meaning thereof
include his/her heirs, executors, administrators and assigns of the ONE PART:
M/S SYNTEL SOFTWARE PVT. LTD., a company registered under the provision
of the Companies Act, and having its Registered Office at Unit No. 69,
S..D.F. III, SEEPZ, Andheri (East), Mumbai - 400 096 hereinafter called the
Tenant which expression shall unless it be repugnant to the context or meaning
thereof include its successors and assigns OF THE OTHER PART:
WHEREAS the Landlord is the owner of the property namely Office
Premises having [an area of 32813.83 square feet in the building situated at]
No.21, Mount Road, (Anna Salai) Madras 600 035, and more fully described in the
Schedule hereunder, hereinafter referred to as "the demised premises":
AND whereas the Landlord had agreed to grant a Tenancy and the Tenant
agreed to take the demised premises for a period of 6 years (extendable by a
further term of three years) subject to the
<PAGE> 2
terms and conditions set out hereinafter and the tenancy shall be
calculated to the English Calendar month.
NOW THIS DEED WITHESSETH
1. The Landlord hereby grants unto the Tenant a tenancy in respect
of [32813.83 square feet in] the building situated at
No.21, Anna Salai, (Mount Road) Madras 600035 more fully described in
the Schedule hereto
2. The Tenancy shall be for a period of 6 years commencing from 01 May
1997
a. The Tenancy agrees to pay the MONTHLY RENT as follows-
i. At the rate of Rs [18.00] per square feet per month amounting to Rs
[5,90,648.94] per month commencing from 1st of May 1997 for the first
term of three years upto 30th April 2000.
ii. At the rate of Rs [21.60] per square feet month amounting to Rs
[7,08,778.68] per month commencing from 1st May 2000 for the second
term of three year upto 30th April 2003.
b. If the Tenant desires to continue the tenancy for a third term of 3
years then in that event, the Landlord and the Tenant shall agree upon
on the same terms and conditions and the rent to be mutually agreed,
based on prevailing market rates at the time.
3. a. The premises shall be handed over to the Tenant on or before
01 Mar 1997. to enable the tenants to commence their Interior
Decoration Work.
b. Certain modifications in the toilets including the provision of
one additional toilet shall be carried out immediately by the
Landlords with the materials required being supplied by/ cost
borne by the client and the cost of labour for the execution
being borne by the landlords as per design submitted by the
tenants Architects.
4. The monthly rents as aforesaid shall be payable on or before the 7th
day of each succeeding month to Ms Hassina Beevi.
5. The Tenant has paid to the Landlord the sum of Rs [47,25,191.10] as
interest free deposit representing EIGHT months rent by means of
Cheque No [ ] dated [2-24-97] drawn on [ ] check which is
refundable by the Landlord upon the Tenant vacating and handing over
possession of the demised premises on termination of this agreement.
6. The Tenant agrees to pay the charges for electricity actually consumed
by the Tenant on the demised premises as shall be registered in the
meter in respect of the demises premises and in the event of the Tenant
consuming over and above the limit fixed by the Tamil Nadu Electricity
Board, the Tenant shall be liable to pay the extra Security Deposit and
other charges to TNEB Madras. The Landlord shall at his/her expense
arrange to install 500 KVA. Power as agreed to and for that purpose the
Tenant shall pay to the Landlord the necessary additional Security
Deposit if any, as demanded by TNEB and such amount shall be treated as
additional interest free advance and refunded by the Landlord to the
Tenant upon the Tenant vacating the premises. The Tenant shall pay the
Water Charges as may be charged by the local authorities in respect of
water consumed by the Tenant in the demised premises. The electricity
consumption for the common area, pump and lift shall be borne by the
tenant, he being the sole occupant of the entire premises.
<PAGE> 3
7. The Landlords /agree to make clear an area of about 500 sq. ft adjacent
to the property and such space shall be used by the Tenant for the
purposes of installing their generator and/or any parking purposes.
8. The Tenant convenants with the Landlord as follows:
a. The premises shall be used for Non Residential purposes only.
b. The Tenant shall be entitled to put up and/or fix their own
partitions, false ceilings, fittings, including air conditioners,
name board, etc., in the demised premises and on the outside walls,
but shall not make any structural alterations without the written
consent of the Landlord. The Tenants are allowed/permitted to install
all computers, Communications equipment, UPS, Electrical panels and
all equipment necessary for their business. Air-conditioning and for
that purpose ducting and alteration of the windows as may be required
shall be done at the cost of the Tenant. Air Conditioner, condensers
and name boards will be fixed on the outer walls and/or on the ledges
as structurally thought fit. It is further agreed that the landlord
shall not be liable for any damages caused by fire or other accidents
to the air conditioning system and wooden partition or other
properties belonging to the tenatn kept in the demised premises.
9. The Landlord shall be responsible for the maintenance of the common
facilities including Lifts, Motors Pumps, Water supply. Comprehensive
Annual Maintenance contracts shall be periodically renewed by the
Landlord, and the tenants informed of the details. The Landlord shall
keep the premises insured against Fire and floods etc. at all times. If
the Tenants incur any expenditure in respect of these items the same may
be deducted from the rent payable to the Landlord upon production of
legitimate bills and vouchers.
10. The Landlord shall provide a dependable Security from a reputed Agency
round the clock to oversee the security of the building in general and
the common facilities. The Tenants shall have their own Internal
security in addition. The Landlords security shall have restricted
entry inside the premises.
11. The Landlord does convenant with the Tenant as follows:
a. The Landlord shall permit the Tenant to peacefully and quietly hold
and enjoy the scheduled premises without eviction or interruption or
disturbance by the Landlord or any person lawfully or otherwise
claiming by or through or under them during the currency of the lease
period.
b. The Landlord shall regularly and periodically pay or cause to be paid
all rents, rates and taxes in respect of the said property on the
basis of assessments made by the local authorities and other
outgoings of every description that may during the continuance of the
said term be or has become payable in respect of or charged upon the
scheduled premises, whether the same shall be imposed or assessed by
the Government, local authorities or otherwise. The Landlord further
states that he/she has no Income Tax arrears and there are no Revenue
recovery proceedings pending against them. In the event of any loss
or damage arising to the Tenant by the non-payment of any of
these dues the Landlord shall at all times keep the Tenant,
fully indemnified from all such loss or damage.
c. The Landlord shall keep, during the said term, at his own expenses
painted outer walls of the demised premises once in three years.
<PAGE> 4
d. The Landlord shall not during the tenure of thus agreement, do or
cause to be done anything which may inconvenience employees, cause
disruption of works, force tenants to vacate any part or portion of
the premises, or shift their equipments, adversely affecting the
Tenant's running business or causing losses of any kind whatsoever.
12. In the event of any unforeseen/natural/irresistible force by which the
said premises becomes unfit for occupation/use, the rent or rents
reserved for a proportion thereof according to the nature and extent of
the damages sustained shall be suspended until the scheduled premises
shall again be rendered fit for occupation and use.
13. The Tenant shall have the further option of terminating the tenancy
hereby granted at any time during the tenancy thereof on giving the
Landlord three months previous notice in writing. The Landlord shall be
entitled to terminate this Agreement only in the event the Tenant fails
to pay the rent hereby reserved or part thereof for a period of three
months and is given atleast one months written notice for termination of
the agreement and vacation of the premises.
14. Tenant shall not sub-let or assign the tenancy in favor of and other
person except their associate/successor/sister/assignee company, without
the written consent of the Landlord.
15. The Tenant agrees not to carry on any activity which are against
Law/Government and which are opposed to public policy.
16. The Tenant shall maintain the entire interior building at their own
cost. The Landlords shall have a right to inspect the premises upon
giving proper Notice of their intention to do so in writing to the
Tenant.
17. The tenants shall be entitled to the use the entire premises with all
facilities, amenities, use of the entire compound for the purpose of
parking of vehicles belonging to them, their employees and visitors.
The Landlord shall ensure all the time that the compound is free from
any nuisance or encroachment and that its access remains clean and
unhindered.
18. It is further agreed by and between the parties that as and when
required by the tenant to execute and complete all such documents
including execution of a proper lease deed and having the same
registered and do all such acts, things and deeds, as would be necessary
for giving effect to this agreement. All costs for such registration
including stamp duties will be borne by the tenant.
19. It is specifically agreed by the Landlords that the open terrace space
at the top of the premises shall be used by the Tenant with or without
any modification. It is also agreed that the same may be used for
Installation of any Communication equipment, sign Boards, generators,
Storage Batteries and Air Conditioners and the like and for this
purpose. The Landlord shall have right of access to the Terrace for
their maintenance staff and such authorized persons with prior
intimation given to the tenant, without causing any inconvenience to the
tenant or his staff.
20. It is clearly agreed by the Landlords that given the nature and type of
Lease, it is necessary and mandatory for all Owners/Landlords of the
building to act in unison and no disputes shall arise amidst the various
owners of the building. It is also clearly agreed to by the Landlords
that in the event of any of them failing to comply with or act
detrimental to the interests of the other owners/Landlords/Tenants, then
the matter shall be settled as per terms and conditions of this
agreement. It is also clearly understood that at the end fo 6 years and
at the time of renewal of the Lease if so desired by the Tenants, should
there be any dispute in fixing the market price, what is
<PAGE> 5
the prevailing market price for rental will be a matter that will be
decided by Arbitration the sole arbitrator of the dispute being a person
of repute to be nominated by the tenant. The parties shall fall in line
with any decisiion given by the arbitrator in this regard.
21. It is agreed that the Tenant shall pay to G R Maintenance Services the
authorized maintenance contractor of the Landlords/owner cumulatively a
sum of Rs.6500/-per month for the first year towards maintenance charges
for the Lift, Pump, plumbing, security etc. A sum of Rs 12,000/- shall
be paid from the 2nd year onwards.
22. The Landlord declares that he/she is the lawful owner of the scheduled
premises and have an unfettered right to grant tenancy of the same, and
no other person has any right, lien title or interest in the said
Premises. Should the Tenant suffer any loss monetary or otherwise, then
the Landlord undertakes to indemnify the Tenant from any loss suffered
by them in this regard.
23. The landlord shall obtain and confirm the receipt of a Completion
certificate from the Local Building Authorities, MMDA, Corporation of
Madras etc. The landlord confirms that the same will be made
available, when provided by the authorities, once the construction
of another building now in progress at the site, and forming part
of the same approval by MMDA is completed.
SCHEDULE
All that Office building of an plinth area of 1389.25 square feet in
the BASEMENT FLOOR in the multistoried building bearing Door No. 21, Mount
Road, Madras 600 035, together with reserved for car parking with the compound
of the complex, and situate within the Registration District of Madras Central
and Registration Sub District of Thousand light.
IN WITNESS WHEREOF THE Landlord and THE Tenant have sets his/her/their
hands and signatures on the day month and year first above written.
WITNESSES [LANDLORDS]
1. /S/ /s/ N. Umayal Achi
2. /S/ /s/ S.V. Alamelu Achi
/s/ V.L. Ambika
1. /S/ /s/ M. Anitha
2. /S/ /s/ Hassina Beevi
/s/ S.V. Sevagun Chetti
/s/ S.RMS. Narayanan Chettiar
/s/ V.R. Periyakaruppan Chettiar
/s/ M. Geetha
/s/ V.K. Kalavathy
/s/ N. Mahesh
/s/ S. Meenakshi
/s/ S.V. Meyyappan
/s/ N. Ramanathan
/s/ Mohamed Rasied
/s/ V.S. Shanthi
/s/ Periakaruppan Valliappan
TENANT
/s/Syntel Software Pvt. Ltd.
Managing Director
<PAGE> 1
EXHIBIT 10.10
AGREEMENT FOR SOFTWARE PROGRAMMING SERVICES
-------------------------------------------
This Agreement for software programming services (the "Agreement") is
entered into effective as of September 6, 1994 (the "Effective Date") by and
between American Home Assurance Company, a New York corporation ("AH") with
principal offices at 70 Pine Street, New York, NY 10270 and Syntel, Inc., a
Michigan corporation ("Syntel") with principal offices at 5700 Crooks Road,
Suite 301, Troy, Michigan 48098. For and in consideration of the mutual
premises and undertakings set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
all parties hereto, AH and Syntel hereby agree as follows:
1. BACKGROUND AH and its Affiliates, are the owners, licensees or
otherwise authorized users of various software systems. "Affiliate" shall mean
any company controlling, controlled by or under common control of a party
hereto. AH, on behalf of itself and its Affiliates, desires to engage Syntel
to provide programming services for these various software systems (the
"Services"). Syntel is willing to contract to provide such Services. The
parties hereto wish to reduce their agreement to writing.
2. ENGAGEMENT AH, on behalf of itself and its Affiliates, hereby
engages Syntel as the contractor to provide the Services as described herein
and Syntel hereby accepts such engagement and agrees to provide such services
pursuant to the terms and conditions set forth herein.
3. TERM This Agreement shall commence upon the Effective Date and
shall remain in full force and effect continuously thereafter until December
31, 1998 (the "Expiration Date"), subject to termination as provided herein.
Except as otherwise expressly provided herein and in the attachments hereto,
any extension of the term hereof must be in writing and mutually agreed to by
both AH and Syntel. In the event either party desires to continue this
Agreement after the Expiration Date, then, at least on hundred eighty (180)
days prior to the Expiration Date, that party shall provide the other party
with a written proposal for continuance. The receiving party shall respond in
writing to the proposal no later than thirty (30) days after receipt of the
proposal whether or not the party agrees to the terms of the proposal. In the
event the parties are unable to agree upon terms of continuance or renewal at
least ninety (90) days prior to the Expiration Date, then this Agreement shall
terminate pursuant to its own terms, unless otherwise agreed to in writing by
both parties.
4. DUTIES OF AH
------------
4.01 AH shall assign on of its individual employees (the "AH
Engagement Manager") as AH's primary point of contact with Syntel who will be
responsible for assuring that AH meets its obligations under this Agreement and
who will have the authority to manage the day to day operations and to grant
consents hereunder, but no power to amend this Agreement.
- -------------
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 2
4.02 AH shall be responsible for its own equipment and the equipment
located at the mainframe complex located at 2 Peachtree Hill Road, Livingston,
New Jersey (the "AH Data Center"). Syntel shall have no responsibility for any
equipment located in the AH Data Center or any other AH facility. AH agrees *
to provide and maintain back-up files of its data in accordance with the
standards for the facilities of AH and its Affiliates.
4.03 On every April 1st and October 1st, during the term of this
Agreement, AH shall provide to Syntel, a good faith reasonable projection of
Personnel Resource Levels defined in terms of Man Years, as hereinafter defined
("Projection") of the Services to be performed for the following periods: each
October Projection shall encompass the period from the following January 1,
through June 30, and each April Projection shall encompass the period from the
following July 1, through December 31. Services required by AH shall not
exceed the Projection by more than 20% without the written consent of Syntel,
provided however that Syntel may in its sole discretion offer AH different or
additional terms to provide the additional services which exceed the Projection
by more than 20%, and if such different or additional terms are not acceptable
to AH, the additional services do not have to be performed by Syntel. Approval
by AH of such different or additional terms must be in writing.
5. DUTIES OF SYNTEL
----------------
5.01 Syntel will assign an individual (the "Syntel Engagement
Manager") who will serve as Syntel's primary point of contact with AH and who
will be responsible for assuring that Syntel meets its obligations under this
Agreement and who will have the authority to manage the day to day operations
but no power to amend this Agreement. AH reserves the right, for any reason,
to require Syntel to change the Syntel Engagement Manager, or any other
personnel on its account. Syntel agrees that, except with the prior written
consent of AH, Syntel shall not replace the Syntel Engagement Manager for
reasons other than death, disability, failure to perform in the opinion of AH,
request by AH, family considerations, promotion to regional or national
management responsibilities, or resignation or termination from employment by
Syntel.
5.02 Syntel agrees that all Services provided hereunder, will be done
at locations which are identified in writing to AH and which must be acceptable
to AH and Syntel (collectively the "Syntel Service Center"). Syntel agrees
that it will not relocate the Syntel Service Center, nor establish a satellite
facility, for providing Services hereunder, without first obtaining the written
consent of AH, which consent shall not be unreasonably withheld. AH and Syntel
agree that initially the Services will be performed from a Syntel facility in
India and a Syntel facility in North Carolina.
5.03 Syntel will adhere to all material AH practices and standards
identified to them and further agrees to use its best efforts to adhere to all
practices and standards concerning access to the mainframes located in the AH
Data Center as outlined in the
- -------------
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 3
American International Group Data Center, Inc. Manual, as amended from time to
time, provided however, Syntel shall be responsible for only those changes to
practices and standards for which it receives prior notice sufficient for it to
act upon. A copy of the manual which is in effect will be available at all
times for Syntel to access on the AH mainframe computer under TSO under data
set AIGDC. Prod. Stands.
5.04 Syntel shall be solely responsible for establishing a connection
to the AH Data Center including without limitation all telecommunications
equipment, all telephone and other telecommunications lines and all expenses
associated with transmission of data from Syntel's locations to the AH Data
Center or other AH facilities.
5.05 Prior to * , Syntel, at the Syntel Service Center * will
install * Both of these systems may be a non-customized, off the shelf
version of current software, acceptable to AH, such acceptance not to be
unreasonably withheld. AH shall have complete access to these systems or the
output of these systems as AH deems necessary.
5.06 Syntel shall be responsible * for developing a disaster
recovery plan, acceptable to AH addressing, among other matters, the
telecommunication connection between the Syntel Service Center and the AH Data
Center. Syntel will provide for and maintain backup files of the data and
programs at its facilities.
5.07 *
5.08 Syntel agrees to accept assignment of leases for certain computer
hardware and the licenses for software that are currently installed on them
which (i) have been utilized by AH or an Affiliate, (ii) AH shall identify
reasonably promptly after the Effective Date and (iii) are reasonably
acceptable to Syntel and required by Syntel to provide the Services. AH shall
take all necessary action to transfer to Syntel all rights to the software that
resides in, or is necessary for the operation of, the computer hardware being
transferred to Syntel. * All such computer hardware is "as is" without
warranty of any kind. If prior to the Expiration Date AH terminates this
Agreement, AH shall accept reassignment from Syntel of any remaining leases and
licenses of computer hardware and software provided hereunder by AH.
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 4
6. PAYMENT
6.01. In consideration of the Services to be provided by Syntel, AH
agrees that it will provide Syntel with sufficient requests for Services to
meet the following project Guaranteed Personnel Resource Levels or AH will pay
Syntel * as indicated in the table below *
*
All Services required by AH in November, 1994 and December, 1994 will
be based * and will be paid on November 15, 1994 for November 1994 and
December 15, 1994 for December 1994 based on * provided by AH in *
by October 1, 1994 on the amount of Services to be required. If the actual
charges are more or less than the payments made, such adjustment will be made
to the charges are more or less than the payments made, such adjustment will be
made to the February 15th payment required hereunder. Any Services required by
AH during the term of this Agreement which are in excess of the Guaranteed
Personnel Resource Level will be provided by Syntel at the rate of * ,
subject to the provision of the last sentence
of Section 4.03.
6.02 AH agrees to reimburse Syntel at its cost for *
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 5
*
6.03 As set forth in Section 4.03, AH shall provide a * to Syntel
every April 1st and October 1st during the term of this Agreement. *
Beginning in 1995 and continuing in each subsequent year on April 10,
July 10, October 10 and January 10, Syntel will provide a detailed summary of *
6.04 AH shall reimburse Syntel the amount * Invoices are subject to
audit by AH. All other out of pocket expenses are to be paid by Syntel.
6.05 Computer charges for use of the * at * will be paid for by *
6.06 *
6.07 All amounts payable hereunder are payable in legal tender of the
United States of America. Acceptance by * of any payment in an amount
less than the amount then due hereunder shall be deemed an acceptance on
account only, and the
page 5
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 6
failure to pay the entire amount then due shall be and continue to be a
default. *
6.08 Notwithstanding any provision of this Agreement to the contrary,
it is the intent of AH and Syntel hereof that * shall never be entitled to
receive, collect or apply, as interest on principal of the indebtedness due
hereunder, any amount in excess of the maximum rate of interest permitted to be
charged by applicable law.
7. PROJECT MANAGEMENT
------------------
7.01 Syntel agrees to perform the Services as set forth in Attachment
A as may be amended by agreement of AH and Syntel.
8. CONFIDENTIALITY AND OWNERSHIP OF WORK PRODUCT
---------------------------------------------
8.01 AH and Syntel acknowledge to each other that they will be
disclosing to each other valuable and confidential information including but
not limited to data processing techniques, software programs, business affairs,
methods of operation and access codes, financial information (collectively
"Confidential Information") which contain proprietary information and trade
secrets of the disclosing party. Accordingly, each party hereto agrees that it
will only use the Confidential Information in furtherance of this Agreement and
will maintain the complete confidentiality of the Confidential Information and
prevent its unauthorized disclosure to any third party, provided such
information may be disclosed to Affiliates, agents, advisors and third party
consultants so long as such information remains subject to the terms of this
provision. Confidential Information shall not include: (i) any such
information that has been released to the public by a party hereto, its
Affiliates or any third party other than through a breach of this Agreement;
(ii) any information already possessed by the receiving party; (iii) any
information received from a third party without an obligation of
confidentiality; and (iv) any information independently developed. All
tangible forms of Confidential Information,including but not limited to
diskettes, tapes or written material delivered to Syntel by AH shall be and
remain the property of AH. If either party receives a subpoena or other legal
notice requiring disclosure of Confidential Information of the other party, it
will promptly notify the other party and will take reasonable steps to try to
retain confidential treatment. Any resulting disclosure shall not be a breach
hereof. Notwithstanding anything contained herein to the contrary, under no
circumstances shall AH disclose any of Syntel's financial or related
information which AH obtains through the financial reviews of Syntel, except as
compelled by law and then only after giving prior notice to Syntel. Upon the
termination of this Agreement for any reason, with respect to any AH software,
data, information or materials ("AH Data"), on request by AH, or on such
earlier date that the same shall be no longer required by Syntel in order to
render the Services, all AH Data in the custody of Syntel and permitted
subcontractors will be returned to AH or,if AH so elects, destroyed by Syntel.
