UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[ ] Definitive Proxy Statement.
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[ ] Soliciting Material Pursuant to Section 240.14a-12
Syntel, Inc.
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(Name of Registrant as Specified In Its Charter)
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
[SYNTEL LOGO]
April 28, 2005
Dear Shareholder:
It is my pleasure to invite you to attend Syntel's 2005 Annual Meeting of
Shareholders on Thursday, June 2, 2005, at 10:00 a.m. The meeting will be held
at the global headquarters of Syntel, Inc. located at 525 East Big Beaver Road,
Suite 300, Troy, Michigan. If you should need directions to Syntel's global
headquarters, please contact us at (248) 619-2800.
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, which will consist of
the election of a director, a proposed amendment to Syntel's Restated Articles
of Incorporation, a proposed amendment to Syntel's 1997 Stock Option and
Incentive Plan, and ratifying the appointment of Syntel's independent registered
public accounting firm.
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 later revoke your proxy and vote in person at
the meeting if you wish.
Sincerely,
/S/ BHARAT DESAI
Bharat Desai
Chairman, President, and Chief
Executive Officer
SYNTEL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 2, 2005
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The Annual Meeting of Shareholders of Syntel, Inc., a Michigan corporation,
will be held on Thursday, June 2, 2005, at 10:00 a.m., at Syntel's global
headquarters located at 525 East Big Beaver Road, Suite 300, Troy, Michigan. The
purposes of the Annual Meeting are to:
1. elect one director to serve on Syntel's Board of Directors;
2. consider amending Syntel's Restated Articles of Incorporation to
declassify the Board of Directors;
3. consider amending Syntel's 1997 Stock Option and Incentive Plan to
prohibit re-pricing of options;
4. ratify the appointment of Crowe Chizek and Company LLC as Syntel's
independent registered public accounting firm for the current fiscal
year; and
5. 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 April 7, 2005 may
receive notice of and vote at the meeting.
By Order of the Board
/s/ DANIEL M. MOORE
April 28, 2005 Daniel M. Moore
Chief Administrative Officer
and Secretary
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WE WOULD LIKE SHAREHOLDERS TO COME TO THE MEETING, BUT, EVEN IF YOU PLAN TO
ATTEND, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
ENVELOPE PROVIDED.
SYNTEL, INC.
525 EAST BIG BEAVER ROAD, SUITE 300
TROY, MICHIGAN 48083
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, JUNE 2, 2005
SOLICITATION OF PROXIES
This proxy statement and the accompanying proxy are being distributed to
shareholders of Syntel, Inc. ("Syntel") in connection with the solicitation of
proxies to be used at Syntel's 2005 Annual Meeting of Shareholders. The proxy is
your vote as a shareholder of Syntel on the matters presented at the Annual
Meeting. The Annual Meeting will be held at Syntel's global headquarters located
at 525 East Big Beaver Road, Suite 300, Troy, Michigan, on Thursday, June 2,
2005, at 10:00 a.m.
The enclosed proxy is solicited by Syntel's Board of Directors. This Proxy
Statement and the enclosed proxy were first mailed or given to shareholders
beginning on April 28, 2005. Syntel's 2004 Annual Report to Shareholders is also
enclosed with this Proxy Statement.
Syntel will pay the entire cost of soliciting proxies. Syntel will arrange
with brokerage houses, nominees, custodians, and other fiduciaries to send proxy
soliciting materials to beneficial owners of the Common Stock at Syntel'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: (1) you may deliver a
written notice of revocation, dated after the date of your proxy, to the
inspectors of the election at or before the Annual Meeting; (2) you may deliver
a later-dated proxy to the inspectors of the election at or before the Annual
Meeting; or (3) you may attend the Annual Meeting in person and vote your shares
by ballot. If you decide to send your written notice of revocation or
later-dated proxy to the inspectors of election before the Annual Meeting,
please send it to the attention of the Chief Administrative Officer, Syntel,
Inc., 525 East Big Beaver Road, Suite 300, Troy, Michigan 48083 so that it will
arrive before June 2, 2005.
RECORD DATE
The record date for determining shareholders entitled to vote at the Annual
Meeting is April 7, 2005. Each of the 40,774,069 shares of Syntel's Common Stock
issued and outstanding on that date and not held in an account for Syntel's
benefit is entitled to one vote on any matter voted on at the Annual Meeting.
Abstentions 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 DIRECTORS
Under Syntel's current Restated Articles of Incorporation, the members of
Syntel's Board of Directors are organized into three classes, 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 their successors are duly
elected and qualified. There are currently six members of the Board, however,
Douglas E. Van Houweling, who was slated to stand for reelection to the Board of
Directors announced to the Board of Directors on April 13, 2005 that he would
not stand for reelection. Syntel's Nominating and Corporate Governance Committee
and Board of Directors has begun a search for a qualified replacement for Mr.
Van Houweling. Due to the short time period between Mr. Van Houweling's
announcement and the Annual Meeting, the Nominating and Corporate
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Governance Committee and the Board of Directors have determined that it would
not be in Syntel's best interest to conduct a hurried search in order to have a
candidate for election at this time. Once the search for a suitable candidate is
completed, the Board of Directors will elect a director to fill the vacancy on
the Board.
One director is to be elected at this year's Annual Meeting. If Proposal 2
amending Syntel's Restated Articles of Incorporation is not approved by Syntel's
shareholders, the new director will serve for a term that ends at Syntel's 2008
Annual Meeting of Shareholders and upon the election and qualification of her or
his successor. If Proposal 2 is approved by Syntel's shareholders, she or he
will serve a one year term ending at Syntel's 2006 Annual Meeting of
Shareholders. The nominee named below has 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 proxy provided with this proxy statement
to vote to elect the nominee named below as a director.
The person receiving the highest number of votes cast at the Annual Meeting
in person or by proxy will be elected as a director. Shares not voted (whether
by abstention, broker non-votes or otherwise) have no effect on the election. In
case a nominee is unable or declines to serve, proxies will be voted for another
person designated by the Board of Directors to replace the nominee. However, the
Board of Directors does not anticipate this will occur. For the 2005 Annual
Meeting of Shareholders, each proxy may be voted for no more than one director
candidate.
