10-K

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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1997
                         Commission File Number 0-22903

                                  SYNTEL, INC.
             (Exact name of Registrant as specified in its charter)

          Michigan                                        38-2312018
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                       Identification No.)

    2800 Livernois Road, Suite 400, Troy, Michigan      48084
     (Address of principal executive offices)        (Zip Code)

       Registrant's telephone number, including area code: (248) 619-2800

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, no par value
                           --------------------------
                                (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
has been required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                           Yes   X          No
                                ---           ---

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

     The aggregate market value of the Common Stock held by non-affiliates of
the Registrant as of March 13, 1998, based on the last sale price of $31.625 per
share for the Common Stock on the NASDAQ National Market on such date, was
approximately $107,724,400.

         As of March 13, 1998, the Registrant had 25,450,000 shares of Common
Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's Proxy Statement for the 1998 Annual Meeting of
Shareholders to be held on or about May 18, 1998 are incorporated by reference
into Part III hereof.

 
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                                     PART I

ITEM 1.  BUSINESS.

References herein to the "Company" or "Syntel" refer to Syntel, Inc. and its
wholly owned subsidiaries in India, the UK, and Singapore on a consolidated
basis.

OVERVIEW

     Syntel is a worldwide provider of professional information technology
("IT") consulting and applications management services to Fortune 1000 
companies, as well as to government entities. The Company's service offerings 
include IntelliSourcing(sm), consisting of outsourcing services for ongoing 
management, development and maintenance of business applications, including 
Year 2000 compliance services, and TeamSourcing(sm), consisting of 
professional IT consulting services. Syntel believes that its service offerings 
are distinguished by its Global Service Delivery Model, a corporate culture 
focused on customer service and responsiveness and its own internally 
developed "intellectual capital" based on a proven set of methodologies, 
practices and tools for managing the IT functions of its customers,

     Through IntelliSourcing, Syntel provides higher-value applications
management services for ongoing management, development and maintenance of 
customers' business applications. Syntel assumes responsibility for and 
manages selected application support functions of the customer. Utilizing its 
developed methodologies, processes and tools, known as IntelliTransfer(sm), 
the Company is able to assimilate the business process knowledge of its 
customers to develop and deliver services specifically tailored for that 
customer. The Company also provides Year 2000 compliance services to customers 
using its proprietary Method2000(R) solution. IntelliSourcing accounted for 
approximately 36% and 51% of revenues, for the years ended December 31, 1996 
and 1997, respectively.

     Through TeamSourcing, Syntel provides professional IT consulting services
directly to customers. TeamSourcing services include systems specification,
design, development, implementation and maintenance of complex IT applications
involving diverse computer hardware, software, data and networking technologies
and practices. TeamSourcing services are provided by individual professionals
and teams of professionals dedicated to assisting customer IT departments with
systems projects and ongoing functions. TeamSourcing accounted for approximately
64% and 49% of revenues, for the years ended December 31, 1996 and 1997,
respectively.

     The Company's Global Service Delivery Model provides Syntel with
flexibility to deliver to each customer a unique mix of services on-site at the
customer's location, off-site at its U.S. locations and offshore at Global 
Development Centers in Mumbai and Chennai, India. The benefits to the customer 
from this customized service approach include responsive delivery based on an 
in-depth understanding of the specific processes and needs of the customer, 
quick turnaround, access to the most knowledgeable personnel and best practices,
resource depth, 24-hour support seven days a week and cost-effectiveness. By
linking each of its service locations together through a dedicated data and
voice network, Syntel provides a seamless service capability to its customers
around the world largely unconstrained by geographies, time zones and cultures.

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     Syntel provides its services to a broad range of Fortune 1000 companies
principally in the financial services, manufacturing, retail, transportation and
information/communications industries, as well as to government entities. Its
five largest customers during 1997, based on revenues, were American
International Group, Inc., Dayton Hudson Corp., Ford Motor Co., AT&T Corp., and
Chrysler Corporation. The Company has been chosen as a preferred vendor by
several of its customers and has been recognized for its quality and
responsiveness. The Company has a focused sales effort that includes a strategy
of migrating existing TeamSourcing customers to higher-value IntelliSourcing
services. During recent years the Company has focused on increasing its
resources in the development, marketing and sales of its IntelliSourcing
services.

         The Company believes its human resources are its most valuable asset
and invests significantly in programs to recruit, train and retain IT
professionals. The Company recruits globally through its worldwide recruiting
network, trains recent college graduates and other recruits and maintains a
broad package of employee support programs. Syntel believes that its management
structure and human resources organization is designed to maximize the Company's
ability to efficiently expand its IT professional staff in response to customer
needs. This scaleable business model has enabled the Company to grow
significantly in recent years. As of December 31, 1997, Syntel's worldwide
billable headcount consisted of 1,746 it consultants providing professional
services to Syntel's customers. The Company was incorporated under Michigan law
on April 15, 1980.

FORWARD LOOKING STATEMENTS / RISK FACTORS

         Certain statements contained in this Report are forward looking
statements within the meaning of the Securities Exchange Act of 1934. In
addition, the Company from time to time may publish other forward looking
statements. Such forward looking statements are based on management's estimates,
assumptions and projections and are subject to risks and uncertainties that
could cause actual results to differ materially from those discussed in the
forward looking statements. Factors which could affect the forward looking
statements include those listed below. The Company does not intend to update
these forward looking statements.

         Recruitment and Retention of IT Professionals. The Company's business
of delivering professional IT services is labor intensive, and, accordingly, its
success depends upon its ability to attract, develop, motivate, retain and
effectively utilize highly-skilled IT professionals. The Company believes that
both in the United States and in India there is a growing shortage of, and
significant competition for, IT professionals who possess the technical skills
and experience necessary to deliver the Company's services, and that such IT
professionals are likely to remain a limited resource for the foreseeable
future. The Company believes that, as a result of these factors, it operates
within an industry that experiences a significant rate of annual turnover of IT
personnel. The Company's business plans are based on hiring and training a
significant number of additional IT professionals each year to meet anticipated
turnover and increased staffing needs. The Company's ability to maintain and
renew existing engagements and to obtain new business depends, in large part, on
its ability to hire and retain qualified IT professionals. Historically, the
Company has performed a significant portion of its employee recruiting in
foreign countries, particularly in India. Any perception among the Company's
recruits or foreign IT professionals, whether or not well-founded, that the
Company's ability to assist them in obtaining permanent residency status in the
United States has been diminished could result in


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increased recruiting and personnel costs or lead to significant employee
attrition or both. There can be no assurance that the Company will be able to
recruit and train a sufficient number of qualified IT professionals or that the
Company will be successful in retaining current or future employees. Failure to
hire and train or retain qualified IT professionals in sufficient numbers could
have a material adverse effect on the Company's business, results of operations
and financial condition.

     Government Regulation of Immigration. The Company recruits its IT
professionals on a global basis and, therefore, must comply with the immigration
laws in the countries in which it operates, particularly the United States. As
of December 31, 1997, approximately 63% of Syntel's U.S. workforce (43% of
Syntel's worldwide workforce) worked under H-1B visas (permitting temporary
residence while employed in the U.S.). Pursuant to United States federal law,
the Department of Immigration and Naturalization Services (the "INS") limits the
number of new H-1B visas to be approved in any government fiscal year. In years
in which this limit is reached, the Company may be unable to obtain enough H-1B
visas to bring a sufficient number of foreign employees to the U.S. If the
Company were unable to obtain sufficient H-1B employees, the Company's business,
results of operations and financial condition could be materially and adversely
affected. Furthermore, Congress and administrative agencies have periodically
expressed concerns over the levels of legal immigration into the U.S. These
concerns have often resulted in proposed legislation, rules and regulations
aimed at reducing the number of work visas, including H-1B visas, that may be
issued. From September 29, 1995 through September 30, 1997, the Company was
subject to a consent decree with the U.S. Department of Labor relating to its
H-1B employees. The Company believes that it fully complied with the consent
decree. (See "Overview - Management's discussion and analysis of Financial
condition and results of operations.")

     Variability of Quarterly Operating Results. The Company has experienced and
expects to continue to experience fluctuations in revenues and operating results
from quarter to quarter due to a number of factors, including: the timing,
number and scope of customer engagements commenced and completed during the
quarter; progress on fixed-price engagements; timing and cost associated with
expansion of the Company's facilities; changes in IT professional wage rates;
the accuracy of estimates of resources and time frames required to complete
pending assignments; the number of working days in a quarter; employee hiring,
attrition and utilization rates; the mix of services performed on-site, off-site
and offshore; termination of engagements; start-up expenses for new engagements;
longer sales cycles for IntelliSourcing engagements; customers' budget cycles;
and investment time for training. Because a significant percentage of the
Company's selling, general and administrative expenses are relatively fixed,
variations in revenues may cause significant variations in operating results. As
fixed price engagements grow in revenue and percent of total revenue, operating
results may be adversely affected in the future if there are cost overruns on
fixed-price engagements. In addition, it is possible that in some future quarter
the Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would likely be materially adversely affected. No assurance can be given that
quarterly results will not fluctuate causing a material adverse effect on the
Company's financial condition.

     Customer Concentration; Risk of Termination. The Company has in the past
derived, and believes it will continue to derive, a significant portion of its
revenues from a limited number of large, corporate customers. The Company's



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ten largest customers represented approximately 81%, 78% and 75% of revenues for
the years ended December 31, 1995, 1996 and 1997, respectively. The Company's
largest customer is American Home Assurance Company and certain other
subsidiaries of American International Group Inc. (collectively, "AIG"). AIG
accounted for approximately 38%, 34% and 31% of revenues for the years ended
December 31, 1995, 1996, and 1997, respectively. Ford Motor Company ("Ford"),
the Company's next largest customer in 1995 and 1996, accounted for
approximately 14%, 12% and 9% of revenues for the years ended December 31, 1995,
1996 and 1997, respectively. For the year ended December 31, 1997, Dayton Hudson
Corporation became the Company's second largest customer, accounting for 12% of
total revenues, and for the year ended December 31, 1996 was the Company's
fourth largest customer, accounting for 5% of total revenues. The volume of work
performed for specific customers is likely to vary from year to year, and a
significant customer in one year may not provide the same level of revenues in
any subsequent year. Because many of its engagements involve functions that are
critical to the operations of its customer's businesses, any failure by Syntel
to meet a customer's expectations could result in cancellation or nonrenewal of
the engagement and could damage Syntel's reputation and adversely affect its
ability to attract new business. Most of the Company's contracts are terminable
by the customer with limited notice and without penalty. An unanticipated
termination of a significant engagement could result in the loss of substantial
anticipated revenues and could require the Company to either maintain or
terminate a significant number of unassigned IT professionals. The loss of any
significant customer or engagement could have a material adverse effect on the
Company's business, results of operations and financial condition.

     Exposure to Regulatory and General Economic Conditions in India. A
significant element of the Company's business strategy is to continue to develop
and expand offshore Global Development Centers in India. As of December 31,
1997, the Company had approximately 27% of its billable workforce in India, and
anticipates that this percentage will increase over time. While wage costs in
India are significantly lower than in the U.S. and other industrialized
countries for comparably skilled IT professionals, wages in India are increasing
at a faster rate than in the U.S., and could result in the Company incurring
increased costs for IT professionals. In the past, India has experienced
significant inflation and shortages of foreign exchange, and has been subject to
civil unrest. No assurance can be given that the Company will not be adversely
affected by changes in inflation, interest rates, taxation, social stability or
other political, economic or diplomatic developments in or affecting India in
the future. In addition, the Indian government is significantly involved in and
exerts significant influence over its economy. In the recent past, the Indian
government has provided significant tax incentives and relaxed certain
regulatory restrictions in order to encourage foreign investment in certain
sectors of the economy, including the technology industry. Certain of these
benefits that directly benefited the Company included, among others, tax
holidays, liberalized import and export duties and preferential rules on foreign
investment. The Company plans to treat any earnings from its operations in India
as permanently invested in India. If the Company decides to repatriate any of
such earnings, it will incur a "border" tax, currently 10%, under Indian tax law
and be required to pay U.S. corporate income taxes on such earnings. Changes in
the business or regulatory climate of India could have a material adverse effect
on the Company's business, results of operations and financial condition.

     Intense Competition. The IT services industry is intensely competitive,
highly fragmented and subject to rapid change and evolving industry standards.
The Company competes with a variety of other companies, depending on the IT




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services it offers. The Company's primary competitors for professional IT
staffing engagements include participants from a variety of market segments,
including "Big Six" accounting firms, systems consulting and implementation
firms, applications software development and maintenance firms, service groups
of computer equipment companies and temporary staffing firms. In applications
outsourcing services, the Company competes primarily with Electronic Data
Systems Corp., IBM Global Solutions (ISSC), Andersen Consulting and Computer
Sciences Corporation. The Company's principal competitors for Year 2000
compliance engagements include IBM Global Solutions (ISSC), Cap Gemini and
Andersen Consulting. Many of the Company's competitors have substantially
greater financial, technical and marketing resources and greater name
recognition than the Company. As a result, they may be able to compete more
aggressively on pricing, respond more quickly to new or emerging technologies
and changes in customer requirements, or devote greater resources to the
development and promotion of IT services than the Company. In addition, there
are relatively few barriers to entry into the Company's markets and the Company
has faced, and expects to continue to face, additional competition from new IT
service providers. Further, there is a risk that the Company's customers may
elect to increase their internal resources to satisfy their IT services needs as
opposed to relying on a third-party vendor such as the Company. The IT services
industry is also undergoing consolidation which may result in increased
competition in the Company's target markets. Increased competition could result
in price reductions, reduced operating margins and loss of market share, any of
which could have a material adverse effect on the Company. The Company also
faces significant competition in recruiting and retaining IT professionals which
could result in higher labor costs or shortages. There can be no assurance that
the Company will compete successfully with existing or new competitors or that
competitive pressures faced by the Company will not materially adversely affect
its business, results of operations or financial condition.

     Ability to Manage Growth. The Company's business has experienced rapid
growth over the years that has placed significant demands on the Company's
managerial, administrative and operational resources. Revenues have increased
from $45.3 million in 1993 to $124.3 million in 1997, and the number of
worldwide billable employees has increased from 689 as of December 31, 1993 to
1,746 as of December 31, 1997. The Company established a sales office in London,
England in 1996, opened a sales and service office in Singapore in May 1997, is
expanding its Global Development Center in Mumbai, India and has established a
new Global Development Center in Chennai, India. The Company's future growth
depends on recruiting, hiring and training IT professionals, increasing its
international operations, expanding its U.S. and offshore capabilities, adding
effective sales and management staff and adding service offerings. Effective
management of these and other growth initiatives will require the Company to
continue to improve its operational, financial and other management processes
and systems. Failure to manage growth effectively could have a material adverse
effect on the quality of the Company's services and engagements, its ability to
attract and retain IT professionals, its business prospects, and its results of
operations and financial condition. The Company has historically derived most of
its revenues from professional IT staffing services. In the second half of 1996,
the Company realigned personnel and resources to focus more attention on
outsourcing services for ongoing applications management, development and
maintenance and Year 2000 compliance services. A key factor in the Company's
growth strategy is to substantially increase outsourcing service engagements
with new and existing customers. The Company is less experienced in marketing,
developing and performing such outsourcing services, which have a longer sales
cycle (up to 12 months) and generally require approval by more senior levels of
management within the



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customer's organization, as compared to more traditional IT staffing services.
While the Company has achieved some initial success as a result of its
realignment, there can be no assurance that the Company's increased focus on
outsourcing services will continue to be successful, and any failure of such
strategy could have a material adverse effect on the Company's business, results
of operations and financial condition.

     Fixed-Price Engagements. The Company undertakes, from time to time, certain
engagements billed on a fixed-price basis, as distinguished from the Company's
principal method of billing on a time-and-materials basis. In addition, the
Company offers its Year 2000 compliance services on a fixed-price basis in
contrast to most other compliance service providers who charge customers on a
time-and-materials basis. Furthermore, the Company has a strategy to increase
its percentage of revenue from fixed-price outsourcing. The Company's failure to
estimate accurately the resources and time required for an engagement or its
failure to complete fixed-price engagements within budget, on time and to the
required quality levels would expose the Company to risks associated with cost
overruns and, in certain cases, penalties, any of which could have a material
adverse effect on the Company's business, operating results and financial
condition. Fixed price revenues represented approximately 3% and 12% of total
revenues for the years ended December 31, 1996 and 1997, respectively.

     Potential Liability to Customers. Many of the Company's engagements involve
IT services that are critical to the operations of its customers' businesses.
The Company's failure or inability to meet a customer's expectations in the
performance of its services could result in a claim for substantial damages
against the Company, regardless of the Company's responsibility for such
failure. Although the Company attempts to limit contractually its liability for
damages arising from negligent acts, errors, mistakes or omissions in rendering
its IT services, there can be no assurance the limitations of liability set
forth in its service contracts will be enforceable in all instances or would
otherwise protect the Company from liability for damages. Although the Company
maintains general liability insurance coverage, including coverage for errors
and omissions, there can be no assurance that such coverage will continue to be
available on reasonable terms or will be available in sufficient amounts to
cover one or more large claims, or that the insurer will not disclaim coverage
as to any future claim. The successful assertion of one or more large claims
against the Company that are uninsured, exceed available insurance coverage or
result in changes to the Company's insurance policies, including premium
increases or the imposition of large deductible or co-insurance requirements,
could adversely affect the Company's business, results of operations and
financial condition.

     Dependence on Principal. The success of the Company is highly dependent on
the efforts and abilities of Bharat Desai, the Company's founder, Chief
Executive Officer and President. Mr. Desai is subject to an employment agreement
with the Company with a term ending December 31, 1999, which contains
noncompetition, nonsolicitation and nondisclosure covenants during the term of
the agreement and for two years following termination of employment. The loss of
the services of this key executive for any reason could have a material adverse
effect on the Company's business, operating results and financial condition. The
Company does not maintain key man life insurance on Mr. Desai.

     Risks Related to Possible Acquisitions. The Company may expand its
operations through the acquisition of additional businesses. Financing of any
future acquisition could require the incurrence of indebtedness, the issuance




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of equity (common or preferred) or a combination thereof. There can be no
assurance that the Company will be able to identify, acquire or profitably
manage additional businesses or successfully integrate any acquired businesses
into the Company without substantial expense, delays or other operational or
financial risks and problems. Furthermore, acquisitions may involve a number of
special risks, including diversion of management's attention, failure to retain
key acquired personnel, unanticipated events or legal liabilities and
amortization of acquired intangible assets, any of which could have a material
adverse effect on the Company's business, results of operations and financial
condition. Customer satisfaction or performance problems within an acquired firm
could have a material adverse impact on the reputation of the Company as a
whole. In addition, there can be no assurance that acquired businesses, if any,
will achieve anticipated revenues and earnings. In December, 1997, the Company
acquired substantially all of the business interests of Waypointe Information
Technologies, Inc. (WIT) including hiring certain WIT employees and taking over
performance of WIT's consulting contracts. WIT was engaged in the business of
providing IT consulting services, including the Enterprise Resource Planning
"ERP" practice area. The failure of the Company to manage its acquisition
strategy successfully could have a material adverse effect on the Company's
business, results of operations and financial condition.

     Limited Intellectual Property Protection. The Company's success depends in
part upon certain methodologies, practices, tools and technical expertise it
utilizes in designing, developing, implementing and maintaining applications and
other proprietary intellectual property rights. The Company is continuing to
develop proprietary conversion tools specifically tailored to address the Year
2000 problem. In order to protect its proprietary rights in these various
intellectual properties, the Company relies upon a combination of nondisclosure
and other contractual arrangements and trade secret, copyright and trademark
laws which afford only limited protection. The Company also generally enters
into confidentiality agreements with its employees, consultants, customers and
potential customers and limits access to and distribution of its proprietary
information. India is a member of the Berne Convention, an international treaty,
and has agreed to recognize protections on intellectual property rights
conferred under the laws of foreign countries, including the laws of the U.S.
The Company believes that laws, rules, regulations and treaties in effect in the
U.S. and India are adequate to protect it from misappropriation or unauthorized
use of its intellectual property. However, there can be no assurance that such
laws will not change and, in particular, that the laws of India will not change
in ways that may prevent or restrict the transfer of software components,
libraries and toolsets from India to the U.S. There can be no assurance that the
steps taken by the Company will be adequate to deter misappropriation of its
intellectual property, or that the Company will be able to detect unauthorized
use and take appropriate steps to enforce its rights. Although the Company
believes that its intellectual property rights do not infringe on the
intellectual property rights of others, there can be no assurance that such a
claim will not be asserted against the Company in the future or what impact any
such claim, would have on the Company's business, results of operation or
financial condition. The Company presently holds no patents or registered
copyrights, trademarks or servicemarks other than Syntel(R), Method2000(R),
IntelliTransfer(sm), Pilot2000(sm), Recover2000(sm), Implement2000(sm) and
Consider IT Done(sm). The Company has submitted federal trademark applications
to register certain names for its service offerings, including the
IntelliSourcing and TeamSourcing names. There can be no assurance, however, that
the Company will be successful in obtaining federal trademarks for these trade
names.


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INDUSTRY BACKGROUND

     Increasing globalization, technological innovation and deregulation are
creating an increasingly competitive business environment that is requiring
companies to change fundamentally their business processes. This change is
driven by increasing demand from customers for increased quality, lower costs,
faster turnaround, and highly responsive and personalized service. To effect
these changes and adequately address these needs, companies are focusing on
their core competencies and cost-effectively utilizing IT solutions to improve
productivity, lower costs and manage operations more effectively.

