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                                                                    EXHIBIT 10.7

                                  SYNTEL, INC.
                      1997 STOCK OPTION AND INCENTIVE PLAN
                             (AMENDED AND RESTATED)

                              I. GENERAL PROVISIONS

         1.1 ESTABLISHMENT. On April 1, 1997, the Board of Directors ("Board")
of Syntel, Inc. ("Corporation") adopted the 1997 Stock Option and Incentive Plan
("Plan"), which was approved by the shareholders of the Corporation on April 1,
1997. This Plan is further amended and restated as of August 11, 1997 and May
23, 2000.

         1.2 PURPOSE. The purpose of the Plan is (i) to promote the best
interests of the Corporation and its shareholders by encouraging Employees and
non-employee directors of the Corporation and its Subsidiaries to acquire an
ownership interest in the Corporation through Options, Stock Appreciation
Rights, Restricted Stock, Performance Share Awards and Annual Incentive Awards,
thus identifying their interests with those of shareholders, and (ii) to enhance
the ability of the Corporation to attract and retain qualified Employees and
non-employee directors. It is the further purpose of the Plan to permit the
granting of Nonqualified Stock Options, Stock Appreciation Rights and Annual
Incentive Awards that will constitute performance based compensation, as
described in Section 162(m) of the Code, and regulations promulgated thereunder.

         1.3 DEFINITIONS. As used in this Plan, the following terms have the
meaning described below:

              (a) "AGREEMENT" means the written agreement that sets forth the
terms of a Participant's Option, Stock Appreciation Right, Restricted Stock
Grant, Performance Share Award or Annual Incentive Award.

              (b) "ANNUAL INCENTIVE AWARD" means an award that is granted in
accordance with Article VI of the Plan.

              (c) "BOARD" means the Board of Directors of the Corporation.

              (d) "CHANGE IN CONTROL" means the occurrence of any of the
following events: (i) the acquisition of ownership by a person, firm or
corporation, or a group acting in concert, of fifty-one percent, or more, of the
outstanding Common Stock of the Corporation in a single transaction or a series
of related transactions within a one-year period; (ii) a sale of all or
substantially all of the assets of the Corporation to any person, firm or
corporation; or (iii) a merger or similar transaction between the Corporation
and another entity if shareholders of the Corporation do not own a majority of
the voting stock of the corporation surviving the transaction and a majority in
value of the total outstanding stock of such surviving corporation after the
transaction; provided, however, that any such event involving any of the current
shareholders of the Corporation as of the date of adoption of this Plan by the
Board (or any entity at any time controlled by any such shareholder or
shareholders) shall not be included within the meaning of "Change in Control."

              (e) "CHANGE IN POSITION" means, with respect to any Participant:
(i) such Participant's involuntary termination of employment; or (ii) a
significant reduction in such Participant's duties, responsibilities,
compensation and/or fringe benefits, or the assignment to such Participant of
duties inconsistent with his position (all as in effect immediately prior to a
Change in Control), whether or

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not such Participant voluntarily terminates employment as a result thereof.

              (f) "CODE" means the Internal Revenue Code of 1986, as amended.

              (g) "COMMITTEE" means the Compensation Committee of the
Corporation, which shall be comprised of two or more members of the Board.

              (h) "COMMON STOCK" means shares of the Corporation's authorized
common stock.

              (i) "CORPORATION" means Syntel, Inc., a Michigan corporation.

              (j) "DISABILITY" means total and permanent disability, as defined
in Code Section 22(e).

              (k) "EMPLOYEE" means an individual who has an "employment
relationship" with the Corporation or a Subsidiary, as defined in Treasury
Regulation 1.421-7(h), and the term "employment" means employment with the
Corporation, or a Subsidiary of the Corporation.

              (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time and any successor thereto.

              (m) "FAIR MARKET VALUE" means for purposes of determining the
value of Common Stock on the Grant Date, the Stock Exchange closing price of the
Corporation's Common Stock as reported in The Wall Street Journal (or as
otherwise reported by such Stock Exchange) for the Grant Date. In the event that
there were no Common Stock transactions on such date, the Fair Market Value
shall be determined as of the immediately preceding date on which there were
Common Stock transactions.

Unless otherwise specified in the Plan, "Fair Market Value" for purposes of
determining the value of Common Stock on the date of exercise means, the Stock
Exchange closing price of the Corporation's Common Stock on the last date
preceding the exercise on which there were Common Stock transactions.

              (n) "GRANT DATE" means the date on which the Committee authorizes
an individual Option, Stock Appreciation Right, Restricted Stock grant,
Performance Share Award or Annual Incentive Award, or such later date as shall
be designated by the Committee.

              (o) "INCENTIVE STOCK OPTION" means an Option that is intended to
meet the requirements of Section 422 of the Code.

              (p) "NONQUALIFIED STOCK OPTION" means an Option that is not
intended to constitute an Incentive Stock Option.

              (q) "OPTION" means either an Incentive Stock Option or a
Nonqualified Stock Option.

              (r) "PARTICIPANT" means an Employee or non-employee director
designated by the Committee to participate in the Plan.

              (s) "PERFORMANCE SHARE AWARD" means a performance share award that
is granted in accordance with Article V of the plan.

              (T) "PLAN" means the Syntel, Inc. 1997 Stock Option and Incentive
Plan, the terms of which are set forth herein, and amendments thereto.

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              (u) "RESTRICTION PERIOD" means the period of time during which a
Participant's Restricted Stock grant is subject to restrictions and is
nontransferable.

              (v) "RESTRICTED STOCK" means Common Stock that is subject to
restrictions.

              (w) "RETIREMENT" means termination of employment on or after the
attainment of age 65.

              (x) "STOCK APPRECIATION RIGHT" means the right to receive a cash
or Common Stock payment from the Corporation upon the surrender of a tandem
Option, in accordance with Article III of the Plan.

              (y) "STOCK EXCHANGE" means the principal national securities
exchange on which the Common Stock is listed for trading or, if the Common Stock
is not listed for trading on a national securities exchange, such other
recognized trading market or quotation system upon which the largest number of
shares of Common Stock has been traded in the aggregate during the last 20 days
before a Grant Date or date on which an Option is exercised, whichever is
applicable.

              (z) "SUBSIDIARY" means a corporation defined in Code Section
424(f).

              (aa) "VESTED" means the extent to which an Option or Stock
Appreciation Right granted hereunder has become exercisable in accordance with
this Plan and the terms of the respective Agreement pursuant to which such
Option or Stock Appreciation Right was granted.

        1.4   ADMINISTRATION.

              (a) The Plan shall be administered by the Committee. At all times
it is intended that the directors appointed to serve on the Committee shall be
"disinterested persons" (within the meaning of Rule 16b-3 promulgated under the
Exchange Act) and "outside directors" (within the meaning of Code Section
162(m)); however, the mere fact that a Committee member shall fail to qualify
under either of these requirements shall not invalidate any award made by the
Committee if the award is otherwise validly made under the Plan. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time, at the discretion of the Board.

              (b) The Committee shall interpret the Plan, prescribe, amend, and
rescind rules and regulations relating to the Plan, and make all other
determinations necessary or advisable for its administration. The decision of
the Committee on any question concerning the interpretation of the Plan or its
administration with respect to any Option, Stock Appreciation Right, Restricted
Stock grant, Performance Share Award or Annual Incentive Award granted under the
Plan shall be final and binding upon all Participants. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any grant or award hereunder.