Information concerning the nominee for election and the directors
continuing in office, with respect to age and positions with Syntel or other
principal occupations for the past five years follows.
NOMINEE FOR ELECTION AS A DIRECTOR UNTIL EITHER THE 2006 OR 2008 ANNUAL MEETING
Neerja Sethi, age 50, is a co-founder of Syntel and has served as a Vice
President and a director since Syntel's formation in 1980 and was recommended
for nomination for election at this Annual Meeting of Syntel's shareholders by
the full Board of Directors. Ms. Sethi is the spouse of Mr. Desai.
DIRECTORS WHOSE TERMS CONTINUE UNTIL THE 2006 ANNUAL MEETING
Bharat Desai, age 52, is a co-founder of Syntel and has served as its
Chairman of the Board, President and Chief Executive Officer and as a director
since February 1999. He has served as its President and Chief Executive Officer
and as a director since its formation in 1980. Mr. Desai is the spouse of Ms.
Sethi.
Paritosh K. Choksi, age 52, is Executive Vice President, Chief Operating
Officer, and Chief Financial Officer and a director of ATEL Capital Group, a
financial services management company, and has served in those capacities since
April 2001. From May 1999 to April 2001, Mr. Choksi was Chief Financial Officer,
Senior Vice President, and a director of ATEL Capital Group. Mr. Choksi has been
a director of Syntel since August 1997.
DIRECTORS WHOSE TERMS CONTINUE UNTIL THE 2007 ANNUAL MEETING
George R. Mrkonic, age 52, served as the Vice Chairman of Borders Group,
Inc., a retailer of books, music, and educational entertainment media products
headquartered in Ann Arbor, Michigan from December 1994 until January 2002, and
served as a director of Borders Group, Inc. from August 1994 until January 2005.
Mr. Mrkonic is also a director of (i) Nashua Corporation, a manufacturer of
specialty imaging products and services to industrial and commercial customers
to meet various print application needs, (ii) Guitar Center, Inc., the nation's
leading retailer of guitars, amplifiers, percussion instruments, keyboards and
pro-audio and recording equipment, and (iii) Brinker International, Inc., the
parent company of a diverse portfolio of casual dining restaurant concepts. Mr.
Mrkonic has been a director of Syntel since August 1997.
Vasant Raval, age 65, has been a Professor and Chair of the Department of
Accounting at Creighton University since 2001. Mr. Raval joined the faculty of
Creighton University in 1981 and has served as Professor of Accounting and
Associate Dean and Director of Graduate Programs at the College of Business
Administration. Mr. Raval is also a director of InfoUSA, Inc., a provider of
business and consumer information products, database marketing services, data
processing services, and sales and marketing solutions. Mr. Raval has been a
director of Syntel since January 2004.
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BOARD RECOMMENDATION
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEE LISTED
ABOVE.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors meets regularly, at least once each quarter. During
2004, the Board of Directors held nine meetings. The standing committees
established by the Board of Directors are described below. The Board of
Directors has determined that each of Messrs. Choksi, Mrkonic, Raval, and Van
Houweling are independent under the listing standards of the National
Association of Securities Dealers ("NASD") in that such directors have no
relationships which would interfere with their exercise of independent judgment
in carrying out their responsibilities as a director.
Audit Committee. The Audit Committee is responsible for, among other
things, appointing an independent accounting firm to conduct the independent
audit of Syntel, periodically reviewing the qualifications of Syntel's
independent auditors, reviewing the scope and results of any audit, and
reviewing fees charged by the independent auditors for audit service, non-audit
service, and related matters. The Audit Committee met eighteen times during
2004. The members of the Audit Committee are Vasant Raval (Committee
Chairperson), Paritosh K. Choksi, and George R. Mrkonic, Jr. The Board has
determined that Vasant Raval is an "audit committee financial expert" and that
each member of the Audit Committee is independent and qualified to serve on the
Committee under the NASD listing standards. The Audit Committee charter is
available on Syntel's website at www.syntelinc.com on the corporate governance
page in the "investors" section of the website.
Compensation Committee. The Compensation Committee develops and monitors
the executive compensation policies of Syntel. The Compensation Committee is
responsible for the administration of all salary and incentive compensation
plans, including bonuses, for the chief executive officer, other officers, and
the key employees of Syntel. The Compensation Committee also administers
Syntel's 1997 Stock Option and Incentive Plan and the 1997 Employee Stock
Purchase Plan. The Compensation Committee met ten times during 2004. The members
of the Compensation Committee are Douglas E. Van Houweling (Committee
Chairperson), Paritosh K. Choksi, and George R. Mrkonic, Jr. The Board has
determined that each member of the Committee is independent under the NASD
listing standards. The Compensation Committee charter is available on Syntel's
website at www.syntelinc.com on the corporate governance page in the "investors"
section of the website.
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee is responsible for identifying and recommending
to the Board of Directors nominees, including nominees submitted by
shareholders, who are qualified to serve on Syntel's Board of Directors, to
develop and periodically review corporate governance principles for Syntel, and
oversee the evaluation of Board members and management. The Nominating and
Corporate Governance Committee met once during 2004. The members of the
Nominating and Corporate Governance Committee are George R. Mrkonic, Jr.
(Committee Chairperson), Paritosh K. Choksi, and Douglas E. Van Houweling. The
Board of Directors has determined that each member of the Committee is
independent under the NASD listing standards. The Nominating and Corporate
Governance Committee charter is available on Syntel's website at
www.syntelinc.com on the corporate governance page in the "investors" section of
the website.
The Nominating and Corporate Governance Committee's policy with respect to
the consideration of director candidates recommended by shareholders is that it
will consider such candidates on the same basis as it considers all director
candidates. In considering director candidates, the Nominating and Corporate
Governance Committee will consider such factors as it deems appropriate to
assist in developing a Board and committees that are diverse in nature and
comprised of experienced and qualified advisors. These factors may include
judgment, skill, diversity (including factors such as race, gender or
experience), integrity, experience with businesses and other organizations of
comparable size, the interplay of the candidate's experience with the experience
of other Board members, and the extent to which the candidate would be a
desirable addition to the Board and any committees of the Board.