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 7
8.02 All intellectual property rights including without limitation,
software program code, logic diagrams, flow charts, procedural diagrams, maps
and documentation related to all the foregoing developed hereunder by Syntel
(collectively, "Work Product") shall be the sole and exclusive property of AH,
who shall own any rights based upon trade secret law, copyrights and/or patents
on those materials. To the extent that any Work Product, under applicable law
may not be considered works made for hire, Syntel (i) hereby irrevocably
assigns and transfers to AH the ownership of all rights, title and interests in
such Work Product (including copyrights, whether published or unpublished and
patents and all other intellectual property rights thereto); (ii) waives any
rights or claims to such right or claims to moral rights; and (iii) will
execute * all documents which AH may require to secure or confirm AH's
rights, titles and interests hereunder. Syntel shall have all personnel that
provide Services hereunder execute a noncompete nondisclosure agreement
reasonably acceptable to AH that will among other things, require such
personnel to agree not to claim any rights in AH's intellectual property. Upon
termination of this Agreement for any reason, any Work Product will be
delivered to AH with Syntel retaining no copies of Work Product.
8.03 All design tools, design techniques, computer programming
techniques and know how, relating to information systems, developed by Syntel
as a result of this engagement shall be the sole and exclusive property of
Syntel, who shall own any rights based upon trade secret law, copyrights and/or
patents on those materials. To the extent necessary or required by law or
Syntel, AH (i) hereby assigns and transfers to Syntel the ownership of all
rights, title and interests in such works and material (including copyrights,
whether published or unpublished and patents thereto); (ii) waives any rights
or claims to such right or claims to moral rights; and (iii) will execute *
all documents which Syntel may require to secure or confirm Syntel's rights,
titles and interests hereunder. Syntel hereby irrevocably grants AH, in
perpetuity, a non assignable license for its own or its Affiliates use of the
above referenced property of Syntel.
9. REPRESENTATIONS, COVENANTS AND WARRANTIES OF SYNTEL
Syntel represents, covenants and warrants that:
9.01 It will use its best efforts so that all Services provided
hereunder will be performed in a workmanlike manner by competent staff,
appropriately experienced to do the tasks assigned to them. Syntel's
obligation under this warranty shall be to manage and direct the persons
providing Services in a proper and workmanlike manner. Syntel makes no
representation or warranty regarding whether the source code it develops is
error free.
9.02 Any employees or any subcontractors it assigns to perform
Services hereunder will be qualified individuals with suitable training,
experience and skill to perform the duties they are assigned.
9.03 It will perform its responsibilities under this Agreement in a
manner that does not knowingly infringe, or constitute an infringement or
misappropriation of, any patent,
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 8
trade secret, copyright or other proprietary right of any third party.
9.04 It is the owner of or otherwise has the rights to use in
performance of its obligations hereunder all systems and methodologies utilized
in connection with the Services.
9.05 It will materially comply with all AH standards, rules,
procedures and policies relating to or affecting the Services and the
performance standards agreed to by the parties, including the Service Levels
and Performance Standards, in the Attachments contained hereto.
9.06 All software maintained and developed by Syntel will conform to
AH's requirements and/or applicable specifications and that the Services
provided hereunder shall meet or exceed the standards set forth in this
Agreement and the Attachments hereto for such Services and that it shall use
its best efforts in providing the Services.
9.07 It will comply with all applicable United States federal, state
and local laws and all international laws relating to the provision of the
Services and the AH operations affected by this Agreement.
9.08 It will not engage in any unlawful discrimination as to race,
creed, color, national origin, sex, age, disability, marital status,
citizenship status, sexual orientation or affectional preference in any
employment decisions relating to this Agreement and that it is an equal
opportunity employer and will comply with all federal and state employment laws
and regulations, including: Executive Order 11246; The Vietnam ERA Veteran's
Readjustment Act of 1974; Section 503 of the Rehabilitation Act of 1973.
9.09 As of the time of delivery to AH it will have successfully tested
all software to be provided to AH to determine if the software contains threats
known as software viruses, time bombs, logic bombs, trojan horses, trap doors,
or other malicious computer instructions, intentional devices or techniques
that can or were designed to threaten, infect, attack, assault, vandalize,
defraud, disrupt, damage, disable, or shut down a computer system or any
component of such computer system, including its security or user data
(hereinafter "Disabling Devices"). Syntel further warrants that as of at the
time of delivery to AH the Syntel developed software, as delivered, to the best
of Syntel's knowledge, is free and clear of and contains no Disabling Devices.
9.10 It will maintain books and records relating to time records,
billing statements related to the Services hereunder for four (4) calendar
years following the end of the calendar year in which Services were provided.
9.11 It will maintain its computer hardware, equipment, software and
facilities utilized for the performance of the Services with appropriate
providers of such services at all times during the term of this Agreement.
9.12 It is a duly organized corporation authorized to enter into this
Agreement and
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<PAGE> 9
entering into this Agreement will not violate any other agreement to which it
is a party.
9.13 THE REPRESENTATIONS, COVENANTS AND WARRANTIES SET FORTH IN THIS
AGREEMENT CONSTITUTE THE ONLY REPRESENTATIONS, COVENANTS, WARRANTIES OF SYNTEL
WITH RESPECT TO THIS AGREEMENT, AND SUCH REPRESENTATIONS, COVENANTS AND
WARRANTIES ARE IN LIEU OF ALL OTHER REPRESENTATIONS, COVENANTS AND WARRANTIES,
WRITTEN OR ORAL, STATUTORY, EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION
THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, OR THE RESULTS TO BE DERIVED FROM THE USE OF ANY INFORMATION
TECHNOLOGY SERVICE, SOFTWARE, HARDWARE OR OTHER MATERIALS PROVIDED UNDER THIS
AGREEMENT. THE UNIFORM COMMERCIAL CODE DOES NOT APPLY TO THIS AGREEMENT NOR
GOVERN THE RELATIONSHIP OF THE PARTIES HERETO.
10. TAXES AND INSURANCE
10.01 * agrees to pay all local, state and federal taxes that are now
or may become applicable to the payments hereunder, including but not limited
to sales, use and excise taxes but these do not include taxes based on *
10.02 Syntel shall maintain throughout the term of this Agreement at
least the following insurance coverages in a policy or policies of insurance,
primary and excess, including so-called Umbrella or Catastrophe form, which may
also include comprehensive Automobile insurance and Employer's Liability
insurance:
(1) Worker's Compensation Insurance for all states in which work
is to be performed hereunder with limits in accord with the
statutory requirements of the respective states, and Coverage B
- Employer's Liability Coverage including occupational disease
with a limit of not less than $1,000,000 per event.
(2) General Liability Insurance covering Syntel's operations,
with minimum limit of $3 million per occurrence, with AH
named as an additional insured and including the following
coverages: (i) Commercial General Liability; (ii) Contractual
Liability; (iii) Independent Contractor (if any part of the work
is subcontracted); (iv) Broad Form Property Damage; (v) Personal
Injury; and (vi) Products/ Completed Operations.
(3) Automobile insurance including coverage for non-owned and
hired vehicle in the amount of $1,000,000 per occurrence for
bodily injury and property damage.
(4) Errors and Omissions Insurance in the amount of
$5,000,000.00.
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 10
(5) Crime/Theft, Computer Crime, Fidelity in an amount not less
than $1,000,000.00.
(6) Syntel shall provide that AH is an additional insured under
policies required herein at least in respect of work being
performed hereunder. *
(7) Unless waived by AH, Certificates of Insurance listing
required coverages and acceptable to AH shall be provided
to AH prior to Syntel's commencement of duties pursuant to this
Agreement and shall require each carrier to give AH no less than
30 days notice of any prospective cancellation or restriction of
coverage or limits.
11. AUDIT RIGHTS
11.01 Syntel will provide AH, its auditors (including internal audit
staff), and other representatives as AH may from time to time designate in
writing, and AH's regulators and designated agents of such regulators with any
reasonably required access to the Syntel Service Center during normal business
hours reasonable advance notice and at the sole expense of AH. Such access
shall be for the purpose of (a) performing audits and inspections and (b) to
verify the integrity of data including, without limitation, audits (i) of
maintenance practices and procedures, (ii) of general controls and security
practices and procedures, (iii) of disaster recovery procedures, (iv) project
management systems and project time reporting systems, and (v) any other audit
necessary or appropriate to enable AH to meet applicable regulatory
requirements.
11.02 AH shall have the right * to retain an independent
certified public accountant to conduct a review of the records of Syntel
related to this Agreement provided however, such review shall be conducted
during normal business hours of Syntel, upon reasonable advance notice and
under such conditions so as not to materially interfere with the operation of
Syntel's operations. This right to review with respect to any period shall
terminate upon the termination of this Agreement provided however that AH can
review Syntel for up to * after termination of the Agreement concerning
events occurring prior tot he termination. Neither AH nor its auditors shall
disclose any information that it obtains by or through these reviews provided
in this Section 11.
12. INDEMNIFICATION
12.01 Subject to the limitations contained in Section 14, Syntel and AH
agree to indemnify and hold harmless, to the full extent permitted by law, the
other party and their
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 11
respective Affiliates, officers, directors, shareholders, employees and agents,
against all losses, claims, damages, liabilities and expenses (including
without limitation, reasonable legal fees and expenses) that either relate to
damages to personal property, personal injury or, knowingly infringing on a
third party's intellectual property rights or are caused by, arising from or
relating to actions taken or omitted to be taken by the indemnifying party or
its respective Affiliates, officers, directors, shareholders, employees and
agents pursuant to, in violation of or as a result of this Agreement, or in
connection with the transactions contemplated hereby or otherwise including
without limitaiton breaches of representations, warranties and covenants. In
the event of an unintentional infringing on a third party's intellectual
property rights, AH and Syntel agree to cooperate in the defense of such claim
and if the parties disagree over the defense, any proposed settlement, the
degree of fault that should be assigned to each party or otherwise fail to
agree, either party may demand mediation under the laws of New York, to be
resolved in New York City.
12.02 In the event that any action or proceeding is brought, or any
claim or other liability is asserted ("Claim"), against any party entitled to
indemnity hereunder in respect of which indemnity may be sought hereunder
("Indemnitee"), such Indemnitee shall promptly give notice of such Claim to the
Indemnifying party ("Indemnitor"), but any failure to so notify the Indemnitor
shall not relieve the Indemnitor from any liability that it may have to the
Indemnitee hereunder. The Indemnitor shall be entitled to participate in the
defense of such Claim and to assume control of such defense with counsel
reasonably satisfactory to such Indemnitee provided, however, that:
a. The Indemnitee shall be entitled to participate at its own
expense in the defense of such Claim and to employ counsel at its
own expense to participate in the defense of such Claim;
b. The Indemnitor shall obtain the prior written approval of the
Indemnitee before entering into any settlement of such Claim or
ceasing to defend against such Claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other
equitable relief would be imposed against the Indemnitee;
c. The Indemnitor shall not consent to the entry of any judgment
or enter into any settlement that does not include as an
unconditional term thereof the giving by each plaintiff or
claimant to the Indemnitee of a release from all liability in
respect of such Claim; and
d. The Indemnitor shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and
the Indemnitee shall be entitled to have sole control over, the
defense or settlement of any Claim to the extent such Claim seeks
an order, injunction or other equitable relief, which if
successful, could materially interfere with the business,
operations, assets, conditions (financial or otherwise) or
prospects of the Indemnitee.
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<PAGE> 12
12.03 In the event that the Indemnitor shall be obligated to indemnify
the Indemnitee hereunder, the Indemnitor shall, upon payment of such indemnity
in full, be subrogated to all rights of the Indemnitee with respect to the
Claims to which such indemnification relates.
12.04 The indemnities set forth in Section 12 hereof will not apply (i)
to the extent that the party claiming indemnification was responsible for
giving rise to the matter upon which the claim for indemnification is based,
and (ii) unless the party claiming indemnification reasonably promptly notifies
the other of any matters in respect of which the indemnity may apply and of
which the notifying party has knowledge and gives the other full opportunity to
control the response thereto and the defense thereof, including without
limitation any agreement relating to the settlement thereof; provided, however,
that the indemnitee's failure to provide such reasonably prompt notice will
relieve the indemnitor of its indemnity obligation hereunder only to the extent
that the rights of the indemnitor are prejudiced by such failure. In addition
to the foregoing, each party will have a right of contribution against the
other party with respect to any claim by a third party to the extent that the
party against which such right of contribution is asserted contributed to the
events, acts or omissions that gave rise to such third party claim.
13. TERMINATION
13.01 In the event that Syntel (i) files a voluntary petition in
bankruptcy or petitions for reorganization or arrangement under the bankruptcy
laws or if a petition in bankruptcy is filed against Syntel and remains
undismissed for a period of thirty (30) days, or if a receiver or trustee is
appointed for all or any material part of the property or assets of Syntel that
would adversely affect the performance of Syntel hereunder or (ii) defaults in
the performance of any of its material duties or obligations hereunder and does
not substantially cure such default within thirty (30) days after being given
written notice specifying the default and the period to cure, or, with respect
to those defaults which cannot reasonably be cured within thirty (30) days, if
Syntel fails to proceed promptly after being given such notice to commence
during the default and thereafter to proceed with all due diligence to
substantially cure the same, then AH may, by giving written notice thereof to
Syntel, terminate, in whole or in part, the Agreement as of a date specified in
such notice of termination.
13.02 All written notices from AH concerning default or termination
must be from either an officer of AH that is at least a vice president or from
AH's legal counsel and must specify that a breach has occurred, must specify
the nature and extent of such breach, and if appropriate must state the date of
termination. AH shall have the duty to mitigate all damages and to incur only
reasonable costs to remedy such breach.
13.03 Syntel may terminate this Agreement if (i) AH fails to cure any
nonmonetary material default within thirty (30) days after written notice
specifying the default or (ii) AH fails to cure any monetary default within ten
(10) days following the receipt of written
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<PAGE> 13
notice of such default from Syntel, specifying the nature and extent of any
such breach, provided that if AH reasonably in good faith disputes an amount
claimed by Syntel * as provided in Section 6.03, and withholds payments of the
disputed amount, such withholding will not be deemed a breach of this Agreement
and provided further, that on or prior to the twenty-fifth (25th) day of the
month in which such * is received by AH, AH shall provide Syntel with a
detailed, written delineation of the amounts of and AH's objections to each
item in dispute, if any, and the parties shall meet within forty-eight (48)
hours of the receipt by Syntel of such delineation to attempt in good faith to
resolve each such disputed item, or (iii) in the event AH files a voluntary
petition in bankruptcy or petitions for reorganization or arrangement under the
bankruptcy laws, or if a petition in bankruptcy is filed against AH and remains
undismissed for a period of thirty (30) days, or (iv) if a receiver or trustee
is appointed for all or any material part of the property and assets of AH that
would adversely affect the performance hereunder. In the event of termination
pursuant to subsection (i) or (ii) above, the termination shall not take effect
until 120 days from the date of notice, provided however, AH must prepay Syntel
for the Services to be provided for the 120 day period.
13.04 Syntel agrees that it will meet or exceed the Service Levels set
forth in Attachment B.
13.05 If a majority interest in the stock of Syntel (or any successor
to Syntel's rights and obligations under this Agreement) or a substantial part
of its business is sold to, or Syntel or such successor merges or consolidates
with, any competitor of American International Group, Inc. and its Affiliates,
then, for a period of six months following the consummation of such sale. AH
may terminate this Agreement by giving Syntel at least thirty days prior
written notice designating the date upon which such termination will be
effective. Syntel will notify AH immediately upon the occurrence of any
transaction described in this Section 13.05.
13.06 At any time during the term of this Agreement, AH may elect to
terminate this Agreement, for its convenience and for no other reason upon six
(6) months prior written notice. In the event of such termination for
convenience, AH will pay Syntel the following termination amounts (the "Early
Termination Amounts") based on the date such notice of termination is received:
If during calendar year 1994 or calender year 1995: * If during
calendar year 1996: * If during calendar year 1997:* If during calendar year
1998: * Payment by AH of the Early Termination Amounts shall by Syntel's sole
and exclusive remedy for any early termination of this Agreement by AH for
convenience in accordance with this Section 13.06 but Syntel shall also be
entitled to any other amounts due from AH for Services provided hereunder and
both parties will be entitled to any amounts due pursuant to Section 12.
13.07 In the event this Agreement expires or is terminated, and upon
timely receipt by Syntel in full of all sums owed by AH to Syntel which are not
in reasonable dispute, Syntel agrees to make its best efforts to ensure an
orderly transition of its responsibilities hereunder and to provide to AH any
and all termination assistance requested by AH to
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 14
allow its computer systems to continue without interruption and to facilitate
the orderly transfer to AH or its designee. Upon expiration or notice of
termination AH and Syntel shall attempt to agree on the budget for the
transference of Services provided during the termination period, however in the
event no agreement can be reached then the amount to be paid by AH to Syntel for
Syntel's services during the transition period shall be equal to * AH can
verify that such * Any amount due from AH shall be paid within thirty (30) days
following cessation of services by Syntel. AH's obligation to pay Syntel all
amounts due hereunder shall survive the termination of this Agreement. The
transition period shall in no event exceed *
13.08 AH may terminate this Agreement immediately if damages for
breach of this Agreement paid or payable to AH by or on behalf of Syntel exceed
*
14. LIMITATION OF LIABILITY
-----------------------
14.01 In no event shall either party be liable to anyone for any
consequential, special or incidental damages in connection with this Agreement.
This limitation shall apply whether or not the likelihood of such losses or
damages was known to the party or reasonably foreseeable by the party.
14.02 AH agrees to limit any and all liability or claim against Syntel,
for losses, claims, damages, liabilities and expenses (Including without
limitation reasonable legal fees and expenses) arising from or related to this
Agreement or the Services provided hereunder to a cumulative sum not to exceed
* Any and all insurance proceeds shall apply toward this
limitation so that Syntel shall only be liable for the difference between the
insurance policy proceeds and the * liability limitation.
14.03 Except for (i) claims for non payment for Services provided and
Early Termination Amounts, Syntel agrees to limit any and all liability or
claim against AH and its Affiliates for losses, claims, damages, liabilities
and expenses (including without limitation reasonable legal fees and expenses)
arising from or related to this Agreement or the Services provided hereunder to
a cumulative sum not to exceed * . Any and all insurance proceeds
shall apply toward this limitation so that except for claims for non payment
for Services provided and Early Termination Amounts, AH shall only be liable
for the difference between the insurance policy proceeds and the *
liability limitation.
15. GENERAL
-------
15.01 AH and Syntel warrant to each other that while this Agreement is
in effect, and for a period of 24 months after termination or expiration of
this Agreement,
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 15
neither AH, Syntel nor their Affiliates will directly or indirectly through one
or more intermediaries, induce any employee of the other to terminate his or
her employment, without prior written consent of the other, offer employment
to, or otherwise obtain the Services of, any employee of the other, or to any
former employee during the * period immediately following such employee's
termination.
15.02 Any notices to be given hereunder by either party to the other
shall be in writing, by personal delivery with signed receipt, or by mail,
registered or certified, postage prepaid with return receipt requested or by
telecopy with a copy mailed by registered or certified mail, postage prepaid
with return receipt requested. Notices shall be addressed to either party at
the address or telecopy number set forth below or at such address or telecopy
number as either party may direct by written notice to the other party in
accordance with this Section. Mailed notices shall be deemed communicated as
of three (3) days after mailing. Notices delivered personally shall be deemed
communicated as of actual receipt. Notices delivered via telecopy shall be
deemed communicated upon receipt of the telecopy confirmation indicating a good
transmission received by the other party. All notices to AH shall be
addressed to the attention of Raymond Roy or his successor at 70 Pine Street,
New York, New York 10270 with a copy to General Counsel, American International
Group, Inc., 70 Pine Street, New York, New York 10270. All notices to Syntel
shall be addressed to the attention of Bharat Desai, President, Syntel, Inc.,
5700 Crooks Road, Suite 301, Troy, Michigan 48098, with a copy to Richard
Baldyga, Vice President of Operations, Syntel, Inc., 5700 Crooks Road, Troy,
Michigan 48098.
15.03 AH and Syntel covenant to each other not to disclose to any
third party the terms and conditions of this Agreement and any related
Attachments hereto except as required by law, to their attorneys, accountants,
their creditors or potential creditors in confidence, securities disclosure
statements, to regulatory authorities, insurance companies and their agents,
underwriters and brokers or as expressly agreed to by the other party.
15.04 This Agreement and all Attachments are hereby made part hereof
and: (a) constitute the entire agreement between parties concerning the subject
matter hereof and supersede any and all prior discussions, representations,
negotiations, correspondence, writings and other agreement and together state
the entire understanding and agreement between AH and Syntel with respect to
the subject matter hereof; (b) may be amended or modified only in a writing
signed by the signatories hereto or their designated representatives; (c)
shall be construed, performed and enforced in all respects in accordance with
the laws of the State of New York, except for its conflicts of law provisions;
and (d) shall in no way affect, nor be affected by, any other agreement,
arrangement or engagement between the parties hereto.
15.05 Neither party hereto shall be deemed to have waived any rights
or remedies accruing to it hereunder unless such waiver is in writing and
signed by such party. No delay or omission by either party hereto in exercising
any right shall operate as a waiver of said right on any future occasion.