     Designing, developing, implementing and maintaining IT solutions requires
highly skilled individuals trained in diverse technologies. However, there is a
growing shortage of these individuals and many companies are reluctant to expand
their IT departments through additional staffing, particularly at a time when
they are attempting to minimize their fixed costs and reduce workforces. The
Company believes that many organizations are concluding that using outside
specialists to address their IT requirements enables them to develop better
solutions in shorter time frames and to reduce implementation risks and ongoing
maintenance costs. Those outside specialists best positioned to benefit from
these trends have access to a pool of skilled technical professionals, have
demonstrated the ability to manage IT resources effectively, have low-cost
offshore software development facilities, and can efficiently expand operations
to meet customer demands.

     Demand for IT services has grown significantly as companies seek ways to
outsource not only specific projects for the design, development and integration
of new technologies, but also ongoing management, development and maintenance of
existing IT systems. In addition, many organizations face a significant
challenge because many of their existing computer systems run software programs
which cannot properly process dates after 1999. Without a resolution of this
Year 2000 problem, these software programs will fail due to an inability to
correctly interpret dates in the year 2000 and thereafter.

     The Company believes that outsourcing the ongoing management, development
and maintenance of IT applications is becoming increasingly critical to business
enterprises. The difficulties of IT planning, budgeting and execution in the
face of technological innovations and uncertainties, the focus on cost cutting,
and a growing shortage of skilled personnel are driving senior corporate
management to strategically pursue outsourcing of critical internal IT
functions. Organizations are seeking an experienced IT services outsourcing
provider that not only has the expertise and knowledge to address the
complexities of rapidly changing technologies, but also possesses the capability
to understand and automate the business processes and knowledge base of the
organization. In addition, the IT provider must be able to develop customized
solutions to problems unique to the organization. This involves maintaining
on-site professionals who know the customer's IT processes, providing access to
a wide range of expertise and best practices, providing responsiveness and
accountability to allow internal IT departments to meet organization goals, and
providing low cost, value-added services to stay within the organization's IT
budget constraints.

     In this environment, large organizations are increasingly finding that full
facilities management outsourcing providers who own and manage an organization's
entire IT function do not permit the organization to retain control over, or
permit flexible reallocation of, its IT resources. At the same time, IT service
providers focused on project oriented professional services, with a finite
beginning and end, or "deliverables," do not typically


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provide ongoing maintenance services and management of IT functions. As a
result, the Company believes there is a significant opportunity to provide
outsourcing services to customers for ongoing IT management, development and
maintenance of their business applications.

SYNTEL SOLUTION

     Syntel provides IntelliSourcing services consisting of applications
management services for ongoing management, development and maintenance of 
business applications, including Year 2000 compliance services, and 
TeamSourcing services consisting of professional IT consulting services. The 
Company believes that its IntelliSourcing approach to IT services outsourcing, 
which involves assuming responsibility for management of selected applications 
rather than taking over an entire IT department or providing facilities 
management, provides significant differentiation from its competitors in the 
IT services market. Syntel believes that its TeamSourcing and IntelliSourcing 
service offerings are distinguished by its Global Service Delivery Model, a 
corporate culture focused on customer service and responsiveness and its 
internally developed "intellectual capital," comprised of a proven set of 
methodologies, practices and tools for managing the IT functions of its 
customers.

     Global Service Delivery Model. Syntel performs its services on-site at the
customer's location, off-site at Syntel's U.S. locations and offshore at its
Indian locations. By linking each of its service locations together through a
dedicated data and voice network, Syntel provides a seamless service capability
to its customers around the world, largely unconstrained by geographies, time
zones and cultures. This Global Service Delivery Model gives the Company the
flexibility to deliver to each customer a unique mix of on-site, off-site and
offshore services to meet varying customer needs for direct interaction with
Syntel personnel, access to technical expertise, resource availability and
cost-effective delivery. The benefits to the customer from this customized
service include responsive delivery based on an in-depth understanding of the
specific processes and needs of the customer, quick turnaround, access to the
most knowledgeable personnel and best practices, resource depth, 24-hour support
seven days a week, and cost-effectiveness. To support its Global Service
Delivery Model, the Company currently has four Global Development Centers
located in Cary, North Carolina; Mumbai, India; Chennai, India; and Santa Fe,
New Mexico.

     Focus on Customer Service. The Syntel corporate culture reflects a
"customer for life" philosophy which emphasizes flexibility, responsiveness,
cost-consciousness and a tradition of excellence. The Company recognizes that
its best source for new business opportunities comes from existing customers and
believes its customer service is a significant factor in Syntel's high rate of
repeat business. For the years ended December 31, 1995, 1996, and 1997, over 90%
of the Company's revenues were from customers for whom the Company provided
services during the previous period. At engagement initiation, Syntel's services
are typically based on expertise in the software life-cycle and underlying
technologies. Over time, however, as Syntel develops an in-depth knowledge of a
customer's business processes, IT applications and industry, Syntel gains a
competitive advantage to perform higher-value IT services for that customer.

     Proven Intellectual Capital. Over its 18-year history, Syntel has developed
a proven set of methodologies, practices, tools and technical expertise for the
development and management of its customers' information systems. This
"intellectual capital" of Syntel includes methodologies for the selection of
appropriate customer IT functions for management by Syntel, tools


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for the transfer to Syntel of the systems knowledge of the customer, and
techniques for providing systems support improvements to the customer. Syntel
also offers to its customers well-trained personnel backed by a proven,
extensive employee training and continuing development program. The Company
believes its intellectual capital enhances its ability to understand customer
needs, design customized solutions and provide quality services on a timely and
cost-effective basis.

SYNTEL STRATEGY

     The Company's objective is to become a strategic partner with its customers
in the ongoing management, development and maintenance of their IT systems by
utilizing its Global Service Delivery Model, intellectual capital and customer
service orientation. The Company plans to continue to pursue the following
strategies to achieve this objective:

     Leverage Global Service Delivery Model. The ability to deliver a seamless
service capability virtually anywhere in the world from its domestic and
offshore facilities gives the Company an effective ability to meet customer
needs for technical expertise, best practice IT solutions, resource
availability, responsive turnaround and cost-effective delivery. The Company
strives to leverage this capability to provide reliable and cost-effective
services to its existing customers, expand services to existing customers and to
attract new customers. Moreover, the flexibility and capacity of the Global
Service Delivery Model and the Company's worldwide recruitment and training
programs enhance the ability of the Company to expand its business as the number
of customers grows and their IT demands increase. The Company intends to expand
the capacity of its Global Development Centers worldwide.

     Focus Resources on IntelliSourcing Services. Through IntelliSourcing, the
Company markets its higher value applications management services for ongoing 
applications management, development, maintenance and Year 2000 compliance 
functions. In recent years, the Company has significantly increased its 
investment in IntelliSourcing services. The Company recently realigned its 
resources to focus on the development, marketing and sales of its 
IntelliSourcing services, including the hiring of additional salespeople and 
senior managers, redirecting personnel experienced in the sale of higher value 
contracts, developing proprietary methodologies, such as Year 2000 offerings 
and services, increasing marketing efforts, and redirecting organizational 
support in the areas of finance and administration, human resources and legal. 
As a result, IntelliSourcing revenues have increased from $33.3 million for 
the year ended December 31, 1996, to $63.9 million for the year ending 
December 31, 1997; representing a 92% increase.

     Expand Customer Base and Role with Current Customers. The Company's sales
efforts focus on its strategy of migrating existing TeamSourcing customers to
higher value IntelliSourcing services. Traditionally, the Company has formed
strong relationships with customers through its high quality and responsive
TeamSourcing services. The Company's emphasis on customer service and long-term
relationships has enabled the Company to generate recurring revenues from
existing customers. These long-term relationships also provide the opportunity
for the Company to cross-sell IntelliSourcing services which, in some cases,
represent a natural extension of work initially performed under the TeamSourcing
engagement. Cross selling engagements with existing clients generated
incremental revenues of $10.4 million for the year ended December 31, 1997. The
Company also seeks to expand its customer base by leveraging its expertise in
providing services to the financial services, manufacturing, retail,
transportation and information/communications industries, as well as



                                       11
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to government entities. With the expansion of the Company's Indian operations,
the Company is increasing its marketing efforts in other parts of the world,
particularly in Asia, and the UK.

     Enhance Proprietary Knowledge Base and Expertise. The Company believes that
its "intellectual capital" of methodologies, practices, tools and technical
expertise is an important part of its competitive advantage. The Company strives
to continually enhance this knowledge base by creating competencies in emerging
technical fields such as Internet/intranet applications, client/server
applications and object-oriented software. The Company continually develops new
methodologies and toolsets such as its package of Year 2000 services, building
skills in enterprise resource planning (ERP), and acquiring a broad knowledge
and expertise in the IT functions of specific industries. Through these efforts,
the Company becomes more valuable to the customer, is often able to expand the
scope of its work to existing customers, and is able to offer industry-specific
expertise.

     Attract and Retain Highly Skilled IT Professionals. The Company believes
that its human resources are its most valuable asset. Accordingly, its success
depends in large part upon its ability to attract, develop, motivate, retain and
effectively utilize highly skilled IT professionals. Over the years, the Company
has developed a worldwide recruiting network, logistical expertise to relocate
its personnel, and programs for human resource retention and development. The
Company (i) employs professional recruiters who recruit qualified professionals
throughout the U.S. and in India, Canada, Europe, Singapore, the Philippines,
Australia and New Zealand, (ii) trains recent college graduates and other
recruits through its four training centers, two of which are located in the U.S.
and two of which are located in India, and (iii) maintains a broad range of
employee support programs, including relocation assistance, a comprehensive
benefits package, career planning and incentive plans. The Company believes that
its management structure and human resources organization is designed to
maximize the Company's ability to efficiently expand its professional IT staff
in response to customer needs.

     Pursue Selective Acquisition Opportunities. Given the highly fragmented
nature of the IT services market, the Company believes that opportunities exist
to expand through the selective acquisitions of IT services firms to either
augment its technical expertise or provide opportunities to cross sell services.

SERVICES

     Syntel provides a broad range of IT services through its IntelliSourcing
and TeamSourcing service offerings. Through IntelliSourcing, the Company 
provides applications management services for ongoing management, development 
and maintenance of customer applications, including Year 2000 compliance 
services. Through TeamSourcing, the Company provides professional IT 
consulting services. The Company believes that its established TeamSourcing 
customers represent an attractive base from which to grow its IntelliSourcing 
services and, as such, during the past year has increased the personnel and 
resources dedicated to the development, marketing and sales of its 
IntelliSourcing services. TeamSourcing and IntelliSourcing services are based 
on Syntel's methodologies and technical expertise, which the Company continues 
to develop on an ongoing basis in order to further enhance the value of its 
services to customers. For the years ended December 31, 1996 and December 31, 
1997, IntelliSourcing accounted for approximately 36% and 51%, respectively, 
of the Company's revenues and TeamSourcing represented approximately 64% and 
49%, respectively, of the Company's revenues.



                                       12
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     IntelliSourcing(sm)

     Syntel provides higher-value applications management services for ongoing 
management, development and maintenance of business applications, including 
Year 2000 compliance services. Over the last two years, the Company has made 
significant investments in IntelliSourcing, including the hiring of additional
sales people and senior managers, redirecting personnel experienced in the 
sale of higher-value contracts, developing proprietary methodologies, 
including a package of Year 2000 offerings and services, increasing marketing 
efforts, and realigning organizational support in the areas of finance, 
administration, human resources and legal. The Global Service Delivery model 
is central to Syntel's delivery of IntelliSourcing services. It enables the 
Company to respond to customers' needs for ongoing service and flexibility and 
has provided the capability to become productive quickly on a cost-effective 
basis to meet timing and resource demands for mission critical applications.

     Business Applications Outsourcing. Through IntelliSourcing, Syntel assumes
responsibility for and manages selected application support functions of the
customer. Rather than being responsible for an entire IT department, including
computers, other hardware, networks and all IT functions, IntelliSourcing
focuses solely on providing professional services for selected IT applications.
IntelliSourcing is fundamentally different than facilities management, which is
cost-intensive and involves the ownership of hardware. IntelliSourcing is a more
flexible alternative to traditional full-scale outsourcing, as it permits the
customer to maintain control of its IT resources and establish priorities.
IntelliSourcing permits the customer to select the applications best-suited to
remain managed in-house, while still benefiting from Syntel's expertise and
resource availability. The benefits of IntelliSourcing also include reliable
maintenance and up-keep of systems on which the business depends, reduced
operating costs, availability of IT personnel and access to best-practice
solutions, while allowing the customer to focus on its core competencies.

     Syntel has developed methodologies, processes and tools to effectively
integrate and execute IntelliSourcing engagements. Referred to as
"IntelliTransfer," this methodology is implemented in three stages of planning,
transition and launch. Syntel first focuses on the customer's personnel,
processes, technology and culture to develop a plan to effectively assimilate
the business process knowledge of the customer. Syntel then begins to learn the
business processes of the customer, and, finally, seeks to assume responsibility
for performance of a particular customer application system or systems. As the
Company develops an in-depth knowledge of the customer's personnel, processes,
technology and culture, Syntel acquires a competitive advantage to pursue more
value-added services. The Company believes its approach to providing these
services results in a long-term customer relationship involving a key Syntel
role in the business processes and applications of the customer.

     At engagement initiation, Syntel's services are based on its expertise in
the software life-cycle and underlying technologies, and are thus focused on
technical solutions. For most new engagements, the Company starts by performing
functions primarily revolving around production control, application systems
maintenance, development of new and changed systems functionality, and 24-hour
help desk support. As IntelliSourcing engagements progress, the Company
typically provides an increasing proportion of software development services
offshore, allowing Syntel to reduce its overall cost of service and improve
responsiveness.



                                       13
   14

     Because providing IntelliSourcing services typically involves close
participation in the IT strategy of a customer's organization, Syntel adjusts
the manner in which it delivers these services to meet the specific needs of
each customer. For example, if the customer's business requires fast delivery of
a mission-critical application update, Syntel will combine its on-site
professionals, who have knowledge of the customer's business processes and
applications, together with its global infrastructure to deliver
around-the-clock resources. If the customer's need is for cost reduction, Syntel
may increase the portion of work performed at its offshore Global Development
Center, which has significantly lower costs. The Company believes that its
ability to provide flexible service delivery and access to resources permits
responsiveness to customer needs and are important factors that distinguish its
IntelliSourcing services from other outsourcing services.

     Year 2000 Compliance Services. As a component of its IntelliSourcing
services, the Company has invested substantial resources in developing a package
of Year 2000 offerings and services. The Company intends to use its Year 2000
capabilities to expand its role with existing TeamSourcing customers, gain new
customers and market its IntelliSourcing services. All of Syntel's Year 2000
service packages are based on Method2000(R), a proprietary solution developed by
Syntel. Method2000(R) is a second generation solution aimed at innovative
business processes, methodologies, techniques and tools, and maximizing the use
of lower-cost offshore resources.

     The Method2000(R) service packages are: Pilot2000(sm), Implement2000(sm)
and Recover2000(sm). Using the Pilot2000 service package, Syntel identifies a
small representative portion of the customer's application systems portfolio,
and executes an entire Year 2000 compliance project on the representative
sample. In addition to constituting an effective "proof of concept," this
provides specific customer environment knowledge to Syntel. With this specific
knowledge, Syntel seeks to offer fixed-price solutions for additional
applications beyond the pilot using the offering Implement2000. The Company is
also marketing a Recover2000 service package in which Syntel assumes
responsibility for in-progress Year 2000 compliance projects previously
performed by the customer or another IT service provider.

     Syntel markets its applications outsourcing services as a follow-on to its
Year 2000 compliance services. The Company believes that such follow-on services
will be an attractive offering in the coming years based on the current trend of
most Year 2000 service providers not to provide warranties or services to fix
any Year 2000 failures that may result from limitations, if any, of their
services. Syntel believes that the most efficient way for customers to achieve
Year 2000 compliance is to have key team members from the Year 2000 compliance
project fully employed in ongoing maintenance and development of the same
applications portfolio.

     TeamSourcing(sm)

     Syntel offers professional IT consulting services directly to its customers
and, to a lesser degree, in partnership with other service providers. The
professional IT consulting services include individual professionals and teams 
of professionals dedicated to assisting customer systems projects and ongoing IT
functions. This service responds to the demand from internal IT departments for
additional expertise, technical skills and personnel. The Company's wide range
of TeamSourcing services include IT applications systems specification, design,
development, implementation and maintenance, which involve diverse computer
hardware, software, data and


                                       14
   15

networking technologies and practices. Syntel also provides professional IT
staffing services to state governments, principally in the area of state welfare
automation services. Services to state governments are provided directly by
Syntel and in partnership with Deloitte & Touche and with Unisys. In providing
its TeamSourcing services, Syntel utilizes its Global Service Delivery Model,
primarily through international recruiting, training and relocation, to meet
customer needs for resource depth, expertise, and responsiveness.

     By focusing on customer satisfaction and the delivery of quality services
to TeamSourcing customers, the Company believes it is able to generate
opportunities to provide its TeamSourcing customers with higher value
application outsourcing services and Year 2000 compliance services. The Company
has recently realigned its TeamSourcing sales people on an account basis within
each sales region in an effort to further enhance customer relationships and
marketing to larger, more complex businesses. The effectiveness of its
TeamSourcing services and its focus on customer service is evidenced by the high
level of repeat business from existing customers and the quality awards its
customers have bestowed on Syntel. During 1996, Syntel received the Q-1 rating
from Ford Motor Company and became a Preferred Supplier to Chrysler Corporation
receiving the highest rating in each customer service category. The Q-1 rating
from Ford Motor Company and the Preferred Supplier designation from Chrysler
Corporation are the highest facility supplier quality ratings awarded by each of
these principal customers. During 1997, Ford extended Syntels Q-1 rating for
another year after successful completion of a Q-1 standards audit. The Company
is also a Microsoft Certified Solution Provider. For the years ended December
31, 1995, 1996, and 1997, over 90% of Syntel's annual revenues were from
customers for whom the Company provided services during the previous period.

     In order to continue to enhance its TeamSourcing services expertise, Syntel
has enhanced its capabilities in enterprise resource planning (ERP), including
the implementation of software packages from SAP and Oracle. The Company also
enhanced its ERP practice through the acquisition of substantially all of the
business interests of Waypointe Information Technologies Inc. in December, 1997.
The Company has also developed expertise in emerging technologies such as
Internet/intranet applications, client/server applications and object-oriented
software.


     Technical Services Group

     The Company seeks to gain a competitive advantage through its
methodologies, tools and technical expertise. The Company employs a team of
professionals in its Technical Services Group whose mission is to develop and
formalize Syntel's "intellectual capital" for use by the entire Syntel
organization. The Technical Services Group focuses on monitoring industry
trends, creating competencies in emerging technical fields, developing new
methodologies, techniques and tools such as IntelliTransfer(sm) and
Method2000(R), creating reusable software components to enhance quality and
value on customer assignments, and educating Syntel's personnel to improve
marketing, sales and delivery effectiveness. The Technical Services Group
consists of senior technical personnel located in both the U.S. and India.



                                       15

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CUSTOMERS

     Syntel provides its services to a broad range of Fortune 1000 companies
principally in the financial services, manufacturing, retail, transportation and
information/communications industries, as well as to government entities. During
1997, the Company provided services to over 140 customers, principally in the
U.S. The Company also provides services to customers in Europe and Southeast
Asia, many of whom are subsidiaries or affiliates of its U.S. customers.
Representative customers of the Company, each of which provided revenue of at
least $100,000 during 1997, include:

FINANCIAL SERVICES            MANUFACTURING               RETAIL
- ------------------            -------------               ------

American International     Ford Motor Co.              Dayton Hudson Corp.
  Group, Inc.              Chrysler Corporation        Safeway, Inc.
World Bank                 International Business      Mervyn's
Colonial Management          Machines Corp.            Kmart Corp.
CitiBank                   Unisys Corp.                Lucky Stores
CIGNA Corp.                New Venture Gear
First Union Corp.          Meldisco
Prudential Insurance       Hewlett-Packard Corp.
American Annuities Group   Xerox Corp.
                           Westinghouse Electric
                             Corp.
                           Lucent Technologies

                             INFORMATION/
TRANSPORTATION              COMMUNICATIONS              GOVERNMENT
- --------------              --------------              ----------

Norfolk Southern Corp.     AT&T Corp.                   New Mexico
Allied Van Lines           Consolidated Communication   New York
Burlington Northern, Inc.     Directories               Malta
Yellow Technologies        Intellisoft                  West Virginia
Northwest Airlines Corp.   McDonnell Douglas            Illinois
                              Information Systems
                           LM Ericsson Telephone Co.

     For the years ended December 31, 1995, 1996, and 1997, the Company's top
ten customers accounted for approximately 81%, 78% and 75% of the Company's
revenues, respectively. American International Group, Inc. and Ford Motor Co.,
the Company's largest customers, for the years ended December 31, 1995 and
December 31, 1996, represented approximately 38% and 14% of revenue for the year
ended December 31, 1995, respectively, and approximately 34% and 12% of revenue
for the year ended December 31, 1996. For the year ended December 31, 1997,
American International Group remained the Company's largest client with 31% of
the revenues while Dayton Hudson Corporation grew to the second largest client
with 12% of the revenues. Ford Motor Company was the third largest client for
the year ended December 31, 1997 with 9% of the revenues.

     American International Group. The Company's largest customer is American
Home Assurance Company, and certain other subsidiaries of American International
Group, Inc. (collectively, "AIG"). This customer relationship began with the
placement of a single IT professional in 1989 and has grown continuously through
December 31, 1997. The Company supports AIG systems throughout the U.S. and in
selected countries around the world. Both the Company's Cary, North Carolina and
Mumbai, India Global Development Centers 


                                       16
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were initially established to support AIG. As the Company has become more
knowledgeable about AIG's personnel, processes, technology and culture, it has
had the opportunity to expand the range of its services beyond contract minimums
and to play an increasingly valuable role in project management and systems
design.