         1.5 PARTICIPANTS. Participants in the Plan shall be such Employees
(including Employees who are directors) and non-employee directors of the
Corporation and its Subsidiaries as the Committee in its sole discretion may
select from time to time. The Committee may grant Options, Stock Appreciation
Rights, Restricted Stock, Performance Share Awards and Annual Incentive Awards
to an individual upon the condition that the individual become an Employee of
the Corporation or of a Subsidiary, provided that the Option, Stock Appreciation
Right, Restricted Stock, Performance Share Award or Annual Incentive Award shall
be deemed to be granted only on the date that the individual becomes an
Employee.

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         1.6 STOCK. The Corporation has reserved 8,000,000 shares of the
Corporation's Common Stock for issuance under the Plan. Shares subject to any
unexercised portion of a terminated, cancelled or expired Option, Stock
Appreciation Right, Restricted Stock grant or Performance Share Award granted
hereunder, and pursuant to which a Participant never acquired benefits of
ownership, including payment of a stock dividend (but excluding voting rights),
may again be subjected to grants and awards under the Plan, but shares
surrendered pursuant to the exercise of a Stock Appreciation Right are not
available for future grants and awards. All provisions in this Section 1.6 shall
be adjusted, as applicable, in accordance with Article VIII.

                                II. STOCK OPTIONS

         2.1 GRANT OF OPTIONS. The Committee, at any time and from time to time,
subject to Section 9.8, may grant Options to such Employees and for such number
of shares of Common Stock (whole or fractional) as it shall designate. Provided,
however, that no Employee may be granted Options and Stock Appreciation Rights
during any one fiscal year to purchase more than 100,000 shares of Common Stock.
Any Participant may hold more than one Option under the Plan and any other Plan
of the Corporation or Subsidiary. The Committee shall determine the general
terms and conditions of exercise, including any applicable vesting requirements,
which shall be set forth in a Participant's Option Agreement. No Option granted
hereunder may be exercised after the tenth anniversary of the Grant Date. The
Committee may designate any Option granted as either an Incentive Stock Option
or a Nonqualified Stock Option, or the Committee may designate a portion of an
Option as an Incentive Stock Option or a Nonqualified Stock Option. At the
discretion of the Committee, an Option may be granted in tandem with a Stock
Appreciation Right. Nonqualified Stock Options are intended to satisfy the
requirements of Code Section 162(m) and the regulations promulgated hereunder.

         2.2 INCENTIVE STOCK OPTIONS. Any Option intended to constitute an
Incentive Stock Option shall comply with the requirements of this Section 2.2 No
Incentive Stock Option shall be granted with an exercise price below the Fair
Market Value of Common Stock on the Grant Date or with an exercise term that
extends beyond 10 years from the Grant Date. An Incentive Stock Option shall not
be granted to any Participant who owns (within the meaning of Code Section
424(d)) stock of the Corporation or any Subsidiary possessing more than 10% of
the total combined voting power of all classes of stock of the Corporation or a
Subsidiary unless, at the Grant Date, the exercise price for the Option is at
least 110% of the Fair Market Value of the shares subject to the Option and the
Option, by its terms, is not exercisable more than 5 years after the Grant Date.
The aggregate Fair Market Value of the underlying Common Stock (determined at
the Grant Date) as to which Incentive Stock Options granted under the Plan
(including a plan of a Subsidiary) may first be exercised by a Participant in
any one calendar year shall not exceed $100,000. To the extent that an Option
intended to constitute an Incentive Stock Option shall violate the foregoing
$100,000 limitation (or any other limitation set forth in Code Section 422), the
portion of the Option that exceeds the $100,000 limitation (or violates any
other Code Section 422 limitation) shall be deemed to constitute a Nonqualified
Stock Option.

         2.3 OPTION PRICE. The Committee shall determine the per share exercise
price for each Option granted under the Plan. The Committee, at its discretion,
may grant Nonqualified Stock Options with an exercise price below 100% of the
Fair Market Value of Common Stock on the Grant Date. The foregoing
notwithstanding, no Incentive Stock Option shall be granted with an exercise
price below the Fair Market Value of Common Stock on the Grant Date.

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         2.4  PAYMENT FOR OPTION SHARES.

              (a) The purchase price for shares of Common Stock to be acquired
upon exercise of an Option granted hereunder shall be paid in full in cash or by
personal check, bank draft or money order at the time of exercise; provided,
however, that in lieu of such form of payment a Participant may pay such
purchase price in whole or in part by tendering shares of Common Stock, which
are freely owned and held by the Participant independent of any restrictions,
hypothecations or other encumbrances, duly endorsed for transfer (or with duly
executed stock powers attached), or in any combination of the above. Shares of
Common Stock surrendered upon exercise shall be valued at the Stock Exchange
closing price for the Corporation's Common Stock on the day prior to exercise,
as reported in The Wall Street Journal (or as otherwise reported by such Stock
Exchange), and the certificate(s) for such shares, duly endorsed for transfer or
accompanied by appropriate stock powers, shall be surrendered to the
Corporation. Participants who are subject to short swing profit restrictions
under the Exchange Act and who exercise an Option by tendering
previously-acquired shares shall do so only in accordance with the provisions of
Rule 16b-3 of the Exchange Act.

              (b) At the discretion of the Committee, as set forth in a
Participant's Option Agreement, any Option granted hereunder may be deemed
exercised by delivery to the Corporation of a properly executed exercise notice,
acceptable to the Corporation, together with irrevocable instructions to the
Participant's broker to deliver to the Corporation sufficient cash to pay the
exercise price and any applicable income and employment withholding taxes, in
accordance with a written agreement between the Corporation and the brokerage
firm ("cashless exercise procedure").

                         III. STOCK APPRECIATION RIGHTS

         3.1 GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may
be granted, held and exercised in such form as set by the Committee on an
individual basis. A Stock Appreciation Right may be granted to a Participant
with respect to such number of shares of Common Stock of the Corporation as the
Committee may determine. The number of shares covered by the Stock Appreciation
Right shall not exceed the number of shares of stock which the Participant could
purchase upon the exercise of the related Option. Stock Appreciation Rights are
intended to satisfy the requirements of Code Section 162(m) and the regulations
promulgated thereunder.

         3.2 EXERCISE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
shall be deemed exercised upon receipt by the Corporation of written notice of
exercise from the Participant. Except as permitted under Rule 16b-3, notice of
exercise of a Stock Appreciation Right by a participant subject to the insider
trading restrictions of Section 16(b) of the Securities Exchange Act of 1934,
shall be limited to the period beginning on the third day following the release
of the Corporation's quarterly or annual summary of earnings and ending on the
12th business day after such release. The exercise term of each Stock
Appreciation Right shall be limited to 10 years from its Grant Date or such
earlier period as set by the related Option. A Stock Appreciation Right shall be
exercisable only at such times and in such amounts as the related Option may be
exercised. A Stock Appreciation Right granted to a Participant subject to the
insider trading restrictions shall not be exercisable in whole or part during
the first six months of its term, unless the Participant dies or becomes
disabled during such six-month period.

         3.3 STOCK APPRECIATION RIGHT ENTITLEMENT.

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              (a) Upon exercise of a Stock Appreciation Right, a Participant
shall be entitled to payment from the Corporation, in cash, shares, or partly in
each (as determined by the Committee in accordance with any applicable terms of
the Agreement), of an amount equal to the difference between--

              (1) the Fair Market Value of the number of shares subject to the
              Stock Appreciation Right on the exercise date, and

              (2) the Option price of the associated Option multiplied by the
              number of shares available under the Option.

              (b) Notwithstanding paragraph (a) of this Section, upon exercise
of a Stock Appreciation Right the Participant shall be required to surrender the
associated Option.

