Exhibit 10.1

SEPARATION AGREEMENT

          AGREEMENT (“Agreement”), dated as of December 19, 2006 between CRM
Holdings, Ltd., a Bermuda company (together with its subsidiaries from time to
time and its successors and assigns, the “Company”), and Martin D. Rakoff (the
“Executive”).

W I T N E S S E T H:

          WHEREAS Executive and the Company are currently parties to an
Employment Agreement;

          WHEREAS Executive and the Company have agreed that Executive will
resign from the Company as of the Resignation Date; and

          WHEREAS the parties wish to document the terms and conditions
pertaining to the resignation;

          NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the Company and Executive hereby agree as follows:

          1.       Definitions.

          The capitalized terms used herein shall have the following meanings:

          “409A Excise Taxes” shall have the meaning ascribed to it in Section
3(a).

          “Additional Payment” shall have the meaning ascribed to it in Section
4(h).

          “Agreement” shall mean this Separation Agreement, together with the
Exhibits.

          “Board of Directors” shall mean the board of directors or other
governing body of Company, and from time to time the boards of directors, or
other governing bodies, of the Company Subsidiaries.

          “Business Day” shall mean any day upon which trading on the Nasdaq
Stock Market occurs.

          “Code” shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.

          “Company Subsidiaries” shall mean all the Company’s subsidiary
companies and affiliates, collectively, including but not limited to, Twin
Bridges (Bermuda), Ltd., CRM USA Holdings Inc., Compensation Risk Managers, LLC,
Compensation Risk Managers of California, LLC, EIMAR, LLC, Compensation Risk
Claims Services, LLC, Embarcadero Insurance Holdings, Inc., Majestic Insurance
Company, Great Western Insurance Services, Inc. and Redhorse Insurance Company.

          “Company” shall mean CRM Holdings, Ltd., together with its successors
and assigns.

          “Competition” shall have the meaning ascribed to it in Section
6(d)(ii).

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          “Competitor” shall have the meaning ascribed to it in Section
6(d)(iii).

          “Confidential Information” shall have the meaning ascribed to it in
Section 6(a)(ii).

          “Covenant Term” shall have the meaning ascribed to it in Section 6.

          “Effective Date” shall have the meaning ascribed to it in Section
4(c).

          “Effectiveness Period” shall mean the period of six (6) months from
the Effective Date and any additional period resulting from an extension
pursuant to Section 4(f).

          “Employment Agreement” shall mean the employment agreement entered
into between the Company and Executive dated November 3, 2005, as annexed hereto
as Exhibit A.

          “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.

          “Executive” shall mean Martin D. Rakoff.

          “Offering” shall have the meaning ascribed to it in Section 4(c).

          “Proceeding” shall have the meaning ascribed to it in Section
3(d)(iv)(A).

          “Prospectus” shall mean the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Rakoff Shares covered
by the Registration Statement, and all other amendments and supplements to the
Prospectus, including, without limitation, post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

          “Rakoff Shares” shall have the meaning ascribed to it Section 4(a).

          “Rakoff Information” shall have the meaning ascribed to it in Section
4(i)(i) .

          “Registration Statement” shall have the meaning ascribed to it in
Section 4(a).

          “Release” shall mean the release executed by Executive of even date
herewith, in the form of Exhibit B.

          “Releasees” shall have the meaning ascribed to it in the Release.

          “Resignation Date” shall the meaning ascribed to it in Section 2(b).

          “Restrictive Covenants” shall the meaning ascribed to it in Section 6.

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          “Rule 144” shall mean Rule 144 as currently promulgated by the SEC
under the Securities Act and codified at 17 C.F.R. § 230.144 and any successor
provision thereto.

          “SEC” shall the U.S. Securities and Exchange Commission.

          “Securities Act” shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder.

          “Underwriter” shall have the meaning ascribed to it in Section 4(c).

          “Violation” shall have the meaning ascribed to it in Section 4(i)(i).

          2.       Resignation.

                    (a)     Executive hereby resigns from each of the following
positions: (i) Co-Chief Executive Officer of the Company; (ii) Co-Chief
Executive Officer of each of the Company Subsidiaries; and (iv) as a member of
the Board of Directors of the Company and all Company Subsidiaries.

                    (b)     Executive’s resignation shall be effective on the
eighth (8th) calendar day following Executive’s execution of this Agreement and
the Release; provided, that Executive has not previously exercised his rights
under Section 9(b) (the “Resignation Date”).

                    (c)     During the initial 6 months after Resignation Date,
Executive shall provide reasonable assistance to the Company with regard to
transition issues and make himself reasonably available during regular business
hours to confer on Company business matters; provided, however, that (i)
Executive shall not be required to assist or confer if and to the extent such
activities interfere with his then current professional or business activities;
(ii) Executive shall be reimbursed by the Company on an after-tax basis for all
expenses actually incurred in any given month in connection with such activities
for the Company; provided, however, that any expenses in an amount exceeding
one-thousand ($1,000) dollars that are incurred, or reasonably estimated to be
incurred, must be pre-approved by the Company; and (iii) except for payments
under Section 4(h) of this Agreement, Executive’s inability or failure to assist
or confer shall not be a defense to Company’s obligations under this Agreement.

                    (d)     Executive hereby agrees to execute and deliver any
and all further documentation reasonably requested by the Company to evidence
and effect the resignation contemplated by this Agreement.  Executive hereby
further agrees that the Employment Agreement is hereby terminated as of the
Resignation Date and from and after the Resignation Date, the Employment
Agreement shall have no further force or effect.

