CLAYTON HOLDINGS INC
EX-10
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<p align="right" style="margin:0pt 0pt 12.0pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit
10.1</font></b></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[CLAYTON HOLDINGS, INC. LETTERHEAD]</font></b></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">October 18, 2006</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Mr.
Lou Iannaccone<br>
16 Lookout Drive, No.<br>
Fairfield, CT 06825</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dear Lou:</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This letter confirms your separation from employment
with Clayton Holdings, Inc. (formerly known as CMH Holdings, Inc.) and any and
all of its subsidiaries or affiliates, including but not limited to Clayton
Technologies, Inc. (collectively, the &#147;<u>Company</u>&#148;).&#160; This letter also confirms the agreement that
you have reached with the Company with respect to your separation.&#160; The purpose of this Agreement is to establish
an amicable arrangement for ending your employment relationship, including
releasing the Company and related persons or entities from any claims,
permitting you to receive separation pay and related benefits, and acknowledging
your continuing obligations to the Company.&#160;&#160;
If you agree to the terms of this Agreement, you acknowledge that you
are entering into this Agreement voluntarily.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">With those understandings, you and the Company agree
as follows:</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Resignation
from Employment</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This confirms that, subject to your continued good
faith performance of the responsibilities of your position and your not
otherwise providing the Company with Cause to terminate your employment, you
will resign from employment with the Company and your position as the Company&#146;s
Chief Information Officer effective on February
28, 2007 (the &#147;<u>Resignation Date</u>&#148;).</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Severance
Benefits</u></h1>

<h2 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>Severance Pay</b>.&#160; The
Company shall pay you severance pay (&#147;<u>Severance Pay</u>&#148;) consisting of
salary continuation at your final base salary rate of $ 260,000 per year
effective for the period from the date immediately following the Resignation
Date to and including February 29, 2008 (the &#147;<u>Severance Pay Period</u>&#148;).&#160; The Company shall pay you Severance Pay on
its regular payroll dates applicable to your position with the Company, <i>provided </i>that the Company is not obligated to include you on
the payroll during the Severance Pay Period unless this Agreement becomes
effective in accordance with Section 20, below.</h2>

<h2 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b>Health Benefits</b>.&#160; Your
rights and obligations under COBRA will be explained in a separate letter to
you describing your medical and dental insurance continuation rights under
COBRA.&#160; To continue your medical and
dental insurance coverage, you must elect COBRA continuation coverage.&#160; If you elect COBRA continuation coverage and <i>provided</i> that you and any beneficiaries remain eligible for
COBRA continuation coverage, the Company shall continue to pay for medical and
dental insurance premiums for coverage of you and any beneficiaries to the same
extent as if you had remained employed to the end of the Severance Pay
Period.&#160; You</h2>

