<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SYNTEL, INC.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[SYNTEL LOGO]
April 21, 2000
Dear Shareholder:
It is my pleasure to invite you to attend the 2000 Annual Meeting of
Shareholders of Syntel, Inc. on Tuesday, May 23, 2000, at 9:00 a.m. The meeting
will be held at the Embassy Suites Hotel, 850 Tower Drive, Troy, Michigan.
The following pages contain the formal Notice of the Annual Meeting and the
Proxy Statement. You will want to review this material for information
concerning the business to be conducted at the meeting, the election of
directors and the amendment of Syntel's 1997 Stock Option and Incentive Plan.
Your vote is important. Whether or not you plan to attend the meeting, we
urge you to complete, sign, and return your proxy as soon as possible in the
envelope provided. This will ensure representation of your shares in the event
you are unable to attend. You may, of course, revoke your proxy and vote in
person at the meeting if you desire.
Sincerely,
/s/BHARAT DESAI
Bharat Desai
Chairman, President, and Chief
Executive Officer
<PAGE> 3
SYNTEL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 2000
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of Syntel, Inc., a Michigan corporation,
will be held on Tuesday, May 23, 2000, at 9:00 a.m., at the Embassy Suites
Hotel, 850 Tower Drive, Troy, Michigan. The purposes of the Annual Meeting are
to:
1. elect two directors for a term of three years;
2. approve an amendment to Syntel, Inc.'s 1997 Stock Option and Incentive
Plan; and
3. conduct any other business that is properly raised at the meeting or any
adjournment of the meeting.
Only shareholders of record at the close of business on March 27, 2000 are
entitled to notice of and to vote at the meeting.
By Order of the Board
/s/ DANIEL M. MOORE
April 21, 2000 Daniel M. Moore
Chief Administrative Officer
and Secretary
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YOU ARE INVITED TO ATTEND THE MEETING, BUT, WHETHER OR NOT YOU EXPECT TO ATTEND,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE
PROVIDED.
<PAGE> 4
SYNTEL, INC.
2800 LIVERNOIS, SUITE 400
TROY, MICHIGAN 48083
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 23, 2000
SOLICITATION OF PROXIES
This Proxy Statement and the accompanying proxy are being distributed to
shareholders of Syntel, Inc. (the "Company") in connection with the solicitation
of proxies to be used at the 2000 Annual Meeting of Shareholders of the Company.
The Annual Meeting will be held at the Embassy Suites Hotel, 850 Tower Drive,
Troy, Michigan, on Tuesday, May 23, 2000, at 9:00 a.m.
The enclosed proxy is solicited by the Board of Directors of the Company.
This Proxy Statement and the enclosed proxy were mailed or given to shareholders
beginning on or about April 21, 2000. The Company's 1999 Annual Report to
Shareholders is also enclosed with this Proxy Statement.
The Company will pay the entire cost of soliciting proxies. The Company
will arrange with brokerage houses, nominees, custodians, and other fiduciaries
to send proxy soliciting materials to beneficial owners of the Common Stock at
the Company's expense.
REVOKING A PROXY
Any person giving a proxy has the power to revoke it at any time before it
is voted. There are three ways to revoke your proxy. You may deliver a written
notice of revocation, which is dated after the date of the proxy, to the
Secretary of the Company at or before the Annual Meeting. You may deliver a
later-dated proxy to the Secretary of the Company at or before the Annual
Meeting. You may attend the Annual Meeting in person and vote your shares by
ballot.
RECORD DATE
The record date for determining shareholders entitled to vote at the Annual
Meeting is March 27, 2000. Each of the 38,289,569 shares of Common Stock of the
Company issued and outstanding on that date is entitled to one vote on any
matter voted on at the Annual Meeting. Abstention votes and votes withheld by
brokers on non-routine proposals in the absence of instructions from beneficial
owners ("broker non-votes") will be counted as present at the Annual Meeting to
determine whether a quorum exists.
MATTERS TO COME BEFORE THE MEETING
PROPOSAL 1. ELECTION OF TWO DIRECTORS
The Board of Directors is composed of three classes of members, each class
being as nearly equal in number as possible. One class of directors is elected
each year to hold office for a three-year term and until successors of such
class are duly elected and qualified. There are currently five members of the
Board.
Two directors are to be elected at the Annual Meeting to serve for a term
ending at the 2003 Annual Meeting of Shareholders. The nominees named below have
been selected by the Board of Directors. Except where the authority to do so has
been withheld, it is the intention of the persons named in the Company's proxy
to vote to elect the nominees as directors.