          3.       Payments.

          In consideration for Executive entering into this Agreement,
specifically including the Release, the Company agrees that the Company shall
provide Executive with the following payments and benefits, all of which are
expressly conditioned on Executive’s ongoing compliance with the Restrictive
Covenants, which Restrictive Covenants are in turn expressly conditioned on the
Company’s ongoing compliance with all of its obligations to Executive under this
Agreement other than the provisions of Section 4 of this Agreement:

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                    (a)     Cash Severance Payment.  The Company shall pay
Executive the sum of three million, three-hundred thousand dollars ($3,300,000)
in sixteen (16) equal quarterly cash installments of two-hundred and six
thousand, two-hundred and fifty dollars ($206,250), beginning on January 1, 2007
and following thereafter on the first day of the month of each quarterly
anniversary thereafter (April 1st, July 1st, October 1st and January 1st),
continuing until October 1, 2010;  provided, however, that Executive has at all
times remained in compliance with the Restrictive Covenants.  The timing of such
cash severance payments shall be subject to delay to the extent necessary to
avoid the imposition of any excise tax pursuant to Section 409A of the Code
(such taxes referred to herein as “409A Excise Taxes”); provided, however, that
if the commencement of severance payments is subject to a waiting period to
avoid 409A Excise Taxes, the first installment payment following the waiting
period will be increased to include any prior quarterly payments that were
deferred as a result of such delay.

                    (b)     2006 Bonus.  Executive hereby waives any right,
claim or entitlement to a bonus or annual incentive payment for the Company’s
fiscal year ending December 31, 2006.

                    (c)     Welfare Benefits Continuation.  Executive and his
family shall be entitled to continued participation in all medical, health and
life insurance plans at the same benefit level at which Executive and his family
were participating on the Resignation Date until the earlier of (A) the third
anniversary of the Resignation Date, or (B) the date, or dates, Executive
receives substantially similar coverage and benefits under the plans and
programs of a subsequent employer (such coverage and benefits to be determined
on a coverage-by-coverage, or benefit-by-benefit, basis). Such coverage shall be
determined as if Executive had continued to be an active employee of the
Company, and the Company shall continue to pay the costs of such coverage under
such plans on the same basis as is applicable to active employees covered
thereunder.

                    (d)     Other Benefits.  Executive shall be entitled to
receive such other benefits as follows:

                              (i)     Executive shall receive any and all
benefits accrued under any deferred compensation or qualified or non-qualified
pension plan in which he currently participates (other than any severance plan)
in accordance with, and subject to, the terms thereof; provided that no such
deferred compensation or non-qualified pension benefits shall be paid prior to
the first date on which they would not be subject to 409A Excise Taxes.

                              (ii)     Executive shall be reimbursed by the
Company in an amount not to exceed twenty-thousand ($20,000) dollars for
professional fees and expenses, and such amount(s) distributed under this
Section 3(d)(ii) shall be net of all amounts previously distributed by the
Company under Section 6(d) of the Employment Agreement.  Beyond such amounts,
Executive shall be solely liable for any and all costs and expenses relating to
this Agreement and associated documents.

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                              (iii)     Executive shall be paid any (A) base
salary (at the rate of salary in effect immediately prior to the Resignation
Date) to the extent earned but unpaid as of the Resignation Date, and (B)
reasonable business and fringe benefit expenses incurred by him prior to the
Resignation Date in accordance with Company policy in effect on the Resignation
Date which have not yet been reimbursed. Such payments shall be made in
accordance with the Company’s standard payroll and expense reimbursement
practices.

                              (iv)     Indemnification.

                                         (A)     Company Indemnity.  The Company
agrees that if Executive is at any time made a party, or is threatened to be
made a party, to any third-party action, suit or proceeding, whether civil,
criminal, administrative or investigative (a “Proceeding”), by reason of the
fact that he was a director, officer or employee of the Company or was serving
at the Company’s request as a director, officer, member, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether or not the
basis of such Proceeding is Executive’s alleged action in an official capacity
while serving as a director, officer, member, employee or agent, and including
Proceedings arising from or relating to Executive’s resignation and his
execution of this Agreement, Executive shall be indemnified and held harmless by
the Company to the fullest extent legally permitted or authorized by the
Company’s bye-laws or resolutions of the Board of Directors or, if greater, by
the laws of the State of New York against all cost, expense, liability and loss
(including, without limitation, reasonable attorney’s fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by Executive in connection therewith.  The
Company shall advance to Executive all reasonable costs and expenses to be
incurred by him in connection with a Proceeding within 30 days after receipt by
the Company of a written request for such advance. Such request shall include an
undertaking by Executive to repay the amount of such advance if it shall
ultimately be determined that he is not entitled to be indemnified against such
costs and expenses. The provisions of this Section 3(d)(iv)(A) shall not be
deemed exclusive of any other rights of indemnification to which Executive may
be entitled or which may be granted to him, including, without limitation,
pursuant to Section 4(i) of this Agreement, and it shall be in addition to any
rights of indemnification to which he may be entitled under any policy of
insurance.

                                         (B)     No Presumption Regarding
Standard of Conduct.  Neither the failure of the Company (including its Board of
Directors, independent legal counsel or shareholders) to have made a
determination prior to the commencement of any Proceeding concerning payment of
amounts claimed by Executive under Section 3(d)(iv)(A) that indemnification of
Executive is proper because he has met the applicable standard of conduct, nor a
determination by the Company (including its Board of Directors, independent
legal counsel or stockholders) that Executive has not met such applicable
standard of conduct, shall create a presumption that Executive has not met the
applicable standard of conduct.