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The Nominating and Corporate Governance Committee considers candidates for
Board membership suggested by its members and other Board members and
management, as well as shareholders. In the past, the Board of Directors has
retained third party search firms from time to time to identify and evaluate
candidates, and the Nominating and Corporate Governance Committee is authorized
to continue that practice. The Nominating and Corporate Governance Committee is
authorized to engage or consult from time to time, as appropriate, at Syntel's
expense, consultants, independent legal counsel and other experts and advisors
it considers necessary, appropriate or advisable in the discharge of its
responsibilities. Shareholders may propose nominees for consideration by the
Nominating and Corporate Governance Committee by submitting the names and
supporting information to: Syntel, Inc., 525 East Big Beaver Road, Suite 300,
Troy, Michigan 48083, Attn: Secretary.
Executive Committee. The Executive Committee assists the Board of
Directors in discharging its duties relating to Syntel's strategic vision. The
Executive Committee met once during 2004. The members of the Executive Committee
are Paritosh K. Choksi (Committee Chairperson), Bharat Desai, and Neerja Sethi.
The Executive Committee charter is available on Syntel's website at
www.syntelinc.com on the corporate governance page in the "investors" section of
the website.
MEETING ATTENDANCE AND SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
During 2004, all current directors attended at least 75% of the meetings of
the Board of Directors and the committees on which they served. In 2004, two
directors attended the Annual Meeting of Shareholders. Syntel does not have a
policy on individual director attendance at annual shareholder meetings.
Shareholders may send written communications to the Board, committees of the
Board, and individual directors by mailing those communications to our Corporate
Secretary at Syntel, Inc., 525 East Big Beaver Road, Suite 300, Troy, Michigan
48083, who will forward all such communications to the addressee(s).
Shareholders may also communicate with the Board of Directors, or only with the
independent directors, by means of the incident reporting process at
www.mysafeworkplace.com.
COMPENSATION OF DIRECTORS
Directors who are also employees of Syntel do not receive any additional
compensation for their service as a Director. Directors who are not employees of
Syntel are paid a $25,000 annual retainer as well as $2,000 for attending each
Board meeting and $500 for attending each committee meeting which is not held on
the same day as a Board meeting. Committee chairpersons also receive annual
retainers in addition to those they receive as Board members. The Audit
Committee chairperson receives an annual retainer of $10,000 and all other
committee chairpersons receive an annual retainer of $5,000. Currently, each
non-employee director receives, under Syntel's 1997 Stock Option and Incentive
Plan, 6,000 shares of restricted stock at the annual shareholder meeting at
which the director is elected to a three year term. That restricted stock vests
over the three year term to which the director is elected, with one third or
2,000 of the shares of restricted stock vesting on the first three anniversaries
of the grant date. If Syntel's Restated Articles of Incorporation are amended at
this Annual Meeting to declassify the Board of Directors, resulting in directors
being elected to a one year term of office, the restricted stock portion of the
directors compensation will be modified to a grant of 2,000 shares upon their
election to a one year term of office which will vest at the first anniversary
of the grant.
PROPOSAL 2. APPROVAL OF AMENDMENT TO
THE RESTATED ARTICLES OF INCORPORATION OF SYNTEL TO
ELIMINATE THE CLASSIFIED BOARD OF DIRECTORS
Article VI of Syntel's Restated Articles of Incorporation currently divides
Syntel's Board of Directors into three equal classes, with one class elected
each year to a three year term. The Board of Directors has adopted, subject to
stockholder approval, an amendment to revise Article VI of Syntel's Restated
Articles of Incorporation to eliminate the classified Board of Directors. The
proposal would allow for the annual election of directors in the manner
described below.
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Since Syntel's Restated Articles of Incorporation were adopted by the
shareholders in 1997, Syntel has had a classified Board of Directors. Classified
boards have been widely adopted and have a long history in corporate law, and
Syntel's Board believes that the classified Board of Directors has served the
best interests of Syntel and its shareholders over the last eight years.
Recognizing, however, the significant changes that have occurred in corporate
governance standards over the last few years, the Board of Directors has decided
to propose eliminating the classified Board. The elimination of the classified
Board would require an amendment to Syntel's Restated Articles of Incorporation.
If this proposal is approved by the shareholders, commencing with this Annual
Meeting of Shareholders and for each subsequent annual meeting, those directors
whose terms expire at the applicable annual meeting of shareholders will be
elected for a one-year term, such that, from and after the 2007 Annual Meeting
of Shareholders, our Board would cease to be classified and all directors would
be elected for one-year terms at each annual meeting of shareholders. The
amendment to the Syntel's Restated Articles of Incorporation to implement this
proposal is substantially in the form set forth in Appendix A. If approved, this
proposal will become effective upon the filing of a Certificate of Amendment to
the Restated Articles of Incorporation of Syntel with the Bureau of Commercial
Services of the Michigan Department of Labor and Economic Growth containing
substantially this amendment, which Syntel would do promptly after the Annual
Meeting.
Under the Restated Articles of Incorporation of Syntel, approval of this
proposal requires the affirmative vote of a majority of the holders of the
shares of Syntel's Common Stock outstanding as of the Record Date. Abstentions
and broker non-votes will be counted as present for purposes of determining if a
quorum is present, but will have the same effect as a negative vote on the
outcome of this proposal. PROXIES RECEIVED BY SYNTEL 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 TO
SYNTEL'S RESTATED ARTICLES OF INCORPORATION TO ELIMINATE THE CLASSIFIED BOARD.
PROPOSAL 3. APPROVAL OF AN AMENDMENT TO
SYNTEL, INC.'S 1997 STOCK OPTION AND INCENTIVE PLAN
In April 2005, Syntel's Board of Directors and the Compensation Committee
of the Board of Directors approved an amendment to Syntel's 1997 Stock Option
and Incentive Plan (the "Plan") and approved submitting the Plan amendment to
Syntel's shareholders for approval at the 2005 Annual Meeting of Shareholders.
The proposed Plan amendment will not allow Syntel, its Board of Directors, or
the Compensation Committee to reprice stock options issued under the Plan.
