Document:

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                                                                    EXHIBIT 10.4

                    THIRD CASUALTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE CONTRACT
                           EFFECTIVE: JANUARY 1, 2007

                                    issued to

                      American Interstate Insurance Company
                               DeRidder, Louisiana
                 American Interstate Insurance Company of Texas
                                  Austin, Texas
                            Silver Oak Casualty, Inc.
                               DeRidder, Louisiana
                                       and
                 any other insurance companies which are now or
          hereafter come under the ownership, control or management of
                            Amerisafe Insurance Group

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE                                                                     PAGE
-------                                                                     ----
<S>                                                                         <C>
      I Classes of Business Reinsured                                         1
     II Commencement and Termination                                          1
    III Territory (BRMA 51A)                                                  3
     IV Exclusions                                                            3
      V Special Acceptances                                                   7
     VI Retention and Limit                                                   8
    VII Reinstatement                                                         8
   VIII Definitions                                                           9
     IX Annuities at Company's Option                                        11
      X Claims                                                               12
     XI Sunset                                                               12
    XII Special Commutation                                                  12
   XIII Salvage and Subrogation                                              14
    XIV Federal Terrorism Coverage                                           15
     XV Reinsurance Premium                                                  15
    XVI Late Payments                                                        16
   XVII Offset (BRMA 36A)                                                    17
  XVIII Access to Records (BRMA 1D)                                          17
    XIX Liability of the Reinsurer                                           17
     XX Net Retained Lines (BRMA 32E)                                        17
    XXI Errors and Omissions                                                 18
   XXII Currency (BRMA 12A)                                                  18
  XXIII Taxes (BRMA 50B)                                                     18
   XXIV Federal Excise Tax                                                   18
    XXV Reserves and Letters of Credit                                       19
   XXVI Insolvency                                                           20
  XXVII Arbitration (BRMA 6J)                                                21
 XXVIII Service of Suit (BRMA 49C)                                           22
   XXIX Entire Agreement                                                     22
    XXX Governing Law (BRMA 71B)                                             22
   XXXI Agency Agreement                                                     23
  XXXII Intermediary (BRMA 23A)                                              23
</TABLE>

                                                                 (BENFIELD LOGO)
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                    THIRD CASUALTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE CONTRACT
                           EFFECTIVE: JANUARY 1, 2007

                                    issued to

                      American Interstate Insurance Company
                               DeRidder, Louisiana
                 American Interstate Insurance Company of Texas
                                  Austin, Texas
                            Silver Oak Casualty, Inc.
                               DeRidder, Louisiana
                                       and
                 any other insurance companies which are now or
          hereafter come under the ownership, control or management of
                            Amerisafe Insurance Group
             (hereinafter referred to collectively as the "Company")

                                       by

                   The Subscribing Reinsurer(s) Executing the
                     Interests and Liabilities Agreement(s)
                                 Attached Hereto
                  (hereinafter referred to as the "Reinsurer")

ARTICLE I - CLASSES OF BUSINESS REINSURED

By this Contract the Reinsurer agrees to reinsure the excess liability which may
accrue to the Company under its policies, contracts and binders of insurance or
reinsurance (hereinafter called "policies") in force at the effective date
hereof or issued or renewed on or after that date, and classified by the Company
as Workers' Compensation, Employers Liability, including coverage provided under
the U.S. Longshore and Harbor Workers' Compensation Act and the Jones Act, and
General Liability business, subject to the terms, conditions and limitations
hereinafter set forth.

ARTICLE II - COMMENCEMENT AND TERMINATION

A.   This Contract shall become effective at 12:01 a.m., Local Standard Time,
     January 1, 2007, with respect to losses arising out of occurrences
     commencing at or after that time and date, and shall continue in force
     thereafter until terminated.

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B.   Either party may terminate this Contract at 12:01 a.m., Local Standard
     Time, on any January 1 by giving the other party not less than 90 days
     prior notice by certified or registered mail.

C.   Notwithstanding the provisions of paragraph B above, the Company may
     terminate a Subscribing Reinsurer's percentage share in this Contract in
     the event any of the following circumstances occur as clarified by public
     announcement for subparagraphs 1 through 6 below and upon discovery for
     subparagraphs 7 and 8 below. The Company has 120 days from the date of
     applicable public announcement or discovery to exercise the option to
     terminate a Subscribing Reinsurer's percentage share in this Contract. The
     effective date of special termination shall not be sooner than one day
     after the Company provides the Subscribing Reinsurer notice of its election
     to specially terminate, unless mutually agreed otherwise:

     1.   The Subscribing Reinsurer's policyholders' surplus at the beginning of
          any contract year has been reduced by more than 20.0% of the amount of
          surplus 12 months prior to that date; or

     2.   The Subscribing Reinsurer's policyholders' surplus at any time during
          any contract year has been reduced by more than 20.0% of the amount of
          surplus at the date of the Subscribing Reinsurer's most recent
          financial statement filed with regulatory authorities and available to
          the public as of the beginning of the contract year; or

     3.   The Subscribing Reinsurer's A.M. Best's rating has been assigned or
          downgraded below A- (inclusive of "Not Rated" ratings) and/or Standard
          & Poor's rating has been assigned or downgraded below BBB+ (inclusive
          of "Not Rated" ratings); or

     4.   The Subscribing Reinsurer has become merged with, acquired by or
          controlled by any other company, corporation or individual(s) not
          controlling the Subscribing Reinsurer's operations previously; or

     5.   A State Insurance Department or other legal authority has ordered the
          Subscribing Reinsurer to cease writing business; or

     6.   The Subscribing Reinsurer has become insolvent or has been placed into
          liquidation or receivership (whether voluntary or involuntary) or
          proceedings have been instituted against the Subscribing Reinsurer for
          the appointment of a receiver, liquidator, rehabilitator, conservator
          or trustee in bankruptcy, or other agent known by whatever name, to
          take possession of its assets or control of its operations; or

     7.   The Subscribing Reinsurer has reinsured its entire liability under
          this Contract without the Company's prior written consent; or

     8.   The Subscribing Reinsurer has ceased assuming new and renewal treaty
          reinsurance business.

D.   Unless the Company elects that the Reinsurer have no liability for losses
     arising out of occurrences commencing after the effective date of
     termination, and so notifies the Reinsurer prior to or as promptly as
     possible after the effective date of termination,

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     reinsurance hereunder on business in force on the effective date of
     termination shall remain in full force and effect until expiration,
     cancellation or next premium anniversary of such business, whichever first
     occurs, but in no event beyond 12 months plus odd time (not exceeding 18
     months in all) following the effective date of termination.

ARTICLE III - TERRITORY (BRMA 51A)

The territorial limits of this Contract shall be identical with those of the
Company's policies.

ARTICLE IV - EXCLUSIONS

A.   This Contract does not apply to and specifically excludes the following:

     1.   Lines of business not identified in the Classes of Business Reinsured
          Article.

     2.   All excess of loss reinsurance assumed by the Company.

     3.   Reinsurance assumed by the Company under obligatory reinsurance
          agreements, except:

          a.   Agency reinsurance where the policies involved are to be
               reunderwritten in accordance with the underwriting standards of
               the Company and reissued as Company policies at the next
               anniversary or expiration date; and

          b.   Intercompany reinsurance between any of the reinsured companies
               under this Contract.