     Currently, the Company provides applications development and maintenance
services in support of various AIG subsidiaries through integrated service teams
located onsite, offsite, and offshore. Its applications development services
focus on providing customized solutions and applications in support of policy
underwriting, claims management and financial reporting and encompass both
mainframe and client/server environments. The Company also provides Year 2000
conversion services to AIG on a fixed-price basis. The Company's applications
maintenance services focus on enhancing existing business systems, including
24-hour management of data processing functions and a 24 hour customer
assistance center. The Company is responsible for complete production support,
maintenance and related activities for over 250 applications. Through its
long-term relationship with AIG, Syntel has enabled AIG to better control,
manage, and plan its IT resource allocation and to simplify management of IT
functions while benefiting from Syntel's expertise, practices and resource
availability for the cost-efficient execution of their plans and priorities.
Syntel has also delivered to AIG 24-hour support, fast turnaround and the
capacity to address AIG enterprise needs in other parts of the world. The
Company recently signed a contract renewal with AIG to provide IT services
through December 31, 2000. AIG may terminate the contract upon six months
written notice and payment of an early termination penalty.

GLOBAL SERVICE DELIVERY MODEL

     Syntel's Global Service Delivery Model gives the Company the flexibility
and resources to perform services on-site at the customer's location, off-site
at the Company's U.S. locations and offshore at the Company's Indian locations.
By linking each of its service locations together through a dedicated data and
voice network, Syntel provides a seamless service capability to its customers.
The Global Service Delivery Model gives the Company the flexibility to deliver
to each customer a customized mix of integrated on-site, off-site and offshore
services to meet varying customer needs for direct interaction with Syntel
personnel, access to technical expertise and best practices, resource
availability and cost-effective delivery.

     Through on-site service delivery at the customer's location, the Company is
able to gain comprehensive knowledge concerning the customer's personnel,
processes, technology and culture, and maintain direct customer contact to
facilitate project management, problem solving and integration of Syntel
services. Off-site service delivery at the Company's U.S. locations provides the
customer with access to the diverse skill base and technical expertise resident
at different regional centers, availability of resources, and cost-effective
delivery due to the savings in transportation, facilities and relocation costs
associated with on-site work. Offshore service delivery at the Company's Indian
location provides the customer with the capacity to receive around the clock
attention to applications maintenance and project development for faster
turnaround, greater availability of resources, expertise resident in India and
more cost-effective delivery than the Company's off-site services.



                                       17
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     The Company has developed global recruiting and training programs which
have efficiently provided skilled IT professionals to meet customer needs. In
addition, the Company's sales, solutions and delivery functions are closely
integrated in the Global Service Delivery Model so that appropriate resources
can be provided to the customer at the right time and at the most advantageous
location. Each customer is tracked and serviced through a multi-stage customer
care process. Weekly meetings are held with key project management, sales,
technical, legal and finance personnel to monitor progress, identify issues and
discuss solutions. As engagements evolve and customer needs change, the Company
can reallocate resources responsively from among these locations as necessary.

     The Company's four Global Development Centers located in Cary, North
Carolina, Mumbai, India, Chennai, India and Santa Fe, New Mexico support the
Company's Global Service Delivery Model.

     The Cary, North Carolina Global Development Center, which employs over 350
persons, serves as the hub for the Company's telecommunications, project
management, technical training and professional development programs. Its
support functions include administration of a dedicated data and voice network,
a 24-hour customer assistance center which coordinates problem resolution
worldwide, and a development center for the sharing of knowledge and expertise
among IT professionals. Moreover, due to its proximity to a large number of
major universities, the Cary, North Carolina Global Development Center has
access to a relatively large talent pool.

     The Mumbai, India Global Development Center, which employed over 670
persons as of December 31, 1997, serves as the hub of the Company's Indian
operations. This Global Development Center provides substantial resource depth
to meet customer needs around the world, low-cost service delivery, a 24-hour
customer assistance center and development of technical solutions and expertise.
Mumbai also serves as a principal recruiting and training center for the Company
due to the large resource pool of skilled IT professionals and college
graduates. The Mumbai Center, which has been in operation for over four years,
is being expanded to accommodate a capacity in excess of 700 people. Such
expansion is expected to be completed by mid 1998.

     The Company also has leased space for a new Global Development Center in
Chennai, India. This Center is intended to provide additional resources and will
include a training and development center. The Company has begun staffing the
Chennai Center and will continue to incrementally increase staffing over time in
response to customer needs. Once fully operational in mid 1998, the Chennai
Center will be able to accommodate up to 600 persons. Both the Mumbai and
Chennai expansion programs are expected to be financed from internally generated
funds from the Company's Indian operations.

     The Santa Fe, New Mexico Global Development Center, which employs over 30
people, serves as a training and development center.

     During 1997, the Company established wholly owned subsidiaries in London
England and Singapore with a total investments of $0.1 million.

SALES AND MARKETING

     The Company markets and sells its services directly through its
professional salespeople and senior management operating principally from the
Company's offices in Oakbrook, Illinois; Dallas, Texas; Jacksonville, Florida;
San Ramon, California; Minneapolis, Minnesota; New York, New York; Troy,



                                       18
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Michigan; Woodbridge, New Jersey; Pittsburgh, Pennsylvania; London, England; and
Singapore. In early 1997, the Company realigned its sales staff into two sales
forces, one for TeamSourcing services and one for IntelliSourcing services.

     During recent years the Company has focused on increasing its staffing of
professional salespeople in IntelliSourcing both by dedicating internal sales
professionals to this service offering and through outside hiring of
professionals experienced in marketing outsourcing engagements. The sales cycle
for IntelliSourcing engagements ranges from 6 to 12 months depending on the
complexity of the engagement. Due to this longer sales cycle, IntelliSourcing
sales executives follow an integrated sales process for the development of
engagement proposals and solutions, and receive ongoing input from the Company's
technical services, delivery, finance and legal departments throughout the sales
process. The IntelliSourcing sales process also typically involves a greater
number of customer personnel at more senior levels of management than the
TeamSourcing sales process. 

     The sales cycle for TeamSourcing engagements, from initial contact to
execution of an agreement, varies by type of service and account size, but is
typically completed within 30 days. A significant amount of TeamSourcing
engagements are developed from existing customers. During both 1996 and 1997,
over 90% of TeamSourcing revenues were from customers who received services
during the prior period. 

     Syntel's marketing organization seeks to promote brand identities for its
TeamSourcing, IntelliSourcing and Method2000(R) services and to generate sales
leads. The Company's current marketing efforts consist of direct mail, trade
shows, publications and public relations campaigns targeted to CEOs, CFOs and
CIOs of Fortune 500 organizations and CIOs of government agencies. In addition,
Syntel maintains relationships with key industry research groups such as the
Gartner Group, Meta Group, Giga Group, and the Information Technology
Association of America.

HUMAN RESOURCES

     The Company believes that its human resources are its most valuable asset.
Accordingly, the Company's success depends in large part upon its ability to
attract, develop, motivate, retain and effectively utilize highly skilled IT
professionals. The Company has developed a number of processes, methodologies,
technologies and tools for the recruitment, training, development and retention
of its employees. As of December 31, 1997 the Company had 2,190 full time
employees. Of this total, the U.S. operations employed 1,481 persons, including
1,323 IT professionals; the Indian operation employed 699 persons, including 575
IT professionals; and the Company employed an additional 10 persons in various
remote locations, including the U.K. and Singapore. Of the 1,481 persons
employed in the U.S. operation 936 held H-1 visas (permitting temporary
residency in the U.S.)

     A majority of the Company's professional employees have a Bachelor of
Science degree or its equivalent, or higher degrees in computer science,
engineering disciplines, management, finance and other areas. Their experience
level ranges from entry-level programmers to engagement managers and senior
consultants with over 20 years of IT experience. The Company has personnel who



                                       19
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are experienced in mainframe, client/server and open systems technologies, and
proficient in a variety of computer programming languages, software tools,
database management systems, networks, processes, methodologies, techniques and
standards.

     The Company has implemented a management structure and human resources
organization intended to maximize the Company's ability to efficiently expand
its professional staff. Although the Company believes that it has the capability
to meet its anticipated future needs for IT professionals through its
established recruiting and training programs, there can be no assurance that the
Company will be able to hire, train or retain qualified IT professionals in
sufficient numbers to meet anticipated staffing needs.

     Recruiting. The Company has developed a recruiting methodology and
organization which is a core competency. The Company has a recruiting team based
in the U.S. which recruits primarily across the U.S., India, Canada, Europe,
Singapore, the Philippines, Australia and New Zealand. The Company also has an
international-based recruiting team, with recruiters in Mumbai, Chennai and
Banglore, India, and Australia, to recruit for the Company's needs in India, as
well as for the Company's U.S. operations. The Company uses a standardized
global selection process that includes interviews and reference checks.

     Among the Company's other recruiting techniques are the placement of
advertisements on its web site, in newspapers and trade magazines, providing
bonuses to its employees who refer qualified applicants, participating in job
fairs and recruiting on university campuses. In addition, the Company has
developed a proprietary database of talent utilizing the Resumix database
system, which is an automated tool for managing all phases of recruiting. This
system directly downloads resumes from the Internet, directly loads faxed
resumes and currently stores approximately 40,000 resumes. This system enhances
the ability of the Company's recruiters to select appropriate candidates and can
distribute resumes directly to the recruiters.

     Training. The Company uses a number of established training delivery
mechanisms in its efforts to provide a consistent and reliable source for
qualified IT professionals. Recent college graduates and other recruits selected
by the Company participate in Syntel's Technical and Professional Development
("TPD") program which is delivered in both the U.S. and India. The TPD program
consists of 8-12 weeks of training programs, including classroom lectures,
hands-on experience, exercises, projects and tests. Another entry-level training
program is the Syntel Management Trainee Program. As part of this program,
Syntel selects graduates from leading universities who are suited for corporate
and regional positions within Syntel in account management, sales, recruiting
and other management areas. Syntel also maintains a comprehensive Computer-Based
Training program ("CBT"), with over 200 training modules, which Syntel employees
can use at their convenience. The CBT topics cover the latest client/server
areas, local-area and wide-area networks, relational data base management
systems, object-oriented systems, Microsoft products, in addition to a number of
management and related developmental areas. The Company has been accepted as a
Microsoft Certified Solution Partner and sponsors the Microsoft Certification
Program at its Cary, North Carolina Global Development Center, and provides
opportunities for cross-training of its professionals in emerging technologies.

     Support and Retention. The Company seeks to provide meaningful support to
its employees which the Company believes leads to improved employee retention
and better quality services to its customers. Traditionally, a



                                       20
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significant percentage of the Company's employees have been recruited from
outside the U.S. and relocated to the U.S. This has resulted in the need to
provide a higher level of initial support to its employees than is common for
U.S.-based employees. As a result of these activities, Syntel has developed a
significant knowledge base in making foreign professionals comfortable and
quickly productive in the U.S. and Europe. The Company also conducts regular
career planning sessions with its employees, and seeks to meet their career
goals over a long-term planning horizon. As part of its retention strategy, the
Company strives to provide a competitive compensation and benefits package,
including relocation reimbursement and support, health insurance, 24-hour
on-call nurse consulting, a 401(K) plan, life insurance, dental options, a
vision eye-care program, long-term disability coverage, short-term disability
options, tuition subsidy plan, PC purchase plan and an employee referral plan.
The Company offered stock options to substantially all of its employees under
the Stock Option Plan at consummation of its initial public offering in 1997,
and intends to offer substantially all of its employees an opportunity to
purchase the Company's Common Stock at a discount to fair market value under the
Employee Stock Purchase Plan.

COMPETITION

     The IT services industry is intensely competitive, highly fragmented and
subject to rapid change and evolving industry standards. The Company competes
with a variety of other companies, depending on the IT services it offers. The
Company's primary competitors for professional IT staffing engagements include
participants from a variety of market segments, including "Big Six" accounting
firms, systems consulting and implementation firms, applications software
development and maintenance firms, service groups of computer equipment
companies and temporary staffing firms. In applications outsourcing services,
the Company competes primarily with Electronic Data Systems Corp., IBM Global
Solutions (ISSC), Andersen Consulting and Computer Sciences Corporation. The
Company's principal competitors for Year 2000 compliance engagements include IBM
Global Solutions (ISSC), Cap Gemini and Andersen Consulting. Many of the
Company's competitors have substantially greater financial, technical and
marketing resources and greater name recognition than the Company. As a result,
they may be able to compete more aggressively on pricing, respond more quickly
to new or emerging technologies and changes in customer requirements, or devote
greater resources to the development and promotion of IT services than the
Company. In addition, there are relatively few barriers to entry into the
Company's markets and the Company has faced, and expects to continue to face,
additional competition from new IT service providers. Further, there is a risk
that the Company's customers may elect to increase their internal resources to
satisfy their IT services needs as opposed to relying on a third-party vendor
such as the Company. The IT services industry is also undergoing consolidation
which may result in increased competition in the Company's target markets.
Increased competition could result in price reductions, reduced operating
margins and loss of market share, any of which could have a material adverse
effect on the Company. The Company also faces significant competition in
recruiting and retaining IT professionals which could result in higher labor
costs or shortages. There can be no assurance that the Company will compete
successfully with existing or new competitors or that competitive pressures
faced by the Company will not materially adversely affect its business, results
of operations or financial condition.



                                       21
   22


ITEM 2.  PROPERTIES.

     The Company's headquarters and principal administrative, sales and
marketing, and system development operations are located in approximately 24,900
square feet of leased space in Troy, Michigan. The Company occupies these
premises under a lease expiring on November 30, 2001. The Company's primary
training and development center is located in approximately 50,240 square feet
of leased space in Cary, North Carolina, under a lease which expires March 31,
1999. The Company also leases regional office facilities in Dallas, Texas; San
Ramon, California; Oakbrook, Illinois; Minneapolis, Minnesota; Santa Fe, New
Mexico; Jacksonville, Florida; Woodbridge, New Jersey; Pittsburgh, Pennsylvania;
London, England; and Singapore

     Syntel leases approximately 20,210 square feet of office space in Mumbai,
India, under four leases expiring on various dates from October 14, 1997 to
September 30, 1998, each of which is expected to be renewed for a period of five
years upon expiration. This leased space is in the process of being expanded by
approximately 13,000 square feet. Syntel's IT professionals in India, as well as
its senior management, administrative personnel, human resources and sales and
marketing functions are housed in this facility. Syntel has leased substantially
all of an office building in Chennai, India consisting of approximately 33,000
square feet. The lease terms expire May 2003, subject to the Company's option to
renew for an additional period of three years. This facility is projected to
accommodate approximately 600 IT professionals once improvements are completed
in mid 1998.

     The Company believes that these facilities are adequate for its currently
anticipated future needs.



ITEM 3.  LEGAL PROCEEDINGS.

     The Company is not currently a party to any material legal proceedings or
governmental investigation.

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

     No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of the year ended December 31, 1997.


                                     PART II


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

     (a) The Registrant's common stock is traded on the NASDAQ National Market
under the symbol "SYNT." The common stock commenced trading on NASDAQ on August
12, 1997 in connection with the underwritten initial public offering of shares
of the Company's common stock at an initial price to the public of $11.00 per
share. Quarterly stock prices were as follows:



                                       22
   23



              1997                   High                    Low
- --------------------------------------------------------------------------------
     August 12, 1997 through
     September 30, 1997              18.25                   12.0
     Fourth Quarter                  16.625                   8.5

     (b) There were approximately 85 shareholders of record and 3972 beneficial
holders on March 16, 1998.

     (c) During the years ended December 31, 1997 and 1996, the Company declared
dividends of $11,400,000 and $12,000,000, respectively. The 1997 dividends
included distributions, to the shareholders of the Company prior to the
Company's initial public offering, equal to the Company's undistributed S
corporation earnings through the date of termination of the company's S
corporation status on August 12, 1997. The Company does not intend to declare 
or pay cash dividends in the foreseeable future. Management anticipates that 
all earnings and other cash resources of the Company, if any, will be retained 
by the Company for investment in its business.

ITEM 6.  SELECTED FINANCIAL DATA.
SYNTEL, INC. & Subsidiaries
FIVE-YEAR HIGHLIGHTS 
(In thousands, except per share amounts)

The following tables set forth selected consolidated financial data and other
data concerning Syntel, Inc. for each of the last five years.



                                                      YEAR ENDED DECEMBER 31,                  
                                      ---------------------------------------------------
                                        1993       1994       1995       1996      1997
                                      -------    -------    -------    -------    -------
                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                       
STATEMENT OF INCOME DATA:             
    Revenues...................       $45,345    $67,340    $90,326    $92,330   $124,338
    Cost of revenues...........        38,323     55,315     70,014     67,083     87,584
                                      -------    -------    -------    -------   --------
    Gross profit.... ..........         7,022     12,025     20,312     25,247     36,754
    Selling, general and              
      administrative expenses,.         5,523      8,603     13,909     19,271     23,547
                                      -------    -------    -------    -------   --------
    Income from operations ....         1,499      3,422      6,403      5,976     13,207
    Other income (expense), net.         (127)       (67)       188        149        730
                                      -------    -------    -------    -------   --------
    Income before income taxes.         1,372      3,355      6,591      6,125     13,937
    Income taxes.........                  --          1        436        350      3,517
                                      -------    -------    -------    -------   --------
    Net income.................       $ 1,372    $ 3,354    $ 6,155    $ 5,775   $ 10,420
                                      =======    =======    =======    =======   ========
    Pro forma net income.......       $   982    $ 2,203    $ 4,421    $ 4,379   $ 10,196
                                      =======    =======    =======    =======   ========
    Pro forma net income              
      per share - diluted             $  0.04    $  0.09    $  0.17    $  0.17   $   0.39
                                      =======    =======    =======    =======   ========
    Pro forma weighted average        
      shares outstanding (diluted)     26,145     25,845     26,145     26,245     26,055
                                      =======    =======    =======    =======   ========
                          


                                       23
   24





                                                              DECEMBER 31,
                                     ----------------------------------------------------
                                     1993       1994       1995       1996        1997
                                    -------    -------    -------    -------    ---------
                                              (IN THOUSANDS, EXCEPT OTHER DATA)
                                                                                                       
BALANCE SHEET DATA:                
    Working capital...........     $ 9,049    $11,999    $15,763    $ 1,842    $35,346
    Total assets...  .........      16,377     22,928     29,140     32,992     65,232
    Long-term debt............        --         --         --         --         --
    Total shareholders' equity       9,847     13,201     19,209      6,145     39,585
OTHER DATA:                        
    Billable headcount in U.S.         670      1,097      1,029      1,103      1,260
    Billable headcount in India         19         83        107        190        478
    Billable headcount in          
       other locations.........         --         --         --         --          8
                                   -------    -------    -------    -------    -------
    Total billable headcount...        689      1,180      1,136      1,293      1,746
                                   =======    =======    =======    =======    =======


                                   
(1)       For all periods shown through August 12, 1997, the Company elected to
          be treated as an S corporation and, as a result, the income of the
          Company has been taxed for federal and state purposes (with exceptions
          under certain state income tax laws) directly to the Company's
          shareholders rather than to the Company.
                               
(2)       Pro forma data reflect income tax provisions for the periods presented
          for federal and additional state income taxes as if the Company had
          been taxed as a C corporation.
                                   
                                   
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.
                               
OVERVIEW

     Syntel is a worldwide provider of professional IT consulting and
applications management services to Fortune 1000 companies, as well as to 
government entities. The Company's service offerings include, IntelliSourcing, 
consisting of applications management services for ongoing management, 
development and maintenance of business applications, including Year 2000 
compliance services, and TeamSourcing, consisting of professional IT 
consulting services.

     The Company's revenues are generated from professional services fees
provided through IntelliSourcing and TeamSourcing engagements. The Company has
invested significantly in developing its ability to sell and deliver
IntelliSourcing services, and has shifted a larger portion of its business to
IntelliSourcing engagements which the Company believes have higher gross margin
potential. For the years ended December 31, 1996 and 1997, the percentage of
revenues generated by IntelliSourcing engagements was 36% and 51%, respectively.
On IntelliSourcing engagements, the Company typically assumes responsibility for
engagement management and generally is able to allocate certain portions of the
engagement to on-site, off-site and offshore personnel. Syntel may bill the
customer on either a time-and-materials or fixed-price basis. While a
significant portion of IntelliSourcing engagements have been historically on a
time-and-materials basis most IntelliSourcing engagements started during 1997
have been on a fixed-price basis. For the years ended December 31, 1996 and
1997, fixed-price revenues comprised 7% and



                                       24
   25



23% of total IntelliSourcing revenues respectively. Syntel recognizes revenues
from fixed-price engagements on the percentage of completion method. For the
years ended December 31, 1996 and 1997, the percentage of revenues generated by
TeamSourcing engagements was 64% and 49%, respectively. On TeamSourcing
engagements, Syntel's professional services typically are provided at the
customer's site and under the direct supervision of the customer. TeamSourcing
revenues generally are recognized on a time-and-materials basis as services are
performed.

     The Company's most significant cost is personnel cost, which consists of
compensation, benefits and other related costs for its IT professionals. The
Company strives to maintain its gross margin by controlling engagement costs and
offsetting increases in salaries and benefits with increases in billing rates.
The Company has established a human resource allocation team whose purpose is to
staff IT professionals on engagements that efficiently utilize their technical
skills and allow for optimal billing rates. Syntel India derives substantially
all of its revenues from providing software development services to the Company
from Mumbai, India, where salaries of IT professionals are comparatively lower
than in the U.S.