The persons receiving a plurality of the votes cast at the Annual Meeting
in person or by proxy will be elected as directors. "Plurality" means that the
nominee who receives the largest number of votes cast is elected as a director.
Shares not voted (whether by abstention, broker non-votes or otherwise) have no
effect
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on the election. In case a nominee is unable or declines to serve, proxies will
be voted for such other person as shall be designated by the Board of Directors
to replace such nominee. However, the Board of Directors does not anticipate
this will occur.
Information concerning the nominees for election and the directors
continuing in office, with respect to age and positions with the Company or
other principal occupations for the past five years follows. Mr. Desai and Ms.
Sethi have been directors of the Company since its formation in 1980. Messrs.
Mrkonic, Van Houweling, and Choksi were appointed by the Board to fill vacancies
created upon increasing the size of the Board after completion of the Company's
initial public offering in August 1997.
NOMINEES FOR ELECTION AS DIRECTORS UNTIL THE 2003 ANNUAL MEETING
BHARAT DESAI, age 47, is a co-founder of the Company and has served as its
President and Chief Executive Officer and as a director since its formation in
1980. He has also served as Chairman of the Board since February 1999. Mr. Desai
is the spouse of Ms. Sethi.
PARITOSH K. CHOKSI, age 47, is Chief Financial Officer and Senior Vice
President of ATEL Capital Group, an equipment leasing company, and has served in
those capacities since May 1999. From December 1997 through April 1999, Mr.
Choksi was Chief Financial Officer of Wink Communications, a developer of
interactive television. From 1977 through November 1997, Mr. Choksi was
associated with the Phoenix American group of companies, and at the end of that
period served as Phoenix American's Senior Vice President, Chief Financial
Officer, and Treasurer and as a director.
DIRECTOR WHOSE TERM CONTINUES UNTIL THE 2001 ANNUAL MEETING
GEORGE R. MRKONIC, age 47, is Vice Chairman of Borders Group, Inc., a
retailer of books and music headquartered in Ann Arbor, Michigan. From November
1994 to January 1997, Mr. Mrkonic was also the President of Border's Group, Inc.
From November 1990 to November 1994, Mr. Mrkonic was Executive Vice President,
Specialty Retail Group at Kmart Corporation, Troy, Michigan. Mr. Mrkonic is also
a director of Borders Group, Inc., Champion Enterprises, Inc. and Cheap Tickets,
Inc.
DIRECTORS WHOSE TERMS CONTINUE UNTIL THE 2002 ANNUAL MEETING
NEERJA SETHI, age 45, is a co-founder of the Company and has served as its
Vice President, Corporate Affairs and as a director since the Company's
formation in 1980, and as Secretary and Treasurer from 1980 to March 1996. Ms.
Sethi is the spouse of Mr. Desai.
DOUGLAS E. VAN HOUWELING, age 56, has been Chief Executive Officer and
President of the University Corporation for Advanced Internet Development
(UCAID) since November 1997. UCAID is the not for profit organization created by
the higher education community to support continued development of the Internet
through the Internet2 project. Dr. Van Houweling is on leave from the University
of Michigan where he is Professor of Information. From December 1984 until
November 1997, he was Vice Provost for Information and Technology and from 1995
until November 1997 he was the Dean for Academic Outreach, both at the
University of Michigan.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid $2,000 per Board
meeting and $500 per Committee meeting, and all directors are reimbursed for
travel expenses incurred in connection with attending Board and Committee
meetings. Each non-employee director is also granted 1,500 shares of the
Company's Common Stock for each year of service on the Board. Messrs. Choksi,
Mrkonic, and Van Houweling were each granted 6,000 shares of Common Stock,
without restriction, in 1999 as compensation for their service as directors for
the years 1999 through 2002.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company meets regularly, at least once each
quarter. During 1999, the Board of Directors held seven meetings. The standing
committees established by the Board of Directors are described below. The Board
of Directors does not have a nominating committee or any committee performing
similar functions. Each director attended at least 75% of the board and
committee meetings he or she was required to attend.
AUDIT COMMITTEE. The Audit Committee is responsible for reviewing with
management the financial controls, accounting and reporting activities, and
legal and compliance issues of the Company. The Audit Committee reviews the
qualifications of the Company's independent auditors, makes recommendations to
the Board of Directors regarding the selection of independent auditors, reviews
the scope, fees and results of any audit, and reviews non-audit services and
related fees. The Audit Committee met four times during 1999. The members of the
Audit Committee are Paritosh K. Choksi, Douglas E. Van Houweling (Committee
Chairperson), and George R. Mrkonic.
