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                                                                   Exhibit 10.14

                              EMPLOYMENT AGREEMENT

       THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is entered into this
2nd day of September, 2005, effective on the Employee's (as defined herein)
first date of employment which shall be September 19, 2005 (the "EFFECTIVE
DATE") by and between CLAYTON HOLDINGS, INC., a Delaware Corporation with its
principal place of business located at 2 Corporate Drive, Shelton, CT 06484
(hereinafter referred to as "EMPLOYER"), and Frederick C. Herbst (hereinafter
referred to as "EMPLOYEE"). Employer and Employee are collectively hereinafter
referred to as the "PARTIES".

                                   WITNESSETH:

       WHEREAS, Employer together with its subsidiaries and other affiliates is
in the business of providing advisory products and services relating to
residential, consumer and commercial loan asset classes, including (a) portfolio
due diligence, advice, data collection, management and analysis, (b) regulatory
and operational compliance reporting, (c) credit underwriting, and (d) loan
valuation, in each case to financial institutions, including investment banking
firms, mortgage companies, commercial banks, thrifts, government sponsored
enterprises, mortgage insurance companies and bond insurers (together with any
other businesses or activities conducted by Employer and its subsidiaries from
time to time, the "BUSINESS");

       WHEREAS, Employer desires to employ Employee in the position of Chief
Financial Officer ("CFO"); and

       WHEREAS, Employee desires be employed by Employer in the position of CFO.

       NOW THEREFORE, for the consideration stated herein, Employer agrees to
employ Employee and Employee agrees to accept employment in accordance with the
following terms and conditions.

I.     EMPLOYMENT

       (a) Employee acknowledges and agrees that his employment is at-will,
       meaning that either Employer or Employee may terminate his employment at
       any time for any reason or for no reason, in accordance with applicable
       law, so long as the Party desiring to terminate Employee's employment
       (and this Agreement) provides written notice thirty (30) days in advance
       of the termination date, unless such termination is by Employer for Cause
       (as such term is defined in Section VI herein). Nothing in this Agreement
       is intended to or should be construed to contradict, modify or alter this
       at-will relationship. Employee's at-will employment status shall not
       effect any rights to severance payments and benefits to which he may be
       entitled pursuant to Section VI below.

       (b) Employee affirms and represents that as of the commencement of his
       employment with Employer he will be under no obligation to any former
       employer or other party which is in any way inconsistent with, or which
       imposes any restriction upon, Employee's acceptance of employment
       hereunder with Employer, the employment of Employee by Employer, or
       Employee's undertakings under this Agreement.

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II.    DUTIES; RESPONSIBILITIES; REPORTING

       (a) Employee shall be employed as CFO, and shall faithfully and
       competently perform such duties as inhere in such position and as are set
       forth in the Job Description attached hereto as Exhibit 1. Employee shall
       also perform and discharge such other employment duties and
       responsibilities as the Chief Executive Officer of Employer ("CEO")
       and/or the Board of Directors of Employer (the "BOARD") shall from time
       to time determine.

       (b) Employee may be required from time to time to serve in additional
       roles and capacities on behalf of Employer or any entity that directly or
       indirectly controls, is controlled by, or is under common control with,
       Employer (an "AFFILIATE") not materially inconsistent with his position
       as CFO of Employer, and for which Employee shall not be entitled to any
       additional compensation or benefits.

       (c) Except as may otherwise be approved in advance by the CEO, and except
       during vacation periods and reasonable periods of absence due to
       sickness, personal injury or other disability, Employee shall devote his
       full business time throughout the term of his employment to the services
       required of him hereunder. Employee shall render his business services
       exclusively to the Employer during the term of his employment and shall
       use his best efforts, judgment and energy to improve and advance the
       business and interests of Employer in a manner consistent with the duties
       of his position.

       (d) In his capacity as CFO, Employee will report to the CEO or such other
       individual as the CEO of Employer may direct from time to time.
       Employee's duties and responsibilities may be amended, modified,
       increased or decreased from time to time as Employer may determine in its
       sole and absolute discretion.