        3.4   MAXIMUM STOCK APPRECIATION RIGHT AMOUNT PER SHARE. The Committee
may, at its sole discretion, establish (at the time of grant) a maximum amount
per share which shall be payable upon the exercise of a Stock Appreciation
Right, expressed as a dollar amount or as a percentage or multiple of the Option
price of a related Option.

                              IV. RESTRICTED STOCK

         4.1 GRANT OF RESTRICTED STOCK. Subject to the terms and conditions of
the Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock under this Plan to such Employees and in such amounts as it
shall determine.

         4.2 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Stock shall be
evidenced by a Restricted Stock Agreement that shall specify the terms of the
restrictions, including the restriction period, or periods, the number of
Restricted Stock shares subject to the grant, and such other provisions,
including performance goals, as the Committee shall determine.

         4.3 TRANSFERABILITY. Except as provided in this Article IV of the Plan,
the shares of Restricted Stock granted hereunder may not be transferred,
pledged, assigned, or otherwise alienated or hypothecated until the termination
of the applicable Restriction Period or for such period of time as shall be
established by the Committee and as shall be specified in the Restricted Stock
Agreement, or upon the earlier satisfaction of other conditions as specified by
the Committee in its sole discretion and as set forth in the Restricted Stock
Agreement. All rights with respect to the Restricted Stock granted to an
Employee shall be exercisable during a Participant's lifetime only by the
Participant or the Participant's legal representative.

         4.4 OTHER RESTRICTIONS. The Committee shall impose such other
restrictions on any shares of Restricted Stock granted under the Plan as it may
deem advisable including, without limitation, restrictions under applicable
Federal or State securities laws, and may legend the certificates representing
Restricted Stock to give appropriate notice of such restrictions.

         4.5 CERTIFICATE LEGEND. In addition to any legends placed on
certificates pursuant to Sections 4.3 and 4.4, each certificate representing
shares of Restricted Stock shall bear the following legend:

         The sale or other transfer of the shares of stock represented by this
         certificate, whether voluntary, involuntary or by operation of law, is
         subject to certain restrictions on transfer set forth in the Syntel,
         Inc. 1997 Stock Option and Incentive Plan ("Plan"), rules and
         administrative guidelines adopted pursuant to such Plan

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         and a Restricted Stock Agreement dated. A copy of the Plan, such rules
         and such Restricted Stock Agreement may be obtained from the General
         Counsel of Syntel, Inc.

         4.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this
Article IV of the Plan, and subject to applicable federal and state securities
laws, shares covered by each Restricted Stock grant made under the Plan shall
become freely transferable by the Participant after the last day of the
Restriction Period. Once the shares are released from the restrictions, the
Participant shall be entitled to have the legend required by Section 4.5 of the
Plan removed from the applicable Common Stock certificate. Provided further, the
Committee shall have the discretion to waive the applicable Restriction Period
with respect to all or any part of a Restricted Stock grant.

         4.7 VOTING RIGHTS. During the Restriction Period, Participants holding
shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to the Restricted Stock.

         4.8 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Restriction Period, a
Participant shall be entitled to receive all dividends and other distributions
paid with respect to shares of Restricted Stock. If any dividends or
distributions are paid in shares of Common Stock during the Restriction Period,
the dividend or other distribution shares shall be subject to the same
restrictions on transferability as the shares of Restricted Stock with respect
to which they were paid.

         4.9 RESTRICTED STOCK AWARDS GRANTED UNDER CODE SECTION 162(M). The
Committee, at its discretion, may designate certain Restricted Stock Awards as
granted pursuant to Code Section 162(m). Such Restricted Stock Awards must
comply with the following additional requirements, which override any other
provision set forth in this Article IV:

             (a) Each Code Section 162(m) Restricted Stock Award shall be
based upon pre-established, objective performance goals that are intended to
satisfy the performance-based compensation requirements of Code Section 162(m)
and the regulations promulgated thereunder. Further, at the discretion of the
Committee, a Restricted Stock Award also may be subject to goals and
restrictions in addition to the performance requirements.

             (b) Each Code Section 162(m) Restricted Stock Award shall be
based upon the attainment of specified levels of Corporation or Subsidiary
performance during a specified performance period, as measured by any or all of
the following: earnings (as measured by net income, net income per share,
operating income or operating income per share), sales growth and market
capitalization.

             (c) For each designated performance period, the Committee
shall (i) select those Employees who shall be eligible to receive a Restricted
Stock Award, (ii) determine the performance period, which may be a one to three
fiscal year period, (iii) determine the target levels of Corporation or
Subsidiary performance, and (iv) determine the number of shares subject to a
Restricted Stock Award to be paid to each selected Employee. The Committee shall
make the foregoing determinations prior to the commencement of services to which
a Restricted Stock Award relates (or within the permissible time-period
established under Code Section 162(m)) and while the outcome of the performance
goals and targets is uncertain.

             (d) For each performance period, the Committee shall certify,
in writing: (i) if the Corporation has attained the performance targets, and
(ii) the number of shares pursuant to the Restricted Stock Award that are to
become freely transferable. The Committee shall have no discretion to waive all
or part of the conditions, goals and restrictions applicable to the receipt of
full or

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partial payment of a Restricted Stock Award.

              (e) Any dividends paid during the Restriction Period automatically
shall be reinvested on behalf of the Employee in additional shares of Restricted
Stock under the Plan, and such additional shares shall be subject to the same
performance goals and restrictions as the other shares under the Restricted
Stock Award. No shares under a Code Section 162(m) Restricted Stock Award shall
become transferable until the Committee certifies in writing that the
performance goals and restrictions have been satisfied.

              (f) No Employee, in any one fiscal year of the Company, shall be
granted a Code Section 162(m) Restricted Stock Award for more than 25,000 shares
of Common Stock.

              (g) Except as provided in this Article IV of the Plan, the shares
pursuant to a Restricted Stock Award granted hereunder may not be transferred,
pledged, assigned, or otherwise alienated or hypothecated until the applicable
performance targets and other restrictions are satisfied, as shall be certified
in writing by the Committee. All rights with respect to a Performance Share
Award granted hereunder shall apply only to such Employee or the Employee's
legal representative.

              (h) Except as otherwise provided in this Article IV of the Plan,
and subject to applicable federal and state securities laws, shares covered by
each Restricted Stock Award made under the Plan shall become freely transferable
by the Employee after the Committee has certified that the applicable
performance targets and restrictions have been satisfied. Once the shares are
released from the restrictions, the Employee shall be entitled to have the
legend required by Section 4.5 of the Plan removed from the applicable Common
Stock certificate.

                           V. PERFORMANCE SHARE AWARDS

         5.1 GRANT OF PERFORMANCE SHARE AWARDS. The Committee, at its
discretion, may grant Performance Share Awards to Employees of the Corporation
and its Subsidiaries and may determine, on an individual or group basis, the
performance goals to be attained pursuant to each Performance Share Award.

         5.2 TERMS OF PERFORMANCE SHARE AWARDS. In general, Performance Share
Awards shall consist of rights to receive cash, Common Stock or a combination of
each, if designated performance goals are achieved. The terms of a Participant's
Performance Share Award shall be set forth in his individual Performance Share
Agreement. Each Agreement shall specify the performance goals applicable to a
particular Employee or group of Employees, the period over which the targeted
goals are to be attained, the payment schedule if the goals are attained, and
any other terms, conditions and restrictions applicable to an individual
Performance Share Award and not inconsistent with the provisions of the Plan.
The Committee, at its discretion, may waive all or part of the conditions, goals
and restrictions applicable to the receipt of full or partial payment of a
Performance Share Award.