COMPENSATION COMMITTEE. The Compensation Committee develops and monitors
the executive compensation policies of the Company. The Compensation Committee
is 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 also administers the Company's 1997 Stock Option and
Incentive Plan and the 1997 Employee Stock Purchase Plan. The Compensation
Committee met twice during 1999. The members of the Compensation Committee are
Paritosh K. Choksi (Committee Chairperson), Douglas E. Van Houweling, and George
R. Mrkonic.
PROPOSAL 2. APPROVAL OF AMENDMENT TO SYNTEL, INC.'S 1997 STOCK OPTION AND
INCENTIVE PLAN
In February 2000, the Board of Directors approved an amendment to the
Company's 1997 Stock Option and Incentive Plan (the "Plan") and approved
submitting the Plan amendment to the Company's shareholders for approval at the
2000 Annual Meeting of Shareholders. The proposed Plan amendment will increase
from 3,000,000 to 8,000,000 the number of shares of the Company's Common Stock
reserved for issuance under the Plan (the "Amendment"). The Board of Directors
believes that the Amendment will benefit the Company by increasing the number of
shares available for granting stock options, stock appreciation rights,
restricted stock, or performance share awards under the Plan, providing the
Company with the ability to attract, retain, and motivate key personnel.
The Amendment is being submitted to the shareholders of the Company in
compliance with certain rules of the Nasdaq Stock Market. The affirmative vote
of a majority of the shares of the Company's Common Stock present or represented
and entitled to vote at the Annual Meeting is required for the approval of the
amendment to the Plan. If the shareholders do not approve the proposal, then the
Plan will continue in effect in accordance with its existing provisions.
Because executive officers (who may also be members of the Board) are
eligible to receive awards under the Plan, each of them has a personal interest
in the approval of this amendment to the Plan.
Adoption of this proposal requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting. Shares not voted (whether by abstention, broker non-votes or
otherwise) have the effect of a vote against the proposal. PROXIES RECEIVED BY
THE COMPANY WILL BE VOTED IN FAVOR OF APPROVAL OF THE AMENDMENT UNLESS A
CONTRARY CHOICE IS INDICATED.
BOARD RECOMMENDATION
THE BOARD RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AMENDMENT OF THE
PLAN.
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SUMMARY OF THE PLAN
GENERAL INFORMATION
The Plan was adopted by the Company's Board of Directors and shareholders
on April 1, 1997, and amended and restated by the Board of Directors on August
11, 1997. The purpose of the Plan is (i) to promote the best interests of the
Company and its shareholders by encouraging employees of the Company and its
subsidiaries to acquire an ownership interest in the Company, thus identifying
their interests with those of shareholders, and (ii) to enhance the ability of
the Company to attract and retain qualified employees and non-employee
directors. The Compensation Committee of the Company's Board of Directors
administers and interprets the Plan. The Plan is not subject to the Employee
Retirement Income Security Act of 1974. The Plan is not a "qualified plan" under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
A total of 3,000,000 shares of the Company's Common Stock (or 8,000,000
shares if the proposed Amendment is approved by the shareholders) may be awarded
pursuant to stock options, stock appreciation rights ("SARs"), performance share
awards, restricted stock awards and annual incentive awards under the Plan.
Awards under the Plan may be made at the discretion of the Compensation
Committee to any employee or non-employee director of the Company or its
subsidiaries. On March 27, 2000, the Company had approximately 1,950 employees
and non-employee directors, while stock options to purchase approximately
2,723,000 shares of Common Stock were outstanding under the Plan and no other
type of award had been made. As of March 27, 2000, the last sale price for
shares of the Company's Common Stock was $16.81 per share.
GRANT AND EXERCISE
STOCK OPTIONS. Options granted under the Plan may be either incentive stock
options under Section 422 of the Code or nonqualified stock options. The
exercise price for incentive stock options must be at least the fair market
value of the shares on the grant date. At the discretion of the Compensation
Committee, the exercise price for nonqualified options may be less than fair
market value. Options granted under the Plan become exercisable at such times as
the Compensation Committee may determine and generally will expire ten years
after the grant date, unless a shorter period has been set by the Compensation
Committee. In any one fiscal year, no optionee may be granted options to
purchase more than 100,000 shares of the Company's Common Stock under the Plan.
Payment for shares to be acquired upon the exercise of options granted under the
Plan or payment of related withholding tax obligations may be made in cash, by
check, by tendering previously-held shares of the Company's Common Stock or, at
the discretion of the Compensation Committee, through a cashless exercise
procedure.
