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                                                                   EXHIBIT 10.22

                         COMPREHENSIVE AUTOMATIC TREATY
                              REINSURANCE AGREEMENT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE                                                                 PAGE
<S>      <C>                                                            <C>
         Preamble..................................................       2
1        Acquisition...............................................       2
2        Commencement And Termination..............................       2
3        Termination Of Any Prior Agreement........................       5
4        Business And Territory Covered............................       7
5        Exclusions................................................       8
6        Retention And Limit.......................................       9
7        Definitions...............................................      10
8        Premium And Commission....................................      12
9        Accounts, Reports And Payments............................      13
10       Claims And Losses.........................................      14
11       Salvage And Subrogation...................................      14
12       Reinsurance Follows Original Policies.....................      15
13       Taxes.....................................................      15
14       Federal Excise Tax........................................      15
15       Access To Records.........................................      16
16       Currency..................................................      16
17       Service Of Suit...........................................      17
18       Arbitration...............................................      17
19       Indemnification And Errors And Omissions..................      19
20       Insolvency................................................      19
21       Security..................................................      20
22       Reserves And Risk Limits..................................      22
23       Confidentiality...........................................      22
24       Offset....................................................      23
25       Governing Law.............................................      24
26       Participation.............................................      24
27       Assignment................................................      24
28       Notice....................................................      24
</TABLE>

EXHIBITS

                                       1
<PAGE>

                         COMPREHENSIVE AUTOMATIC TREATY
                              REINSURANCE AGREEMENT

                    (hereinafter referred to as "Agreement")

                      made and entered into by and between

            MBIA Insurance Corporation, Armonk, New York; and/or MBIA Assurance
            S.A., Paris, France; and/or MBIA UK Insurance Limited, London,
            England; and/or Capital Markets Assurance Corporation, Armonk, New
            York; and/or any other insurance or reinsurance company subsidiaries
            of MBIA Inc. listed in Exhibit No. 1 attached to this Agreement
            (hereinafter referred to as the "Company"), and

                          RAM REINSURANCE COMPANY LTD.
                  (hereinafter referred to as the "Reinsurer").

In consideration of the mutual covenants hereinafter contained and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:

                                    ARTICLE 1

                                   ACQUISITION

In the event that, following the execution of this Agreement, the Company
notifies the Reinsurer of a proposed acquisition by the Company of an insurance
company (a "Target") and provides the Reinsurer as soon as practicable with full
particulars as to how such affiliation is likely to affect this Agreement and
such due diligence information as the Reinsurer may reasonably request with
respect thereto (the "Information"), the Reinsurer shall provide, within 30 days
following receipt of the Information, a written notice to the Company which
notice shall state whether or not the Reinsurer will consent to the inclusion of
such Target as a reinsured hereunder upon consummation of the acquisition of
such Target by the Company. If the Reinsurer consents to the inclusion of a
Target as a reinsured hereunder, such Target shall be included in the term
"Company" from and after the date on which the Company's acquisition of the
Target is consummated, and the Company shall prepare and deliver to the
Reinsurer an addendum to this Agreement that revises Exhibit No. 1 to include
the name of such Target thereon. The 30 day period referred to in this paragraph
shall not commence until all of the information reasonably requested by the
Reinsurer has been received by the Reinsurer.

                                    ARTICLE 2

                          COMMENCEMENT AND TERMINATION

Covering the liabilities for Proportionate Share of Net Loss and Net Allocated
Loss Adjustment Expenses on Policies attaching on or after 12:01 a.m. (in the
time zone in which the Policy is issued), July 1, 2005 (the "Effective Time").
This Agreement may be terminated on a run-off

                                       2
<PAGE>

basis by the Company or by the Reinsurer as of 12:01 a.m. Eastern Standard Time,
July 1, 2006 or any July 1 thereafter by one party giving to the other at least
120 days' prior notice of termination (the "Termination Time"). Notice of
termination must be provided in writing by certified letter. In addition, this
Agreement shall automatically terminate on a run-off basis on or after July 1,
2006, as of the effective time and date of any replacement Comprehensive
Automatic Reinsurance Treaty entered into by the Company with respect to the
Policies described under "Business and Territory" below.

In the event of termination on a run-off basis (and until any termination on a
cut-off basis as provided herein), the Reinsurer will be entitled to receive its
Proportionate Share of all premiums paid after the Termination Time with respect
to, and will remain liable for the Reinsurer's Proportionate Share of Losses,
Allocated Loss Adjustment Expenses and applicable reserves with respect to, all
Policies ceded hereunder prior to the Termination Time until the natural
expiration of such Policies.

Only the Company shall have the right to terminate the Policies covered by this
Agreement on a cut-off basis (whether or not this Agreement has been previously
terminated on run-off basis) or run-off basis at any time by written notice to
the Reinsurer in the event:

A.    that a Reinsurer Downgrade Event (as defined below) has occurred; provided
      that the foregoing shall not be deemed an event of termination if the
      Reinsurer, within 90 days of the occurrence of such Reinsurer Downgrade
      Event, either (1) restores the Reinsurer's Standard & Poor's and Moody's
      financial strength ratings and/or financial enhancement ratings to the
      ratings in effect as of the Effective Time, or (2) provides such
      additional security or takes any additional action that restores the
      reinsurance credit that the Company receives under any Applicable Rating
      Agency or regulatory method with respect to this Agreement as of the
      Effective Time, it being agreed that all costs and expenses related to
      such efforts shall be the sole responsibility of the Reinsurer,

B.    that the Policyholders' Surplus of the Reinsurer is less than the amount
      required in order for the Company to be entitled to credit for the
      reinsurance provided by this Agreement by any Applicable Rating Agency,
      regulatory body of any jurisdiction in which the Company legally operates
      or to which it submits its statutory financial statements; or

C.    there is a breach of any provision of this Agreement by the Reinsurer,
      provided that the Company shall have first given written notice by
      certified letter to the Reinsurer of such breach and the Reinsurer shall
      not have cured such breach within 30 Business Days following receipt of
      such notice from the Company; or

D.    of a Change in Control (as defined below), provided that the Company gives
      written notice by certified letter of its intention to terminate within
      120 Business Days of becoming aware of the Change of Control or of receipt
      of the notice set forth below. The Reinsurer shall be required to notify
      the Company in writing (by certified letter) of any Change of Control
      within no more than 15 Business Days after the Reinsurer becomes aware of
      such Change of Control. For the purposes of this Agreement, a "Change of
      Control" will be deemed to occur when (x) an individual person,
      corporation or other entity acquires directly or indirectly more than
      forty-nine percent (49%) of the voting

                                       3
<PAGE>

      securities of the Reinsurer or the Reinsurer's intermediate or ultimate
      parent or obtains the power to vote (directly or through proxies) more
      than forty-nine percent (49%) of the voting securities of the Reinsurer or
      the Reinsurer's intermediate or ultimate parent or (y) an individual
      person, corporation or other entity who is a monoline insurance company
      who issues financial guarantee or similar policies or a multiline
      insurance company that issues financial guarantee or similar policies
      acquires directly or indirectly more than twenty-five percent (25%) of the
      voting securities of the Reinsurer or the Reinsurer's intermediate or
      ultimate parent or obtains the power to vote (directly or through proxies)
      more than twenty-five percent (25%) of the voting securities of the
      Reinsurer or the Reinsurer's intermediate or ultimate parent; provided,
      however, that a "Change of Control" shall not be deemed to have occurred
      pursuant to this paragraph D if (i) such individual person, corporation or
      other entity is under common control with the Reinsurer or the Reinsurer's
      intermediate or ultimate parent or (ii) as a result of a merger, exchange
      offer, or similar transaction, the holders of the voting securities of the
      ultimate controlling person or persons of the Reinsurer exchange such
      securities for, or such securities are converted into the right to
      receive, an equivalent amount of voting securities of a newly-formed
      holding company; or

E.    the Reinsurer undertakes, as a new line of business, to write, on a
      primary basis, financial guaranty or similar policies in direct
      competition with the business the Company is engaged in as of the date of
      this Agreement; provided that such activities shall expressly not include
      any reinsurance business, any retrocessions accepted by the Reinsurer or
      any financial guaranty or similar policy written incidentally to the
      Reinsurer's reinsurance business; and provided further that the Company
      shall have first provided written notice by certified letter to the
      Reinsurer of such competitive activity and requesting that it cease and
      the Reinsurer shall not have ceased such business activity within a period
      of 60 days following receipt of such notice from the Company.

As used in this Agreement, "Reinsurer Downgrade Event" shall have the following
meaning:

"Reinsurer Downgrade Event' shall mean, with respect to the Reinsurer, either
(i) a downgrade of the Standard & Poor's financial strength rating below the
rating in effect as of the Effective Time (or, with respect to any Prior
Agreement, the Effective Time of such Prior Agreement), (ii) a downgrade of the
Moody's financial strength rating below the rating in effect as of the Effective
Time (or, with respect to any Prior Agreement, the Effective Time of such Prior
Agreement), (iii) a downgrade or withdrawal of the Standard & Poor's financial
enhancement rating below the rating in effect as of the Effective Time, (or,
with respect to any Prior Agreement, the Effective Time of such Prior
Agreement), (iv) the Reinsurer is no longer rated by the Applicable Rating
Agencies, or (v) a deterioration in any additional security provided or
additional action taken by the Reinsurer if such deterioration results in the
failure to maintain the reinsurance credit that the Company receives under any
applicable rating agency or regulatory method for this Agreement or (vi) there
is more than a ten (10%) percent decrease in the reinsurance credit that the
Company receives under any applicable rating agency or regulatory method for
this Agreement and the Reinsurer has failed to cure such decrease within 30 days
of receipt of written notice of such decrease, except that such decrease shall
not constitute a Reinsurer Downgrade Event if it arose out of the failure of the
Company to file any required report or to promptly inform the Reinsurer of any
information not otherwise available to the

                                       4
<PAGE>

Reinsurer that, if known by the Reinsurer, would have assisted the Reinsurer in
taking steps necessary to maintain the applicable amount of credit.

A termination on a cut-off basis shall be effective as of the date specified in
the written notice of termination, which date shall be no less than 25 Business
Days after the Reinsurer's receipt of the written notice of termination in the
case of a termination pursuant to subparagraphs A., B., C. or E. and no less
than 60 Business Days after the Reinsurer's receipt of the written notice of
termination in the case of termination pursuant to subparagraph D. In the event
of a termination on cut-off basis, (i) the Reinsurer will pay to the Company on
the effective date of the cut-off termination an amount equal to its
Proportionate Share of the reserves (including but not limited to Net Loss and
Net Allocated Loss Adjustment Expense reserves) and the unearned premium
reserve, net of applicable ceding commission and the Reinsurer's Percentage
Share of the anticipated salvage carried on the books and records of the
Company, as respects Policies covered hereunder which are in force at such date;
and (ii) immediately upon the payment referred to in clause (i) of this
sentence, the Company shall grant the Reinsurer a complete and final release
with respect to this Agreement, and all liabilities of the Reinsurer whatsoever,
whether such liabilities are known or unknown at the time of the termination,
arising out of this Agreement and all Policies shall be discharged and the
Reinsurer shall not be entitled to any premiums earned with respect to any
period of time after the effective date of termination. It is understood and
agreed that the Company will assume all liabilities hereunder unless prohibited
by any regulatory body of a jurisdiction in which the Company legally operates
or to which it submits its statutory financial statements.

Notwithstanding the termination of this Agreement as herein provided, the
provisions of this Agreement shall continue to apply to all Policies covered
hereunder to the end that all obligations and liabilities assumed by the
Reinsurer hereunder prior to such termination other than such obligations and
liabilities as are reassumed by the Company in connection with a termination on
a cut-off basis, shall be fully performed and discharged.

Except as provided in this Agreement, the rights, powers, remedies, and
privileges provides in this Agreement are cumulative and not exclusive of any
rights, powers, remedies, and privileges provided by law.

In addition to its right to terminate this Agreement on a cut off basis upon the
occurrence of the events specified above, the Company shall, upon the occurrence
of any such events, have the right to terminate on a cut off basis all, but not
less than all, other reinsurance agreements between the Company and the
Reinsurer, whether facultative or treaty, by giving notice in the manner
prescribed, and on the same basis, as set forth above.

                                    ARTICLE 3

                       TERMINATION OF ANY PRIOR AGREEMENT

The Company may terminate any one or more Prior Agreements on a cut-off basis
(whether or not the Prior Agreement has been previously terminated on run-off
basis) by written notice to the Reinsurer in the event that a Reinsurer
Downgrade Event has occurred.

                                       5
<PAGE>

A termination of a Prior Agreement on a cut-off basis shall be effective as of
the date specified in the written notice of termination, which date shall be no
less than 25 Business Days after the Reinsurer's receipt of the written notice
of termination. In the event of such a termination of a Prior Agreement on a
cut-off basis, (i) the Reinsurer will pay to the Company on the effective date
of the cut-off termination an amount equal to the Reinsurer's Proportionate
Share of reserves (including but not limited to loss and allocated loss
adjustment expense reserves) and the unearned premium reserve, net of applicable
ceding commission and the Reinsurer's Percentage Share of the anticipated
salvage carried on the books and records of the Company, as respects the Subject
Prior Policies which are in force at the effective date of the cut-off
termination; and (ii) immediately upon the payment referred to in clause (i) of
this sentence, the Company shall grant the Reinsurer a complete and final
release with respect to the Subject Prior Policies being reassumed by the
Company, and all liabilities of the Reinsurer whatsoever, whether such
liabilities are known or unknown at the time of the termination, arising out of
the Subject Prior Policies being reassumed by the Company shall be discharged,
and the Reinsurer shall not be entitled to any premiums earned with respect to
any period of time after the effective date of termination. It is understood and
agreed that the Company will assume all liabilities with respect to any Policies
under each Subject Prior Agreement terminated pursuant to this Agreement unless
prohibited by any regulatory body of a jurisdiction in which the Company legally
operates of to which it submits its statutory financial statements.