                                         (C)     Liability Insurance.  The
Company agrees to continue and maintain a directors and officers’ liability
insurance policy covering Executive to the extent and for as long as the Company
provides such coverage for its other executive officers.

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          4.       Registration and Sale of Rakoff Shares.

                    (a)     Within twenty (20) Business Days after the
Resignation Date, the Company shall file with the SEC a Securities Act
registration statement on Form S-1 (“Registration Statement”) regarding
registration of Executive’s current total of 1,924,690 shares (the “Rakoff
Shares”).  The Company agrees to use its reasonable best efforts to make
appropriate arrangements, including the preparation of a Prospectus containing
required disclosures, to enable the Rakoff Shares (other than any of the Rakoff
Shares that are subject to an over-allotment option agreed to by Executive) to
be sold as promptly as reasonably practicable following effectiveness of the
Registration Statement in a firm commitment underwritten offering (the
“Offering”) by one or more investment banks (the “Underwriter”).  If the
Registration Statement as initially filed does not provide for a firm commitment
underwritten offering, the Registration Statement will describe the Executive’s
plan of distribution relating to the Rakoff Shares.  If the Registration
Statement as initially filed provides for the Offering but the Offering
subsequently is terminated before it is consummated, or Executive otherwise
advised the Company that he does not wish to proceed with the Offering, or the
Offering is consummated for less than all of the Rakoff Shares (including any of
the Rakoff Shares that are subject to such over-allotment option), the Company
will, in accordance with Section 4(d) hereof, as soon as reasonably practicable,
file a post-effective amendment to the Registration Statement to describe the
plan of distribution relating to the sale of the remaining Rakoff Shares.

                    (b)     Not less than five (5) Business Days before filing
the Registration Statement, the Company will furnish to Executive drafts of all
documents proposed to be filed with the SEC in connection with Registration
Statement (other than the documents to be incorporated by reference) and give
reasonable consideration in good faith to any comments of the Executive.

                    (c)     The Company agrees to use its reasonable best
efforts to (i) cause the Registration Statement to be ordered effective by the
SEC as promptly as reasonably practicable and in any event within ninety (90)
days of filing (the “Effective Date”), and (ii) maintain the effectiveness of
the Registration Statement until the earlier of (A) the sale of all the Rakoff
Shares or (B) a period of six (6) months from the Effective Date (the
“Effectiveness Period”).  Following the Effective Date, the Company will use its
reasonable best efforts to facilitate the completion of the Offering, and in
connection with the Offering, the Company will, and cause its management to,
provide the same kind of cooperation to the Underwriter, including execution of
an underwriting agreement with customary representations and warranties, the
provision of legal opinions of Company’s counsel, the provision of a “comfort
letter” by the Company’s independent registered public accountants, and
participation in “road shows” and similar events, as would be provided in an
underwritten offering by the Company of its own securities.  Without limiting
the foregoing, the Company shall:

                              (i)     (A)  prepare and file with the SEC such
amendments, including post-effective amendments, to the Registration Statement
and the Prospectus used in connection therewith as may be necessary to (x) keep
such Registration Statement effective, subject to the provisions of Section 4(f)
of this Agreement, as to the Rakoff Shares for the duration of Effectiveness
Period; (B) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to be filed
pursuant to Rule 424; (C) respond as promptly as reasonably practicable to any
comments received from the SEC with respect to the Registration Statement or any
amendment thereto and, as promptly as reasonably practicable, provide the
Executive true and complete copies of all correspondence from and to the SEC
relating to such Registration Statement that pertains to Executive, but not any
comments that would result in the disclosure to Executive of material and
non-public information concerning the Company; and (D) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the Registration Statement.

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                              (ii)    notify Executive in writing no later than
two (2) Business Days following the day (A)(x) when the SEC notifies the Company
whether there will be a “review” of such Registration Statement and whenever the
SEC comments in writing on such Registration Statement (the Company shall
provide to Executive true and complete copies thereof and all written responses
thereto that pertain to the Executive or to the plan of distribution, but not
information which the Company reasonably believes would constitute material and
non-public information); and (y) with respect to the Registration Statement or
any post-effective amendment thereto, when the same has become effective; (B) of
any request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information that pertains to the Executive or the plan of
distribution; (C) on which the Company has knowledge of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or
the initiation of any proceeding for that purpose; and (D) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Rakoff Shares for sale in any
jurisdiction, or on which the Company has knowledge the initiation or
threatening of any Proceeding for such purpose.

                              (iii)   use its reasonable best efforts to avoid
the issuance of, or, if issued, to obtain the withdrawal of (A) any order
suspending the effectiveness of a Registration Statement, or (B) any suspension
of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.

                              (iv)   furnish to the Executive, without charge,
at least one conformed copy of the Registration Statement and any amendment
thereto and such number of copies of the Prospectus, including any preliminary
Prospectus, and any amendments or supplements thereto in conformity with the
requirements of the Securities Act, and such other documents as Executive may
reasonably request in order to facilitate the disposition of the Rakoff Shares;

                              (v)    use its reasonable best efforts to register
and qualify the Rakoff Shares under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Executive; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;

                              (vi)   in connection with the Offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the Underwriter;

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                              (vii)    notify Executive at any time when a
Prospectus relating to the offer and sale of any Rakoff Shares is required to be
delivered under the Securities Act of the happening of any event as a result of
which the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, whereupon
Executive shall immediately cease any and all sales of Rakoff Shares pursuant to
the Registration Statement or otherwise.  The Company will, as expeditiously as
reasonably practicable, amend or supplement such Prospectus in order to cause
such Prospectus not to include any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and notify Executive that he may resume sales of the Rakoff Shares. 
For the period of time that Executive is caused to cease the sale of Rakoff
Shares pursuant to this Section 4(c)(vii), the Effectiveness Period shall be
extended in accordance with Section 4(f) of this Agreement;