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<h2 style="font-weight:normal;margin:0pt 0pt 12.0pt;page-break-after:auto;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">will be responsible for the remaining portion of such coverage as if
you remained employed.&#160; You hereby
authorize the deduction of the portion for which you are responsible from your
Severance Pay.&#160; If you elect COBRA
continuation coverage, you may continue coverage for yourself and any
beneficiaries after the end of the Severance Pay Period at your own expense for
the remainder of the COBRA period, to the extent you and they remain eligible.</font></h2>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Incentive
Compensation</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company shall pay you incentive compensation for
the year ending December 31, 2006 in an amount set by the Company&#146;s Board of
Directors, which target amount shall be $156,000, adjusted to reflect the level
of certain Company performance objectives, except that you understand and agree
that any bonus paid to you will be reduced by $35,000<b> </b>to
the extent that you materially fail to ensure, as determined in good faith by
the Company&#146;s Board of Directors, that the Company has by December 31, 2006,
met certain technology development milestones agreed to between you and the
Company&#146;s Chief Financial Officer, that relate to the Company&#146;s (1)
Sarbanes-Oxley Act of 2002 requirements, and (2) remediation of significant
internal control deficiencies set forth in Grant Thornton&#146;s memo to the Company
dated December 31, 2005.&#160; You understand
and agree that you will not be eligible to receive any incentive compensation
for any period beginning January 1, 2007 or thereafter.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Stock
Options</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">All options that you hold to purchase shares of the
Company&#146;s common stock pursuant to the CMH Holdings, Inc. 2005 Stock Option and
Grant Plan or any predecessor plan that are not vested as of your Resignation
Date shall lapse on that date and will not be exercisable.&#160; As you know, you and the Company entered into
an Incentive Stock Option Agreement with a grant date of November 5, 2004 (the &#147;Incentive
Stock Option Agreement&#148;) pursuant to which the Company granted you options to
purchase 178,360 shares of common stock in the Company at an exercise price of
$0.243889964 per share pursuant to a vesting schedule set forth in the
Incentive Stock Option Agreement.&#160; You
acknowledge that on or about March 1, 2006, the Company effected a reverse
stock split by which the number of any options held by you was divided by four
(4) and the exercise price was multiplied by four (4).&#160; Based on that reverse stock split, the
following summarizes all vested options issued to you in the Incentive Stock
Option Agreement that have not been exercised as of the date of this Agreement
and that shall remain exercisable by you as of the Resignation Date, assuming
that your employment does not terminate prior to the Resignation Date and that
you do not exercise any options prior to the Resignation Date:</font></p>

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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <td width="12%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Vested&nbsp;and</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="12%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Exercisable&nbsp;Shares</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <td width="12%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Unvested&nbsp;Shares</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Exercise</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p align="left" style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Grant&nbsp;Date</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">No.&nbsp;of&nbsp;Shares</font></b></p>
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  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="12%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">as&nbsp;of&nbsp;2/28/07</font></b></p>
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  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="12%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">as&nbsp;of&nbsp;2/28/07</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="12%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Price</font></b></p>
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  <td width="0%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:.34%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
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  <td width="38%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:38.36%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11/5/04</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">44,590</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">37,158</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7,432</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:12.96%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">0.975559856</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:.34%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
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 <p style="margin:0pt 0pt .0001pt;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The exercise of any such stock options shall be
subject to the terms of the CMH Holdings, Inc. Stock Option and Grant Plan and
the Incentive Stock Option Agreement, including, without limitation, the time
limits on exercise.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Tax
Treatment</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Company shall undertake to make deductions,
withholdings and tax reports with respect to payments and benefits under this
Agreement to the extent that it reasonably and in good faith determines that it
is required to make such deductions, withholdings and tax reports.&#160; Payments under this Agreement shall be in
amounts net of any such deductions or withholdings.&#160; Nothing in this Agreement shall be construed
to require the Company to make any payments to compensate you for any adverse
tax effect associated with any payments or benefits or for any deduction or
withholding from any payment or benefit.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Return
of Property</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You confirm that, on the Resignation Date, you will
return to the Company all Company property, including, without limitation,
computer equipment, software, keys and access cards, cell phones, personal data
assistants, credit cards, files and any documents (including computerized data
and any copies made of any computerized data or software) containing
information concerning the Company, its business or its business relationships
(in the latter two cases, actual or prospective).&#160; You
also commit to deleting and finally purging any duplicates of files or
documents that may contain Company information from any computer or other
device that remains your property after the Resignation Date.&#160; In the event that you discover that
you continue to retain any such property, you shall return it to the Company
immediately.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Acknowledgement
of Enforceability of Employee Agreement</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You understand and agree that you entered into an
Employee Agreement with the Company on or about September 6, 2005, a copy of
which is attached at <b>Tab A</b> (the &#147;Employee
Agreement&#148;) and that, in addition to governing terms for your employment
through February 28, 2007, the Employee Agreement also contains certain
provisions that survive the termination of your employment with the Company
including, but not limited to, agreements related to Proprietary Information
(Sections 1 and 2), return of Company property upon termination of employment
(Section 6), Enforcement of Intellectual Property Rights (Section 7) and
Restrictions on post-termination activities (Section 8).&#160; You acknowledge and agree that your continued
employment as an at-will employee of the Company constituted adequate
consideration for the Employee Agreement when you executed it and that the
payments and benefits provided to you by the Company pursuant to this Agreement
constitute additional consideration to support the Employee Agreement as it is
acknowledged and agreed to herein.</font></p>


