17.

STOCK BASED COMPENSATION

Share Based Compensation:

On June 1, 2006, the Company adopted an Amended and Restated Stock Option and Incentive Plan (the “Amended Plan”). Under the Amended Plan, a total of sixteen million shares of common stock (adjusted for the effects of the 2014 stock split) were reserved for issuance. The dates on which options or restricted stock units granted under the Amended Plan become first exercisable or have their restriction lapse are determined by the Compensation Committee of the Board of Directors, but generally occur over a four-year period from the date of grant. The term of any option may not exceed ten years from the date of grant. As of June 1, 2016, the Amended Plan terminated and no further awards may be made under the Amended Plan.

On February 28, 2016, the Company’s Board of Directors approved the adoption of the 2016 Incentive Plan (the “2016 Plan”) subject to shareholder approval. On June 8, 2016 the Company’s shareholders approved the 2016 Plan. The principal features of the 2016 Plan are substantially the same as those of the Amended Plan. Under the 2016 Plan, a total of sixteen million shares of common stock were reserved for issuance. The dates on which options or restricted stock units granted under the Amended Plan become first exercisable or have their restriction lapse are determined by the Compensation Committee of the Board of Directors, but for employees generally occur over a four-year period from the date of grant and for non-employee directors generally occur at the Company’s next annual meeting of shareholders.

On November 30, 2016, Company’s Board of Directors and the Compensation Committee established a program for a one-time grant of Restricted Stock Units (“RSUs”) to certain senior management employees. The parameters of the program and the restrictions on the RSUs granted are consistent with the 2016 Plan approved by shareholders on June 8, 2016, except as follows:

1.	The employee may purchase up to a specified number of shares of Syntel, Inc. common stock (“Common Stock”) whose purchase price is equal to up to 25% of the employee’s base salary (“Purchased Shares”).

2.	Upon proof of purchase of the Common Stock, the employee will receive a grant of RSUs equal to 25% of the number of the Purchased Shares (the “Grant”).

3.	The restriction period on 25% of the Grant will lapse on each of the first four anniversaries of the grant date.

The RSUs will be forfeited if the employee ceases to be an employee of the Company or if the employee does not retain Purchased Shares equal to four times the remaining RSUs from the Grant through the applicable restriction period.

No stock options were issued for the three months and nine months ended September 30, 2017 and 2016 under either the Amended Plan or the 2016 Plan.

The Company accounts for share-based compensation based on the fair value of share-based payment awards on the date of grant. Fair value of share-based payment awards are calculated based on the Company’s share prices which are quoted in market. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s Statement of Comprehensive Income. Share-based compensation expense recognized as above for the three months ended September 30, 2017 and 2016 was $2.1 million (including charges for restricted stock units and a dividend equivalent) and $1.7 million, respectively, including a charge for restricted stock and for the nine months ended September 30, 2017 and 2016 was $6.7 million (including charges for restricted stock units and a dividend equivalent) and $5.3 million, respectively, including a charge for restricted stock.

The shares issued upon the exercise of the options are new share issues.

Restricted Stock Units:

On different dates during the years ended December 31, 2016, 2015 and 2014 and for the nine months ended September 30, 2017, the Company issued restricted stock awards (adjusted to account for the 2014 stock split) of 415,519, 135,440, 293,904 and 315,022, respectively, to its non-employee directors and some employees as well as to some employees of its subsidiaries. The restricted stock awards were granted to employees for their future services as a retention tool at a zero exercise price, vest in shares with regards to 25% of the awards issued on or after the first, second, third and fourth anniversary of the grant dates.

During the third quarter of 2016, the Board of Directors declared a special cash dividend of fifteen dollars ($15.00) per share on outstanding common stock which was payable on October 3, 2016, to shareholders of record at the close of business on September 22, 2016. Further, it was resolved by the Board of Directors that restricted stock units granted to employees and directors prior to the dividend record date will receive an amount equivalent to the dividend when the applicable restriction on the restricted stock units lapses. The special dividend resulted in a modification of the existing stock compensation plan. Accordingly, incremental compensation cost was measured as the excess, if any, of the fair value of the modified award over the fair value of the original award accounted on a graded basis with the incremental expense being recognized over the remaining vesting period. As a result of the above, the Company has recorded an additional compensation cost of $0.4 million during the three months ended September 30, 2017 and $1.6 million during the nine months ended September 30, 2017.

The impact on the Company’s results of operations of recording stock-based compensation (including impact of restricted stock) for the three and nine months ended September 30, 2017 and 2016 was as follows:


	(in thousands)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	*(in thousands)*				*(in thousands)*
Cost of revenues	$	917	$	635	$	2,854	$	2,024
Selling, general and administrative expenses		1,223		1,017		3,871		3,310

	$	2,140	$	1,652	$	6,725	$	5,334

No cash was received from option exercises under all share-based payment arrangements for the nine months ended September 30, 2017 and 2016, respectively.

A summary of the activity for restricted stock unit awards granted under our stock-based compensation plans as of September 30, 2017 and December 31, 2016 and changes during the period ended are presented below:


	Nine Months Ended September 30, 2017					Year ended December 31, 2016
	Number Of Awards			Weighted Average Grant Date Fair Value		Number Of Awards			Weighted Average Grant Date Fair Value
Unvested at January 1		669,556		$	29.16		465,290		$	41.47
Granted		315,022		$	18.13		415,519		$	20.57
Vested		(94,377	)	$	40.47		(198,725	)	$	39.10
Forfeited		(72,275	)	$	37.22		(12,528	)	$	43.77

Unvested Total		817,926		$	22.90		669,556		$	29.16

As of September 30, 2017, $15.1 million of total remaining unrecognized stock-based compensation cost related to restricted stock awards is expected to be recognized over the weighted-average remaining requisite service period of 3.18 years.