Notwithstanding the termination of a Prior Agreement as herein provided, the
provisions of each Subject Prior Agreement shall continue to apply to all
Subject Prior Policies covered under each the Subject Prior Agreement to the end
that all obligations and liabilities assumed by the Reinsurer under the Subject
Prior Agreement prior to such termination, other than such obligations and
liabilities under the Subject Prior Agreement as are reassumed by the Company in
connection with a termination on a cut-off basis under this Article, shall be
fully performed and discharged.

As used in this Article, the following terms have the following respective
meanings:

      "Reserve," "loss reserve," "allocated loss adjustment expense reserve,"
      "unearned premium reserve" and "ceding commission" shall have the meanings
      set forth in the Subject Prior Agreement under which the Subject Prior
      Policy is ceded.

      "Prior Agreement" shall mean any reinsurance agreement under which the
      Company cedes reinsurance to the Reinsurer which is (i) classified by the
      Company, in its sole judgment, as surplus reinsurance, and (ii) which
      originally became effective prior to the Effective Time.

      "Prior Policies" shall mean any binder, policy, surety bond or contract of
      insurance of reinsurance or amendment or endorsement thereto issued by the
      Company and constituting business ceded under a Prior Agreement.

      "Recoveries" shall mean any amount received by the Company in respect of
      any loss and allocated loss adjustment expense covered by the Reinsurer
      under a Subject Prior Agreement whether by subrogation, salvage,
      reimbursement or other recovery from the Issuer (or from an underlying
      obligor of that Issuer).

                                       6
<PAGE>

      "Subject Prior Agreement" shall mean a Prior Agreement subject to
      termination on cut-off basis under this Article.

      "Subject Prior Policies" shall mean the Prior Policies ceded under a
      Subject Prior Agreement.

                                    ARTICLE 4

                         BUSINESS AND TERRITORY COVERED

(a) This Agreement shall cover all Policies that provide insurance against
financial loss by reason of nonpayment of obligations arising under Issues sold
or otherwise issued by Issuers or Sellers/Servicers.

(b) In the event of a refinancing (whether by refunding or otherwise) of the
obligations insured under a Policy (the "Refinanced Obligations") by the
issuance of new obligations that are insured by the Company (the "Refinancing
Obligations"), (i) undertaken, in the sole judgment of the Company, to mitigate,
prevent or improve the Company's position in respect of a claim or loss under
the Policy or (ii) undertaken, in the sole judgment of the Company, to improve
the credit quality or credit risk profile of the related Policy or exposure, or
(iii), structured with terms or pricing that, in the sole opinion of the
Company, are less attractive than current market terms or pricing for such a
transaction but are undertaken because the pricing or terms in the Company's
sole opinion, are superior to the original structure, the Reinsurer shall
automatically assume under this Agreement the Proportionate Share of the
Refinancing Obligations as is designated by the Company, regardless of whether
the par amount of such Refinancing Obligations exceeds $175,000,000, provided,
however; that such Proportionate Share of the Refinancing Obligations shall not
exceed the Reinsurer's Proportionate Share assumed with respect to the
Refinanced Obligations. Any Policy issue by the Company in respect of the
Refinancing Obligations shall be deemed to be a Policy hereunder to the same
extent as that of the original Policy.

(c) The liability of the Reinsurer shall be subject in all respects to and shall
not be affected by all the general and specific stipulations, clauses, waivers,
extensions, modifications, amendments and endorsements of any of the Policies,
subject to the exclusions set forth below and the other terms and conditions of
this Agreement as set forth herein.

(d) The Reinsurer shall be bound by the judgment of the Company as to the
obligation(s) and liability(ies) of the Company under any original insurance or
reinsurance in accordance with Article 12 hereof. The Reinsurer acknowledges the
Company's obligations to make payment under its Policies or Prior Policies are
unconditional, irrevocable and non-cancellable by the Company for any reason and
that the Company has waived, to the fullest extent permitted by applicable law,
and agreed not to assert any and all rights (whether by counterclaim, set-off or
otherwise) and defenses (including, without limitation, any defense of fraud
(other than fraud by the related beneficiary) or any defense based or
misrepresentation, breach of warranty, or non-disclosure of information by any
person) whether acquired by subrogation, assignment or otherwise to the extent
such rights and defenses may be available to the Company to avoid

                                       7
<PAGE>

payment of its obligations under any Policy or Prior Policy in accordance with
the express provisions of any Policy or Prior Policy.

                                    ARTICLE 5

                                   EXCLUSIONS

The following general exclusions apply in respect of all Policies ceded to the
Reinsurer under this Agreement:

A.    All liability of the Company arising by agreement, operation of law, or
      otherwise from its participation or membership, whether voluntary or
      involuntary, in any Insolvency Fund. "Insolvency Fund" includes any
      Guaranty Fund, Insolvency Fund, Plan, Pool, Association, Fund, or other
      arrangement, howsoever denominated, established or governed, which
      provides for any assessment of, or payment, or assumption by the Company
      of part or all of any claim, debt, charge, fee, or other obligation of an
      insurer, or its successors, or assigns which has been declared by any
      competent authority to be insolvent or which otherwise is deemed unable to
      meet any claim, debt, charge, fee, or other obligation in whole or in
      part.

B.    The amount by which the portion of the Reinsurer's Percentage Share of the
      Pro Rata Share of Par Amount per Issue under a Policy covering an Issue
      sold by an Issuer to Seller/Servicer to be identified in Exhibit No. 2
      attached to and forming part of this Agreement exceeds the "Maximum
      Assumed Amount Per Issue" (to be either zero or a stated dollar amount)
      specified in Exhibit No. 2 provided that Exhibit No. 2 may be amended only
      with the prior consent of the Company, which consent will not be
      unreasonably withheld and which consent shall not be required if such
      amendment is based on regulatory or rating agency limitations applicable
      to the Reinsurer or the Reinsurer's internal risk limits. Any such amended
      Exhibit No. 2; shall (x) be in electronic form; (y) be in the format
      provided in Exhibit No. 2; and (z) include in its text its effective date
      substantially similar in form to the following: "This Amended Exhibit No.
      2 Effective as of July 1, 2005"; and shall identify, for each Issuer or
      Seller/Servicer, the name of the Issuer or Seller/Servicer and the
      applicable "Maximum Assumed Amount Per Issue" for that Issuer or
      Seller/Servicer (to be either zero or a stated dollar amount). No
      amendment to Exhibit No. 2 shall be effective with respect to any Issue
      for which the Company has issued a written mandate letter or other similar
      written evidence of commitment prior to the delivery of such amendment.

C.    The Company maintains the right in its sole discretion to exclude any
      Policy that would have otherwise been ceded hereunder. The Company shall
      provide a list of any such Policies to the Reinsurer on a quarterly basis.
      The Reinsurer shall have the right, upon written notice to the Company
      given no later than 15 Business Days after receipt of such quarterly list
      of excluded Policies, to assume the Reinsurer's Percentage Share of the
      Pro Rata Share of the liabilities for Net Loss and Net Allocated Loss
      Adjustment Expense of any such excluded Policy. In the event the Reinsurer
      exercises such right, the Pro Rata Share with respect to such Policy shall
      be determined by the Company in accordance with the terms hereof.

                                       8
<PAGE>

D.    No Policy shall be ceded to the Reinsurer hereunder if the Issuer, Seller
      or Servicer under such Policy is listed on the Company's most current
      Caution List; provided, however, that this Section D shall not apply with
      respect to Refinancing Obligations.

E.    Nothing in this Agreement requires the Company to cede any CDO business
      covered hereunder that has already been ceded to another reinsurance
      cover.

                                    ARTICLE 6

                               RETENTION AND LIMIT

The Company shall cede and the Reinsurer shall accept the Reinsurer's
Proportionate Share of each Issue relating to Policies covered hereunder. In
addition to being liable for its Proportionate Share of any Net Loss, the
Reinsurer shall be liable for its Proportionate Share of Net Allocated Loss
Adjustment Expense.

With respect to Policies for which the Par Amount of the Issue exceeds [ * ],
the Company shall cede to the Reinsurer the Reinsurer's Percentage Share of a
Pro Rata Share of Par Amount, which Pro Rata Share shall, at the Company's
election, be [ * ] In the event that the Company maintains a minimum net
retained share of gross insured outstanding principal under all Issues for such
an Issuer, Seller or Servicer equal to at least 50% (excluding Issues that have
been advance refunded), the Company shall cede to the Reinsurer the Reinsurer's
Percentage Share of a Pro Rata Share up to [ * ] of each Issue for such Issuer.]

With respect to any Policy ceded by the company hereunder, the Reinsurer's
Proportionate Share of the Pro Rata Share of Par Amount of any Issue related to
such Policy shall not exceed the Single Issue Limit set forth in the table below
next to the "Business Class" applicable to such Policy, as classified by the
Company (pursuant to the Company's risk codes attached hereto as Exhibit No. 3
and made a part hereof):

<TABLE>
<CAPTION>
Business Class                          Single Issue Limit
--------------                          ------------------
<S>                                     <C>
[ * ]                                         $[ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
[ * ]                                          [ * ]
</TABLE>

[ * ]

*Confidential treatment requested for redacted portion.

                                       9
<PAGE>

The Company and/or its affiliates maintain the right to purchase non
proportional and excess of loss reinsurance (or similar types of loss
protection) with respect to Policies. Such reinsurance shall inure to the sole
benefit of the Company or its affiliates. The Company shall be able to obtain
loss protection for a Policy which may inure to the benefit of the Reinsurer,
regardless of whether the Reinsurer has consented to the purchase thereof and
the Company shall be entitled to deduct the Reinsurer's Proportionate Share of
the cost of such loss protection from any amount payable to the Reinsurer
hereunder. The Company agrees to notify the Reinsurer in writing, after the end
of each calendar quarter, in the event that its net exposure to any Policy ceded
hereunder is zero; provided that the failure to provide such notice shall not
affect any rights or obligations of any party under this Agreement.

The parties agree that Exhibit No. 3 may be amended by the Company effective the
first day of any calendar quarter, provided that (i) the Company submits an
amended Exhibit No. 3 to the Reinsurer at least 30 Business Days prior to the
effective date of the amended Exhibit No. 3 and (ii) the amended Exhibit No. 3
is (x) delivered to the Reinsurer in electronic form, (y) is in the format
provided in Exhibit No. 3, and (z) includes in its text its effective date
substantially similar in form to the following: "This Amended Exhibit No. 3
Effective as of July 1, 2005."

                                    ARTICLE 7

                                  DEFINITIONS

A.    "Allocated Loss Adjustment Expenses" as used in this Agreement means all
      court costs, interest upon judgments, and mitigation, investigation,
      adjustment, and legal expenses chargeable to or incurred in: (i) the
      mitigation, investigation, negotiation, settlement of or defense against a
      Loss, (ii) loss prevention, mitigation or investigation in respect of
      Policies as to which the Company has posted a loss reserve, (iii) the
      investigation, prevention and workout of a potential Loss, or (iv) the
      protection, perfection and exercise of any subrogation or salvage or
      reimbursement rights or security interests with respect to a Policy.
      Allocated Loss Adjustment Expenses shall exclude all office expenses,
      salaries and other compensation and expenses of officials and employees of
      the Company, and all expenses (including, but not limited to, travel and
      costs and expenses incurred in respect of the outside consultants and
      independent contractors) attributable to routine surveillance activities.

B.    "Applicable Rating Agencies" as used in this Agreement mean Moody's and
      Standard and Poor's.

C.    "Business Day" means any day other than a Saturday, Sunday or holiday on
      which banks in New York, New York and Hamilton, Bermuda are not open for
      business.

D.    "Issue" as used in this Agreement means all obligations of one Issuer sold
      or created simultaneously which are covered by a Policy or several related
      Policies and which may be secured by a single revenue source (with
      essentially the same structure), accepting credit risk on a common pool of
      reference credits or obligations, or in the case of structured finance or
      asset-backed securities, secured by a common pool of assets. The Company
      shall be the sole judge of what constitutes one Issue.

                                       10
<PAGE>

E.    "Issuer"" as used in this Agreement means, with respect to an Issue, the
      entity issuing the bonds, notes, or other instruments comprising the Issue
      or the entity whose obligations are the subject of a Policy or several
      related Policies. The Company shall be the sole judge of what constitutes
      one Issuer.

F.    "Loss" as used in this Agreement means the aggregate amount of payments
      for which the Company is liable with respect to a claim under a Policy.

G.    "Moody's" as used in this Agreement means Moody's Investors Services, Inc.

H.    "Net" as used in this Agreement means, with respect to any Policy, after
      giving effect to other Policy specific facultative and/or quota share or
      other non-proportional reinsurance in effect with respect to such Policy
      inuring to the benefit of this Agreement.

I.    "Net Premium" as used in this Agreement means, with respect to any Policy,
      all premium received by the Company in respect of such Policy, less
      premium paid by the Company for other Policy specific facultative and/or
      treaty reinsurance in effect with respect to such Policy inuring to the
      benefit of this Agreement.

J.    "Par Amount" as used in this Agreement means the face amount of an Issue
      or Issues, except in the case of zero coupon or originally issued discount
      bonds or notes, in which case the Par Amount shall exclude the accreted
      interest component of the face amount.

K.    "Policy" as used in this Agreement means each binder, policy, surety bond
      or contract of insurance or reinsurance or amendment or endorsement
      thereto issued by the Company and constituting business covered as defined
      in the Business and Territory Covered Article. The Company shall be the
      sole judge of what constitutes a Policy under this Agreement.

L.    "Proportionate Share" as used in this Agreement with respect to any Policy
      means the Reinsurer's Percentage Share times the Pro Rata Share applicable
      to that Policy.

M.    "Pro Rata Share" as used in this Agreement means the percentage specified
      as such by the Company with respect to a particular Policy at the time the
      Policy is ceded to the Reinsurer.

N.    "Reinsurer's Percentage Share" as used in this Agreement means the
      percentage specified in Article 26 of this Agreement.

O.    "Seller" as used in this Agreement means a selling or servicing
      organization that originates and/or services assets that back asset-backed
      or mortgage-backed securities.

P.    "Servicer" as used in this Agreement means a servicing organization that
      services assets that back asset-backed or mortgage-backed securities.