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<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Release
of Your Claims</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In consideration for, among other terms, the payments
and benefits described in Section&nbsp;2, to which you acknowledge you would
otherwise not be entitled, you voluntarily release and forever discharge the
Company, its affiliated and related entities, its and their respective
predecessors, successors and assigns, its and their respective employee benefit
plans and fiduciaries of such plans, and the current and former officers,
directors, shareholders, employees, attorneys, accountants and agents of each
of the foregoing in their official and personal capacities (collectively
referred to as the &#147;<u>Releasees</u>&#148;) generally from all claims, demands,
debts, damages and liabilities of every name and nature, known or unknown (&#147;<u>Claims</u>&#148;)
that, as of the date when you sign this Agreement, you have, ever had, now
claim to have or ever claimed to have had against any or all of the
Releasees.&#160; This release includes,
without limitation, all Claims:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt .0001pt 18.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>relating to your
employment by the Company and the termination of your employment with the
Company;</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt .0001pt 18.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>of wrongful
discharge;</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt .0001pt 18.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>of breach of
contract, including, but not limited to, breach of the Employment Agreement
between you and Clayton Technologies, Inc. dated September 15, 2004 (the &#147;Employment
Agreement&#148;);</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt .0001pt 18.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>of retaliation
or discrimination under federal, state or local law (including, without
limitation, Claims of age discrimination or retaliation under the Age
Discrimination in Employment Act, Claims of disability discrimination or
retaliation under the Americans with Disabilities Act, Claims of discrimination
or retaliation under Title VII of the
Civil Rights Act of 1964 and/or Claims
brought pursuant to the Connecticut Human Rights Law);</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt .0001pt 18.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>under any other
federal or state statute (including, without limitation, Claims under the
Worker Adjustment and Retraining Notification Act);</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt .0001pt 18.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>of defamation or
other torts;</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt .0001pt 18.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>of violation of
public policy;</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt .0001pt 18.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>for wages,
bonuses, incentive compensation, stock, stock options, vacation pay or any
other compensation or benefits; and</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt 18.0pt;text-indent:-18.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>for
damages or other remedies of any sort, including, without limitation,
compensatory damages, punitive damages, injunctive relief and attorney&#146;s fees;</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">provided</font></i>,
however, that this release shall not affect your vested rights under the
Company&#146;s Section&nbsp;401(k) plan or your rights under this Agreement.</p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You agree that you shall not seek or accept damages of
any nature, other equitable or legal remedies for your own benefit, attorney&#146;s
fees, or costs from any of the Releasees with respect to any Claim released by
this Agreement.&#160; As a material inducement
to the Company to enter into this Agreement, you represent that you have not
assigned to any third party and you have not filed with any agency or court any
Claim released by this Agreement.</font></p>