                              (viii)    cause all Rakoff Shares to be listed on
each securities exchange or automated quotation system on which similar
securities issued by the Company are then listed;

                               (ix)     (A)  furnish on the date, or dates, the
Rakoff Shares are delivered to the Underwriter for sale in connection with the
Offering, an opinion, of even date therewith, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the Underwriter and Executive and (B) furnish on the Effective Date, or such
other date as is provided for by the terms of the underwriting agreement, a
letter, of even date therewith (and updated as of the date or dates the Rakoff
Shares are delivered to the Underwriter) relating to the Offering, from the
registered independent certified public accountants of the Company, in form and
substance as is customarily given by registered independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
Underwriter and, to the extent such accountant customarily provides such a
letter to selling stockholders, to the Executive.

                    (d)     For any of the Rakoff Shares not sold in the
Offering, Executive shall have the continuing right to sell such shares pursuant
to the Registration Statement in the public markets, through the same or another
underwriter, through private sales or otherwise during the Effectiveness Period,
at a sale price acceptable to Executive.  To provide for the continued
registration of the offer and sale of the Rakoff Shares not sold in the
Offering, the Company agrees to maintain for the Effectiveness Period, including
any extensions of the Effectiveness Period under Section 4(f) of this Agreement,
the effectiveness of the Registration Statement, and the Company shall as soon
as reasonably practicable:

                              (i)     file one or more amendments or
post-effective amendments, as applicable, to the Registration Statement to
accommodate the plan of distribution relating to the sale of Rakoff Shares,
along with such other changes as are required to comply in all material respects
with the disclosure requirements under the Securities Act; or

                              (ii)    file one or more amendments or
post-effective amendments, as applicable, converting the Registration Statement
to a Securities Act shelf registration statement on Form S-3 and including the
plan of distribution relating to the sale of Rakoff Shares, along with such
other changes as are required to comply in all material respects with the
disclosure requirements under the Securities Act, and use its reasonable best
efforts to cause the Registration Statement, as so amended, to be ordered
effective by the SEC as promptly as practicable after filing; or

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                              (iii)    if permissible under applicable law, file
one or more prospectus supplements including revisions to the plan of
distribution to indicate the applicable distribution alternatives following
completion of the Offering.

                    (e)     Blackout Period.  The Company may suspend the
effectiveness of the Registration Statement on one occasion for a period of up
to seventy five (75) days if there is a possible acquisition or business
combination or other transaction, business development or event involving the
Company that may require disclosure in the Registration Statement, or an
amendment or post-effective amendment thereto, as the case may be, and the
Company’s Board of Directors determines in the exercise of its reasonable
judgment that such disclosure is not in the best interests of the Company and
its shareholders or if any financial statements relating to an acquisition or
business combination are required to be included in the Registration Statement,
or an amendment or post-effective amendment thereto, as the case may be, and
such financial statements are not available.  In such a case, the Company shall
promptly notify the Executive in writing of the suspension of the Registration
Statement’s effectiveness pursuant to this Section 4(e) and, as a consequence,
his need to cease sales of Rakoff Shares pursuant to the Registration Statement,
but such notice shall not disclose any material non-public information.  Upon
the abandonment, consummation, termination or public disclosure of the possible
acquisition or business combination or other transaction, business development
or event, or the availability of the required financial statements with respect
to an acquisition or business combination, the Company shall as soon as
practicable comply with Section 4(c)(vii) and, in connection with the offering
of Rakoff Shares other than in the Offering, Section 4(d) of this Agreement and
promptly notify the Executive when sales of Rakoff Shares may be resumed.  For
the period from Executive’s receipt of notice of his need to cease sales of
Rakoff Shares pursuant to the Registration Statement until Executive’s receipt
of notice that he may resume such sales, the Effectiveness Period shall be
extended in accordance with Section 4(f) of this Agreement.

                    (f)     Extension of Effectiveness Period.  If the sale of
Rakoff Shares may not be effected by reason of (i) the Company’s requirement to
make such filings as contemplated in Section 4(c)(i) or Section 4(d) of this
Agreement, (ii) the occurrences of any event that results in the cessation of
the sale of Rakoff Shares under Section 4(c)(vii) of this Agreement, or (iii)
the Company exercises its rights under Section 4(e) of this Agreement, the
Company shall extend the Effectiveness Period by the number of days that
Executive was prevented from selling Rakoff Shares as a result thereof

                    (g)     Executive’s Right to Delay or Cancel Sale.  The
Company and Executive agree that the decision to enter into any underwriting
agreement or contract for sale of the Rakoff Shares shall be in sole the
discretion of the Executive.

                    (h)     Right to Additional Payment.  Executive shall be
entitled to receive an additional payment equal to one hundred sixty two
thousand dollars ($162,000) on or before January 15, 2007 (the “Additional
Payment”).  The parties acknowledge that the Additional Payment is distinct from
the severance payment set forth in Section 3(a) of this Agreement, that it is
not a benefit which was contemplated or required by the Employment Agreement,
and that it is a separately negotiated item being paid in connection with
Executive’s agreement concerning registration rights with respect to the Rakoff
Shares.

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                    (i)     Indemnification for Sale of Rakoff Shares.