The Amendment is being submitted to Syntel's shareholders in compliance
with certain rules of the NASDAQ Stock Market. Adoption of the proposal requires
the affirmative vote of the votes cast on the proposal. Shares not voted,
whether by marking "Abstain" on the proxy card, by broker non-votes, or
otherwise, will have no effect on the outcome of the vote. 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 a majority of
the votes cast on the proposal. Shares not voted, whether by marking "Abstain"
on the proxy card, by broker non-votes, or otherwise, will have no effect on the
outcome of the vote. PROXIES RECEIVED BY SYNTEL 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 Syntel's Board of Directors and shareholders on
April 1, 1997, amended and restated by the Board of Directors on August 11,
1997, and amended by the Board of Directors and shareholders on May 23, 2000.
The purpose of the Plan is (i) to promote the best interests of Syntel and its
shareholders by encouraging employees of Syntel and its subsidiaries to acquire
an ownership interest in Syntel, thus identifying their interests with those of
shareholders, and (ii) to enhance the ability of Syntel to attract and retain
qualified employees and non-employee directors. The Compensation Committee of
Syntel'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 8,000,000 shares of Syntel's Common Stock 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 Syntel or its
subsidiaries. On March 31, 2005, Syntel had approximately 4,700 employees and
non-employee directors, while stock options to purchase approximately
shares of Common Stock were outstanding under the Plan and
shares of restricted stock had been granted under the Plan. No other type of
award had been made. As of March 31, 2005, the closing price for shares of
Syntel's Common Stock was $17.70 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 Syntel'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 Syntel'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 Syntel 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 Syntel'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.
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
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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 Syntel, 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 Syntel 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 a 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 Syntel 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 Syntel (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.
AMENDED PLAN BENEFITS
Because benefits under the Plan, if the proposal to amend it is approved,
will depend on the Compensation Committee's actions and the fair market value of
Syntel's common stock at various future dates, it is not possible to quantify
the benefits that will be received by executive officers, other employees,
non-employee directors or consultants if the proposal to amend the Plan is
approved by shareholders. If the
7
proposed amendments to the Plan had been in effect during 2004, executive
officers, other employees, and non-employee directors would have received the
same benefits as those actually received during 2004 and described in this Proxy
Statement.
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
Syntel 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, Syntel 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, Syntel 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 Syntel'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, Syntel 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 Syntel 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.
PROPOSAL 4. RATIFYING THE APPOINTMENT OF
SYNTEL'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ratification of the appointment of Crowe Chizek and Company LLC ("Crowe
Chizek") for the current fiscal year requires the affirmative vote of a majority
of the shares present at the meeting, in person or by proxy. Syntel's 2005
fiscal year began on January 1, 2005 and will end on December 31, 2005. You may
vote "for", "against", or "abstain" from the proposal to ratify the appointment
of Crowe Chizek as Syntel's independent registered public accounting firm for
the current fiscal year. In the event the shareholders fail to ratify the
appointment, the Board of Directors will reconsider its selection. Even if the
appointment is ratified, the Board of Directors, in its discretion, may direct
the appointment of a different independent accounting firm at any time during
the year if the Board of Directors feels that such a change would be in Syntel's
and its shareholders' best interests.
Crowe Chizek has audited Syntel's financial statements since July 2004. Its
representatives are expected to be present at the Annual Meeting, will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
8
Ratification of the selection of Crowe Chizek to serve as Syntel's
independent registered public accountants for the 2005 fiscal year 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 SYNTEL WILL BE VOTED IN FAVOR OF APPROVAL OF
THE RATIFICATION UNLESS A CONTRARY CHOICE IS INDICATED.
BOARD RECOMMENDATION
THE BOARD RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE SELECTION OF
CROWE CHIZEK TO SERVE AS SYNTEL'S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR
THE 2005 FISCAL YEAR.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Crowe Chizek was selected by the Audit Committee to serve as Syntel's
independent registered public accounting firm for the fiscal year ending
December 31, 2005. Crowe Chizek also served as Syntel's independent registered
public accounting firm for Syntel's 2004 fiscal year end financial statements
and the third quarter of 2004. Ernst & Young LLP ("E&Y") served as independent
registered public accounting firm for Syntel and reviewed its quarterly
financial statements for the first two quarters of 2004.
AUDIT FEES
The following table lists the aggregate fees for professional services
rendered by Crowe Chizek and E&Y for all "Audit Fees," "Audit-Related Fees,"
"Tax Fees," and "All Other Fees" which pertain to the last two fiscal years.
FISCAL YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2004 2003
------------ ------------
Audit Fees.................................................. $342,100 $239,725
Audit Related Fees.......................................... $ 7,500 $ 25,905
Tax Fees.................................................... $ 64,667 $329,152
All Other Fees.............................................. $ 14,085 $ 10,207
Audit Fees represent fees for professional services rendered for the audit
of the consolidated financial statements of Syntel and assistance with review of
documents filed with the SEC, including $120,000 in 2004 relating to the audit
of management's assessment of the effectiveness of internal control over
financial reporting. Audit Related Fees represent professional fees in
connection with the statutory audit services relative to Syntel Limited, an
Indian company, and Syntel Deutschland GmbH, a German company, and the 401(k)
plan for Syntel. Tax Fees represent fees for the services related to tax
compliance, tax advice and tax planning. All Other Fees represent fees for
consultation on matters related to transfer pricing, dividends, and other
advisory services.
AUDIT COMMITTEE AUTHORIZATION OF AUDIT AND NON-AUDIT SERVICES
The Audit Committee has the sole authority to authorize all audit and
non-audit services to be provided by the independent audit firm engaged to
conduct the annual statutory audit of Syntel's consolidated financial
statements. In addition, the Audit Committee has adopted pre-approval policies
and procedures that are detailed as to each particular service to be provided by
the independent auditors, and such policies and procedures do not permit the
Audit Committee to delegate its responsibilities under the Securities Exchange
Act of 1934, as amended, to management. The Audit Committee pre-approved fees
for all audit and non-audit services provided by the independent audit firm
during the fiscal year ended December 31, 2004. The Audit Committee considers
the impact of the fees for proposed non-audit services on the independence of
the independent accountant before determining whether to give its approval. With
regard to both Crowe Chizek for fiscal year 2004 and E&Y for fiscal year 2003,
the Audit Committee determined that their provision of
9
non-audit services was not incompatible with maintaining their independence as
independent registered public accounting firm to Syntel.