     4.   Business written by the Company on a co-indemnity basis where the
          Company is not the controlling carrier.

     5.   Business written to apply in excess of a deductible of more than
          $25,000, and business issued to apply specifically in excess over
          underlying insurance. However, if the Company is required, by any
          state regulation, to provide a deductible of more than $25,000, this
          exclusion shall not apply.

     6.   Nuclear risks as defined in the "Nuclear Incident Exclusion Clause -
          Liability - Reinsurance (U.S.A.)" attached to and forming part of this
          Contract.

     7.   As regards interests which at time of loss or damage are on shore, no
          liability shall attach hereto in respect of any loss or damage which
          is occasioned by war, invasion, hostilities, acts of foreign enemies,
          civil war, rebellion, insurrection, military or usurped power, or
          martial law or confiscation by order of any government or public
          authority. This War Exclusion Clause shall not, however, apply to
          interests which at time of loss or damage are within the territorial
          limits of the United States of America (comprising the Fifty States of
          the Union, the District of Columbia, and including bridges between the
          United States of America and Mexico provided they are under United
          States ownership), Canada, St. Pierre and Miquelon, provided such
          interests are insured

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          under policies containing a standard war or hostilities or warlike
          operations exclusion clause.

     8.   Liability as a member, subscriber or reinsurer of any Pool, Syndicate
          or Association, but this exclusion shall not apply to Assigned Risk
          Plans or similar plans.

     9.   All liability of the Company arising by contract, 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, however 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 is otherwise deemed
          unable to meet any claim, debt, charge, fee or other obligation in
          whole or in part.

     10.  Workers' Compensation where the principal exposures, as defined by the
          governing class code, include:

          a.   Operation of aircraft, but only if the annual estimated policy
               premium is $250,000 or more;

          b.   Railroad, subway or street railway operations;

          c.   Operation or navigation of vessels or barges;

          d.   Manufacture, production or refining of gas, natural or artificial
               fuel, or other liquefied petroleum fuel, but only if the annual
               estimated policy premium is $250,000 or more;

          e.   Manufacturing, assembly, packing or processing of fireworks,
               fuses, nitroglycerine, magnesium, pyroxylin, ammunition or
               explosives. This exclusion does not apply to the assembly,
               packing or processing of explosives when the estimated annual
               premium is under $250,000;

          f.   Wrecking or demolition of structures, but only if the annual
               estimated policy premium is $250,000 or more;

          g.   Underground mining.

     11.  As respects Workers' Compensation and Employers Liability only, unless
          otherwise excluded as set forth above, the reinsurance provided under
          this Contract shall not apply to any loss, cost or expense arising out
          of or related to, either directly or indirectly, any "terrorist
          activity," as defined herein, but this exclusion shall only apply when
          the activity includes, involves or is associated with the use of any
          biological, chemical, radioactive or nuclear agent, material, device
          or weapon, or when the predominant business of the policyholder, as
          defined by the governing class code, is:

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          a.   The operation of: airports and aircraft; flight schools; bridges,
               dams, tunnels or locks; department stores; shopping malls; chain
               retail stores; casinos and casino hotels; cruise lines;
               railroads; ports/public transit authorities; security services;
               stadiums; convention/exhibition centers; or theme/amusement
               parks;

          b.   The manufacture and distribution of: automobiles; chemicals,
               petrochemicals or pharmaceuticals; utilities (electric, gas,
               water and sewer); major defense/aerospace products; or high-tech
               equipment, but only if the policyholder employs more than 20
               personnel at the location of a terrorist activity at the time of
               its occurrence;

          c.   The management or operation of the following type of structures,
               but only if greater than 25 stories in height:
               apartments/condominiums/co-ops; hotels/motels; or office
               buildings;

          d.   Businesses primarily engaged in the entertainment, media or
               transportation industry limited to the following: major media
               providers (NBC, FOX, ABC, CBS, etc.); television and motion
               picture studios; Broadway theaters; major internet companies
               (AOL, Yahoo, etc.); professional sports teams; major
               telecommunications companies (AT&T, WorldCom/MCI, etc.); national
               truck rental companies (Ryder, Penske, U-Haul, etc.); or major
               national motor freight common carriers (J.B. Hunt, Red Arrow,
               etc.);

          e.   Policyholders primarily located in, or predominantly doing
               business as: hospitals; universities; nuclear facilities;
               financial institutions; or governmental buildings and national
               landmarks.

          "Terrorist activity" shall mean any deliberate, unlawful act that:

          a.   Is declared by any authorized government official to be or to
               involve terrorism, terrorist activity or acts of terrorism; or

          b.   Includes, involves, or is associated with the use or threatened
               use of force, violence or harm against any person, tangible or
               intangible property, the environment, or any natural resources,
               where the act or threatened act is intended, in whole or in part,
               to:

               i.   Promote or further any political, ideological,
                    philosophical, racial, ethnic, social or religious cause or
                    objective of the perpetrator or any organization,
                    association or group affiliated with the perpetrator; or

               ii.  Influence, disrupt or interfere with any government related
                    operations, activities or policies; or

               iii. Intimidate, coerce or frighten the general public or any
                    segment of the general public; or

               iv.  Disrupt or interfere with a national economy or any segment
                    of a national economy; or

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          c.   Includes, involves, or is associated with, in whole or in part,
               any of the following activities, or the threat thereof:

               i.   Hijacking or sabotage of any form of transportation or
                    conveyance, including but not limited to spacecraft,
                    satellite, aircraft, train, vessel or motor vehicle;

               ii.  Hostage taking or kidnapping;

               iii. The use of any bomb, incendiary device, explosive or
                    firearm;

               iv.  The interference with or disruption of basic public or
                    commercial services and systems, including but not limited
                    to the following services or systems: electricity, natural
                    gas, power, postal, communications, telecommunications,
                    information, public transportation, water, fuel, sewer or
                    waste disposal;

               v.   The injuring or assassination of any elected or appointed
                    government official or any government employee;

               vi.  The seizure, blockage, interference with, disruption of, or
                    damage to any government buildings, institutions, functions,
                    events, tangible or intangible property or other assets; or

               vii. The seizure, blockage, interference with, disruption of, or
                    damage to tunnels, roads, streets, highways, or other places
                    of public transportation or conveyance.

          d.   Any of the activities listed in subparagraph c, above, shall be
               considered terrorist activity, except where the Company can
               demonstrate to the Reinsurer that the foregoing activities or
               threats thereof were motivated solely by personal objectives of
               the perpetrator that are unrelated, in whole or in part, to any
               intention to:

               i.   Promote or further any political, ideological,
                    philosophical, racial, ethnic, social or religious cause or
                    objective of the perpetrator or any organization,
                    association or group affiliated with the perpetrator;

               ii.  Influence, disrupt or interfere with any government-related
                    operations, activities or policies;

               iii. Intimidate, coerce or frighten the general public or any
                    segment of the general public; or

               iv.  Disrupt or interfere with a national economy or any segment
                    of a national economy.

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     12.  As respects General Liability policies, exposures, other than those
          identified below, as included in the General Liability section of the
          Company's Commercial Lines Manual:

          a.   Class 97111 - Logging;

          b.   Class 58873 - Sawmill;

          c.   Class 59984 - Woodyard and Drivers;

          d.   Class 95410 - Grading of Land;

          e.   Class 45819 - Lumber Yard;

          f.   Class 10073 - Repair Shops and Drivers;

          g.   Class 43822 - Timber Cruiser;

          h.   Class 99793 - Truckmen Not Otherwise Classified;

          i.   Class 91591 - Contractors - Subcontracted Work Other Than
               Construction;

          j.   Class 49452 - Vacant Land.