Q.    "Standard & Poor's" or "S&P" as used in this Agreement means Standard &
      Poor's Rating Services, Inc.

                                       11
<PAGE>

                                    ARTICLE 8

                             PREMIUM AND COMMISSION

The Company shall pay to the Reinsurer its Proportionate Share of the Net
Premium after deducting from such Net Premium a flat ceding commission equal to
the amount set forth below. Such ceding commission shall be based on the
then-current reinsurance credit which the Company receives with respect to the
reinsurance provided by the Reinsurer under the applicable rating agency method,
whichever is lower. In addition, the Company may, in its sole discretion,
immediately adjust the ceding commission with respect to any policies reinsured
under any other reinsurance agreement between the Company and the Reinsurer in
line with the then current reinsurance credit which the Company receives under
the applicable rating agency method, whichever is lower.

<TABLE>
<CAPTION>
 Reinsurance Credit        Reinsurance Credit      Ceding Commission
        S&P                     Moody's
<S>                        <C>                     <C>
[ * ]                          [ * ]%                   [ * ]%

[ * ]%                         [ * ]%                   [ * ]%
[ * ]%                         [ * ]%                   [ * ]%
</TABLE>

*Confidential treatment requested for redacted portion.

At any time, the Reinsurer may adjust the ceding commission by either (x)
restoring of increasing the Reinsurer's Standard & Poor's and Moody's financial
strength or financial enhancement ratings such that the Company receives an
increase in capital credit, or (y) providing such additional security as would
be necessary to restore or increase the reinsurance credit that the Company
receives under the rating agency method, it being agreed that all costs and
expenses related to such efforts shall be the sole responsibility of the
Reinsurer.

If the reinsurance credit the Company receives is either increased or decreased
as set forth above, the revised ceding commission figure shall be applied to any
Net Premium paid to the Reinsurer and to the amount of the unearned premium
reserve from and after the time of the occurrence of the event which
precipitated such increase or decrease.

No exercise of any right pursuant to this Article 8 and no failure or delay by
the Company in exercising any right, power or privilege arising under this
Agreement, including, without limitation the Company's ability to terminate this
Agreement and other reinsurance agreements on a run-off or cut-off basis as set
forth in Article 2 hereof, will operate as a waiver thereof, nor will any single
or partial exercise of any right under this Article 8 preclude any other or
further exercise of any right, power or privilege of the Company arising under
this Agreement.

Nothing in this Agreement shall entitle the Reinsurer to receive any
compensation other than as may described in this Article 8 and any such
compensation shall be limited to the compensation to be received by the
Reinsurer as set forth in this Article 8 and Article 11.

                                       12
<PAGE>

                                    ARTICLE 9

                         ACCOUNTS, REPORTS AND PAYMENTS

A.    The Company shall furnish to the Reinsurer monthly accounts of Policies
      ceded hereunder within 25 days after the close of each calendar month,
      showing premiums due the Reinsurer, adjustments to premium reserves, if
      any, and ceding commission, Federal Excise Tax, if any, the Proportionate
      Share of paid Losses and Allocated Loss Adjustment Expenses due from the
      Reinsurer, supported by statistical details as set forth herein.

      The net balance shown shall be payable by the debtor party at the time the
      account is rendered, if the Company is the debtor party, and within 10
      days of the Reinsurer's receipt of the account, if the Reinsurer is the
      debtor party.

B.    The statistical details referred to in the preceding paragraph shall be
      comprised of the following:

      1.    Net Premiums ceded during the month;

      2.    Less ceding commissions with respect to Policies ceded during the
            month;

      3.    Less U. S. Federal Excise Tax, to the extent applicable;

      4.    Less the Reinsurer's Proportionate Share of Net Losses paid during
            the month;

      5.    Less the Reinsurer's Proportionate Share of Net Allocated Loss
            Adjustment Expenses paid by the Company during the month;

      6.    Plus the Reinsurer's Proportionate Share of Net subrogation, salvage
            and other recoveries received by the Company on Net Losses and Net
            Allocated Loss Adjustment Expenses under the Policies;

      7.    Net balance due the Reinsurer or the Company, as the case may be.

C.    In addition to the monthly account required by Section B of this Article,
      with respect to all in-force business covered by this Agreement, the
      Company shall provide to the Reinsurer within 45 days of the close of each
      calendar quarter, (i) quarterly reports showing the Reinsurer's
      Proportionate Share of all Net contingency, Loss, Allocated Loss
      Adjustment Expenses, and unearned premium reserves maintained by the
      Company (ii) any "credit watch" or "caution list" reports prepared by the
      Company with respect to such ceded Policies, and (iii) such additional
      statistics as may reasonably be required by the Reinsurer on such ceded
      Policies.

D.    All reports delivered pursuant to this Article 9 shall itemize Allocated
      Loss Adjustment Expenses so that such expenses are separately identifiable
      by (i) Policy or, (ii) if more than one Policy covers the same Issuer,
      Seller or Servicer, by Issuer, Seller or Servicer (as the case may be).

                                       13
<PAGE>

E.    The Reinsurer shall provide the Company with such information as the
      Company may reasonably request.

                                   ARTICLE 10

                                CLAIMS AND LOSSES

(1)   The Company shall have complete and sole control of and direction of all
      efforts to: (i) mitigate, investigate, negotiate, settle or defend a Net
      Loss, (ii) prevent, mitigate, or investigate a probable Net Loss under
      Policies as to which the Company has posted a loss reserve, (iii)
      investigate and work out a potential Net Loss, and (iv) to protect,
      perfect and exercise any subrogation, salvage or reimbursement rights or
      security interests with respect to any Policy, and may take any action as
      it may deem advisable with respect thereto. All Net Loss settlements by
      the Company, all salvage and subrogation settlements, and all settlements
      with an Issuer (or with an underlying obligor of that Issuer), shall be
      final, conclusive and unconditionally binding upon the Reinsurer and the
      Reinsurer hereby agrees to be bound by any determination made by the
      Company hereunder.

(2)   The Company will give to the Reinsurer at least three Business Days'
      notice of Net Loss that the Company will require a cash loss payment for
      all Net Losses; and such payment is due within one Business Day of receipt
      by the Reinsurer of such notice of Net Loss. The Reinsurer shall effect
      payment by wire transfer of federal funds to the party designated by the
      Company in the notice. Details of the Net Loss will be provided to the
      Reinsurer by the Company promptly by mail, or by such other means as
      requested by the Reinsurer.

(3)   The Reinsurer shall pay to the Company the Reinsurer's Proportionate Share
      of any Net Allocated Loss Adjustment Expenses paid by the Company at the
      times and in the manner specified in the Accounts, Reports and Payments
      Article.

                                   ARTICLE 11

                             SALVAGE AND SUBROGATION

(1)   The Company shall pay the Reinsurer the Reinsurer's Proportionate Share of
      any Recovery in respect of any Net Loss covered by the Reinsurer under
      this Agreement at the times and in the manner specified in the Accounts,
      Reports and Payments Article.

(2)   "Recovery" as used in this Agreement means any amount received by the
      Company in respect of any Net Loss covered by the Reinsurer under this
      Agreement whether by subrogation, salvage, or reimbursement from the
      Issuer (or from an underlying obligor of that Issuer).

                                       14
<PAGE>

                                   ARTICLE 12

                      REINSURANCE FOLLOWS ORIGINAL POLICIES

This Agreement shall be construed as an honorable undertaking between the
parties hereto and shall not be defeated by technical legal construction, it
being the intention of this Agreement that the fortunes of the Reinsurer with
respect to a Net Loss covered by the Reinsurer under this Agreement or with
respect to any exercise by the Company pursuant to the first paragraph of
Article 10 hereunder shall follow the fortunes of the Company. Nothing herein
shall in any manner create any obligations or establish any rights against the
Reinsurer in favor of any third parties or any persons not parties to this
Agreement.

                                   ARTICLE 13

                                      TAXES

The Company shall be liable for all taxes due on the Premiums paid with respect
to the Policies. For any portion of the Reinsurer's Proportionate Share of
Premium due to the Reinsurer pursuant to Article 8 hereof which is subject to
U.S. Federal Excise Tax, the Company shall act as the withholding agent and
remit such tax to the United States Internal Revenue Service as set forth in
Article 14 hereof.

The Company shall not be liable for any taxes (including, without limitation,
any United Kingdom Insurance Premium Tax or similar tax on reinsurance premiums
that may apply or be imposed prospectively by any taxing authority or
jurisdiction) imposed on the Reinsurer's Proportionate Share of Premium due or
paid by the Company to the Reinsurer pursuant to this Agreement. The Reinsurer
shall not be liable for any taxes that may be imposed on ceding commissions due
or paid by the Reinsurer to the Company pursuant to this Agreement.

                                   ARTICLE 14

                               FEDERAL EXCISE TAX

(This Article applies only to those reinsurers domiciled outside of the United
States of America who are not exempt from the Federal Excise Tax.)

In the event that any United States Federal Excise Tax is due with respect to
any premium due under this Agreement, the Company agrees to withhold and remit
such tax to the United States Internal Revenue Service on behalf of the
Reinsurer.

For any reinsurance premium payments made to a foreign reinsurer, the Company is
required under the Internal Revenue Code to withhold, for U.S. Federal Excise
Tax purposes, 1% of the gross premiums paid on policies of reinsurance that
cover risks wholly or partly within the United States unless:

      1.    the reinsurance premiums paid to the foreign reinsurer are exempt
            from U.S. Federal Excise Tax pursuant to an applicable U.S. income
            tax treaty; or

                                       15
<PAGE>

      2.    the foreign reinsurer elects under Internal Revenue Code Section
            953(d) to be treated as a U.S. insurance company for all purposes of
            the Internal Revenue Code.

The Company must receive a signed statement on an annual basis from an officer
of the foreign reinsurance company certifying that it qualifies under either of
the foregoing exceptions in order for the Company not to withhold the 1% U.S.
Federal Excise Tax on the reinsurance premiums that it pays to the foreign
reinsurer.

The foreign reinsurer must provide written notice to the Company to the extent
that the reinsurer retrocedes to a foreign reinsurer any risk undertaken with
respect to any Policy.

In the event of any return of premium becoming due hereunder, the Reinsurer will
deduct the percentage specified by United States law from the amount of the
return and the Company or its agent should take steps to recover the Tax from
the United States Government.

                                   ARTICLE 15

                                ACCESS TO RECORDS

The Reinsurer and its duly designated representatives shall have the right to
inspect at all reasonable times the books, records, and documents of the Company
with respect to its participation in the insurance or reinsurance provided by
the Company. In addition, the Company shall, and shall cause its affiliates and
agents to make available any director, officer or employee of the Company and/or
its affiliates and agents, to interview in connection with this Agreement and
the Policies; The Reinsurer's rights under this provision shall survive
termination of this Agreement and shall continue to exist as long as one of the
parties hereto has a claim against any other arising from this Agreement. The
Reinsurer hereby agrees that it will, at least 90 days in advance of undertaking
an activity in competition with the Company's primary financial guaranty
insurance business, notify the Company of any such planned activity (including
defining the areas to be included in such activity and the proposed extent
thereof), and under such circumstances the Company may limit or restrict
Reinsurer's access to its books, records and documents that are related to any
such activity to the extent that the Company believes such information to be
proprietary, confidential, integral or essential to its business and which it
believes is not essential to the Reinsurer's business or operations covered by
this Agreement.

                                   ARTICLE 16

                                    CURRENCY

Where the word "dollars" and/or the sign "$" appear in this Agreement, they
shall meal United States dollars.

For purposes of this Agreement, where the Company receives premiums or pays
losses in currencies other than United States dollars, any payments of such
amounts, or portions, thereof, to the Reinsurer may be remitted in either the
original currency received by the Company or in United States dollars; provided,
however, where the Company receives premiums or pays losses in currencies other
than United States dollars, to the extent the Company converts such premiums or
losses into United States dollars, such

                                       16
<PAGE>

premiums of losses shall be converted into United States dollars at the actual
rates of exchange at which these premiums or losses are entered in the Company's
books.

                                   ARTICLE 17

                                 SERVICE OF SUIT

(This Article shall apply only if the Reinsurer is domiciled outside of the
United States of America or if the Reinsurer is not authorized in the State of
New York.)

(1)   In the event of the failure of the Reinsurer to pay any amount claimed to
      be due hereunder, the Reinsurer, at the request of the Company, will
      submit to the jurisdiction of a court of competent jurisdiction within the
      United States of America. Nothing in this Article constitutes or should be
      understood to constitute a waiver of the Reinsurer's rights to commence an
      action in any court of competent jurisdiction in the United States of
      America, to remove an action to a district court of the United States of
      America, or to seek a transfer of a case to another court as permitted by
      the laws of the Unites States of America or of any State in the United
      States of America. It is further agreed that service of process on the
      Reinsurer in such suit may be made upon Messrs Mendes & Mount, 750 Seventh
      Avenue, New York, New York 10019-6829 or other agent previously designated
      by the Reinsurer which designation has been previously notified to the
      Company), and that in any suit instituted against the Reinsurer, the
      Reinsurer will abide by the final decision of such court or, in the case
      of an appeal, the appellate court.

(2)   The above-named firm is authorized and directed to accept service of
      process on behalf of the Reinsurer in any such suit and/or upon the
      request of the Company to give written undertaking to the Company that
      such firm will enter a general appearance upon the Reinsurer's behalf in
      the event such a suit shall be instituted.

(3)   Further, pursuant to any statute of any state, territory or district of
      the United States of America which makes provision therefor, the Reinsurer
      hereon hereby designates the superintendent, commissioner or director of
      insurance or other officer specified for that purpose in the statute, or
      his successor or successors in office, as its true and lawful attorney
      upon whom may be served any lawful process in action, suit or proceeding
      instituted by or on behalf of the Company or any beneficiary hereunder
      arising out of this Agreement, and hereby designates the above named as
      the person to whom the said officer is authorized to mail such process or
      a true copy thereof.

                                   ARTICLE 18

                                   ARBITRATION

(1)   As a condition precedent to any right of action hereunder, any dispute
      arising out of or related to this Agreement shall be finally settled by
      arbitration. The arbitration shall be conducted by a board of arbitration
      composed of two arbitrators and an umpire, meeting in Armonk, New York,
      unless otherwise agreed.

