Tax Indemnification Agreement

TAX INDEMNIFICATION AGREEMENT


This Tax Indemnification Agreement is entered into as of December 7, 2005 (this "Agreement") by and among:


(i) Compensation Risk Managers, LLC, a New York limited liability company ("CRM");


(ii) Compensation Risk Managers of California, LLC, a California limited liability company and a wholly-owned subsidiary of CRM ("CRM CA");


(iii) EIMAR, L.L.C., a New York limited liability company ("Eimar");


(iv) Twin Bridges (Bermuda) Ltd., a Bermuda company ("Twin Bridges"); and


(v) the following individuals and entity, each of whom shall be referred to herein as an "Existing Member" and together shall be referred to as the "Existing Members":


Daniel G. Hickey, Sr.;
Daniel G. Hickey, Jr.;
Martin D. Rakoff;
Anthony Bottini, Jr.;
Mark Bottini;
Brian L. Bottini, Sr.;
Louis J. Viglotti;
Dominick Diaferia;
David M. Birsner; and
Village Holdings, LLC
("Village Holdings").


CRM, CRM CA, Eimar, Twin Bridges and each of the Existing Members are individually referred to herein as a "Party" and collectively as the "Parties."


RECITALS


WHEREAS, each of CRM and Eimar is a limited liability company which is treated as a partnership for US federal income tax purposes; and,


WHEREAS, the income of each of CRM and Eimar is taxable, on a current basis, to those Existing Members that hold interests therein, directly or indirectly, regardless of whether such income has actually been distributed; and,


WHEREAS, it has been the historic business practice of each of CRM and Eimar to distribute to those Existing Members that hold interests therein, directly or indirectly, all amounts taxable to those Existing Members; and,


WHEREAS, Twin Bridges is a controlled foreign corporation for US federal tax purposes; and,


WHEREAS, a proportionate share of the income of Twin Bridges is taxable to its 10 percent or greater US shareholders regardless of whether it is distributed; and,


WHEREAS, it has been the historic business practice of the Parties that an amount equal to the income of Twin Bridges be distributed proportionately to Twin Bridges' shareholders, either directly or indirectly by a distribution to the Existing Members of CRM and Eimar, regardless of whether they are currently taxable on such income, in order to maintain equity among them; and,


WHEREAS, it has been the historic business practice of CRM CA to make distributions to CRM to enable CRM to make such distributions to Existing Members; and for CRM to borrow funds to make distributions when amounts received from CRM CA were insufficient for such purposes; and,


WHEREAS, CRM and Eimar distributed in the aggregate $1,090,077 to the Existing Members on November 28, 2005;


WHEREAS, the foregoing amount was equal to the aggregate income of CRM, CRM CA, Eimar and Twin Bridges from their inception through October 31, 2005 to the extent that it had not been previously been distributed; and,


WHEREAS, CRM, CRM CA, Eimar and Twin Bridges have agreed to indemnify the Existing Members for certain of their US federal income tax liabilities attributable to these entities for the period from November 1, 2005 to the effective date of the elections of CRM, CRM CA and Eimar to be taxed as associations for U.S. federal income tax purposes (the "Effective Date");


NOW, THEREFORE, in consideration of the respective representations, warranties, covenants and agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereto hereby agree as follows:


ARTICLE I


INDEMNIFICATION


1.1 CRM, CRM CA, Eimar and Twin Bridges agree to make payments (the "indemnification payments") to each of the Existing Members in an aggregate amount equal to thirty-five percent (35%) of the excess, if any, of the aggregate of the net income of CRM, Eimar and Twin Bridges allocable to such Existing Member as computed for US federal tax income tax purposes over the aggregate of the net loss of CRM, Eimar and Twin Bridges allocable to such Existing Member as computed for US federal income tax purposes (provided, however, that the amount of any net loss of Twin Bridges allocable to an Existing Member shall be computed on the same basis as the net income of Twin Bridges would have been allocated to such Existing Member), for the period from November 1, 2005 through the Effective Date (computed with respect to CRM and Eimar on a cash basis). The amount that each of CRM, CRM CA, Eimar and Twin Bridges shall contribute to the indemnification payments shall be determined through agreement among these parties taking into account Twin Bridges' need to satisfy its solvency margin and liquidity ratio as set out in the Bermuda Insurance Act 1978, the requirements of the Companies Act 1981 and any contractual obligations. Such indemnification payments shall be made as soon as practicable after the Effective Date. For purposes of this Section 1.1, payments to Village Holdings shall be treated as indirect payments to its members.


2


ARTICLE II


REPRESENTATIONS AND WARRANTIES


2.1 Representations and Warranties of CRM, CRM CA, Eimar, Twin Bridges and Village Holdings. In order to induce each other Party hereto to enter into this Agreement and to consummate the transactions contemplated hereby, each of CRM, CRM CA, Eimar, Twin Bridges and Village Holdings hereby represents, severally and not jointly, to each other Party hereto that:


(a) Organization. Such Party has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization. Such Party has the requisite power and authority to execute and deliver this Agreement and perform its obligations under this Agreement.


(b) Valid and Binding Obligation. This Agreement has been duly authorized, executed and delivered by such Party and constitutes a valid and binding obligation of such Party enforceable against such Party in accord ...