       (e) Employee will primarily provide services from Employer's offices at 2
       Corporate Drive, Shelton, Connecticut 06484 or at such other location as
       agreed to by Employer and Employee. Employee acknowledges and agrees that
       depending upon the needs of Employer, he may be required to provide
       services from time to time at locations other than Employer's principal
       location in Shelton, Connecticut.

III.   COMPENSATION

       (a) BASE SALARY. As compensation for Employee's performance of his duties
       hereunder, Employer shall pay to Employee an annual base salary of Two
       Hundred Fifty Thousand Dollars ($250,000), less applicable taxes and
       withholdings, payable in installments in accordance with the normal
       payroll practices of Company, less required deductions for state and
       federal withholding tax, social security and all other employment taxes
       and payroll deductions ("BASE SALARY"). Base Salary shall be reviewed
       annually and shall be subject to annual increases, if any, as determined
       by Employer.

       (b) TRAVEL ALLOWANCE. In addition to Base Salary, Employer shall pay to
       Employee a Travel Allowance in the amount of $2,000 per month for mileage
       and accommodations.

       (c) INCENTIVE COMPENSATION. In addition to Base Salary, Employer shall be
       eligible to receive an annual incentive bonus. Employer, at its
       discretion, shall determine the exact amount of such bonus based on a
       combination of Employer and Employee performance goals, criteria and
       targets established by the CEO and the Board (or the Compensation

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       Committee of the Board), which terms shall be disclosed to Employee in
       writing on an annual basis. For calendar year 2005, Employee's incentive
       compensation shall be based on a pro rata share of a target bonus of
       $300,000. The targeted bonus amount specified above (which as stated
       herein shall be pro rated based on the Effective Date) shall constitute
       the maximum payable incentive compensation available to Employee for
       calendar year 2005. The bonus provided for in this Section III(c), if
       any, shall be paid to Employee at such time as Employer pays bonuses to
       other employees at Employee's level, provided Employee must be employed
       by the Company on such date in order to be eligible to receive payment
       for such bonus.

       (d) TAXES AND WITHHOLDING. All Base Salary payments, bonus payments and
       benefits provided to Employee hereunder shall be reported as taxable
       income to the extent required by law and shall be subject to applicable
       federal, state and local income and payroll withholding requirements.

IV.    GRANT OF STOCK OPTIONS

       Subject to the terms and conditions of the Clayton Holdings, Inc. 2005
       Stock Option Grant Plan (the "PLAN"), and upon execution and delivery of
       this Agreement and the Stock Option Agreement memorializing the grant,
       Employer will issue to Employee stock options (the "OPTIONS") to purchase
       200,000 shares of common stock of the Company. The exercise price of the
       Options shall be the fair market value of a share of common stock of the
       Company, as determined by Employer, as of the date of grant of the
       Options, which shall be the Effective Date. Provided Employee remains an
       employee of Employer, twenty-five percent (25%) of the Options shall vest
       on the one-year anniversary of the date of grant of the Options, with the
       remaining Options vesting at a rate of 2.08333% per month thereafter. The
       specific terms and conditions relating to the Options shall be set forth
       in the Stock Option Agreement and the Plan.

V.     OTHER EMPLOYEE BENEFITS

       (a) EMPLOYER INSURANCE PLANS. Employee shall be entitled to participate
       in any Employer established insurance plan(s) on the same terms and
       conditions as other employees of Employer and in a manner consistent with
       and in accordance with the terms and provisions of said plan(s) and
       Employer's policies.

       (b) EMPLOYER RETIREMENT PLANS. Employee shall be entitled to participate
       in any Employer established pension or retirement plan(s) on the same
       terms and conditions as other employees of Employer and in a manner
       consistent with and in accordance with the terms and conditions of said
       plan(s) and Employer's policies.

       (c) VACATION. Employee shall earn up to twenty-three (23) days vacation
       on an annual basis commencing January 1st of each calendar year at the
       rate of 1.92 days per month of employment. Vacation periods are not
       cumulative and must be taken annually. Vacation not taken during the year
       in which it is earned is forfeited. If Employee's employment terminates,
       Employee will be paid for all accrued, unused vacation for the year of
       termination at Employee's then current Base Salary. Vacation must be
       taken by Employee at such time or times as approved by Employer.