                              (i)     To the extent permitted by law, the
Company will indemnify and hold harmless Executive against any losses, claims,
damages, or liabilities (joint or several) or actions in respect thereof to
which Executive may become subject under the Securities Act, the Exchange Act,
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
“Violation”) by the Company:  (A) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, any issuer free writing prospectus (as
defined in Rule 433 under the Securities Act) relating to the Rakoff Shares, any
“issuer information” filed or required to be filed by the Company pursuant to
Rule 433 under the Securities Act, or any preliminary prospectus together with
any combination of issuer free writing prospectuses and such “issuer
information,” or any materials or information provided to investors by, or with
the approval of, the Company in connection with the marketing of the offering of
the Rakoff Shares, (B) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, (C) in whole or in part upon any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law, or any rule or regulation promulgated under the Securities Act,
the Exchange Act, or any state securities law in connection with an Offering
covered by the Registration Statement, and the Company will promptly reimburse
Executive for any legal or other expenses reasonably incurred by him in
connection with investigating or defending against any such losses, claims,
damages, liabilities or action; provided, however, that the indemnity agreement
contained in this Section 4(i)(i) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company, nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it is based directly upon a Violation which occurs solely in
reliance upon and in conformity with information (“Rakoff Information”) in each
case furnished to the Company by Executive specifically for use in the
Registration Statement regarding (x) Executive, the sale of the Rakoff Shares
and any other information contained in the Registration Statement relating to
Executive that, in each case, as between the Company and Executive, is solely
within Executive’s actual knowledge, (y) Executive’s beneficial ownership of the
Rakoff Shares, and (z) to the extent the Registration Statement addresses a plan
of distribution for the Rakoff Shares other than the plan of distribution
relating to the Offering, such plan of distribution.

                              (ii)    To the extent permitted by law, Executive
will indemnify and hold harmless the Company, each of its directors and each of
its officers who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of the Securities Act, and the
Underwriter, against any losses, claims, damages, or liabilities (joint or
several), or actions in respect thereof, to which the Company or any such
director, officer, or Underwriter may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with Rakoff
Information, and Executive shall promptly reimburse such persons for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending against any such losses, claims, damages, liabilities or action;
provided, however, that the indemnity agreement contained in this Section
4(i)(ii) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of Executive; provided, further, that in no event shall the indemnity by
Executive under this Section 4(i)(ii) exceed the net proceeds from the sale of
Rakoff Shares received by Executive in the offering that is the subject of the
Violation, less any damages Executive has otherwise been required to pay by
reason of the Violation relating to such offering.

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                              (iii)    Promptly after receipt by an indemnified
party under Section 4(i)(i) or Section 4(i)(ii) of notice of the commencement of
any action (including any governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under
Section 4(i)(i) or Section 4(i)(ii), deliver to the indemnifying party a written
notice of the commencement thereof, and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel of its choice; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if in the reasonable judgment
of the indemnified party representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding.  The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall relieve such indemnifying party of any liability to the
indemnified party under this Section 4(i) if, and solely to the extent that,
such failure materially prejudices the ability of the indemnifying party to
defend such action; provided that the omission so to deliver written notice to
the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 4(i).

                              (iv)    If the indemnification provided for in
Section 4(i) is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation that resulted in
such loss, claim, damage or liability, as well as any other relevant equitable
considerations.  The relative fault of the indemnifying party and of the
indemnified party shall be determined with respect to the offering that is the
subject of the Violation by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. 
In no event shall any contribution by Executive under this Section 4(f)(iv) with
respect to the offering that is the subject of the Violation exceed the net
proceeds from the sale of Rakoff Shares in such offering received by Executive,
less any amounts Executive otherwise has been required to pay by reason of the
Violation with respect to such offering.

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                              (v)     The obligations of the Company and
Executive under Section 4(i) shall survive completion of any offering of Rakoff
Shares under the Registration Statement and the termination of this Agreement. 
No indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.

                    (j)     Reports Under the Exchange Act.  With a view to
making available to Executive the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit Executive to sell securities
of the Company to the public without registration or pursuant to a registration
statement on Form S-3, to the extent necessary for Rakoff Shares not sold in the
Offering, the Company agrees to use its reasonable best efforts to:

                              (i)     file with the SEC in a timely manner all
reports and other documents required of the Company under the Exchange Act; and

                              (ii)    furnish to Executive upon his request, so
long as the Executive owns the Rakoff Shares, (A) a written statement by the
Company that it has complied with the reporting requirements of the Exchange
Act, (B) a copy of the most recent annual or quarterly report of the Company,
and (C) such other information as may be reasonably requested to avail Executive
of any rule or regulation of the SEC that permits the selling of any such
securities without registration under the Securities Act.

          5.     Underwriting/Offering Fees.

                    (a)     Executive shall be responsible for all Underwriter
discounts, fees or commissions or brokers’ fees or commissions relating to the
sale of the Rakoff Shares.  The Underwriting discounts, fees or commissions will
be paid as a deduction from the net sale proceeds payable to Executive from the
sale of the Rakoff Shares.

                    (b)     The Company will pay all other expenses relating to
the Registration Statement and the Offering and the satisfaction of its
obligations under Section 4 of this Agreement.

          6.     Disclosure; Restrictive Covenants Against Competition and
Solicitation.

          Executive and Company hereby acknowledge and agree that for a period
of forty-eight (48) months beginning on the Resignation Date (“Covenant Term”),
or as otherwise specified in this Agreement, Executive and Company shall
continue to be bound by the following restrictive covenants and other provisions
(collectively referred to as the “Restrictive Covenants”), with Executive’s
obligations expressly conditioned on Company’s compliance with its obligations
under this Agreement other than the provisions of Section 4 of this Agreement:

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                    (a)     Confidentiality.