CHANGE IN INDEPENDENT ACCOUNTANT
On July 21, 2004, the Syntel's Audit Committee voted to engage the
independent registered public accounting firm of Crowe Chizek as Syntel's
independent registered public accounting firm for the fiscal year ending 2004.
Crowe Chizek began providing independent accountant services to Syntel with the
third quarter of 2004. On June 17, 2004, Syntel filed a Form 8-K reporting that
its then current independent registered public accounting firm, E&Y, would not
submit a competitive proposal (decline to stand for re-election) for the 2004
and 2005 fiscal years, and that E&Y would continue as the independent registered
public accounting firm for Syntel through the filing of the Form 10-Q for the
period ending June 30, 2004. Syntel filed its Form 10-Q for the period ending
June 30, 2004 on August 9, 2004 and E&Y ceased to serve as Syntel's independent
registered public accounting firm as of the same date.
The reports of E&Y on Syntel's financial statements for the 2003 fiscal
year did not contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope, or accounting principles.
There were no disagreements between Syntel and E&Y on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure during the 2003 fiscal year and the period through August 9, 2004,
which disagreements, if not resolved to the satisfaction of E&Y, would have
caused it to make reference to the subject matter of the disagreements in
connection with its reports on financial statements. During the 2003 fiscal year
and the period through August 9, 2004, there were no "reportable events" within
the meaning of Item 304(a)(1)(v) of the Securities and Exchange Commission's
Regulation S-K.
During the fiscal year ended December 31, 2003, and the interim period
ended July 21, 2004, Syntel did not consult Crowe Chizek regarding the
application of accounting principles to a specific completed or proposed
transaction or regarding the type of audit opinion that might be rendered on
Syntel's financial statements, and Crowe Chizek did not provide any written or
oral advice that Crowe Chizek concluded was an important factor considered by
Syntel in reaching a decision as to any such accounting, auditing or financial
reporting issue.
AUDIT COMMITTEE REPORT
The Audit Committee is responsible for, among other things, appointing an
independent registered public accounting firm to conduct the independent audit
of Syntel, periodically reviewing the qualifications of Syntel's independent
auditors, reviewing the scope and results of any audit, and reviewing fees
charged by the independent registered public accounting firm for audit services,
non-audit services, and related matters. The Board of Directors has adopted an
Audit Committee Charter, which is available on Syntel's website at
www.syntelinc.com on the corporate governance page in the "investors" section of
the website.
The Audit Committee's job is one of oversight as set forth in its Charter.
It is not the duty of the Audit Committee to prepare Syntel's financial
statements, to plan or conduct audits, or to determine that Syntel's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. Syntel's management is responsible for preparing
Syntel's financial statements and for maintaining internal control. The
independent registered public accounting firm is responsible for auditing the
financial statements and for expressing an opinion as to whether those audited
financial statements fairly present the financial position, results of
operations, and cash flows of Syntel in conformity with generally accepted
accounting principles.
The Audit Committee has reviewed and discussed Syntel's audited
consolidated financial statements with management and with Crowe Chizek,
Syntel's independent registered public accounting firm for the year ending
December 31, 2004, both with and without management present. The Audit Committee
has discussed with Crowe Chizek the matters required to be discussed by
Statement on Auditing Standards No. 61. The Audit Committee has received from
Crowe Chizek the written statements and the letter required by
10
Independence Standards Board Standard No. 1, has discussed Crowe Chizek's
independence with them, and has considered the compatibility of non-audit
services with the auditor's independence. Based on the review and discussions
referred to above, the Audit Committee has recommended to the Board of
Directors, and the Board of Directors has approved, inclusion of the audited
consolidated financial statements in Syntel's Annual Report on Form 10-K for the
fiscal year ended December 31, 2004 filed with the Securities and Exchange
Commission.
AUDIT COMMITTEE
Vasant Raval, Chairperson
Paritosh K. Choksi
George R. Mrkonic, Jr.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
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 Syntel.
COMPENSATION POLICIES
Syntel'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, Syntel's
compensation policies can be summarized as:
(a) annual base salaries targeted to be competitive with other leading
information technology ("IT") services companies with which Syntel
competes for talent;
(b) annual cash bonuses based on improved performance by Syntel; and
(c) long-term incentive-based compensation through Syntel'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 Syntel 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 Syntel competes for personnel. Executive salary
levels are based on level of job responsibility, individual performance, and
published compensation data for comparable companies. These factors were used by
the Committee in determining the Executive Officers' 2005 annual base salary
compensation.
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. These factors were used by the
Committee in determining the Executive Officers' 2004 bonus compensation.
11
LONG-TERM PERFORMANCE INCENTIVES
The Committee grants restricted stock, with a four year vesting period
weighted towards the end of the four year period. This provides an incentive for
executives to develop shareholder value and rewards them for gains received by
other shareholders. The Committee considers the level of restricted stock or
stock options granted by comparable IT services companies and the number of
Company stock options or restricted stock previously granted in reaching its
decision to make additional grants of restricted stock, 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 $1 million the
corporate tax deduction for compensation paid to certain executive officers
unless the compensation is based on non-discretionary, pre-established
performance goals. The Committee believes that both annual incentive bonuses and
stock options granted as long-term performance incentives meet the requirements
for fully deductible compensation under Section 162(m).
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee uses the same procedures described above for the other
executive officers in setting the annual salary and bonus for Bharat Desai,
Syntel's Chief Executive Officer. The Committee will evaluate the performance of
Mr. Desai at least annually based upon both Syntel's financial performance and
the extent to which the strategic and business goals established for Syntel are
met. The Committee does not assign relative weights or rankings to particular
factors, but makes its determination based upon a consideration of all such
factors. Mr. Desai's annual base salary for 2005 was based upon his historical
compensation as well as the factors listed above. His 2004 annual bonus
compensation was based upon goals set with regard to Syntel's revenue and
earnings per share.