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VI.    CERTAIN RIGHTS AND OBLIGATIONS UPON TERMINATION OF EMPLOYMENT

       (a)    In the event Employee's employment terminates for any reason other
       than (i) by Employer for Cause (as that term is defined herein), (ii) as
       a result of Employee's voluntary termination other than for Good Reason
       (as that term is defined herein), or (iii) due to Employee's death or
       disability, Employer shall provide to Employee the following termination
       benefits ("TERMINATION BENEFITS"):

              (i) continuation of salary at a rate equal to 100% of Employee's
              Base Salary as in effect at the date of termination for a period
              of twelve (12) months following the date of termination (payment
              shall be subject to withholding under applicable law and shall be
              made in periodic installments in accordance with Employer's
              payroll policies); and

              (ii) continuation of group health plan benefits during the period
              during which Employee is receiving payments pursuant to subsection
              (i) above, to the extent authorized by and consistent with 29
              U.S.C. Section 1161 ET SEQ. (commonly known as "COBRA"), with the
              cost of the regular premium for such benefits shared in the same
              relative proportion by Employer and Employee as in effect for
              other employees who are at a similar level as Employee.

       (b)    Employer shall have the right to terminate the Termination
       Benefits set forth in Section VI(a)(i) and (ii) in the event that
       Employee fails to comply with Employee's continuing obligations under
       Sections VII and VIII of this Agreement. Employer's liability for Base
       Salary continuation pursuant to subsection (a)(i) shall be reduced by the
       amount of any severance, termination pay or salary continuation paid to
       Employee pursuant to any plan or policy of Employer. Notwithstanding the
       foregoing, nothing in this Section VI shall be construed to affect
       Employee's right to receive COBRA continuation entirely at Employee's own
       cost to the extent that Employee may continue to be entitled to COBRA
       continuation after Employee's right to cost sharing under subsection
       (a)(ii) ceases. The Termination Benefits paid by Employer to Employee
       under this Section VI shall be in full satisfaction, compromise and
       release of any claims arising exclusively out of any termination of
       Employee's employment, including but not limited to any common law or
       contractual claims, and that the payment of the Termination Benefits
       shall be contingent upon Employee's delivery of a general release
       effectuating such full satisfaction, compromise and release, in favor of
       Employer and its affiliates of any and all claims arising exclusively out
       of any such termination, which general release shall be effective upon
       termination of employment and shall be in a form reasonably satisfactory
       to Employer, it being understood that no Termination Benefits shall be
       provided unless and until Employee executes and delivers such release.

       (c)    Definitions of "CAUSE" and "GOOD REASON"

              (i) For purposes of this Agreement, the circumstances giving rise
       to termination for "CAUSE" shall include, without limitation, (A) any
       act, whether or not involving Employer or any of its affiliates or their
       respective businesses, of fraud or gross misconduct (including, without
       limitation, any act of employment discrimination or related harassment);
       (B) any material act of dishonesty or illegality; (C) any act
       constituting breach of fiduciary duty; (D) the conviction of Employee for
       (1) a felony, or (2) any misdemeanor involving moral turpitude; (E) the
       commission, in the reasonable judgment of the Board, of an act

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       involving a violation of a material procedure or policy of Employer; (F)
       a material and sustained failure of Employee to perform the duties and
       responsibilities assigned or delegated under this Agreement, which such
       failure continues for fourteen (14) days after written notice has been
       given to Employee by the Board; (G) any act of gross negligence or
       willful misconduct by Employee; or (H) a breach by Employee of any of
       Employee's material obligations under this Agreement.

              (ii) For purposes of this Agreement, "GOOD REASON" shall mean the
       occurrence of any of the following events: (A) a reduction in Employee's
       annual Base Salary; or (B) a material dimunition of Employee's duties or
       job function as the Chief Financial Officer of the Employer or otherwise
       normally expected of or assigned to a person holding the position of
       Chief Financial Officer at a business of Employer's size, nature and
       industry, or (C) the relocation of the offices at which Employee is
       principally employed to any other location which increases Employee's
       commute by more than fifty (50) miles from the current location of such
       offices.