B.   Any exclusion set forth in subparagraphs 10 and/or 12 of paragraph A shall
     be waived automatically when, in the opinion of the Company, the exposure
     excluded therein is incidental to the principal exposure on the risk in
     question.

C.   If the Company is bound, without the knowledge and contrary to the
     instructions of the Company's supervisory underwriting personnel, on any
     business falling within the scope of one or more of the exclusions set
     forth in subparagraphs 10 and/or 12 of paragraph A, the exclusion shall be
     suspended with respect to such business until the Company has the first
     opportunity to cancel the policy in compliance with governmental
     requirements.

D.   If the Company is required to accept an assigned risk which conflicts with
     one or more of the exclusions set forth in subparagraph 10 of paragraph A,
     reinsurance shall apply, but only for the difference between the Company's
     retention and the minimum limit required by the applicable state statute,
     and in no event shall the Reinsurer's liability exceed the limit set forth
     in the Retention and Limit Article.

ARTICLE V - SPECIAL ACCEPTANCES

From time to time the Company may request a special acceptance of reinsurance
falling outside the scope of the provisions set forth herein. If each
Subscribing Reinsurer whose share in the interests and liabilities of the
Reinsurer is 20.0% or greater agrees to a special acceptance, such special
acceptance shall be binding on all Subscribing Reinsurers with respect to their
respective share. In the event agreement is not achieved, such special
acceptance shall be made to this Contract only with respect to the interests and
liabilities of each Subscribing Reinsurer who agrees to such special acceptance.
In the event a reinsurer becomes a party to

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this Contract subsequent to one or more special acceptances hereunder, the new
reinsurer shall automatically accept such special acceptance(s) as being covered
hereunder.

ARTICLE VI - RETENTION AND LIMIT

A.   The Company shall retain and be liable for the first $30,000,000 of
     ultimate net loss arising out of each occurrence. The Reinsurer shall then
     be liable for the amount by which such ultimate net loss exceeds the
     Company's applicable retention, but the liability of the Reinsurer shall
     not exceed $20,000,000 as respects any one occurrence.

B.   As respects Workers' Compensation business, the Company's ultimate net
     loss, for the purpose of this Contract, shall be deemed to be a maximum of
     $5,000,000 any one life.

C.   The Company shall be permitted to carry excess of loss and quota share
     reinsurance, recoveries under which shall inure solely to the benefit of
     the Company and be entirely disregarded in applying all of the provisions
     of this Contract.

D.   The Company shall purchase or be deemed to have purchased inuring excess
     facultative reinsurance to limit its ultimate net loss under any one
     coverage, any one policy (exclusive of loss in excess of policy limits,
     extra contractual obligations and loss adjustment expense) to $2,000,000
     each occurrence as respects General Liability and Employers Liability
     business subject hereto.

E.   The Company shall be permitted to carry excess of loss reinsurance applying
     to Workers' Compensation risks in the State of Minnesota, recoveries under
     which shall inure to the benefit of this Contract.

     Such coverage shall be provided through the Minnesota Workers' Compensation
     Reinsurance Association. It is understood that the liability of the
     Reinsurer for Minnesota Workers' Compensation risks is not released.

     In the event the Company accrues liability that is not provided by any
     inuring reinsurance, for whatever reason, the Reinsurer agrees to reinsure
     such excess liability.

ARTICLE VII - REINSTATEMENT

A.   In the event all or any portion of the reinsurance hereunder is exhausted
     by loss, the amount so exhausted shall be reinstated immediately from the
     time the occurrence commences hereon. For each amount so reinstated the
     Company agrees to pay additional premium equal to the product of the
     following:

     1.   The percentage of the occurrence limit reinstated (based on the loss
          paid by the Reinsurer); times

     2.   The earned reinsurance premium for the contract year (exclusive of
          reinstatement premium).

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B.   Whenever the Company requests payment by the Reinsurer of any loss
     hereunder, the Company shall submit a statement to the Reinsurer of
     reinstatement premium due the Reinsurer. If the earned reinsurance premium
     for the contract year has not been finally determined as of the date of any
     such statement, the calculation of reinstatement premium due shall be based
     on the annual deposit premium and shall be readjusted when the earned
     reinsurance premium for the contract year has been finally determined. Any
     reinstatement premium shown to be due the Reinsurer as reflected by any
     such statement (less prior payments, if any) shall be payable by the
     Company concurrently with payment by the Reinsurer of the requested loss.
     Any return reinstatement premium shown to be due the Company shall be
     remitted by the Reinsurer as promptly as possible after receipt and
     verification of the Company's statement.

C.   Notwithstanding anything stated herein, the liability of the Reinsurer
     shall not exceed either of the following:

     1.   $20,000,000 as respects loss or losses arising out of any one
          occurrence; or

     2.   $40,000,000 in all as respects loss or losses arising out of all
          occurrences commencing during the contract year.

D.   In the event this Contract is terminated on a runoff basis, additional
     reinstatement coverage shall be negotiated on or prior to the effective
     date of termination.

ARTICLE VIII - DEFINITIONS

A.   "Ultimate net loss" as used herein is defined as the sum or sums (including
     loss in excess of policy limits, extra contractual obligations and any loss
     adjustment expense, as hereinafter defined) paid or payable by the Company
     in settlement of claims and in satisfaction of judgments rendered on
     account of such claims, after deduction of all salvage, all recoveries and
     all claims on inuring insurance or reinsurance, whether collectible or not.
     Nothing herein shall be construed to mean that losses under this Contract
     are not recoverable until the Company's ultimate net loss has been
     ascertained.

B.   "Loss in excess of policy limits" and "extra contractual obligations" as
     used herein shall be defined as follows:

     1.   "Loss in excess of policy limits" shall mean 90.0% of any amount paid
          or payable by the Company in excess of its policy limits, but
          otherwise within the terms of its policy, such loss in excess of the
          Company's policy limits having been incurred because of, but not
          limited to, failure by the Company to settle within the policy limits
          or by reason of the Company's alleged or actual negligence, fraud or
          bad faith in rejecting an offer of settlement or in the preparation of
          the defense or in the trial of an action against its insured or
          reinsured or in the preparation or prosecution of an appeal consequent
          upon such an action.

     2.   "Extra contractual obligations" shall mean 90.0% of any punitive,
          exemplary, compensatory or consequential damages paid or payable by
          the Company, not covered by any other provision of this Contract and
          which arise from the handling of

                                     Page 9

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          any claim on business subject to this Contract, such liabilities
          arising because of, but not limited to, failure by the Company to
          settle within the policy limits or by reason of the Company's alleged
          or actual negligence, fraud or bad faith in rejecting an offer of
          settlement or in the preparation of the defense or in the trial of any
          action against its insured or reinsured or in the preparation or
          prosecution of an appeal consequent upon such an action. An extra
          contractual obligation shall be deemed, in all circumstances, to have
          occurred on the same date as the loss covered or alleged to be covered
          under the policy.