COMPENSATION COMMITTEE
Douglas E. Van Houweling, Chairperson
Paritosh K. Choksi
George R. Mrkonic
12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation of Syntel's Chief Executive Officer and the other four most highly
compensated executive officers of Syntel for the last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION RESTRICTED
FISCAL -------------------- STOCK AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (1)($) COMPENSATION($)
--------------------------- ------ --------- -------- ------------ ---------------
Bharat Desai......................... 2004 $300,000 -0- -0- -0-
Chairman, President, and 2003 $300,000 -0- -0- -0-
Chief Executive Officer 2002 $300,000 $500,000 -0- -0-
Prakash Kenjale...................... 2004 $160,000 $ 20,000 $20,688 $ x,xxx(2)
Chief Technology Officer 2003 $160,000 $ 54,600 -0- $ 3,872(2)
2002 $160,000 $ 25,000 -0- $ 3,195(2)
Marlin Mackey........................ 2004 $220,000 $ 48,750 $165,500 -0-
Senior Vice President, 2003 $220,000 $100,295 -0- -0-
Client Partnerships(3) 2002 $220,000 $ 70,000 -0- -0-
Daniel M. Moore...................... 2004 $215,000 $ 46,875 $20,688 $ x,xxx(2)
Chief Administrative Officer 2003 $215,000 $ 82,813 -0- $ 1,140(2)
and Secretary 2002 $215,000 $ 88,595 -0- $ 1,050(2)
Rajiv Tandon......................... 2004 $230,000 -0- $165,500 $12,000(5)
Senior Vice President, 2003 $230,000 $ 82,013 -0- $12,000(5)
Verticals and Operation(4) 2002 $220,417 $ 42,000 -0- $11,700(5)
---------------
(1) On June 30, 2004, the following persons were granted the following numbers
of restricted Common Stock: Prakash Kenjale, 1,250 shares; Marlin Mackey,
10,000 shares; Daniel M. Moore, 1,250 shares; and Rajiv Tandon, 10,000
shares. The restrictions on all shares of restricted stock lapse in annual
installments of 10%, 20%, 30%, and 40% of the restricted shares on the
first, second, third, and fourth anniversaries (respectively) of the grant
date so long as the grantees remain continuously employed with Syntel
through the respective anniversary dates. Messrs. Mackey's and Tandon's
restricted shares were forfeited upon the cessation of their employment with
Syntel. The restricted Common Stock was granted pursuant to the 1997 Stock
Option and Incentive Plan. Dividends, if any, on all shares of restricted
Common Stock are paid at the same rate and at the same time as they are paid
to all shareholders. The value of the shares of restricted Common Stock
reflected in the table is based on the closing market price of the Common
Stock of $16.55 per share on June 30, 2004, the date of grant. The value of
the shares of the aggregate restricted Common Stock reflected in the table
for each person based on the closing market price of the Common Stock of
$17.54 per share at the close of Syntel's fiscal year, December 31, 2004 is
as follows: Mr. Kenjale, $21,925; Mr. Mackey $174,500; Mr. Moore, $21,925;
and Mr. Tandon, $174,500. At April 7, 2005 the closing market price was
$18.39 per share.
(2) These amounts reflect payments by Syntel for life insurance upon the named
executive officer.
(3) Mr. Mackey ceased employment with Syntel on March 15, 2005.
(4) Mr. Tandon ceased employment with Syntel on January 31, 2005.
(5) These amounts are city allowances for working in a Syntel office located in
a metropolitan area with a high cost of living.
13
OPTION/SAR GRANTS IN LAST FISCAL PERIOD
Syntel did not grant any stock options or stock appreciation rights to the
persons named in the Summary Compensation Table during the last fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information regarding the exercise of stock
options during the last fiscal year by the persons named in the Summary
Compensation Table and the value of each of those person's unexercised
in-the-money options held at the end of the last fiscal year.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR-END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
Bharat Desai............ -0- -0- -0- -0- -0- -0-
Prakash Kenjale......... -0- -0- 21,050 10,000 $221,017 $ 62,700
Marlin Mackey........... 992 $ 21,576 23,008 15,000 $262,494 $188,100
Daniel M. Moore......... 4,500 $112,500 -0- 6,000 -0- $ 75,240
Rajiv Tandon............ 12,500 $269,125 30,905 12,500 $288,079 $156,750
---------------
(1) Assumes a market price of $17.54 per share, which was the last sale price
before the close of Syntel's fiscal year on December 31, 2004. At April 7,
2005 the last sale price was $18.39 per share.
14
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
Syntel's Common Stock to the cumulative total shareholder returns for the S&P
500 Stock Index and for an index of peer companies selected by Syntel. The
period for comparison is for five years from December 31, 1999, through December
31, 2004, the end of Syntel's last fiscal year. The peer group index is composed
of 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 FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SYNTEL, INC., S&P 500 STOCK INDEX
AND AN INDEX OF PEER COMPANIES*
[PERFORMANCE GRAPH]
12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
-------- -------- -------- -------- -------- --------
Syntel, Inc. ....................... $100 $ $ $ $ $
S&P 500 Stock Index................. $100 $ $ $ $ $
Peer Group Index.................... $100 $ $ $ $ $
---------------
* Assumes that the value of an investment in Syntel's Common Stock and each
index was $100 on December 31, 1999 and that all dividends were reinvested.
15
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth, with respect to the Company's equity
compensation plans, (i) the number of shares of common stock to be issued upon
the exercise of outstanding options, (ii) the weighted average exercise price of
outstanding options, and (iii) the number of shares remaining available for
future issuance, as of December 31, 2004.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO EXERCISE PRICE OF EQUITY COMPENSATION
BE ISSUED UPON EXERCISE OUTSTANDING OPTIONS, PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, WARRANTS, AND RIGHTS SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS, AND RIGHTS(#) ($) COLUMN (1))(#)
------------- ----------------------- ----------------------- -----------------------
Equity compensation plans
approved by
shareholders............. 883,323 10.93 2,411,844
Equity compensation plans
not approved by
shareholders............. -- -- --
------- ----- ---------
TOTAL.................... 883,323 10.93 2,411,844
======= ===== =========
ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information about the beneficial ownership of
Syntel's Common Stock by (i) any person or entity known by the management of
Syntel to have been the beneficial owner of more than five percent of Syntel's
outstanding Common Stock as of April 7, 2005, (ii) the nominees, present
directors, and named executive officers of Syntel, and (iii) by all directors
and executive officers of Syntel as a group.