       (d)    Upon termination of Employee's employment, for any reason,
       Employee shall deliver forthwith to Employer all manner of
       identification, advertising materials, promotional items, sample
       contracts, and other materials Employer may have furnished Employee, or
       which Employee may have created or developed for Employer during
       Employee's employment, as well as all documents pertaining to Employer,
       including but not limited to correspondence with customers and potential
       customers, communications between Employer and Employee, customer and
       potential customer information including names, addresses and telephone
       and fax numbers and any other material not specified above but which
       contain Confidential Information (as defined below), as well as all other
       property of Employer in Employee's possession, custody or control, and
       Employee shall execute at the request of Employer, such documents and
       take such actions as necessary in order to reaffirm the covenants and
       obligations set forth in this Agreement; provided, however, that failure
       to request such reaffirmation shall not act as a waiver of any
       requirements of this Agreement.

VII.   CONFIDENTIAL INFORMATION

       (a)    DEFINITION OF "CONFIDENTIAL INFORMATION" means information and
       data not generally known outside Employer (unless as a result of a breach
       by Employee or others of any of the obligations imposed by this Agreement
       or a similar agreement or legal duty). It includes all confidential
       information of Employer, its parent and subsidiary companies and its and
       their affiliates (collectively, the "EMPLOYER GROUP") and their
       respective customers, including, but not limited to: the terms,
       conditions and existence of this Agreement, research, design,
       development, strategies, production, presentation, methodologies, costs,
       expenses, margins and budgets; information and materials used in
       marketing or presenting the business of any member of the Employer Group,
       including style, format and content; customer and potential customer
       lists and information pertaining to customer goals and strategies; prices
       and terms offered or paid for products and services; information and
       materials related to determining whether products and services should be
       offered or sold to a customer; supplier and contractor lists, contacts,
       prices, specifications and other information; techniques, procedures,
       processes, formulas, equipment, methods, technical data, know-how and
       compilations; business proposals and plans and financial and operational
       information and strategies; the financial and capital structure of any
       member of the Employer Group; creditors, debtors and financial data of
       any member of the Employer Group; any material or information of whatever
       nature which provides Employer or Employer's customers an

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       opportunity to gain an advantage over competitors; and any and all other
       trade secrets or proprietary and confidential information or materials of
       Employer or any customer or potential customer.

       (b)    DUTY NOT TO DISCLOSE. Except as required in the course of
       representing Employer and in the furtherance of Employer's interests,
       Employee shall not use or disclose Confidential Information to any person
       or entity for any reason or purpose whatsoever during or after the term
       of Employee's employment by or other engagement with Employer. Employee
       shall immediately notify an officer of Employer of any information which
       becomes known to Employee which indicates that an unauthorized disclosure
       or use of Confidential Information may have occurred or is likely to
       occur. Employee shall not publish or submit for publication any material
       based upon any Confidential Information without the prior written consent
       of an officer of Employer. Employee acknowledges that Employer has
       expended time, effort and money to obtain and develop the Confidential
       Information, and that the Confidential Information constitutes special,
       valuable and unique assets of Employer, without regard to whether or not
       any of the Confidential Information is embodied in tangible or intangible
       form.

       (c)    PROTECTION OF COMPANY PROPERTY. Employee shall protect all
       property of the Employer Group (as well as the property of customer(s) to
       which Employee has access because of Employee's employment by or other
       engagement with Employer) with the utmost care and shall not suffer or
       permit any such property, including, without limitation, copies of any
       such property or any proprietary works to be removed from Employer's
       offices or other locations without the consent of an officer of Employer.
       All materials containing Confidential Information are the property of
       Employer, Parent or the affiliate as the case may be. Employee
       acknowledges and shall adhere to the Employer Group's security policies
       and measures, including, but not limited to: (i) locking offices and file
       cabinets; (ii) enforcing and complying with Employer's sign in and out
       procedures; and (iii) provision of information only to those authorized
       to receive it, who have signed Confidentiality Agreements with Employer,
       and who need to know such information. In addition, Employee acknowledges
       and shall adhere to Employer's procedures concerning password-protected
       computer access and, among other things, shall safeguard and maintain the
       confidentiality of any and all such passwords used to access records or
       information.