                              (i)     During the Covenant Term and at all times
thereafter, Executive shall not disclose to anyone or make use of any
Confidential Information, except when required to do so by legal process, by any
governmental agency having supervisory authority over the business of the
Company and the Company Subsidiaries or by any administrative or legislative
body (including a committee thereof) that requires him to divulge, disclose or
make accessible such information. In the event that Executive is so ordered, he
shall give prompt written notice to the Company to allow the Company the
opportunity to object to or otherwise resist such order.

                              (ii)    For purposes of this Agreement,
“Confidential Information” shall mean all information concerning the business of
the Company, the Company Subsidiaries and their respective affiliates relating
to any of their products, product development, trade secrets, customers,
suppliers, finances, and business plans and strategies. Excluded from the
definition of Confidential Information is information (1) that is or becomes
part of the public domain, other than through the breach of this Agreement by
Executive or (2) regarding the Company’s business or industry properly acquired
by Executive in the course of his career as an executive in the Company’s
industry and independent of Executive’s employment by the Company that is not
proprietary information of the Company or the Company Subsidiaries or their
respective affiliates.  For this purpose, information known or available
generally within the trade or industry of the Company shall be deemed to be
known or available to the public.

                    (b)     Litigation Cooperation.  During the Covenant Term
and at all times thereafter, Executive agrees to cooperate reasonably with the
Company, Company Subsidiaries and their respective affiliates by making himself
reasonably available to testify on behalf of the Company, Company Subsidiaries
and their respective affiliates in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, and to assist the Company,
Company Subsidiaries and their respective affiliates, in any such action, suit,
or proceeding, by providing information and meeting and consulting with the
Board of Directors or its representatives or counsel, or representatives or
counsel to the Company, Company Subsidiaries and their respective affiliates, as
reasonably requested; provided, however, that the same does not materially
interfere with his then current professional activities. The Company agrees to
reimburse Executive, on an after-tax basis, for all expenses actually incurred
in connection with his provision of testimony or assistance.

                    (c)     Non-Disparagement.  During the Covenant Term and at
all times thereafter, Executive agrees that he will not make statements or
representations, or otherwise communicate, directly or indirectly, in writing,
orally, or otherwise, or take any action which may, directly or indirectly,
disparage the Company, Company Subsidiaries or their respective affiliates or
their respective officers, directors, employees, advisors, businesses or
reputations. The Company agrees that, during the Covenant Term and all times
thereafter, the Company will not make statements or representations, or
otherwise communicate, directly or indirectly, in writing, orally, or otherwise,
or take any action which may directly or indirectly, disparage Executive, his
business or reputation. However, nothing in this Agreement shall preclude either
of Executive or the Company from making truthful statements or disclosures
required by applicable law, regulation or legal process.  The Company agrees
that if Executive is in breach of this Section 6(c), the breach shall not be a
defense to, or relieve the Company of, any of the Company’s obligations under
this Agreement, notwithstanding anything to the contrary in Section 7(a)(i)(A)
of this Agreement.

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                    (d)     Non-competition.

                              (i)     During the Covenant Term, Executive shall
not engage in Competition with the Company or any of the Company Subsidiaries or
their respective affiliates.

                              (ii)    “Competition” shall mean engaging in any
activity for a Competitor of the Company, the Company Subsidiaries or their
respective affiliates, whether as an employee, consultant, principal, agent,
officer, director, partner, shareholder (except as a less than one percent
shareholder of a publicly traded company) or otherwise.

                              (iii)    “Competitor” shall mean any corporation,
limited liability company, partnership, limited partnership, sole
proprietorship, joint venture or any other entity which competes with the
business conducted by the Company, any of the Company Subsidiaries or any of
their respective affiliates, as determined on the Resignation Date.

                    (e)     Non-solicitation.

                              (i)     During the Covenant Term, Executive shall
not induce employees of the Company or any of the Company Subsidiaries or their
respective affiliates to terminate their employment, nor shall Executive solicit
or encourage any customers of the Company, the Company’s Subsidiaries or their
respective affiliates, or any corporation, limited liability company,
partnership, limited partnership, sole proprietorship, joint venture or any
other entity in a joint venture relationship (directly or indirectly) with the
Company, the Company’s Subsidiaries or their respective affiliates, to terminate
or diminish their relationship with the Company or to violate any agreement with
any of them.

                              (ii)    During the Covenant Term, Executive shall
not hire, either directly or through any employee, agent or representative, any
employee of the Company, the Company’s Subsidiaries or their respective
affiliates, or any person who was employed by the Company, the Company’s
Subsidiaries or their respective affiliates, within 180 days of such hiring;
provided, however, that the Company agrees that Section 6(e)(i) and Section
(6)(e)(ii) of this Agreement shall not apply solely to Executive’s hiring of his
current administrative assistant.

          7.       Right to Withhold or Cancel Payments; No Mitigation.

                    (a)     If, after written notice and provided such breach is
not cured within seven (7) days of the receipt of the written notice, and to the
extent the breach is curable, Executive breaches any of the Restrictive
Covenants, the Company, or Company Subsidiaries and their respective affiliates,
shall have the right to (i) immediately be relieved of any further obligation to
(A) make any additional payments to Executive pursuant to Section 3 of this
Agreement and (B) maintain the effectiveness of any Registration Statement
pursuant to Section 4 of this Agreement, and (ii) seek injunctive relief and/or
damages for such breach.  Executive acknowledges that a breach of the
Restrictive Covenants would cause irreparable injury and that money damages
would not provide an adequate remedy for the Company and that the Company shall
be entitled to injunctive relief or other equitable relief without posting any
bond; provided, however, the foregoing shall not prevent Executive from
contesting the issuance of any such injunction on the ground that no violation
or threatened violation of the Restrictive Covenants has occurred.  The
Company’s remedies under this Section 7(a), or as provided by law, shall be
cumulative and not exclusive of one another.