     If any provision of this Article shall be rendered illegal or unenforceable
     by the laws, regulations or public policy of any state, such provision
     shall be considered void in such state, but this shall not affect the
     validity or enforceability of any other provision of this Contract or the
     enforceability of such provision in any other jurisdiction.

     Notwithstanding anything stated herein, this Contract shall not apply to
     any loss in excess of policy limits or any extra contractual obligation
     incurred by the Company as a result of any fraudulent and/or criminal act
     by any officer or director of the Company acting individually or
     collectively or in collusion with any individual or corporation or any
     other organization or party involved in the presentation, defense or
     settlement of any claim covered hereunder.

C.   "Occurrence" as used herein is defined as an accident or occurrence or a
     series of accidents or occurrences arising out of or caused by one event,
     except that:

     1.   As respects General Liability policies where the Company's limit of
          liability for Products and Completed Operations coverages is
          determined on the basis of the insured's aggregate losses during a
          policy period, all such losses proceeding from or traceable to the
          same causative agency shall, at the Company's option, be deemed to
          have been caused by one occurrence commencing at the beginning of the
          policy period, it being understood and agreed that each renewal or
          annual anniversary date of the policy involved shall be deemed the
          beginning of a new policy period;

     2.   Each occupational or industrial disease case or cumulative trauma case
          contracted by an employee of an insured shall be deemed to have been
          caused by a separate occurrence, commencing on:

          a.   The date of disability for which compensation is payable if the
               case is compensable under the Workers' Compensation Law;

          b.   The date disability due to the disease actually began if the case
               is not compensable under the Workers' Compensation Law;

          c.   The date of cessation of employment if claim is made after
               employment has ceased.

     3.   Notwithstanding the provisions of subparagraph 2 above, as respects
          losses resulting from occupational or industrial disease or cumulative
          trauma suffered by employees of an insured for which the employer is
          liable, as a result of a sudden and accidental event not exceeding 72
          hours in duration, all such losses shall be considered one

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          occurrence and may be combined with losses classified as other than
          occupational or industrial disease or cumulative trauma which arise
          out of the same event and the combination of such losses shall be
          considered as one occurrence within the meaning hereof.

D.   "Occupational or industrial disease" is any abnormal condition that
     fulfills all of the following conditions:

     1.   It is not traceable to a definite compensable accident occurring
          during the employee's past or present employment.

     2.   It has been caused by exposure to a disease producing agent or agents
          present in the worker's occupational environment.

     3.   It has resulted in disability or death.

E.   "Cumulative trauma" is an injury that fulfills all of the following
     conditions:

     1.   It is not traceable to a definite compensable accident occurring
          during the employee's past or present employment.

     2.   It has occurred from and has been aggravated by a repetitive
          employment related activity.

     3.   It has resulted in disability or death.

F.   "Loss adjustment expense" as used herein shall mean expenses allocable to
     the investigation, defense and/or settlement of specific claims, including
     litigation expenses, interest on judgments, declaratory judgment expenses
     or other legal expenses and costs incurred in connection with coverage
     questions and legal actions connected thereto, and salaries and expenses of
     salaried adjusters associated with claims covered under policies of the
     Company reinsured hereunder but not including office expenses or salaries
     of the Company's regular employees.

G.   "Contract year" as used in this Contract shall mean the period from 12:01
     a.m., Local Standard Time, January 1, 2007 to 12:01 a.m., Local Standard
     Time, January 1, 2008, and each respective 12-month period thereafter that
     this Contract continues in force. However, if this Contract is terminated
     on a "cutoff" basis, the final contract year shall be from the beginning of
     the then current contract year through the effective date of termination.
     If this Contract is terminated on a "runoff" basis, the period from the
     effective date of termination through the end of the "runoff" period shall
     be a separate contract year and referred to as the "runoff contract year."

ARTICLE IX - ANNUITIES AT COMPANY'S OPTION

A.   Whenever the Company is required, or elects, to purchase an annuity or to
     negotiate a structured settlement, either in satisfaction of a judgment or
     in an out-of-court settlement or

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     otherwise, the cost of the annuity or the structured settlement, as the
     case may be, shall be deemed part of the Company's ultimate net loss.

B.   The terms "annuity" or "structured settlement" shall be understood to mean
     any insurance policy, lump sum payment, agreement or device of whatever
     nature resulting in the payment of a lump sum by the Company in settlement
     of any or all future liabilities which may attach to it as a result of an
     occurrence.

C.   In the event the Company purchases an annuity which inures in whole or in
     part to the benefit of the Reinsurer, it is understood that the liability
     of the Reinsurer is not released thereby. In the event the Company is
     required to provide benefits not provided by the annuity for whatever
     reason, the Reinsurer shall pay its share of any loss.

ARTICLE X - CLAIMS

A.   Whenever a claim is reserved by the Company for an amount greater than
     50.0% of its retention hereunder and/or whenever a claim appears likely to
     result in a claim under this Contract, the Company shall notify the
     Reinsurer. Further, the Company shall notify the Reinsurer whenever a claim
     involves a fatality, major limb amputation, spinal cord damage, brain
     damage, blindness or extensive burns, regardless of liability, if the
     policy limits or statutory benefits applicable to the claim are greater
     than the Company's retention hereunder. The Reinsurer shall have the right
     to participate, at its own expense, in the defense of any claim or suit or
     proceeding involving this reinsurance.

B.   All claim settlements made by the Company, provided they are within the
     terms of this Contract (including but not limited to ex-gratia payments),
     shall be binding upon the Reinsurer, and the Reinsurer agrees to pay all
     amounts for which it may be liable upon receipt of satisfactory evidence of
     the amount paid by the Company.

ARTICLE XI - SUNSET

Ten years after the effective date of termination of this Contract (or after the
end of the runoff period, if applicable), the Company shall advise the Reinsurer
of any outstanding claims and/or occurrences (each hereinafter referred to as a
"claim") arising during any contract year, which have not been finally settled
and which may cause a recovery under this Contract. Unless mutually agreed, no
liability shall attach hereunder for any claim not reported to the Reinsurer
within 90 days following the 10-year period.

ARTICLE XII - SPECIAL COMMUTATION

A.   In the event a Subscribing Reinsurer meets the following conditions, the
     Company may require a commutation of that portion of any excess loss
     hereunder represented by any outstanding claim or claims, including any
     related loss adjustment expense.

                                     Page 12

<PAGE>

     1.   The Subscribing Reinsurer's A.M. Best's rating has been assigned or
          downgraded below A- (inclusive of "Not Rated" ratings) and/or Standard
          & Poor's rating has been assigned or downgraded below BBB+ (inclusive
          of "Not Rated" ratings); or

     2.   The Subscribing Reinsurer has ceased assuming new and renewal treaty
          reinsurance business.

     "Outstanding claim or claims" shall be defined as known or unknown claims,
     including any billed yet unpaid claims. However, unless otherwise mutually
     agreed, this paragraph shall not apply unless the outstanding claim or
     claims is for an amount not less than $5,000.

B.   If the Company elects to require commutation as provided in paragraph A
     above, the Company shall submit a Statement of Valuation of the outstanding
     claim or claims as of the last day of the month immediately preceding the
     month in which the Company elects to require commutation, as determined by
     the Company. Such Statement of Valuation shall include the elements
     considered reasonable to establish the excess loss and shall set forth or
     attach the information relied upon by the Company and the methodology
     employed to calculate the excess loss. The Subscribing Reinsurer shall then
     pay the amount requested within 30 calendar days of receipt of such
     Statement of Valuation, unless the Subscribing Reinsurer needs additional
     information from the Company to assess the Company's Statement of Valuation
     or contests such amount.