       (d)    SURVIVAL. Employee acknowledges that the provisions of this
       Section VII and the Employee Non-Disclosure Agreement are integral parts
       of Employee's employment arrangements with Employer and shall
       specifically survive the termination of this Agreement and Employee's
       employment with Employer.

VIII.  NON-COMPETITION RESTRICTIONS

       (a)    POST-EMPLOYMENT RESTRICTIONS. Employee acknowledges and agrees
       that during his employment with Employer and for a period of twelve (12)
       months immediately following the termination of the employment
       relationship, whether such termination is voluntary or involuntary,
       Employee, without additional compensation, shall not:

              (i) directly or indirectly, perform services (as an agent,
       principal, employee, consultant, contractor, or other capacity) for a
       Competitor similar to those Employee performed for Employer or for a
       Customer or Potential Customer of Employer;

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              (ii) directly or indirectly, own any interest in a Competitor of
       Employer, except that owning such an interest which does not exceed five
       percent (5%) of the outstanding shares of stock of a publicly traded
       entity shall not violate this section;

              (iii) directly or indirectly, solicit or accept any business of
       the nature performed by Employer from any Customer or Potential Customer
       of Employer or otherwise interfere with or disturb the relationship
       between any Customer or Potential Customer and Employer;

              (iv) directly or indirectly, solicit or induce or attempt to
       solicit or induce any employee of Employer to leave Employer or hire any
       employee of Employer on your own behalf or on behalf of another person or
       entity; or

              (v) solicit or induce or attempt to solicit or induce any
       supplier, vendor or contractor of Employer to terminate or disturb its
       relationship or business with Employer.

       (b)    DEFINITIONS. For the purposes of the foregoing paragraph and
       sub-paragraphs:

              (i) "COMPETITOR" shall mean any business (including the business
       of any successor, assign or affiliate) engaged in the provision of
       products, services, programs or systems similar to or competitive with
       those engaged in or provided by Employer and those planned (while
       Employee was working with Employer) to be introduced by Employer,
       provided that in the case of planned products, services, programs or
       systems, Employee was involved in the planning or development of such
       items or had access to such plans or items.

              (ii) While Employee is employed by Employer, "CUSTOMER(S)" shall
       mean a person or entity which purchased any product, service, program, or
       system from Employer. If Employee's employment with Employer is
       terminated by either party, with or without Cause or with or without Good
       Reason, "CUSTOMER(S)" shall mean a person or entity which within the
       eighteen (18) months prior to termination of Employee's employment with
       Employer purchased any product, service, program, or system from Employer
       or an affiliated entity.

              (iii) While Employee is employed by Employer, "POTENTIAL
       CUSTOMER(S)" shall mean a person or entity which Employer solicited or
       developed plans or prepared proposals to solicit or market to become a
       Customer. If Employee's employment with Employer is ended by either
       party, with or without Cause, "POTENTIAL CUSTOMER(S)" shall mean a person
       or entity which Employer solicited or developed plans or prepared
       proposals to solicit or market to become a Customer within six (6) months
       prior to termination of Employee's employment with Employer, provided
       that Employee was involved in such solicitation or development of plans
       or proposals or had access to such plans or proposals.

              (iv) For purposes of this Section VIII, the term "EMPLOYER" shall
       include Employer, all of its Affiliates, and the Business.

       (c)    LIMITATION ON NON-COMPETITION CLAUSE. If Employee's employment is
       terminated by either party for any reason, the restrictions specified in
       Section XIII(a)(i), above, shall apply to only those counties in the
       United States in which in the eighteen (18) month period prior to such
       termination, (i) Employee physically performed services for Employer;
       (ii) there is a Customer or Potential Customer for which Employee
       performed services for Employer; or

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       (iii) Employee had substantial contact with or had access to substantial
       information or materials of Employer pertaining to a Customer or
       Potential Customer.