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                    (b)     If, after written notice and provided such breach is
not cured within seven (7) days of the receipt of the written notice, and to the
extent the breach is curable, the Company breaches any of its obligations under
this Agreement, Executive shall have the right, in addition to any other
remedies legally available, to (i) be relieved of any further obligation to
Company under the Restrictive Covenants, and (ii) seek injunctive relief and/or
an order of specific performance.

                    (c)     No payments or benefits payable to or with respect
to Executive pursuant to this Agreement shall be reduced by any amount Executive
may earn or receive from employment with another employer or from any other
source. Executive shall have no duty to mitigate his damages by seeking other
employment.

          8.     Announcements.

          The Company and Executive will agree on the wording of all written
internal and external announcements regarding Executive’s resignation from the
Company, except that this Section 8 shall not apply to any and all documents
covered by Section 4 of this Agreement.  The Company further agrees that oral
communications made by a Company spokesperson acting in his official capacity
and on behalf of the Company shall conform in material respects with any
previously agreed upon internal or external announcement regarding Executive’s
resignation from the Company.

          9.     Binding Effect; Revocation; Modification.

                    (a)     The Company and Executive hereby understand and
agree that:

                              (i)     this Agreement is final and binding and
constitutes the complete and exclusive statement of the terms and conditions
relating to Executive’s resignation;

                              (ii)    except as otherwise specifically provided
herein, this Agreement supersedes all prior agreements and understandings,
whether oral or written, between Executive and the Releasees relating to
Executive’s employment, Resignation Date, or severance, including but not
limited to the Employment Agreement;

                              (iii)    no representations or commitments were
made by the parties to induce this Agreement other than as expressly set forth
herein; and

                              (iv)    the consideration provided to Executive in
exchange for the Release exceeds that to which he is otherwise entitled to, and
that this Agreement is fully understood by the parties.

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                    (b)     Executive further represents that Executive has had
the opportunity and time to consult with legal counsel and other personal or
financial advisors of his own choosing concerning the provisions of this
Agreement and the Release and that Executive has been given twenty-one (21) days
within which to execute this Agreement and the Release and seven (7) days
following that execution to revoke the Release. To be effective, any such
revocation must be in writing and actually delivered in accordance with Section
11(g) no later than the close of business on the 7th day following Executive’s
execution of this Agreement and the Release.  If Executive revokes the Release,
then this Agreement, the Release and the resignation contemplated hereunder
shall be null and void.  No obligation upon the Company set forth herein shall
be effective, and no payment or other benefit shall be required to be made or
provided to Executive hereunder, any earlier than the 8th day following
Executive’s execution of the Release. This Agreement may not be modified or
supplemented except by a subsequent written agreement signed by both parties.

          10.     Withholding.

          The Company may withhold from any amounts payable under this Agreement
such federal, state and local taxes as may be required to be withheld pursuant
to applicable laws or regulations.

          11.     Miscellaneous.

                    (a)     Assignability; Binding Nature.  This Agreement shall
be binding upon and inure to the benefit of the Releasees and to their heirs,
administrators, representatives, executors, successors and assigns.  No rights
or obligations of the Company under this Agreement may be assigned or
transferred by the Company, except that such rights or obligations may be
assigned or transferred to any purchaser of all or substantially all of the
Company’s business or assets or any successor to the Company (whether direct or
indirect, by purchase, merger, consolidation or otherwise).  The Company will
require in a writing delivered to Executive that any such purchaser, successor
or assignee (and any parent entity of any such purchaser, successor or assignee)
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
purchase, succession or assignment had taken place.  No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to compensation and benefits.

                    (b)     Representation.  The Company represents and warrants
that it is fully authorized and empowered to enter into this Agreement and that
the performance of its obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization.

                    (c)     Entire Agreement.  This Agreement contains the
entire understanding and agreement between the Company and Executive concerning
the subject matter hereof and, as of the Effective Date, supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, between the Company and Executive with respect thereto.

                    (d)     Amendment or Waiver.  No provision in this Agreement
may be amended unless such amendment is agreed to in writing and signed by
Executive and an authorized officer of the Company. Except as set forth herein,
no delay or omission to exercise any right, power or remedy accruing to the
Company or the Executive shall impair any such right, power or remedy or shall
be construed to be a waiver of or an acquiescence to any breach hereof. No
waiver by either the Company or the Executive of any breach by the other party
of any condition or provision contained in this Agreement to be performed by
such other party shall be deemed a waiver of a similar or dissimilar condition
or provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by Executive or an authorized director or officer of the
Company, as the case may be.

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                    (e)     Survivorship.  The respective rights and obligations
of the Company and the Executive shall survive to the extent necessary to the
intended preservation of such rights and obligations.

                    (f)     Beneficiaries/References.  Executive shall be
entitled, to the extent permitted under any applicable law, to select and change
a beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive’s death by giving the Company written notice
thereof.  In the event of Executive’s death or a judicial determination of his
incompetence, reference in this Agreement to Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal representative.

                    (g)     Notices.  Any notice given to the Company or the
Executive shall be in writing and shall be deemed to have been given when
delivered personally or sent by certified or registered mail, postage prepaid,
return receipt requested, duly addressed to the party concerned at the address
indicated below or to such changed address as such party may subsequently give
such notice of:

If to CRM:

CRM Holdings, Ltd.