STOCK APPRECIATION RIGHTS. The Plan provides for the discretionary grant of
SARs in tandem with stock options. A SAR represents the right to receive a cash
or stock payment from the Company equal to the excess of the fair market value
of the share of Common Stock subject to the related option on the date of
exercise over the per share exercise price of the related option. An option to
purchase shares will terminate with respect to the number of shares for which a
SAR is exercised.
RESTRICTED STOCK AND PERFORMANCE SHARE AWARDS. The Plan also authorizes the
Compensation Committee to grant restricted stock and performance share awards to
key employees. Restricted stock may not be transferred, pledged or assigned or
otherwise alienated or hypothecated until termination of the applicable
restrictions. Participants who receive restricted stock are entitled to dividend
and voting rights on the restricted shares prior to the lapse of restrictions on
such grants. Performance share awards are payable at the discretion of the
Compensation Committee in cash or shares of the Company's Common Stock. Each
performance share award will specify the performance goals applicable to the
award, the period over which the goals are to be achieved and the payment
schedule if the goals are attained. The terms and conditions of the restricted
stock and performance share awards, including the acceleration or lapse of any
restrictions and conditions of such awards, are to be determined by the
Compensation Committee.
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ANNUAL PERFORMANCE INCENTIVE AWARDS. Under the Plan, certain executive
officers designated by the Compensation Committee may receive annual awards
determined by pre-established objective performance goals ("Annual Incentive
Awards") that are intended to satisfy the performance based compensation
requirements of Section 162(m) of the Code. Annual Incentive Awards will be paid
in cash or in shares of Common Stock of the Company, as determined by the
Compensation Committee.
TRANSFER
Stock options, SARs, restricted stock awards, performance share awards and
Annual Performance Incentive Awards are not transferable by a participant except
by will or the laws of descent and distribution.
DEATH, DISABILITY, TERMINATION OF EMPLOYMENT
A participant who terminates employment with the Company for reasons other
than permanent disability or death must exercise all exercisable options and
SARs within the earlier of the expiration of the option or SAR or 90 days after
such participant's termination. Upon the death of an participant, exercisable
options and SARs must be exercised by the participant's heirs before the
expiration of the options. If a participant's employment terminates due to total
and permanent disability, exercisable options and SARs must be exercised by the
participant before the expiration of the option. A participant who terminates
employment for any reason forfeits any restricted stock awards and performance
share awards still subject to restrictions or conditions; provided, however,
that the Compensation Committee is authorized to accelerate or waive any
restrictions or conditions on restricted stock and performance share awards. A
participant who terminates employment for any reason other than retirement,
disability or death before receiving payment of an Annual Incentive Award
forfeits the opportunity to receive any such compensation. A participant who
retires, becomes disabled or dies before receiving payment of an Annual
Incentive Award will be paid the full amount for the relevant year if employed
during the entire year or a prorated amount according to the number of full
months of employment during the year.
ADJUSTMENTS
The number of shares authorized for the Plan and the number of shares
subject to individual awards and grants under the Plan will be adjusted pro rata
by the Compensation Committee in the event of any increase or decrease in the
number of outstanding shares of Common Stock of the Company resulting from a
dividend of Common Stock, subdivision or combination of shares or a
reclassification of Common Stock.
In certain circumstances, upon a change in control of the Company (as
defined in the Plan), outstanding stock options and SARs immediately become
exercisable, all restrictions lapse on restricted stock grants, and all
performance goals and conditions will be deemed to have been satisfied on
outstanding performance shares awards. For purposes of granting annual incentive
awards, the determination of whether performance targets have been achieved will
be made as of the date of the change in control. Any payment due will become
immediately payable.
AMENDMENT OR TERMINATION OF PLAN
The Plan may be terminated or amended at any time by the Board of
Directors, but no amendment may, without the approval of shareholders, (i)
materially increase the benefits accruing to participants, (ii) increase the
number of securities issuable under the Plan, or (iii) modify the requirements
for eligibility. No amendment, modification or termination of the Plan may
adversely affect any option, SAR, restricted stock grant, performance share
award or Annual Incentive Award previously granted under the Plan without the
consent of the participant. Unless the Plan is terminated sooner by the Board of
Directors, no new awards or grants may be authorized under the Plan after April
1, 2007.