         5.3 PERFORMANCE SHARE AWARDS GRANTED UNDER CODE SECTION 162(M). The
Committee, at its discretion, may designate certain Performance Share Awards as
granted pursuant to Code Section 162(m). Such Performance Share Awards must
comply with the following additional requirements, which override any other
provision set forth in this Article V:

             (a) The Committee, at its discretion, may grant Code Section
162(m) Performance Share Awards based upon pre-established, objective
performance goals that are intended to satisfy the performance-based
compensation requirements of Code Section 162(m) and

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the regulations promulgated thereunder. Further, at the discretion of the
Committee, a Performance Share Award also may be subject to goals and
restrictions in addition to the performance requirements.

              (b) Each Code Section 162(m) Performance Share Award shall be
based upon the attainment of specified levels of Corporation or Subsidiary
performance during a specified performance period, as measured by any or all of
the following: earnings (as measured by net income, net income per share,
operating income or operating income per share), sales growth and market
capitalization.

              (c) For each designated performance period, the Committee shall
(i) select those Employees who shall be eligible to receive a Code Section
162(m) Performance Share Award, (ii) determine the performance period, which may
be a one to three fiscal year period, (iii) determine the target levels of
Corporation or Subsidiary performance, and (iv) determine the Performance Share
Award to be paid to each selected Employee. The Committee shall make the
foregoing determinations prior to the commencement of services to which a
Performance Share Award relates (or within the permissible time-period
established under Code Section 162(m)) and while the outcome of the performance
goals and targets is uncertain.

              (d) For each performance period, the Committee shall certify, in
writing: (i) if the Corporation has attained the performance targets, and (ii)
the cash or number of shares (or combination thereof) pursuant to the
Performance Share Award that shall be paid to each selected Employee (or the
number of shares that are to become freely transferable, if a Performance Share
Award is granted subject to attainment of the designated performance goals). The
Committee, may not waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Performance Share
Award.

              (e) Code Section 162(m) Performance Share Awards may be granted in
two different forms, at the discretion of the Committee. Under one form, the
Employee shall receive a Performance Share Award that consists of a legended
certificate of Common Stock, restricted from transfer prior to the satisfaction
of the designated performance goals and restrictions, as determined by the
Committee and specified in the Employee's Performance Share Agreement. Prior to
satisfaction of the performance goals and restrictions, the Employee shall be
entitled to vote the Performance Shares. Further, any dividends paid on such
shares during the performance/restriction period automatically shall be
reinvested on behalf of the Employee in additional Performance Shares under the
Plan, and such additional shares shall be subject to the same performance goals
and restrictions as the other shares under the Performance Share Award. No
shares under a Performance Share Award shall become transferable until the
Committee certifies in writing that the performance goals and restrictions have
been satisfied.

              (f) Under the second form, the Employee shall receive a
Performance Share Agreement from the Committee that specifies the performance
goals and restrictions that must be satisfied before the Company shall issue the
payment, which may be cash, a designated number of shares of Common Stock or a
combination of the two. Any certificate for shares under such form of
Performance Share Award shall be issued only after the Committee certifies in
writing that the performance goals and restrictions have been satisfied.

              (g) No Employee, in any one fiscal year of the Company, shall be
granted a Performance Share Award to receive more than 25,000 shares of Common
Stock.

              (h) Except as provided in this Article V of the Plan, the shares
pursuant to a Performance Share Award granted hereunder may not

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be transferred, pledged, assigned, or otherwise alienated or hypothecated until
the applicable performance targets and other restrictions are satisfied, as
shall be certified in writing by the Committee. All rights with respect to a
Performance Share Award granted hereunder shall apply only to such Employee or
the Employee's legal representative.

              (i) In addition to any legends placed on certificates pursuant to
paragraph (h), each certificate representing shares under a Performance Share
Award shall bear the following legend:

              The sale or other transfer of the shares of stock represented by
              this certificate, whether voluntary, involuntary or by operation
              of law, is subject to certain restrictions on transfer set forth
              in the Syntel, Inc. 1997 Stock Option and Incentive Plan ("Plan"),
              rules and administrative guidelines adopted pursuant to such Plan
              and a Performance Share Agreement dated. A copy of the Plan, such
              rules and such Performance Share Agreement may be obtained from
              the General Counsel of Syntel, Inc.

              (j) Except as otherwise provided in this Article V of the Plan,
and subject to applicable federal and state securities laws, shares covered by
each Performance Share Award made under the Plan shall become freely
transferable by the Employee after the Committee has certified that the
applicable performance targets and restrictions have been satisfied. Once the
shares are released from the restrictions, the Employee shall be entitled to
have the legend required by paragraph (i) removed from the applicable Common
Stock certificate.

                           VI. ANNUAL INCENTIVE AWARDS

         6.1  GRANT OF ANNUAL INCENTIVE AWARDS.

              (a) The Committee, at its discretion, may grant Annual Incentive
Awards to such Employees as it may designate from time to time. Annual Incentive
Awards shall be based upon pre-established, objective performance goals that are
intended to satisfy the performance-based compensation requirements of Code
Section 162(m) and the regulations promulgated thereunder.

              (b) The determination of Annual Incentive Awards for a given year
shall be based upon the attainment of specified levels of Corporation or
Subsidiary performance as measured by any or all of the following: earnings (as
measured by net income, net income per share, operating income or operating
income per share), sales growth and market capitalization.

              (c) For each fiscal year of the Corporation, the Committee shall
(i) select those Employees who shall be eligible to receive an Annual Incentive
Award, (ii) determine the performance period, which may be a one to three fiscal
year period, (iii) determine target levels of Corporation performance, and (iv)
determine the level of Annual Incentive Award to be paid to each selected
Employee upon the achievement of each performance level as provided below. The
Committee shall make the foregoing determinations prior to the commencement of
services to which an Annual Incentive Award relates (or within the permissible
time-period established under Code Section 162(m)) and while the outcome of the
performance goals and targets is uncertain.

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<PAGE>

         6.2  ATTAINMENT OF PERFORMANCE TARGETS.

              (a) For each fiscal year, the Committee shall certify, in writing:
(i) the degree to which the Corporation has attained the performance targets,
and (ii) the amount of the Annual Incentive Award to be paid to each selected
Employee.

              (b) Notwithstanding anything to the contrary herein, the Committee
may, in its discretion, reduce any Annual Incentive Award based on such factors
as may be determined by the Committee, including, without limitation, a
determination by the Committee that such a reduction is appropriate: (i) in
light of pay practices of competitors; or (ii) in light of the Corporation's, a
subsidiary's, or an selected Employee's performance relative to competitors
and/or performance with respect to the Corporation's strategic business goals.

         6.3 PAYMENT OF ANNUAL INCENTIVE AWARDS. An Annual Incentive Award shall
be paid only if (i) the Corporation achieves at least the threshold performance
level; and (ii) the Committee makes the certification described in Section 6.2.

         6.4  ANNUAL INCENTIVE AWARD PAYMENT FORMS.

              (a) Annual Incentive Awards shall be paid in cash and/or shares of
Common Stock of the Corporation, at the discretion of the Committee. Payments
shall be made within 30 days following (i) a certification by the Committee that
the performance targets were attained, and (ii) a determination by the Committee
that the amount of an Annual Incentive Award shall not be decreased in
accordance with Section 6.2. The aggregate maximum Annual Incentive Award that
may be earned by any Participant on behalf of any one fiscal year (calculated as
of the last day of the fiscal year for which the Annual Incentive Award is
earned) may not exceed the lesser of two (2) times the Participant's base salary
for the fiscal year or $1,000,000.