C.   If the Subscribing Reinsurer needs additional information from the Company
     to assess the Company's Statement of Valuation or contests the amount
     requested, the Subscribing Reinsurer shall so notify the Company within 15
     calendar days of receipt of the Company's Statement of Valuation. The
     Company shall supply any reasonably requested information to the
     Subscribing Reinsurer within 15 calendar days of receipt of the
     notification. Within 30 calendar days of the date of the notification or of
     the receipt of the information, whichever is later, the Subscribing
     Reinsurer shall provide the Company with its Statement of Valuation of the
     outstanding claim or claims as of the last day of the month immediately
     preceding the month in which the Company elects to require commutation, as
     determined by the Subscribing Reinsurer. Such Statement of Valuation shall
     include the elements considered reasonable to establish the excess loss and
     shall set forth or attach the information relied upon by the Subscribing
     Reinsurer and the methodology employed to calculate the excess loss.

D.   In the event the Subscribing Reinsurer's Statement of Valuation of the
     outstanding claim or claims is viewed as unacceptable to the Company, the
     Company may either abandon the commutation effort, or may seek to settle
     any difference by using an independent actuary agreed to by the parties.

E.   If the parties cannot agree on an acceptable independent actuary within 15
     calendar days of the date of the Subscribing Reinsurer's Statement of
     Valuation, then each party shall appoint an actuary as party arbitrators
     for the limited and sole purpose of selecting an independent actuary. If
     the actuaries cannot agree on an acceptable independent actuary within 15
     calendar days of the date of the Subscribing Reinsurer's Statement of
     Valuation, the Company shall supply the Subscribing Reinsurer with a list
     of at least three proposed independent actuaries, and the Subscribing
     Reinsurer shall select the independent actuary from that list.

                                     Page 13

<PAGE>

F.   Upon selection of the independent actuary, both parties shall present their
     respective written submissions to the independent actuary. The independent
     actuary may, at his or her discretion, request additional information. The
     independent actuary shall issue his or her decision within 45 calendar days
     after the written submissions have been filed and any additional
     information has been provided.

G.   The decision of the independent actuary shall be final and binding. The
     expense of the independent actuary shall be equally divided between the two
     parties. For the purposes of this Article, unless mutually agreed
     otherwise, an "independent actuary" shall be an actuary who satisfies each
     of the following criteria:

     1.   Is regularly engaged in the valuation of claims resulting from lines
          of business subject to this Contract; and

     2.   Is either a Fellow of the Casualty Actuarial Society or of the
          American Academy of Actuaries; and

     3.   Is disinterested and impartial regarding this commutation.

H.   Notwithstanding paragraphs A, B and C above, in the event that the
     Subscribing Reinsurer no longer meets the conditions set forth in
     subparagraph 1 or 2 in paragraph A above, this commutation may continue on
     a mutually agreed basis.

I.   Payment by the Subscribing Reinsurer of the amount requested in accordance
     with paragraph B, C or F above, shall release the Subscribing Reinsurer
     from all further liability for outstanding claim or claims, known or
     unknown, under this Contract, which shall release the Company from all
     further liability for payments of salvage or subrogation amounts, known or
     unknown, to the Subscribing Reinsurer under this Contract.

J.   In the event of any conflict between this Article and any other Article of
     this Contract, the terms of this Article shall control.

K.   This Article shall survive the termination of this Contract.

ARTICLE XIII - SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or
recovery made by the Company, less the actual cost, excluding salaries of
officials and employees of the Company and sums paid to attorneys as retainer,
of obtaining such reimbursement or making such recovery) or subrogation on
account of claims and settlements involving reinsurance hereunder. Salvage or
subrogation thereon shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation before being
used in any way to reimburse the Company for its primary loss. The Company
hereby agrees to enforce its rights to salvage or subrogation where it is
economically reasonable in the judgment of the Company, relating to any loss, a
part of which loss was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.

                                     Page 14

<PAGE>

ARTICLE XIV - FEDERAL TERRORISM COVERAGE

A.   Any loss reimbursement the Company receives from the United States
     Government under the Terrorism Risk Insurance Act of 2002, as amended by
     the Terrorism Risk Insurance Extension Act of 2005 (together the "Terrorism
     Act") as a result of occurrences commencing during the contract year shall
     inure to the benefit of this Contract in the proportion that the Company's
     insured losses (as defined in the Terrorism Act) in that occurrence under
     policies reinsured under this Contract bear to the Company's total insured
     losses in that occurrence.

B.   If a loss reimbursement received by the Company under the Terrorism Act is
     based on the Company's insured losses in more than one occurrence and the
     United States Government does not designate the amount allocable to each
     occurrence, the reimbursement shall be prorated in the proportion that the
     Company's insured losses in each occurrence bear to the Company's total
     insured losses arising out of all occurrences to which the recovery
     applies.

ARTICLE XV - REINSURANCE PREMIUM

A.   As premium for the reinsurance provided hereunder during each contract year
     (except the runoff contract year, if any), the Company shall pay the
     Reinsurer 0.114% of its net earned premium for the contract year, subject
     to an annual minimum premium of $302,400 (or a pro rata portion thereof if
     this Contract is terminated in accordance with paragraph C of the
     Commencement and Termination Article).

B.   The Company shall pay the Reinsurer an annual deposit premium of $378,000
     in four equal installments of $94,500 on January 1, April 1, July 1 and
     October 1 of each contract year (except the runoff contract year, if any).
     However, in the event this Contract is terminated in accordance with
     paragraph C of the Commencement and Termination Article, no deposit premium
     shall be due after the effective date of termination (except as provided in
     paragraph D below).

C.   Within 60 days after the end of each contract year (and 60 days after the
     end of the runoff contract year, if any), the Company shall provide a
     report to the Reinsurer setting forth the premium due hereunder for the
     contract year, computed in accordance with paragraph A, and any additional
     premium due the Reinsurer or return premium due the Company shall be
     remitted promptly.

D.   In the event this Contract is terminated on a runoff basis, the reinsurance
     premium for the runoff contract year shall be calculated by multiplying the
     unearned portion of premium in force at the effective date of termination
     by 0.114%, and paid semi-annually, and no minimum premium shall apply.

E.   "Net earned premium" as used herein is defined as the Company's gross
     earned premium collected on the classes of business subject to this
     Contract, less only the earned portion of premiums, if any, ceded by the
     Company for reinsurance which inures to the benefit of this Contract and
     less dividends incurred.

                                     Page 15
<PAGE>

ARTICLE XVI - LATE PAYMENTS

A.   The provisions of this Article shall not be implemented unless specifically
     invoked, in writing, by one of the parties to this Contract.

B.   In the event any premium, loss or other payment due either party is not
     received by the intermediary named in the Intermediary Article (BRMA 23A)
     (hereinafter referred to as the "Intermediary") by the payment due date,
     the party to whom payment is due, may, by notifying the Intermediary in
     writing, require the debtor party to pay, and the debtor party agrees to
     pay, an interest penalty on the amount past due calculated for each such
     payment on the last business day of each month as follows:

     1.   The number of full days which have expired since the due date or the
          last monthly calculation, whichever the lesser; times

     2.   1/365ths of the sum of 400 basis points plus the six-month United
          States Treasury Bill rate as quoted in The Wall Street Journal on the
          first business day of the month for which the calculation is made;
          times

     3.   The amount past due, including accrued interest.

     It is agreed that interest shall accumulate until payment of the original
     amount due plus interest penalties have been received by the Intermediary.