Page 15
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 16
15.06 The descriptive headings of this Agreement are intended for
reference only and shall not effect the construction or interpretation of this
Agreement. Wherever the singular of any term is used herein it shall be deemed
to include the plural wherever the plural thereof may be applicable.
15.07 Neither party shall be liable to the other party for loss or
damage or deemed to be in breach of this Agreement, if its failure to perform
its duties and obligations hereunder results from either: (i) acts God, civil
unrest, domestic labor strikes; (ii) compliance with any law, ruling, order,
regulation, requirement, or instruction of any federal, state or municipal
government of any department or agency thereof; (iii) transportation shortages,
merchandise, supplies, domestic labor, material, line connections or energy, or
the voluntary forgoing of the right to acquire the use any of the foregoing in
order to accommodate or comply with the orders, requests, regulations,
recommendations, or instructions of any federal, state, or municipal government
or any department or agency thereof; or (iv) acts or omissions of a similar
nature, event or cause. In the event that either party is excused from
performance pursuant to this paragraph as a result of such force majeure, then
that party shall take all reasonable actions to resume or provide alternative
performance of its obligations as soon as feasible. Syntel's obligations
pursuant to this paragraph shall be to promptly, diligently and continuously
use its best efforts to provide the Services and otherwise perform its
obligations under this Agreement, * For the Syntel Service Center, Syntel shall
at all times maintain an adequate and tested disaster recovery plan and have
adequate backup facilities. In the event of a force majeure or other
interruption or such Syntel facilities, Syntel shall immediately put into
operation its disaster recovery plan and migrate its operations to the backup
or alternative facilities until the existing facilities have been repaired.
15.08 Neither party shall assign its duties under this Agreement
without the prior written consent of the other provided however that AH and
Syntel shall have the right to assign this Agreement to an Affiliate.
15.09 This Agreement may be executed in any number of counterparts with
the same effect as if all parties hereto had signed the same document. All
counterparts shall be construed together and shall constitute one agreement,
but in making proof of this Agreement it shall not be necessary to produce or
account for more than one such counterpart.
15.10 If any provision of this Agreement or the Attachments hereto or
the application thereof to any party or circumstances shall, to any extent, now
or hereafter be or become invalid or unenforceable, the remainder of this
Agreement shall not be affected there by and every other provision of this
Agreement shall be valid and enforceable, to the fullest extent permitted by
law.
15.11 Except as otherwise expressly provided in this Agreement, Syntel,
in furnishing the Services to AH hereunder, is acting only as an independent
contractor. Syntel shall be solely responsible for the payment of compensation
of Syntel employees
Page 16
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 17
assigned to perform Services hereunder such personnel are not entitled to the
provisions of any AH employee benefit. AH shall not be responsible for payment
of worker's compensation, disability benefits and unemployment insurance or for
withholding and paying employment taxed for any Syntel employees performing
Services hereunder. *
15.12 Syntel may not, except with the express written consent of AH in
each instance, use the name of AH or any AH Affiliate in advertising, publicity
or similar materials, such consent not to be unreasonably withheld.
15.13 Each party will cooperate with the other by, among other things,
making available, as reasonably requested by the other, management decisions,
information, approvals, and acceptances in order that each party may properly
accomplish its obligations and responsibilities hereunder. Where agreement,
approval, acceptance, consent or similar action by either party hereto is
required by any provision of this Agreement, such action shall not be
unreasonably delayed or withheld.
15.14 The parties acknowledge that certain Software and technical data
to be provide under this Agreement and certain transactions under this
Agreement may be subject to export controls under the laws and regulations of
the United States and other countries. No party shall export or re-export any
such items or any direct product thereof or undertake any transaction in
violation of any laws or regulations.
15.15 If any legal action or other proceeding is brought pursuant to
this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it may be entitled.
15.16 Not withstanding any provisions of this Agreement to the
contrary and without limiting the survivability of any other provision of this
Agreement that, by its terms or operation of law, survives the expiration or
earlier termination of the term of this Agreement, the provisions regarding
confidentiality, proprietary rights, indemnifications, and nonemployment and
this Section 15.16 shall survive the expiration or earlier termination of this
Agreement.
15.17 All representations and warranties made herein shall survive the
execution and delivery of this Agreement and any termination of this Agreement.
Page 17
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 18
15.18 The parties agree that this Agreement is for the benefit of the
parties hereto and Affiliates of AH and is not intended to confer any rights or
benefits on any other third party, including any employee, vendor, or customer
of either party, and that other than Affiliates of AH, there are no third party
beneficiaries to this Agreement or any part or specific provision of this
Agreement.
15.19 Either party may give the other party written notice of any
dispute not resolved in the normal course of business as contemplated by this
Agreement. Such notice shall constitute a request for senior management review
pursuant to this Section 15.19. As used herein, senior management means the
person to whom the Engagement Manager of Syntel or AH reports. Senior
management review shall commence within seven (7) days of receipt of notice at
a mutually acceptable time and place and continue thereafter as often as
reasonably necessary. If the matter has not been resolved by mutual agreement
within fifteen (15) days of the referring party's notice, the parties can take
any other actions allowed under this Agreement.
THE PARTIES CERTIFY BY THEIR UNDERSIGNED AUTHORIZED OFFICERS THAT THEY HAVE
READ THIS AGREEMENT, INCLUDING ALL ATTACHMENTS HERETO, AND AGREE TO BE BOUND
BY THEIR TERMS AND CONDITIONS.
Syntel, Inc.: American Home Assurance Company
/s/ Raymond Roy
By:____________________________
Raymond Roy, Senior Vice President
/s/ Bharat Desai /s/ Elizabeth Tuck
By:_______________________ By:____________________________
Bharat Desai, President Elizabeth Tuck, Secretary
<PAGE> 19
ATTACHMENT A
PROGRAMMING SERVICES
1. Programming Services shall mean (1) preparation of computer programs and
associated documentation that meet the predefined specifications of AH (2) the
correction of Production Problems as designated from time to time by AH.
2. Specifications mean written descriptions of inputs, outputs, interim
processes, testing, data definitions to be used in or to be the result of the
programming.
3. Production Problems are defined as critical errors in production computer
programs that prohibit AH from completing regularly scheduled computer
services. These critical errors prevent AH from doing normal business.
4. Architecture shall mean the general environment of hardware and software
that the program will operate in when placed in production.
* Projects include all other programming services and include:
development, regulatory and general business enhancements, and systems
upgrades.
*
Projects will be submitted to the Syntel Project Manger by an AH Project
Manager in the form of written request for Programming Services. The request
will include Specification description of the business problem and required
Architecture if appropriate.
*
*
Page A-1
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 20
*
*
From time to time during the term of this Agreement, AH will make changes in
the scope or priority of service requests or projects which are part of the
Services, or staff in excess of the staff dedicated by Syntel to provide the
Services. *
- -------------
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 21
ATTACHMENT B
SERVICE LEVEL AGREEMENT
AH and Syntel agree that as of June 1, 1995 Syntel shall provide to AH
the Services at no less than the Service Levels identified below. Commencing
on the Effective Date and until June 1, 1995, Syntel will perform Services in a
manner reasonably acceptable to AH but in any event, no less than recognized
industry standards. Should Syntel fail to meet the standards * AH shall have
the right to terminate this Agreement without penalty to either party. AH
agrees that it will provide Syntel notice at least one month prior to sending
any notice of termination based on the fact that its performance is below the
standards set forth herein and the Agreement will be terminated if the
standards are not met in the third month. In the event Syntel should fail to
meet the standards set forth under * AH and Syntel acknowledge that the Service
Levels are baseline levels and agree to work together in good faith to
establish aggressive Service Levels for the Services that are fair and
reasonable to both parties. If the parties are unable to agree, the standards
provided herein will apply but Syntel can terminate this Agreement by notice on
July 1, 1995, or the next business day, said termination to be effective June
30, 1996.
*
Page B-1
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* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 22
*
Page B-2
- -------------
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 23
*
Page B-3
- -------------
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 1
EXHIBIT 10.11
[PEOPLE NET LOGO]
SUPPLIER CONTRACT - VERSION J1FZA-6
This contract represents a working agreement between Geometric Results,
Incorporated (doing business as "PeopleNet" and henceforth called "PeopleNet")
and Syntel, Inc. (henceforth called the "Supplier") covering the Supplier
providing contract personnel (henceforth called "Supplier's employees") to be
placed on the site of the Customer. For purposes of this agreement, "Customer"
will mean the various components and activities of Ford Motor Company as defined
on attachment A.
This agreement will be effective for a one year term beginning April 1, 1996.
This agreement will be renewed automatically for one year terms unless either
party notifies the other, before completion of each current term, that the
agreement will not be renewed.
The Supplier will provide competitive bids to PeopleNet in response to its
broadcasts of open contract personnel positions on Customer sites. The
competitive bids will represent competent, fully trained personnel submitted as
candidates for the positions specified in the broadcasts. PeopleNet will act
as a clearinghouse for these bids and for all other activities required to
support the administration of on-site contract personnel for the Customer. The
obligations of PeopleNet to the Supplier, including payment for services and
reimbursement for pass-through expenses, will be limited to and governed by the
Terms and Conditions specified in this agreement. All PeopleNet Purchase
Orders issued to and accepted by the Supplier shall be bound by the terms and
conditions specified in this agreement.
TERMS AND CONDITIONS
1. CONTRACT PERSONNEL ORDERS. It is understood that PeopleNet's obligations
with respect to quantity commitments shall be limited to the quantities
specified in the PeopleNet Purchase Order to the Supplier. Specific position
specifications and skill sets will be detailed on PeopleNet's Open Position
Notifications (Broadcasts). Supplier is authorized to start their employee
based upon the confirmation received by PeopleNet prior to the issuance of a
PeopleNet Purchase Order.
2. PURCHASE ORDER TERMINATION. PeopleNet, at its option, may terminate any
Purchase Order issued hereunder, at any time for any reason. Upon termination
of a Purchase Order by PeopleNet, PeopleNet's only liability to the Supplier
will be payment for services rendered prior to the date of termination.
3. PAYMENT TERMS. Supplier payments will be based on prices bid by the
Supplier to PeopleNet, and accepted by PeopleNet. Suppliers will be paid by
PeopleNet within 10 days after receipt of properly completed PeopleNet time
sheets submitted by the prescribed date for a given time period. Time sheets
received after this deadline are automatically processed in the next cycle.
4. ACCOUNTING AUDIT. Supplier shall establish a reasonable accounting system
and PeopleNet shall have the right to audit Supplier's records at any time
prior to two years after final payment to verify payment obligation. Supplier
agrees not to supply personnel or submit time sheets or any other payable
document against an expired Purchase Order for either time or money. The
total fee payable to Supplier for all contract services and expenses requested
and provided under this agreement shall not exceed the amount specified on
PeopleNet's Purchase Order, and Supplier shall not perform contract services or
incur any expenses that cause the aggregate amount payable under this agreement
to exceed such Purchase Order specification amount without a written
modification of the Purchase Order. Supplier agrees that their accounting
system is also subject to a Customer audit for the same period and for the same
purpose.
5. ECONOMICS. Customer (Facilities, Materials, and Services Purchasing) will
review the maximum allowable Billing Rates for each classification on an annual
basis. Customer (Facilities, Materials, and Services Purchasing) will review
the supplier's requests for economic adjustments annually. Supplier cannot
accept economics in excess of the percentages approved by the Customer
(Facilities, Materials, and Services Purchasing). Acceptance of economics is
auditable by both the Customer and PeopleNet.
- -------------
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 2
6. PLACE OF PERFORMANCE OF CONTRACT SERVICES; TRAVEL EXPENSES. The contract
services shall be performed at a place or places designated by PeopleNet or the
Customer. Reasonable travel expenses of the Supplier's employee to be
reimbursed by PeopleNet to Supplier on an actual cost basis (no mark up).
Travel expenses to cover overnight travel outside of a 100-mile radius of the
designated Customer site. All travel to be pre-approved in writing by the
appropriate Customer's Requesting Manager. Expenses incurred for the
relocation of contractees to the Customer designated service location will be
reimbursed by PeopleNet to the Supplier on an actual cost basis (no mark up),
only if such expenses were pre-approved in writing by the appropriate Customer's
Requesting Manager.
7. RELATIONSHIP. Supplier's relationship to PeopleNet under this agreement
shall be that of an independent contractor and not an employee or agent. No
new assignments at launched Customer sites will be undertaken by Supplier
without securing prior written approval from PeopleNet. PeopleNet shall not be
responsible for any tax levied on Supplier or Supplier's employees or
representatives by any governmental authority relating to this agreement or
income attributed to Supplier's employees or representatives.
8. TITLE TO WORK PRODUCT. All information and data Supplier's employee(s)
develops or acquires in performing contract services under this agreement shall
belong to the Customer, without further consideration, and shall be delivered
to the Customer upon completion of this agreement or earlier if requested.
The Customer shall be free to use and disclose to others such information and
data delivered hereunder.
9. WORK MADE FOR HIRE. Any work of authorship created by Supplier's
employee(s) in performing services under this agreement shall be considered
to be a specially ordered or commissioned "Work Made for Hire," for the
Customer and all copyrights for such works of authorship shall belong to the
Customer. In the event any portion of such work of authorship created by the
Supplier's employee(s) in performing the services hereunder does not qualify
as "Work Made for Hire," Supplier shall acquire all right, title and interest
to all copyrights for such portion and assign to the Customer all acquired
right, title and interest to such copyrights, without further consideration
from the Customer. All such works of authorship will bear a valid copyright
notice designating the Customer as the copyright owner, for example, "Copyright
199X, Ford Motor Company."
10. TITLE TO INVENTIONS. Every invention, discovery and improvement made,
conceived, or first reduced to practice by the Supplier's employee(s) in
performing contract services under this agreement shall belong to the Customer,
without further consideration, and shall be reported to the Customer promptly.
Upon request of the Customer, Supplier shall execute all documents and papers,
and shall furnish all reasonable assistance required (i) to establish in the
Customer title to such inventions, discoveries and improvements and (ii) to
enable the Customer to apply for United States and foreign patents thereon.
11. COPYRIGHT LICENSE. Supplier hereby grants to the Customer and its
domestic and foreign subsidiaries, a permanent, non-exclusive,paid-up,
worldwide license, with a right to grant sublicenses to their associated
companies, under each copyright Supplier owns or controls or has the right to
license in each work of authorship fixed in any tangible medium of expression
that Supplier furnishes to the Customer or the Customer's designee in
performing contract services under this agreement, to use such work, reproduce
such work in quantities, prepare derivative works, distribute copies of such
work to the public, and perform and display such work publicly.
12. CONFIDENTIALITY. Supplier and Supplier's employee(s) shall use the
information and data Supplier acquires from PeopleNet or the Customer, or
develops or acquires for PeopleNet or the Customer, under this agreement only in
performing the contract services and shall not disclose to any third party,
during the term of this agreement and thereafter, any such information and data
that is not already in the public domain through no fault of the Supplier or
Supplier's employee(s). Supplier shall collect from each of its employees on
assignment to Customer an executed Contract Personnel Agreement (copy attached)
and shall furnish such Agreements to PeopleNet. Supplier shall be required to
furnish an executed Agreement to PeopleNet for each new assignment as a
precondition to placement of Supplier's employee with Customer. In the absence
of a separate written agreement expressly directed to the contrary, neither
PeopleNet nor the Customer accepts any obligation and Supplier hereby releases
PeopleNet and the Customer from any and all obligation to maintain
confidentiality of any information disclosed heretofore or hereafter by
Supplier to PeopleNet or the Customer in connection with the contract services.
13. LIABILITY FOR PERSONAL INJURIES AND PROPERTY DAMAGE. Supplier shall be
responsible for and shall hold PeopleNet and the Customer harmless from all
expenses, including legal fees, which arise from its performance hereunder and
which are for actual or alleged injury to any person or damage to any property,
including PeopleNet's or the Customer's property, except to the extent that
such expenses are attributable to PeopleNet's or the Customer's negligence or
willful misconduct.
14. SUPPLIER'S EMPLOYEES AND THIRD PARTY HIRES. In performing the contract
services, Supplier shall employ only such employees and third parties as
PeopleNet or the Customer shall have approved in writing in advance. Supplier
shall execute and require each of its employees and each approved third party
hire to execute the Customer-approved Personnel Agreement a copy of which is
attached hereto and incorporated herein, prior to commencing work under this
agreement. Supplier shall then retain the original executed form and deliver a
copy of such executed form to PeopleNet, and the Customer upon its request. In
the event that, for any reason, PeopleNet or the Customer is not satisfied with
the performance of Supplier's employee(s) or third Party hire assigned to a
Customer site, Supplier shall
<PAGE> 3
replace such with another qualified employee. Supplier must have any
subcontracting agreement with third parties, approved in writing in advance by
the Customer (Ford Purchasing).
15. COMPLIANCE WITH LAW AND GOVERNING LAW. Supplier and its employees shall
comply with all applicable laws and regulations in performing the services
under this agreement. This agreement shall be construed and enforced in
accordance with the laws of the State of Michigan. Litigation in contractual
causes arising from this agreement shall be brought only in a Federal District
Court located in Michigan or in a court of The State of Michigan. Supplier
shall be responsible for making contributions to any employment related
statutory programs such as FICA payments, FUTA and SUTA payments, Workers
Compensation Insurance, etc. Additionally, Supplier shall be responsible for
the collection and remittance to the appropriate governmental body of any
required contributions to such programs.
16. OVERTIME RATES FOR ELIGIBLE POSITIONS. Supplier must determine positions
required to receive overtime premiums as defined in the Fair Labor Standards
Act. In recognition of Supplier's responsibility in accurately determining
positions required to receive overtime premiums, Supplier indemnifies PeopleNet
from any violations of the Fair Labor Standards Act applying to Supplier's
employees servicing PeopleNet. Supplier will notify PeopleNet that a position
is required to receive overtime when replying to PeopleNet's sourcing
broadcast. PeopleNet will use the overtime determination when evaluating price
competitiveness.
HOLIDAYS PeopleNet holidays for the purposes of this agreement are the
following: New Year's Day, Martin Luther King Day, Good Friday, Easter Monday,
Memorial Day, July 4th, Labor Day, Thanksgiving Day, Thanksgiving Friday, and
Christmas Day. PeopleNet will pay ONLY for hours actually worked on these
holidays (as defined below).
OVERTIME PREMIUMS REQUIRED Positions determined by Supplier to require
overtime premiums will be billed to PeopleNet at * times the standard
billing rate for all hours worked in excess of * in a given week. For work
weeks containing a PeopleNet holiday (defined above), hours worked in excess of
* , should be considered overtime hours, excluding actual hours
worked on the holiday. Positions determined by Supplier to require overtime
premiums will be billed at * times the standard billing rate for all hours
worked on a PeopleNet holiday or the *
OVERTIME PREMIUMS NOT REQUIRED Positions determined by Supplier to not require
overtime premiums will be billed to PeopleNet at the Standard billing rate for
forty hours per week. Overtime beyond * for these positions must be
authorized by PeopleNet (or the Customer) in advance and will be billed to
PeopleNet at * times the standard billing rate for all approved billable
overtime hours.
17. SHIFT PREMIUMS. Under this contract, shift premiums must be approved in
advance by the Customer's Requesting Manager and indicated on the Purchase
Order authorization. When authorized, shift premiums will be computed as
follows:
*
Shift premiums for overtime hours will be computed by * PeopleNet will
not be responsible for rates computed under any other method or assumption.
18. HIRING OF CURRENTLY CONTRACTED PERSONNEL TO FORD MOT0R COMPANY. In the
event supplier hires an individual who is on a project assignment to the
Customer or is an employee of Geometric Results, Incorporated (GRI) at the time
of such hiring, Supplier shall not provide such individual to the Customer for
any assignment for a period of 90 days without written approval from PeopleNet
(for previous GRI employees) or the Customer (Facilities, Materials, and
Services Purchasing for all others). The Customer (Facilities, Materials, and
Services Purchasing) may elect to waive this restriction for any reason
including to ensure service quality, morale of contract personnel, or
competitive pricing.
19. HIRE OPTION. The Customer shall have an unequivocal right to hire one or
more of Supplier's contract personnel employees. Supplier agrees that this
right shall supersede any restrictive agreements that exist between Suppliers
and the Suppliers' employees and shall survive any termination of this purchase
order. If the Customer hires a contractee who is presently on a Customer
on-site assignment, PeopleNet is subject to be charged a service fee to a
maximum of:
*
- -------------
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 4
20. BACKGROUND CHECK. PeopleNet reserves the right to request a background
check on Supplier's employee(s) that Supplier might place at Customer
facilities. The background check will be performed by an organization of the
Customer's choosing. Release forms must be signed by Supplier's
candidates/employee(s) for placement and presented to PeopleNet prior to
placement. The Customer will specify the requirement for a background check on
the PeopleNet Contract Personnel Order form.
21. TRAINING. Supplier's employee(s) supplied to PeopleNet shall be qualified
and fully trained to fulfill PeopleNet's job specification prior to providing
services. Training identified as a new service requirement for contract
service personnel already assigned to the Customer will be paid for by
PeopleNet, excluding the Customer's Standard Office Automation requirements
(see attached listing). The Standard Office Automation requirements are
subject to change at any time, and those changes will be forwarded to the
Supplier. The Customer's Standard Office Automation training will be paid by
the Supplier, bothe the hours and the class. Such PeopleNet paid training and
related expenses must be approved in advance in writing by the Customer.