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FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
INCENTIVE STOCK OPTIONS. At the time an incentive stock option is granted
or exercised, the optionee will not be deemed to have received any income, and
the Company will not be entitled to a deduction. The optionee generally will
receive long-term capital gain or loss treatment on the disposition of stock
acquired upon exercise of the option, provided the disposition occurs more than
two years from the date the option is granted and the stock acquired is held by
the optionee for more than one year. An optionee who disposes of shares acquired
by exercise prior to the expiration of the foregoing holding periods realizes
ordinary income upon the disposition equal to the difference between the option
price and the lesser of the fair market value of the shares on the date of
exercise or the disposition price. Any appreciation between the fair market
value of the shares on the date of the exercise and the disposition price is
taxed to the optionee as long or short-term capital gain, depending of the
length of the holding period. To the extent ordinary income is recognized by the
optionee, the Company receives a corresponding compensation tax deduction.
NONQUALIFIED STOCK OPTIONS. Upon the exercise of a nonqualified stock
option, an optionee not subject to short swing profit restrictions under Section
16(b) of the Securities Exchange Act of 1934, and an insider subject to such
restrictions who has held the option until the restrictions have lapsed (usually
six months), will realize ordinary income equal to the difference between the
option price and the fair market value of the Common Stock on the date of
exercise. Upon withholding for income and employment tax, the Company is
entitled to a compensation tax deduction equal to the ordinary income realized
by the employee. When the optionee disposes of the shares acquired by the
exercise of the option, any amount received in excess of the fair market value
of the shares on the date of exercise will be treated as long or short-term
capital gain, depending on the holding period of the shares.
If option shares are paid for with the Company's Common Stock, the optionee
will realize ordinary income equal to the fair market value of the number of
shares received upon exercise of the nonqualified option which exceeds the
number of shares surrendered for payment of such option, reduced by the amount
of any cash paid upon the exercise of the option. Upon withholding for income
and employment taxes, the Company will be entitled to a compensation tax
deduction equal to the ordinary income realized by the optionee.
The foregoing is only a summary of the effect of federal income taxation
upon award recipients and the Company with respect to the grant and exercise of
awards under the Plan. It does not purport to be complete, and does not discuss
the tax consequences of the employee's death or the provisions of the income tax
laws of any municipality, state, or foreign country in which the employee may
reside.
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
Compensation policies for executive officers are developed and monitored by
the Compensation Committee of the Board of Directors. The Committee recommends
to the Board of Directors the nature and amount of compensation for all
executive officers. This Committee consists of three independent directors who
are neither officers nor employees of the Company.
COMPENSATION POLICIES
The Company's executive compensation policies are designed to encourage and
reward executive efforts which create shareholder value through achievement of
corporate objectives and performance goals and, as a result, to align the
interests of executives with those of shareholders. More specifically, the
Company's compensation policies can be summarized as:
(a) annual base salaries targeted to be competitive with other leading
information technologies (IT) services companies with which the Company
competes for talent;
(b) annual cash bonuses based on improved Company performance; and
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(c) long-term incentive-based compensation through the Company's 1997 Stock
Option and Incentive Plan and Employee Stock Purchase Plan which is
used to link executive performance to shareholder interests, encourage
stock ownership in the Company and provide an incentive to create
long-term shareholder value.
Each component of compensation (annual base salary, annual cash bonus, and
long-term performance incentives) is described more fully below.
ANNUAL BASE SALARIES
Executive salaries are intended to be competitive with other leading IT
services companies with which the Company competes for personnel. Executive
salary levels are based on level of job responsibility, individual performance,
and published compensation data for comparable companies.
ANNUAL CASH BONUSES
Annual incentive-based compensation is provided primarily through cash
bonuses. Bonuses are based upon the achievement of specified individual and
corporate goals, as well as a review of personal performance which is determined
at the discretion of the Committee.
LONG-TERM PERFORMANCE INCENTIVES
The Committee grants stock options, with ten-year terms at an exercise
price equal to the fair market value on the date of grant, having a value based
on the level of stock price appreciation over the market price on the date of
grant. This provides an incentive for executives to develop shareholder value
and rewards them in proportion to the gain received by other shareholders. The
Committee considers the level of stock options granted by comparable IT services
companies and the number of Company stock options previously granted in reaching
its decision to make additional grants of stock options, but does not have a
specific weighting formula for each factor.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the U.S. Internal Revenue Code limits to $1 million the
corporate tax deduction for compensation paid to certain executive officers
unless the compensation is based on non-discretionary, pre-established
performance goals. The Committee believes that both annual incentive bonuses and
stock options granted as long-term performance incentives meet the requirements
for fully deductible compensation under Section 162(m).
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee uses the same procedures described above for the other
executive officers in setting the annual salary and bonus for Bharat Desai, the
Company's Chief Executive Officer. The Committee will evaluate the performance
of Mr. Desai at least annually based upon both the Company's financial
performance and the extent to which the strategic and business goals established
for the Company are met. The Committee does not assign relative weights or
rankings to particular factors, but makes its determination based upon a
consideration of all such factors.