     The Company has performed a significant portion of its employee recruiting
in other countries. As of December 31, 1997, approximately 63% of Syntel's U.S.
workforce (43% of Syntel's worldwide workforce) worked under H-1B temporary work
visas in the U.S. To resolve a 1994 investigation of the Company by the U.S.
Department of Labor ("DOL") for failing to meet prevailing wage requirements for
certain H-1B employees, the Company voluntarily entered into a two-year consent
decree with the DOL. In response to the consent decree, the Company did not seek
any new H-1B visas during the fourth quarter of 1995, significantly curtailed
its H-1B hiring from April 1995 through September 1996, and significantly
increased its U.S. domestic recruiting and hiring efforts throughout 1996. As a
result, the Company believes that it was unable to increase billable IT
personnel during 1995 and 1996 to levels that it would have otherwise expected
in the absence of these factors. Because the Company's revenues are closely
related to the number of billable IT professionals it employs, the Company
believes that these developments adversely affected revenue growth in 1995 and
1996. From June 30, 1995, to June 30, 1996, the total number of U.S. billable IT
personnel declined from 1,137 to 1,019, but the Company has increased billable
IT personnel significantly beginning in the fourth quarter of 1996. As of
December 31, 1997, total billable U.S. headcount had increased to 1,260. The
Company believes that it has fully complied with the consent decree which
expired in September 1997.

     The Company has made substantial investments in infrastructure since 1995,
including: (i) establishing the Company's Global Development Center in Cary,
North Carolina to support up to 400 IT professionals; (ii) establishing a
dedicated telecommunications link between the Company's United States operations
and the Mumbai, India development center; (iii) establishing a Global
Development Center in Chennai, India; (iv) relocating the Company's headquarters
to larger offices in Troy, Michigan; (v) increasing IntelliSourcing sales and
delivery capabilities through significant expansion of the IntelliSourcing sales
force and the Technical Services Group, which develops and formalizes
proprietary methodologies, practices and tools for the entire Syntel
organization; (vi) hiring additional experienced senior management; and (vii)
expanding global recruiting and training capabilities.

     Through its strong relationships with customers, the Company has been able
to generate recurring revenues from repeat business. For the years ended



                                       25
   26



December 31, 1995 and 1996 and 1997, over 90% of Syntel's revenues were derived
from customers served in the prior period. These strong relationships also have
resulted in the Company generating a significant percentage of revenues from key
customers. The Company's top ten customers accounted for approximately 81%, 78%
and 75% of revenues for the years ended December 31, 1995, 1996, and 1997. The
Company does not believe there is any material collectibility exposure among its
top ten customers. American International Group, Inc. and Ford Motor Co., the
Company's largest customers, for the years ended December 31, 1995 and December
31, 1996, represented approximately 38% and 14% of revenue for the year ended
December 31, 1995, respectively, and approximately 34% and 12% of revenue for
the year ended December 31, 1996. For the year ended December 31, 1997, American
International Group remained the Company's largest client with 31% of the
revenues while Dayton Hudson Corporation grew to the second largest client with
12% of the revenues. Ford Motor Company was the third largest client for the
year ended December 31, 1997 with 9% of the revenues. Although the Company does
not currently foresee a credit risk associated with accounts receivable from
these customers, credit risk is affected by conditions or occurrences within the
economy and the specific industries in which these customers operate.

SYNTEL INDIA ACQUISITION

     Before the Company's initial public offering in 1997, Bharat Desai and
Neerja Sethi, the Company's President, and Chief Executive Officer and the
Company's Vice President, Corporate Affairs, respectively, were the sole
beneficial shareholders of the Company's Indian subsidiary Syntel Software
Private Limited "Syntel India". Syntel India provides offshore software
development services to the Company. Prior to the offering, the Company entered
into an agreement pursuant to which the Company acquired Mr. Desai and Ms.
Sethi's combined 100% ownership interest in Syntel India for $7.0 million in
cash. The $7.0 million purchase price was based on a valuation performed by
independent chartered accountants in India pursuant to guidelines established by
the Reserve Bank of India for acquisitions of Indian corporations. The purchase
price was paid from a portion of the net proceeds of the initial public
offering. This acquisition was closed upon consummation of the offering, and the
portion of the purchase price in excess of the carrying value of the net assets
acquired ($1.5 million) was accounted for as a reduction in shareholders'
equity.

INCOME TAX MATTERS

     Syntel India is eligible for certain favorable tax provisions provided
under Indian tax law including: (i) an exemption from payment of corporate
income taxes for a period of five consecutive years in the first eight years of
operation (the "Tax Holiday"); or (ii) an exemption from income taxes on the
profits derived from exporting computer software services from India (the
"Export Exemption"). The Export Exemption remains available after expiration of
the Tax Holiday. The Company plans to treat any Syntel India earnings as
permanently invested in India and does not anticipate repatriating any of these
earnings to the U.S. If the Company decides to repatriate any earnings of Syntel
India, it will incur a "border" tax, currently 10%, under Indian tax law and
will be required to pay U.S. corporate income taxes on such earnings.



                                       26
   27

RESULTS OF OPERATIONS

     The following table sets forth for the periods indicated selected pro forma
income statement data as a percentage of the Company's total revenues.



                                   PERCENTAGE OF REVENUES
                             -----------------------------------

                                    YEAR ENDED DECEMBER 31,
                             -----------------------------------
                             1995          1996           1997
                             -----         -----         -----

                                                   
Revenues...................  100.0%        100.0%        100.0%
Cost of revenues...........   77.5          72.6          70.5
                             -----         -----         -----
Gross profit...............   22.5          27.4          29.5
Selling, general and
  administrative expenses..   15.4          20.9          18.9
                             -----         -----         -----
Income from operations.....    7.1%          6.5%         10.6%



COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996

     Revenues. Total consolidated revenues increased from $92.3 million in 1996
to $124.3 million in 1997, representing a 34.7% increase. The Company's total
revenues were less dependent upon its largest customers in 1997 as compared to
1996. The top two customers accounted for 43% of total revenues in 1997, down
from 46% of total revenues in 1996. Additionally, the top 10 customers accounted
for 75% of total revenues in 1997 as compared to 78% in 1996.

The worldwide billable headcount increased to 1,746 as of December 31, 1997
compared to 1,293 as of December 31, 1996.

IntelliSourcing Revenues. IntelliSourcing revenues in 1997 increased to $64.0
million, or 51% of total revenues, from $33.3 million, or 36% of total revenues
in 1996. The revenue increase was attributable primarily to the conversion of
TeamSourcing clients to long term IntelliSourcing engagements, new 1997
engagements, and growth in the existing base, contributing increased
IntelliSourcing revenues of $14.1 million, $9.3 million, and $7.2 million
respectively. The number of IntelliSourcing engagements increased from 5 as of
December 31, 1996 to 26 as of December 31, 1997.

TeamSourcing Revenues. TeamSourcing revenues in 1997 increased to $60.3 million,
or 49% of total revenues, from $59.0 million, or 64% of total revenues in 1996.
The increase in revenues was attributable primarily to bill rate increases and
growing ERP revenues, which more than offset a reduction in average billable
headcount. End of year average hourly bill rates increased to $52.70 as of
December 31, 1997 from $46.81 as of December 31, 1996. The reduction in average
billable headcount was due largely to the conversion of TeamSourcing engagements
to long term IntelliSourcing engagements.

Cost of Revenues. Consolidated cost of revenues consist of costs directly
associated with billable consultants in both the US and offshore, including
salaries, payroll taxes, benefits, relocation costs, immigration costs, 




                                       27
   28



finders fees, and trainee compensation. Consolidated cost of revenues in 1997
increased to $87.6 million in 1997 from $67.1 million, but decreased as a
percent of revenue from 72.7% in 1996 to 70.4% in 1997. The decrease in cost of
revenues as a percentage of revenues was attributable primarily to increased
TeamSourcing billing rates and new higher margin IntelliSourcing engagements,
partially offset by increased compensation, benefits, and other direct expenses.
TeamSourcing bill rate increases and new higher margin IntelliSourcing
engagements contributed 3% and 2.7% respectively to the overall improvement in
cost of revenues while increased compensation/benefits and other direct costs
partially offset the improvement with increases of 2.6% and .4% , respectively.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of salaries, payroll taxes and
benefits for sales, finance, human resources, administrative, and corporate
staff, travel, communications, business promotions, marketing, and various
facility costs for the Company's Global Development Centers. Selling, general
and administrative expenses for the year ended December 31, 1997 increased to
$23.5 million, or 18.9% of total revenues, from $19.3 million, or 20.9% of total
revenues. The $4.2 million increase in selling, general, and administrative
costs was attributable primarily to facility expansion at the Company's Global
Development Centers of $1.0 million, fixed price reserves of $.8 million,
Company wide communication costs of $.4 million, compensation and benefits $.4
million, marketing costs of $.3 million, start-up costs of $.3 million and $1.1
million for other office and personnel expenses necessary to support the
increasing activity levels.

COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995

     Revenues. Total consolidated revenues increased to $92.3 million in 1996
from $90.3 million in 1995. The primary cause of this growth was an increase in
TeamSourcing revenues, which offset a decline in IntelliSourcing revenues. The
Company believes that actions taken in 1995 and 1996 in response to the DOL
consent decree adversely affected revenue growth in the last quarter of 1995 and
in 1996.

     IntelliSourcing Revenues. IntelliSourcing revenues in 1996 decreased to
$33.3 million, or 36.0% of total revenues, from $36.8 million, or 40.7% of total
revenues in 1995, despite an increase in the number of IntelliSourcing
customers. The number of the Company's IntelliSourcing customers increased to
five in 1996 from two in 1995, but the Company recorded minimal revenues from
these new engagements as they commenced in the fourth quarter of 1996.
Approximately $1.9 million of the $3.5 million decrease in the Company's
IntelliSourcing revenues was attributable to a significant reduction in the
funding for a state government project. The remainder of the decrease was the
result of the Company increasing the efficiency of services provided under a
time-and-materials based contract to its largest customer, which enabled the
Company to maintain the customer's applications with fewer employees.

     TeamSourcing Revenues. TeamSourcing revenues in 1996 increased to $59.0
million, or 64.0% of total revenues, from $53.6 million, or 59.3% of total
revenues in 1995. The increase in TeamSourcing revenues was primarily
attributable to a substantial increase in the scope of services provided to two
of the Company's largest customers, including maintenance services and the
development of new applications. The increase in TeamSourcing revenues was also
the result of an increase in the average billing rates for IT professionals.




                                       28
   29




     The worldwide billable headcount, as of December 31, 1996 increased to
1,293 compared to 1,136 as of December 31, 1995.

     Cost of Revenues. Consolidated cost of revenues in 1996 decreased to $67.1
million, or 72.6% of revenues, from $70.0 million, or 77.5% of revenues in 1995.
The decrease in cost of revenues was primarily attributable to reduced health
benefit costs resulting from a self-insurance program the Company instituted in
the second half of 1995, and to an increase in the billing rates of certain IT
professionals performing IntelliSourcing services for a major customer which
occurred in the second half of 1995. To a lesser extent, the decrease in cost of
revenues was attributable to the migration of work to the Company's offshore
facility in Mumbai, India where the salaries of IT professionals are lower as a
percentage of professional service fees. The number of billable IT professionals
in India increased to 190 at December 31, 1996, compared to 107 at December 31,
1995. In addition, the Company incurred one-time costs of approximately $0.5
million for the relocation of employees to its Cary, North Carolina Global
Development Center in 1995 which did not recur in 1996.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1996 increased to $19.3 million, or 20.9% of
revenues, from $13.9 million, or 15.4% of revenues in 1995.

         The $5.4 million increase in selling, general and administrative
expenses resulted primarily from $2.1 million in additional personnel cost to
strengthen the IntelliSourcing sales and support staff and $0.9 million to
develop the Company's proprietary Method2000(R) solution for its Year 2000
compliance service offering, reflecting the Company's focus on increasing
revenues from its IntelliSourcing business unit. In addition, the increase in
selling, general and administrative expenses was attributable to $1.5 million in
additional personnel cost to strengthen the TeamSourcing sales and support staff
and $0.9 million increased facilities costs.

         The $3.6 million aggregate personnel cost to build the TeamSourcing and
IntelliSourcing sales and support staff consisted primarily of hiring additional
sales executives, account executives, recruiting personnel and operational
support personnel.

QUARTERLY RESULTS OF OPERATIONS

         Note 11 of the audited financial statements sets forth certain
quarterly income statement data for each of the eight quarters beginning January
1, 1996 and ended December 31, 1997. In the opinion of management, this
information has been presented on the same basis as the Company's Financial
Statements appearing elsewhere in this document and all necessary adjustments
(consisting only of normal recurring adjustments) have been included in the
amounts stated below to present fairly the unaudited quarterly results. The
results of operations for any quarter are not necessarily indicative of the
results for any future period.

         The Company's quarterly revenues and results of operations have
fluctuated from quarter to quarter in the past and will likely fluctuate in the
future. Various factors causing such fluctuations include: the timing, number
and scope of customer engagements commenced and completed during the quarter;
progress on fixed-price engagements; timing and cost associated with expansion
of the Company's facilities; changes in IT professional wage rates; the accuracy
of estimates of resources and time frames required to complete pending
assignments; the number of working days in a quarter; employee hiring 







                                       29
   30

and training, attrition and utilization rates; the mix of services performed
on-site, off-site and offshore; termination of engagements; start-up expenses
for new engagements; longer sales cycles for IntelliSourcing engagements;
customers' budget cycles and investment time for training.

LIQUIDITY AND CAPITAL RESOURCES

         The Company generally has financed its working capital needs through
operations, occasionally supplemented by borrowings under a line of credit with
a commercial bank. Both the Mumbai and Chennai expansion programs are expected
to be financed from internally generated funds.

         Net cash provided by operating activities was $12.2 million, $5.9
million and $18.1 million for the years ended December 31, 1995, 1996, and 1997,
respectively. The decrease in net cash provided by operating activities in 1996
over 1995 was attributable to a $3.75 million increase in accounts receivable
due to: a $2.1 million increase in fourth quarter revenue in 1996 over fourth
quarter revenue in 1995, which resulted in an increase in accounts receivable at
year end due to the normal delay in receiving payment on revenue billed; $1.3
million in deferred revenue recorded in 1996; and a one-time $600,000 receivable
which arose out of the Company moving to a self-funded health insurance program.
The increase in cash provided by operating activities in 1997 over 1996 was
primarily attributable to a $4.6 million increase in net income, an improvement
of $3.8 million from a reduction in the days sales outstanding in accounts
receivable, and a $6.7 million increase in accrued payroll, operating costs, and
taxes, partially offset by a $3.5 million increase in advanced billings.

         Net cash used in investing activities was $3.3 million, $2.1 million
and $8.7 million for the years ended December 31, 1995, 1996 and 1997,
respectively. Cash used in investing activities in 1995 included $2.7 million to
establish the Company's Cary, North Carolina Global Development Center. Cash
used in investing activities in 1996 included $0.9 million for the relocation of
the Company's worldwide headquarters, $0.5 million invested in recruiting and
training software, and $0.5 million for facility upgrades and equipment for the
Mumbai, India Global Development Center. Cash used in investing activities in
1997 of $8.7 million included $7.0 million for the India acquisition, and $1.7
million for computer equipment, software, and facility improvements at the
Company's Global Development Centers.

         Net cash used in financing activities was $0.3 million and $5.0 million
in 1995 and 1996 respectively. Net cash provided by financing activities in 1997
was $16.5 million. Net cash used in financing activities in 1995 reflects net
payments on the bank's line of credit. Net cash used in financing activities in
1996 reflects a dividend paid to the Company's shareholders. In 1997 the company
received $34.6 million in net proceeds from the initial public offering. The net
proceeds were offset by pre-IPO shareholder distributions of $18.1 million
related to undistributed S corporation taxable income through August 12, 1997.

         The Company has a line of credit with NBD Bank which provides for
borrowings up to $25.0 million. The line of credit matures on August 31, 1998.
The line of credit contains covenants restricting the Company from, among other
things, incurring additional debt, issuing guarantees and creating liens on the
Company's property, without the prior consent of the bank. The line of credit
also requires the Company to maintain certain tangible net worth levels and
leverage ratios. At December 31, 1997, there was no indebtedness outstanding
under the line of credit. Borrowings under the line of credit bear 






                                       30
   31

interest at the lower of the Eurodollar rate plus the applicable Eurodollar 
margin, the bank's prime rate or a negotiated rate established by the bank at 
the time of borrowing.

         In addition to the bank line of credit, the Company has a $10.0 million
facility with NBD Bank to finance acquisitions which terminates on August 31,
1998. The Company has not borrowed any amounts under this facility. The Company
intends to extend both the $25 million and $10 million line of credit before the
expiration date.

         The Company believes that the combination of present cash balances and
future operating cash flows will be sufficient to meet the Company's currently
anticipated cash requirements for at least the next 12 months.

YEAR 2000 DATE CONVERSION

The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than year 2000. This could result in a system
failure or miscalculations causing disruptions of operations.

The Company has developed a plan and implemented initiatives to replace existing
network systems, computers, and financial systems with year 2000 compliant
computers and software. Management anticipates that these initiatives will be
completed before December 31, 1998 with no effect on customers or disruption to
business operations.

Cost of addressing year 2000 issues are reflected in the current year financial
budgets and are not anticipated to have a material adverse impact on the
Company's financial position or results of operations.

NEW ACCOUNTING STANDARDS

         Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, is effective for fiscal year beginning after December 15,
1997. This statement requires all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This new accounting standard is not expected to have a
material impact of the Company's financial statements. The Company has adopted
this standard on January 1, 1998 as required.

         Statement of Financial Accounting standards No. 131, Disclosure about
Segments of an Enterprise and related Information, is effective for periods
beginning after December 15, 1997. This statement establishes standards for
reporting information about operation segments in annual financial statements
and requires that enterprises report selected information about operating
segments in interim financial reports. This new accounting standard is not
expected to have a material impact of the Company's financial statements. The
Company will adopt this standard on for fiscal 1998 as required.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The financial statements and schedules filed herewith are set forth on
the Index to Financial Statements and Financial Statement Schedules on page F-1
of the separate financial section which follows page 37 of this Report and are
incorporated herein by reference.





                                       31
   32


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

         None.
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information set forth in the first part of the section entitled
"Election of Directors" in the Registrant's Proxy Statement for the Annual
Shareholders' Meeting to be held May 18, 1998 (the "Proxy Statement"), and under
the caption "Certain Information Regarding Nominees" in such section of the
Proxy Statement is incorporated herein by reference.

EXECUTIVE OFFICERS OF THE REGISTRANT

         The executive officers of the Registrant, their ages, and the position
or office held by each, are as follows:


              NAME                  AGE                       POSITION
              ----                  ---                       --------
Bharat Desai................         45     President, Chief Executive Officer
                                            and Director
Neerja Sethi................         42     Vice President, Corporate Affairs
                                            and Director
John Andary.................         48     Chief Financial Officer and
                                            Treasurer
Ken Kenjale.................         47     Chief Technology Officer
Daniel M. Moore.............         43     General Counsel, Secretary and
                                            Vice President, Benefits and
                                            Policy Administration
Bill McCarthy...............         43     Vice President, Sales and
                                            Marketing Management
Jay Clark...................         34     Vice President, Global
                                            Infrastructure and Career
                                            Administration
Venkat Mallya...............         36     Assistant Vice President,
                                            TeamSourcing
Tim Webb....................         36     Vice President, Enterprise
                                            Solutions
- ------------------------------------------------------------------------------

         Bharat Desai is a co-founder of the Company and has served as its
President, Chief Executive Officer and Director since its formation in 1980.

         Neerja Sethi is a co-founder of the Company and has served as a Vice
President, Corporate Affairs and Director since its formation in 1980 and as
Secretary and Treasurer from 1980 to March 1996. Ms. Sethi is the spouse of Mr.
Desai.

         John Andary has served the Company as Chief Financial Officer since
August 1994 and as Treasurer since March 1996. From October 1992 to April 1994,
Mr. Andary was a General Manager of Automatic Data Processing and from May 1987
to October 1992 he was one of its Division Controllers.






                                       32
   33

         Ken Kenjale has served the Company as Chief Technology Officer since
July 1995. From April 1988 to July 1995, Mr. Kenjale served in various positions
with the Company.

         Daniel M. Moore has served the Company as General Counsel and Secretary
since March 1996, and Vice President, Benefits and Policy Administration since
July 1997. From June 1996 to June 1997, Mr. Moore served as the Company's Acting
Vice President, Human Resources. From June 1992 to March 1996, Mr. Moore served
as Vice President and Senior Corporate Counsel with Comerica Incorporated, and
he was Vice President and Managing Commercial Counsel with Manufacturers
National Corporation prior to its merger with Comerica Incorporated.

         William T. McCarthy has served the Company as Vice President, Sales &
Marketing since December, 1997. From April, 1990 to December, 1997, Mr. McCarthy
served as Managing Director of Andersen Consulting's Americas Business
Integration Program headquartered in Chicago. From April, 1976 to March, 1990,
Mr. McCarthy served with IBM in a variety of executive sales, marketing, and
support roles in all the major industries.

         Jay Clark has served the Company as Vice President, Global
Infrastructure and Career Administration since July 1997. From August 1994 to
July 1997, Mr. Clark served as Assistant Vice President, Outsourcing Solutions
of the Company. From January 1985 to August 1994, Mr. Clark served in various
positions at EDS.

         Venkat Mallya has served the Company as Assistant Vice President,
TeamSourcing of the Company since February 1997. From June 1992 through February
1997, Mr. Mallya served in various positions with the Company, most recently as
a Branch Manager and a Director, Sales. From 1990 to 1992, Mr. Mallya served as
Group Marketing Manager for Onward Technology Group.


         Tim Webb has served the Company as Vice President, Enterprise Solutions
since February, 1998. From June, 1995 to January, 1998, Mr. Webb served as
Regional Vice President and Senior Practice Director with Oracle Corporation's
Consulting Services Division. From July, 1983 to May, 1995, Mr. Webb served in a
variety of executive roles with Andersen Consulting.

         The information set forth under the caption "Compliance with Section
16(a) of The Exchange Act" in the section entitled "Additional Information" in
the Registrant's Proxy Statement is incorporated herein by reference.


ITEM 11. EXECUTIVE COMPENSATION.