Properly approved training expenses may include travel, in such cases paragraph
six of this agreement will apply. All hours that Supplier's employee(s) time
sheets (hours of service spent in the Customer's Standard Office Automation
training are not billable to PeopleNet). If the Supplier's employee(s) do not
complete the service term defined in the PeopleNet Purchase Order, for reasons
not caused by the Customer, then the Supplier shall reimburse PeopleNet and/or
the Customer for all PeopleNet and/or customer paid training, training hours,
and related expenses that were incurred by PeopleNet and/or the Customer during
the current PeopleNet Purchase Order servece term or the previous twelve
months, whichever is the shorter time period.
22. DRUG-FREE ENVIRONMENT. Supplier shall provide PeopleNet with drug-free
contract personnel.
23. ADVERTISING. Supplier agrees to obtain prior written approval from the
Customer (Facilities, Materials, and Services Purchasing) to use the Customer's
name or logo in any of their advertising. this includes advertising for
contract personnel positions that are open through the Customer and press
releases of any kind, for any purpose.
24. SERVICE FEES. When an existing contract position is transitioned from a
Customer contract to a PeopleNet Purchase Order, the position will be subject
to a Transition Service Fee to be deducted from PeopleNet's payment to the
Supplier (determined by the rate approved on the latest Customer purchase
order) in response to properly submitted time sheets. The position will be
subject to the Transition Service Fee for the service term defined in the
Purchase Order, and/or throughout any renewals to the Purchase Order. New
positions should be competitively bid by the Supplier. The submitted time
sheets. The fees will be applied to the various billing classifications based
on the following table:
*
This fee structure is subject to change based upon re-negotiation between
PeopleNet and the Customer that may occur as needed.
*******************************************************************
Contract is awarded by the PeopleNet Division of Geometric Results,
Incorporated.
(signature) (date) 3-13-96
------------------------ -------------------
(title) UP
----------------------------
- -------------
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 406.
<PAGE> 5
By signing and returning a copy of this Contract, the Supplier agrees to be
bound by it and by all of its terms and conditions in all business done with
PeopleNet under Purchase Orders referencing this Contract. The Supplier
understands that the contract may be changed and reissued by PeopleNet at will
as long as the Supplier is issued the new Contract prior to the Supplier's
acceptance of a Purchase Order referencing it.
(signature) (date) 4/2/96
------------------------- ------------------------
(title) AVP SALES & NATIONAL ACCOUNTS
-----------------------------
<PAGE> 1
EXHIBIT 10.12
SYNTEL, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
(AMENDED AND RESTATED)
I. GENERAL PROVISIONS
1.1 ESTABLISHMENT. On April 1, 1997, the Board of Directors ("Board") of
Syntel, Inc. ("Corporation") adopted the 1997 Stock Option and Incentive Plan
("Plan"), which was approved by the shareholders of the Corporation on April 1,
1997. This Plan is further amended and restated as of _________, 1997.
1.2 PURPOSE. The purpose of the Plan is (i) to promote the best
interests of the Corporation and its shareholders by encouraging Employees and
non-employee directors of the Corporation and its Subsidiaries to acquire an
ownership interest in the Corporation through Options, Stock Appreciation
Rights, Restricted Stock, Performance Share Awards and Annual Incentive Awards,
thus identifying their interests with those of shareholders, and (ii) to
enhance the ability of the Corporation to attract and retain qualified
Employees and non-employee directors. It is the further purpose of the Plan to
permit the granting of Nonqualified Stock Options, Stock Appreciation Rights
and Annual Incentive Awards that will constitute performance based
compensation, as described in Section 162(m) of the Code, and regulations
promulgated thereunder.
1.3 DEFINITIONS. As used in this Plan, the following terms have the
meaning described below:
(a) "AGREEMENT" means the written agreement that sets forth the terms
of a Participant's Option, Stock Appreciation Right, Restricted Stock Grant,
Performance Share Award or Annual Incentive Award.
(b) "ANNUAL INCENTIVE AWARD" means an award that is granted in
accordance with Article VI of the Plan.
(c) "BOARD" means the Board of Directors of the Corporation.
(d) "CHANGE IN CONTROL" means the occurrence of any of the following
events: (i) the acquisition of ownership by a person, firm or corporation, or
a group acting in concert, of fifty-one percent, or more, of the outstanding
Common Stock of the Corporation in a single transaction or a series of related
transactions within a one-year period; (ii) a sale of all or substantially all
of the assets of the Corporation to any person, firm or corporation; or (iii) a
merger or similar transaction between the Corporation and another entity if
shareholders of the Corporation do not own a majority of the voting stock of
the corporation surviving the transaction and a majority in value of the total
outstanding stock of such surviving corporation after the transaction;
provided, however, that any such event involving any of the current
shareholders of the Corporation as of the date of adoption of this Plan by the
Board (or any entity at any time controlled by any such shareholder or
shareholders) shall not be included within the meaning of "Change in Control."
<PAGE> 2
(e) "CHANGE IN POSITION" means, with respect to any Participant: (i) such
Participant's involuntary termination of employment; or (ii) a significant
reduction in such Participant's duties, responsibilities, compensation and/or
fringe benefits, or the assignment to such Participant of duties inconsistent
with his position (all as in effect immediately prior to a Change in Control),
whether or not such Participant voluntarily terminates employment as a result
thereof.
(f) "CODE" means the Internal Revenue Code of 1986, as amended.
(g) "COMMITTEE" means the Compensation Committee of the Corporation, which
shall be comprised of two or more members of the Board.
(h) "COMMON STOCK" means shares of the Corporation's authorized common
stock.
(i) "CORPORATION" means Syntel, Inc., a Michigan corporation.
(j) "DISABILITY" means total and permanent disability, as defined in Code
Section 22(e).
(k) "EMPLOYEE" means an individual who has an "employment relationship"
with the Corporation or a Subsidiary, as defined in Treasury Regulation
1.421-7(h), and the term "employment" means employment with the Corporation, or
a Subsidiary of the Corporation.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time and any successor thereto.
(m) "FAIR MARKET VALUE" means for purposes of determining the value of
Common Stock on the Grant Date, the Stock Exchange closing price of the
Corporation's Common Stock as reported in The Wall Street Journal (or as
otherwise reported by such Stock Exchange) for the Grant Date. In the event
that there were no Common Stock transactions on such date, the Fair Market
Value shall be determined as of the immediately preceding date on which there
were Common Stock transactions.
Unless otherwise specified in the Plan, "Fair Market Value" for purposes of
determining the value of Common Stock on the date of exercise means, the Stock
Exchange closing price of the Corporation's Common Stock on the last date
preceding the exercise on which there were Common Stock transactions.
(n) "GRANT DATE" means the date on which the Committee authorizes an
individual Option, Stock Appreciation Right, Restricted Stock grant,
Performance Share Award or Annual Incentive Award, or such later date as shall
be designated by the Committee.
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(o) "INCENTIVE STOCK OPTION" means an Option that is intended to meet the
requirements of Section 422 of the Code.
(p) "NONQUALIFIED STOCK OPTION" means an Option that is not intended to
constitute an Incentive Stock Option.
(q) "OPTION" means either an Incentive Stock Option or a Nonqualified
Stock Option.
(r) "PARTICIPANT" means an Employee or non-employee director designated by
the Committee to participate in the Plan.
(s) "PERFORMANCE SHARE AWARD" means a performance share award that is
granted in accordance with Article V of the plan.
(t) "PLAN" means the Syntel, Inc. 1997 Stock Option and Incentive Plan,
the terms of which are set forth herein, and amendments thereto.
(u) "RESTRICTION PERIOD" means the period of time during which a
Participant's Restricted Stock grant is subject to restrictions and is
nontransferable.
(v) "RESTRICTED STOCK" means Common Stock that is subject to restrictions.
(w) "RETIREMENT" means termination of employment on or after the
attainment of age 65.
(x) "STOCK APPRECIATION RIGHT" means the right to receive a cash or Common
Stock payment from the Corporation upon the surrender of a tandem Option, in
accordance with Article III of the Plan.
(y) "STOCK EXCHANGE" means the principal national securities exchange on
which the Common Stock is listed for trading or, if the Common Stock is not
listed for trading on a national securities exchange, such other recognized
trading market or quotation system upon which the largest number of shares of
Common Stock has been traded in the aggregate during the last 20 days before a
Grant Date or date on which an Option is exercised, whichever is applicable.
(z) "SUBSIDIARY" means a corporation defined in Code Section 424(f).
(aa) "VESTED" means the extent to which an Option or Stock Appreciation
Right granted hereunder has become exercisable in accordance with this Plan and
the terms of the respective Agreement pursuant to which such Option or Stock
Appreciation Right was granted.
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1.4 ADMINISTRATION.
(a) The Plan shall be administered by the Committee. At all times it
is intended that the directors appointed to serve on the Committee shall be
"disinterested persons" (within the meaning of Rule 16b-3 promulgated under the
Exchange Act) and "outside directors" (within the meaning of Code Section
162(m)); however, the mere fact that a Committee member shall fail to qualify
under either of these requirements shall not invalidate any award made by the
Committee if the award is otherwise validly made under the Plan. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time, at the discretion of the Board.
(b) The Committee shall interpret the Plan, prescribe, amend, and
rescind rules and regulations relating to the Plan, and make all other
determinations necessary or advisable for its administration. The decision of
the Committee on any question concerning the interpretation of the Plan or its
administration with respect to any Option, Stock Appreciation Right, Restricted
Stock grant, Performance Share Award or Annual Incentive Award granted under the
Plan shall be final and binding upon all Participants. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any grant or award hereunder.
1.5 PARTICIPANTS. Participants in the Plan shall be such Employees
(including Employees who are directors) and non-employee directors of the
Corporation and its Subsidiaries as the Committee in its sole discretion may
select from time to time. The Committee may grant Options, Stock Appreciation
Rights, Restricted Stock, Performance Share Awards and Annual Incentive Awards
to an individual upon the condition that the individual become an Employee of
the Corporation or of a Subsidiary, provided that the Option, Stock
Appreciation Right, Restricted Stock, Performance Share Award or Annual
Incentive Award shall be deemed to be granted only on the date that the
individual becomes an Employee.
1.6 STOCK. The Corporation has reserved 2,000,000 shares of the
Corporation's Common Stock for issuance under the Plan. Shares subject to any
unexercised portion of a terminated, cancelled or expired Option, Stock
Appreciation Right, Restricted Stock grant or Performance Share Award granted
hereunder, and pursuant to which a Participant never acquired benefits of
ownership, including payment of a stock dividend (but excluding voting rights),
may again be subjected to grants and awards under the Plan, but shares
surrendered pursuant to the exercise of a Stock Appreciation Right are not
available for future grants and awards. All provisions in this Section 1.6
shall be adjusted, as applicable, in accordance with Article VIII.
II. STOCK OPTIONS
2.1 GRANT OF OPTIONS. The Committee, at any time and from time to time,
subject to Section 9.8, may grant Options to such Employees and for such number
of shares of Common Stock (whole or fractional) as it shall designate.
Provided, however, that no Employee may be granted Options and Stock
Appreciation Rights during any one fiscal year to purchase more than 100,000
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shares of Common Stock. Any Participant may hold more than one Option under
the Plan and any other Plan of the Corporation or Subsidiary. The Committee
shall determine the general terms and conditions of exercise, including any
applicable vesting requirements, which shall be set forth in a Participant's
Option Agreement. No Option granted hereunder may be exercised after the tenth
anniversary of the Grant Date. The Committee may designate any Option granted
as either an Incentive Stock Option or a Nonqualified Stock Option, or the
Committee may designate a portion of an Option as an Incentive Stock Option or
a Nonqualified Stock Option. At the discretion of the Committee, an Option may
be granted in tandem with a Stock Appreciation Right. Nonqualified Stock
Options are intended to satisfy the requirements of Code Section 162(m) and the
regulations promulgated hereunder.
2.2 INCENTIVE STOCK OPTIONS. Any Option intended to constitute an
Incentive Stock Option shall comply with the requirements of this Section 2.2
No Incentive Stock Option shall be granted with an exercise price below the
Fair Market Value of Common Stock on the Grant Date or with an exercise term
that extends beyond 10 years from the Grant Date. An Incentive Stock Option
shall not be granted to any Participant who owns (within the meaning of Code
Section 424(d)) stock of the Corporation or any Subsidiary possessing more than
10% of the total combined voting power of all classes of stock of the
Corporation or a Subsidiary unless, at the Grant Date, the exercise price for
the Option is at least 110% of the Fair Market Value of the shares subject to
the Option and the Option, by its terms, is not exercisable more than 5 years
after the Grant Date. The aggregate Fair Market Value of the underlying Common
Stock (determined at the Grant Date) as to which Incentive Stock Options
granted under the Plan (including a plan of a Subsidiary) may first be
exercised by a Participant in any one calendar year shall not exceed $100,000.
To the extent that an Option intended to constitute an Incentive Stock Option
shall violate the foregoing $100,000 limitation (or any other limitation set
forth in Code Section 422), the portion of the Option that exceeds the $100,000
limitation (or violates any other Code Section 422 limitation) shall be deemed
to constitute a Nonqualified Stock Option.
2.3 OPTION PRICE. The Committee shall determine the per share exercise
price for each Option granted under the Plan. The Committee, at its
discretion, may grant Nonqualified Stock Options with an exercise price below
100% of the Fair Market Value of Common Stock on the Grant Date. The foregoing
notwithstanding, no Incentive Stock Option shall be granted with an exercise
price below the Fair Market Value of Common Stock on the Grant Date.
2.4 PAYMENT FOR OPTION SHARES.
(a) The purchase price for shares of Common Stock to be acquired upon
exercise of an Option granted hereunder shall be paid in full in cash or by
personal check, bank draft or money order at the time of exercise; provided,
however, that in lieu of such form of payment a Participant may pay such
purchase price in whole or in part by tendering shares of Common Stock, which
are freely owned and held by the Participant independent of any restrictions,
hypothecations or other encumbrances, duly endorsed for transfer (or with duly
executed stock powers attached), or in any combination of the above. Shares of
Common Stock surrendered upon exercise shall be
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valued at the Stock Exchange closing price for the Corporation's Common Stock
on the day prior to exercise, as reported in The Wall Street Journal (or as
otherwise reported by such Stock Exchange), and the certificate(s) for such
shares, duly endorsed for transfer or accompanied by appropriate stock powers,
shall be surrendered to the Corporation. Participants who are subject to short
swing profit restrictions under the Exchange Act and who exercise an Option by
tendering previously-acquired shares shall do so only in accordance with the
provisions of Rule 16b-3 of the Exchange Act.
(b) At the discretion of the Committee, as set forth in a Participant's
Option Agreement, any Option granted hereunder may be deemed exercised by
delivery to the Corporation of a properly executed exercise notice, acceptable
to the Corporation, together with irrevocable instructions to the Participant's
broker to deliver to the Corporation sufficient cash to pay the exercise price
and any applicable income and employment withholding taxes, in accordance with
a written agreement between the Corporation and the brokerage firm ("cashless
exercise procedure").
III. STOCK APPRECIATION RIGHTS
3.1 GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted, held and exercised in such form as set by the Committee on an
individual basis. A Stock Appreciation Right may be granted to a Participant
with respect to such number of shares of Common Stock of the Corporation as the
Committee may determine. The number of shares covered by the Stock
Appreciation Right shall not exceed the number of shares of stock which the
Participant could purchase upon the exercise of the related Option. Stock
Appreciation Rights are intended to satisfy the requirements of Code Section
162(m) and the regulations promulgated thereunder.
3.2 EXERCISE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
shall be deemed exercised upon receipt by the Corporation of written notice of
exercise from the Participant. Except as permitted under Rule 16b-3, notice of
exercise of a Stock Appreciation Right by a participant subject to the insider
trading restrictions of Section 16(b) of the Securities Exchange Act of 1934,
shall be limited to the period beginning on the third day following the release
of the Corporation's quarterly or annual summary of earnings and ending on the
12th business day after such release. The exercise term of each Stock
Appreciation Right shall be limited to 10 years from its Grant Date or such
earlier period as set by the related Option. A Stock Appreciation Right shall
be exercisable only at such times and in such amounts as the related Option may
be exercised. A Stock Appreciation Right granted to a Participant subject to
the insider trading restrictions shall not be exercisable in whole or part
during the first six months of its term, unless the Participant dies or becomes
disabled during such six-month period.
3.3 STOCK APPRECIATION RIGHT ENTITLEMENT.
(a) Upon exercise of a Stock Appreciation Right, a Participant shall be
entitled to payment from the Corporation, in cash, shares, or partly in each
(as determined by the Committee
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in accordance with any applicable terms of the Agreement), of an amount equal
to the difference between--
(1) the Fair Market Value of the number of shares subject to
the Stock Appreciation Right on the exercise date, and
(2) the Option price of the associated Option multiplied
by the number of shares available under the Option.
(b) Notwithstanding paragraph (a) of this Section, upon
exercise of a Stock Appreciation Right the Participant shall be required to
surrender the associated Option.
3.4 MAXIMUM STOCK APPRECIATION RIGHT AMOUNT PER SHARE. The Committee may,
at its sole discretion, establish (at the time of grant) a maximum amount per
share which shall be payable upon the exercise of a Stock Appreciation Right,
expressed as a dollar amount or as a percentage or multiple of the Option price
of a related Option.
IV. RESTRICTED STOCK
4.1 GRANT OF RESTRICTED STOCK. Subject to the terms and conditions of the
Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock under this Plan to such Employees and in such amounts as it
shall determine.
4.2 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Stock shall be
evidenced by a Restricted Stock Agreement that shall specify the terms of the
restrictions, including the restriction period, or periods, the number of
Restricted Stock shares subject to the grant, and such other provisions,
including performance goals, as the Committee shall determine.
4.3 TRANSFERABILITY. Except as provided in this Article IV of the Plan,
the shares of Restricted Stock granted hereunder may not be transferred,
pledged, assigned, or otherwise alienated or hypothecated until the termination
of the applicable Restriction Period or for such period of time as shall be
established by the Committee and as shall be specified in the Restricted Stock
Agreement, or upon the earlier satisfaction of other conditions as specified by
the Committee in its sole discretion and as set forth in the Restricted Stock
Agreement. All rights with respect to the Restricted Stock granted to an
Employee shall be exercisable during a Participant's lifetime only by the
Participant or the Participant's legal representative.
4.4 OTHER RESTRICTIONS. The Committee shall impose such other
restrictions on any shares of Restricted Stock granted under the Plan as it may
deem advisable including, without limitation, restrictions under applicable
Federal or State securities laws, and may legend the certificates representing
Restricted Stock to give appropriate notice of such restrictions.
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4.5 CERTIFICATE LEGEND. In addition to any legends placed on certificates
pursuant to Sections 4.3 and 4.4, each certificate representing shares of
Restricted Stock shall bear the following legend:
The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer set forth in the Syntel, Inc.
1997 Stock Option and Incentive Plan ("Plan"), rules and administrative
guidelines adopted pursuant to such Plan and a Restricted Stock Agreement
dated_______________________. A copy of the Plan, such rules and
such Restricted Stock Agreement may be obtained from the General Counsel
of Syntel, Inc.
4.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Article
IV of the Plan, and subject to applicable federal and state securities laws,
shares covered by each Restricted Stock grant made under the Plan shall become
freely transferable by the Participant after the last day of the Restriction
Period. Once the shares are released from the restrictions, the Participant
shall be entitled to have the legend required by Section 4.5 of the Plan
removed from the applicable Common Stock certificate. Provided further, the
Committee shall have the discretion to waive the applicable Restriction Period
with respect to all or any part of a Restricted Stock grant.
4.7 VOTING RIGHTS. During the Restriction Period, Participants holding
shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to the Restricted Stock.
4.8 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Restriction Period, a
Participant shall be entitled to receive all dividends and other distributions
paid with respect to shares of Restricted Stock. If any dividends or
distributions are paid in shares of Common Stock during the Restriction Period,
the dividend or other distribution shares shall be subject to the same
restrictions on transferability as the shares of Restricted Stock with respect
to which they were paid.
4.9 RESTRICTED STOCK AWARDS GRANTED UNDER CODE SECTION 162(M). The
Committee, at its discretion, may designate certain Restricted Stock Awards as
granted pursuant to Code Section 162(m). Such Restricted Stock Awards must
comply with the following additional requirements, which override any other
provision set forth in this Article IV:
(a) Each Code Section 162(m) Restricted Stock Award shall be based upon
pre-established, objective performance goals that are intended to satisfy the
performance-based compensation requirements of Code Section 162(m) and the
regulations promulgated thereunder. Further, at the discretion of the
Committee, a Restricted Stock Award also may be subject to goals and
restrictions in addition to the performance requirements.
(b) Each Code Section 162(m) Restricted Stock Award shall be based upon
the attainment of specified levels of Corporation or Subsidiary performance
during a specified performance period, as measured by any or all of the
following: earnings (as measured by net
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income, net income per share, operating income or operating income per share),
sales growth and market capitalization.
(c) For each designated performance period, the Committee shall (i) select
those Employees who shall be eligible to receive a Restricted Stock Award, (ii)
determine the performance period, which may be a one to three fiscal year
period, (iii) determine the target levels of Corporation or Subsidiary
performance, and (iv) determine the number of shares subject to a Restricted
Stock Award to be paid to each selected Employee. The Committee shall make the
foregoing determinations prior to the commencement of services to which a
Restricted Stock Award relates (or within the permissible time-period
established under Code Section 162(m)) and while the outcome of the performance
goals and targets is uncertain.
(d) For each performance period, the Committee shall certify, in writing:
(i) if the Corporation has attained the performance targets, and (ii) the
number of shares pursuant to the Restricted Stock Award that are to become
freely transferable. The Committee shall have no discretion to waive all or
part of the conditions, goals and restrictions applicable to the receipt of
full or partial payment of a Restricted Stock Award.