IX.    REASONABLE RESTRICTIONS

       Employee recognizes and acknowledges that: (a) the nature of Employer's
       business is highly competitive; (b) he will have access to Confidential
       Information while employed by Employer and it will not be possible to
       perform services for a Competitor without using such Confidential
       Information; (c) Employer has a compelling and legitimate interest in
       protecting against the use or disclosure of its Confidential Information
       and the loss of its goodwill in the event Employee goes to work for or
       otherwise renders services to a Competitor; and (d) the restrictions and
       limitations set forth in Sections VII and VIII of this Agreement have
       been narrowly drafted to protect only the legitimate business interests
       of Employer and the restrictions and limitations set forth in this
       Agreement will not unreasonably interfere or restrict Employee's ability
       to earn a living following the termination of Employee's employment with
       Employer, and Employee's ability to pursue a livelihood without violating
       such restrictions is a material condition of Employee's employment with
       Employer.

X.     DEVELOPMENTS; WORK FOR HIRE

       Employee will make full and prompt disclosure to Employer of all
       inventions, discoveries, designs, developments, methods, modifications,
       improvements, processes, algorithms, databases, computer programs,
       formulae, techniques, trade secrets, graphics or images, audio or visual
       works, and other works of authorship (collectively "DEVELOPMENTS"),
       whether or not patentable or copyrightable, that are created, made,
       conceived or reduced to practice by Employee (alone or jointly with
       others) or under her direction during the period of his employment with
       Employer. Employee acknowledges that all work performed by him during his
       employment with Employer is on a "work for hire" basis, and Employee
       hereby assigns and transfers, and will assign and transfer, to Employer
       and its successors and assigns all Employee's right, title and interest
       in all Developments that (a) relate to the Business or any Customer of or
       supplier to Employer or any of the products or services being researched,
       developed or sold by Employer or which may be used with such products or
       services; (b) result from tasks assigned to Employee by Employer; or (c)
       result from the use of premises or personal property (whether tangible or
       intangible) owned, leased or contracted for by Employer
       ("EMPLOYER-RELATED DEVELOPMENTS"), and all related patents, patent
       applications, trademarks and trademark applications, copyrights and
       copyright applications, and other intellectual property rights in all
       countries and territories worldwide and under any international
       conventions ("INTELLECTUAL PROPERTY RIGHTS").

       This Agreement does not obligate Employee to assign to Employer any
       Development which, in the sole judgment of Employer, reasonably
       exercised, is developed entirely on Employee's own time and does not
       relate to the business efforts or research and development efforts in
       which, during the period of Employee's employment, Employer actually is
       engaged or reasonably would be engaged, and does not result from the use
       of premises or equipment owned or leased by Employer. However, Employee
       will also promptly disclose to Employer any and all such Developments for
       the purpose of determining whether they qualify for such exclusion.

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       Employee will cooperate fully with Employer, both during and after
       Employee's employment with Employer, with respect to the procurement,
       maintenance and enforcement of Intellectual Property Rights in
       Employer-Related Developments. Employee will sign all papers, including,
       without limitation, copyright applications, patent applications,
       declarations, oaths, assignments of priority rights, and powers of
       attorney, which Employer may deem necessary or desirable in order to
       protect its rights and interests in any Employer-Related Development. If
       Employer is unable, after reasonable effort, to secure Employee's
       signature on any such papers, Employee hereby irrevocably designates and
       appoints each officer of Employer as her agent and attorney-in-fact to
       execute any such papers on her behalf, and to take any and all actions as
       Employer may deem necessary or desirable in order to protect its rights
       and interests in any Employer-Related Development.

XI.    REMEDIES

       Employee recognizes that the remedy(ies) at law for a violation of
       Section VII, VIII or IX of this Agreement will be inadequate and that in
       any event such damages will be substantial but not readily ascertainable
       and that Employer will suffer continuing and irreparable injury to its
       business as a direct result of such violation. Employee agrees that if
       Employee should breach or fail to perform, or to threaten to breach or
       fail to perform any term, condition, or duty contained in this Agreement,
       Employer shall be entitled to institute and prosecute proceedings in any
       court of competent jurisdiction either in law or in equity to obtain the
       specific performance thereof by Employee or to enjoin Employee from
       violating the provisions hereof. Pending the outcome of any such
       litigation, Employer shall be entitled to obtain temporary, preliminary,
       and permanent injunctive or other relief, without bond. Employer shall be
       entitled to recover from Employee all reasonable attorneys' fees, court
       costs and related expenses incurred in enforcing this Agreement.