COMPENSATION COMMITTEE
Paritosh K. Choksi
Douglas E. Van Houweling
George R. Mrkonic
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation of the Company's Chief Executive Officer and the other four most
highly compensated executive officers of the Company for the last three fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bharat Desai, Chairman,
President, 1999 $300,000 -0- -0- -0-
and Chief Executive Officer.... 1998 $300,000 $600,000 -0- -0-
1997 $395,682(1) $200,000 -0- -0-
John Andary, Chief Financial 1999 $197,917 $ 20,000 30,000 $1,450(2)
Officer and Treasurer.......... 1998 $149,167 $ 60,000 -0- $2,660(2)
1997 $135,417 $ 50,000 45,000 -0-
Jay Clark, Vice President, Global 1999 $197,917 $ 20,000 30,400 $ 410(2)
Applications Management........ 1998 $150,000 $ 70,000 -0- $1,020(2)
1997 $153,333 $ 50,000 37,500 -0-
Daniel M. Moore, Chief
Administrative 1999 $197,917 $ 20,000 30,500 $ 820(2)
Officer and Secretary.......... 1998 $144,708 $ 75,000 -0- $1,800(2)
1997 $139,375 $ 65,000 45,000 -0-
Rajiv Tandon, Vice President, 1999 $170,355 $ 51,000 62,500 -0-
Global Delivery................ 1998 $121,667 $ 60,000 -0- -0-
1997 $109,375 $ 32,000 37,500 -0-
</TABLE>
- ----------------------------------
(1) Effective in August, 1997, Mr. Desai began receiving an annual salary of
$300,000.
(2) These amounts reflect payments by the Company for life insurance upon the
named executive officers.
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OPTION/SAR GRANTS IN LAST FISCAL PERIOD
The following table provides information about stock options granted to the
persons named in the Summary Compensation Table during the last fiscal year. The
table also shows projected hypothetical gains for the options over the full
option term, based on assumed annual compound rates of stock price appreciation
of 5% and 10% and have not been discounted to reflect present values. These
amounts are not intended to forecast possible future appreciation, if any, of
the Company's stock price.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ---------- ------------ --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Bharat Desai................... -0-
John Andary.................... 15,000 0.7% $11.31 1/1/09 $106,650 $270,450
15,000 0.7% $ 8.25 10/29/09 $ 77,850 $197,250
Jay Clark...................... 15,400 0.8% $11.31 1/1/09 $109,494 $277,662
15,000 0.7% $ 8.25 10/29/09 $ 77,850 $197,250
Daniel M. Moore................ 15,500 0.8% $11.31 1/1/09 $110,205 $279,465
15,000 0.7% $ 8.25 10/29/09 $ 77,850 $197,250
Rajiv Tandon................... 12,500 0.6% $11.31 1/1/09 $ 88,875 $225,375
50,000 2.4% $ 8.25 10/29/09 $259,500 $657,500
</TABLE>
- ----------------------------------
(1) The options granted to all employees have a ten year term and become
exercisable in annual installments of 10%, 20%, 30% and 40% of the shares
subject to the option on the first, second, third and fourth anniversaries,
respectively, of the grant date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information regarding the exercise of stock
options and the value of unexercised in-the-money options held at the end of the
last fiscal year by the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES VALUE AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON REALIZED ------------------------------- -----------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bharat Desai........... -0- -0- -0- -0- -0- -0-
John Andary............ -0- -0- 13,500 61,500 $158,580 $562,320
Jay Clark.............. 4,500 $31,328 6,750 56,650 $ 68,783 $510,775
Daniel M. Moore........ -0- -0- 12,000 62,000 $136,290 $564,760
Rajiv Tandon........... 2,000 $29,980 7,750 88,750 $ 83,643 $774,523
</TABLE>
- ----------------------------------
(1) Assumes a market price of $16.19 per share, which was the last sale price on
December 31, 1999. At March 27, 2000 the last sale price was $16.81 per
share.