         The information set forth under the section entitled "Executive
Compensation" in the Registrant's Proxy Statement is incorporated herein by
reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information set forth under the captions "Principal Shareholders"
and "Security Ownership of Management" in the section entitled "Additional
Information" in the Registrant's Proxy Statement is incorporated herein by
reference.






                                       33
   34


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Syntel India, the Company's Indian Subsidiary, was owned prior to the
Company's initial public offering in August 1997 by Mr. Desai and Ms. Sethi, the
President and CEO and Vice President, Corporate Affairs of the Company,
respectively. Prior to the offering, the Company engaged Syntel India as a
subcontractor to perform offshore software development projects. During 1997 and
until completion of the public offering, the Company purchased $4,602,000 of
services from Syntel India. Prior to the offering, the Company entered into an
agreement to purchase all of the shares of Syntel India from Mr. Desai and Ms.
Sethi for $7.0 million in cash. The $7.0 million purchase price was based on a
valuation performed by independent chartered accountants in India pursuant to
guidelines established by the Reserve Bank of India for acquisitions of Indian
corporations. The purchase price was paid from a portion of the net proceeds of
the public offering. This acquisition was closed upon consummation of the
offering.

Also in connection with the initial public offering, the Company, Mr. Desai, Ms.
Sethi and the Company's other shareholders entered into a mutual indemnification
agreement relating to income tax liabilities of the Company and the shareholders
in connection with the termination of the Company's S corporation status in
August 1997. The agreement provides that the shareholders, severally (according
to their relative percentage ownership of the Common Stock of the Company) and
not jointly, will indemnify the Company against any unpaid income tax liability
of the Company attributable to the period prior to the termination of the
Company's S corporation status. The agreement also provides that the Company
will indemnify the shareholders against any income tax liability they may incur
as a result of a final adjustment the taxable income of the Company for any
period ending after the termination date of the Company's S corporation status
which results in a decrease for any period in the Company's taxable income and a
corresponding increase in the taxable income of the shareholders.

                                    PART IV

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

         (a) The financial statements, supplementary financial information, and
financial statement schedules filed herewith are set forth on the Index to
Financial Statements and Financial Statement Schedules on page F-1 of the
separate financial section which follows page 37 of this Report, which is
incorporated herein by reference.

         The following exhibits are filed as part of this Report. Those exhibits
with an asterisk(*) designate the Registrant's management contracts or
compensation plans or arrangements for its executive officers.

Exhibit No.                   Description


         3.1               Restated Articles of Incorporation of the Registrant
                           filed as an Exhibit to the Registrant's Registration
                           Statement on Form S-1 dated June 6, 1997, and
                           incorporated herein by reference.

         3.2               Bylaws of the Registrant filed as an Exhibit to the
                           Registrant's Registration Statement on Form S-1 dated
                           June 6, 1997, and incorporated herein by reference.





                                       34
   35


         10.1              Credit Authorization Agreement, dated September 13,
                           1996, between the Registrant and NBD Bank filed as an
                           Exhibit to the Registrant's Registration Statement on
                           Form S-1 dated June 6, 1997, and incorporated herein
                           by reference.

         10.2              Letter Agreement between the Registrant and NBD Bank
                           dated March 11, 1997 amending Credit Authorization
                           Agreement, filed as an Exhibit to the Registrant's
                           Registration Statement on Form S-1 dated June 6,
                           1997, and incorporated herein by reference.

         10.3              Letter Agreement between the Registrant and NBD Bank
                           dated March 25, 1997 amending Credit Authorization
                           Agreement, filed as an Exhibit to the Registrant's
                           Registration Statement on Form S-1 dated June 6,
                           1997, and incorporated herein by reference.

         10.4              Form of Stock Purchase Agreement between the
                           Registrant and the stockholders of Syntel Software
                           Private Limited, filed as an Exhibit to the
                           Registrant's Registration Statement on Form S-1 dated
                           June 6, 1997, and incorporated herein by reference.

         10.5              Lease, dated August 22, 1996, between WRC Properties,
                           Inc. and the Registrant, filed as an Exhibit to the
                           Registrant's Registration Statement on Form S-1 dated
                           June 6, 1997, and incorporated herein by reference.

         10.6              Lease Agreement, dated November 30, 1994, between the
                           Registrant and NationsBank of North Carolina, NA., as
                           Trustee for the Public Employees Retirement System of
                           Ohio, filed as an Exhibit to the Registrant's
                           Registration Statement on Form S-1 dated June 6,
                           1997, and incorporated herein by reference.

         10.7              Lease Agreement, dated June 7, 1995, between the
                           Registrant and Office Court Development Ltd. Co., a
                           New Mexico General Partnership, filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.

         10.8              Indentures of Lease entered into between the
                           President of India and Syntel Software Pvt. Ltd. on
                           the dates and for the square footage indicated below
                           for the Mumbia Global Development Center and filed as
                           an Exhibit to the Registrant's Registration Statement
                           on Form S-1 dated June 6, 1997, and incorporated
                           herein by reference:

                                    October 11, 1993; 7825 sq. ft.
                                    January 18, 1993; 3,443 sq. ft.
                                    November 2, 1992; 3,443 sq. ft.
                                    October 11, 1993; 5,502 sq. ft.

         10.9              Rental Agreement, dated February 24, 1997, between
                           Syntel Software Pvt. Ltd. and the Landlords for the
                           Chennai Global Development Center, filed as an
                           Exhibit to the Registrant's Registration Statement on
                           Form S-1 dated June 6, 1997, and 





                                       35
   36

                           incorporated herein by reference.

         10.10**           Agreement for Software Programming Services, dated
                           as of December 31, 1997, between the Registrant and
                           American Home Assurance Company.

         10.11             PeopleNet Supplier Contract, effective as of April 1,
                           1996, between the Registrant and Geometric Results,
                           Incorporated (d/b/a "PeopleNet"), filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.

         10.12*            1997 Stock Option and Incentive Plan, filed as an
                           Exhibit to the Registrant's Registration Statement on
                           Form S-1 dated June 6, 1997, and incorporated herein
                           by reference.

         10.13*            Employee Stock Purchase Plan, filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.

         10.14*            Employment Agreement, dated June 5, 1997, between
                           the Registrant and Bharat Desai, filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.

         10.15*            Employment Agreement, dated June 5, 1997, between
                           the Registrant and Neerja Sethi, filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.

         10.16             Form of S Corporation Revocation, Tax Allocation and
                           Indemnification Agreement (the "Agreement") between
                           the Registrant and the shareholders of the Registrant
                           on the date of the Agreement, filed as an Exhibit to
                           the Registrant's Registration Statement on Form S-1
                           dated June 6, 1997, and incorporated herein by
                           reference.

         21                Subsidiaries of the Registrant.

         27                Financial Data Schedule.

         99.1              Proxy Statement for the Registrant's 1998 Annual
                           Meeting of Shareholders, filed by the Registrant
                           pursuant to Regulation 14A and incorporated herein by
                           reference.

         (b)  No report on Form 8-K was filed during the fourth quarter of the 
                                  year ended December 31, 1997.

** Portions of this document have been redacted pursuant to the Company's
request to the Secretary of the Commission for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.





                                       36
   37

                                  SIGNATURES


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

                                     SYNTEL, INC.

                                            By:  /s/Bharat Desai
                                                 ---------------
                                                 Bharat Desai
Dated:  March 23, 1998                           President
                                                 and Chief Executive Officer


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

   Signature                         Title                          Date


/s/Bharat Desai            President and Chief Executive Officer March 23, 1998 
- -------------------        (Principal Executive Officer)
Bharat Desai               


/s/John Andary             Chief Financial Officer               March 23, 1998
- --------------------       (Principal Financial and
John Andary                    and Accounting Officer)
                               


/s/Neerja Sethi            Director and Vice President,          March 23, 1998
- --------------------         Corporate Affairs
Neerja Sethi             


/s/Paritosh K. Choksi      Director                              March 23, 1998
- --------------------
Paritosh K. Choksi         


/s/Douglas VanHouweling    Director                              March 23, 1998
- ----------------------
Douglas Van Houweling


/s/GEORGE R. MRKONIC       Director                              March 23, 1998
- --------------------
George R. Mrkonic






                                       37
   38




                                                           
SYNTEL, INC.
CONTENTS


                                                                       PAGES


Report of Independent Accountants.......................................F-2



Consolidated Financial Statements:

     Consolidated Statements of Income..................................F-3

     Consolidated Balance Sheets........................................F-4

     Consolidated Statements of Shareholders' Equity....................F-5

     Consolidated Statements of Cash Flows..............................F-6

     Notes to Consolidated Financial Statements......................F-7-F-17





                                      F-1

   39



REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors of
Syntel, Inc.:

We have audited the accompanying consolidated balance sheets of Syntel, Inc. as
of December 31, 1997 and 1996, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Syntel, Inc. as of
December 31, 1997 and 1996, and the consolidated results of its operations and
cash flows for the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.





Detroit, Michigan
February 18, 1998




                                      F-2

   40


SYNTEL, INC.
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1997, 1996 and 1995
(in thousands, except per share data)






                                                                                       1997                1996                1995
                                                                                                                     
Revenues                                                                            $124,338            $ 92,330            $ 90,326
Cost of revenues                                                                      87,584              67,083              70,014
                                                                                    --------            --------            --------

      Gross profit                                                                    36,754              25,247              20,312

Selling, general and administrative expenses                                          23,547              19,271              13,909
                                                                                    --------            --------            --------

      Income from operations                                                          13,207               5,976               6,403

Other income, net, principally investment income                                         730                 149                 188
                                                                                    --------            --------            --------

      Income before income taxes                                                      13,937               6,125               6,591

Provision for income taxes                                                             3,517                 350                 436
                                                                                    --------            --------            --------

      Net income                                                                    $ 10,420            $  5,775            $  6,155
                                                                                    ========            ========            ========

Pro forma income data (unaudited):
    Income before income taxes                                                      $ 13,937            $  6,125            $  6,591
    Pro forma income tax expense*                                                      3,741               1,746               2,170
                                                                                    --------            --------            --------

    Pro forma net income                                                            $ 10,196            $  4,379            $  4,421
                                                                                    ========            ========            ========

    Pro forma net income per share:
      Basic earnings per share                                                      $   0.41            $   0.18            $   0.18
                                                                                    ========            ========            ========

      Diluted earnings per share                                                    $   0.39            $   0.17            $   0.17
                                                                                    ========            ========            ========



*Presentation of income tax expense as if the Company was a C-corporation during
the years presented.

The accompanying notes are an integral part of the consolidated financial
statements.


                                      F-3


   41


SYNTEL, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(in thousands)





                                             ASSETS                                                         1997               1996

                                                                                                                          
 Current assets:
    Cash and cash equivalents                                                                            $ 32,945           $  7,332
    Accounts receivable                                                                                    20,644             20,642
    Advance billings and other current assets                                                               6,897                715
                                                                                                         --------           --------

      Total current assets                                                                                 60,486             28,689

Property and equipment                                                                                      9,299              7,551
    Less accumulated depreciation                                                                           5,060              3,248
                                                                                                         --------           --------

      Property and equipment, net                                                                           4,239              4,303

Deferred income taxes, noncurrent                                                                             507                  -
                                                                                                         --------           --------

                                                                                                         $ 65,232           $ 32,992
                                                                                                         ========           ========

                                          LIABILITIES

Current liabilities:
    Accrued payroll and related costs                                                                    $ 10,388           $  8,020
    Accounts payable and other accrued liabilities                                                          7,382              3,541
    Dividends/distribution payable                                                                            300             14,000
    Income taxes payable                                                                                    1,365                  -
    Deferred revenue                                                                                        5,705              1,286
                                                                                                         --------           --------

      Total current liabilities                                                                            25,140             26,847

Income taxes payable                                                                                          507                  -
                                                                                                         --------           --------

      Total liabilities                                                                                    25,647             26,847

                                     SHAREHOLDERS' EQUITY

Commonstock, no par value per share, 40 million shares authorized, 25.45 million 
      shares issued and outstanding at December 31, 1997; 22 million shares 
      issued and outstanding at December 31, 1996 after stock split                                             1                  1
Additional paid-in capital                                                                                 34,659                  -
Retained earnings                                                                                           5,174              6,144
Cumulative foreign currency translation adjustment                                                           (249)                 -
                                                                                                         --------           --------

      Total shareholders' equity                                                                           39,585              6,145
                                                                                                         --------           --------

                                                                                                         $ 65,232           $ 32,992
                                                                                                         ========           ========


The accompanying notes are an integral part of the consolidated financial
statements.



                                      F-4

   42


SYNTEL, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1997, 1996 and 1995
(in thousands)


                                                                               

                                                                                                CUMULATIVE
                                                        --------------------                              FOREIGN
                                                            COMMON STOCK        ADDITIONAL                CURRENCY
                                                        --------------------     PAID-IN      RETAINED   TRANSLATION   SHAREHOLDERS'
                                                         SHARES*     AMOUNT      CAPITAL      EARNINGS    ADJUSTMENT      EQUITY
                                                        --------    --------  ------------   ----------  -------------  -----------

                                                                                                              
Balance, January 1, 1995                                 22,000     $      1                   $  6,214                    $  6,215

Net income                                                                                        6,155                       6,155
                                                       --------     --------     --------      --------      --------      --------

Balance, December 31, 1995                               22,000            1                     12,369                      12,370

Net income                                                                                        5,775                       5,775

Dividends declared, paid $5,000 in
      1996 and $7,000 in 1997                                                                   (12,000)                    (12,000)
                                                       --------     --------     --------      --------      --------      --------

Balance, December 31, 1996                               22,000            1                      6,144                       6,145

Net income                                                                                       10,420                      10,420

Dividends declared (previously
      undistributed S-Corporation earnings)                                                     (11,400)                    (11,400)

Termination of S-Corporation tax status                                          $  1,525        (1,525)                           

Shares issued in initial public                           
      offering                                            3,450                    34,627                                    34,627

Compensation expense related to
      stock options                                                                    38                                        38

Acquisition of Syntel India (Note 3)                                               (1,531)        1,531                             

Translation adjustments                                                                               4      $   (249)         (245)
                                                       --------     --------     --------      --------      --------      --------

Balance, December 31, 1997                               25,450     $      1     $ 34,659      $  5,174      $   (249)     $ 39,585
                                                       ========     ========     ========      ========      ========      ========



*Gives effect to the 22 million-for-one stock split declared in 1997.

The accompanying notes are an integral part of the consolidated financial
statements.


                                      F-5

   43


SYNTEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996 and 1995
(in thousands)




                                                                                                1997           1996           1995

                                                                                                                       
 Cash flows from operating activities:
    Net income                                                                               $ 10,420       $  5,775       $  6,155
    Adjustments to reconcile net income to net cash provided by operating
         activities:
      Depreciation                                                                              1,812          1,442          1,075
      Deferred income taxes                                                                      (507)
      Compensation expense related to stock options                                                38                              

      Changes in assets and liabilities:
         Accounts receivable                                                                       (2)        (3,913)         3,429
         Advance billings and other assets                                                     (6,182)           (20)           710
         Accounts payable and accrued liabilities                                               7,837          1,370            632
         Deferred revenue                                                                       4,419          1,277             35
                                                                                             --------       --------       --------

      Net cash provided by operating activities                                                17,835          5,931         12,036

Cash flows used in investing activities:
    Property and equipment expenditures                                                        (1,749)        (2,138)        (3,320)
    Acquisition of Syntel India                                                                (7,000)
                                                                                             --------       --------       --------

      Net cash used in investing activities                                                    (8,749)        (2,138)        (3,320)
                                                                                             --------       --------       --------

Cash flows from financing activities:
    Net payments on bank line of credit                                                                                        (340)
    Net proceeds from issuance of stock                                                        34,627
    Dividend/distribution payments                                                            (18,100)        (5,000)              
                                                                                             --------       --------       --------

      Net cash provided by (used in) financing activities                                      16,527         (5,000)          (340)
                                                                                             --------       --------       --------

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

Net increase (decrease) in cash and cash equivalents                                           25,613         (1,207)         8,376

Cash and cash equivalents, beginning of year                                                    7,332          8,539            163
                                                                                             --------       --------       --------

Cash and cash equivalents, end of year                                                       $ 32,945       $  7,332       $  8,539
                                                                                             ========       ========       ========

Cash paid during the year for income taxes                                                   $  3,411       $    723               
                                                                                             ========       ========       ========


The accompanying notes are an integral part of the consolidated financial
statements.


                                     F-6

   44


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. BUSINESS:

Syntel, Inc. and Subsidiaries (the "Company") provides information technology
services such as programming, systems integration, outsourcing and overall
project management. The Company provides services to customers primarily in the
financial, manufacturing, transportation, retail and information/communication
industries, as well as to government entities through two separate delivery
teams, IntelliSourcing and TeamSourcing.

Through IntelliSourcing, the Company provides higher-value outsourcing services
for ongoing management, development and maintenance of customers' business
applications. In most IntelliSourcing engagements, the Company assumes
responsibility for the management of customer development and support functions.
IntelliSourcing engagements are generally supported by multi year contracts. As
a percentage of total revenues, IntelliSourcing revenues grew from 36 percent in
1996 to 51 percent in 1997.

Through TeamSourcing, the Company provides professional information technology
services directly to the customer. TeamSourcing contracts are generally
terminable by the customer without penalty.

During the years ended December 31, 1997, 1996 and 1995, there were sales to two
customers that exceeded 10 percent of total revenues. The largest customer was
the same for 1997, 1996 and 1995, while the second largest customer was
different in 1997 than in 1996 and 1995. Sales to these customers approximated:
1997, $38,560,000 (31.1 percent) and $14,828,000 (11.9 percent); 1996,
$30,980,000 (33.6 percent) and $10,757,000 (11.7 percent); 1995, $34,084,000
(37.7 percent) and $12,455,000 (13.8 percent). At December 31, 1997 and 1996,
approximately 36 and 30 percent of accounts receivable, net were from these two
customers, respectively.



2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES:

a. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
   the accounts of Syntel, Inc. ("Syntel") and its wholly owned subsidiaries
   Syntel Software Private Limited ("Syntel India"), an Indian limited
   liability company, Syntel Singapore Ptd., Ltd., ("Syntel Singapore"), a
   Singapore limited liability company, and Syntel ("Syntel U. K."), a United
   Kingdom unlimited liability company. All significant intercompany balances
   and transactions have been eliminated.



                                      F-7

   45


2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

b. REVENUE RECOGNITION: The Company recognizes revenues from time and material
   contracts as services are rendered and costs are incurred.

   Revenue from fixed-price contracts are recognized on the
   percentage-of-completion method, measured by the percentage of cost 
   incurred to date to the estimated total cost at completion. The cumulative 
   impact of any revision in estimates of the percentage complete or losses on 
   contracts is reflected in the period in which the changes become known.

c. CASH AND CASH EQUIVALENTS: For the purpose of reporting cash and cash
   equivalents, the Company considers all liquid investments purchased with a
   maturity of three months or less to be cash equivalents. Cash equivalents are
   principally bonds and notes with maturity dates of less than 90 days.

d. WARRANTY COSTS: The Company provides limited warranties on certain of its
   Year 2000 compliance contracts. A provision for warranty costs is made at the
   time contract services are performed. At December 31, 1997, the warranty 
   accrual aggregated $818,000.

e. FINANCIAL INSTRUMENTS: The carrying amount of cash equivalents, trade
   receivables and trade payables approximate fair value because of the 
   short-term nature of these instruments.

f. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost.
   Maintenance and repairs are charged to expense when incurred. Depreciation is
   computed primarily using the straight-line method over the estimated useful
   lives of the assets ranging from three to seven years.

   Upon sale or retirement, the cost of assets and related accumulated 
   depreciation is eliminated from the respective accounts, and the resulting 
   gain or loss is included in operations.

g. INCOME TAXES: Prior to August 12, 1997, the Company elected to operate as an
   S-corporation under the Internal Revenue Code. An S-corporation is not 
   subject to income taxes at the corporate level (with exceptions under certain
   state income tax laws). As part of the initial public offering, the Company
   terminated its S-corporation status, and effective August 12, 1997, became 
   subject to federal and state income taxes on its earnings.

   With the termination of the S-corporation status, the Company changed its 
   method of accounting for tax reporting purposes from the cash method to the 
   accrual method, resulting in an income tax obligation of $1.8 million, to 
   be paid in four equal annual installments. The obligation includes $.7 
   million resulting from the tax effect of temporary differences between 
   financial statement and tax reporting carrying amounts which was recognized
   as a deferred tax asset.




                                     F-8


   46


NOTES TO FINANCIAL STATEMENTS, CONTINUED

2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

h. PRO FORMA NET INCOME: To reflect the Company's pro forma net income
   the provision for income taxes has been adjusted as if the Company had been
   a taxable entity subject to federal and state income taxes at the marginal
   rates applicable to such periods. The resulting apparent tax rate is less
   than the federal statutory tax rate due principally to the tax exempt status
   of the income generated by Syntel India.

i. ESTIMATES: Use of estimates, as determined by management, are required in
   the preparation of financial statements in conformity with generally
   accepted accounting principles. Actual results could differ from estimates.

j. FOREIGN CURRENCY TRANSLATION: The financial statements of the Company's
   foreign operations utilize the functional currency of the country in which
   business is conducted. Revenues, costs and expenses of the foreign
   subsidiaries are translated to U. S. dollars at average - period exchange
   rates. Assets and liabilities are translated to U. S. dollars at year-end
   exchange rates with the effects of these translation adjustments being
   reported as a separate component of shareholders' equity.

k. PER SHARE DATA: The Company adopted Statement of Financial Accounting
   Standards No. 128 "Earnings per Share", for the year ended December 31,
   1997. The pro forma earnings per share for the years 1996 and 1995 have been
   restated to comply with these standards.

   Basic earnings per share is calculated by dividing pro forma net income by 
   the average number of shares outstanding during the applicable period.

   The Company had stock options which are considered to be potentially 
   dilutive to common stock. Diluted earnings per share is calculated by 
   dividing pro forma net income by the average number of shares outstanding 
   during the applicable period adjusted for these potentially dilutive options.