C.   The establishment of the due date shall, for purposes of this Article, be
     determined as follows:

     1.   As respects the payment of routine deposits and premiums due the
          Reinsurer, the due date shall be as provided for in the applicable
          section of this Contract. In the event a due date is not specifically
          stated for a given payment, it shall be deemed due 30 days after the
          date of transmittal by the Intermediary of the initial billing for
          each such payment.

     2.   Any claim or loss payment due the Company hereunder shall be deemed
          due 45 days after the proof of loss or demand for payment is
          transmitted to the Reinsurer. If such loss or claim payment is not
          received within the 45 days, interest will accrue on the payment or
          amount overdue in accordance with paragraph B above, from the date the
          proof of loss or demand for payment was transmitted to the Reinsurer.

     3.   As respects any payment, adjustment or return due either party not
          otherwise provided for in subparagraphs 1 and 2 of paragraph C above,
          the due date shall be as provided for in the applicable section of
          this Contract. In the event a due date is not specifically stated for
          a given payment, it shall be deemed due 14 days following transmittal
          of written notification that the provisions of this Article have been
          invoked.

     For purposes of interest calculations only, amounts due hereunder shall be
     deemed paid upon receipt by the Intermediary.

                                     Page 16

<PAGE>

D.   Nothing herein shall be construed as limiting or prohibiting a Subscribing
     Reinsurer from contesting the validity of any claim, or from participating
     in the defense of any claim or suit, or prohibiting either party from
     contesting the validity of any payment or from initiating any arbitration
     or other proceeding in accordance with the provisions of this Contract. If
     the debtor party prevails in an arbitration or other proceeding, then any
     interest penalties due hereunder on the amount in dispute shall be null and
     void. If the debtor party loses in such proceeding, then the interest
     penalty on the amount determined to be due hereunder shall be calculated in
     accordance with the provisions set forth above unless otherwise determined
     by such proceedings. If the debtor party advances payment of any amount it
     is contesting, and proves to be correct in its contestation, either in
     whole or in part, the other party shall reimburse the debtor party for any
     such excess payment made plus interest on the excess amount calculated in
     accordance with this Article.

E.   Interest penalties arising out of the application of this Article that are
     $100 or less from any party shall be waived unless there is a pattern of
     late payments consisting of three or more items over the course of any
     12-month period.

ARTICLE XVII - OFFSET (BRMA 36A)

The Company and the Reinsurer may offset any balance or amount due from one
party to the other under this Contract or any other contract heretofore or
hereafter entered into between the Company and the Reinsurer, whether acting as
assuming reinsurer or ceding company. This provision shall not be affected by
the insolvency of either party to this Contract.

ARTICLE XVIII - ACCESS TO RECORDS (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any
reasonable time to all records of the Company which pertain in any way to this
reinsurance.

ARTICLE XIX - LIABILITY OF THE REINSURER

A.   The liability of the Reinsurer shall follow that of the Company in every
     case and be subject in all respects to all the general and specific
     stipulations, clauses, waivers and modifications of the Company's policies
     and any endorsements thereon.

B.   Nothing herein shall in any manner create any obligations or establish any
     rights against the Reinsurer in favor of any third party or any persons not
     parties to this Contract.

ARTICLE XX - NET RETAINED LINES (BRMA 32E)

A.   This Contract applies only to that portion of any policy which the Company
     retains net for its own account (prior to deduction of any underlying
     reinsurance specifically permitted in this Contract), and in calculating
     the amount of any loss hereunder and also in computing the amount or
     amounts in excess of which this Contract attaches, only loss or losses in
     respect

                                     Page 17

<PAGE>

     of that portion of any policy which the Company retains net for its own
     account shall be included.

B.   The amount of the Reinsurer's liability hereunder in respect of any loss or
     losses shall not be increased by reason of the inability of the Company to
     collect from any other reinsurer(s), whether specific or general, any
     amounts which may have become due from such reinsurer(s), whether such
     inability arises from the insolvency of such other reinsurer(s) or
     otherwise.

ARTICLE XXI - ERRORS AND OMISSIONS

Except as provided in the Sunset Article, inadvertent delays, errors or
omissions made in connection with this Contract or any transaction hereunder
shall not relieve either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that such error or
omission is rectified as soon as possible after discovery.

ARTICLE XXII - CURRENCY (BRMA 12A)

A.   Whenever the word "Dollars" or the "$" sign appears in this Contract, they
     shall be construed to mean United States Dollars and all transactions under
     this Contract shall be in United States Dollars.

B.   Amounts paid or received by the Company in any other currency shall be
     converted to United States Dollars at the rate of exchange at the date such
     transaction is entered on the books of the Company.

ARTICLE XXIII - TAXES (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company
will not claim a deduction in respect of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or the District of Columbia.

ARTICLE XXIV - FEDERAL EXCISE TAX

A.   The Reinsurer has agreed to allow for the purpose of paying the Federal
     Excise Tax the applicable percentage of the premium payable hereon (as
     imposed under Section 4371 of the Internal Revenue Code) to the extent such
     premium is subject to the Federal Excise Tax.

B.   In the event of any return of premium becoming due hereunder the Reinsurer
     will deduct the applicable percentage from the return premium payable
     hereon and the Company or its agent should take steps to recover the tax
     from the United States Government.

                                     Page 18

<PAGE>

ARTICLE XXV - RESERVES AND LETTERS OF CREDIT

[Applies only to a reinsurer which does not qualify for full credit with any
insurance regulatory authority having jurisdiction over the Company's reserves,
which is or becomes rated "B++" or lower by A.M. Best (inclusive of "Not Rated"
ratings) and/or Standard & Poor's rating is or becomes "BBB+" or lower
(inclusive of "Not Rated" ratings).]

A.   As regards policies or bonds issued by the Company coming within the scope
     of this Contract, the Company agrees that when it shall file with the
     insurance regulatory authority or set up on its books reserves for losses
     covered hereunder which it shall be required by law to set up, it will
     forward to the Reinsurer a statement showing the proportion of such
     reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees
     to fund such reserves in respect of known outstanding losses that have been
     reported to the Reinsurer and allocated loss adjustment expense relating
     thereto, losses and allocated loss adjustment expense paid by the Company
     but not recovered from the Reinsurer, plus reserves for losses incurred but
     not reported, as shown in the statement prepared by the Company
     (hereinafter referred to as "Reinsurer's Obligations") by funds withheld,
     cash advances or a Letter of Credit. The Reinsurer shall have the option of
     determining the method of funding provided it is acceptable to the
     insurance regulatory authorities having jurisdiction over the Company's
     reserves with regards to unauthorized reinsurers; or, should the Reinsurer
     be downgraded, the method of funding shall be mutually agreed.