                                       17
<PAGE>

(2)   The members of the board of arbitration shall be active or retired
      disinterested officials of insurance or reinsurance companies. Each party
      shall appoint its arbitrator, and the two arbitrators shall choose an
      umpire before instituting the hearing. If the respondent fails to appoint
      its arbitrator within four weeks after being requested to do so by the
      claimant, the latter shall also appoint the second arbitrator. If the two
      arbitrators fail to agree upon the appointment of an umpire within four
      weeks after their nominations, the umpire shall be selected by the
      regional director of the American Arbitration Association in New York, New
      York, or the regional director's delegate. The arbitration shall be
      conducted in the English language.

(3)   The claimant shall submit its initial brief within 20 days from
      appointment of the umpire. The respondent shall submit its brief within 20
      days after receipt of the claimant's brief and the claimant shall submit a
      reply brief within 10 days after receipt of the respondent's brief.

(4)   The board shall make its decision with regard to the custom and usage of
      the insurance and reinsurance business. The board shall issue its decision
      in writing based upon a hearing in which evidence may be introduced
      without following strict rules of evidence but in which cross-examination
      and rebuttal shall be allowed. The board shall make its decision within 60
      days following the termination of the hearings unless the parties consent
      to an extension. The majority decision of the board shall be final and
      binding upon all parties to the proceeding. Judgment may be entered upon
      the award of the board in any court having jurisdiction thereof or having
      jurisdiction over the parties or their assets.

(5)   If more than one reinsurer is involved in the same dispute, all such
      reinsurers shall constitute and act as one party for purposes of this
      Article and communications shall be made by the Company to each of the
      reinsurers constituting the one party; provided, however, that nothing
      herein shall impair the rights of such reinsurers to assert several,
      rather than joint, defenses or claims, nor be construed as changing the
      liability of the reinsurers under the terms of this Agreement from several
      to joint.

(6)   Each party shall bear the expense of its own arbitrator and shall jointly
      and equally bear with the other party the expense of the umpire. The
      remaining costs of the arbitration proceedings shall be allocated by the
      board.

(7)   Unless prohibited by applicable law, an arbitral award hereunder and any
      judgment thereon shall bear interest from the date the arbitral award was
      rendered at the rate equal from time to time to the rate publicly
      announced by Citibank, N. A., as its base rate plus 2%.

(8)   The parties consent to the jurisdiction of the Supreme Court of the State
      of New York, County of New York, and of the United States District Court
      for the Southern District of New York, for all purposes in connection with
      such arbitration, including without limitation any application to compel
      arbitration or to confirm an arbitration award. The parties consent that
      any process or notice of motion or other application to either of said
      Courts, and any paper in connection with arbitration, may be served by
      certified mail,

                                       18
<PAGE>

      return receipt requested, or by personal service or in such other manner
      as may be permissible under the rules of the applicable court or panel
      provided a reasonable time for appearances is allowed. Service upon the
      Company shall be directed to the Company, in care of the Company's General
      Counsel. Service upon the Reinsurer shall be directed to the Reinsurer in
      care of its General Counsel.

                                   ARTICLE 19

                    INDEMNIFICATION AND ERRORS AND OMISSIONS

Any recitals in this Agreement to the terms and provisions of any original
insurance or reinsurance are merely descriptive. The Reinsurer is reinsuring, to
the amount herein provided, the obligations of the Company under any original
insurance or reinsurance. The Company, shall be the sole judge as to:

      (a)   what shall constitute a claim or loss covered under any original
            insurance of reinsurance written by the Company;

      (b)   the Company's liability thereunder; and

      (c)   the amount or amounts which it shall be proper for the Company to
            pad thereunder.

The Reinsurer shall be bound by the judgment of the Company as to the
obligation(s) an( liability(ies) of the Company under any original insurance or
reinsurance.

Any inadvertent error, omission or delay in complying with the terms and
conditions of this Agreement shall not be held to relieve either party hereto
from any liability which would attach to it hereunder if such error, omission or
delay had not been made, provided such error, omission or delay is rectified
immediately upon discovery.

                                   ARTICLE 20

                                   INSOLVENCY

(1)   In the event of the insolvency of the Company, reinsurance provided by
      this Agreement shall be payable by the Reinsurer on the basis of the
      liability of the Company under the Policies ceded without diminution
      because of the insolvency of the Company or because its liquidator,
      receiver, conservator or statutory successor (hereinafter referred to as
      the "Liquidator") has failed to pay all or a portion of any claim. The
      Liquidator shall give written notice to the Reinsurer of the pendency of a
      claim against the Company under any Policy ceded to Reinsurers and covered
      by this Agreement within a reasonable time after such claim is filed in
      the conservation or liquidation proceeding or in the receivership. During
      the pendency of such claim, the Reinsurer may investigate such claim and
      interpose at its own expense, in the proceeding where such claim is to be
      adjudicated, any defense or defenses that it may deem available to the
      Company or the Liquidator. The expense thus incurred by the Reinsurer
      shall be chargeable, subject to the approval of the court, against the
      Company as part of the expense of conservation or liquidation to the

                                       19
<PAGE>

      extent of a Proportionate Share of the benefit which may accrue to the
      Company solely as a result of the defense undertaker by the Reinsurer.

(2)   Where two or more Reinsurers are involved in the same claim and a majority
      in interest elect to interpose defense to such claim, the expense shall be
      apportioned in accordance with the terms of this Agreement as though such
      expense has been incurred by the Company.

(3)   In the event of the insolvency of the Company, the reinsurance provided by
      this Agreement shall be payable directly by the Reinsurer to the Company
      or to the Liquidator, except (a) where the Policy specifically provides
      another payee of such reinsurance in the event of the insolvency of the
      Company, or (b) where the Reinsurer with the consent of the direct
      insured(s) has assumed the obligations of the Company under the Policies
      as the direct obligations of the Reinsurer to the payees under such
      Policies and in substitution for the obligations of the Company to such
      payees.

                                   ARTICLE 21

                                    SECURITY

(1)   When a governing body of any jurisdiction in which the Company legally
      operates or to which it submits, requires as a condition to credit for the
      reinsurance provided by this Agreement that the Reinsurer post a Letter of
      Credit for the benefit of the Company, establish a Trust Account for the
      benefit of the Company or deposit funds under the control of the Company
      then the Reinsurer, at its option, shall either (a) post and maintain such
      a Letter of Credit, or (b) establish such a Trust Account, or (c) deposit
      such funds in the form and amount necessary to permit the Company to avoid
      on any statutory financial statement filed by the Company the penalty to
      surplus which would result from the loss of credit for the reinsurance. In
      addition, with respect to the reinsurance ceded hereunder of any Policy
      issued by MBIA Assurance S.A. and/or MBIA UK Insurance Limited, the
      Reinsurer, at its option, shall either (a) post and maintain a Letter of
      Credit, or (b) establish a Trust Account, or (c) deposit funds in the form
      and amount necessary to permit the Company, under the applicable laws and
      regulations in the State of New York, to avoid on any statutory financial
      statement filed by the Company the penalty to surplus which would result
      from the loss of credit for the reinsurance for such Policies if the
      Company had issued such Policies and ceded the reinsurance directly to the
      Reinsurer hereunder.

(2)   The Reinsurer and Company agree that the Letters of Credit provided by the
      Reinsurer pursuant to the provisions of this Agreement may be drawn upon
      at any time, notwithstanding any other provision of this Agreement, and be
      utilized by the Company or any successor, by operation of law, of the
      Company including, without limitation, any liquidator, rehabilitator,
      receiver or conservator of the Company for the following purposes, unless
      otherwise provided for in a separate trust agreement:

                                       20
<PAGE>

      (a)   to reimburse the Company for the Reinsurer's Proportionate Share of
            Net Losses and Net Allocated Loss Adjustment Expenses paid by the
            Company under this Agreement;

      (b)   if this Agreement has been terminated pursuant to the Commencement
            and Termination Article, to reimburse the Company for unearned
            premium due to the Company;

      (c)   to fund an account with the Company in an amount at least equal to
            the deduction allowed for the reinsurance provided by this
            Agreement, from the Company's liabilities for Policies ceded under
            the Agreement, such amount to include, if applicable, but not be
            limited to, amounts for net contingency reserves, loss reserves for
            paid, reported and incurred but not reported losses, allocated loss
            adjustment expense reserves and unearned premium reserves; or

      (d)   to pay any other amounts the Company claims are due under the
            Agreement.

All of the foregoing should be applied without diminution because of insolvency
on the part of the Company or Reinsurer.

(3)   If the Reinsurer elects to provide a Letter of Credit under section (1) of
      this Article, the Reinsurer shall cause the Letter of Credit to be issued,
      in place and effective no later than the "as of date" of the first
      quarterly filing prepared by the Company for the appropriate regulatory
      authority after the Effective Time.

(4)   The Reinsurer may comply with section (1) of this Article by entering into
      a trust agreement to establish a Trust Account for the benefit of the
      Company that meets the requirements of New York Insurance Department
      Regulation 114 to cover an amount equal to or greater than reserves to be
      maintained by the Reinsurer. The assets deposited in such trust account
      shall be valued according to their fair market value and shall consist
      only of cash (United States legal tender), certificates of deposit (issued
      by a United States bank and payable in United States legal tender), and
      investment of the types specified in paragraphs (1), (2), (3), (8) and
      (10) of New York Insurance Law Section 1404(a), provided that such
      investments are issued by an institution that is not a parent, subsidiary
      or affiliate of either the Reinsurer or the Company. Prior to depositing
      assets with the trustee, the Reinsurer shall execute assignments,
      endorsements in blank, or transfer legal title to the trustee of all
      shares, obligations or any other assets requiring assignments, in order
      that the Company, or the trustee upon the direction of the Company, may
      whenever necessary negotiate any such assets without consent or signature
      from the Reinsurer or any other entity. All settlements of account under
      such a trust agreement between the Company and the Reinsurer shall be made
      in cash or its equivalent. The Reinsurer and the Company agree that the
      assets in the trust account may be withdrawn by the Company at any time
      and be used and applied by the Company or any successor by operation of
      law of the Company, including, without limitation, any liquidator,
      rehabilitator, receiver or conservator of the Company, without diminution
      because of insolvency of the Company or the Reinsurer, only for the
      following purposes:

                                       21
<PAGE>

      (a)   to reimburse the Company for the Reinsurer's Proportionate Share of
            Net Losses and Net Allocated Loss Adjustment Expenses paid by the
            Company under this Agreement;

      (b)   if this Agreement has been terminated pursuant to the Commencement
            and Termination Article, to reimburse the Company for unearned
            premium due to the Company;

      (c)   to fund an account with the Company in an amount at least equal to
            the deduction allowed for the reinsurance provided by this
            Agreement, from the Company's liabilities for Policies ceded under
            the Agreement, such amount to include, if applicable, but not be
            limited to, amounts for Net contingency reserves, loss reserves for
            paid, reported and incurred but not reported losses, allocated loss
            adjustment expense reserves and unearned premium reserves; or

      (d)   to pay any other amounts the Company claims are due under the
            Agreement.

All of the foregoing should be applied without diminution because of insolvency
on the part of the Company or Reinsurer.

                                   ARTICLE 22

                            RESERVES AND RISK LIMITS

When a regulatory body of any jurisdiction in which the Company legally operates
or to which it submits its statutory financial statements requires as a
condition to credit for the reinsurance provided by this Agreement that the
Reinsurer establish and maintain certain reserves (including but not limited to
contingency, unearned premium, loss and loss expense reserves upon the
liabilities ceded under this Agreement) and risk limits, the Reinsurer shall
establish and maintain those reserves and risk limits. Without limiting the
generality of the foregoing, the Reinsurer hereby acknowledges that in order for
the Company to obtain credit for the reinsurance provided by this Agreement in
determining its reserves and risk limits under the New York and Florida
Insurance Laws, the Reinsurer must establish and maintain a reserve in an amount
equal to the Reinsurer's Proportionate Share of the amount by which the Company
reduces its contingency reserves attributable to the Policies covered by the
Agreement and the Reinsurer agrees to establish such a reserve. The amount of
reserves to be established by the Reinsurer to meet these requirements will be
reported quarterly by the Company pursuant to the Accounts, Reports, and
Payments Article.

                                   ARTICLE 23

                                 CONFIDENTIALITY

As a condition to receiving any information from MBIA with respect to any Policy
(the "MBIA Information") the Reinsurer agrees to: (i) hold and treat the MBIA
Information in strict confidence, (ii) use it solely for the purpose of its
reinsurance pursuant to this Agreement, (iii) take all reasonable measures to
keep the MBIA Information secret and confidential, (iv) disclose the MBIA
Information only to (a) those officers, directors, employees, advisors, legal
counsel

                                       22
<PAGE>

and auditors (collectively, "Representatives") who "need to know" in order to
evaluate the transactions contemplated by this Agreement, (b) any rating agency
in connection with their rating of the Reinsurer, (c) regulatory authorities
having applicable jurisdiction over the Reinsurer or the transaction to which
such MBIA Information relates, but only as may be required or requested by such
regulatory authorities, and (d) as may be necessary or appropriate in connection
with any retrocession; provided, that (1) in the case of disclosure pursuant to
(a) - (d) above the Reinsurer will inform such Representatives or other persons
set forth in this clause (iv) that the MBIA Information in confidential and
direct them to keep it confidential, and (2) in the case of disclosure pursuant
to (d) above, receipt by the Reinsurer, which will be made available to MBIA
upon request of a written obligation of confidentiality that covers the MBIA
Information from any proposed retrocessional reinsurer containing provisions
substantially similar to those set fort in this paragraph, and further that the
Reinsurer shall remain liable hereunder for any breach by such prospective
retrocessional reinsurer, and (v) not disclose or otherwise make available any
of the MBIA Information to any third party, except as set forth in (iv) above
without MBIA's written consent. Notwithstanding anything contained herein to the
contrary, any MBIA Information which is in the public domain (through no breach
of this paragraph by Reinsurer or any of its Representatives of the obligations
set forth in this paragraph), (2) was lawfully in Reinsurer's or any of its
Representatives' possession at the time of disclosure; or (3) MBIA Information
which was lawfully received from a third party that, to the Reinsurer's or any
of its Representatives' knowledge, was not under an obligation of
confidentiality, directly or indirectly, to MBIA will not be deemed
confidential. If the Reinsurer is requested or required in connection with a
judicial or governmental proceeding or by applicable law or regulation to
disclose any MBIA Information, unless prohibited by applicable law, court order,
subpoena or similar legal process, the Reinsurer shall provide MBIA with timely
notice of such request so that MBIA can seek, at MBIA's expense, an appropriate
protective order. It is understood and agreed that MBIA would be irreparably
injured by a breach of these conditions, that money damages would not be a
sufficient remedy for any breach, and that, in addition to MBIA's remedies
available at law for losses, claims, damages, liabilities or expenses suffered
or incurred in connection with a breach of this Confidentiality provision, or in
equity, MBIA will be entitled to seek, and to obtain, specific performance and
injunctive or other equitable relief as a remedy for any breach.