   The following table sets forth the computation of pro forma earnings per 
   share:



                                                                      1997                      1996                  1995
                                                           ----------------------    -----------------------  -------------------
                                                                         EARNINGS                  EARNINGS              EARNINGS
                                                                           PER                        PER                  PER
                                                            SHARES        SHARE       SHARES         SHARE     SHARES     SHARE
                                                           --------     ---------    --------     ----------  --------  ---------
                                                                           (in thousands, except per share earnings)

                                                                                                        
Basic earnings per share                                   25,175        $  0.41     25,000        $ 0.18     25,000    $0.18
Net dilutive effect of stock options
     outstanding                                              117           
Shares assumed outstanding due to
     excess distributions in 1997                             763                     1,245                    1,145        
                                                           ------        -------     ------        ------     ------    -----

     Diluted earnings per share                            26,055        $  0.39     26,245        $ 0.17     26,145    $0.17
                                                           ======        =======     ======        ======     ======    =====




                                     F-9

   47

NOTES TO FINANCIAL STATEMENTS, CONTINUED


2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

l. RECLASSIFICATIONS: Certain amounts in previously issued financial statements
   have been reclassified to conform with the current year presentation.



3. INITIAL PUBLIC OFFERING BUSINESS COMBINATION:

   In August 1997, the Company completed an initial public offering of 3,450,000
   shares of common stock at a price of $11.00 per share. After underwriting
   discounts and other issuance costs, net proceeds to the Company were
   approximately $34.6 million.

   Prior to the initial public offering, the Company agreed to acquire 100 
   percent ownership of Syntel India for $7 million in cash. The purchase 
   price was paid from available cash after the initial public offering. The 
   acquisition, which was a merger of interests under common control, is being 
   accounted for on the carryover basis of accounting similar to pooling of 
   interests with the historical financial statements of the Company restated 
   to include Syntel India. The portion of the purchase price in excess of the
   carrying value of the net assets acquired at August 12, 1997, or $1.5 
   million was accounted for as a reduction of additional paid in capital.

   A reconciliation of the period between January 1, 1997 and August 12, 1997 
   and the previously reported years ended December 31, 1996 and 1995, revenue
   and net income is as follows:


   


                                                                           JAN 1, 1997 -
                                                                           AUG 12, 1997             1996                     1995
                                                                           -------------         ----------               ----------
                                                                                             (in thousands)

                                                                                                                       
Revenue                                                                    $ 70,929                $ 92,237                $ 90,326
Syntel India revenue                                                          4,668                   4,159                   2,520
Intercompany revenue elimination                                             (4,602)                 (4,066)                 (2,520)
                                                                           --------                --------                --------

     Total revenue                                                         $ 70,995                $ 92,330                $ 90,326
                                                                           ========                ========                ========

Net income                                                                 $  4,561                $  4,171                $  5,237
Syntel India net income                                                       2,240                   1,604                     918
                                                                           --------                --------                --------

     Total net income                                                      $  6,801                $  5,775                $  6,155
                                                                           ========                ========                ========





                                     F-10

   48

NOTES TO FINANCIAL STATEMENTS, CONTINUED


4. PROPERTY AND EQUIPMENT:

   Cost of property and equipment at December 31, 1997 and 1996 is summarized as
   follows (in thousands):



                                                                                             1997        1996
                                                                                                 
  Computer equipment and software                                                          $  5,432    $  4,084
  Furniture and equipment                                                                     3,482       3,167
  Leasehold improvements                                                                        385         300
                                                                                           ---------   ---------

                                                                                              9,299       7,551
  Accumulated depreciation                                                                    5,060       3,248
                                                                                           ---------   ---------

                                                                                           $  4,239    $  4,303
                                                                                           =========   =========



5. LINE OF CREDIT:

   The Company has a line-of-credit arrangement with a bank which will expire
   August 31, 1998, which provides for borrowings up to $25,000,000. Interest is
   computed on the basis of the Company's option at (i) the Eurodollar rate plus
   the applicable Eurodollar margin, (ii) the bank's prime rate or (iii) a
   negotiated rate, as defined. The Company also has an additional line of 
   credit with the same bank which will expire August 31, 1998 which provides 
   for borrowings up to $10,000,000 to finance acquisitions.



6. LEASES:

   The Company leases certain facilities and equipment under operating leases.
   Current operating lease obligations are expected to be renewed or replaced 
   upon expiration. Future minimum payments under noncancelable leases as of 
   December 31, 1997 are as follows (in thousands):



                                                                    
   1,998                                                              $  1,825
   1,999                                                                 1,112
   2,000                                                                   789
   2,001                                                                   490
   2,002                                                                    18
                                                                      --------
                                                                       $ 4,234 
                                                                      ======== 


Total rent expense charged to operations amounted to approximately $1,678,
$1,352 and $1,219 for the years ended December 31, 1997, 1996 and 1995,
respectively.


                                      F-11

   49


NOTES TO FINANCIAL STATEMENTS, CONTINUED

7. INCOME TAXES:

Income before income taxes for U. S. and foreign operations was as follows (in
thousands):



                                                                                     1997         1996       1995
                                                                                                  
       U. S.                                                                      $   9,663    $  4,492    $  5,665
       Foreign                                                                        4,274       1,633         926
                                                                                  ---------    --------    --------

                                                                                  $  13,937    $  6,125    $  6,591
                                                                                  =========    ========    ========



   The provision for income taxes is as follows:



                                                                                       1997       1996       1995
                                                                                                   
       Currently payable
         Federal                                                                     $  3,839        321        408
         State and local                                                                  474         29          8
         Foreign                                                                            2    $     -          -
                                                                                     --------    -------    -------

            Total currently payable provision for income taxes                          4,313        350        436

       Deferred:
         Federal                                                                         (708)         -          -
         State and local                                                                  (88)         -          -
         Foreign                                                                            -          -          -
                                                                                     --------    -------    ------- 

            Total deferred                                                               (796)         -          -
                                                                                     --------    -------    ------- 

            Total provision                                                          $  3,517    $   350        436
                                                                                     ========    =======    =======
       


Upon termination of the S-Corporation election, as described in Note 2, current
and deferred income taxes of $1.8 million and ($.7) million, respectively, were
recognized. Accordingly, the above provision for income taxes includes a $1.1
million nonrecurring expense resulting from the termination of the S-Corporation
election. In accordance with the Internal Revenue Code, the Company will defer
the payment of 75 percent of the total tax obligation of $1.8 million over the
next three years.

The components of the net deferred tax asset are as follows (in thousands):





                                                                                        1997        1996
                                                                                              
  Deferred tax assets, accrued expenses                                               $   1,574          -
  Deferred tax liabilities, property and equipment                                         (26)          -
                                                                                      ----------  --------
 
       Net deferred tax asset                                                         $   1,548          -
                                                                                      ==========  ========
 



                                     F-12

   50


NOTES TO FINANCIAL STATEMENTS, CONTINUED

7. INCOME TAXES, CONTINUED:

Balance sheet classification of net deferred tax asset is summarized as follows 
(in thousands):




                                                                                      1997        1996
                                                                                          
  Deferred tax asset, current                                                       $  1,041           -
  Deferred tax asset, noncurrent                                                         507           -
                                                                                    --------    --------

                                                                                    $  1,548           -
                                                                                    =========   ========

   
Under the Indian Income Tax Act of 1961 (the "Act"), virtually all of Syntel
India's income is exempt from Indian Income Tax as profits attributable to
export operations. Under the Act, there are certain alternative minimum tax
provisions which impose tax on net profits at a rate of approximately 35
percent. These provisions are not currently applicable due to the tax holiday
expiring in March 2000 for the Mumbai operation and in March 2002 for the
Chennai operation.

The Company has not recorded deferred income taxes applicable to undistributed
earnings of Syntel India. Those earnings are considered to be indefinitely
reinvested and, accordingly, no provision for U. S. federal and state income tax
or India "border tax" of 10 percent has been provided thereon. The unrecognized
taxes on the undistributed earnings is approximately $3.8 million.

The following table accounts for the differences between the actual tax
provision and the amounts obtained by applying the statutory U. S. federal
income tax rate of 34 percent to income before income taxes:



                                                                             1997         1996         1995
                                                                                     (in thousands)
                                                                                            
  Statutory tax provision                                                  $   4,739    $   2,083    $   2,241
  State taxes, net of federal benefit                                            655          321          428
  S-Corporation income not subject to federal income taxes                   (1,556)      (1,527)      (1,926)
  Foreign income not subject to tax                                          (1,411)        (527)        (307)
  Termination of S-corporation status                                          1,090           -            -
                                                                           ----------   ----------   ----------

       Total provision for income taxes                                    $   3,517    $     350    $     436
                                                                           ==========   ==========   ==========




                                      F-13

   51
NOTES TO FINANCIAL STATEMENTS, CONTINUED



8. STOCK OPTION PLAN:

The Company established a stock option plan in 1997 under which 2 million shares
of common stock were reserved for issuance. The dates on which granted options
are first exercisable is determined by the Compensation Committee of the Board
of Directors, but generally vest over a four-year period from the date of grant.
The term of any option may not exceed 10 years from the date of grant. Options
available to grant under the plan at December 31, 1997 aggregate 919,420 shares.

For certain options granted during 1997, the exercise price was less than the
fair value of the Company's stock on the date of grant and, accordingly,
compensation expense is being recognized over the vesting period for such
difference. For certain other options granted in 1997, the exercise price
equaled the market price on the date of grant, and therefore, no compensation
expense was recognized.

The Company has elected to measure compensation cost using the intrinsic value
method, in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Had the fair value of each stock option granted in 1997 been
determined consistent with the methodology of SFAS 123, the pro forma impact on
the Company's net income and earnings per share would have been immaterial

The following table sets forth changes in options outstanding:



                                                                                                   WEIGHTED
                                                                     NUMBER                         AVERAGE
                                                                    OF SHARES        AMOUNT          PRICE
                                                                   ------------   -------------   ------------
                                                                                         
Shares under option:
   Outstanding at beginning of year                                          -               -              -
   Granted
     Price equals fair value                                           503,000    $  4,536,000    $      9.02
     Price less than fair value                                        650,500       4,021,500           6.18
                                                                   -----------     -----------
   Granted                                                           1,153,500       8,557,500           7.42
   Forfeited                                                            72,920         501,120           6.87
                                                                   -----------    ------------    -----------

   Outstanding at end of year                                        1,080,580    $  8,056,380           7.46
                                                                   ===========    ============

   Exercisable at end of year                                          none
                                                                   ===========




                                      F-14


   52


NOTES TO FINANCIAL STATEMENTS, CONTINUED

8. STOCK OPTION PLAN, CONTINUED:

The following table sets forth details of options outstanding at December 31,
1997:




                                                       OPTIONS OUTSTANDING
           -------------------------------------------------------------------------------------------------------------
                                                                                              WEIGHTED       WEIGHTED
                 RANGE OF                                                                      AVERAGE        AVERAGE
                 EXERCISE                                                     NUMBER         CONTRACTUAL     EXERCISE
                  PRICES                                                   OUTSTANDING          LIFE           PRICE
           ---------------------                                          ---------------   --------------  ------------
                                                                                                  
                  $2.00                                                          130,000         9.2        $   2.00
           $   7.00 - $    9.00                                                  915,750         9.7            8.09
           $  11.00 - $   12.00                                                   34,830         9.6           11.09
                                                                          --------------

           $   2.00 - $   12.00                                                1,080,580         9.7            7.46
                                                                          ==============

  
The Company has also reserved one million shares of common stock for issuance
under the Company's employee stock purchase plan. The plan, which has not yet
been implemented, provides for employees to purchase pre-established amounts as
determined by the Compensation Committee. The price at which employees may
purchase common stock will be set by the Compensation Committee at not less than
the lesser of 85 percent of the fair market value of the common stock on the
NASDAQ National Market on the first day of the purchase period or 85 percent of
the fair market value of the common stock on the last day of the purchase
period. The purchase period will generally be one year or less.




                                      F-15


   53

NOTES TO FINANCIAL STATEMENTS, CONTINUED


9. SEGMENT INFORMATION:

Total revenues, income before income taxes and identifiable assets by geographic
location were as follows:




                                                                            1997          1996         1995
                                                                                    (in thousands)
                                                                                           
  Revenues:
    United States operations                                             $   124,157    $  92,237    $  90,326
    Foreign operations                                                         9,379        4,159        2,520
    Intercompany revenue elimination                                         (9,198)      (4,066)      (2,520)
                                                                         -----------    ---------    ---------

       Total revenue                                                         124,338       92,330       90,326

  Income before income taxes:
    United States operations                                             $     9,663    $   4,492    $   5,665
    Foreign operations                                                         4,274        1,633          926
                                                                         -----------    ---------    --------- 

       Total income before income taxes                                       13,937        6,125        6,591

  Assets at December 31:
    United States operations                                             $    58,574    $  29,649    $  27,878
    Foreign operations                                                         6,658        3,343        1,692
                                                                         -----------    ---------    ---------

       Total assets                                                      $    65,232    $  32,992    $  29,570
                                                                         ===========    =========    =========




                                     F-16

   54

NOTES TO FINANCIAL STATEMENTS, CONTINUED


10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

Selected financial data by calendar quarter were as follows:



                                                          FIRST      SECOND      THIRD      FOURTH       FULL
                                                         QUARTER    QUARTER     QUARTER     QUARTER      YEAR
                                                        ----------  ---------   ---------  ----------  ----------
                                                                             (in thousands)
                                                                                        
    1997:              
      Revenues                                          $  26,294   $ 29,031    $ 33,596   $  35,417   $ 124,338
      Cost of revenues                                     18,892     20,849      23,681      24,162      87,584
                                                        ---------   --------    --------   ---------   --------- 

           Gross profit                                     7,402      8,182       9,915      11,255      36,754

      Selling, general and administrative
           expenses                                         5,395      5,752       6,276       6,124      23,547
                                                        ---------   --------    --------   ---------   --------- 

           Income from operations                           2,007      2,430       3,639       5,131      13,207

      Other income, net                                       121        102         299         208         730
                                                        ---------   --------    --------   ---------   ---------

           Income before income taxes                       2,128      2,532       3,938       5,339      13,937

      Pro forma income taxes                                  541        629       1,030       1,541       3,741
                                                        ---------   --------    --------   ---------   ---------

        Pro forma Net income                            $   1,587   $  1,903    $  2,908   $   3,798   $  10,196
                                                        =========   ========    ========   =========   ========= 

      Pro forma earnings per share, diluted             $    0.06   $   0.07    $   0.11   $    0.15   $    0.39
                                                        =========   ========    ========   =========   =========

      Weighted average shares outstanding, diluted         25,820     26,245      25,992      25,737      26,055
                                                        =========   ========    ========   =========   ========= 

    1996:             
      Revenues                                          $  21,862   $ 22,697    $ 23,482   $  24,289   $  92,330
      Cost of revenues                                     16,200     16,396      17,048      17,439      67,083
                                                        ---------   --------    --------   ---------   --------- 

        Gross profit                                        5,662      6,301       6,434       6,850      25,247

      Selling, general and administrative
           expenses                                         4,266      4,840       5,019       5,146      19,271
                                                        ---------   --------    --------   ---------   --------- 

        Income from operations                              1,396      1,461       1,415       1,704       5,976

      Other income (expense), net                             138         86          39       (114)         149
                                                        ---------   --------    --------   ---------   --------- 

        Income before income taxes                          1,534      1,547       1,454       1,590       6,125

      Pro forma income taxes                                  452        446         353         495       1,746
                                                        ---------   --------    --------   ---------   --------- 

        Pro forma Net income                            $   1,082   $  1,101    $  1,101   $   1,095   $   4,379
                                                        ==========  =========   =========  ==========  ==========

      Pro forma earnings per share, diluted             $    0.04   $   0.04    $   0.04   $    0.04   $    0.17
                                                        =========   ========    ========   =========   ========= 

      Weighted average shares outstanding, diluted         26,245     26,245      26,245      26,245      26,245
                                                        =========   ========    ========   =========   ========= 





                                      F-17
   55




Exhibit No.                   Description


         3.1               Restated Articles of Incorporation of the Registrant
                           filed as an Exhibit to the Registrant's Registration
                           Statement on Form S-1 dated June 6, 1997, and
                           incorporated herein by reference.

         3.2               Bylaws of the Registrant filed as an Exhibit to the
                           Registrant's Registration Statement on Form S-1 dated
                           June 6, 1997, and incorporated herein by reference.

         10.1              Credit Authorization Agreement, dated September 13,
                           1996, between the Registrant and NBD Bank filed as an
                           Exhibit to the Registrant's Registration Statement on
                           Form S-1 dated June 6, 1997, and incorporated herein
                           by reference.

         10.2              Letter Agreement between the Registrant and NBD Bank
                           dated March 11, 1997 amending Credit Authorization
                           Agreement, filed as an Exhibit to the Registrant's
                           Registration Statement on Form S-1 dated June 6,
                           1997, and incorporated herein by reference.

         10.3              Letter Agreement between the Registrant and NBD Bank
                           dated March 25, 1997 amending Credit Authorization
                           Agreement, filed as an Exhibit to the Registrant's
                           Registration Statement on Form S-1 dated June 6,
                           1997, and incorporated herein by reference.

         10.4              Form of Stock Purchase Agreement between the
                           Registrant and the stockholders of Syntel Software
                           Private Limited, filed as an Exhibit to the
                           Registrant's Registration Statement on Form S-1 dated
                           June 6, 1997, and incorporated herein by reference.

         10.5              Lease, dated August 22, 1996, between WRC Properties,
                           Inc. and the Registrant, filed as an Exhibit to the
                           Registrant's Registration Statement on Form S-1 dated
                           June 6, 1997, and incorporated herein by reference.

         10.6              Lease Agreement, dated November 30, 1994, between the
                           Registrant and NationsBank of North Carolina, NA., as
                           Trustee for the Public Employees Retirement System of
                           Ohio, filed as an Exhibit to the Registrant's
                           Registration Statement on Form S-1 dated June 6,
                           1997, and incorporated herein by reference.

         10.7              Lease Agreement, dated June 7, 1995, between the
                           Registrant and Office Court Development Ltd. Co., a
                           New Mexico General Partnership, filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.





                                       38
   56


         10.8              Indentures of Lease entered into between the
                           President of India and Syntel Software Pvt. Ltd. on
                           the dates and for the square footage indicated below
                           for the Mumbia Global Development Center and filed as
                           an Exhibit to the Registrant's Registration Statement
                           on Form S-1 dated June 6, 1997, and incorporated
                           herein by reference:

                                    October 11, 1993; 7825 sq. ft.
                                    January 18, 1993; 3,443 sq. ft.
                                    November 2, 1992; 3,443 sq. ft.
                                    October 11, 1993; 5,502 sq. ft.

         10.9              Rental Agreement, dated February 24, 1997, between
                           Syntel Software Pvt. Ltd. and the Landlords for the
                           Chennai Global Development Center, filed as an
                           Exhibit to the Registrant's Registration Statement on
                           Form S-1 dated June 6, 1997, and incorporated herein
                           by reference.

         10.10**           Agreement for Software Programming Services, dated
                           as of December 31, 1997, between the Registrant and
                           American Home Assurance Company.

         10.11             PeopleNet Supplier Contract, effective as of April 1,
                           1996, between the Registrant and Geometric Results,
                           Incorporated (d/b/a "PeopleNet"), filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.

         10.12*            1997 Stock Option and Incentive Plan, filed as an
                           Exhibit to the Registrant's Registration Statement on
                           Form S-1 dated June 6, 1997, and incorporated herein
                           by reference.

         10.13*            Employee Stock Purchase Plan, filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.

         10.14*            Employment Agreement, dated June 5, 1997, between
                           the Registrant and Bharat Desai, filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.

         10.15*            Employment Agreement, dated June 5, 1997, between
                           the Registrant and Neerja Sethi, filed as an Exhibit
                           to the Registrant's Registration Statement on Form
                           S-1 dated June 6, 1997, and incorporated herein by
                           reference.

         10.16             Form of S Corporation Revocation, Tax Allocation and
                           Indemnification Agreement (the "Agreement") between
                           the Registrant and the shareholders of the Registrant
                           on the date of the Agreement, filed as an Exhibit to
                           the Registrant's Registration Statement on Form S-1
                           dated June 6, 1997, and incorporated herein by
                           reference.

         21                Subsidiaries of the Registrant.

         27                Financial Data Schedule.





                                       39
   57


         99.1              Proxy Statement for the Registrant's 1998 Annual
                           Meeting of Shareholders, filed by the Registrant
                           pursuant to Regulation 14A and incorporated herein by
                           reference.

                            (b) No report on Form 8-K was filed during the 
                                fourth quarter of the year ended December 31, 
                                1997.

** Portions of this document have been redacted pursuant to the Company's
request to the Secretary of the Commission for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.







                                       40

EX-10.10

   1

                                                                Exhibit 10.10*


                   AGREEMENT FOR SOFTWARE PROGRAMMING SERVICES

         This Agreement for software programming services ("the "Agreement") is
entered into as of December 31, 1997, to be effective as of January 1, 1998 (the
"Effective Date") by and between American Home Assurance Company, a New York
corporation ("AH") with principal offices at 70 Pine Street, New York, NY 10270
and Syntel, Inc., a Michigan corporation ("Syntel") with principal offices at
2800 Livernois Road, Suite 400, Troy, Michigan 48083. For and in consideration
of the mutual premises and undertakings set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by all parties hereto, AH and Syntel hereby agree as follows:

         1. BACKGROUND AH and its Affiliates, are the owners, licensees or
otherwise authorized users of various software systems. "Affiliate" shall mean
any company controlling, controlled by or under common control of a party
hereto. AH, on behalf of itself and its Affiliates, desires to engage Syntel and
its Affiliates to provide programming services for these various software
systems under this Agreement (the "Services"). Syntel, on behalf of itself and
its Affiliates, is willing to contract to provide such Services. The parties
hereto wish to reduce their agreement to writing.