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED(1) CLASS
---------------- ------------ ----------
Bharat Desai Irrevocable Trust, Dtd 12/27/04................ 8,467,750(2) 20.8%
7446 Fisher Island Drive
Miami Beach, Florida 33109
Bharat Desai................................................ 24,122,650(3) 59.2%
525 East Big Beaver Road, Suite 300
Troy, Michigan 48083
Neerja Sethi Irrevocable Trust FBO Saahill Desai, Dtd
2/28/97................................................... 4,659,346(4) 11.4%
525 East Big Beaver Road, Suite 300
Troy, Michigan 48083
Neerja Sethi Irrevocable Trust FBO Pia Desai, Dtd 2/28/97... 4,659,346(4) 11.4%
525 East Big Beaver Road, Suite 300
Troy, Michigan 48083
Neerja Sethi Irrevocable Trust, Dtd 12/27/04................ 10,302,158(4) 25.3%
525 East Big Beaver Road, Suite 300
Troy, Michigan 48083
Parashar Ranade............................................. 28,389,600(5) 69.6%
1500 Bay Road, Apt. 764
Miami Beach, Florida 33139
Royce & Associates, LLC..................................... 2,453,705(6) 6.0%
1414 Avenue of the Americas
New York, New York 10019
16
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED(1) CLASS
---------------- ------------ ----------
Neerja Sethi................................................ 8,624,750(7) 21.2%
525 East Big Beaver Road, Suite 300
Troy, Michigan 48083
Paritosh K. Choksi.......................................... 43,860(8) *
Prakash Kenjale............................................. 27,300(8) *
Marlin Mackey............................................... 80,037(8) *
Daniel M. Moore............................................. 17,415(8) *
George R. Mrkonic, Jr. ..................................... 32,240(8) *
Vasant Raval................................................ 6,000(8) *
Rajiv Tandon................................................ 74,711(8) *
Douglas E. Van Houweling.................................... 7,000(8) *
All Directors and Executive Officers as a group (12
persons).................................................. 33,075,963(8) 80.8%
---------------
* Less than 1%.
(1) For the purpose of this table, a person or group is deemed to have
"beneficial ownership" of any shares as of a given date which such person
has voting power, investment power, or has the right to acquire within 60
days after such date. For purposes of computing the percentage of
outstanding shares held by each person or group of persons named above on a
given date, any security which such person or persons has the right to
acquire within 60 days after such date is deemed to be outstanding, but is
not deemed to be outstanding for the purpose of computing the percentage of
ownership of any other person. Except as otherwise noted, each beneficial
owner of more than five percent of Syntel's Common Stock and each director
and executive officer has sole voting and investment power over the shares
reported. With respect to the restricted Common Stock of Syntel shown as
owned by certain executive officers, the executive officers have voting
power but no investment power.
(2) These shares are also included under both Ms. Sethi's and Mr. Ranade's
ownership as they are co-trustees for this trust and share voting and
dispositive power for these shares of Common Stock.
(3) Mr. Desai holds shared voting and dispositive power for the (a) 4,659,346
shares held by the Neerja Sethi Irrevocable Trust FBO Saahill Desai Dtd
2/28/97, (b) 4,659,346 shares held by the Neerja Sethi Irrevocable Trust FBO
Pia Desai Dtd 2/28/97, (c) 10,302,158 shares held by the Neerja Sethi
Irrevocable Trust Dtd 12/27/04, (d) 75,000 shares held by the Neerja Sethi
Irrevocable Trust FBO Saahill Desai Dtd 5/17/97, (e) 75,000 shares held by
the Neerja Sethi Irrevocable Trust FBO Pia Desai Dtd 5/17/97, of which
trusts Mr. Desai is a co-trustee with Mr. Ranade, and (f) 1,800 shares held
in several educational trusts for the benefit of other individuals, of which
trusts Mr. Desai is a trustee. Mr. Desai disclaims beneficial ownership of
shares held by these trusts.
(4) These shares are also included under both Messrs. Desai's and Ranade's
ownership as they are co-trustees for these trusts and share voting and
dispositive power for these shares of Common Stock.
(5) Mr. Ranade holds shared voting and dispositive power for the shares of
Common Stock held by (a) the Bharat Desai Irrevocable Trust Dtd 12/27/04,
(b) the Neerja Sethi Irrevocable Trust FBO Saahill Desai Dtd 2/28/97, (c)
the Neerja Sethi Irrevocable Trust FBO Pia Desai Dtd 2/28/97, (d) the Neerja
Sethi Irrevocable Trust Dtd 12/27/04, (e) 75,000 shares held by the Neerja
Sethi Irrevocable Trust FBO Saahill Desai Dtd 5/17/97, (f) 75,000 shares
held by the Neerja Sethi Irrevocable Trust FBO Pia Desai Dtd 5/17/97, (g)
75,000 shares held by the Bharat Desai Irrevocable Trust FBO Saahill Desai
Dtd 5/17/97, and (h) 75,000 shares held by the Bharat Desai Irrevocable
Trust FBO Pia Desai Dtd 5/17/97, of which trusts Mr. Ranade is a co-trustee.
Mr. Ranade disclaims beneficial ownership of shares held by these trusts.
(6) Information based upon a Schedule 13G filed on February 3, 2005 by Royce &
Associates, LLC.
17
(7) Ms. Sethi holds shared voting and dispositive power for the (a) 8,467,750
shares held by the Bharat Desai Irrevocable Trust Dtd 12/27/04, (b) 75,000
shares held by the Bharat Desai Irrevocable Trust FBO Saahill Desai Dtd
5/17/97, (c) 75,000 shares held by the Bharat Desai Irrevocable Trust FBO
Pia Desai Dtd 5/17/97, of which trust Ms. Sethi is a co-trustee with Mr.
Ranade, and (d) 7,000 shares held in several educational trusts for the
benefit of other individuals, of which Ms. Sethi is a trustee. Ms. Sethi
disclaims beneficial ownership of shares held by these trusts and of the
shares held by her spouse, Mr. Desai.