              (b) The amount of an Annual Incentive Award to be paid upon the
attainment of each targeted level of performance shall equal a percentage of
each Participant's base salary for the fiscal year, as determined by the
Committee.

                         VIII. TERMINATION OF EMPLOYMENT

         7.1. OPTIONS AND STOCK APPRECIATION RIGHTS.

              (a) If, prior to the date that an Option or Stock Appreciation
Right first becomes Vested, a Participant's employment is terminated for any
reason (other than as provided in Section 8.2, after a Change in Control), the
Participant's right to exercise the Option or Stock Appreciation Right shall
terminate and all rights thereunder shall cease.

              (b) If, on or after the date that an Option or Stock Appreciation
Right first becomes Vested, a Participant's employment is terminated for any
reason other than death or Disability, the Participant shall have the right,
within the earlier of (i) the expiration of the Option or Stock Appreciation
Right, and (ii) three months after termination of employment, to exercise the
Option or Stock Appreciation Right to the extent that it was exercisable and
unexercised on the date of the Participant's termination of employment, subject
to any other limitation on the exercise of the Option or Stock Appreciation
Right in effect on the date of exercise. The Committee may designate in a
Participant's Agreement that an Option or Stock Appreciation Right shall
terminate at an earlier time than set forth above.

              (c) If, on or after the date that an Option or Stock

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Appreciation Right first becomes Vested, a Participant dies while an Option or
Stock Appreciation Right is still exercisable, the person or persons to whom the
Option or Stock Appreciation Right shall have been transferred by will or by the
laws of descent and distribution, shall have the right within the exercise
period specified in the Participant's Agreement to exercise the Option or Stock
Appreciation Right to the extent that it was exercisable and unexercised on the
Participant's date of death, subject to any other limitation on exercise in
effect on the date of exercise. Provided, however, that the beneficial tax
treatment of an Incentive Stock Option may be forfeited if the Option is
exercised more than one year after a Participant's date of death.

              (d) If, on or after the date that an Option or Stock Appreciation
Right first becomes Vested, a Participant terminates employment due to
Disability, the Participant shall have the right, within the exercise period
specified in the Participant's Agreement to exercise the Option or Stock
Appreciation Right to the extent that it was exercisable and unexercised on the
date of the Participant's termination of employment, subject to any other
limitation on the exercise of the Option or Stock Appreciation Right in effect
on the date of exercise. If the Participant dies after termination of employment
while the Option or Stock Appreciation Right is still exercisable, the Option or
Stock Appreciation Right shall be exercisable in accordance with the terms of
paragraph (c) above.

              (g) The Committee, at the time of a Participant's termination of
employment, may accelerate a Participant's right to exercise an Option or extend
the exercise period of an Option or Stock Appreciation Right; provided, however
that the extension of the exercise period for an Incentive Stock Option may
cause such Option to forfeit its preferential tax treatment.

              (f) Shares subject to Options and Stock Appreciation Rights that
are not exercised in accordance with the provisions of (a) through (e) above
shall expire and be forfeited by the Participant as of their expiration date and
shall become available for new grants and awards under the Plan as of such date.

         7.2  RESTRICTED STOCK. If a Participant terminates employment for any
reason (other than as provided in Section 8.2, after a Change in Control), the
Participant's shares of Restricted Stock still subject to the Restriction Period
automatically shall expire and be forfeited by the Participant and, subject to
Section 1.6, shall be available for new grants and awards under the Plan as of
such termination date; provided, however, that the Committee, in its sole
discretion, may waive the restrictions remaining on any or all shares of
Restricted Stock and add such new restrictions to such shares of Restricted
Stock as it deems appropriate. Notwithstanding the foregoing, the Committee
shall not waive any restrictions on a Code Section 162(m) Restricted Stock
Award, but the Committee may include a provision in an Employee's Code Section
162(m) Restricted Stock Agreement stating that upon the Employee's termination
of employment due to (i) death, (ii) Disability, or (iii) involuntary
termination by the Company without cause prior to the attainment of the
associated performance goals and the termination of the Restriction Period, that
the performance goals and restrictions shall be deemed to have been satisfied on
a pro rata basis, so that the number of shares that become freely transferable
shall be based on the Employee's full number of months of employment during the
Restriction Period, and the Employee shall forfeit the remaining shares and his
rights to such forfeited shares shall terminate in full.

         7.3 PERFORMANCE SHARES. Performance Share Awards shall expire and be
forfeited by a Participant upon the Participant's termination of employment for
any reason (other than as provided in Section 8.2, after a Change in Control),
and such shares shall be available for new grants

                                      105

<PAGE>

and awards under the Plan as of such termination date; provided, however, that
the Committee, in its discretion, may waive all or part of the conditions, goals
and restrictions applicable to the receipt of full or partial payment of a
Performance Share Award. Notwithstanding the foregoing, the Committee shall not
waive any restrictions on a Code Section 162(m) Performance Share Award, but the
Committee may include a provision in an Employee's Code Section 162(m)
Performance Share Agreement stating that upon the Employee's termination of
employment due to (i) death, (ii) Disability, or (iii) involuntary termination
by the Company without cause prior to the attainment of the associated
performance goals and restrictions, that the performance goals and restrictions
shall be deemed to have been satisfied on a pro rata basis, so that the number
of shares that become freely transferable shall be based on the Employee's full
number of months of employment during the employment period, and the Employee
shall forfeit the remaining shares and his rights to such forfeited shares shall
terminate in full.

        7.4  ANNUAL INCENTIVE AWARDS.

             (a) A Participant who has been granted an Annual Incentive Award
and terminates employment due to Retirement, Disability or death prior to the
end of the Corporation's fiscal year shall be entitled to a prorated payment of
the Annual Incentive Award, based on the number of full months of employment
during the fiscal year. Any such prorated Annual Incentive Award shall be paid
at the same time as regular Annual Incentive Awards or, in the event of the
Participant's death, to the beneficiary designated by the Participant.

              (b) A Participant who has been granted an Annual Incentive Award
and resigns or is terminated for any reason (other than Retirement, Disability
or death), before the end of the Corporation's fiscal year for which the Annual
Incentive Award is to be paid, shall forfeit the right to an Annual Incentive
Award payment for that fiscal year.

         7.5 OTHER PROVISIONS. The transfer of an Employee from one corporation
to another among the Corporation and any of its Subsidiaries, or a leave of
absence under the leave policy of the Corporation or any of its Subsidiaries
shall not be a termination of employment for purposes of the Plan, unless a
provision to the contrary is expressly stated by the Committee in a
Participant's Agreement issued under the Plan.

                     VIII. ADJUSTMENTS AND CHANGE IN CONTROL

         8.1 ADJUSTMENTS.

             (a) The total amount of Common Stock for which Options, Stock
Appreciation Rights, Restricted Stock, Performance Share Awards and Annual
Incentive Awards may be issued under the Plan, and the number of shares subject
to any such grants or awards (both as to the number of shares of Common Stock
and the Option price), shall be adjusted pro rata for any increase or decrease
in the number of outstanding shares of Common Stock resulting from payment of a
stock dividend on Common Stock, a subdivision or combination of shares of Common
Stock, or a reclassification of Common Stock.

              (b) The foregoing adjustments shall be made by the Committee. Any
such adjustment may provide for the elimination of any fractional share which
might otherwise become subject to an Option, Stock Appreciation Right,
Restricted Stock grant, Performance Share Award or Annual Incentive Award.