(e) Any dividends paid during the Restriction Period automatically shall
be reinvested on behalf of the Employee in additional shares of Restricted
Stock under the Plan, and such additional shares shall be subject to the same
performance goals and restrictions as the other shares under the Restricted
Stock Award. No shares under a Code Section 162(m) Restricted Stock Award
shall become transferable until the Committee certifies in writing that the
performance goals and restrictions have been satisfied.
(f) No Employee, in any one fiscal year of the Company, shall be granted a
Code Section 162(m) Restricted Stock Award for more than 25,000 shares of
Common Stock.
(g) Except as provided in this Article IV of the Plan, the shares pursuant
to a Restricted Stock Award granted hereunder may not be transferred, pledged,
assigned, or otherwise alienated or hypothecated until the applicable
performance targets and other restrictions are satisfied, as shall be certified
in writing by the Committee. All rights with respect to a Performance Share
Award granted hereunder shall apply only to such Employee or the Employee's
legal representative.
(h) Except as otherwise provided in this Article IV of the Plan, and
subject to applicable federal and state securities laws, shares covered by each
Restricted Stock Award made under the Plan shall become freely transferable by
the Employee after the Committee has certified that the applicable performance
targets and restrictions have been satisfied. Once the shares are released
from the restrictions, the Employee shall be entitled to have the legend
required by Section 4.5 of the Plan removed from the applicable Common Stock
certificate.
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V. PERFORMANCE SHARE AWARDS
5.1 GRANT OF PERFORMANCE SHARE AWARDS. The Committee, at its discretion,
may grant Performance Share Awards to Employees of the Corporation and its
Subsidiaries and may determine, on an individual or group basis, the
performance goals to be attained pursuant to each Performance Share Award.
5.2 TERMS OF PERFORMANCE SHARE AWARDS. In general, Performance Share
Awards shall consist of rights to receive cash, Common Stock or a combination
of each, if designated performance goals are achieved. The terms of a
Participant's Performance Share Award shall be set forth in his individual
Performance Share Agreement. Each Agreement shall specify the performance
goals applicable to a particular Employee or group of Employees, the period
over which the targeted goals are to be attained, the payment schedule if the
goals are attained, and any other terms, conditions and restrictions applicable
to an individual Performance Share Award and not inconsistent with the
provisions of the Plan. The Committee, at its discretion, may waive all or
part of the conditions, goals and restrictions applicable to the receipt of
full or partial payment of a Performance Share Award.
5.3 PERFORMANCE SHARE AWARDS GRANTED UNDER CODE SECTION 162(M). The
Committee, at its discretion, may designate certain Performance Share Awards as
granted pursuant to Code Section 162(m). Such Performance Share Awards must
comply with the following additional requirements, which override any other
provision set forth in this Article V:
(a) The Committee, at its discretion, may grant Code Section 162(m)
Performance Share Awards based upon pre-established, objective performance
goals that are intended to satisfy the performance-based compensation
requirements of Code Section 162(m) and the regulations promulgated thereunder.
Further, at the discretion of the Committee, a Performance Share Award also
may be subject to goals and restrictions in addition to the performance
requirements.
(b) Each Code Section 162(m) Performance Share Award shall be based
upon the attainment of specified levels of Corporation or Subsidiary performance
during a specified performance period, as measured by any or all of the
following: earnings (as measured by net income, net income per share, operating
income or operating income per share), sales growth and market capitalization.
(c) For each designated performance period, the Committee shall
(i) select those Employees who shall be eligible to receive a Code Section
162(m) Performance Share Award, (ii) determine the performance period, which may
be a one to three fiscal year period, (iii) determine the target levels of
Corporation or Subsidiary performance, and (iv) determine the Performance Share
Award to be paid to each selected Employee. The Committee shall make the
foregoing determinations prior to the commencement of services to which a
Performance Share Award relates
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(or within the permissible time-period established under Code Section 162(m))
and while the outcome of the performance goals and targets is uncertain.
(d) For each performance period, the Committee shall certify, in
writing: (i) if the Corporation has attained the performance targets, and (ii)
the cash or number of shares (or combination thereof) pursuant to the
Performance Share Award that shall be paid to each selected Employee (or the
number of shares that are to become freely transferable, if a Performance Share
Award is granted subject to attainment of the designated performance goals).
The Committee, may not waive all or part of the conditions, goals and
restrictions applicable to the receipt of full or partial payment of a
Performance Share Award.
(e) Code Section 162(m) Performance Share Awards may be granted in two
different forms, at the discretion of the Committee. Under one form, the
Employee shall receive a Performance Share Award that consists of a legended
certificate of Common Stock, restricted from transfer prior to the satisfaction
of the designated performance goals and restrictions, as determined by the
Committee and specified in the Employee's Performance Share Agreement. Prior to
satisfaction of the performance goals and restrictions, the Employee shall be
entitled to vote the Performance Shares. Further, any dividends paid on such
shares during the performance/restriction period automatically shall be
reinvested on behalf of the Employee in additional Performance Shares under the
Plan, and such additional shares shall be subject to the same performance goals
and restrictions as the other shares under the Performance Share Award. No
shares under a Performance Share Award shall become transferable until the
Committee certifies in writing that the performance goals and restrictions have
been satisfied.
(f) Under the second form, the Employee shall receive a Performance
Share Agreement from the Committee that specifies the performance goals and
restrictions that must be satisfied before the Company shall issue the payment,
which may be cash, a designated number of shares of Common Stock or a
combination of the two. Any certificate for shares under such form of
Performance Share Award shall be issued only after the Committee certifies in
writing that the performance goals and restrictions have been satisfied.
(g) No Employee, in any one fiscal year of the Company, shall be
granted a Performance Share Award to receive more than 25,000 shares of Common
Stock.
(h) Except as provided in this Article V of the Plan, the shares
pursuant to a Performance Share Award granted hereunder may not be transferred,
pledged, assigned, or otherwise alienated or hypothecated until the applicable
performance targets and other restrictions are satisfied, as shall be certified
in writing by the Committee. All rights with respect to a Performance Share
Award granted hereunder shall apply only to such Employee or the Employee's
legal representative.
(i) In addition to any legends placed on certificates pursuant to
paragraph (h), each certificate representing shares under a Performance Share
Award shall bear the following legend:
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The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer set forth in the Syntel,
Inc. 1997 Stock Option and Incentive Plan ("Plan"), rules and
administrative guidelines adopted pursuant to such Plan and a
Performance Share Agreement dated_____________________. A copy of the
Plan, such rules and such Performance Share Agreement may be obtained
from the General Counsel of Syntel, Inc.
(j) Except as otherwise provided in this Article V of the Plan, and
subject to applicable federal and state securities laws, shares covered by each
Performance Share Award made under the Plan shall become freely transferable by
the Employee after the Committee has certified that the applicable performance
targets and restrictions have been satisfied. Once the shares are released from
the restrictions, the Employee shall be entitled to have the legend required by
paragraph (i) removed from the applicable Common Stock certificate.
VI. ANNUAL INCENTIVE AWARDS
6.1 GRANT OF ANNUAL INCENTIVE AWARDS.
(a) The Committee, at its discretion, may grant Annual Incentive
Awards to such Employees as it may designate from time to time. Annual
Incentive Awards shall be based upon pre-established, objective performance
goals that are intended to satisfy the performance-based compensation
requirements of Code Section 162(m) and the regulations promulgated thereunder.
(b) The determination of Annual Incentive Awards for a given year
shall be based upon the attainment of specified levels of Corporation or
Subsidiary performance as measured by any or all of the following: earnings (as
measured by net income, net income per share, operating income or operating
income per share), sales growth and market capitalization.
(c) For each fiscal year of the Corporation, the Committee shall (i)
select those Employees who shall be eligible to receive an Annual Incentive
Award, (ii) determine the performance period, which may be a one to three fiscal
year period, (iii) determine target levels of Corporation performance, and (iv)
determine the level of Annual Incentive Award to be paid to each selected
Employee upon the achievement of each performance level as provided below. The
Committee shall make the foregoing determinations prior to the commencement of
services to which an Annual Incentive Award relates (or within the permissible
time-period established under Code Section 162(m)) and while the outcome of the
performance goals and targets is uncertain.
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6.2 ATTAINMENT OF PERFORMANCE TARGETS.
(a) For each fiscal year, the Committee shall certify, in writing: (i) the
degree to which the Corporation has attained the performance targets, and (ii)
the amount of the Annual Incentive Award to be paid to each selected Employee.
(b) Notwithstanding anything to the contrary herein, the Committee may, in
its discretion, reduce any Annual Incentive Award based on such factors as may
be determined by the Committee, including, without limitation, a determination
by the Committee that such a reduction is appropriate: (i) in light of pay
practices of competitors; or (ii) in light of the Corporation's, a
subsidiary's, or an selected Employee's performance relative to competitors
and/or performance with respect to the Corporation's strategic business goals.
6.3 PAYMENT OF ANNUAL INCENTIVE AWARDS. An Annual Incentive Award shall
be paid only if (i) the Corporation achieves at least the threshold performance
level; and (ii) the Committee makes the certification described in Section 6.2.
6.4 ANNUAL INCENTIVE AWARD PAYMENT FORMS.
(a) Annual Incentive Awards shall be paid in cash and/or shares of
Common Stock of the Corporation, at the discretion of the Committee. Payments
shall be made within 30 days following (i) a certification by the Committee that
the performance targets were attained, and (ii) a determination by the Committee
that the amount of an Annual Incentive Award shall not be decreased in
accordance with Section 6.2. The aggregate maximum Annual Incentive Award that
may be earned by any Participant on behalf of any one fiscal year (calculated as
of the last day of the fiscal year for which the Annual Incentive Award is
earned) may not exceed the lesser of two (2) times the Participant's base salary
for the fiscal year or $1,000,000.
(b) The amount of an Annual Incentive Award to be paid upon the
attainment of each targeted level of performance shall equal a percentage of
each Participant's base salary for the fiscal year, as determined by the
Committee.
VIII. TERMINATION OF EMPLOYMENT
7.1. OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) If, prior to the date that an Option or Stock Appreciation Right
first becomes Vested, a Participant's employment is terminated for any reason
(other than as provided in Section 8.2, after a Change in Control), the
Participant's right to exercise the Option or Stock Appreciation Right shall
terminate and all rights thereunder shall cease.
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(b) If, on or after the date that an Option or Stock Appreciation
Right first becomes Vested, a Participant's employment is terminated for any
reason other than death or Disability, the Participant shall have the right,
within the earlier of (i) the expiration of the Option or Stock Appreciation
Right, and (ii) three months after termination of employment, to exercise the
Option or Stock Appreciation Right to the extent that it was exercisable and
unexercised on the date of the Participant's termination of employment, subject
to any other limitation on the exercise of the Option or Stock Appreciation
Right in effect on the date of exercise. The Committee may designate in a
Participant's Agreement that an Option or Stock Appreciation Right shall
terminate at an earlier time than set forth above.
(c) If, on or after the date that an Option or Stock Appreciation
Right first becomes Vested, a Participant dies while an Option or Stock
Appreciation Right is still exercisable, the person or persons to whom the
Option or Stock Appreciation Right shall have been transferred by will or by the
laws of descent and distribution, shall have the right within the exercise
period specified in the Participant's Agreement to exercise the Option or Stock
Appreciation Right to the extent that it was exercisable and unexercised on the
Participant's date of death, subject to any other limitation on exercise in
effect on the date of exercise. Provided, however, that the beneficial tax
treatment of an Incentive Stock Option may be forfeited if the Option is
exercised more than one year after a Participant's date of death.
(d) If, on or after the date that an Option or Stock Appreciation
Right first becomes Vested, a Participant terminates employment due to
Disability, the Participant shall have the right, within the exercise period
specified in the Participant's Agreement to exercise the Option or Stock
Appreciation Right to the extent that it was exercisable and unexercised on the
date of the Participant's termination of employment, subject to any other
limitation on the exercise of the Option or Stock Appreciation Right in effect
on the date of exercise. If the Participant dies after termination of
employment while the Option or Stock Appreciation Right is still exercisable,
the Option or Stock Appreciation Right shall be exercisable in accordance with
the terms of paragraph (c) above.
(e) The Committee, at the time of a Participant's termination of
employment, may accelerate a Participant's right to exercise an Option or extend
the exercise period of an Option or Stock Appreciation Right; provided, however
that the extension of the exercise period for an Incentive Stock Option may
cause such Option to forfeit its preferential tax treatment.
(f) Shares subject to Options and Stock Appreciation Rights that are
not exercised in accordance with the provisions of (a) through (e) above shall
expire and be forfeited by the Participant as of their expiration date and shall
become available for new grants and awards under the Plan as of such date.
7.2 RESTRICTED STOCK. If a Participant terminates employment for any
reason (other than as provided in Section 8.2, after a Change in Control), the
Participant's shares of Restricted Stock still subject to the Restriction
Period automatically shall expire and be forfeited by the Participant and,
subject to Section 1.6, shall be available for new grants and awards under the
Plan as of such
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termination date; provided, however, that the Committee, in its sole
discretion, may waive the restrictions remaining on any or all shares of
Restricted Stock and add such new restrictions to such shares of Restricted
Stock as it deems appropriate. Notwithstanding the foregoing, the Committee
shall not waive any restrictions on a Code Section 162(m) Restricted Stock
Award, but the Committee may include a provision in an Employee's Code Section
162(m) Restricted Stock Agreement stating that upon the Employee's termination
of employment due to (i) death, (ii) Disability, or (iii) involuntary
termination by the Company without cause prior to the attainment of the
associated performance goals and the termination of the Restriction Period,
that the performance goals and restrictions shall be deemed to have been
satisfied on a pro rata basis, so that the number of shares that become freely
transferable shall be based on the Employee's full number of months of
employment during the Restriction Period, and the Employee shall forfeit the
remaining shares and his rights to such forfeited shares shall terminate in
full.
7.3 PERFORMANCE SHARES. Performance Share Awards shall expire and be
forfeited by a Participant upon the Participant's termination of employment for
any reason (other than as provided in Section 8.2, after a Change in Control),
and such shares shall be available for new grants and awards under the Plan as
of such termination date; provided, however, that the Committee, in its
discretion, may waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Performance Share
Award. Notwithstanding the foregoing, the Committee shall not waive any
restrictions on a Code Section 162(m) Performance Share Award, but the
Committee may include a provision in an Employee's Code Section 162(m)
Performance Share Agreement stating that upon the Employee's termination of
employment due to (i) death, (ii) Disability, or (iii) involuntary termination
by the Company without cause prior to the attainment of the associated
performance goals and restrictions, that the performance goals and restrictions
shall be deemed to have been satisfied on a pro rata basis, so that the number
of shares that become freely transferable shall be based on the Employee's full
number of months of employment during the employment period, and the Employee
shall forfeit the remaining shares and his rights to such forfeited shares
shall terminate in full.
7.4 ANNUAL INCENTIVE AWARDS.
(a) A Participant who has been granted an Annual Incentive Award and
terminates employment due to Retirement, Disability or death prior to the end of
the Corporation's fiscal year shall be entitled to a prorated payment of the
Annual Incentive Award, based on the number of full months of employment during
the fiscal year. Any such prorated Annual Incentive Award shall be paid at the
same time as regular Annual Incentive Awards or, in the event of the
Participant's death, to the beneficiary designated by the Participant.
(b) A Participant who has been granted an Annual Incentive Award and
resigns or is terminated for any reason (other than Retirement, Disability or
death), before the end of the Corporation's fiscal year for which the Annual
Incentive Award is to be paid, shall forfeit the right to an Annual Incentive
Award payment for that fiscal year.
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<PAGE> 16
7.5 OTHER PROVISIONS. The transfer of an Employee from one corporation to
another among the Corporation and any of its Subsidiaries, or a leave of
absence under the leave policy of the Corporation or any of its Subsidiaries
shall not be a termination of employment for purposes of the Plan, unless a
provision to the contrary is expressly stated by the Committee in a
Participant's Agreement issued under the Plan.
VIII. ADJUSTMENTS AND CHANGE IN CONTROL
8.1 ADJUSTMENTS.
(a) The total amount of Common Stock for which Options, Stock
Appreciation Rights, Restricted Stock, Performance Share Awards and Annual
Incentive Awards may be issued under the Plan, and the number of shares subject
to any such grants or awards (both as to the number of shares of Common Stock
and the Option price), shall be adjusted pro rata for any increase or decrease
in the number of outstanding shares of Common Stock resulting from payment of a
stock dividend on Common Stock, a subdivision or combination of shares of Common
Stock, or a reclassification of Common Stock.
(b) The foregoing adjustments shall be made by the Committee. Any
such adjustment may provide for the elimination of any fractional share which
might otherwise become subject to an Option, Stock Appreciation Right,
Restricted Stock grant, Performance Share Award or Annual Incentive Award.
8.2 CHANGE IN CONTROL. Notwithstanding anything contained herein to the
contrary, in the event of a Participant's Change in Position subsequent to a
Change in Control, (i) any outstanding Option or Stock Appreciation Right
granted to such Participant hereunder immediately shall become fully Vested and
exercisable in full, regardless of any installment provision applicable to such
Option or Stock Appreciation Right; (ii) the remaining Restriction Period on
any Restricted Stock granted to such Participant hereunder immediately shall
lapse and the shares shall become fully transferable, subject to any applicable
federal or state securities laws; (iii) all performance goals and conditions
shall be deemed to have been satisfied and all restrictions shall lapse on any
outstanding Performance Share Awards granted to such Participant hereunder, and
such Awards shall become payable in full; and (iv) for purposes of any Annual
Incentive Awards granted to such Participant hereunder, the determination of
whether the performance targets have been achieved shall be made as of the date
of the Change in Control and payments due should become immediately payable.
IX. MISCELLANEOUS
9.1 PARTIAL EXERCISE/FRACTIONAL SHARES. The Committee may permit, and
shall establish procedures for, the partial exercise of Options and Stock
Appreciation Rights granted under the Plan.
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<PAGE> 17
No fractional shares shall be issued in connection with the exercise of a Stock
Appreciation Right or payment of a Performance Share Award or Annual Incentive
Award; instead, the Fair Market Value of the fractional shares shall be paid in
cash, or at the discretion of the Committee, the number of shares shall be
rounded down to the nearest whole number of shares and any fractional shares
shall be disregarded.
9.2 RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on the exercise of an Option or
Stock Appreciation Right (including, without limitation, the right of the
Committee to limit the time of exercise to specified periods), or the grant of
Restricted Stock or the payment of a Performance Share Award or Annual
Incentive Award, as may be required to satisfy the requirements of Rule 16b-3
of the Exchange Act.
9.3 RIGHTS PRIOR TO ISSUANCE OF SHARES. No Participant shall have any
rights as a shareholder with respect to shares covered by an Option, Stock
Appreciation Right, Restricted Stock grant, Performance Share Award or Annual
Incentive Award until the issuance of a stock certificate for such shares. No
adjustment shall be made for dividends or other rights with respect to such
shares for which the record date is prior to the date the certificate is
issued.
9.4 NON-ASSIGNABILITY. No Option, Stock Appreciation Right, Restricted
Stock grant, Performance Share Award or Annual Incentive Award shall be
transferable by a Participant except by will or the laws of descent and
distribution. During the lifetime of a Participant, an Option or Stock
Appreciation Right shall be exercised only by the Participant, except in the
event of the Participant's Disability, in which case the Participant's legal
guardian or the individual designated in the Participant's durable power of
attorney may exercise the Option or Stock Appreciation Right. Any transferee
of the Option or Stock Appreciation Right shall take the same subject to the
terms and conditions of this Plan. No transfer of an Option, Stock
Appreciation Right, Restricted Stock grant, Performance Share Award or Annual
Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Corporation unless the Corporation shall have been
furnished with written notice thereof and a copy of the will and/or such
evidence as the Corporation may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferees of the terms and
conditions of the Option, Stock Appreciation Right, Restricted Stock grant,
Performance Share Award or Annual Incentive Award.
9.5. SECURITIES LAWS.
(a) Anything to the contrary herein notwithstanding, the Corporation's
obligation to sell and deliver Common Stock pursuant to the exercise of an
Option or Stock Appreciation Right or deliver Common Stock pursuant to a
Restricted Stock grant, Performance Share Award or Annual Incentive Award is
subject to such compliance with federal and state laws, rules and regulations
applying to the authorization, issuance or sale of securities as the
Corporation deems necessary or advisable. The Corporation shall not be
required to sell and deliver or issue Common Stock unless and until it receives
satisfactory assurance that the issuance or transfer of such shares shall not
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<PAGE> 18
violate any of the provisions of the Securities Act of 1933 or the Securities
Exchange Act of 1934, or the rules and regulations of the Securities Exchange
Commission promulgated thereunder or those of the Stock Exchange or any stock
exchange on which the Common Stock may be listed, the provisions of any state
laws governing the sale of securities, or that there has been compliance with
the provisions of such acts, rules, regulations and laws.
(b) The Committee may impose such restrictions on any shares of Common
Stock acquired pursuant to the exercise of an Option or Stock Appreciation
Right or the grant of Restricted Stock or the payment of a Performance Share
Award or Annual Incentive Award under the Plan as it may deem advisable,
including, without limitation, restrictions (i) under applicable federal
securities laws, (ii) under the requirements of the Stock Exchange or any other
securities exchange, recognized trading market or quotation system upon which
such shares of Common Stock are then listed or traded, and (iii) under any blue
sky or state securities laws applicable to such shares. No shares shall be
issued until counsel for the Corporation has determined that the Corporation
has complied with all requirements under appropriate securities laws.