                                   ARTICLE 24

                                     OFFSET

Each party hereto shall have, and may exercise at any time and from time to
time, the right to offset any balance or balances, whether on account of Net
Premiums or on account of Net Losses or otherwise, due from such party to the
other party hereto under this Agreement or under any other reinsurance agreement
heretofore or hereafter entered into by and between them, and may offset the
same against any balance or balances due or to become due to the former from the
latter under the same or any other reinsurance agreement between them. The party
asserting the right of offset shall have and may exercise such right whether the
balance(s) due or to become due to such party from the other are on account of
premiums or on account of Losses or otherwise and regardless of the capacity,
whether as assuming reinsurer or as ceding company, in which each party acted
under this Agreement. In the event of the insolvency of a party hereto,

                                       23
<PAGE>

offsets shall be allowed only in accordance with the provisions of Section 7427
of the Insurance Law of the State of New York.

                                   ARTICLE 25

                                  GOVERNING LAW

This Agreement shall be governed by the laws of the State of New York.

                                   ARTICLE 26

                                  PARTICIPATION

The Reinsurer's Percentage Share:

<TABLE>
<CAPTION>
BUSINESS CLASSIFICATION     REINSURER'S PERCENTAGE SHARE
-----------------------     ----------------------------
<S>                         <C>
[ * ]                                [ * ]%

[ * ]                                [ * ]%
[ * ]                                [ * ]%
[ * ]                                [ * ]%
[ * ]                                [ * ]%
[ * ]                                [ * ]%
[ * ]                                [ * ]%
</TABLE>

*Confidential treatment requested for redacted portion.

                                   ARTICLE 27

                                   ASSIGNMENT

The Reinsurer may not assign any of its rights or obligations hereunder without
the prior written consent of the Company.

                                   ARTICLE 28

                                     NOTICE

Except as otherwise expressly provided herein, all notices, requests, demands,
instructions, consents or other communications provided for hereunder shall be
in writing and delivered or mailed by registered or certified mail or by
overnight courier or by facsimile communication, in each case prepaid and
addressed to the intended recipient at its address for notices specified in
paragraph B of this Article.

All notices, requests, demands, consents, approvals or other communications
under this Agreement shall be addressed as follows (or to any other address as
may be designated in writing by the recipient):

                                       24
<PAGE>

If to the Company:

                  MBIA Insurance Corporation
                  113 King Street
                  Armonk, New York 10504
                  Attention: Reinsurance Group
                  Facsimile: (914) 765-3410
                  Telephone: (914) 765-3046

                  With a copy to the Company's General Counsel.

If to the Reinsurer:

                  RAM Reinsurance Company Ltd
                  RAM Re House
                  46 Reid Street
                  Hamilton HM 12
                  Bermuda
                  Attention: Chief Risk Manager
                  Facsimile: (441) 296-6509
                  Telephone: (441) 296-6501

                  With a copy to the Company's General Counsel.

The Company and Reinsurer shall provide each other, with wiring instructions
promptly after execution of this Agreement and at the time of any change in such
instructions.

                                       25
<PAGE>

IN WITNESS WHEREOF the parties hereto, by their respective duly authorized
officers, have executed this COMPREHENSIVE AUTOMATIC TREATY REINSURANCE
AGREEMENT, in triplicate, as of the dates recorded below:

ACCEPTED:\

At: Hamilton, Bermuda

Reinsurer:                               RAM Reinsurance Company Ltd.

Authorized Signature:                    __________________________________

Date:                                    __________________________________

At: Armonk New York

Company:                                 MBIA Insurance Corporation

Authorized Signature:                    __________________________________

Date:                                    __________________________________

Company:                                 MBIA Assurance S.A.

Authorized Signature:                    __________________________________

Date:                                    __________________________________

Company:                                 MBIA UK Insurance Limited

Authorized Signature:                    __________________________________

Date:                                    __________________________________

Company:                                 Capital Markets Assurance Corporation

Authorized Signature:                    __________________________________

Date:                                    __________________________________

                                       26EX-10.1

 

Exhibit 10.1

 

 

UST INC.

DIRECTOR

DEFERRAL PROGRAM

Effective as of April 7, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	Page	 
	ARTICLE I
— INTRODUCTION
	 	 	1	 
	 
	 	 	 	 
	ARTICLE
II — DEFINITIONS
	 	 	2	 
	 
	 	 	 	 
	2.01 Account:
	 	 	 2	 
	2.02 Act:
	 	 	 2	 
	2.03 Adjusted Holdings:
	 	 	 2	 
	2.04 Annual Award:
	 	 	 2	 
	2.05 Beneficiary:
	 	 	 2	 
	2.06 Board Year:
	 	 	 3	 
	2.07 Change in Control:
	 	 	 3	 
	2.08 Code:
	 	 	 4	 
	2.09 Common Stock Holding Determination Date:
	 	 	 4	 
	2.10 Common Stock Holding Requirement:
	 	 	 4	 
	2.11 Company:
	 	 	 4	 
	2.12 Deferral Subaccount:
	 	 	 4	 
	2.13 Director:
	 	 	 4	 
	2.14 Director Compensation:
	 	 	 5	 
	2.15 Disability:
	 	 	 5	 
	2.16 Distribution Valuation Date:
	 	 	 5	 
	2.17 Election Form:
	 	 	 6	 
	2.18 Eligible Director:
	 	 	 6	 
	2.19 ERISA:
	 	 	 6	 
	2.20 Fair Market Value:
	 	 	 6	 
	2.21 Key Employee:
	 	 	 7	 
	2.22 Participant:
	 	 	 8	 
	2.23 Plan:
	 	 	 8	 
	2.24 Plan Administrator:
	 	 	 8	 
	2.25 Plan Year:
	 	 	 8	 
	2.26 Section 409A:
	 	 	 9	 
	2.27 Separation from Service:
	 	 	 9	 
	2.28 UST Organization:
	 	 	 9	 
	2.29 Unforeseeable Emergency:
	 	 	 9	 
	2.30 Valuation Date:
	 	 	 9	 
	 
	 	 	 	 
	ARTICLE
III — ELIGIBILITY AND PARTICIPATION
	 	 	10	 
	 
	 	 	 	 
	3.01 Eligibility to Participate:
	 	 	10	 
	3.02 Termination of Eligibility to Defer:
	 	 	10	 
	3.03 Termination of Participation:
	 	 	10	 
	 
	 	 	 	 
	ARTICLE
IV — DEFERRAL OF COMPENSATION
	 	 	11	 
	 
	 	 	 	 
	4.01 Automatic Deferral:
	 	 	11	 
	4.02 Voluntary Deferrals and Elections:
	 	 	11	 

-i-

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	Page	 
	4.03 Time and Manner of Voluntary Deferral Election:
	 	 	12	 
	4.04 Beneficiaries:
	 	 	12	 
	4.05 Period of Deferral:
	 	 	13	 
	4.06 No Subsequent Elections:
	 	 	13	 
	 
	 	 	 	 
	ARTICLE V — INTERESTS OF PARTICIPANTS
	 	 	14	 
	 
	 	 	 	 
	5.01 Accounting for Participants’ Interests:
	 	 	14	 
	5.02 Phantom Investment of Account:
	 	 	14	 
	5.03 Vesting of a Participant’s Account:
	 	 	15	 
	 
	 	 	 	 
	ARTICLE VI — DISTRIBUTIONS
	 	 	16	 
	 
	 	 	 	 
	6.01 General:
	 	 	16	 
	6.02 Distributions on Account of a Separation from Service:
	 	 	17	 
	6.03 Distributions on Account of Death:
	 	 	17	 
	6.04 Distributions on Account of Disability:
	 	 	17	 
	6.05 Distributions on Account of Change in Control:
	 	 	18	 
	6.06 Distributions on Account of Unforeseeable Emergency:
	 	 	18	 
	6.07 Valuation:
	 	 	18	 
	6.08 Impact of Section 16 of the Act on Distributions:
	 	 	19	 
	 
	 	 	 	 
	ARTICLE VII — PLAN ADMINISTRATION
	 	 	20	 
	 
	 	 	 	 
	7.01 Plan Administrator:
	 	 	20	 
	7.02 Action:
	 	 	20	 
	7.03 Powers of the Plan Administrator:
	 	 	20	 
	7.04 Compensation, Indemnity and Liability:
	 	 	21	 
	7.05 Taxes:
	 	 	22	 
	7.06 Section 16 Compliance:
	 	 	22	 
	7.07 Conformance with Section 409A:
	 	 	22	 
	 
	 	 	 	 
	ARTICLE VIII — CLAIMS PROCEDURE
	 	 	23	 
	 
	 	 	 	 
	8.01 Claims for Benefits:
	 	 	23	 
	8.02 Appeals of Denied Claims:
	 	 	23	 
	8.03 Special Claims Procedures for Disability Determinations:
	 	 	23	 
	 
	 	 	 	 
	ARTICLE IX — AMENDMENT AND TERMINATION
	 	 	24	 
	 
	 	 	 	 
	9.01 Amendment of Plan:
	 	 	24	 
	9.02 Termination of Plan:
	 	 	24	 
	 
	 	 	 	 
	ARTICLE X — MISCELLANEOUS
	 	 	25	 
	 
	 	 	 	 
	10.01 Limitation on Participant’s Rights:
	 	 	25	 
	10.02 Unfunded Obligation of the Company:
	 	 	25	 
	10.03 Other Plans:
	 	 	25	 
	10.04 Receipt or Release:
	 	 	25	 
	10.05 Governing Law:
	 	 	25	 

-ii-

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	Page	 
	10.06 Gender, Tense and Examples:
	 	 	26	 
	10.07 Successors and Assigns; Nonalienation of Benefits:
	 	 	26	 
	10.08 Facility of Payment:
	 	 	26	 
	 
	 	 	 	 
	ARTICLE XI — SIGNATURE
	 	 	27	 

-iii-

 

ARTICLE I — INTRODUCTION

     UST Inc. (the “Company”) established the UST Inc. Director Deferral Program (the
“Plan”) to permit Eligible Directors to defer certain compensation paid to them as Directors.

     This document is effective as of April 7, 2005, which shall be the effective date of the Plan
(the “Effective Date”). It sets forth the terms of the Plan, deferrals under which are subject to
Section 409A.

     This document specifies the group of Directors of the Company that are eligible to make
deferrals, the procedures for electing to defer compensation and the Plan’s provisions for
maintaining and paying out amounts that have been deferred.

     The Plan is unfunded and unsecured. Amounts deferred by a Director are a liability and an
obligation of the Company, and Directors have the rights of a general creditor. As of the
Effective Date, this Plan is not currently subject to ERISA.

1

 

ARTICLE II — DEFINITIONS

     When used in this Plan, the following underlined terms shall have the meanings set
forth below unless a different meaning is plainly required by the context:

2.01 Account:

     The account maintained for a Participant on the books of the Company to determine, from time
to time, the Participant’s interest under this Plan. The balance in such Account shall be
determined by the Plan Administrator. Each Participant’s Account shall consist of at least one
Deferral Subaccount for each separate deferral under Section 4.01 or 4.02. The Plan Administrator
may also establish such additional Deferral Subaccounts as it deems necessary for the proper
administration of the Plan. The Plan Administrator may also combine Deferral Subaccounts to the
extent it deems separate accounts are not needed for sound recordkeeping. Where appropriate, a
reference to a Participant’s Account shall include a reference to each applicable Deferral
Subaccount that has been established thereunder.

2.02 Act:

     The Securities Exchange Act of 1934, as amended.

2.03 Adjusted Holdings:

     The sum of (a) the Director’s holdings of UST Inc. Common Stock that may be taken into account
in satisfying the Common Stock Holding Requirement from time to time, plus (b) the amount of the
Annual Award for the upcoming Board Year.

2.04 Annual Award:

     The grant of UST Inc. Common Stock that is awarded to Directors on an annual basis for each
Board Year.

2.05 Beneficiary:

     The person or persons (including a trust or trusts) properly designated by a Participant, as
determined by the Plan Administrator, to receive the amounts in one or more of the Participant’s
Deferral Subaccounts in the event of the Participant’s death, provided such person or persons are
living (or in existence, in the case of a trust) at the Participant’s death. To be effective, any
Beneficiary designation must be in writing, signed by the Participant, and must meet such other
standards (including any requirement for spousal consent) as the Plan Administrator shall require
from time to time. The Beneficiary designation must also be filed with the Plan Administrator
prior to the Participant’s death. An incomplete Beneficiary designation, as determined by the Plan
Administrator, shall be void and of no effect. If some but not all of the persons designated by a
Participant to receive

2

 

his or her Account at death predecease the Participant, the Participant’s
surviving Beneficiaries shall be entitled to the portion of the Participant’s Account intended for such
pre-deceased persons in proportion to the surviving Beneficiaries’ respective shares. If no
designation is in effect at the time of a Participant’s death (as determined by the Plan
Administrator) or if all persons designated as Beneficiaries have predeceased the Participant, then
the Participant’s Beneficiary shall be his or her estate. A Beneficiary designation of an
individual by name remains in effect regardless of any change in the designated individual’s
relationship to the Participant. A Beneficiary designation of an individual by name and
relationship ceases to be effective when the designated individuals is no longer in the specified
relationship to the Participant. Any Beneficiary designation submitted to the Plan Administrator
that only specifies a Beneficiary by relationship shall not be considered an effective Beneficiary
designation and shall be void and of no effect. An individual who is otherwise a Beneficiary with
respect to a Participant’s Account ceases to be a Beneficiary when all payments have been made from
the Account.