XII.   MISCELLANEOUS PROVISIONS

       (a)    AMENDMENTS AND MODIFICATIONS: This Agreement may be amended,
              changed, modified or altered only by an instrument in writing
              executed by the Parties.

       (b)    WAIVERS: Any waiver by any party of a breach of any provision of
              this Agreement will not operate as or be construed to be a waiver
              of any other breach of such provision or any other provision of
              this Agreement. The failure of any party to insist upon strict
              adherence to any term of this Agreement will not be considered a
              waiver of, nor shall it deprive, any party of the right thereafter
              to insist upon strict adherence to that term or any other term of
              this Agreement.

       (c)    SEVERABILITY: Every provision of this Agreement is intended to be
              severable. If any Section or provision, or sub-paragraph or
              sub-part, of this Agreement shall, for any reason, be adjudged by
              any court of competent jurisdiction to be invalid or
              unenforceable, such judgment shall not affect, impair or otherwise
              invalidate the remainder of this Agreement or the Section or
              provision, or sub-paragraph or sub-part, but shall be confined in
              its operation to the Section or provision, or sub-paragraph or
              sub-part, of this Agreement directly involved in the controversy
              in which judgment shall have been rendered. If any Section or
              provision, or sub-paragraph or sub-part, hereof is deemed
              unenforceable because of its scope in terms of area, time or
              business activities, or any other reason, the Court may modify
              such

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              Section or provision, or sub-paragraph or sub-party, by
              reductions, additions, or limitations thereon, or otherwise, so as
              to be render the Section or provision, or sub-paragraph or
              sub-part, enforceable to the fullest extent permissible under
              applicable law.

       (d)    GOVERNING LAW: This Agreement shall be construed in accordance
              with the laws of the State of Connecticut and the obligations,
              rights, and remedies of the Parties hereunder shall be determined
              in accordance with such laws without reference to the principles
              of conflicts of law thereof. The parties hereby agree that they
              are and shall be subject to the jurisdiction of the courts of the
              State of Connecticut and the United States District Court for the
              District of Connecticut. Venue for all actions or claims related
              to this Agreement or Employee's employment by or other
              relationship with Employer shall be in the State and Federal
              Courts located in Connecticut.

       (e)    HEADING: The headings of the various sections and paragraphs of
              this Agreement have been inserted for convenience and reference
              only and shall not be deemed to be a part of this Agreement.

       (f)    SUCCESSORS AND ASSIGNS: This Agreement shall inure to the benefit
              of and be binding upon Employer and its successors and assigns.
              Any successor or assign of Employer is authorized to enforce the
              restrictive covenants of this Agreement in Section VII as if the
              name of such successor or assign replaced Employer throughout this
              Agreement. Since this Agreement is personal to Employee,
              Employee's obligation under this Agreement may not be assigned or
              transferred to any other person or entity.

       (g)    NOTICE: Any notices under this Agreement to any Party will be in
              writing and will be mailed registered mail, postage prepaid, or
              delivered by overnight carrier or express mail or personally
              delivered, addressed to the party at the following address or to
              such address as such party may designate by written notice.

              To Employer:

                     Clayton Holdings, Inc.
                     2 Corporate Drive
                     Shelton, CT 06484
                     Attn: Jeanne Rudell

              To Employee:

                     Frederick C. Herbst, CPA

       (h)    ENTIRE AGREEMENT. This Agreement and its exhibits and attachments
              contain the entire understanding between the Parties and merges
              and supersedes all prior discussions and agreements with respect
              thereto, including, without limitation, all other agreements
              described in the preceding sentence.

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                          [***SIGNATURES TO FOLLOW***]

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       IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first written above.


                                    EMPLOYEE:


                                    By:  /s/ Frederick C. Herbst
                                         --------------------------------
                                         Frederick C. Herbst, CPA


                                    EMPLOYER:

                                    CLAYTON HOLDINGS, INC.


                                    By:  /s/ Frank P. Filipps
                                         --------------------------------
                                    Name:  Frank P. Filipps
                                    Title: Chief Executive Officer

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