9.6 FOREIGN LAW RESTRICTIONS. Anything to the contrary herein
notwithstanding, the Corporation's obligation to sell and deliver Common Stock
pursuant to the exercise of an Option or Stock Appreciation Right or deliver
Common Stock pursuant to a Restricted Stock grant, Performance Share Award or
Annual Incentive Award is subject to compliance with the laws, rules and
regulations of any foreign nation applying to the authorization, issuance or
sale of securities, providing of compensation, transfer of currencies and
other matters, as may apply to any Participant hereunder who is a resident of
such foreign nation. To the extent that it shall be impermissible under such
foreign laws for such a Participant to pay the exercise price for any Option
granted under the Plan (to the extent Vested), the Committee may treat such
Participant as being entitled instead to exercise additional Stock Appreciation
Rights (to the extent not previously granted in tandem with such Option) which
are of equivalent value to the Participant, as determined by comparing the Fair
Market Value upon exercise of the number of shares subject to the Option (to
the extent Vested), less the Option price of such shares. Further, to the
extent that it shall be impermissible under such foreign laws for the
Corporation to deliver Common Stock to any such Participant pursuant to any
Option, Stock Appreciation Right, Restricted Stock grant, Performance Share
Award or Annual Incentive Award granted under the Plan (to the extent Vested),
the Committee may arrange for payment to the Participant of an equivalent
amount of cash in lieu of such shares (less any amount otherwise payable by the
Participant), in accordance with all applicable United States and foreign
currency restrictions and regulations. To the extent that the Corporation is
restricted in accordance with such foreign laws from delivering shares of
Common Stock to Participants as would otherwise be provided for in this Plan,
the Corporation shall be released from such obligation and shall not be subject
to the claims of any Participant hereunder with respect thereto.
9.7 WITHHOLDING TAXES.
(a) The Corporation shall have the right to withhold from a
Participant's compensation or require a Participant to remit sufficient funds to
satisfy applicable withholding for
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income and employment taxes upon the exercise of an Option or Stock
Appreciation Right or the lapse of the Restriction Period on a Restricted Stock
grant or the payment of a Performance Share Award or Annual Incentive Award. A
Participant may make a written election to tender previously-acquired shares of
Common Stock or have shares of stock withheld from the exercise, provided that
the shares have an aggregate Fair Market Value sufficient to satisfy in whole
or in part the applicable withholding taxes. The cashless exercise procedure
of Section 2.4 may be utilized to satisfy the withholding requirements related
to the exercise of an Option. At no point shall the Corporation withhold from
the exercise of an Option more shares than are necessary to meet the
established tax withholding requirements of federal, state and local
obligations.
(b) A Participant subject to the insider trading restrictions of
Section 16(b) of the Exchange Act may use Common Stock to satisfy the applicable
withholding requirements only if such disposition is approved in accordance
with Rule 16b-3 of the Exchange Act. Any election by a Participant to utilize
Common Stock for withholding purposes is further subject to the discretion of
the Committee.
9.8 TERMINATION AND AMENDMENT.
(a) The Board may terminate the Plan, or the granting of Options,
Stock Appreciation Rights, Restricted Stock, Performance Share Awards or Annual
Incentive Awards under the Plan, at any time. No new grants or awards shall be
made under the Plan after the tenth anniversary of the adoption of this Plan by
the Board, or approval by the shareholders, whichever is earlier, as noted in
Section 1.1.
(b) The Board may amend or modify the Plan at any time and from time
to time, but no amendment or modification, without the approval of the
shareholders of the Corporation, shall (i) materially increase the benefits
accruing to Participants under the Plan; (ii) increase the amount of Common
Stock for which grants and awards may be made under the Plan, except as
permitted under Sections 1.6 and 8.1; or (iii) change the provisions relating to
the eligibility of individuals to whom grants and awards may be made under the
Plan.
(c) No amendment, modification, or termination of the Plan shall in
any manner affect any Option, Stock Appreciation Right, Restricted Stock grant,
Performance Share Award or Annual Incentive Award granted under the Plan without
the consent of the Participant holding the Option, Stock Appreciation Right,
Restricted Stock grant, Performance Share Award or Annual Incentive Award.
9.9 EFFECT ON EMPLOYMENT. Neither the adoption of the Plan nor the
granting of any Option, Stock Appreciation Right, Restricted Stock, Performance
Share Award or Annual Incentive Award pursuant to the Plan shall be deemed to
create any right in any individual to be retained or continued in the
employment of the Corporation or a Subsidiary.
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9.10 USE OF PROCEEDS. The proceeds received from the sale of Common Stock
pursuant to the Plan will be used for general corporate purposes of the
Corporation.
9.11 APPROVAL OF PLAN. As noted in Section 1.1, the Plan has been
approved by the shareholders of the Corporation within 12 months of adoption of
the Plan by the Board, as required by Section 422 of the Code.
IN WITNESS WHEREOF, this Amended and Restated 1997 Stock Option and
Incentive Plan has been executed on behalf of the Corporation on the ____ day
of_____________, 1997.
SYNTEL, INC.
By:_________________________
Bharat Desai, President
BH/89542.6
ID/DRM
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<PAGE> 1
EXHIBIT 10.13
SYNTEL, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT. On April 1, 1997, the Board of Directors ("Board") of
Syntel, Inc. ("Corporation") adopted the Employee Stock Purchase Plan ("Plan"),
which was approved by the shareholders of the Corporation on April 1, 1997,
effective as provided in Section 23 below.
2. PURPOSE. The purpose of this Plan is (i) to promote the best
interests of the Corporation and its shareholders by encouraging Employees of
the Corporation and its Subsidiaries to acquire an ownership interest in the
Corporation through the purchase of stock in the Corporation, thus identifying
their interests with those of shareholders, and (ii) to enhance the ability of
the Corporation to attract and retain qualified Employees. The Plan is intended
to constitute an "employee stock purchase plan" under Section 423 of the Code.
3. DEFINITIONS. As used in this Plan, the following terms have the
meaning described below:
(a) "CODE" means the Internal Revenue Code of 1986, as amended.
(b) "COMMITTEE" means the Compensation Committee of the Corporation,
which shall be comprised of two or more members of the Board of Directors of the
Corporation.
(c) "COMMON STOCK" means shares of the Corporation's authorized common
stock.
(d) "CORPORATION" means Syntel, Inc., a Michigan corporation.
(e) "ELECTION PERIOD" has the meaning described in Section 10(a) below.
(f) "EMPLOYEE" means an individual who has an "employment relationship"
with the Corporation or a Subsidiary, as defined in Treasury Regulation
1.421-7(h), and the term "employment" means employment with the Corporation, or
a Subsidiary of the Corporation.
(g) "FAIR MARKET VALUE" means for purposes of determining the value of
Common Stock the Stock Exchange closing price of the Corporation's Common Stock
as reported in The Wall Street Journal (or as otherwise reported by such Stock
Exchange) for the Grant Date or the date of exercise of an option, as is
applicable. In the event that there were no Common Stock transactions on such
date, the Fair Market Value shall be determined as of the immediately preceding
date on which there were Common Stock transactions.
(h) "GRANT DATE" means the first day of any Purchase Period hereunder,
which shall be the first date upon which payroll deductions may be made with
respect to any offering of options under the Plan.
(i) "INITIAL PUBLIC OFFERING" means a firm commitment underwritten
initial
<PAGE> 2
public offering of at least 2,000,000 shares of the Corporation's Common Stock
registered under the Securities Act of 1933, as amended.
(j) "PLAN" means the Syntel, Inc. Employee Stock Purchase Plan, the terms
of which are set forth herein, and amendments thereto.
(k) "PURCHASE PERIOD" has the meaning described in Section 10(b) below.
(l) "STOCK EXCHANGE" means the principal national securities exchange on
which the Common Stock is listed for trading or, if the Common Stock is not
listed for trading on a national securities exchange, such other recognized
trading market or quotation system upon which the largest number of shares of
Common Stock has been traded in the aggregate during the last 20 days before
the date on which an Option is exercised.
(m) "SUBSIDIARY" means a corporation defined in Code Section 424(f).
4. STOCK. The stock subject to option and purchase under the Plan shall be
the Common Stock of the Corporation (the "Common Stock"), and may be either
authorized and unissued shares or shares that have been reacquired by the
Corporation. The total amount of Common Stock on which options may be granted
under the Plan shall not exceed 1,000,000 shares, subject to adjustment in
accordance with Section 14. Shares of Common Stock subject to any unexercised
portion of a terminated, canceled or expired option granted under the Plan may
again be subjected to options under the Plan.
5. ADMINISTRATION. The Plan shall be administered by the Committee. The
Committee may prescribe rules and regulations from time to time for the
administration of the Plan and may decide questions which may arise with
respect to its interpretation or application. The decisions of the Committee
in interpreting the Plan shall be final, conclusive and binding on all persons,
including the Corporation, its subsidiaries, Employees and optionees. The
Committee, from time to time via the offering of options to all eligible
Employees, shall grant to eligible Employees options to purchase Common Stock
pursuant to the terms and conditions of the Plan. The total number of options
to purchase Common Stock to be offered at any time hereunder shall be
determined by the Committee in its sole discretion.
6. PARTICIPANTS. Except as provided in Section 7 below, any Employee who
has completed six full months of service with the Corporation, or any
subsidiary of the Corporation, and whose customary employment is more than 20
hours per week and five or more months per calendar year on the various
offering dates of options granted under this Plan is eligible to participate in
the Plan in accordance with its terms.
7. OWNERSHIP AND PURCHASE LIMITATIONS. Notwithstanding anything herein to
the contrary, no Employee shall be entitled to participate in an offering under
the Plan if such Employee, immediately after a grant under this Plan, would, in
the aggregate, own or hold options to purchase
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shares of Common Stock equal to or exceeding five percent (5%) or more of
the total combined voting power or value of all classes of stock of the
Corporation or of its Subsidiaries. For the foregoing purposes the rules of
Section 424(d) of the Code shall apply in determining stock ownership. With
respect to individual Employees, Section 424(d) provides that an Employee shall
be considered as owning the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse, ancestors,
and lineal descendants. No Employee shall be granted an option under the Plan
which, together with options granted under all stock purchase plans (qualified
under Section 423 of the Code) of the Corporation and its Subsidiaries permits
the employee to accrue option rights in excess of $25,000 of Fair Market Value
of such shares (determined at the Grant Date) for each calendar year in which
an option is outstanding at any time. 8. OPTION PRICE. The option price of the
shares shall be determined at the discretion of the Committee for each grant;
provided, however, that the option price shall not be lower than the lesser of
(i) 85% of the Fair Market Value of shares of the Corporation's Common Stock on
the Grant Date, or (ii) 85% of the Fair Market Value of the shares of the
Corporation's Common Stock on the date of exercise of the option. For purposes
of this Plan, the date of exercise shall be the last day of the Purchase
Period.
8. OPTION PRICE. The option price of the shares shall be determined at the
discretion of the committe for each grant; provided, however, that the option
price shall not be lower than the lesser of (i) 85% of the Fair Market Value of
shares of the Corporation's Common Stock on the Grant Date, or (ii) 85% of the
Fair Market Value of the shares of the Corporation's Common Stock on the date
of execrise of the option. For purposes of this Plan, the date of exercse
shall be the last day of the Purchase Period.
9. NUMBER OF SHARES OFFERED. The maximum number of shares of Common Stock
which each eligible Employee shall be entitled to purchase in a particular
offering of options shall be determined by the Committee and also shall bear a
uniform relationship to the Employee's cash compensation, as defined below,
subject to rounding down for fractional shares, as determined from time to time
by the Committee; provided, however, that the aggregate option price for the
number of shares of Common Stock that each eligible Employee shall be entitled
to purchase in a particular offering shall not exceed a maximum of thirty
percent (30%) of such Employee's cash compensation during the Purchase Period.
For purposes of this Plan, cash compensation shall mean an Employee's total
cash compensation during the Purchase Period, excluding performance, hire-on
and non-compete bonuses and any other non-recurring special pay as determined
by the Committee.
10. PAYMENT FOR OPTION SHARES.
(a) SHARES UNDER OPTION. An eligible Employee may elect to participate
in an offering of options by delivering to the Corporation an election to
participate and a payroll deduction form within a certain period of time after
the offering date, which period shall be designated by the Committee prior to
each offering date (the "Election Period"). An Employee who elects to
participate may not authorize payroll deductions which, in the aggregate, are
less than one percent (1%) of the Employee's cash compensation. Only whole
shares of Common Stock may be purchased under the Plan.
(b) A participating Employee must authorize payroll deductions over a
period of six months next succeeding the Election Period or such other period
of time as designated by the Committee (the "Purchase Period"); provided,
however, that no such Purchase Period shall extend beyond 27 months from the
Grant Date of the particular offering of options under the Plan to which
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<PAGE> 4
it relates. An Employee may suspend payroll deductions during a Purchase
Period only at the discretion of the Committee in the event of an unforeseen
hardship; provided, however, that payroll deductions made prior to approval of
the suspension by the Committee shall still be used to purchase Common Stock
for the Employee at the end of the Purchase Period.
(c) Payroll deductions shall commence on the first payroll date in the
Purchase Period and shall continue until the last payroll date in the Purchase
Period.
(d) A participating Employee's option shall be deemed to have been
exercised on the last business day of the Purchase Period.
(e) As soon as practicable after the end of the Purchase Period, the
Corporation shall deliver to each Employee or a designated brokerage account,
through a certificate or electronic transfer, the shares of Common Stock that
he has purchased. Any amount that has been deducted and withheld in excess of
the option price automatically shall be applied toward the purchase of option
shares in the next Purchase Period. An Employee who does not elect to
participate in the following Purchase Period shall receive a check from the
Corporation for any amount that has been deducted and withheld in excess of the
option price.
11. NO INTEREST. No interest shall accrue or be paid on any amounts paid
by payroll deduction by any participating Employee.
12. TERMINATION OF EMPLOYMENT. If a participating Employee ceases to be
employed by the Corporation for any reason, including but not limited to,
voluntary or forced resignation, retirement, death, disability or lay-off, the
Corporation, within a reasonable time after notice of the termination, shall
issue a check to the former Employee (or executor, administrator or legal
representative, if applicable) in the aggregate amount of the Employee's
payroll deductions that had not been applied towards the purchase of option
shares as of the date of termination.
13. NON-ASSIGNABILITY. No option shall be transferable by a
participating Employee, and an option may be exercised during a participating
Employee's lifetime only by the Employee. Upon the death of a participating
Employee, his or her executor, administrator or other legal representative
shall receive a check from the Corporation representing the aggregate amount of
the deceased Employee's payroll deductions that had not been applied towards
the purchase of option shares as of the date of death.
14. ADJUSTMENTS. The total amount of Common Stock for which options may
be issued under the Plan (both as to the number of shares of Common Stock and
the option price), shall be adjusted pro rata for any increase or decrease in
the number of outstanding shares of Common Stock resulting from payment of a
stock dividend on Common Stock, a subdivision or combination of shares of
Common Stock, or a reclassification of Common Stock, and, pursuant to the
paragraph below, in the event of a merger in which the Corporation shall be the
surviving corporation.
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After any merger of one or more corporations into the Corporation, or
after any consolidation of the Corporation and one or more corporations in
which the Corporation shall be the surviving corporation, each participating
Employee shall, at no additional cost, be entitled upon the exercise of an
option, to receive (subject to any required action by shareholders), in lieu of
the number of shares of Common Stock to which such option shall then be
exercised, the number and class of shares of stock or other securities to which
such participating Employee would have been entitled to receive pursuant to the
terms of the agreement of merger or consolidation if at the time of such merger
or consolidation such participating Employee had been a holder of record of a
number of shares of Common Stock equal to the number of shares to which such
option shall then be so exercised. Comparable rights shall accrue to each
participating Employee in the event of successive mergers or consolidations of
the character described above.
Anything contained herein to the contrary, upon the dissolution or
liquidation of the Corporation or upon any merger or consolidation in which the
Corporation is not the surviving corporation, the Purchase Period for any
option granted under this Plan shall terminate as of the date of the
aforementioned event, but each participating Employee who is then an Employee
of the Corporation or a subsidiary shall have the right, immediately prior to
such dissolution, liquidation, merger or consolidation, to exercise his option
for such Purchase Period in full as of the last day of the Purchase Period.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole discretion. Any
such adjustment may provide for the elimination of any fractional share which
might otherwise become subject to an option.
15. TERMINATION AND AMENDMENT. The Board may terminate the Plan, or the
granting of options under the Plan, at any time. No option shall be granted
under the Plan after the tenth anniversary of the adoption of this Plan by the
Board, or approval by the shareholders, whichever is earlier, as noted in
Section 1.
The Board may amend or modify the Plan at any time and from time to time,
but no amendment or modification shall disqualify the Plan under Section 423 of
the Code or under Securities and Exchange Commission Rule 16b-3 without the
approval of the shareholders of the Corporation.
No amendment, modification, or termination of the Plan shall in any manner
affect any option granted under the Plan without the consent of the Employee
holding the option.
16. RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on the exercise of an option as
may be required to satisfy the requirements of Rule 16b-3, of the Securities
Exchange Act of 1934, as amended from time to time and any successor thereto.
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17. RIGHTS PRIOR TO ISSUANCE OF SHARES. No participating Employee shall
have any rights as a shareholder with respect to shares covered by an option
until the issuance of a stock certificate or electronic transfer to the
Employee or his brokerage account of such shares. No adjustment shall be made
for dividends or other rights with respect to such shares for which the
record date is prior to the date the certificate is issued or the shares
electronically delivered to a brokerage account.
18. SECURITIES LAWS.
(a) Anything to the contrary herein notwithstanding, the Corporation's
obligation to sell and deliver Common Stock pursuant to the exercise of an
option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities as
the Corporation deems necessary or advisable. The Corporation shall not be
required to sell and deliver or issue Common Stock unless and until it receives
satisfactory assurance that the issuance or transfer of such shares shall not
violate any of the provisions of the Securities Act of 1933 or the Securities
Exchange Act of 1934, or the rules and regulations of the Securities Exchange
Commission promulgated thereunder or those of the Stock Exchange or any other
securities exchange on which the Common Stock may be listed, the provisions of
any state laws governing the sale of securities, or that there has been
compliance with the provisions of such acts, rules, regulations and laws.
(b) The Committee may impose such restrictions on any shares of Common
Stock acquired pursuant to the exercise of an option under the Plan as it may
deem advisable, including, without limitation, restrictions (i) under
applicable federal securities laws, (ii) under the requirements of the Stock
Exchange or any other securities exchange, recognized trading market, or
quotation system upon which such shares of Common Stock are then listed or
traded, and (iii) under any blue sky or state securities laws applicable to
such shares. No shares shall be issued until counsel for the Corporation has
determined that the Corporation has complied with all requirements under
appropriate securities laws.
19. FOREIGN LAW RESTRICTIONS. Anything to the contrary herein
notwithstanding, the Corporation's obligation to sell and deliver Common Stock
pursuant to the exercise of an option is subject to compliance with the laws,
rules and regulations of any foreign nation applying to the authorization,
issuance or sale of securities, providing of compensation, transfer of
currencies and other matters, as may apply to any participating Employee
hereunder who is a resident of such foreign nation. To the extent that it
shall be impermissible under such foreign laws for such a Participant to pay
the exercise price for any option granted under the Plan or for the Corporation
to deliver Common Stock to any such Participant pursuant to any option granted
under the Plan, the Committee shall refund to such Employee the aggregate
amount of the payroll deductions made pursuant to this Plan (to the extent such
amounts have not previously been applied towards the purchase of option shares,
in accordance with all applicable United States and foreign currency
restrictions and regulations. To the extent that the Corporation is restricted
in accordance with such foreign laws from delivering shares of Common Stock to
participating Employees as would
6
<PAGE> 7
otherwise be provided for in this Plan, the Corporation shall be released
from such obligation and shall not be subject to the claims of any Employee
hereunder with respect thereto.
20. APPROVAL OF PLAN. As noted in Section 1, the Plan has been approved
by the shareholders of the Corporation within 12 months of adoption of the Plan
by the Board, as required by Section 423 of the Code.
21. EFFECT ON EMPLOYMENT. Neither the adoption of the Plan nor the
granting of an option pursuant to it shall be deemed to create any right in any
individual to be retained or continued in the employment of the Corporation or
a Subsidiary.
22. USE OF PROCEEDS. The proceeds received from the sale of Common Stock
pursuant to the Plan will be used for general corporate purposes of the
Corporation.
23. EFFECTIVE DATE. This Plan shall automatically become effective on the
date upon which an Initial Public Offering of the Corporation's Common Stock
becomes effective, and no option shall be granted pursuant to this Plan prior
to such date.
IN WITNESS WHEREOF, this Syntel, Inc. Employee Stock Purchase Plan has
been executed on behalf of the Corporation on this the 1st day of April, 1997.
SYNTEL, INC.
By:
_________________________
Bharat Desai, President
BH/110963.2
ID/JDO
7
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into this 5th day of June, 1997, and
is between BHARAT DESAI, residing at_________________,_________ ______ (the
"Executive"), and SYNTEL, INC., a Michigan corporation (the "Company"), with its
principal offices located at 2800 Livernois, Suite 400, Troy, Michigan 48083.
The Executive is currently the President and Chief Executive Officer of the
Company. The Executive and the Company wish to set forth in this Agreement the
terms and conditions of the Executive's employment with the Company.
In consideration of the mutual covenants herein contained, the parties
agree as follows:
1. EMPLOYMENT. The Company employs the Executive as its President and
Chief Executive Officer, and the Executive accepts such employment, upon the
terms and conditions set forth in this Agreement.