2.06 Board Year:

     The 12-month period of time that begins on the date of each annual meeting of the Company and
that ends on the day before the next annual meeting. As of the Effective Date, this is the period
of time from the first Tuesday in May to the day before the first Tuesday in May in the following
year.

2.07 Change in Control:

     A Change in Control shall have the meaning given to it by Section 409A(a)(2)(A)(v). In
general, such meaning shall include the following, as interpreted by Section 409A(a)(2)(A)(v) –

          (a) A change in the ownership of the Company that occurs on the date that any one person, or
more than one person acting as a group, acquires ownership of stock of the Company that, together
with stock held by such person or group, constitutes more than 50% of the total fair market value
or total voting power of the stock of the Company;

          (b) A change in the effective control of the Company that occurs on the date that either (1)
any one person, or more than one person acting as a group, acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by such person or persons)
ownership of stock of the Company possessing 35% or more of the total voting power of the stock of
the Company, or (2) a majority of the members of the Company’s Board of Directors is replaced
during any 12-month period by directors whose appointment or election is not endorsed by a majority
of the members of the Company’s Board of Directors prior to the date of the appointment or
election; or

          (c) A change in the ownership of a substantial portion of the Company’s assets occurring on
the date that any one person, or more than one person acting as a group,

3

 

acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by such person or
persons) assets from the Company that have a total gross fair
market value (determined without regard to any liabilities associated with such assets) equal to or
more than 40% of the total gross fair market value (determined without regard to any liabilities
associated with such assets) of all of the assets of the Company immediately prior to such
acquisition(s).

2.08 Code:

     The Internal Revenue Code of 1986, as amended from time to time.

2.09 Common Stock Holding Determination Date:

     The date as of which the Plan Administrator determines if the Common Stock Holding Requirement
has been satisfied. In determining Director deferrals for a particular Board Year, the Common
Stock Holding Determination Date shall be November 15 of the preceding Board Year (or if
such day is not a business day, the day immediately following November 15 that is a business day).

2.10 Common Stock Holding Requirement:

     The term, Common Stock Holding Requirement, shall have the meaning given to it in Section
4.01.

2.11 Company:

     UST Inc., a corporation organized and existing under the laws of the State of Delaware, or its
successor or successors.

2.12 Deferral Subaccount:

     A subaccount of a Participant’s Account maintained to reflect his or her interest in the Plan
attributable to each deferral (or separately tracked portion of a deferral) of Director
Compensation, and any adjustments to such subaccount in accordance with Section 5.01(b).

2.13 Director:

     Any person who is –

	 	(a)	 	A member of the Board of Directors of the Company,
	 
	 	(b)	 	Currently a citizen or resident of the United States, and
	 
	 	(c)	 	Not currently an employee of the UST Organization.

4

 

2.14 Director Compensation:

     Only the Annual Award paid to an Eligible Director by the Company. In operating the Plan,
Director Compensation shall not include any other compensation, remuneration or payment received by
an Eligible Director from the Company. Subject to the next sentence, Director Compensation shall
be reduced for any applicable tax levies, garnishments and other legally required deductions.
Notwithstanding the preceding sentence, an Eligible Director’s Director Compensation may be reduced
by an item described in the preceding sentence only to the extent such reduction does not violate
Section 409A.

2.15 Disability:

     A Participant shall be considered to suffer from a Disability, if, in the judgment of the Plan
Administrator (based on the provisions of Section 409A), the Participant –

          (a) Is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or

          (b) By reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, is receiving income replacement benefits for a period of not less than 3 months under an
accident and health plan of the Company.

     Solely for those Participants who are otherwise eligible for Social Security, a Participant
who has received a Social Security disability award will be deemed to satisfy the requirements of
Subsection (a) and a Participant who has not received a Social Security disability award will be
deemed to not meet the requirements of Subsection (a).

2.16 Distribution Valuation Date:

     Each date as specified by the Plan Administrator from time to time as of which Participant
Accounts are valued for purposes of a distribution from a Participant’s Account. With respect to
any distribution, the Distribution Valuation Date shall be the business day when the Plan
Administrator begins to process a Participant’s distribution based upon the payment events of
Article VI; provided, however, the Distribution Valuation Date for purposes of valuing any payment
of a fractional share shall be the date of the payment event in Article VI or if such date is not a
business day, the immediately following business day. Any current Distribution Valuation Date may
be changed by the Plan Administrator, provided that such change does not result in a change in when
deferrals are paid out that is impermissible under Section 409A.

5

 

2.17 Election Form:

     The form prescribed by the Plan Administrator on which a Participant specifies the amount of
his or her Director Compensation to be deferred, pursuant to the provisions of Article IV. An
Election Form need not exist in a paper format, and it is expressly contemplated that the Plan
Administrator may make available for use such technologies, including voice response systems and
electronic forms, as it deems appropriate from time to time.

2.18 Eligible Director:

     The term, Eligible Director, shall have the meaning given to it in Section 3.01(b).

2.19 ERISA:

     Public Law 93-406, the Employee Retirement Income Security Act of 1974, as amended from time
to time.

2.20 Fair Market Value:

     The term, Fair Market Value, shall have the following meanings depending upon for what purpose
Fair Market Value is being determined –

          (a) Converting Deferrals. For purposes of converting a Participant’s deferrals to
phantom UST Inc. Common Stock as of any date, the Fair Market Value of such stock is the average of
the high and low prices on such date (or if such date is not a trading date, the date immediately
following such date that is a trading date) for UST Inc. Common Stock as reported on the composite
tape for securities listed on the New York Stock Exchange, Inc., rounded (if necessary) to two
decimal places.

          (b) Plan Distributions. For purposes of determining the value of a Plan distribution,
the Fair Market Value of phantom UST Inc. Common Stock is determined as the average of the high and
low prices for UST Inc. Common Stock on the applicable Distribution Valuation Date, as reported on
the composite tape for securities listed on the New York Stock Exchange, Inc., rounded (if
necessary) to two decimal places.

          (c) Converting Dividend Equivalents. For purposes of converting a Participant’s
dividend equivalents under Section 5.02 to phantom UST Inc. Common Stock as of any date, the Fair
Market Value of such stock shall be the value that is determined by the transfer agent for purposes
of crediting shares of UST Inc. Common Stock under the UST Inc. Dividend Reinvestment Plan.

          (d) Common Stock Holding Requirement. For purposes of determining whether a Director
has satisfied the Common Stock Holding Requirement, the Fair Market
 

6

 

Value of UST Inc. Common Stock
shall be the average of the high and low prices for UST
Inc. Common Stock on the Common Stock Holding Determination Date, as reported on the composite tape
for securities listed on the New York Stock Exchange, Inc., rounded (if necessary) to two decimal
places.

2.21 Key Employee:

     The individuals identified in accordance with the principles set forth in Subsection (a), as
modified by the following provisions of this Section.

          (a) General. Any Eligible Director or former Eligible Director who at any time during
the applicable year is –

          (1) An officer of the Company having annual compensation greater than $130,000 (as
adjusted under Code Section 416(i)(1));

          (2) A 5-percent owner of the Company; or

          (3) A 1-percent owner of the Company having annual compensation of more than $150,000.

     For purposes of (1) above, no more than 50 employees identified in the order of their annual
compensation (or, if lesser, the greater of 3 employees or 10 percent of the employees) shall be
treated as officers. For purposes of this Section, annual compensation means compensation as
defined in Code Section 415(c)(3). The Plan Administrator shall determine who is a Key Employee in
accordance with Code Section 416(i) and the applicable regulations and other guidance of general
applicability issued thereunder or in connection therewith (including the provisions of Code
Section 416(i)(3) that treat self employed individuals as employees for purposes of this
definition); provided, that Code Section 416(i)(5) shall not apply in making such determination,
and provided further that the applicable year shall be determined in accordance with Section 409A
and that any modification of the foregoing definition that applies under Section 409A shall be
taken into account.

          (b) Operating Rules. In the case of Separation from Service distributions, the
Company shall treat as Key Employees for the Plan Year of their Separation from Service those
individuals who meet the provisions of the following paragraphs.

          (1) If the determination of a Key Employee is being made in the first calendar quarter
of a Plan Year, the determination shall be made using data for the calendar year that is two
years prior to the current calendar year (e.g., for a determination made in the first
quarter of the 2005 calendar year, data for the 2003 calendar year shall be used); and

7

 

          (2) If the determination of a Key Employee is being made in the second, third or fourth
calendar quarter of a calendar year, the determination shall be
made using data for the prior calendar year (e.g., for a determination made in the second
quarter of the 2005 calendar year, data for the 2004 calendar year shall be used).

     In addition, a Participant shall be considered an officer for purposes of Subsection (a)(1), a
5-percent owner for purposes of Subsection (a)(2) or a 1-percent owner for purposes of Subsection
(a)(3) with respect to a Separation from Service distribution, if the Participant was an officer, a
5-percent owner or a 1-percent owner at some point during the calendar year that applies, in
accordance with Paragraphs (1) and (2) above.

2.22 Participant:

     Any Director who is qualified to participate in this Plan in accordance with Section 3.01 and
who has an Account, plus any individual who has an Account balance. An active Participant is one
who is currently deferring under Section 4.01.

2.23 Plan:

     The UST Inc. Director Deferral Program, the plan set forth herein, as it may be amended and
restated from time to time (subject to the limitations on amendment that are applicable hereunder).

2.24 Plan Administrator:

     The Compensation Committee of the Board of Directors of the Company (the “Compensation
Committee”) or its delegate or delegates, which shall have the authority to administer the Plan as
provided in Article VII. The Compensation Committee has the authority to delegate operational
responsibilities to other persons or parties. As of the Effective Date, the Compensation Committee
has re-delegated certain operational responsibilities to the compensation function of the Company’s
Human Resources Department (the “Compensation Department”). However, references in this document
to the Plan Administrator shall be understood as referring to the Compensation Committee, the
Compensation Department and those delegated by the Compensation Department. All delegations made
under the authority granted by this Section are subject to Section 7.06.

2.25 Plan Year:

     The 12-consecutive month period beginning on January 1 and ending on December 31; provided
that the first Plan Year shall be a short Plan Year beginning on April 7, 2005 and ending on
December 31, 2005.

8

 

2.26 Section 409A:

     Section 409A of the Code and the applicable regulations and other guidance of general
applicability that is issued thereunder.

2.27 Separation from Service:

     A Participant’s separation from service with the UST Organization, within the meaning of
Section 409A(a)(2)(A)(i). The term may also be used as a verb (i.e., “Separates from Service”)
with no change in underlying meaning.

2.28 UST Organization:

     The controlled group of organizations of which the Company is a part, as defined in Code
section 414(b) and (c) and the regulations issued thereunder. An entity shall be considered a
member of the UST Organization only during the period it is one of the group of organizations
described in the preceding sentence.

2.29 Unforeseeable Emergency:

     A severe financial hardship to the Participant resulting from –

          (a) An illness or accident of the Participant, the Participant’s spouse or a dependent (as
defined in Code Section 152(a)) of the Participant;

          (b) Loss of the Participant’s property due to casualty; or

          (c) Any other similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant.

     The Plan Administrator shall determine the occurrence of an Unforeseeable Emergency in
accordance with Section 409A(a)(2)(B)(ii).

2.30 Valuation Date:

     Each date, as determined by the Plan Administrator, as of which Participant Accounts are
valued in accordance with Plan procedures that are currently in effect. In accordance with
procedures that may be adopted by the Plan Administrator, any current Valuation Date may be
changed.

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ARTICLE
III — ELIGIBILITY AND PARTICIPATION

3.01 Eligibility to Participate:

          (a) An individual shall be eligible to defer compensation under the Plan during the period
that he or she is a Director hereunder.

          (b) During the period an individual satisfies the eligibility requirements of this Section, he
or she shall be referred to as an Eligible Director.

          (c) Each Eligible Director becomes an active Participant on the date an amount is first
withheld from his or her Director Compensation, either automatically under Section 4.01 or pursuant
to an Election Form submitted by the Director to the Plan Administrator under Section 4.02.

3.02 Termination of Eligibility to Defer:

     An individual’s eligibility to participate actively by deferring under Sections 4.01 and 4.02
shall cease on the date he or she ceases to be a Director.

3.03 Termination of Participation:

     An individual, who has been an active Participant under the Plan, ceases to be a Participant
on the date his or her Account is fully paid out.

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ARTICLE
IV — DEFERRAL OF COMPENSATION

4.01 Automatic Deferral:

     If an Eligible Director’s Adjusted Holdings of UST Inc. Common Stock has a Fair Market Value
as of the Common Stock Holding Determination Date of less than or equal to five times the annual
cash retainer paid by the Company to its Directors in effect as of the Common Stock Holding
Determination Date (the “Common Stock Holding Requirement”), then such Eligible Director shall be
deemed to have made an election to automatically defer that portion of his or her Director
Compensation with respect to the following Board Year that allows the Eligible Director to meet the
Common Stock Holding Requirement. The Eligible Director may elect to defer voluntarily the
remaining portion of Director Compensation pursuant to Section 4.02. Any Director Compensation
deferred under this Section 4.01 shall be credited to the Participant’s Account on the date (or
dates) it otherwise would be paid to the Director, provided the Director remains an Eligible
Director as of such time.

4.02 Voluntary Deferrals and Elections:

          (a) An Eligible Director, whose Adjusted Holdings of UST Inc. Common Stock have a Fair Market
Value that exceeds the Common Stock Holding Requirement as of the Common Stock Holding
Determination Date, may make an election to defer under the Plan in 20 percent increments up to 100
percent of the portion of his or her Director Compensation that remains after the application of
Section 4.01 above. Such election to defer shall apply to Director Compensation that is earned for
services performed in the Board Year.