         8.2 CHANGE IN CONTROL. Notwithstanding anything contained herein to the
contrary, in the event of a Participant's Change in Position subsequent to a
Change in Control, (i) any outstanding Option

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<PAGE>

or Stock Appreciation Right granted to such Participant hereunder immediately
shall become fully Vested and exercisable in full, regardless of any installment
provision applicable to such Option or Stock Appreciation Right; (ii) the
remaining Restriction Period on any Restricted Stock granted to such Participant
hereunder immediately shall lapse and the shares shall become fully
transferable, subject to any applicable federal or state securities laws; (iii)
all performance goals and conditions shall be deemed to have been satisfied and
all restrictions shall lapse on any outstanding Performance Share Awards granted
to such Participant hereunder, and such Awards shall become payable in full; and
(iv) for purposes of any Annual Incentive Awards granted to such Participant
hereunder, the determination of whether the performance targets have been
achieved shall be made as of the date of the Change in Control and payments due
should become immediately payable.

                                IX. MISCELLANEOUS

         9.1 PARTIAL EXERCISE/FRACTIONAL SHARES. The Committee may permit, and
shall establish procedures for, the partial exercise of Options and Stock
Appreciation Rights granted under the Plan. No fractional shares shall be issued
in connection with the exercise of a Stock Appreciation Right or payment of a
Performance Share Award or Annual Incentive Award; instead, the Fair Market
Value of the fractional shares shall be paid in cash, or at the discretion of
the Committee, the number of shares shall be rounded down to the nearest whole
number of shares and any fractional shares shall be disregarded.

         9.2 RULE 16b-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on the exercise of an Option or
Stock Appreciation Right (including, without limitation, the right of the
Committee to limit the time of exercise to specified periods), or the grant of
Restricted Stock or the payment of a Performance Share Award or Annual Incentive
Award, as may be required to satisfy the requirements of Rule 16b-3 of the
Exchange Act.

         9.3 RIGHTS PRIOR TO ISSUANCE OF SHARES. No Participant shall have any
rights as a shareholder with respect to shares covered by an Option, Stock
Appreciation Right, Restricted Stock grant, Performance Share Award or Annual
Incentive Award until the issuance of a stock certificate for such shares. No
adjustment shall be made for dividends or other rights with respect to such
shares for which the record date is prior to the date the certificate is issued.

         9.4 NON-ASSIGNABILITY. No Option, Stock Appreciation Right, Restricted
Stock grant, Performance Share Award or Annual Incentive Award shall be
transferable by a Participant except by will or the laws of descent and
distribution. During the lifetime of a Participant, an Option or Stock
Appreciation Right shall be exercised only by the Participant, except in the
event of the Participant's Disability, in which case the Participant's legal
guardian or the individual designated in the Participant's durable power of
attorney may exercise the Option or Stock Appreciation Right. Any transferee of
the Option or Stock Appreciation Right shall take the same subject to the terms
and conditions of this Plan. No transfer of an Option, Stock Appreciation Right,
Restricted Stock grant, Performance Share Award or Annual Incentive Award by
will or the laws of descent and distribution shall be effective to bind the
Corporation unless the Corporation shall have been furnished with written notice
thereof and a copy of the will and/or such evidence as the Corporation may deem
necessary to establish the validity of the transfer and the acceptance by the
transferee or transferees of the terms and conditions of the Option, Stock
Appreciation Right, Restricted Stock grant, Performance Share Award or Annual
Incentive Award.

                                      107
<PAGE>

        9.5. SECURITIES LAWS.

              (a) Anything to the contrary herein notwithstanding, the
Corporation's obligation to sell and deliver Common Stock pursuant to the
exercise of an Option or Stock Appreciation Right or deliver Common Stock
pursuant to a Restricted Stock grant, Performance Share Award or Annual
Incentive Award is subject to such compliance with federal and state laws, rules
and regulations applying to the authorization, issuance or sale of securities as
the Corporation deems necessary or advisable. The Corporation shall not be
required to sell and deliver or issue Common Stock unless and until it receives
satisfactory assurance that the issuance or transfer of such shares shall not
violate any of the provisions of the Securities Act of 1933 or the Securities
Exchange Act of 1934, or the rules and regulations of the Securities Exchange
Commission promulgated thereunder or those of the Stock Exchange or any stock
exchange on which the Common Stock may be listed, the provisions of any state
laws governing the sale of securities, or that there has been compliance with
the provisions of such acts, rules, regulations and laws.

              (b) The Committee may impose such restrictions on any shares of
Common Stock acquired pursuant to the exercise of an Option or Stock
Appreciation Right or the grant of Restricted Stock or the payment of a
Performance Share Award or Annual Incentive Award under the Plan as it may deem
advisable, including, without limitation, restrictions (i) under applicable
federal securities laws, (ii) under the requirements of the Stock Exchange or
any other securities exchange, recognized trading market or quotation system
upon which such shares of Common Stock are then listed or traded, and (iii)
under any blue sky or state securities laws applicable to such shares. No shares
shall be issued until counsel for the Corporation has determined that the
Corporation has complied with all requirements under appropriate securities
laws.

         9.6 FOREIGN LAW RESTRICTIONS. Anything to the contrary herein
notwithstanding, the Corporation's obligation to sell and deliver Common Stock
pursuant to the exercise of an Option or Stock Appreciation Right or deliver
Common Stock pursuant to a Restricted Stock grant, Performance Share Award or
Annual Incentive Award is subject to compliance with the laws, rules and
regulations of any foreign nation applying to the authorization, issuance or
sale of securities, providing of compensation, transfer of currencies and other
matters, as may apply to any Participant hereunder who is a resident of such
foreign nation. To the extent that it shall be impermissible under such foreign
laws for such a Participant to pay the exercise price for any Option granted
under the Plan (to the extent Vested), the Committee may treat such Participant
as being entitled instead to exercise additional Stock Appreciation Rights (to
the extent not previously granted in tandem with such Option) which are of
equivalent value to the Participant, as determined by comparing the Fair Market
Value upon exercise of the number of shares subject to the Option (to the extent
Vested), less the Option price of such shares. Further, to the extent that it
shall be impermissible under such foreign laws for the Corporation to deliver
Common Stock to any such Participant pursuant to any Option, Stock Appreciation
Right, Restricted Stock grant, Performance Share Award or Annual Incentive Award
granted under the Plan (to the extent Vested), the Committee may arrange for
payment to the Participant of an equivalent amount of cash in lieu of such
shares (less any amount otherwise payable by the Participant), in accordance
with all applicable United States and foreign currency restrictions and
regulations. To the extent that the Corporation is restricted in accordance with
such foreign laws from delivering shares of Common Stock to Participants as
would otherwise be provided for in this Plan, the Corporation shall be released
from such obligation and shall not be subject to the claims of any Participant
hereunder with respect thereto.

                                      108
<PAGE>

         9.7  WITHHOLDING TAXES.

              (a) The Corporation shall have the right to withhold from a
Participant's compensation or require a Participant to remit sufficient funds to
satisfy applicable withholding for income and employment taxes upon the exercise
of an Option or Stock Appreciation Right or the lapse of the Restriction Period
on a Restricted Stock grant or the payment of a Performance Share Award or
Annual Incentive Award. A Participant may make a written election to tender
previously-acquired shares of Common Stock or have shares of stock withheld from
the exercise, provided that the shares have an aggregate Fair Market Value
sufficient to satisfy in whole or in part the applicable withholding taxes. The
cashless exercise procedure of Section 2.4 may be utilized to satisfy the
withholding requirements related to the exercise of an Option. At no point shall
the Corporation withhold from the exercise of an Option more shares than are
necessary to meet the established tax withholding requirements of federal, state
and local obligations.

              (b) A Participant subject to the insider trading restrictions of
Section 16(b) of the Exchange Act may use Common Stock to satisfy the applicable
withholding requirements only if such disposition is approved in accordance with
Rule 16b-3 of the Exchange Act. Any election by a Participant to utilize Common
Stock for withholding purposes is further subject to the discretion of the
Committee.