         2. ENGAGEMENT AH, on behalf of itself and its Affiliates, hereby
engages Syntel as the contractor to provide the Services as described herein and
Syntel, on behalf of itself and its Affiliates, hereby accepts such engagement
and agrees to provide such services pursuant to the terms and conditions set
forth herein.

         3. TERM This Agreement shall commence upon the Effective Date and shall
remain in full force and effect continuously thereafter until December 31, 2000
(the "Expiration Date"), subject to termination as provided herein. Except as
otherwise expressly provided herein and in the attachments hereto, any extension
of the term hereof must be in writing and mutually agreed to by both AH and
Syntel. In the event either party desires to continue this Agreement after the
Expiration Date, then, at least one hundred eighty (180) days prior to the
Expiration Date, that party shall provide the other party with a written
proposal for continuance. The receiving party shall respond in writing to the
proposal no later than thirty (30) days after receipt of the proposal whether or
not the party agrees to the terms of the proposal. In the event the parties are
unable to agree upon terms of continuance or renewal at least ninety (90) days
prior to the Expiration Date, then this Agreement shall terminate pursuant to
its own terms, unless otherwise agreed to in writing by both parties.

         4.       DUTIES OF AH

         4.01 AH shall assign one of its individual employees (the "AH
Relationship Manager") as AH's primary point of contact with Syntel who will be
responsible for assuring that AH meets its obligations under this Agreement and
who will have the authority to manage day to day operations hereunder, to grant
consents hereunder and to provide written and verbal directions for the
execution of the terms of this Agreement and its Attachments, but who shall have
no power to amend this Agreement. Upon notice to Syntel, the AH Relationship
Manager may delegate his or her authority to other AH employees 


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.


                                        1
   2

for short periods of time, but shall retain responsibility for meeting AH's 
obligations under this Agreement.

         4.02 * AH agrees * to provide and maintain back-up files of its data in
accordance with the standards utilized by AH and to be responsible for disaster
recovery plans and services for the facilities of AH and its Affiliates.

         4.03 * Technology changes are defined to include, but are not limited
to, making a change to hardware environment, software tools, operating systems
or programming languages not currently supported by Syntel under the existing
agreement. The hardware environment, software tools, operating systems and
programming languages currently supported by Syntel are listed in the attached
Exhibit A and are not subject to the technology change clause.

         4.04 * Technology changes are defined to include, but are not limited
to, making a change to hardware environment, software tools, operating systems
or programming languages not currently supported by Syntel under the existing
agreement. The hardware environment, software tools, operating systems and
programming languages currently supported by Syntel are listed in the attached
Exhibit A and are not subject to the technology change clause.

         4.05 * Such workstations shall be substantially equivalent to the
workstations provided to AH employees performing similar functions.

         4.06     *  See also Section 5.04.

         4.07     *

         4.08     *

         4.09     *


         5.       DUTIES OF SYNTEL

         5.01 Syntel will assign an individual (the "Syntel Relationship
Manager") who will serve as Syntel's primary point of contact with AH and who
will be responsible for assuring that Syntel meets its obligations under this
Agreement and who will have the authority to manage the day to day operations
hereunder, to grant consents hereunder and to provide written and verbal
directions for the execution of the terms of this Agreement and its Attachments,
but who shall have no power to amend this Agreement. Upon notice to AH, the
Syntel Relationship Manager may delegate his or her authority to other Syntel
employees for short periods of time, but shall retain responsibility for meeting
Syntel's obligations under this Agreement. AH reserves the right, for any
reason, to require Syntel to change the Syntel Relationship Manager. Syntel
agrees that, except with the prior written consent of AH, Syntel shall not
replace the Syntel Relationship Manager for reasons other than death,
disability, failure to perform in the opinion of AH, request by AH, family
considerations, promotion to regional or national management responsibilities,
or resignation or termination from employment by Syntel.

         5.02 Syntel agrees that all Services provided hereunder, will be done
at locations which are identified in writing to AH and which must be acceptable
to AH and Syntel. Such locations shall initially be Syntel facilities (the
"Syntel Service Centers") or AH locations in the New York 



*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.






                                       2
   3

Metropolitan Area. Syntel agrees that it will not relocate the Syntel Service
Centers, nor establish a satellite facility for providing Services hereunder,
without first obtaining the written consent of AH, which consent shall not be
unreasonably withheld. AH and Syntel agree that currently the Services will be
performed from a Syntel facility in Mumbai, India and a Syntel facility in Cary,
North Carolina.

         5.03 Syntel will adhere to all material AH practices and standards
identified to it and further agrees to use its best efforts to adhere to all
practices and standards concerning access to the mainframes located at the
mainframe complex located at 2 Peachtree Hill Road, Livingston, New Jersey (the
"AH Data Center") as outlined in the American International Group Data Center,
Inc. Manual, as amended from time to time, provided however, Syntel shall be
responsible for only those changes to practices and standards for which it
receives prior notice sufficient for it to act upon. A copy of the manual which
is in effect will be available at all times for Syntel.

         5.04 Syntel shall be solely responsible for establishing and
maintaining connections from Syntel Service Centers to AH facilities to provide
the Services including without limitation all telecommunications equipment, all
telephone and other telecommunications lines and all expenses associated with
transmission of data from Syntel's Service Centers to AH facilities. Syntel will
use reasonable efforts to provide the appropriate line capacity to assure the
efficient use of resources. See also Section 4.06.

         5.05 Syntel will maintain (i) a Time Reporting System; and (ii) a
Project Management System. Both of these systems may be a non-customized, off
the shelf version of current software, acceptable to AH, such acceptance not to
be unreasonably withheld. AH shall have complete access to these systems or the
output of these systems as AH deems necessary.

         5.06 * Syntel shall be responsible for maintaining disaster recovery
plans and services, acceptable to AH, addressing the Syntel Service Centers and
the telecommunication connection between the Syntel Service Centers and the AH
Data Center and other AH facilities. * Syntel will provide for and maintain
backup files of the data and programs and backups of documentation at its
facilities.

         5.07 * Syntel shall provide additions, deletions and other changes to
the list of necessary access rights each month, which changes will be made by AH
within 48 hours.

         5.08     *  See also Sections 4.03 and 4.04.

         5.09 * Technology changes are defined to include, but are not limited
to, making a change to hardware environment, software tools, operating systems
or programming languages not currently supported by Syntel under the existing
agreement. The hardware environment, software tools, operating systems and
programming languages currently supported by Syntel are listed in the attached
Exhibit A and are not subject to the technology change clause. See also Section
4.03.

         5.10     *

         6.       PAYMENT

         6.01 In consideration of the Services to be provided by Syntel, AH




*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.



                                       3
   4

agrees that it will provide Syntel with sufficient requests for Services to meet
a Guaranteed Personnel Resource Level of * during each calendar year. *

Only Services provided pursuant to the Attachments to this Agreement shall be
considered in determining whether the Guaranteed Personnel Resource Level is
met.

         AH shall pay Syntel for all Services at the following rates:

*

*

*

(iv) AH and Syntel shall negotiate the amount per Person Year for Services
performed at an AH facility located outside of the New York City Metropolitan
Area and Andover, Massachusetts.

(v) The rates above do not apply to employees of Syntel currently providing
services to American International Underwriters, Inc., an affiliate of AH,
unless agreed by American International Underwriters, Inc. in writing. Syntel
and AH will negotiate a separate contract for services to be provided after
December 31, 1998 to American International Underwriters, Inc.

         6.02     *

         6.03     *

*

         6.04 AH shall reimburse Syntel for *. Invoices are subject to audit by
AH. All other out of pocket expenses are to be paid by Syntel. *

         6.05  Computer charges for use of * be paid for by *

         6.06     *

         6.07 All amounts payable hereunder are payable in legal tender of the
United States of America. Acceptance by * of any payment in an amount less than
the amount then due hereunder shall be deemed an acceptance on account only, and
the failure to pay the entire amount then due shall be and continue to be a
default. *

         6.08 Notwithstanding any provision of this Agreement to the contrary,
it is the intent of AH and Syntel hereof that Syntel shall never be entitled to
receive, collect or apply, as interest on principal of the indebtedness due
hereunder, any amount in excess of the maximum rate of interest permitted to be
charged by applicable law.

         7.       PROJECT MANAGEMENT

         7.01 Syntel agrees to perform the Services as set forth in Attachment A
as may be amended by agreement of AH and Syntel.

         7.02 A Joint Advisory Committee ("JAC") shall be established which
shall consist of three (3) senior executives of AH, including the AH
Relationship Manager and three (3) senior executives of Syntel, including the


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.




                                       4
   5


Syntel Relationship Manager. The JAC shall meet each calendar quarter to review
the relationship of the parties to this Agreement, resolve issues as required by
Section 15.20, review Syntel's performance with respect to the service levels
established in Attachment B, review the progress of significant projects,
identify areas for increased cooperation between AH and Syntel, and, annually,
review each parties strategic goals as they affect this Agreement.

         8.       CONFIDENTIALITY AND OWNERSHIP OF WORK PRODUCT

         8.01 AH and Syntel acknowledge to each other that they will be
disclosing to each other valuable and confidential information including but not
limited to data processing techniques, software programs, business affairs,
methods of operation and access codes, financial information (collectively
"Confidential information") which contain proprietary information and trade
secrets of the disclosing party. Accordingly, each party hereto agrees that it
will only use the Confidential Information in furtherance of this Agreement and
will maintain the complete confidentiality of the Confidential Information and
prevent its unauthorized disclosure to any third party, provided such
information may be disclosed to Affiliates, agents, advisors and third party
consultants so long as such information remains subject to the terms of this
provision. Confidential Information shall not include: (i) any such information
that has been released to the public by a party hereto, its Affiliates or any
third party other than through a breach of this Agreement; (ii) any information
already possessed by the receiving party; (iii) any information received from a
third party without an obligation of confidentiality; and (iv) any information
independently developed. All tangible forms of Confidential Information,
including but not limited to diskettes, tapes or written material delivered to
one party by the other party shall be and remain the property of the delivering
party. If either party receives a subpoena or other legal notice requiring
disclosure of Confidential Information of the other party, it will promptly
notify the other party and will take reasonable steps to try to retain
confidential treatment. Any resulting disclosure shall not be a breach hereof.
Notwithstanding anything contained herein to the contrary, under no
circumstances shall AH disclose any of Syntel's financial or related information
which AH obtains through the financial reviews of Syntel, except as compelled by
law and then only after giving prior notice to Syntel. Upon the termination of
this Agreement for any reason, with respect to any software, data, information
or materials ("Party Data"), on request by such party, or on such earlier date
that the same shall be no longer required by the other party in order to render
the Services, all Party Data in the custody of the other party will be returned
to the original party, or if the original party elects, destroyed by the other
party.

         8.02 All intellectual property rights including without limitation,
software program code, logic diagrams, flow charts, procedural diagrams, maps
and documentation related to all the foregoing developed hereunder by Syntel
(collectively, "Work Product") shall be the sole and exclusive property of AH,
who shall own any rights based upon trade secret law, copyrights and/or patents
on those materials. To the extent that any Work Product, under applicable law,
may not be considered works made for hire, Syntel (i) hereby irrevocably assigns
and transfers to AH the ownership of all rights, title and interests in such
Work Product (including copyrights, whether published or unpublished and patents
and all other intellectual property rights thereto); (ii) waives any rights or
claims to such right or claims to moral rights; and (iii) will execute * all
documents which AH may require to secure or confirm AH's rights, titles and
interests hereunder. Syntel shall have all personnel that provide Services
hereunder execute a noncompete nondisclosure agreement reasonably acceptable to
AH that will among other things, require such 


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.




                                       5
   6

personnel to agree not to claim any rights in AH's intellectual property. Upon
termination of this Agreement for any reason, any Work Product will be delivered
to AH with Syntel retaining no copies of Work Product.

         8.03 All design tools, design techniques, computer programming
techniques and know how developed by Syntel as a result of this engagement shall
be the sole and exclusive property of Syntel, who shall own any rights based
upon trade secret law, copyrights and/or patents on those materials. To the
extent necessary or required by law or Syntel, AH (i) hereby assigns and
transfers to Syntel the ownership of all rights, title and interests in such
works and material (including copyrights, whether published or unpublished and
patents thereto); (ii) waives any rights or claims to such right or claims to
moral rights; and (iii) will execute * all documents which Syntel may require to
secure or confirm Syntel's rights, titles and interests hereunder. Syntel hereby
irrevocably grants AH, upon receipt of the payments required under this
Agreement, in perpetuity, a non assignable license for its own or its Affiliates
use of the above referenced property of Syntel.

         9.       REPRESENTATIONS, COVENANTS AND WARRANTIES OF SYNTEL

Syntel represents, covenants and warrants that:

         9.01 It will use its best efforts so that all Services provided
hereunder will be performed in a professional manner, by competent staff,
appropriately experienced to do the tasks assigned to them. Syntel's obligation
under this warranty shall be to manage and direct the persons providing Services
in a proper and professional manner. Syntel makes no representation or warranty
regarding whether the source code it develops is error free.

         9.02 Any employees or any subcontractors it assigns to perform Services
hereunder will be qualified individuals with suitable training, experience and
skill to perform the duties they are assigned.

         9.03 It will perform its responsibilities under this Agreement in a
manner that does not knowingly infringe, or constitute an infringement or
misappropriation of, any patent, trade secret, copyright or other proprietary
right of any third party.

         9.04 It is the owner of or otherwise has the rights to use in
performance of its obligations hereunder all systems and methodologies utilized
in connection with the Services.

         9.05 It will materially comply with all AH standards, rules, procedures
and policies relating to or affecting the Services and the performance standards
agreed to by the parties, including the Service Levels and Performance
Standards, in the Attachments contained hereto.

         9.06 All software maintained and developed by Syntel will conform to
AH's requirements and/or applicable specifications and that the Services
provided hereunder shall meet or exceed the standards set forth in this
Agreement and the Attachments hereto for such Services and that it shall use its
best efforts in providing the Services.

         9.07 It will comply with all applicable United States federal, state
and local laws and all international laws relating to the provision of the
Services and the AH operations affected by this Agreement.

*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.





                                       6
   7


         9.08 It will not engage in any unlawful discrimination as to race,
creed, color, national origin, sex, age, disability, marital status, citizenship
status, sexual orientation or affectional preference in any employment decisions
relating to this Agreement and that it is an equal opportunity employer and will
comply with all federal and state employment laws and regulations, including:
Executive Order 11246; The Vietnam ERA Veteran's Readjustment Act of 1974;
Section 503 of the Rehabilitation Act of 1973.

         9.09 As of the time of delivery to AH it will have successfully tested
all software to be provided to AH to determine if the software contains threats
known as software viruses, time bombs, logic bombs, Trojan horses, trap doors,
or other malicious computer instructions, intentional devices or techniques that
can or were designed to threaten, infect, attack, assault, vandalize, defraud,
disrupt, damage, disable, or shut down a computer system or any component of
such computer system, including its security or user data (hereinafter
"Disabling Devices"). Syntel further warrants that, as of the time of delivery
to AH, the Syntel developed software, as delivered, to the best of Syntel's
knowledge, is free and clear of and contains no Disabling Devices.

         9.10 It will maintain books and records relating to time records,
billing statements related to the Services hereunder for four (4) calendar years
following the end of the calendar year in which Services were provided.

         9.11 Other than as provided in Sections 4 and 5, it will maintain its
computer hardware, equipment, software and facilities utilized for the
performance of the Services with appropriate providers of such services at all
times during the term of this Agreement.

         9.12 It is a duly organized corporation authorized to enter into this
Agreement and entering into this Agreement will not violate any other agreement
to which it is a party.

         9.13 Any new code developed and delivered by Syntel to AH under this
Agreement shall accurately process date data from, into and between the 20th and
21st centuries to the extent that other information technology, used in
combination with the code being delivered, properly exchanges date data with it.
To the extent Syntel maintains or modifies existing AH code under this agreement
which accurately processes date data from, into and between the 20th and 21st
centuries to the extent that other information technology, used in combination
with the code being delivered, properly exchanges date data with it, such
maintenance or modification shall not adversely effect such processing of date
data.

         9.14 THE REPRESENTATIONS, COVENANTS AND WARRANTIES SET FORTH IN THIS
AGREEMENT CONSTITUTE THE ONLY REPRESENTATIONS, COVENANTS, WARRANTIES OF SYNTEL
WITH RESPECT TO THIS AGREEMENT, AND SUCH REPRESENTATIONS, COVENANTS AND
WARRANTIES ARE IN LIEU OF ALL OTHER REPRESENTATIONS, COVENANTS AND WARRANTIES,
WRITTEN OR ORAL, STATUTORY, EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION
THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, OR THE RESULTS TO BE DERIVED FROM THE USE OF ANY INFORMATION TECHNOLOGY
SERVICE, SOFTWARE, HARDWARE OR OTHER MATERIALS PROVIDED UNDER THIS AGREEMENT.
THE UNIFORM COMMERCIAL CODE DOES NOT APPLY TO THIS AGREEMENT NOR GOVERN THE
RELATIONSHIP OF THE PARTIES HERETO.


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.



                                       7
   8


         10.      TAXES AND INSURANCE

         10.01 * agrees to pay all local, state and federal taxes that are now
or may become applicable to the payments hereunder, including but not limited to
sales, use and excise taxes but these do not include taxes based *.

         10.02 Syntel shall maintain throughout the term of this Agreement at
least the following insurance coverage in a policy or policies of insurance,
primary and excess, including so-called Umbrella or Catastrophe form, which may
also include comprehensive Automobile insurance and Employer's Liability
insurance:

(i) Worker's Compensation Insurance for all states in which work is to be
performed hereunder with limits in accord with the statutory requirements of the
respective states, and Coverage B - Employer's Liability Coverage including
occupational disease with a limit of not less that $1,000,000 per event.

(ii) General Liability Insurance covering Syntel's operations, with minimum
limit of $3 million per occurrence, with AH named as an additional insured and
including the following coverage: (i) Commercial General Liability; (ii)
Contractual Liability; (iii) Independent Contractor (if any part of the work is
subcontracted); (iv) Broad Form Property Damage; (v) Personal Injury; and (vi)
Products/Completed Operations.

(iii) Automobile insurance including coverage for non-owned and hired vehicle in
the amount of $1,000,000 per occurrence for bodily injury and property damage.

(iv) Errors and Omissions Insurance in the amount of $5,000,000.00.

(v) Crime/Theft, Computer Crime, Fidelity in an amount not less than
$1,000,000.00.

(vi) Syntel shall provide that AH is an additional insured under policies
required herein at least in respect of work being performed hereunder *.

(vii) Unless waived by AH, Certificates of Insurance listing required coverage
and acceptable to AH shall be provided to AH prior to Syntel's commencement of
duties pursuant to this Agreement and shall require each carrier to give AH no
less than 30 days notice of any prospective cancellation or restriction of
coverage or limits.

         11.      AUDIT RIGHTS

         11.01 Syntel will provide AH, its auditors (including internal audit
staff), and other representatives as AH may from time to time designate in
writing, and AH's regulators and designated agents of such regulators with any
reasonably required access to the Syntel Service Centers during normal business
hours upon reasonable advance notice and at the sole expense of AH. Such access
shall be for the purpose of (a) performing audits and inspections and (b) to
verify the integrity of data including, without limitation, audits (i) of
maintenance practices and procedures, (ii) of general controls and security
practices and procedures, (iii) of disaster recovery procedures, (iv) project
management systems and project time reporting systems, and (v) any other audit
necessary or appropriate to enable AH to meet applicable regulatory
requirements.


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.



                                       8
   9


         11.02 AH shall have the right * to retain an independent certified
public accountant to conduct a review of the records of Syntel related to this
Agreement provided however, such review shall be conducted during normal
business hours of Syntel, upon reasonable advance notice and under such
conditions so as not to materially interfere with Syntel's operations. This
right to review with respect to any period shall terminate upon the termination
of this Agreement provided however that AH can review Syntel for up to one year
after termination of the Agreement concerning events occurring prior to the
termination. Neither AH nor its auditors shall disclose any information that it
obtains by or through these reviews provided in this Section 11.

         12.      INDEMNIFICATION

         12.01 Subject to the limitations contained in Section 14, Syntel and AH
agree to indemnify and hold harmless, to the full extent permitted by law, the
other party and their respective Affiliates, officers, directors, shareholders,
employees and agents, against all losses, claims, damages, liabilities and
expenses (including without limitation, reasonable legal fees and expenses) that
either relate to damages to personal property, personal injury or, knowingly
infringing on a third party's intellectual property rights or are caused by,
arising from or relating to actions taken or omitted to be taken by the
indemnifying party or its respective Affiliates, officers, directors,
shareholders, employees and agents pursuant to, in violation of or as a result
of this Agreement, or in connection with the transactions contemplated hereby or
otherwise including without limitation breaches of representations, warranties
and covenants. In the event of an unintentional infringing on a third party's
intellectual property rights, AH and Syntel agree to cooperate in the defense of
such claim and if the parties disagree over the defense, any proposed
settlement, the degree of fault that should be assigned to each party or
otherwise fail to agree, either party may demand mediation under the laws of New
York, to be resolved in New York City.

         12.02 In the event that any action or proceeding is brought, or any
claim or other liability is asserted ("Claim"), against any party entitled to
indemnity hereunder in respect of which indemnity may be sought hereunder
("Indemnitee"), such Indemnitee shall promptly give notice of such Claim to the
indemnifying party ("Indemnitor"), but any failure to so notify the Indemnitor
shall not relieve the Indemnitor from any liability that it may have to the
Indemnitee hereunder. The Indemnitor shall be entitled to participate in the
defense of such Claim and to assume control of such defense with counsel
reasonably satisfactory to such Indemnitee provided, however, that:

(i) The Indemnitee shall be entitled to participate at its own expense in the
defense of such Claim and to employ counsel at its own expense to participate in
the defense of such Claim;

(ii) The Indemnitor shall obtain the prior written approval of the Indemnitee
before entering into any settlement of such Claim or ceasing to defend against
such Claim if, pursuant to or as a result of such settlement or cessation,
injunctive or other equitable relief would be imposed against the Indemnitee;

(iii) The Indemnitor shall not consent to the entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by each plaintiff or claimant to the Indemnitee of a release from all
liability in respect of such Claim; and


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.