          (b) If a newly Eligible Director satisfies the Common Stock Holding Requirement, such newly
Eligible Director may only elect to defer the portion of his or her eligible Director Compensation
for a Board Year that is earned for services performed after the date of his or her appointment.
For this purpose, if a valid Election Form is received prior to becoming a Director and the
Election Form is effective immediately as of becoming a Director under Section 4.03(a), then the
Director shall be deemed to receive all of his or her Director Compensation for the year after the
date of the appointment.

          (c) Any Director Compensation deferred under this Section 4.02 shall be credited to the
Participant’s Account on the date (or dates) it otherwise would be paid to the Director, provided
the Director remains an Eligible Director as of such time. To be effective, an Eligible Director’s
Election Form must set forth the percentage of Director Compensation to be deferred and any other
information that may be required by the Plan Administrator from time to time. In addition, the
Election Form must meet the requirements of Section 4.03.

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4.03 Time and Manner of Voluntary Deferral Election:

          (a) Deferral Election Deadlines. An election to defer Director Compensation under
Section 4.02 must be made by the following deadlines:

         (1) Ordinarily an Eligible Director must make a deferral election with respect to
Director Compensation payable for a Board Year no later than the December 31 that precedes
such Board Year (although the Plan Administrator may adopt policies that encourage earlier
submission of election forms). If such December 31 is not a business day, then the deadline
for deferral elections will be the first business day preceding such December 31.

         (2) An individual, who has been nominated for Director status, must submit an Election
Form prior to becoming an Eligible Director, and such Election Form will be effective
immediately upon commencement of the individual’s status as an Eligible Director.

         (3) Notwithstanding paragraph (1) above, an Eligible Director may elect to defer
Director Compensation with respect to the Board Year that begins on May 1, 2005 by filing an
Election Form during the period beginning on April 7, 2005 and ending on April 25, 2005.

          (b) General Provisions. A separate deferral election under subsection (a) above must
be made by an Eligible Director for each Board Year’s compensation that is eligible for deferral.
If a properly completed and executed Election Form is not actually received by the Plan
Administrator by the prescribed time in subsection (a) above, the Eligible Director will be deemed
to have elected not to defer any Director Compensation for the applicable Board Year. An election
is irrevocable once received and determined by the Plan Administrator to be properly completed.
Increases or decreases in the amount or percentage a Participant elects to defer shall not be
permitted as of the beginning of the calendar year during which the applicable Board Year begins.

4.04 Beneficiaries:

     A Participant who has Director Compensation automatically deferred under Section 4.01 or who
makes a deferral election under Section 4.02 may designate on a form (authorized by the Plan
Administrator for this purpose) one or more Beneficiaries to receive payment, in the event of his
or her death, of the amounts credited to his or her Account. If more than one Beneficiary is
specified and the Participant fails to indicate the respective percentage applicable to two or more
Beneficiaries, then each Beneficiary for whom a percentage is not designated will be entitled to an
equal share of the portion of the Account (if any) for which percentages have not been designated.
At any time, a Participant may change a Beneficiary designation for his or her Account in a writing
that is signed by the

12

 

Participant and filed with the Plan Administrator prior to the Participant’s
death, and that meets such other standards as the Plan Administrator shall require from time to
time.

4.05 Period of Deferral:

     An Eligible Director who either has an automatic deferral under Section 4.01 or who makes a
deferral election under Section 4.02 shall defer his or her Director Compensation until the date it
becomes distributable under the provisions of Article VI.

4.06 No Subsequent Elections:

     No Participant shall be permitted to make a subsequent election that extends the
time of payment or changes the form of payment under Article VI.

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ARTICLE
V — INTERESTS OF PARTICIPANTS

5.01 Accounting for Participants’ Interests:

          (a) Deferral Subaccounts. Each Participant generally shall have at least one separate
Deferral Subaccount for each separate deferral of Director Compensation made by the Participant
under this Plan. A Participant’s deferral shall be credited to his or her Account as soon as
practicable following the date the compensation would be paid in the absence of a deferral. A
Participant’s Account is a bookkeeping device to track the value of the Participant’s deferrals and
the Company’s liability therefor. No assets shall be reserved or segregated in connection with any
Account, and no Account shall be insured or otherwise secured.

          (b) Adjustments. The Plan provides only for “phantom investments,” and therefore any
adjustments to a Participant’s Account as provided by Section 5.02(b) are hypothetical and not
actual. However, they shall be applied to measure the value of a Participant’s Account and the
amount of the Company’s liability to make deferred payments to or on behalf of the Participant.

5.02 Phantom Investment of Account:

          (a) General. Each of a Participant’s Deferral Subaccounts shall be invested on a
phantom basis in phantom UST Inc. Common Stock as provided in Subsection (b) below.

          (b) Phantom UST Inc. Common Stock. Participant Accounts invested in phantom UST Inc.
Common Stock are adjusted to reflect an investment in UST Inc. Common Stock. An amount deferred is
converted to phantom shares of UST Inc. Common Stock of equivalent value by dividing such amount by
the Fair Market Value of a share of UST Inc. Common Stock on the date (or dates) applicable under
Sections 4.01 and 4.02 above. The Plan Administrator shall adopt a fair valuation methodology for
valuing an investment in phantom UST Inc. Common Stock, such that the value shall reflect the
complete value of an investment in UST Inc. Common Stock in accordance with the following
Paragraphs below.

          (1) The Plan Administrator shall value a phantom investment in UST Inc. Common Stock
pursuant to an accounting methodology which credits partial phantom shares (as necessary).

          (2) A Participant’s interest in the phantom UST Inc. Common Stock is valued as of a
Valuation Date by multiplying the number of phantom shares (whole and fractional) credited
to the Participant’s Account on such date by the Fair Market Value of a share of UST Inc.
Common Stock on such date.

14

 

          (3) If shares of UST Inc. Common Stock change by reason of any stock split, stock
dividend, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or any other corporate change treated as subject to this provision by the Plan
Administrator, such equitable adjustment shall be made in the number and kind of phantom shares credited to an Account or Deferral Subaccount as the Plan Administrator may determine
to be necessary or appropriate.

          (4) In no event will shares of UST Inc. Common Stock actually be purchased or held
under this Plan, and no Participant shall have any rights as a stockholder of UST Inc.
Common Stock on account of an interest in phantom UST Inc. Common Stock.

          (5) Any amounts that would be received by the Account as dividends, if dividends were
paid on phantom shares of UST Inc. Common Stock as they are on actual shares of equivalent
value, shall be converted to phantom shares of UST Inc. Common Stock of equivalent value by
dividing the dollar amount of the dividend by the Fair Market Value of a share of UST Inc.
Common Stock and credited to the Participant’s Account. For this purpose, the date that the
Fair Market Value is determined and the date that the dividend equivalent is credited to the
Participant’s Account shall be the dates established by the transfer agent for the UST Inc.
Dividend Reinvestment Plan for reinvestment of dividends under such plan.

5.03 Vesting of a Participant’s Account:

     A Participant’s interest in the value of his or her Account shall at all times be 100% vested,
which means that it will not forfeit as a result of his or her Separation from Service.

15

 

ARTICLE
VI — DISTRIBUTIONS

6.01 General:

     A Participant’s Deferral Subaccount(s) shall be distributed as provided in this Article,
subject in all cases to Section 7.03(j) (relating to safeguards against insider trading) and
Section 7.06 (relating to compliance with Section 16 of the Act). All Deferral Subaccount balances
shall be distributed in a single lump sum of shares of UST Inc. Common Stock (or such other stock
that applies after application of Section 5.02(b)(3)) with one share of such actual stock payable
for each phantom share, and with the value of any fractional phantom share paid in cash. In no
event shall any portion of a Participant’s Account be distributed earlier or later than is allowed
under Section 409A.

     The following general rules shall apply for purposes of interpreting the provisions of this
Article VI.

          (a) Section 6.02 (Distributions on Account of a Separation from Service) applies when a
Participant Separates from Service, but not including death or Disability.

          (b) Section 6.03 (Distributions on Account of Death) applies when the Participant dies. If a
Participant is entitled to receive, but has not received, a distribution under Section 6.02, 6.04,
6.05 or 6.06 (see below) at the time of his or her death, Section 6.03 shall take precedence over
those sections.

          (c) Section 6.04 (Distributions on Account of Disability) applies when the Participant becomes
Disabled. If a Participant who becomes Disabled dies, Section 6.03 shall take precedence over
Section 6.04 to the extent it would result in an earlier distribution of a Participant’s Account.
Further, distributions under Section 6.04 take precedence over a distribution under Section 6.02,
6.03, 6.05 and 6.06 to the extent Section 6.04 would result in an earlier distribution.

          (d) Section 6.05 (Distributions on Account of Change in Control) applies when a Change in
Control occurs. If a Change in Control occurs and a Participant dies before a distribution can be
made under Section 6.05, Section 6.03 shall take precedence over Section 6.05 to the extent it
would result in an earlier distribution of a Participant’s Account.

          (e) Section 6.06 (Distributions on Account of an Unforeseeable Emergency) applies when an
Unforeseeable Emergency occurs. If an Unforeseeable Emergency occurs and a Participant dies before
a distribution can be made under Section 6.06, Section 6.03 shall take precedence over Section 6.06
to the extent it would result in an earlier distribution of a Participant’s Account. Further, a
distribution under Section 6.06 takes precedence over a distribution under Sections 6.02, 6.03,
6.04 and 6.05 to the extent that Section 6.06 would result in an earlier distribution.

16

 

6.02 Distributions on Account of a Separation from Service:

     A Participant’s total Account balance shall be distributed upon the occurrence of a
Participant’s Separation from Service (other than Disability or death) in accordance with the terms
and conditions of this Section. When used in this Section, the phrase “Separation from Service”
shall not include a Participant’s Disability or death.

          (a) Subject to subsection (b), a Participant’s total Account balance, shall be distributed as
soon as administratively practicable following the Participant’s Separation from Service.

          (b) If the Participant is classified as a Key Employee at the time of the Participant’s
Separation from Service (or at such other time for determining Key Employee status as may apply
under Section 409A), then such Participant’s Account shall not be paid, as a result of the
Participant’s Separation from Service, earlier than the date that is at least 6 months after the
Participant’s Separation from Service.

6.03 Distributions on Account of Death:

          (a) Upon a Participant’s death, the Participant’s total Account balance shall be distributed
as soon as administratively practicable following the Participant’s death. Amounts paid following
a Participant’s death shall be paid to the Participant’s Beneficiary.

          (b) Any claim to be paid with respect to any amounts standing to the credit of a Participant
in connection with the Participant’s death must be received by the Plan Administrator at least 14
days before any such amount is paid out by the Plan Administrator. Any claim received thereafter
is untimely, and it shall be unenforceable against the Plan, the Company, the Plan Administrator,
or any other party acting for one or more of them.

6.04 Distributions on Account of Disability:

     Prior to the time that an amount would become distributable under Section 6.02, 6.03, 6.05 or
6.06, if a Participant believes he or she is suffering from a Disability, the Participant may file
a written request with the Plan Administrator for payment of the entire amount credited to his or
her Account in connection with a Disability. After a Participant has filed a written request
pursuant to this Section, along with all supporting material that may be required by the Plan
Administrator from time to time, the Plan Administrator shall determine within 45 days (or as soon
as practicable thereafter if special circumstances warrant additional time and such extension does
not violate applicable law) whether the Participant meets the criteria for a Disability. In
addition, to the extent required under Section 409A, if the Company becomes aware that the
Participant appears to meet the criteria for a Disability, the Company shall advise the Plan
Administrator and the Plan Administrator shall proceed to determine if the Participant meets the
criteria for a Disability under this Plan, even if the

17

 

Participant has not yet applied for payment
from this Plan. To the extent practicable, the Participant shall be expected to permit whatever
medical examinations are necessary for the
Plan Administrator to make its determination. If the Plan Administrator determines that the
Participant has satisfied the criteria for a Disability, the Participant’s total Account balance
shall be distributed as soon as administratively practicable following the date on which the
Disability determination is made.

6.05 Distributions on Account of Change in Control:

     Each Participant’s total Account balance shall be distributed as soon as administratively
practicable following the occurrence of a Change in Control.

6.06 Distributions on Account of Unforeseeable Emergency:

     Prior to the time that an amount would become distributable under Sections 6.02 through
6.05, a Participant may file a written request with the Plan Administrator for accelerated payment
of all or a portion of the amount credited to the Participant’s Account based upon an Unforeseeable
Emergency. After a Participant has filed a written request pursuant to this Section, along with
all supporting material that may be required by the Plan Administrator from time to time, the Plan
Administrator shall determine within 45 days (or such other number of days that is necessary if
special circumstances warrant additional time) whether the individual meets the criteria for an
Unforeseeable Emergency. If the Plan Administrator determines that an Unforeseeable Emergency has
occurred, the Participant shall receive a distribution from his or her Account as soon as
administratively practicable. However, the value of such distribution shall not exceed the dollar
amount necessary to satisfy the Unforeseeable Emergency (plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution) after taking into account the extent to
which the Unforeseeable Emergency is or may be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation
of such assets would not itself cause severe financial hardship). Distributions under this Section
6.06 may only be made in whole shares of UST Inc. Common Stock (or such other stock that
applies after application of Section 5.02(b)(3)). No cash may be distributed for a fractional
share. The distribution made to a Participant shall be reduced as necessary to comply with this
restriction.

6.07 Valuation:

     If a particular Section in this Article does not specify a Distribution Valuation Date to be
used in calculating the distribution, the Distribution Valuation Date that is on or immediately
prior to such distribution shall be used. In determining the value of a Participant’s remaining
Account following a partial distribution under Section 6.06 for a distribution on account of an
Unforeseeable Emergency, such distribution shall reduce the value of the Participant’s Account as
of the close of the Distribution Valuation Date preceding the payment date for such partial
distribution.