(8) The number of shares shown in the table includes the following number of
shares which the person specified may acquire within 60 days by exercising
options which were unexercised on April 7, 2005: Paritosh K. Choksi, 10,750;
Prakash Kenjale, 26,050; Marlin Mackey, 38,008; George R. Mrkonic, Jr.,
5,000; Rajiv Tandon, 43,405; Douglas E. Van Houweling, 5,000; and all
directors and executive officers as a group, 145,713. The number of shares
shown in the table includes the following number of shares which are
represented by shares of restricted Common Stock which are not vested:
Paritosh K. Choksi, 4,000; Prakash Kenjale, 1,250; Daniel M. Moore, 1,250;
George R. Mrkonic, Jr., 6,000; Vasant Raval, 6,000; Douglas E. Van
Houweling, 2,000; and all directors and executive officers as a group,
30,500.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Syntel's
executive officers and directors, and persons who own more than ten percent of a
registered class of Syntel's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Officers, directors and greater than ten percent shareholders are required by
regulations of the SEC to furnish Syntel copies of all Section 16(a) forms they
file.
Based solely on Syntel'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, Syntel 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 reports after their due dates: V. Chandrashekhar, one Form 4
Statement of Changes in Beneficial Ownership reporting one transaction, Paritosh
K. Choksi, one Form 4 Statement of Changes in Beneficial Ownership reporting one
transaction, Prakash Kenjale, two Form 4 Statements of Changes in Beneficial
Ownership each reporting one transaction, Marlin Mackey, one Form 4 Statement of
Changes in Beneficial Ownership reporting one transaction, Daniel M. Moore, one
Form 4 Statement of Changes in Beneficial Ownership reporting one transaction,
George R. Mrkonic, Jr., one Form 4 Statement of Changes in Beneficial Ownership
reporting one transaction, Vasant Raval, one Form 4 Statement of Changes in
Beneficial Ownership reporting one transaction, and Rajiv Tandon, one Form 4
Statement of Changes in Beneficial Ownership reporting one transaction. All but
one of these transactions involved the granting of restricted stock to the
reporting persons by Syntel and were reported on a Form 5 for each of the
reporting persons at the end of the year. Syntel assisted the reporting persons
with these filings and did not inform them that the new filing rules required
these reports to be filed immediately rather than at the end of the year on Form
5.
SHAREHOLDER PROPOSALS FOR 2006 ANNUAL MEETING
Shareholder proposals to be presented at the 2006 Annual Meeting of
Shareholders must be received by Syntel not later than December 29, 2005 if they
are to be included in Syntel's Proxy Statement for the 2006 Annual Meeting of
Shareholders. Such proposals should be addressed to the Secretary at Syntel's
executive offices.
Shareholder proposals to be presented at the 2006 Annual Meeting of
Shareholders which are not to be included in Syntel's Proxy Statement for that
meeting must be received by Syntel not before March 4, 2006 and not later than
April 3, 2006; or, for any special meeting of shareholders, no later than 10
days after the day of the public announcement of the date of the special meeting
in accordance with the procedures contained in Syntel's Bylaws. Such proposals
should be addressed to the Secretary at Syntel's executive offices.
18
OTHER MATTERS
At the date of this Proxy Statement, management is not aware of any matters
to be presented for action at the 2005 Annual Meeting of Shareholders 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 those matters.
By Order of the Board of Directors,
/s/ DANIEL M. MOORE
Daniel M. Moore
Secretary
April 28, 2005
19
APPENDIX A
PROPOSAL 2
AMENDMENT TO THE RESTATED
ARTICLES OF INCORPORATION OF SYNTEL, INC.
Article VI of Syntel, Inc.'s Restated Articles of Incorporation is amended
to read in its entirety as follows:
ARTICLE VI
The number of directors which shall constitute the whole Board of Directors
shall be the number from time to time fixed by the Board of Directors, and such
number of directors so fixed may be changed only by the affirmative vote of at
least two-thirds of the directors then in office. Directors shall be elected at
each annual meeting of the shareholders, each to hold office until the next
annual meeting of shareholders and until the director's successor is elected and
qualified, or until the director's resignation or removal. During the intervals
between annual meetings of shareholders, any vacancy occurring in the Board of
Directors caused by resignation, removal, death or incapacity, and any newly
created directorships resulting from an increase in the number of directors,
shall be filled only by a majority vote of the directors then in office, whether
or not a quorum. Each director chosen to fill a vacancy shall hold office until
the next annual meeting of shareholders. Each director chosen to fill a newly
created directorship shall hold office until the next annual meeting of
shareholders. No decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. Any director may be removed from
office as a director at any time, but only for cause, by the affirmative vote of
shareholders of record holding a majority of the outstanding shares of stock of
the corporation entitled to vote in elections of directors given at a meeting of
the shareholders specifically called for that purpose.
A-1
BAR CODE
[SYNTEL LOGO] MMMMMMMMMMMM
[B MR A SAMPLE 000000000.000 ext
A DESIGNATION (IF ANY) 000000000.000 ext
R ADD 1 000000000.000 ext
ADD 2 000000000.000 ext
C ADD 3 000000000.000 ext
O ADD 4 000000000.000 ext
D ADD 5 000000000.000 ext
E] ADD 6
C 1234567890 JNT
[BAR CODE]
[BAR CODE]
[ ] Mark this box with an X if you have made
changes to your name or address details above.
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ANNUAL MEETING PROXY CARD
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A ELECTION OF DIRECTOR
1. The Board of Directors recommends a vote FOR the listed nominee.
For Withhold
01-Neerja Sethi [ ] [ ]
B ISSUES
The Board of Directors recommends a vote FOR the following proposals.
For Against Abstain
2. To amend the Company's Articles of Incorporation. [ ] [ ] [ ]
3. To amend the Company's 1997 Stock Option and [ ] [ ] [ ]
incentive Plan.
4. To ratify the appointment of Crowe Chizek and [ ] [ ] [ ]
Company as the Independent and Registered
Public Accounting Firm for the current fiscal year.
C AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR INSTRUCTIONS TO BE EXECUTED.
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.
Signature 1 - Please keep signature within the box Signature 2- Please keep signature within the box Date (mm/dd/yyy)
[ ] [ ] [ / / ]
[ ] 1 U P X HHH PPPP 005508 +
001CD40001 PPF-4CB
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PROXY - SYNTEL, INC.
--------------------------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS - JUNE 2, 2005
The undersigned appoints Bharat Desai 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 June 2, 2005, or at any adjournment thereof.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS
LISTED ON THE REVERSE SIDE HEREOF. 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 ENCLOSE
ENVELOPE.
(Continued and to be signed on reverse side.)