         9.8  TERMINATION AND AMENDMENT.

              (a) The Board may terminate the Plan, or the granting of Options,
Stock Appreciation Rights, Restricted Stock, Performance Share Awards or Annual
Incentive Awards under the Plan, at any time. No new grants or awards shall be
made under the Plan after the tenth anniversary of the adoption of this Plan by
the Board, or approval by the shareholders, whichever is earlier, as noted in
Section 1.1.

              (b) The Board may amend or modify the Plan at any time and from
time to time, but no amendment or modification, without the approval of the
shareholders of the Corporation, shall (i) materially increase the benefits
accruing to Participants under the Plan; (ii) increase the amount of Common
Stock for which grants and awards may be made under the Plan, except as
permitted under Sections 1.6 and 8.1; or (iii) change the provisions relating to
the eligibility of individuals to whom grants and awards may be made under the
Plan.

              (c) No amendment, modification, or termination of the Plan shall
in any manner affect any Option, Stock Appreciation Right, Restricted Stock
grant, Performance Share Award or Annual Incentive Award granted under the Plan
without the consent of the Participant holding the Option, Stock Appreciation
Right, Restricted Stock grant, Performance Share Award or Annual Incentive
Award.

         9.9 EFFECT ON EMPLOYMENT. Neither the adoption of the Plan nor the
granting of any Option, Stock Appreciation Right, Restricted Stock, Performance
Share Award or Annual Incentive Award pursuant to the Plan shall be deemed to
create any right in any individual to be retained or continued in the employment
of the Corporation or a Subsidiary.

         9.10 USE OF PROCEEDS. The proceeds received from the sale of Common
Stock pursuant to the Plan will be used for general corporate purposes of the
Corporation.

         9.11 APPROVAL OF PLAN. As noted in Section 1.1, the Plan has been
approved by the shareholders of the Corporation within 12 months of adoption of
the Plan by the Board, as required by Section 422 of the Code.

                                      109
<PAGE>

         IN WITNESS WHEREOF, this Amended and Restated 1997 Stock Option and
Incentive Plan has been executed on behalf of the Corporation on the 23rd day of
May, 2000.

                                           SYNTEL, INC.

                                           By: /s/   BHARAT DESAI
                                              -------------------------------
                                                     Bharat Desai, President

                                      110<PAGE>

                                                                   EXHIBIT 10.26

                        RELEASE AND SEVERANCE AGREEMENT

         This Release and Severance Agreement (hereinafter referred to as
"Agreement"), between JEFFREY H. KOENIG, together with his heirs, (hereinafter
collectively referred to as "Mr. Koenig") and MEADOWBROOK, INC., and MEADOWBROOK
INSURANCE GROUP, INC., their agents, employees, officers, directors,
shareholders, subsidiaries, affiliates, successors or assigns (hereinafter
collectively referred to as "MEADOWBROOK"), effective this 9th day of November,
2001.

                                    RECITALS:

         WHEREAS, Mr. Koenig commenced his employment with MEADOWBROOK on
November 27, 2000;

         WHEREAS, Mr. Koenig's employment with MEADOWBROOK terminated, effective
November 8, 2001;

         WHEREAS, a severance package has been offered by MEADOWBROOK to Mr.
Koenig which is more particularly described below; and

         WHEREAS, Mr. Koenig and MEADOWBROOK have agreed to settle all claims
that they may have against one another;

         NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                                   AGREEMENT:

1.       MEADOWBROOK and Mr. Koenig agree to release, acquit, forever discharge
one another from, and covenant not to sue for, any and all claims, demands,
actions, causes of action, which either of them now have, or which may hereafter
accrue arising out of or relating to Mr. Koenig's employment with MEADOWBROOK
and the termination thereof, his Employment Agreement, dated October 31, 2000,
with MEADOWBROOK and the termination thereof, and which shall include, but not
be limited to, claims for breach of contract, breach of fiduciary duty,
negligence, tort, wrongful discharge, discrimination based upon federal, state
or local law, claims based upon any other federal, state or local law or common
law seeking legal or equitable relief, money damages, loss of pay, loss of
fringe benefits, compensatory damages, pain and suffering, emotional distress,
bodily injury, exemplary or punitive damages;

2.       In conjunction with the consideration provided in the Agreement, Mr.
Koenig knowingly agrees to release, acquit, forever discharge and covenant not
to sue MEADOWBROOK for any claim of discrimination including any claim he might
have under the Age Discrimination in Employment Act of 1967 against MEADOWBROOK
arising out of his employment with

                                   Page 1 of 5

<PAGE>

MEADOWBROOK and termination thereof. Mr. Koenig has been advised to consult with
legal counsel prior to executing the Agreement and has been provided twenty-one
(21) days within which to consider this Agreement. Mr. Koenig further
understands that he has seven (7) days after the execution of the Agreement in
which to provide a written revocation of this Agreement, provided that nothing
in Paragraphs 1 or 2 shall limit Mr. Koenig's right to enforce this Agreement;

3.       In consideration for the above, MEADOWBROOK agrees to pay to Mr. Koenig
a severance to be paid as follows:

         a. A one-time lump sum payment equivalent to one hundred percent (100%)
         of twelve (12) months of his former gross base salary ($280,000.00).
         This payment shall be paid to Mr. Koenig, less all applicable local,
         state, federal and other withholdings. This severance payment shall
         only be paid following the expiration of the seven (7) day revocation
         period after execution of this Agreement by Mr. Koenig and its return
         to MEADOWBROOK. MEADOWBROOK shall send a check for this sum via
         overnight mail to Mr. Koenig on the eighth (8th) day following his
         execution of this Agreement;

                  (i) In the event that Mr. Koenig begins any employment during
                  the period of November 9, 2001 through May 8, 2002, Mr. Koenig
                  shall repay to MEADOWBROOK seventy-one percent (71%) of six
                  (6) months of his former gross base salary ($105,000), less
                  any pro-rata reduction based upon Mr. Koenig's next employment
                  salary being less than $280,000. This sum shall be repaid to
                  MEADOWBROOK within fifteen (15) business days of the
                  acceptance of such new employment;

                  (ii) In the event that Mr. Koenig begins any employment during
                  the period of May 9, 2002 through August 8, 2002, Mr. Koenig
                  shall repay to MEADOWBROOK forty-six percent (46%) of the
                  portion of his former gross base salary which would have been
                  payable for the period from the first date his new employment
                  begins through November 8, 2002, less any pro-rata reduction
                  based upon Mr. Koenig's next employment salary being less than
                  $280,000. This sum shall be repaid to MEADOWBROOK within
                  fifteen (15) business days of the acceptance of such new
                  employment;

         b. Additionally, Mr. Koenig shall be paid a one-time lump sum payment
         of $56,000.00. This payment shall be in lieu of any reimbursement of
         moving expenses and any other incidental expenses that may be incurred
         by Mr. Koenig. This payment shall be paid to Mr. Koenig, less all
         applicable local, state, federal and other withholdings. This payment
         shall only be paid following the expiration of the seven (7) day
         revocation period after execution of this Agreement by Mr. Koenig and
         its return to MEADOWBROOK. This sum shall be added to and included in
         the check sent via overnight mail to Mr. Koenig on the eighth (8th) day
         following his execution of this Agreement;