9
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock from August 12, 1997, the date of the initial public
offering of the Common Stock, through December 31, 1999, the end of the
Company's fiscal year, to the cumulative total shareholder returns for the S&P
500 Stock Index and for an index of peer companies selected by the Company for
the same period of time. The peer group index is composed of Cambridge
Technology Partners, Inc., CIBER, Inc., Computer Horizons Corp., Computer
Sciences Corporation, Electronic Data Systems Corporation, Keane, Inc., and
Sapient Corporation. These companies were selected based on similarities in
their service offerings and their competitive position in the industry.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM AUGUST 12, 1997
THROUGH DECEMBER 31, 1999 AMONG SYNTEL, INC., S&P 500 STOCK INDEX
AND AN INDEX OF PEER COMPANIES *
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
8/12/97 12/31/97 12/31/98 12/31/99
------- -------- -------- --------
<S> <C> <C> <C> <C>
Syntel, Inc. ............................................ $100 $106 $126 $180
S&P 500 Stock Index...................................... $100 $105 $133 $159
Peer Group Index......................................... $100 $123 $137 $191
</TABLE>
- ----------------------------------
* Assumes that the value of an investment in the Company's Common Stock and each
index was $100 on August 12, 1997 and that all dividends were reinvested.
10
<PAGE> 14
ADDITIONAL INFORMATION
PRINCIPAL SHAREHOLDERS
The following table provides information about any person known by
management of the Company to have been the beneficial owner of more than five
percent of the Company's outstanding Common Stock as of March 27, 2000.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP OF CLASS
---------------- ---------- --------
<S> <C> <C>
Neerja Sethi................................................ 19,789,350(1) 51.7%
Bharat Desai................................................ 13,173,150(2) 34.4%
</TABLE>
- ----------------------------------
(1) Includes 9,932,138 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, and 13,500 shares held in several educational trusts for the
benefit of other individuals, of which Ms. Sethi is also the 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.
(2) Includes 150,000 shares of Common Stock held in several trusts for the
benefit of Mr. Desai's descendants, of which trusts Mr. Desai is a trustee,
and 5,400 shares held in several educational trusts for the benefit of
individuals related to Mr. Desai, of which Mr. Desai is also the 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.
SECURITY OWNERSHIP OF MANAGEMENT
The following table provides information, as of March 27, 2000, about the
beneficial ownership of the Company's Common Stock by the nominees, present
directors and named executive officers of the Company, and by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
NAME OWNED(1) CLASS
---- ------------ ----------
<S> <C> <C>
John Andary................................................. 22,162 *
Paritosh K. Choksi.......................................... 50,250 *
Jay Clark................................................... 21,890 *
Bharat Desai................................................ 13,173,150(2) 34.3%(4)
Daniel M. Moore............................................. 21,580 *
George R. Mrkonic........................................... 39,000 *
Neerja Sethi................................................ 19,789,350(3) 51.5%(4)
Rajiv Tandon................................................ 13,500 *
Douglas E. Van Houweling.................................... 9,000 *
All directors and executive officers as a group (14
persons).................................................. 33,189,308 86.4%
</TABLE>
- ----------------------------------
* Less than 1%
(1) The number of shares shown in the table includes the following number of
shares which the person specified may acquire by exercising options which
were unexercised on March 27, 2000: John Andary, 19,500; Paritosh K. Choksi,
3,000; Jay Clark, 12,790; Daniel M. Moore, 18,050; George R. Mrkonic, 3,000;
Rajiv Tandon, 13,500; Douglas E. Van Houweling, 3,000; and all directors and
executive officers as a group, 105,840.
(2) Includes 150,000 shares of Common Stock held in several trusts for the
benefit of Mr. Desai's descendants, of which trusts Mr. Desai is a trustee,
and 5,400 shares held in several educational trusts for
11
<PAGE> 15
the benefit of individuals related to Mr. Desai, of which Mr. Desai is also
the trustee. Mr. Desai disclaims beneficial ownership of shares held by his
spouse, Ms. Sethi.
(3) Includes 9,932,138 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, and 13,500 shares held in several educational trusts for the
benefit of unrelated individuals, of which Ms. Sethi is also the trustee.
Ms. Sethi disclaims beneficial ownership of shares held by her spouse, Mr.
Desai.
(4) Percentages vary between this table and the preceding table because, when
calculating percentages, this table includes exercisable but unexercised
options in the total number of shares outstanding.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") and the NASDAQ Stock Market. Officers, directors and greater than
ten percent shareholders are required by regulations of the SEC to furnish the
Company copies of all Section 16(a) forms they file.
Based solely on the Company's review of copies of such forms received by
it, or written representations from certain reporting persons that no Forms 5
were required for those persons, the Company believes that, except for the
following, its officers, directors and greater than ten percent beneficial
owners met all applicable filing requirements during the last year. The
following persons filed the listed late reports: John Andary one report
reporting two transactions; Paritosh K. Choksi one report reporting one
transaction; Vivian Chow two reports reporting one total transaction; Jay Clark
one report reporting three transactions; Bharat Desai one report reporting one
transaction; Prakash Kenjale one report reporting one transaction; Daniel M.