18

 

6.08 Impact of Section 16 of the Act on Distributions:

     The provisions of Section 7.06 shall apply in determining whether a Participant’s distribution
shall be delayed beyond the date applicable under the preceding provisions of this Article VI.

19

 

ARTICLE
VII — PLAN ADMINISTRATION

7.01 Plan Administrator:

     The Plan Administrator is responsible for the administration of the Plan. The Plan
Administrator has the authority to name one or more delegates to carry out certain responsibilities
hereunder, as specified in the definition of Plan Administrator. To the extent not already set
forth in the Plan, any such delegation shall state the scope of responsibilities being delegated
and is subject to Section 7.06 below.

7.02 Action:

     Action by the Plan Administrator may be taken in accordance with procedures that the Plan
Administrator adopts from time to time or that the Company’s legal department determines are
legally permissible.

7.03 Powers of the Plan Administrator:

     The Plan Administrator shall administer and manage the Plan and shall have (and shall be
permitted to delegate) all powers necessary to accomplish that purpose, including the following:

          (a) To exercise its discretionary authority to construe, interpret, and administer this Plan;

          (b) To exercise its discretionary authority to make all decisions regarding eligibility,
participation and deferrals, to make allocations and determinations required by this Plan, and to
maintain records regarding Participants’ Accounts;

          (c) To compute and certify to the Company the amount and kinds of payments to Participants or
their Beneficiaries, and to determine the time and manner in which such payments are to be paid;

          (d) To authorize all disbursements by the Company pursuant to this Plan;

          (e) To maintain (or cause to be maintained) all the necessary records for administration of
this Plan;

          (f) To make and publish such rules for the regulation of this Plan as are not inconsistent
with the terms hereof;

          (g) To delegate to other individuals or entities from time to time the performance of any of
its duties or responsibilities hereunder;

20

 

          (h) To change the phantom investment under Article V;

          (i) To hire agents, accountants, actuaries, consultants and legal counsel to assist in
operating and administering the Plan; and

          (j) Notwithstanding any other provision of this Plan except Section 7.07 (relating to
compliance with Section 409A), the Plan Administrator may take any action that it determines is
necessary to assure compliance with any policy of the Company respecting insider trading as may be
in effect from time to time. Such actions may include altering the distribution date of Deferral
Subaccounts. Any such actions shall alter the normal operation of the Plan to the minimum extent
necessary.

     The Plan Administrator has the exclusive and discretionary authority to construe and to
interpret the Plan, to decide all questions of eligibility for benefits, to determine the amount
and manner of payment of such benefits and to make any determinations that are contemplated by (or
permissible under) the terms of this Plan, and its decisions on such matters will be final and
conclusive on all parties. Any such decision or determination shall be made in the absolute and
unrestricted discretion of the Plan Administrator, even if (1) such discretion is not expressly
granted by the Plan provisions in question, or (2) a determination is not expressly called for by
the Plan provisions in question, and even though other Plan provisions expressly grant discretion
or call for a determination. As a result, benefits under this Plan will be paid only if the Plan
Administrator decides in its discretion that the applicant is entitled to them. In the event of a
review by a court, arbitrator or any other tribunal, any exercise of the Plan Administrator’s
discretionary authority shall not be disturbed unless it is clearly shown to be arbitrary and
capricious.

7.04 Compensation, Indemnity and Liability:

     The Plan Administrator will serve without bond and without compensation for services
hereunder. All expenses of the Plan and the Plan Administrator will be paid by the Company. To
the extent deemed appropriate by the Plan Administrator, any such expense may be charged against
specific Participant Accounts, thereby reducing the obligation of the Company. No member of the
Compensation Committee (who serves as the Plan Administrator), and no individual acting as the
delegate of the Compensation Committee, shall be liable for any act or omission of any individual,
nor for any act or omission on his or her own part, excepting his or her own willful misconduct.
The Company will indemnify and hold harmless each member of the Compensation Committee and any
employee of the Company (or a Company affiliate, if recognized as an affiliate for this purpose by
the Plan Administrator) acting as the delegate of the Compensation Committee against any and all
expenses and liabilities, including reasonable legal fees and expenses, arising in connection with
this Plan (or his or her serving as the delegate of the Compensation Committee), excepting only
expenses and liabilities arising out of his or her own willful misconduct or bad faith.

21

 

7.05 Taxes:

     If the whole or any part of any Participant’s Account becomes subject to the payment of any
estate, inheritance, income, employment, or other tax which the Company may be required to pay or
withhold, the Company will have the full power and authority to withhold and pay such tax out of
any moneys or other property in its hand for the Account of the Participant. To the extent
practicable, the Company will provide the Participant notice of such withholding. Prior to making
any payment, the Company may require such releases or other documents from any lawful taxing
authority as it shall deem necessary. In addition, pursuant to Section 409A amounts deferred under
this Plan shall be reported to the Internal Revenue Service to the extent required under Section
409A. Also, any amounts that become taxable hereunder shall be reported as taxable compensation to
the Participant to the extent required under Section 409A.

7.06 Section 16 Compliance:

     This Plan is intended to be a formula plan for purposes of Section 16 of the Act.
Accordingly, in the case of a deferral or other action under the Plan that constitutes a
transaction that could be covered by Rule 16b-3(d) or (e), if it were approved by the Company’s
Board or Compensation Committee (“Board Approval”), it is intended that the Plan shall be
administered, in the case of a Participant who is subject to Section 16 of the Act, in a manner
that will permit the Board Approval of the Plan to avoid any additional Board Approval of specific
transactions to the maximum possible extent.

7.07 Conformance with Section 409A:

     At all times during each Plan Year, this Plan shall be operated in accordance with the
requirements of Section 409A. Any action that may be taken (and, to the extent possible, any
action actually taken) by the Plan Administrator or the Company shall not be taken (or shall be
void and without effect), if such action violates the requirements of Section 409A. If the failure
to take an action under the Plan would violate Section 409A, then to the extent it is possible
thereby to avoid a violation of Section 409A, the rights and effects under the Plan shall be
altered to avoid such violation. Any provision in this Plan document that is determined to violate
the requirements of Section 409A shall be void and without effect. In addition, any provision that
is required to appear in this Plan document to satisfy the requirements of Section 409A, but that
is not expressly set forth, shall be deemed to be set forth herein, and the Plan shall be
administered in all respects as if such provision were expressly set forth. Any distribution that
is to be made as soon as practicable after a specified date shall in all cases be made on or before
(i) the end of the calendar year containing such date, or (ii) if later, 21/2 months after such date
(or on or before such still later date as may be permitted under the circumstances by Section
409A). In all cases, the provisions of this Section shall apply notwithstanding any contrary
provision of the Plan that is not contained in this Section.

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ARTICLE
VIII — CLAIMS PROCEDURE

8.01 Claims for Benefits:

     If a Participant, Beneficiary or other person (hereafter, “Claimant”) does not receive timely
payment of any benefits which he or she believes are due and payable under the Plan, he or she may
make a claim for benefits to the Plan Administrator. The claim for benefits must be in writing and
addressed to the Plan Administrator. If the claim for benefits is denied, the Plan Administrator
will notify the Claimant within 90 days after the Plan Administrator initially received the benefit
claim. However, if special circumstances require an extension of time for processing the claim,
the Plan Administrator will furnish notice of the extension to the Claimant prior to the
termination of the initial 90-day period and such extension may not exceed one additional,
consecutive 90-day period. Any notice of a denial of benefits shall advise the Claimant of the
basis for the denial, any additional material or information necessary for the Claimant to perfect
his or her claim, and the steps which the Claimant must take to appeal his or her claim for
benefits.

8.02 Appeals of Denied Claims:

     Each Claimant whose claim for benefits has been denied may file a written appeal for a review
of his or her claim by the Plan Administrator. The request for review must be filed by the
Claimant within 60 days after he or she received the notice denying his or her claim. The decision
of the Plan Administrator will be communicated to the Claimant within 60 days after receipt of a
request for appeal. The notice shall set forth the basis for the Plan Administrator’s decision.
If special circumstances require an extension of time for processing the appeal, the Plan
Administrator will furnish notice of the extension to the Claimant prior to the termination of the
initial 60-day period and such extension may not exceed one additional, consecutive 60-day period.
In no event shall the Plan Administrator’s decision be rendered later than 120 days after receipt
of a request for appeal.

8.03 Special Claims Procedures for Disability Determinations:

     Notwithstanding Sections 8.01 and 8.02 to the contrary, if the claim or appeal of the Claimant
relates to Disability benefits, such claim or appeal shall be processed pursuant to the applicable
provisions of Department of Labor Regulation Section 2560.503-1 relating to Disability benefits,
including Sections 2560.503-1(d), 2560.503-1(f)(3), 2560.503-1(h)(4) and 2560.503-1(i)(3).

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ARTICLE
IX — AMENDMENT AND TERMINATION

9.01 Amendment of Plan:

     The Board of Directors of the Company has the right in its sole discretion to amend this Plan
in whole or in part at any time and in any manner, including the manner of making deferral
elections, the terms on which distributions are made, and the form and timing of distributions.
However, except for mere clarifying amendments necessary to avoid an inappropriate windfall, no
Plan amendment shall reduce the amount credited to the Account of any Participant as of the date
such amendment is adopted. Any amendment shall be in writing and adopted by the Board of
Directors. All Participants and Beneficiaries shall be bound by such amendment. Any amendments
made to the Plan shall be subject to any restrictions on amendment that are applicable to ensure
continued compliance under Section 409A.

9.02 Termination of Plan:

     The Company expects to continue this Plan, but does not obligate itself to do so. The
Company, acting by the Board of Directors, reserves the right to discontinue and terminate the Plan
at any time, in whole or in part, for any reason (including a change, or an impending change, in
the tax laws of the United States or any State). Termination of the Plan will be binding on all
Participants (and a partial termination shall be binding upon all affected Participants) and their
Beneficiaries, but in no event may such termination reduce the amounts credited at that time to any
Participant’s Account. If this Plan is terminated (in whole or in part), the termination
resolution shall provide for how amounts theretofore credited to affected Participants’ Accounts
will be distributed. Any termination shall be subject to any restrictions on termination that are
applicable to ensure continued compliance under Section 409A.

24

 

ARTICLE
X — MISCELLANEOUS

10.01 Limitation on Participant’s Rights:

     Participation in this Plan does not give any Participant the right to be retained in the
service of the Company. The Company reserves the right to terminate the service of any Participant
without any liability for any claim against the Company under this Plan, except for a claim for
payment of deferrals as provided herein.

10.02 Unfunded Obligation of the Company:

     The benefits provided by this Plan are unfunded. All amounts payable under this Plan to
Participants are paid from the general assets of the Company. Nothing contained in this Plan
requires the Company to set aside or hold in trust any amounts or assets for the purpose of paying
benefits to Participants. Neither a Participant, Beneficiary, nor any other person shall have any
property interest, legal or equitable, in any specific Company asset. This Plan creates only a
contractual obligation on the part of the Company, and the Participant has the status of a general
unsecured creditor of the Company with respect to amounts of compensation deferred hereunder. Such
a Participant shall not have any preference or priority over the rights of any other unsecured
general creditor of the Company. No other Company affiliate guarantees or shares such obligation,
and no other Company affiliate shall have any liability to the Participant or his or her
Beneficiary.

10.03 Other Plans:

     This Plan shall not affect the right of any Eligible Director or Participant to participate in
and receive benefits under and in accordance with the provisions of any other Director compensation
plans which are now or hereafter maintained by the Company, unless the terms of such other plan or
plans specifically provide otherwise or it would cause such other plan to violate a requirement for
tax favored treatment.

10.04 Receipt or Release:

     Any payment to a Participant in accordance with the provisions of this Plan shall, to the
extent thereof, be in full satisfaction of all claims against the Plan Administrator and the
Company, and the Plan Administrator may require such Participant, as a condition precedent to such
payment, to execute a receipt and release to such effect.

10.05 Governing Law:

     This Plan shall be construed, administered, and governed in all respects in accordance with
applicable federal law and, to the extent not preempted by federal law, in accordance with the laws
of the State of Delaware. If any provisions of this instrument shall be held by a

25

 

 court of
competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall
continue to be fully effective.

10.06 Gender, Tense and Examples:

     In this Plan, whenever the context so indicates, the singular or plural number and the
masculine, feminine, or neuter gender shall be deemed to include the other. Whenever an example is
provided or the text uses the term “including” followed by a specific item or items, or there is a
passage having a similar effect, such passage of the Plan shall be construed as if the phrase
“without limitation” followed such example or term (or otherwise applied to such passage in a
manner that avoids limitation on its breadth of application).

10.07 Successors and Assigns; Nonalienation of Benefits:

     This Plan inures to the benefit of and is binding upon the parties hereto and their
successors, heirs and assigns; provided, however, that the amounts credited to the Account of a
Participant are not (except as provided in Section 7.05) subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy
of any kind, either voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any right to any benefits
payable hereunder, including, without limitation, any assignment or alienation in connection with a
separation, divorce, child support or similar arrangement, will be null and void and not binding on
the Plan or the Company. Notwithstanding the foregoing and to the extent permissible under Section
409A, the Plan Administrator reserves the right to make payments in accordance with a divorce
decree, judgment or other court order as and when payments are made in accordance with the terms of
this Plan from the Deferral Subaccount of a Participant. Any such payment shall be charged against
and reduce the Participant’s Account.

10.08 Facility of Payment:

     Whenever, in the Plan Administrator’s opinion, a Participant or Beneficiary entitled to
receive any payment hereunder is under a legal disability or is incapacitated in any way so as to
be unable to manage his or her financial affairs, the Plan Administrator may direct the Company to
make payments to such person or to the legal representative of such person for his or her benefit,
or to apply the payment for the benefit of such person in such manner as the Plan Administrator
considers advisable. Any payment in accordance with the provisions of this Section shall be a
complete discharge of any liability for the making of such payment to the Participant or
Beneficiary under the Plan.

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ARTICLE
XI — SIGNATURE

     This Plan has been adopted and approved by the Company’s Compensation Committee to be
effective as stated herein.

	 	 	 	 	 
	 	 	UST INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	Date Signed

	 	 	 	Name:
	 

	 	 	 	Title:

27

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