                                   Page 2 of 5

<PAGE>

         c. As additional consideration for the above, MEADOWBROOK agrees to
         waive any claim it may have for the repayment by Mr. Koenig of the
         $100,000 Signing Bonus paid to him pursuant to his Employment
         Agreement, dated October 31, 2000;

         d. Further, MEADOWBROOK and Mr. Koenig agree that any unvested Stock
         Options granted to Mr. Koenig prior to the date of this Agreement shall
         be forfeited by Mr. Koenig and canceled by MEADOWBROOK without any
         payment to Mr. Koenig;

         e. Nothing in this Agreement shall affect Mr. Koenig's right to be paid
         for any earned but unused vacation time or business-related expenses
         submitted and approved prior to November 8, 2001;

4.       Mr. Koenig agrees to actively and in good faith seek new employment and
to immediately notify the Human Resources Department at MEADOWBROOK upon his
acceptance of any other employment and the start date of such employment. Mr.
Koenig agrees that he is not entitled to the payments recited in Paragraph No. 3
under any policy, contract, custom or usage of MEADOWBROOK;

5.       Mr. Koenig's existing health and dental insurance shall be terminated
effective November 8, 2001. However, for a period of twelve (12) months from
November 9, 2001 through November 8, 2002, MEADOWBROOK shall pay the insurance
premium to continue Mr. Koenig's health and dental insurance in accordance with
COBRA. Mr. Koenig shall pay all co-payments and deductibles in the same manner
as during his employment with MEADOWBROOK. If Mr. Koenig accepts other
employment which affords him health and/or dental insurance, MEADOWBROOK'S
obligation for payment of Mr. Koenig's COBRA health and/or dental insurance
premiums shall cease upon the date he is eligible to enroll for such new health
and/or dental insurance coverage. In the event that Mr. Koenig chooses to
continue his health and/or dental insurance in accordance with COBRA after
November 8, 2002, or after becoming eligible to enroll for new health and/or
dental insurance coverage with a subsequent employer, he shall be responsible
for all future COBRA health and/or dental insurance premiums or payments. Mr.
Koenig shall immediately notify the Human Resources Department at MEADOWBROOK
upon his acceptance of other employment and his eligibility date to enroll for
new health and/or dental insurance coverage. Mr. Koenig agrees that he is not
entitled to the payment of his COBRA premiums recited in this paragraph under
any policy, contract, custom or usage of MEADOWBROOK;

6.       All other fringe benefits, including, but not limited to, life
insurance, disability insurance and any future contributions to his 401-K
account that Mr. Koenig was entitled to as an Associate of MEADOWBROOK shall
cease effective November 8, 2001, provided that nothing contained herein shall
affect Mr. Koenig's rights to the assets in his 401-K account or his conversion
rights under his health, life or dental insurance;

                                   Page 3 of 5

<PAGE>

7.       Mr. Koenig and MEADOWBROOK agree not to disparage each other to any
third-party. Further, Mr. Koenig and MEADOWBROOK agree to keep the terms and
conditions of the settlement confidential, except to the extent that the terms
and conditions of the settlement must be disclosed to the parties' accountants
or attorneys. However, Mr. Koenig may disclose the terms and conditions of the
settlement to his spouse. Disclosure of the terms and conditions of the
settlement, (except as may be required by a court or agency of competent
jurisdiction for which notice as soon as practicable to the non-disclosing party
is required), inconsistent with the terms and conditions of the confidentiality
provision shall entitle the non-disclosing party to all legal and equitable
remedies to prevent such disclosure or any damages as a result thereof, and
entitle the non-disclosing party to an award of attorneys' fees, costs or
expenses against the disclosing party;

8.       In terms of a reference for future employment, MEADOWBROOK has agreed
with Mr. Koenig to adhere to its existing policy. MEADOWBROOK'S existing
corporate policy is to provide the prospective employer with only the name of
the employee, title and dates of employment;

9.       In consideration of the sums paid pursuant to Paragraph 3, Mr. Koenig
has executed a Confidential Information Agreement, dated November 8, 2001 which
shall remain in full force and effect, provided that the terms and conditions of
the Confidential Information Agreement are met, there shall be no restriction on
the identity or business of any future employer of Mr. Koenig;

10.      Mr. Koenig agrees to resign as an Officer of Meadowbrook Insurance
Group, Inc. ("Corporation"), and as an officer and/or director of all of its
subsidiary companies, including insurance company subsidiaries, effective
November 8, 2001. Mr. Koenig shall continue to be entitled to defense and
indemnification for any alleged acts or omissions as an Officer, employee or
agent of Corporation and as an Officer, Director, employee or agent of its
subsidiaries to the fullest extent permitted by the Bylaws of the Corporation
and/or any subsidiary in effect as of the date of this Agreement, the Michigan
Business Corporation Act and the Corporation's and/or subsidiary's Director's
and Officer's liability insurance coverage which will continue to cover Mr.
Koenig on the same basis as other current and former directors and officers are
covered;

11.      This Agreement may not be altered, modified or changed except upon the
express written consent of Mr. Koenig and MEADOWBROOK;

12.      This Agreement and the Confidential Information Agreement, which is
incorporated herein by reference, represent the complete understanding between
the parties. No other promises or agreements shall be binding or modify the
Agreement. All other prior understandings, statements or beliefs have been
merged into the Agreement;

13.      This Agreement shall be interpreted under the laws of the State of
Michigan. Its language shall be construed as a whole, according to its fair
meaning and not strictly construed for or against either party. Should any
provision of the Agreement be declared illegal or unenforceable by any court of
competent jurisdiction and cannot be modified to be enforceable, such provisions
shall immediately become null and void or revised by a court of competent
jurisdiction to be enforceable, leaving the remainder of the Agreement in full
force and effect;

                                   Page 4 of 5

<PAGE>

14.      Any amount under this Agreement shall not be due and payable by
MEADOWBROOK until the Agreement has been executed by all parties and the time
referenced in Paragraph No. 2 has lapsed;

15.      In conjunction with the consideration provided in this Agreement, in
the event that Mr. Koenig decides not to execute this Agreement, or revokes this
Agreement within the above stated seven (7) day period, this Agreement shall be
null and void. Further, this Agreement and all settlement discussions,
understandings or statements with regard to this Agreement shall be inadmissible
in any court of law or administrative proceeding of any kind;

16.      MEADOWBROOK shall not be obligated to pay any severance payment or
waive any sums due it (as set forth in Paragraph No. 3), if Mr. Koenig does not
execute or revokes this Agreement; and

17.      Mr. Koenig agrees that he has had sufficient time to review this
Agreement, consult with legal counsel and executes this Agreement voluntarily.

         IN WITNESS WHEREOF, JEFFREY KOENIG, executes this Agreement on the date
designated below.

         /s/ Jeffrey Koenig        11-08-01        [SIG}                11-08-01
         ---------------------    --------  -----------------------     --------
         JEFFREY KOENIG              Date          WITNESS                Date

         IN WITNESS WHEREOF, MEADOWBROOK, INC., executes the Agreement on the
 date designated below.

         MEADOWBROOK, INC.

         /s/ Michael G. Costello     11/8/01   /s/ Susan Cubbin         11/08/01
         -----------------------    ---------  ----------------------   --------
         MICHAEL G. COSTELLO          Date         WITNESS                Date
         SENIOR VICE PRESIDENT

         IN WITNESS WHEREOF, MEADOWBROOK INSURANCE GROUP, INC., executes the
Agreement on the date designated below.

         MEADOWBROOK INSURANCE GROUP, INC.

         /s/ Michael G. Costello     11/8/01  /s/ Susan Cubbin          11/08/01
         -----------------------    --------  --------------------      --------
         MICHAEL G. COSTELLO        Date           WITNESS                Date
         SENIOR VICE PRESIDENT

                                   Page 5 of 5

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