Moore one report reporting two transactions; George R. Mrkonic one report
reporting one transaction; Sanjay Raizada, three reports reporting two total
transactions; Neerja Sethi one report reporting one transaction; and Douglas E.
Van Houweling one report reporting one transaction.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has served as independent accountants for the
Company since 1995. PricewaterhouseCoopers LLP was selected by the Board of
Directors to serve as the Company's independent accountants for the fiscal year
ending December 31, 2000. It is anticipated that a representative of
PricewaterhouseCoopers LLP will be present at the meeting, will have an
opportunity to make a statement, and will respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals to be presented at the 2001 Annual Meeting must be
received by the Company not later than December 22, 2000 if they are to be
included in the Company's Proxy Statement for the 2001 Annual Meeting. Such
proposals should be addressed to the Secretary at the Company's executive
offices.
Shareholder proposals to be presented at the 2001 Annual Meeting or any
Special Meeting which are not to be included in the Company's Proxy Statement
for that meeting must be received by the Company not less than 60 nor more than
90 days before the date of the meeting or no later than 10 days after the day of
the public announcement of the date of the meeting in accordance with the
procedures contained in the Company's Bylaws.
12
<PAGE> 16
OTHER MATTERS
At the date of this Proxy Statement, management is not aware of any matters
to be presented for action at the Annual Meeting other than the matters
described in this Proxy Statement. However, if any other matters should come
before the meeting, the persons named in the proxy card intend to vote the proxy
in accordance with their judgment on such matters.
By Order of the Board of Directors,
/s/ DANIEL M. MOORE
Daniel M. Moore
Secretary
April 21, 2000
13
<PAGE> 17
EXHIBIT A
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 August 11, 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
1
<PAGE> 18
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."
(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.
2
<PAGE> 19
(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.
(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).
3
<PAGE> 20
(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.
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.
4
<PAGE> 21
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
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
5
<PAGE> 22
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 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.
6
<PAGE> 23
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 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
7
<PAGE> 24
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.
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.
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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 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
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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.
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
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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 (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.
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(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:
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
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<PAGE> 29
Code Section 162(m)) and while the outcome of the performance goals and targets
is uncertain.
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
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Participant and, subject to Section 1.6, shall be available for new grants and
awards under the Plan as of such 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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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. No fractional shares shall be issued
in connection with the exercise of a Stock
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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
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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 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.
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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 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.
19
<PAGE> 36
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 11th day of
August, 1997.
SYNTEL, INC.
By:/s/ BHARAT DESAI
------------------------------
Bharat Desai, President
20
<PAGE> 37
PROXY PROXY
SYNTEL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS - MAY 23, 2000
The undersigned appoints Bharat Desai; John Andary and Daniel M. Moore,
and each of them, as proxies with full power of substitution and revocation, to
vote, as designated on the reverse side hereof, all the Common Stock of Syntel,
Inc. which the undersigned has power to vote, with all powers which the
undersigned would possess if personally present, at the annual meeting of
stockholders thereof to be held on May 23, 2000, or at any adjournment thereof.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NAMED NOMINEES AND FOR THE AMENDMENT TO SYNTEL, INC.'S 1997 STOCK OPTION AND
INCENTIVE PLAN. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THE PROXIES' JUDGMENT.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 38
- --------------------------------------------------------------------------------
SYNTEL,INC.
PLEASE MARK VOTE IN OVAL IN FOLLOWING MANNER USING DARK INK ONLY. /X/
[ ]
<TABLE>
<S><C>
1. ELECTION OF DIRECTORS For Withhold For All 2. Approval of an Amendment to Syntel, Inc.'s For Against Abstain
Nominees:01 Bharat Desai and All All Except* 1997 Stock Option and Incentive Plan / / / / / /
02 Paritosh K. Choksi / / / / / / (the "Plan")which will increase the number
of shares of common stock Syntel, Inc. is
authorized to issue under the Plan.
*Vote withheld from the following nominee:
- -------------------------------------------------------
- ---------------------------------------------------------------------------- Dated: , 2000
------------------
THIS SPACE RESERVED FOR ADDRESSING
(key lines do not print) Signature(s)
-------------------------------------
- ----------------------------------------------------------------------------- -------------------------------------------------
(Please date this proxy and sign exactly as your
name appears hereon. If you sign as attorney,
executor, administrator, trustee, guardian
custodian, or corporate official, please give your
full title in such capacity.)
</TABLE>
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.