B.   When funding by a Letter of Credit, the Reinsurer agrees to apply for and
     secure timely delivery to the Company of a clean, irrevocable and
     unconditional Letter of Credit issued by a bank meeting the NAIC Securities
     Valuation Office credit standards for issuers of Letters of Credit and
     containing provisions acceptable to the insurance regulatory authorities
     having jurisdiction over the Company's reserves in an amount equal to the
     Reinsurer's proportion of said reserves. Such Letter of Credit shall be
     issued for a period of not less than one year, and shall contain an
     "evergreen" clause, which automatically extends the term for one year from
     its date of expiration or any future expiration date unless 30 days (60
     days where required by insurance regulatory authorities) prior to any
     expiration date the issuing bank shall notify the Company by certified or
     registered mail that the issuing bank elects not to consider the Letter of
     Credit extended for any additional period.

C.   The Reinsurer and Company agree that the Letters of Credit provided by the
     Reinsurer pursuant to the provisions of this Contract may be drawn upon at
     any time, notwithstanding any other provision of this Contract, 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:

     1.   To reimburse the Company for the Reinsurer's Obligations, the payment
          of which is due under the terms of this Contract and which has not
          been otherwise paid;

     2.   To make refund of any sum which is in excess of the actual amount
          required to pay the Reinsurer's Obligations under this Contract, if so
          requested by the Reinsurer;

     3.   To fund an account with the Company for the Reinsurer's Obligations.
          Such cash deposit shall be held in an interest bearing account
          separate from the Company's

                                     Page 19

<PAGE>

          other assets, and interest thereon not in excess of the prime rate
          shall accrue to the benefit of the Reinsurer;

     4.   To pay the Reinsurer's share of any other amounts the Company claims
          are due under this Contract.

     In the event the amount drawn by the Company on any Letter of Credit is in
     excess of the actual amount required for subparagraphs 1 or 3, or in the
     case of subparagraph 4, the actual amount determined to be due, the Company
     shall promptly return to the Reinsurer the excess amount so drawn. All of
     the foregoing shall be applied without diminution because of insolvency on
     the part of the Company or the Reinsurer.

D.   The issuing bank shall have no responsibility whatsoever in connection with
     the propriety of withdrawals made by the Company or the disposition of
     funds withdrawn, except to ensure that withdrawals are made only upon the
     order of properly authorized representatives of the Company.

E.   At annual intervals, or more frequently as agreed but never more frequently
     than quarterly, the Company shall prepare a specific statement of the
     Reinsurer's Obligations, for the sole purpose of amending the Letter of
     Credit, in the following manner:

     1.   If the statement shows that the Reinsurer's Obligations exceed the
          balance of credit as of the statement date, the Reinsurer shall,
          within 30 days after receipt of notice of such excess, secure delivery
          to the Company of an amendment to the Letter of Credit increasing the
          amount of credit by the amount of such difference.

     2.   If, however, the statement shows that the Reinsurer's Obligations are
          less than the balance of credit as of the statement date, the Company
          shall, within 30 days after receipt of written request from the
          Reinsurer, release such excess credit by agreeing to secure an
          amendment to the Letter of Credit reducing the amount of credit
          available by the amount of such excess credit.

ARTICLE XXVI - INSOLVENCY

A.   In the event of the insolvency of one or more of the reinsured companies,
     this reinsurance shall be payable directly to the company or to its
     liquidator, receiver, conservator or statutory successor on the basis of
     the liability of the company without diminution because of the insolvency
     of the company or because the liquidator, receiver, conservator or
     statutory successor of the company has failed to pay all or a portion of
     any claim. It is agreed, however, that the liquidator, receiver,
     conservator or statutory successor of the company shall give written notice
     to the Reinsurer of the pendency of a claim against the company indicating
     the policy or bond reinsured which claim would involve a possible liability
     on the part of the Reinsurer within a reasonable time after such claim is
     filed in the conservation or liquidation proceeding or in the receivership,
     and that 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 its liquidator, receiver, conservator or
     statutory successor. The expense thus incurred by the Reinsurer shall be
     chargeable, subject to the

                                     Page 20

<PAGE>

     approval of the Court, against the company as part of the expense of
     conservation or liquidation to the extent of a pro rata share of the
     benefit which may accrue to the company solely as a result of the defense
     undertaken by the Reinsurer.

B.   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 Contract as though such
     expense had been incurred by the company.

C.   It is further understood and agreed that, in the event of the insolvency of
     one or more of the reinsured companies, the reinsurance under this Contract
     shall be payable directly by the Reinsurer to the company or to its
     liquidator, receiver or statutory successor, except as provided by Section
     4118(a) of the New York Insurance Law or except (1) where this Contract
     specifically provides another payee of such reinsurance in the event of the
     insolvency of the company or (2) where the Reinsurer with the consent of
     the direct insured or insureds has assumed such policy obligations of the
     company as direct obligations of the Reinsurer to the payees under such
     policies and in substitution for the obligations of the company to such
     payees.

ARTICLE XXVII - ARBITRATION (BRMA 6J)

A.   As a condition precedent to any right of action hereunder, in the event of
     any dispute or difference of opinion hereafter arising with respect to this
     Contract, it is hereby mutually agreed that such dispute or difference of
     opinion shall be submitted to arbitration. One Arbiter shall be chosen by
     the Company, the other by the Reinsurer, and an Umpire shall be chosen by
     the two Arbiters before they enter upon arbitration, all of whom shall be
     active or retired disinterested executive officers of insurance or
     reinsurance companies or Lloyd's London Underwriters. In the event that
     either party should fail to choose an Arbiter within 30 days following a
     written request by the other party to do so, the requesting party may
     choose two Arbiters who shall in turn choose an Umpire before entering upon
     arbitration. If the two Arbiters fail to agree upon the selection of an
     Umpire within 30 days following their appointment, each Arbiter shall
     nominate three candidates within 10 days thereafter, two of whom the other
     shall decline, and the decision shall be made by drawing lots.

B.   Each party shall present its case to the Arbiters within 30 days following
     the date of appointment of the Umpire. The Arbiters shall consider this
     Contract as an honorable engagement rather than merely as a legal
     obligation and they are relieved of all judicial formalities and may
     abstain from following the strict rules of law. The decision of the
     Arbiters shall be final and binding on both parties; but failing to agree,
     they shall call in the Umpire and the decision of the majority shall be
     final and binding upon both parties. Judgment upon the final decision of
     the Arbiters may be entered in any court of competent jurisdiction.

C.   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 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 participating under the terms of this Contract from several
     to joint.

                                     Page 21

<PAGE>

D.   Each party shall bear the expense of its own Arbiter, and shall jointly and
     equally bear with the other the expense of the Umpire and of the
     arbitration. In the event that the two Arbiters are chosen by one party, as
     above provided, the expense of the Arbiters, the Umpire and the arbitration
     shall be equally divided between the two parties.

E.   Any arbitration proceedings shall take place at a location mutually agreed
     upon by the parties to this Contract, but notwithstanding the location of
     the arbitration, all proceedings pursuant hereto shall be governed by the
     law of the state in which the Company has its principal office.

ARTICLE XXVIII - SERVICE OF SUIT (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America,
and/or is not authorized in any State, Territory or District of the United
States where authorization is required by insurance regulatory authorities)

A.   It is agreed that in the event the Reinsurer fails 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. 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, to
     remove an action to a United States District Court, or to seek a transfer
     of a case to another court as permitted by the laws of the United States or
     of any state in the United States.