                                       9
   10


(iv) The Indemnitor shall not be entitled to control (but shall be entitled to
participate at its own expense in the defense of), and the Indemnitee shall be
entitled to have sole control over, the defense or settlement of any Claim to
the extent such Claim seeks an order, injunction or other equitable relief,
which if successful, could materially interfere with the business, operations,
assets, conditions (financial or otherwise) or prospects of the Indemnitee.

         12.03. In the event that the Indemnitor shall be obligated to indemnify
the Indemnitee hereunder, the Indemnitor shall, upon payment of such indemnity
in full, be subrogated to all rights of the Indemnitee with respect to the
Claims to which such indemnification relates.

         12.04 The indemnities set forth in Section 12 hereof will not apply (i)
to the extent that the party claiming indemnification was responsible for giving
rise to the matter upon which the claim for indemnification is based, and (ii)
unless the party claiming indemnification reasonably promptly notifies the other
of any matters in respect of which the indemnity may apply and of which the
notifying party has knowledge and gives the other full opportunity to control
the response thereto and the defense thereof, including without limitation any
agreement relating to the settlement thereof; provided, however, that the
Indemnitee's failure to provide such reasonably prompt notice will relieve the
Indemnitor of its indemnity obligation hereunder only to the extent that the
rights of the Indemnitor are prejudiced by such failure. In addition to the
foregoing, each party will have a right of contribution against the other party
with respect to any claim by a third party to the extent that the party against
which such right of contribution is asserted contributed to the events, acts or
omissions that gave rise to such third party claim.

         13.      TERMINATION

         13.01 In the event that Syntel (i) files a voluntary petition in
bankruptcy or petitions for reorganization or arrangement under the bankruptcy
laws or if a petition in bankruptcy is filed against Syntel and remains
undismissed for a period of thirty (30) days, or if a receiver or trustee is
appointed for all or any material part of the property or assets of Syntel that
would adversely affect the performance of Syntel hereunder or (ii) defaults in
the performance of any of its material duties or obligations hereunder and does
not substantially cure such default within thirty (30) days after being given
written notice specifying the default and the period to cure, or, with respect
to those defaults which cannot reasonably be cured within (30) days, if Syntel
fails to proceed promptly after having given such notice to commence curing the
default and thereafter to proceed with all due diligence to substantially cure
the same, then AH may, by giving written notice thereof to Syntel, terminate, in
whole or in part, this Agreement as of a date specified in such notice of
termination.

         13.02 All written notices from AH concerning default or termination
must be from either an officer of AH that is at least a vice president or from
AH's legal counsel and must specify that a breach has occurred, must specify the
nature and extent of such breach, and, if appropriate, must state the date of
termination. AH shall have the duty to mitigate all damages and to incur only
reasonable costs to remedy such breach.

         13.03 Syntel may terminate this Agreement if (i) AH fails to cure any
non-monetary material default within thirty (30) days after written notice
specifying the default, or (ii) AH fails to cure any monetary default within ten
(10) days following the receipt of written notice of such default from 


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.




                                       10
   11

Syntel, specifying the nature and extent of any such breach, provided that if AH
reasonably in good faith disputes an amount claimed by Syntel * as provided in
Section 6.03, and withholds payments of the disputed amount only, such
withholding will not be deemed a breach of this Agreement and provided further,
that on or prior to the twenty-fifth (25th) day of the month in which such * is
received by AH, AH shall provide Syntel with a detailed, written delineation of
the amounts of and AH's objections to each item in dispute, if any, and the
parties shall meet within forty-eight (48) hours of the receipt by Syntel of
such delineation to attempt in good faith to resolve each such disputed item, or
(iii) the cumulative number of days nondisputed amounts owed by AH are past due
exceeds thirty (30) days, or (iv) in the event AH files a voluntary petition in
bankruptcy or petitions for reorganization or arrangement under the bankruptcy
laws, of if a petition in bankruptcy is filed against AH and remains undismissed
for a period of thirty (30) days, or (iv) if a receiver or trustee is appointed
for all or any material part of the property and assets of AH that would
adversely affect the performance hereunder. In the event of termination pursuant
to subsection (i), (ii) or (iii) above, the termination shall not take effect
until 120 days from the date of notice, provided however, AH must prepay Syntel
for the Services to be provided for the 120 day period.

         13.04 If a majority interest in the stock of Syntel (or any successor
to Syntel's rights and obligations under this Agreement) or a substantial part
of its business is sold to, or Syntel or such successor merges or consolidates
with, any competitor of American International Group, Inc. and its Affiliates,
then, for a period of six months following the consummation of such sale, AH may
terminate this Agreement by giving Syntel at least thirty days prior written
notice designating the date upon which such termination will be effective.
Syntel will notify AH immediately upon the occurrence of any transaction
described in this Section 13.04.

         13.05 At any time during the term of this Agreement, AH may elect to
terminate this Agreement, for its convenience and for no other reason upon six
(6) months prior written notice. In the event of such termination for
convenience, AH will pay Syntel the following termination amounts (the "Early
Termination Amounts") based on the date such notice of termination is received:
If during calendar year 1998: *. If during calendar year 1999: *. If during
calendar year 2000: *. Payment by AH of the Early Termination Amounts shall be
Syntel's sole and exclusive remedy for any early termination of this Agreement
by AH for convenience in accordance with this Section 13.05 but Syntel shall
also be entitled to any other amounts due from AH for Services provided
hereunder and both parties will be entitled to any amounts due pursuant to
Section 12.

         13.06 In the event this Agreement expires or is terminated, and upon
timely receipt by Syntel in full of all sums owed by AH to Syntel which are not
in reasonable dispute, Syntel agrees to make its best efforts to ensure an
orderly transition of its responsibilities hereunder and to provide to AH any
and all termination assistance requested by AH to allow its computer systems to
continue without interruption and to facilitate the orderly transfer to AH or
its designee. Upon expiration or notice of termination AH and Syntel shall
negotiate in good faith to establish the budget for the transference of Services
provided during the termination period. Any amount due from AH shall be paid
within thirty (30) days following cessation of services by Syntel. AH's
obligation to pay Syntel all amounts due hereunder shall survive the termination
of this Agreement. The transition period shall in no event exceed *.


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.



                                       11
   12


         13.07 AH may terminate this Agreement immediately if damages for breach
of this Agreement paid or payable to AH by or on behalf of Syntel exceed *.

         14.      LIMITATION OF LIABILITY

         14.01 Except for willful misconduct, in no event shall either party be
liable to anyone for any consequential, special or incidental damages in
connection with this Agreement. This limitation shall apply whether or not the
likelihood of such losses or damages was known to the party or reasonably
foreseeable by the party.

         14.02 AH agrees to limit any and all liability or claim against Syntel,
for losses, claims, damages, liabilities and expenses (including without
limitation reasonable legal fees and expenses) arising from or related to this
Agreement or the Services provided hereunder to a cumulative sum not to exceed
*. Any and all insurance proceeds shall apply toward this limitation so that
Syntel shall only be liable for the difference between the insurance policy
proceeds and the * liability limitation.

         14.03 Except for claims for non payment for Services provided, Syntel
agrees to limit any and all liability or claim against AH and its Affiliates for
losses, claims, damages, liabilities and expenses (including without limitation
reasonable legal fees and expenses) arising from or related to this Agreement or
the Services provided hereunder to a cumulative sum not to exceed *. Any and all
insurance proceeds shall apply toward this limitation so that, except for claims
for non payment for Services provided, AH shall only be liable for the
difference between the insurance policy proceeds and the * liability limitation.

         14.04 Each party may rely upon any instructions or information,
including but not limited to instructions or information relating to the
performance of Services, provided to them by the Relationship Manager of the
other party, and reasonably believed by them to be genuine and authorized by the
other party. Neither party shall incur liability to the other resulting from
their reasonable reliance on such instructions or information.

         15.      GENERAL

         15.01    *

The Syntel Relationship Manager or his designated representative shall have
responsibility for managing all Syntel employees, regardless of location. AH
understands and agrees Syntel, at its discretion, will transfer additional work
to its Mumbai facility by taking the total number of consultants working in
Mumbai to * of the total number of consultants providing services under this
Agreement. This transfer will be completed on or after *. The parties agree that
Syntel and AH will establish a pilot by * to confirm work flow and metrics for
work product delivery from India under the Service Level Agreement and that such
pilot is subject to the approval of AH. The parties agree that the Mumbai work
transfer will not be started (except for the pilot) prior to the pilot's
approval, which approval cannot be unreasonably withheld, and if any issues
arise regarding the pilot, the parties will immediately meet to address those
issues. If the pilot is not successfully completed to the satisfaction of the
parties and the parties determine that a new Agreement will not be executed, the
parties agree that the terms and conditions of the agreement for software
programming services entered into effective as of September 6, 1994 shall
control the relationship between AH and Syntel from that date forward until
terminated pursuant to its terms. Other than for 


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.





                                       12
   13

Named Positions, Syntel may, in its sole discretion, relocate its employees
and/or amend any employee relocation plans at any time. Notwithstanding the
above, if a Syntel employee in a Named Position leaves Syntel, AH shall have the
ability to interview and approve any replacement to such Named Position and
shall have the ability to require such replacement to be physically located at
the same location as the replaced employee was located.

         15.02 AH and Syntel warrant to each other that while this Agreement is
in effect, and for a period of * after termination or expiration of this
Agreement, neither AH, Syntel nor their Affiliates will directly or indirectly
through one or more intermediaries, induce any employee of the other to
terminate his or her employment, without prior written consent of the other,
offer employment to, or otherwise obtain the Services of, any employee of the
other, or to any former employee during the * period immediately following such
employee's termination.

         15.03 Any notices to be given hereunder by either party to the other
shall be in writing, by personal delivery with signed receipt, or by mail,
registered or certified, postage prepaid with return receipt requested or by
telecopy with a copy mailed by registered or certified mail, postage prepaid
with return receipt requested. Notices shall be addressed to either party at the
address or telecopy number set forth below or at such address or telecopy number
as either party may direct by written notice to the other party in accordance
with this Section. Mailed notices shall be deemed communicated as of three (3)
days after mailing. Notices delivered personally shall be deemed communicated as
of actual receipt. Notices delivered via telecopy shall be deemed communicated
upon receipt of the telecopy confirmation indicating a good transmission
received by the other party. All notices to AH shall be addressed to the
attention of Jeff Stoll or his successor at 160 Water Street, New York, New York
10038 with a copy to General Counsel, American International Group, Inc., 70
Pine Street, New York, New York, 10270. All notices to Syntel shall be addressed
to the attention of Bharat Desai, President, Syntel, Inc., 2800 Livernois Road,
Suite 400, Troy, Michigan 48083, with a copy to Daniel M. Moore, General Counsel
and Secretary, 2800 Livernois Road, Suite 400, Troy, Michigan 48083.

         15.04 AH and Syntel covenant to each other not to disclose to any third
party the terms and conditions of this Agreement and any related Attachments
hereto except as required by law, to their attorneys, accountants, their
creditors or potential creditors in confidence, securities disclosure
statements, to regulatory authorities, insurance companies and their agents,
underwriters and brokers or as expressly agreed to by the other party.

         15.05 This Agreement and all Attachments are hereby made part hereof
and: (a) constitute the entire agreement between the parties concerning the
subject matter hereof and supersede any and all prior discussions,
representations, negotiations, correspondence, writings and other agreements and
together state the entire understanding and agreement between AH and Syntel with
respect to the subject matter hereof; (b) may be amended or modified only in a
writing signed by the signatories hereto or their designated representatives;
(c) shall be construed, performed and enforced in all respects in accordance
with the laws of the State of New York, except for its conflicts of law
provisions; and (d) shall in no way affect, not be affected by, any other
agreement, arrangement or engagement between the parties hereto.

         15.06 Neither party hereto shall be deemed to have waived any rights or
remedies accruing to it hereunder unless such waiver is in writing and signed 


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.




                                       13
   14

by such party. No delay or omission by either party hereto in exercising any
right shall operate as a waiver of said right on any future occasion.

         15.07 The descriptive headings of this Agreement are intended for
reference only and shall not effect the construction or interpretation of this
Agreement. Wherever the singular of any term is used herein it shall be deemed
to include the plural wherever the plural thereof may be applicable.

         15.08 Neither party shall be liable to the other party for loss or
damage or deemed to be in breach of this Agreement, if its failure to perform
its duties and obligations hereunder results from either: (i) acts of God, civil
unrest, domestic labor strikes; (ii) compliance with any law, ruling, order,
regulation, requirement, or instruction of any federal, state or municipal
government or any department or agency thereof; (iii) transportation shortages,
merchandise, supplies, domestic labor, material, line connections or energy, or
the voluntary forgoing of the right to acquire the use of any of the foregoing
in order to accommodate or comply with the orders, requests, regulations,
recommendations, or instructions of any federal, state, or municipal government
or any department or agency thereof; or (iv) acts or omissions of a similar
nature, event or cause. In the event that either party is excused from
performance pursuant to this paragraph as a result of such force majeure, then
that party shall take all reasonable actions to resume or provide alternative
performance of its obligations as soon as feasible. Syntel's obligations
pursuant to this paragraph shall be to promptly, diligently and continuously use
its best efforts to provide the Services and otherwise perform its obligations
under this Agreement, at no additional charge to AH. For Syntel Service Centers,
Syntel shall at all times maintain an adequate and tested disaster recovery plan
and have adequate backup facilities. In the event of a force majeure or other
interruption of such Syntel facilities, Syntel shall immediately put into
operation its disaster recovery plan and migrate its operations to the backup or
alternative facilities until the existing facilities have been repaired.

         15.09 Neither party shall assign its duties under this Agreement
without the prior written consent of the other provided however that AH and
Syntel shall have the right to assign this Agreement to an Affiliate.

         15.10 This Agreement may be executed in any number of counterparts with
the same effect as if all parties hereto had signed the same document. All
counterparts shall be construed together and shall constitute one agreement, but
in making proof of this Agreement it shall not be necessary to produce or
account for more than one such counterpart.

         15.11 If any provision of this Agreement or the Attachments hereto or
the application thereof to any party or circumstances shall, to any extent, now
or hereafter be or become invalid or unenforceable, the remainder of this
Agreement shall not be affected thereby and every other provision of this
Agreement shall be valid and enforceable, to the fullest extent permitted by
law.

         15.12 Except as otherwise expressly provided in this Agreement, Syntel,
in furnishing the Services to AH hereunder, is acting only as an independent
contractor. Syntel shall be solely responsible for the payment of compensation
of Syntel employees assigned to perform Services hereunder and such personnel
are not entitled to the provisions of any AH employee benefit. AH shall not be
responsible for payment of worker's compensation, disability benefits and
unemployment insurance or for withholding and paying employment taxes for any
Syntel employees performing Services hereunder. In the event 


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.






                                       14
   15

that Syntel or any of its employees is characterized by the Internal Revenue
Service or by any other taxing authority or other government agency (whether
United States federal, state or local, or foreign) as an employee of AH, and AH
shall become liable for the withholding or payment of any tax on income earned
by any person hereunder or for any other governmental charge or assessment by
reason of such characterization, then Syntel shall promptly indemnify AH for
such amount provided however that any ancillary penalties and interest will be
shared equally by AH and Syntel. Such indemnification shall extend to any and
all reasonable costs, including reasonable attorneys fees, incurred by AH in
connection with such a loss, liability or claim.

         15.13 Syntel may not, except unless required by law or with the express
written consent of AH in each instance, use the name of AH or any AH Affiliate
in advertising, publicity or similar materials, such consent not to be
unreasonably withheld.

         15.14 Each party will cooperate with the other by, among other things,
making available, as reasonably requested by the other, management decisions,
information, approvals, and acceptances in order that each party may properly
accomplish its obligations and responsibilities hereunder. Where agreement,
approval, acceptance, consent or similar action by either party hereto is
required by any provision of this Agreement, such action shall not be
unreasonably delayed or withheld.

         15.15 The parties acknowledge that certain software and technical data
to be provided under this Agreement and certain transactions under this
Agreement may be subject to export controls under the laws and regulations of
the United States and other countries. No party shall export or re-export any
such items or any direct product thereof or undertake any transaction in
violation of any such laws or regulations.

         15.16 If any legal action or other proceeding is brought pursuant to
this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it may be entitled.

         15.17 Notwithstanding any provisions of this Agreement to the contrary
and without limiting the survivability of any other provision of this Agreement
that, by its terms or operation of law, survives the expiration or earlier
termination of the term of this Agreement, the provisions regarding
confidentiality, proprietary rights, indemnification, and non-employment and
this Section 15.17 shall survive the expiration or earlier termination of this
Agreement.

         15.18 All representations and warranties made herein shall survive the
execution and delivery of this Agreement and any termination of this Agreement.

         15.19 The parties agree that this Agreement is for the benefit of the
parties hereto and their Affiliates and is not intended to confer any rights or
benefits on any other third party, including any employee, vendor, or customer
of either party, and that other than Affiliates of the parties hereto, there are
no third party beneficiaries to this Agreement or any part or specific provision
of this Agreement.


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.



                                       15
   16


         15.20 AH and SYNTEL each agree that any question, dispute, controversy,
or claim arising out of or related to this Agreement (the "Dispute") shall go
through the following informal dispute resolution process. First, the Dispute
shall be resolved between each Syntel delivery manager and their respective AH
Senior Business Systems Officer ("SBSO"). If the Syntel delivery manager and AH
SBSO cannot resolve the dispute within 48 hours, the Dispute shall be submitted
in writing to the Syntel Relationship Manager and AH Relationship Manager. If
the Relationship Managers cannot resolve the Dispute within 48 hours of receipt
of the Dispute, the Relationship Managers shall use good-faith efforts to devise
a workaround for continuance of the Services and to define potential solutions
to the Dispute for the subsequent levels of review. Regardless of the success of
those efforts, the Relationship Managers shall submit the Dispute in writing to
the JAC within four (4) business days of their receipt of the Dispute. If the
JAC cannot resolve the Dispute within four (4) business days of receipt of the
Dispute, the Dispute shall be submitted in writing to the President of Syntel
and the Senior Vice President, ISG, of AH. If the President of Syntel and the
Senior Vice President, ISG, of AH cannot resolve the Dispute within ten (10)
business days of receipt of the Dispute, the parties can take any other actions
allowed under this Agreement.

THE PARTIES CERTIFY BY THEIR UNDERSIGNED AUTHORIZED OFFICERS THAT THEY HAVE READ
THIS AGREEMENT, INCLUDING ALL ATTACHMENTS HERETO, AND AGREE TO BE BOUND BY THEIR
TERMS AND CONDITIONS.

Syntel, Inc.:                                   American Home Assurance Company:



By: /s/ Bharat Desai                    By: /s/ Jeffrey Stoll
   ------------------------                 ------------------------------------
    Bharat Desai, President                 Jeffrey Stoll, Senior Vice President


*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.



                                       16
   17

                                  ATTACHMENT A

                          SERVICES AND DELIVERY PROCESS

SERVICES
Syntel shall provide the following Services to AH:

*

Syntel, Inc.:                                   American Home Assurance Company:



By: /s/ Bharat Desai                   By:  /s/ Jeffrey Stoll
  -------------------------               ------------------------------------
    Bharat Desai, President               Jeffrey Stoll, Senior Vice President



*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.



                                       17
   18


                                  ATTACHMENT B

                             SERVICE LEVEL AGREEMENT

*

Syntel, Inc.:                                   American Home Assurance Company:



By: /s/ Bharat Desai                    By: /s/ Jeffrey Stoll
   ------------------------                ------------------------------------
    Bharat Desai, President                Jeffrey Stoll, Senior Vice President



*  Indicates that material has been omitted and confidential treatment has been
   requested therefore.  All such omitted material has been filed separately
   with the SEC pursuant to Rule 24b-2.










                                       18
   19
*
- --------------------------------------------------------------------------------
                                          EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                Existing Hardware/Software and Network Technology Environment
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
        CATAGEORY                   DESCRIPTION                         COMMENTS
- --------------------------------------------------------------------------------






                                       19

EX-21

   1

                                                                      EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT


Name                                                 State of Other Jurisdiction
                                                of incorporation or Organization

Syntel Software Private Limited                               India

Syntel, LTD.                                                  England

Syntel (Singapore) PTE. LTD.                                  Singapore

EX-27

 

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

<MULTIPLIER> 1,000
       
                             
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-START>                             JAN-01-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                          32,945
<SECURITIES>                                         0
<RECEIVABLES>                                   20,644
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                                60,486
<PP&E>                                           9,299
<DEPRECIATION>                                   5,060
<TOTAL-ASSETS>                                  65,232
<CURRENT-LIABILITIES>                           25,140
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             1
<OTHER-SE>                                      39,833
<TOTAL-LIABILITY-AND-EQUITY>                    65,232
<SALES>                                              0
<TOTAL-REVENUES>                               124,338
<CGS>                                                0
<TOTAL-COSTS>                                   87,584
<OTHER-EXPENSES>                                23,547
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               (730)
<INCOME-PRETAX>                                 13,937
<INCOME-TAX>                                     3,517
<INCOME-CONTINUING>                             10,420
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    10,196
<EPS-PRIMARY>                                      .41
<EPS-DILUTED>                                      .39

<F1>REFLECTS THE PRO FORMA NET INCOME FOR THE TWELVE MONTH PERIOD ENDING DECEMBER
31, 1997.