 

Skandia International House

 

16 Church Street

 

Hamilton HM HX, Bermuda

 

Attn:  Daniel G. Hickey, Jr., Co-Chief Executive Officer

 

Facsimile No.: (441) 296-3829

 

e-mail:  dhickeyjr@trustcrm.com

 

 

If to Executive:

Mr. Martin Rakoff

 

7030 Route 9

 

Rhinebeck, NY 12572

 

 

With copies to:

Louis Viglotti, Esq.

 

General Counsel

 

Compensation Risk Managers, LLC

 

112 Delafield Street

 

Poughkeepsie, New York  12601

 

Facsimile No.:  845-473-6154

 

e-mail: lviglotti@trustcrm.com

 

 

- and –

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Peter J. Weidman, Esq.

 

The Law Office of Peter J. Weidman

 

600 West Germantown Pike, Suite 400

 

Plymouth Meeting, PA 19462

 

Facsimile No.: 610-940-1685

 

e-mail:  pweidman@weidmanlaw.com

                    (h)     Headings.  The headings of the sections contained in
this Agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.

          12.     Governing Law/Jurisdiction.

          This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York without reference to principles of conflict
of laws.  The Company and Executive hereby consent to the jurisdiction of any or
all of the following courts for purposes of resolving any dispute under this
Agreement: (i) the United States District Court for the Southern District of New
York or (ii) the Supreme Court of the State of New York venued in and for the
County of Dutchess.  The Company and Executive further agree that any service of
process or notice requirements in any such proceeding shall be satisfied if the
rules of such court relating thereto have been substantially satisfied.  The
Company and Executive hereby waive, to the fullest extent permitted by
applicable law, any objection which it or he may now or hereafter have to such
jurisdiction and any defense of inconvenient forum.

          13.     Drafting.

          This Agreement represents the joint efforts of the parties involved
and should not be construed as having been drafted by either party for purposes
of resolving ambiguities in the language contained herein.

          14.     Counterparts.

          This Agreement may be executed by either of the parties hereto in
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.

[Remainder of page intentionally left blank;
Signatures are on next succeeding page]

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          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

 

CRM HOLDINGS, LTD

 

 

 

 

 

 

 

By:

/s/ Daniel G. Hickey, Jr.

 

 

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Daniel G. Hickey, Jr.

 

Its:

Co-Chief Executive Officer

 

 

 

 

 

 

 

 

/s/ Martin D. Rakoff

 

 

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Martin D. Rakoff

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EXHIBIT A

Rakoff Employment Agreement

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EXHIBIT B

RELEASE

          As a material inducement to CRM Holdings, Ltd., a Bermuda company
(together with its subsidiaries from time to time and its successors and
assigns, the “Company”), to enter into the annexed Separation Agreement with
Martin D. Rakoff (the “Executive”) executed of even date herewith (“the
Agreement”), and for and in consideration of the payments and other benefits
provided therein, Executive hereby irrevocably and unconditionally releases,
acquits and forever discharges the Company, its subsidiaries and affiliates, and
their respective successors, assigns, agents, directors, officers, executives,
representatives, subsidiaries, divisions, parent corporations and affiliates,
and all other persons acting by, through or in concert with any of them
(collectively, the “Releasees”) from any and all charges, complaints, claims,
demands, liabilities, obligations, promises, agreements, actions, causes of
action, at law, in equity, or otherwise, costs, damages, expenses (including
attorneys’ fees and costs actually incurred), or any rights of any and every
kind or nature, accrued or unaccrued, contingent or otherwise, known or unknown,
which Executive has or claims to have arising out of facts or circumstances
which have occurred or existed prior to, or which are occurring and do exist as
of, the date of Executive’s execution of the Agreement against each or any of
the Releasees. This release (“Release”) pertains to but is in no way limited to
all matters relating to or arising out of Executive’s employment and the
cessation of his employment with the Company and all claims for severance
benefits or other payments which are not express obligations of the Company
under the Agreement. This Release further pertains to, but is in no way limited
to, rights and claims under the Age Discrimination in Employment Act of 1967
(“ADEA”), Title VII of the Civil Rights Act, as amended, the Americans With
Disabilities Act, the Family Medical Leave Act, and all other federal, state,
local or municipal fair employment and discrimination laws, and all claims under
common law, whether based in tort or contract, law or equity.

          Notwithstanding anything herein to the contrary, this Release does not
apply to: (i) claims that arise after the execution of this Release; (ii) the
Executive’s rights under any tax-qualified pension or claims for accrued vested
benefits under any other employee benefit plan, policy or arrangements
maintained by the Company or under COBRA; (iii) worker’s compensation claims and
any other claims that cannot be waived by law; or (iv) Executive’s rights to
enforce the Agreement, the underwriting agreement, or any other document
executed in connection with Executive’s resignation.

          This Release is not intended to and does not interfere with the Equal
Employment Opportunity Commission’s right to enforce anti-discrimination laws or
to seek relief that will benefit the public and any victim of unlawful
employment practices who have not waived their claims.  Therefore, by signing
this Release, Executive waives any right to personally recover against the
Company, but Executive is not prevented from filing a charge with, or
testifying, assisting, or participating in any proceeding brought by the EEOC,
concerning an alleged discriminatory practice of the Company.

          IN WITNESS WHEREOF, I have executed this Release this 19th day of
December, 2006.

 

/s/ Martin Rakoff

 

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Martin Rakoff, an individual

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