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<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Nondisparagement</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You agree not to make any disparaging statements
concerning the Company or any of its affiliates or current or former officers,
directors, shareholders, employees or agents.&#160;
You further agree not to take any actions or conduct yourself in any way
that would reasonably be expected to affect adversely the reputation or
goodwill of the Company or any of its affiliates or any of its current or
former officers, directors, shareholders, employees or agents.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Information
Concerning Actual, Potential or Alleged Financial Irregularities</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You represent that you are not aware of any actual,
potential or alleged financial irregularities concerning the Company.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Future
Cooperation</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You agree to cooperate reasonably with the Company and
all of its affiliates (including its and their outside counsel) in connection
with the contemplation, prosecution and defense of all phases of existing, past
and future litigation about which the Company believes you may have knowledge
or information.&#160; You further agree to make
yourself available at mutually convenient times during and outside of regular
business hours as reasonably deemed necessary by the Company&#146;s counsel.&#160; The Company shall not utilize this Section 11
to require you to make yourself available to an extent that would unreasonably
interfere with full-time employment responsibilities that you may have.&#160; You agree to appear without the necessity of
a subpoena to testify truthfully in any legal proceedings in which the Company
calls you as a witness.&#160; The Company
shall also reimburse you for any pre-approved reasonable business travel
expenses that you incur on the Company&#146;s behalf as a result of your litigation
cooperation services, after receipt of appropriate documentation consistent
with the Company&#146;s business expense reimbursement policy.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Suspension
or Termination of Payments</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In the event that you fail to comply with any of your
obligations under this Agreement, in addition to any other legal or equitable
remedies it may have for such breach the Company shall have the right to
terminate or suspend its payments to you under this Agreement.&#160; The termination or suspension of such
payments in the event of such breach by you will not affect your continuing
obligations under this Agreement.&#160;
Notwithstanding the foregoing, this provision shall not apply to the
extent that your breach of this Agreement consists of initiating a legal action
in which you contend that the release set forth in Section 8 is invalid, in
whole or in part, due to the provisions of 29 U.S.C. &#167;&nbsp;626(f).</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Legal
Representation</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Agreement is a legally binding document and your
signature will commit you to its terms.&#160;
You acknowledge that you have been advised to discuss all aspects of
this Agreement with your</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">5</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

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<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">attorney, that you have carefully read and fully
understand all of the provisions of this Agreement and that you are voluntarily
entering into this Agreement.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Absence
of Reliance</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In signing this Agreement, you are not relying upon
any promises or representations made by anyone at or on behalf of the Company.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Enforceability</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court
of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Waiver</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">No waiver of any provision of this Agreement shall be
effective unless made in writing and signed by the waiving party.&#160; The failure of any party to require the
performance of any term or obligation of this Agreement, or the waiver by any
party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Enforcement</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u style="font-weight:bold;">Jurisdiction</u></b>.&#160; You and the Company hereby agree that the
Superior Court of the State of Connecticut and the United States District Court
for the District of Connecticut shall have the exclusive jurisdiction to
consider any matters related to this Agreement, including without limitation
any claim for violation of this Agreement.&#160;
With respect to any such court action, you (i) submit to the
jurisdiction of such courts, (ii) consent to service of process, and (iii)
waive any other requirement (whether imposed by statute, rule of court or
otherwise) with respect to personal jurisdiction or venue.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <b><u style="font-weight:bold;">Relief</u></b>.&#160;
You agree that it would be difficult to measure any harm caused to the
Company that might result from any breach by you of your promises set forth in
Sections 6, 7, 8, 9 or 11, and that in any event money damages would be an
inadequate remedy for any such breach.&#160;
Accordingly, you agree that if you breach, or propose to breach, any
portion of your obligations under Sections 6, 7, 8, 9 or 11, the Company shall
be entitled, in addition to all other remedies it may have, to an injunction or
other appropriate equitable relief to restrain any such breach, without showing
or proving any actual damage to the Company and without the necessity of
posting a bond.&#160; In the event that the
Company prevails in any action to enforce Sections 6, 7, 8, 9 or 11, then you
also shall be liable to the Company for attorney&#146;s fees and costs incurred by
the</font></p>


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<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Company in enforcing such provision(s).&#160; In addition, in the event that you breach
your continuing obligations under any portion of Section 7 of the Employee
Agreement you agree that the restrictions of Section 7 of the Employee
Agreement shall remain in effect for the period of such breach notwithstanding
the period of one (1) year set forth in Section 7 of the Employee Agreement and
you further agree that the same restrictions shall apply for a period of one
(1) year commencing effective upon the cessation of any such breach.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">18.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Governing
Law; Interpretation</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Agreement shall be interpreted and enforced under
the laws of the State of Connecticut, without regard to conflict of law
principles.&#160; In the event of any dispute,
this Agreement is intended by the parties to be construed as a whole, to be
interpreted in accordance with its fair meaning, and not to be construed
strictly for or against either you or the Company or the &#147;drafter&#148; of all or
any portion of this Agreement.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">19.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Entire
Agreement</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Agreement constitutes the entire agreement
between you and the Company.&#160; This
Agreement supersedes any previous agreements or understandings between you and
the Company, including but not limited to the Employment Agreement.&#160; This Agreement does not, however, supersede
your continuing obligations to the Company as set forth in the Employee
Agreement <b>(Tab A)</b>, which remain in full force and
effect.</font></p>