2. DUTIES DURING EMPLOYMENT PERIOD. The Executive shall perform and
discharge well and faithfully such duties for the Company (a) as are consistent
with those normally incident to his position as President and Chief Executive
Officer, and (b) as may be reasonably assigned to the Executive from time to
time by the Board of Directors of the Company. The Executive shall devote
substantially all of his business time and attention, his best efforts, and all
of his skill and ability to the business of the Company. Notwithstanding the
foregoing, the Executive shall be permitted to engage in other business
activities (as an active participant or a passive investor), provided that such
activities are not rendered for a company which transacts business with the
Company or engages in business competitive with that conducted by the Company
and further provided that such activities (individually or collectively) do not
materially interfere with the performance of his duties or responsibilities
under this Agreement.
3. TERM OF EMPLOYMENT. Executive's employment under Paragraph 1 of this
Agreement shall be for a period (the "Employment Period") commencing on the date
the Company's Common Stock begins trading on the NASDAQ National Market and
terminating on December 31, 1999, unless sooner terminated in accordance with
one of the following alternatives.
(a) The Executive's employment under Paragraph 1 may be terminated by
the Company at any time during the Employment Period for Cause (as hereinafter
defined) by action of the Board of Directors upon giving the Executive notice of
such termination and the reason or reasons therefor at least 30 days prior to
the date upon which termination shall take effect. As used herein, the term
"Cause" shall mean any of the following events:
(i) the Executive's conviction of or plea of guilty or nolo
contendere to a crime providing for a term of imprisonment
(other than traffic violations and crimes not requiring the knowing
involvement of the Executive in the commission thereof) or
substantial and sustained alcohol or other substance abuse on the
part of the Executive (whether or not
<PAGE> 2
constituting a crime) which continues following a written warning from the
Board of Directors of the Company.
(ii) the Executive's (A) neglect of duties involving bad faith, (B)
willful failure to act with respect to duties previously communicated to
the Executive in writing by the Board of Directors of the Company, or (C)
other willful misconduct in connection with the performance of his duties
hereunder, and in the case of any such neglect, failure, or, to the extent
curable, misconduct, only if it is not cured within 10 days from the
receipt by the Executive of written notice from the Company's Board of
Directors specifying such alleged neglect, failure or misconduct.
If the Executive's employment is terminated under the provisions of this clause
(a), all rights of the Executive to compensation and benefits pursuant to
Paragraph 4 shall cease as of the effective date of such termination. If the
Executive's employment is terminated by the Company without "Cause" (as defined
in this clause (a)), the Company shall pay to the Executive his then salary, at
the times and in the amounts then in effect, for the remaining term of this
Agreement, without reduction for any compensation Executive may receive from
other sources. Payment of such amounts to the Executive in such event shall
discharge the Company from any liability under this Agreement to the Executive
for improper termination of his employment.
(b) If the Executive dies, the Executive's employment shall be deemed to
cease as of the date of his death, and the Executive's rights pursuant to
Paragraph 4 shall cease as of such date.
(c) If the Executive is incapacitated by accident, sickness or otherwise so
as to render the Executive mentally or physically incapable of performing his
duties required under Paragraph 2 (which unless agreed to by the Executive shall
be determined by resolution of the Company's Board of Directors following a
thorough examination by at least two qualified medical experts who concur in
their finding of disability, one of which will be Executive's personal
physician), and such condition is not cured within 180 business days after the
first occurrence of such disability, upon the expiration of such period or at
any time thereafter, by action of the Board of Directors of the Company, the
Executive's employment may be terminated immediately upon giving the Executive
notice to that effect. If the Executive's employment is terminated pursuant to
the provisions of this clause (c), the Executive's rights pursuant to Paragraph
4 shall cease as of the date of such termination.
4. EMPLOYMENT PERIOD COMPENSATION.
(a) Salary. As full compensation for services rendered by the Executive
hereunder, the Company shall pay to the Executive a salary at the rate of
$300,000 per year, payable biweekly, through December 31, 1998. The Executive's
salary for the calendar year ended December 31, 1999, shall be established by
the Compensation Committee of the Board of Directors of the Company. Bonus
awards to the Executive during the Employment Period shall be established by the
Compensation Committee of the Board of Directors.
2
<PAGE> 3
(b) Other Benefits. The Company will provide the Executive during the
Employment Period with fringe benefits no less favorable than those then being
received generally by other executive officers of the Company and in a manner
and amount consistent with his position, compensation, seniority and age.
5. COVENANT NOT TO COMPETE. The Executive hereby acknowledges and
recognizes the highly competitive nature of the Company's business and,
accordingly, for the consideration set forth in Paragraph 4 above:
(a) The Executive agrees that during the Restricted Period (as defined
below), he will not, directly or indirectly, engage in the design, development,
manufacturing, sale, marketing or servicing of products which are designed,
developed, manufactured, sold, marketed or serviced by the Company during the
Executive's employment with the Company or engage in any other activity which is
in competition with the activities of the Company (the "Business Activities"),
other than on behalf of the Company, whether such engagement is as an officer,
director, proprietor, employee, partner, investor (other than as a holder of
less than 3% of the outstanding capital stock of a corporation whose stock is
actively traded over-the-counter or on any national securities exchange),
consultant, advisor, agent or otherwise, anywhere in the United States.
(b) The Executive agrees that during the Restricted Period, he will not
directly or indirectly engage in any Business Activity (other than on behalf of
the Company) by supplying products or providing services heretofore supplied or
provided to any customer with whom the Company does business during the
Executive's employment with the Company, whether as an officer, director,
proprietor, employee, partner, investor (other than as a holder of less than 3%
of the outstanding capital stock of a corporation whose stock is actively traded
over-the-counter or on a national securities exchange), consultant, advisor,
agent or otherwise.
(c) The Executive agrees that during the Restricted Period, he will not,
directly or indirectly, assist others in engaging in any of the Business
Activities in the manner prohibited to the Executive.
(d) The Executive agrees that during the Restricted Period, he will not,
directly or indirectly, induce employees of the Company to engage in any
activities that are prohibited to the Executive or to terminate their
employment.
As used herein, the term "Restricted Period" shall mean the period
commencing with the date hereof and ending two year after the termination of the
Executive's employment with the Company, irrespective of the reason for any
termination of employment.
It is expressly understood and agreed that although the Executive and the
Company consider the restrictions contained in each of clauses (a) through (d)
above reasonable for the purpose of preserving for the Company its goodwill,
proprietary rights and going concern value, if a final judicial determination is
made by a court having jurisdiction that the time or territory or any other
3
<PAGE> 4
restriction contained in this Paragraph 5 is an unenforceable restriction on
the activities of the Executive, the provisions of this Paragraph 5 shall not
be rendered void but shall be deemed amended to apply as to such maximum time
and territory and to such other extent as such court may judicially determine
or indicate to be reasonable. Alternatively, if the court referred to above
finds that any restriction contained in clauses (a) through (d) is
unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained therein. The provisions of this Paragraph 5 shall
in no respect limit or otherwise affect the rights or obligations of the
Executive under other agreements with the Company.
6. DISCLOSURE OF INFORMATION. The Executive acknowledges that the
Company's (and its affiliates') trade secrets, private or secret processes as
they exist from time to time and information concerning products, development,
technical information, procurement and sales activities and procedures,
promotion and pricing techniques and credit and financial data concerning
customers (the "Proprietary Information") are valuable, special and unique
assets of the Company, access to and knowledge of which are essential to the
performance of the Executive's duties hereunder. In light of the highly
competitive nature of the industry in which the Company's business is conducted,
the Executive agrees that all Proprietary Information heretofore or in the
future obtained by the Executive as a result of the Executive's association with
the Company shall be considered confidential. In recognition of this fact, the
Executive agrees that he will not, during and after the Employment Period,
disclose any of such Proprietary Information to any person or other entity for
any reason or purpose whatsoever and that he will not use any such Proprietary
Information for his own purposes or for the benefit of any person or other
entity (except the Company) under any circumstances unless such Proprietary
Information has been publicly disclosed generally or, upon advice of legal
counsel reasonably satisfactory to the Company, Executive is legally required to
disclose such Proprietary Information.
7. COMPANY RIGHT TO INVENTIONS. The Executive shall promptly disclose,
grant and assign to the Company for its sole use and benefit any and all
inventions, improvements, technical information and suggestions relating in any
way to the products of the Company which the Executive has in his past
association with the Company conceived, developed or acquired, or may conceive,
develop or acquire during the Executive's employment by the Company (whether or
not during usual working hours), together with all patent applications, letters
patent, copyrights and reissues thereof, as well as trademarks, tradenames,
service marks and all applications with respect thereto, that may at any time be
granted for or upon any such invention, improvement or technical information.
8. REMEDIES. The Executive acknowledges and agrees that the Company's
remedy at law for a breach or threatened breach of any of the provisions of
Paragraphs 5, 6 or 7 would be inadequate. In recognition of this fact, in the
event of a breach by the Executive of any of the provisions of Paragraphs 5, 6
or 7 the Executive agrees that, in addition to its remedy at law, then at the
Company's option, all rights of the Executive to compensation under Paragraph 4
hereof and all amounts then or thereafter due the Executive from the Company
under this Agreement may be
4
<PAGE> 5
terminated and the Company, without posting any bond, shall be entitled to
obtain, and the Executive agrees not to oppose the Company's request for,
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which
may then be available. The Executive acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent injunction
merely prohibiting the use of Proprietary Information would not be an adequate
remedy upon breach or threatened breach of Paragraph 6, and consequently
agrees, upon proof of any such breach, to the granting of injunctive relief
prohibiting the marketing or sale of products and providing of services of the
kind marketed, sold or provided by the Company or its affiliates during the
Executive's employment.
9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be deemed properly given if in writing and if mailed by
registered or certified mail, postage prepaid with return receipt requested or
sent by express courier service, charges prepaid by shipper, to his residence in
the case of notices to the Executive, and to the principal offices of the
Company, to the attention of its President, in the case of notices to the
Company (or to such other address as a party is directed pursuant to written
notice from the other party).
10. ASSIGNMENT. This Agreement shall not be assignable by either party
except by the Company to any subsidiary or affiliate of the Company or any
successor in interest to the Company's business.
11. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties relating to the subject of employment, supersedes and replaces in
its entirety any existing employment agreement of the Executive and may not be
waived, changed, modified, extended or discharged orally but only by agreement
in writing signed by the party against whom enforcement of any such waiver,
change, modification, extension or discharge is sought. The waiver by the
Company of a breach of any provision of this Agreement by the Executive shall
not operate or be construed as a waiver of a breach of any other provision of
this Agreement or of any subsequent breach by the Executive.
12. TERMINATION. Any termination of this Agreement in accordance with
Paragraph 3 shall not affect the provisions of Paragraphs 5, 6, 7 or 8, which
shall survive such termination in accordance with their terms.
13. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan.
14. HEADINGS. The headings of the Paragraphs are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SYNTEL, INC.
By: Daniel M. Moore
-----------------------------------
Its: Vice President and General Counsel
-----------------------------------
BHARAT DESAI
/s/ Bharat Desai
---------------------------------------
BH/115727.2
ID/DRM
6
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into this 5th day of June, 1997, and
is between NEERJA SETHI, residing at__________________,_____________ _____, (the
"Executive"), and SYNTEL, INC., a Michigan corporation (the "Company"), with its
principal offices located at 2800 Livernois, Suite 400, Troy, Michigan 48083.
The Executive is currently the Vice President Corporate Affairs of the
Company. The Executive and the Company wish to set forth in this Agreement the
terms and conditions of the Executive's employment with the Company.
In consideration of the mutual covenants herein contained, the parties
agree as follows:
1. EMPLOYMENT. The Company employs the Executive as its Vice President
Corporate Affairs, and the Executive accepts such employment, upon the terms and
conditions set forth in this Agreement.
2. DUTIES DURING EMPLOYMENT PERIOD. The Executive shall perform and
discharge well and faithfully such duties for the Company (a) as are consistent
with those normally incident to her position as Vice President Corporate
Affairs, and (b) as may be reasonably assigned to the Executive from time to
time by the Board of Directors of the Company. The Executive shall devote
substantially all of her business time and attention, her best efforts, and all
of her skill and ability to the business of the Company. Notwithstanding the
foregoing, the Executive shall be permitted to engage in other business
activities (as an active participant or a passive investor), provided that such
activities are not rendered for a company which transacts business with the
Company or engages in business competitive with that conducted by the Company
and further provided that such activities (individually or collectively) do not
materially interfere with the performance of her duties or responsibilities
under this Agreement.
3. TERM OF EMPLOYMENT. Executive's employment under Paragraph 1 of this
Agreement shall be for a period (the "Employment Period") commencing on the date
the Company's Common Stock begins trading on the NASDAQ National Market and
terminating on December 31, 1999, unless sooner terminated in accordance with
one of the following alternatives.
(a) The Executive's employment under Paragraph 1 may be terminated by the
Company at any time during the Employment Period for Cause (as hereinafter
defined) by action of the Board of Directors upon giving the Executive notice of
such termination and the reason or reasons therefor at least 30 days prior to
the date upon which termination shall take effect. As used herein, the term
"Cause" shall mean any of the following events:
(i) the Executive's conviction of or plea of guilty or nolo
contendere to a crime providing for a term of imprisonment (other than
traffic violations and crimes not requiring the knowing involvement of the
Executive in the commission thereof) or substantial and sustained alcohol
or other substance abuse on the part of the Executive (whether or not
<PAGE> 2
constituting a crime) which continues following a written warning from the
Board of Directors of the Company.
(ii) the Executive's (A) neglect of duties involving bad faith, (B)
willful failure to act with respect to duties previously communicated to
the Executive in writing by the Board of Directors of the Company, or (C)
other willful misconduct in connection with the performance of her duties
hereunder, and in the case of any such neglect, failure, or, to the extent
curable, misconduct, only if it is not cured within 10 days from the
receipt by the Executive of written notice from the Company's Board of
Directors specifying such alleged neglect, failure or misconduct.
If the Executive's employment is terminated under the provisions of this clause
(a), all rights of the Executive to compensation and benefits pursuant to
Paragraph 4 shall cease as of the effective date of such termination. If the
Executive's employment is terminated by the Company without "Cause" (as defined
in this clause (a)), the Company shall pay to the Executive her then salary, at
the times and in the amounts then in effect, for the remaining term of this
Agreement, without reduction for any compensation Executive may receive from
other sources. Payment of such amounts to the Executive in such event shall
discharge the Company from any liability under this Agreement to the Executive
for improper termination of her employment.
(b) If the Executive dies, the Executive's employment shall be deemed to
cease as of the date of her death, and the Executive's rights pursuant to
Paragraph 4 shall cease as of such date.
(c) If the Executive is incapacitated by accident, sickness or otherwise so
as to render the Executive mentally or physically incapable of performing her
duties required under Paragraph 2 (which unless agreed to by the Executive shall
be determined by resolution of the Company's Board of Directors following a
thorough examination by at least two qualified medical experts who concur in
their finding of disability, one of which will be Executive's personal
physician), and such condition is not cured within 180 business days after the
first occurrence of such disability, upon the expiration of such period or at
any time thereafter, by action of the Board of Directors of the Company, the
Executive's employment may be terminated immediately upon giving the Executive
notice to that effect. If the Executive's employment is terminated pursuant to
the provisions of this clause (c), the Executive's rights pursuant to Paragraph
4 shall cease as of the date of such termination.
4. EMPLOYMENT PERIOD COMPENSATION.
(a) Salary. As full compensation for services rendered by the Executive
hereunder, the Company shall pay to the Executive a salary at the rate of
$96,000 per year, payable biweekly, through December 31, 1998. The Executive's
salary for the calendar year ended December 31, 1999, shall be established by
the Compensation Committee of the Board of Directors of the Company. Bonus
awards to the Executive during the Employment Period shall be established by the
Compensation Committee of the Board of Directors.
2
<PAGE> 3
(b) Other Benefits. The Company will provide the Executive during the
Employment Period with fringe benefits no less favorable than those then being
received generally by other executive officers of the Company and in a manner
and amount consistent with her position, compensation, seniority and age.
5. COVENANT NOT TO COMPETE. The Executive hereby acknowledges and
recognizes the highly competitive nature of the Company's business and,
accordingly, for the consideration set forth in Paragraph 4 above:
(a) The Executive agrees that during the Restricted Period (as defined
below), he will not, directly or indirectly, engage in the design, development,
manufacturing, sale, marketing or servicing of products which are designed,
developed, manufactured, sold, marketed or serviced by the Company during the
Executive's employment with the Company or engage in any other activity which is
in competition with the activities of the Company (the "Business Activities"),
other than on behalf of the Company, whether such engagement is as an officer,
director, proprietor, employee, partner, investor (other than as a holder of
less than 3% of the outstanding capital stock of a corporation whose stock is
actively traded over-the-counter or on any national securities exchange),
consultant, advisor, agent or otherwise, anywhere in the United States.
(b) The Executive agrees that during the Restricted Period, he will not
directly or indirectly engage in any Business Activity (other than on behalf of
the Company) by supplying products or providing services heretofore supplied or
provided to any customer with whom the Company does business during the
Executive's employment with the Company, whether as an officer, director,
proprietor, employee, partner, investor (other than as a holder of less than 3%
of the outstanding capital stock of a corporation whose stock is actively traded
over-the-counter or on a national securities exchange), consultant, advisor,
agent or otherwise.
(c) The Executive agrees that during the Restricted Period, he will not,
directly or indirectly, assist others in engaging in any of the Business
Activities in the manner prohibited to the Executive.
(d) The Executive agrees that during the Restricted Period, he will not,
directly or indirectly, induce employees of the Company to engage in any
activities that are prohibited to the Executive or to terminate their
employment.
As used herein, the term "Restricted Period" shall mean the period
commencing with the date hereof and ending two year after the termination of the
Executive's employment with the Company, irrespective of the reason for any
termination of employment.
It is expressly understood and agreed that although the Executive and the
Company consider the restrictions contained in each of clauses (a) through (d)
above reasonable for the purpose of preserving for the Company its goodwill,
proprietary rights and going concern value, if a final judicial determination is
made by a court having jurisdiction that the time or territory or any other
3
<PAGE> 4
restriction contained in this Paragraph 5 is an unenforceable restriction on the
activities of the Executive, the provisions of this Paragraph 5 shall not be
rendered void but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such court may judicially determine or
indicate to be reasonable. Alternatively, if the court referred to above finds
that any restriction contained in clauses (a) through (d) is unenforceable, and
such restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions contained
therein. The provisions of this Paragraph 5 shall in no respect limit or
otherwise affect the rights or obligations of the Executive under other
agreements with the Company.
6. DISCLOSURE OF INFORMATION. The Executive acknowledges that the
Company's (and its affiliates') trade secrets, private or secret processes as
they exist from time to time and information concerning products, development,
technical information, procurement and sales activities and procedures,
promotion and pricing techniques and credit and financial data concerning
customers (the "Proprietary Information") are valuable, special and unique
assets of the Company, access to and knowledge of which are essential to the
performance of the Executive's duties hereunder. In light of the highly
competitive nature of the industry in which the Company's business is conducted,
the Executive agrees that all Proprietary Information heretofore or in the
future obtained by the Executive as a result of the Executive's association with
the Company shall be considered confidential. In recognition of this fact, the
Executive agrees that he will not, during and after the Employment Period,
disclose any of such Proprietary Information to any person or other entity for
any reason or purpose whatsoever and that he will not use any such Proprietary
Information for her own purposes or for the benefit of any person or other
entity (except the Company) under any circumstances unless such Proprietary
Information has been publicly disclosed generally or, upon advice of legal
counsel reasonably satisfactory to the Company, Executive is legally required to
disclose such Proprietary Information.
7. COMPANY RIGHT TO INVENTIONS. The Executive shall promptly disclose,
grant and assign to the Company for its sole use and benefit any and all
inventions, improvements, technical information and suggestions relating in any
way to the products of the Company which the Executive has in her past
association with the Company conceived, developed or acquired, or may conceive,
develop or acquire during the Executive's employment by the Company (whether or
not during usual working hours), together with all patent applications, letters
patent, copyrights and reissues thereof, as well as trademarks, tradenames,
service marks and all applications with respect thereto, that may at any time be
granted for or upon any such invention, improvement or technical information.
8. REMEDIES. The Executive acknowledges and agrees that the Company's
remedy at law for a breach or threatened breach of any of the provisions of
Paragraphs 5, 6 or 7 would be inadequate. In recognition of this fact, in the
event of a breach by the Executive of any of the provisions of Paragraphs 5, 6
or 7 the Executive agrees that, in addition to its remedy at law, then at the
Company's option, all rights of the Executive to compensation under Paragraph 4
hereof and all amounts then or thereafter due the Executive from the Company
under this Agreement may be
4
<PAGE> 5
terminated and the Company, without posting any bond, shall be entitled to
obtain, and the Executive agrees not to oppose the Company's request for,
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available. The Executive acknowledges that the granting of a temporary
injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an adequate remedy
upon breach or threatened breach of Paragraph 6, and consequently agrees, upon
proof of any such breach, to the granting of injunctive relief prohibiting the
marketing or sale of products and providing of services of the kind marketed,
sold or provided by the Company or its affiliates during the Executive's
employment.
9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be deemed properly given if in writing and if mailed by
registered or certified mail, postage prepaid with return receipt requested or
sent by express courier service, charges prepaid by shipper, to her residence in
the case of notices to the Executive, and to the principal offices of the
Company, to the attention of its President, in the case of notices to the
Company (or to such other address as a party is directed pursuant to written
notice from the other party).
10. ASSIGNMENT. This Agreement shall not be assignable by either party
except by the Company to any subsidiary or affiliate of the Company or any
successor in interest to the Company's business.
11. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties relating to the subject of employment, supersedes and replaces in
its entirety any existing employment agreement of the Executive and may not be
waived, changed, modified, extended or discharged orally but only by agreement
in writing signed by the party against whom enforcement of any such waiver,
change, modification, extension or discharge is sought. The waiver by the
Company of a breach of any provision of this Agreement by the Executive shall
not operate or be construed as a waiver of a breach of any other provision of
this Agreement or of any subsequent breach by the Executive.
12. TERMINATION. Any termination of this Agreement in accordance with
Paragraph 3 shall not affect the provisions of Paragraphs 5, 6, 7 or 8, which
shall survive such termination in accordance with their terms.
13. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan.
14. HEADINGS. The headings of the Paragraphs are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SYNTEL, INC.
By: Daniel M. Moore
-----------------------------------
Its: Vice President and General Counsel
-----------------------------------
NEERJA SETHI
/s/ Neerja Sethi
---------------------------------------
BH/115836.1
ID/DRM
6
<PAGE> 1
EXHIBIT 10.16
S CORPORATION REVOCATION, TAX ALLOCATION AND
INDEMNIFICATION AGREEMENT
This Revocation, Tax Allocation and Indemnification Agreement, dated as of
June 6, 1997 (the "Agreement"), is made by and between Syntel, Inc., a Michigan
corporation (the "Company"), and the persons identified on Schedule 1 hereto
who constitute all of the shareholders of the Company on the date hereof (each
individually, a "Shareholder," and collectively, the "Shareholders").
RECITALS:
A. The Company is an S corporation, within the meaning of section 1361 of
the Internal Revenue Code of 1986, as amended (the "Code"), and the
Shareholders are its only shareholders as of the date of this Agreement.
B. The Company intends to enter into an underwriting agreement to sell
shares of its common stock to the public in an initial public offering
registered under the Securities Act of 1933, as amended (the "Public
Offering").
C. The Shareholders are currently the only shareholders of the Company and
will continue to be so until immediately before the Closing (as defined below)
of the Public Offering.
D. In connection with the Public Offering, and in order to induce the
investment by the public in the Company, the Company and the Shareholders
desire to provide for an S corporation termination, tax allocation and
indemnification agreement in connection with tax periods prior to and following
the Termination Date (as defined below).
AGREEMENT:
NOW, THEREFORE, for mutual consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Shareholders do hereby
covenant and agree as follows:
ARTICLE I
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Accumulated Adjustments Account" shall have the meaning assigned to that
term by Section 1368(e)(1) of the Code.
"Closing" shall mean the closing and completion of the offering by the
Company of shares of its stock, as described in the Form S-1 Registration
Statement initially filed by the Company with the Securities and Exchange
Commission on June 6, 1997.
"Code" shall have the meaning set forth in Recital A.
<PAGE> 2
"C Short Year" shall have the meaning set forth in Section 1362 (o) (1)
(B) of the Code.
"Public Offering" shall have the meaning set forth in Recital B.
"S corporation" shall have the meaning set forth in Section 1361 of the
Code.
"S corporation Taxable Income" shall mean, for periods beginning on or
after the date the Company became an S corporation and ending with the close of
the last day of the S Short Year, the sum of (i) the Company's items of
separately stated income and gain (within the meaning of Section 1366(a)(1)(A)
of the Code) reduced, to the extent applicable, by the Company's separately
stated items of deduction and loss (within the meaning of Section 1366(a)(1)(A)
of the Code) and (ii) the Company's non-separately computed net income (within
the meaning of Section 1366(a)(1)(B) of the Code).
"S Short Year" shall have the meaning set forth in Section 1362 (e) (1)
(A) of the Code.
"Termination Date" shall mean the date on which the Company's status as an
S corporation is terminated by reason of revocation of the election for the
Company to be an S corporation pursuant to Section 1362(d)(1) of the Code,
which date shall be not earlier than the date the registration statement
related to the Public offering is declared effective by the Securities and
Exchange Commission and not later than two days prior to the date of the
Closing, as designated by the Company.
ARTICLE II
THE TERMINATION; TERMINATION PAYMENTS
2.1 TERMINATION OF S CORPORATION STATUS. The Company shall terminate its
status as an S corporation pursuant to an election, as permitted pursuant to
Section 1362(d)(1) of the Code, which election shall be made by the Company and
the Shareholders and shall be effective on the Termination Date.
2.2 TERMINATION PAYMENTS TO SHAREHOLDERS. Immediately prior to the
Termination Date, the Company shall distribute to the Shareholders (pro rata in
accordance with the relative number of shares of stock of the Company held by
each Shareholder) an amount equal to the "accumulated adjustments account" of
the Company as of the Termination Date. Such distribution shall take the form
of a promissory note of the Company in the form set forth as Exhibit A. For
purposes of this Section 2.2, the term "accumulated adjustments account" shall
have the meaning set forth in Section 1368(e) of the Code as determined by the
Chief Financial Officer of the Company in accordance with the Company's books
and records and without regard to any future adjustments to the Company's
taxable income as described in Section 2.3.
2.3 FUTURE ADJUSTMENTS. In the event that any future examination of any
tax return by any taxing authority results in a final determination increasing
the taxable income of the Company
2
<PAGE> 3
for the S Short Year, or for any period ending prior to the Termination Date,
the Company shall distribute to the Shareholders (pro rata in accordance with
the relative number of shares of stock of the Company held by each Shareholder)
within 30 days of such final determination, cash in an amount equal to the
product of (i) the amount of such increase in the taxable income of the Company
resulting from such final determination, multiplied by (ii) the highest
marginal federal income tax rate applicable to individuals for the taxable year
to which such adjustment relates.
2.4 SHORT TAXABLE YEARS. The parties acknowledge that the taxable year in
which the S corporation status of the Company is terminated will be an S
Termination Year for tax purposes, as defined in Section 1362(e)(4) of the
Code. Pursuant to Section 1361(e)(1) of the Code, the S Termination Year of
the Company shall be divided into two short taxable years: an "S Short Year"
and a "C Short Year." As defined in Section 1362(e)(1)(A) of the Code, the S
Short Year shall be that portion of the Company's S Termination Year ending on
the day immediately preceding the Termination Date. Pursuant to Section
1362(e)(1)(B) of the Code, that portion of the S Termination Year beginning on
the Termination Date and ending on the last day of the taxable year shall be
the C Short Year of the Company.
ARTICLE III
ALLOCATION OF INCOME
The Company and the Shareholders agree that for tax purposes (including
for purposes of determining the Company's S corporation Taxable Income for its
fiscal year ending December 31, 1997) the Company shall allocate its items of
income, gain, loss, deduction and credit for its fiscal year ending December
31, 1997 between the S Short Year and the C Short Year in accordance with
normal tax accounting rules (the so-called "closing of the books method"), as
permitted by Section 1362(a)(3) of the Code. The Company will make the
election permitted by Section 1362(e)(3) in a timely manner. The Shareholders
agree to consent to such election and to provide the Company with the statement
of consent of all Shareholders described in Section 1.1362-6(b) of the Treasury
Regulations. The Company and the Shareholders agree to make, and to provide
such information and obtain such consents as are necessary to make, any
comparable election required under applicable state and local income tax laws.
ARTICLE IV
TAXES
4.1 LIABILITY FOR TAXES INCURRED DURING THE S SHORT YEAR AND FOR TAX
PERIODS ENDING PRIOR TO THE TERMINATION DATE. Each Shareholder, severally and
not jointly, covenants and agrees that: (i) such Shareholder has duly included,
or will duly include, in such Shareholder's own federal, state, and local
income tax returns such Shareholder's respective allocable shares of all items
of income, gain, loss, deduction, or credit attributable to the S Short Year of
the Company or to any prior period (or that portion of any period) during which
the Company was an S corporation to the extent required by applicable law, (ii)
such returns shall, to the extent required by applicable law, include such
Shareholder's allocable share of S corporation Taxable Income of the Company
from
3
<PAGE> 4
all sources through and including the close of business on the last day of the
S Short Year of the Company, and (iii) such Shareholder shall, to the extent
required by applicable law, pay any and all taxes such Shareholder is required
to pay, as a result of being a Shareholder of the Company, for all taxable
periods (or that portion of any period) during which the Company was an S
corporation.
4.2 SHAREHOLDER INDEMNIFICATION FOR TAX LIABILITIES. The Shareholders,
severally (according to the relative percentage of the outstanding shares of
Company common stock owned by each Shareholder on the last day of any
applicable period to which a liability described below relates) and not
jointly, each hereby indemnify and hold the Company harmless from, against and
in respect of any unpaid income tax liabilities of the Company (including
interest and penalties imposed thereon) (i) which are attributable to the S
Short Year or any period ending prior to the Termination Date, or (ii) which
are incurred by the Company as a result of a final determination of an
adjustment (by reason of an amended return, claim for refund, audit, judicial
decision or otherwise) to the taxable income of the Shareholders for any period
(including, without limitation, the S Short Year) which (in the case of this
clause (ii)) results in a decrease for any period in the Shareholders' taxable
income and a corresponding increase for any period in the taxable income of the
Company.
4.3 COMPANY INDEMNIFICATION FOR TAX LIABILITIES. The Company hereby
indemnifies and agrees to hold the Shareholders harmless from, against and in
respect of income tax liabilities (including interest and penalties imposed
thereof), if any, incurred by the Shareholders as a result of a final
determination of an adjustment (by reasons of an amended return, claim for
refund, audit, judicial decision or otherwise) to the taxable income of the
Company for any period ending after the Termination Date (including, without
limitation, the C Short Year) which results in a decrease for any period in the
Company's taxable income and a corresponding increase for any period in the
taxable income of the Shareholders.
4.4 PAYMENTS. The Shareholders or the Company, as the case may be, shall
make any payment required under Sections 4.2 and 4.3 of this Agreement within
30 days after receipt of notice from the other party that a final determination
has occurred and a payment is due by such party to the appropriate taxing
authority.
4.5 REFUNDS. If the Company receives a refund of any income tax
(including penalties and interest) for any period prior to the Termination
Date, or as to which it has previously been indemnified by the Shareholders, it
shall pay an amount equal to such refund, within 30 days after receipt thereof,
to the Shareholders in accordance with the percentage of the outstanding shares
of Company common stock owned by each such Shareholder on the last day of any
applicable period to which the refund relates. If the Shareholders receive a
refund of any income tax (including penalties and interest) as to which they
have previously been indemnified by the Company, they shall, within 30 days
after receipt thereof, remit an amount equal to such refund to the Company.
4.6 NOTICE AND CONTROL OF PROCEEDINGS. Each of the Company and the
Shareholders agree that (i) within 10 days of receiving written notice of any
income tax examinations, claims,
4
<PAGE> 5
settlements, proposed adjustments or related matters that may affect in any way
the income tax liability of a party under this Agreement, such person shall
provide written notice thereof to such each other party hereto, and (ii) the
party or parties who would be responsible for the payment of the applicable
taxes if the matter in question were to be resolved adversely shall be
entitled, in his or its reasonable discretion and at his or its sole expense,
to handle, control and compromise or settle the defense thereof , so long as
such party or parties are acting diligently and in good faith. Such party or
parties shall keep the other party(ies) apprised of the status thereof and
shall consult with such other party(ies) concerning the conduct of the defense
thereof. Notwithstanding the foregoing, however, no party may take any action
that could adversely affect the tax liability of another party without such
other party's prior written consent, which shall not be unreasonably withheld.
The parties hereto shall execute all instruments required to effectuate the
provisions of this Section 4.6.
4.7 COOPERATION. The parties will make available to one another, as
reasonably requested, and to any taxing authority, all information, records or
documents relating to the liability for taxes covered by this Agreement and
will preserve any such information, records or documents until the expiration
of the applicable statute of limitations or extensions thereof. The party
requesting such information shall reimburse the other party for all reasonable
out-of-pocket costs incurred in producing such information.
4.8 COSTS. Except as otherwise provided herein, each party shall bear his
or its own costs in administering this Agreement.
4.9 CONDUCT OF THE COMPANY IN THE ORDINARY COURSE OF BUSINESS. From the
date hereof until the Termination Date, the Company will be operated in the
ordinary course of business, consistent with past practices (including, without
limitation, its receivables collection and expense payment practices).
ARTICLE V
MISCELLANEOUS
5.1 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which counterparts collectively
shall constitute an instrument representing the Agreement between the parties
hereto.
5.2 CONSTRUCTION OF TERMS. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, firm or
corporation, other than the parties hereto or their respective successors, any
rights or remedies under or by reason of this Agreement.
5.3 INTENT OF PARTIES. It is the parties' intent that the liability for
income taxes arising from the operations of the Company will be borne by the
Shareholders for all periods through and including the S Short Year and by the
Company for periods beginning with the C Short Year, and this Agreement shall
be construed so as most equitably to achieve such intent.
5
<PAGE> 6
5.4 GOVERNING LAW. This Agreement between the parties hereto shall be
governed by and construed in accordance with the substantive laws of the State
of Michigan without regard to its choice of law rules.
5.5 SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be held to be illegal, invalid or unenforceable in any
respect, the same shall not in any respect affect the validity, legality or
enforceability of the remainder of this Agreement, and the parties shall use
their best efforts to replace such illegal, invalid or unenforceable provisions
with an enforceable provision approximating, to the extent possible, the
original intent of the parties.
5.6 NOTICES. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery or telecopy (receipt confirmed, with a copy to be
sent by reputable overnight courier as set forth herein) to the party to be
notified, or one business day after delivery to a reputable overnight courier,
postage prepaid, and addressed to the party to be notified at the address
indicated for such party on the signature pages hereof, or at such other
address as such party may designate by ten (10) days, advance written notice to
the other parties.
5.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended,
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of each of the parties hereto;
provided, however, that no consent of the Company shall be effective unless
approved by a majority of the disinterested members of its Board of Directors.
5.8 FULL UNDERSTANDING. Each Shareholder represents and agrees that such
Shareholder fully understands his or her right to discuss all aspects of this
Agreement with such Shareholder's private attorney, and that to the extent, if
any, that the Shareholder desired, has availed himself or herself of such
right. Each Shareholder further represents that he or she has carefully read
and fully understands all of the provisions of this Agreement, that such
Shareholder is competent to execute this Agreement, that the Shareholder's
agreement to execute this Agreement has not been obtained by any duress and
that he or she freely and voluntarily enters into it, and that he or she has
read this document in its entirety and fully understands the meaning, intent
and consequences of this document.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
this first date set forth above.
SYNTEL, INC.
By:__________________________________
John Andary, Treasurer
_____________________________________
Bharat Desai
_____________________________________
Neerja Sethi
_____________________________________
Paritosh Choksi
_____________________________________
_____________________________________
_____________________________________
106831.3 DRM/BH
7
<PAGE> 8
SCHEDULE 1
SHAREHOLDERS
Bharat Desai
Neerja Sethi
Paritosh Choksi
<PAGE> 9
EXHIBIT A
DEMAND PROMISSORY NOTE
Executed at Troy, Michigan
________________, 1997
FOR VALUE RECEIVED, SYNTEL, INC., a Michigan corporation ("Maker"),
promises to pay the persons identified on Exhibit 1 hereto (each a "Payee" and,
collectively, the "Payees"), the Principal (as defined herein), with interest
on the balance of the Principal outstanding from time to time at a rate per
annum equal to the Interest Rate (as defined herein), compounded annually, on
the following terms and conditions:
1. DEFINITIONS. For purposes of this Demand Promissory Note, the
following capitalized terms shall have the meaning ascribed thereto:
(a) "Agreement" shall mean that certain S Corporation Termination, Tax
Allocation and Indemnification Agreement, dated as of ____________, 1997, by
and among Maker and Payees, a copy of which is attached hereto as Exhibit 2 and
is incorporated herein by this reference.
(b) "Interest Rate" shall mean the prime rate of interest an published by
the Wall Street Journal under the caption "Money Rates" on the Termination Date
(as defined in the Agreement).
(c) "Principal" shall mean a dollar amount not previously paid to Payees
equal to the amount payable by Maker to Payees pursuant to Section 2.2 of the
Agreement.
2. PAYMENT. The entire Principal balance (together with all accrued and
unpaid interest) shall be due and payable immediately upon the presentment of
written demand therefore by Payees to Maker; provided, however, that no such
demand may be made prior to , 1997 (45 days after issuance of
the Note). Principal and interest accrued hereunder shall be payable in lawful
money of the United States of America to Payees, at 2800 Livernois, Suite 400,
Troy, Michigan 48083, or at such other address an Payees may designate in
writing from time to time to maker. All payments to Payees hereunder shall be
made pro rata, to each Payee in proportion to the number of shares of stock of
the Company held by each Payee on the Termination Date an set forth on Exhibit
1.
3. PREPAYMENTS. The indebtedness evidenced by this Demand Promissory Note
may be prepaid in full or in part without penalty at the option of Maker at any
time.
4. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default under this Note:
<PAGE> 10
(a) Failure by Maker to pay Principal or interest under this Demand
Promissory Note when and as the same becomes due and payable and the
continuation of such failure for a period of five (5) days thereafter; or
(b) Maker shall: (i) be generally unable or admit in writing the inability
to pay Maker's debts as they become dues; (ii) have an order for relief entered
in any case commenced by Maker under the federal bankruptcy laws, an now or
thereafter in effect; (iii) commence a proceeding under any federal or state
bankruptcy, insolvency, reorganization or similar law, or have such a
proceeding commenced against Maker and either have an order of insolvency or
reorganization entered against Maker or have the proceeding remain undismissed
and unstayed for ninety (90) days; (iv) make an assignment, for the benefit of
creditors; or (v) have a receiver, trustee or custodian appointed for Maker for
the whole or any substantial party of maker's properties.
5. PENALTY INTEREST. Upon the occurrence of an Event of Default, and to
the extent permitted by applicable law, interest shall accrue on the amount of
unpaid Principal and interest at a rate per annum equal to the Interest Rate,
plus two percent (2%), until said Principal and interest is paid in full to
Payees.
6. WAIVER. Maker agrees (i) that the failure of Payees to exercise any
rights or remedies granted hereunder shall not constitute a waiver of such
rights or remedies or any other rights or remedies, or preclude the exercise of
such rights or remedies or any other rights or remedies at any time, and (ii)
that failure of Payees to exercise any rights or remedies granted hereunder, in
the event of a breach thereof or an Event of Default hereunder, shall not be
deemed a waiver of such breach or Event of Default or of any other or further
breaches or Events of Default. In addition, Maker hereby waives demand,
presentment for payment, notice of dishonor, protest and notice of protest, and
diligence in collection and bringing suit and agrees that Payee may extend the
time for payment, accept partial payment, or take, exchange, or release
security without discharging or releasing Maker.
7. GOVERNING LAW. This Note shall be construed and enforced in accordance
with the laws of the State of Michigan, without giving affect to principles of
conflicts of law.
8. RIGHTS AND REMEDIES. The rights and remedies set forth herein shall be
cumulative and in addition to any other or further rights and remedies
available at law or in equity. The invalidity or unenforceability of any term
or provision of this Demand Promissory Note, or the application of such term or
provision to any person or circumstance, shall not impair or affect the
remainder of this Demand Promissory Note and its application to other persons
and circumstances and the remaining terms and provisions hereof shall not be
invalid, but shall remain in full force and effect.
9. ASSIGNMENT BY MAKER. Assignment by Maker and the assumption by any
third party of Maker's obligations hereunder shall be made only with the
written consent of Payees.
<PAGE> 11
IN WITNESS WHEREOF, this Demand Promissory Note has been executed by Maker
as of the day and year first above written.
MAKER:
SYNTEL, INC.
By:_______________________________________
John Andary, Treasurer
BH/106831.3
ID/DRM
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Syntel, Inc.:
We consent to the inclusion in this registration statement on Form S-1 of
our report dated February 28, 1997, on our audits of the financial statements
and financial statement schedule of Syntel, Inc. We also consent to the
reference to our firm under the caption "Experts."
COOPERS & LYBRAND, L.L.P.
Detroit, Michigan
June 6, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Syntel Software Private Limited:
We consent to the inclusion in this registration statement on Form S-1 of
Syntel Inc. of our report dated March 20, 1997, on our audit of the financial
statements of Syntel Software Private Limited. We also consent to the reference
to our firm under the caption "Experts."
RAJKAMAL SHAH & CO.
Mumbai, India
June 5, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF PARITOSH K. CHOKSI
I, Paritosh K. Choksi, hereby consent to being named as a prospective
director of Syntel, Inc. ("Syntel") in the S-1 Registration Statement of Syntel
to be filed on or about June 6, 1997 (the "S-1"), and also consent to serve as a
director of Syntel upon consummation of the public offering referred to in the
S-1.
June 5, 1997
/s/ PARITOSH K. CHOKSI
--------------------------------------
Paritosh K. Choksi
<PAGE> 1
EXHIBIT 23.5
CONSENT OF DOUGLAS E. VAN HOUWELING
I, Douglas E. Van Houweling, hereby consent to being named as a prospective
director of Syntel, Inc. ("Syntel") in the S-1 Registration Statement of Syntel
to be filed on or about June 6, 1997 (the "S-1"), and also consent to serve as a
director of Syntel upon consummation of the public offering referred to in the
S-1.
June 5, 1997
/s/ DOUGLAS E. VAN HOUWELING
--------------------------------------
Douglas E. Van Houweling
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<ARTICLE> 5
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<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 5,277 3,942
<SECURITIES> 0 0
<RECEIVABLES> 21,002 21,144
<ALLOWANCES> 413 403
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<CURRENT-ASSETS> 26,288 29,130
<PP&E> 6,001 6,277
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<TOTAL-ASSETS> 29,649 32,403
<CURRENT-LIABILITIES> 19,744 21,116
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0 0
0 0
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<TOTAL-LIABILITY-AND-EQUITY> 29,649 32,403
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