<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Time
for Consideration; Effective Date</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You have the opportunity to consider this Agreement
for twenty-one (21) days before signing it.&#160;
To accept this Agreement, you must return a signed original of this
Agreement so that it is received by the undersigned at or before the expiration
of this twenty-one (21) day period.&#160; If
you sign this Agreement within less than twenty-one (21) days of the date of
its delivery to you, you acknowledge by signing this Agreement that such
decision was entirely voluntary and that you had the opportunity to consider
this Agreement for the entire twenty-one (21) day period.&#160; For the period of seven (7) days from the
date when this Agreement becomes fully executed, you have the right to revoke
this Agreement by written notice to the undersigned.&#160; For such a revocation to be effective, it
must be delivered so that it is received by the undersigned at or before the
expiration of the seven (7) day revocation period.&#160; This Agreement shall not become effective or
enforceable during the revocation period.&#160;
This Agreement shall become effective on the first business day
following the expiration of the revocation period (the &#147;<u>Effective Date</u>&#148;).</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">7</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

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 <p style="margin:0pt 0pt .0001pt;"></p>


<h1 style="font-family:Times New Roman;font-size:10.0pt;font-weight:normal;margin:0pt 0pt 12.0pt 36.0pt;page-break-after:auto;text-indent:-36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">21.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><u>Counterparts</u></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original, but all of which together shall constitute one and the same
document.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Please indicate your agreement to the terms of this
Agreement by signing and returning to me the original of this letter within the
time period set forth above.</font></p>

<p style="margin:0pt 0pt 24.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Very truly yours,</font></p>

<p style="margin:0pt 0pt 24.0pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CLAYTON
HOLDINGS, INC.</font></b></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="3%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:3.68%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading -->By:</p>
  </td>
  <td width="17%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:17.62%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Frederick
  Herbst</font></p>
  </td>
  <td width="35%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:35.82%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="14%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:14.64%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">October 18, 2006</font></p>
  </td>
  <td width="28%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:28.24%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="3%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:3.68%;">
  <p style="margin:0pt 0pt .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="53%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:53.44%;">
  <p style="margin:0pt 0pt .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Frederick
  Herbst</font></b></p>
  </td>
  <td width="14%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:14.64%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date</font></p>
  </td>
  <td width="28%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:28.24%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="3%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:3.68%;">
  <p style="margin:0pt 0pt .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="53%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:53.44%;">
  <p style="margin:0pt 0pt .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Chief
  Financial Officer</font></b></p>
  </td>
  <td width="14%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:14.64%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="28%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:28.24%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<p style="line-height:1.0pt;margin:0pt 0pt 12.0pt;"><font size="1" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0pt 0pt 24.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Enclosure (Tab A &#150;
Employee Agreement)</font></p>

<p style="margin:0pt 0pt 24.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">You are advised to
consult with an attorney before signing this Agreement.<b> </b>The foregoing is agreed to and accepted
by:</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="20%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:20.1%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading -->/s/ Louis A. Iannaccone</p>
  </td>
  <td width="37%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:37.06%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="14%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:14.62%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">October 18, 2006</font></p>
  </td>
  <td width="28%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:28.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="57%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:57.16%;">
  <p style="margin:0pt 0pt .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Louis
  A. Iannaccone</font></b></p>
  </td>
  <td width="14%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:14.62%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date</font></p>
  </td>
  <td width="28%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:28.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<p style="line-height:1.0pt;margin:0pt 0pt 12.0pt;"><font size="1" face="Times New Roman">&nbsp;</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">8</font></p>
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