B.   Further, pursuant to any statute of any state, territory or district of the
     United States which makes provision therefor, the Reinsurer hereby
     designates the party named in its Interests and Liabilities Agreement, or
     if no party is named therein, 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 any action, suit or proceeding
     instituted by or on behalf of the Company or any beneficiary hereunder
     arising out of this Contract.

ARTICLE XXIX - ENTIRE AGREEMENT

This written Contract constitutes the entire agreement between the parties
hereto with respect to the business being reinsured hereunder, and there are no
understandings between the parties hereto other than as expressed in this
Contract. Any change or modification to this Contract will be made by amendment
to this Contract and signed by the parties.

ARTICLE XXX - GOVERNING LAW (BRMA 71B)

This Contract shall be governed by and construed in accordance with the laws of
the State of Louisiana.

                                     Page 22

<PAGE>

ARTICLE XXXI - AGENCY AGREEMENT

If more than one reinsured company is named as a party to this Contract, the
first named company shall be deemed the agent of the other reinsured companies
for purposes of sending or receiving notices required by the terms and
conditions of this Contract, and for purposes of remitting or receiving any
monies due any party.

ARTICLE XXXII - INTERMEDIARY (BRMA 23A)

Benfield Inc. is hereby recognized as the Intermediary negotiating this Contract
for all business hereunder. All communications (including but not limited to
notices, statements, premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating thereto shall be
transmitted to the Company or the Reinsurer through Benfield Inc. Payments by
the Company to the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to
constitute payment to the Company only to the extent that such payments are
actually received by the Company.

IN WITNESS WHEREOF, the Company by its duly authorized representative has
executed this Contract as of the date undermentioned at:

DeRidder, Louisiana, this 15th day of January in the year 2007.

                          /s/ Allan E. Farr
                          ----------------------------------------
                          American Interstate Insurance Company
                          American Interstate Insurance Company of Texas
                          Silver Oak Casualty, Inc.

                                     Page 23

<PAGE>

      NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE (U.S.A.)
       (Approved by Lloyd's Underwriters' Fire and Non-Marine Association)

(1)  This reinsurance does not cover any loss or liability accruing to the
     Reassured as a member of, or subscriber to, any association of insurers or
     reinsurers formed for the purpose of covering nuclear energy risks or as a
     direct or indirect reinsurer of any such member, subscriber or association.

(2)  Without in any way restricting the operation of paragraph (1) of this
     Clause it is understood and agreed that for all purposes of this
     reinsurance all the original policies of the Reassured (new, renewal and
     replacement) of the classes specified in Clause II of this paragraph (2)
     from the time specified in Clause III in this paragraph (2) shall be deemed
     to include the following provision (specified as the Limited Exclusion
     Provision):

     LIMITED EXCLUSION PROVISION.*

     I.   It is agreed that the policy does not apply under any liability
          coverage, to

               (injury, sickness, disease, death or destruction

               (bodily injury or property damage

          with respect to which an insured under the policy is also an insured
          under a nuclear energy liability policy issued by Nuclear Energy
          Liability Insurance Association, Mutual Atomic Energy Liability
          Underwriters or Nuclear Insurance Association of Canada, or would be
          an insured under any such policy but for its termination upon
          exhaustion of its limit of liability.

     II.  Family Automobile Policies (liability only), Special Automobile
          Policies (private passenger automobiles, liability only), Farmers
          Comprehensive Personal Liability Policies (liability only),
          Comprehensive Personal Liability Policies (liability only) or policies
          of a similar nature; and the liability portion of combination forms
          related to the four classes of policies stated above, such as the
          Comprehensive Dwelling Policy and the applicable types of Homeowners
          Policies.

     III. The inception dates and thereafter of all original policies as
          described in II above, whether new, renewal or replacement, being
          policies which either

          (a)  become effective on or after 1st May, 1960, or

          (b)  become effective before that date and contain the Limited
               Exclusion Provision set out above;

               provided this paragraph (2) shall not be applicable to Family
               Automobile Policies, Special Automobile Policies, or policies or
               combination policies of a similar nature, issued by the Reassured
               on New York risks, until 90 days following approval of the
               Limited Exclusion Provision by the Governmental Authority having
               jurisdiction thereof.

(3)  Except for those classes of policies specified in Clause II of paragraph
     (2) and without in any way restricting the operation of paragraph (1) of
     this Clause, it is understood and agreed that for all purposes of this
     reinsurance the original liability policies of the Reassured (new, renewal
     and replacement) affording the following coverages:

          Owners, Landlords and Tenants Liability, Contractual Liability,
          Elevator Liability, Owners or Contractors (including railroad)
          Protective Liability, Manufacturers and Contractors Liability, Product
          Liability, Professional and Malpractice Liability, Storekeepers
          Liability, Garage Liability, Automobile Liability (including
          Massachusetts Motor Vehicle or Garage Liability)

     shall be deemed to include, with respect to such coverages, from the time
     specified in Clause V of this paragraph (3), the following provision
     (specified as the Broad Exclusion Provision):

     BROAD EXCLUSION PROVISION.*

     It is agreed that the policy does not apply:

     I.   Under any Liability Coverage to

               (injury, sickness, disease, death or destruction

               (bodily injury or property damage

          (a)  with respect to which an insured under the policy is also an
               insured under a nuclear energy liability policy issued by Nuclear
               Energy Liability Insurance Association, Mutual Atomic Energy
               Liability Underwriters or Nuclear Insurance Association of
               Canada, or would be an insured under any such policy but for its
               termination upon exhaustion of its limit of liability; or

          (b)  resulting from the hazardous properties of nuclear material and
               with respect to which (1) any person or organization is required
               to maintain financial protection pursuant to the Atomic Energy
               Act of 1954, or any law amendatory thereof, or (2) the insured
               is, or had this policy not been issued would be, entitled to
               indemnity from the United States of America, or any agency
               thereof, under any agreement entered into by the United States of
               America, or any agency thereof, with any person or organization.

     II.  Under any Medical Payments Coverage, or under any Supplementary
          Payments Provision relating to

<PAGE>

               (immediate medical or surgical relief

               (first aid,

          to expenses incurred with respect to

               (bodily injury, sickness, disease or death

               (bodily injury

          resulting from the hazardous properties of nuclear material and
          arising out of the operation of a nuclear facility by any person or
          organization.

     III. Under any Liability Coverage to

               (injury, sickness, disease, death or destruction

               (bodily injury or property damage

          resulting from the hazardous properties of nuclear material, if

          (a)  the nuclear material (1) is at any nuclear facility owned by, or
               operated by or on behalf of, an insured or (2) has been
               discharged or dispersed therefrom;

          (b)  the nuclear material is contained in spent fuel or waste at any
               time possessed, handled, used, processed, stored, transported or
               disposed of by or on behalf of an insured; or

          (c)  the

                    (injury, sickness, disease, death or destruction

                    (bodily injury or property damage

               arises out of the furnishing by an insured of services,
               materials, parts or equipment in connection with the planning,
               construction, maintenance, operation or use of any nuclear
               facility, but if such facility is located within the United
               States of America, its territories, or possessions or Canada,
               this exclusion (c) applies only to

                    (injury to or destruction of property at such nuclear
                    facility

                    (property damage to such nuclear facility and any property
                    thereat.

     IV.  As used in this endorsement:

          "hazardous properties" include radioactive, toxic or explosive
          properties; "nuclear material" means source material, special nuclear
          material or byproduct material; "source material", "special nuclear
          material", and "byproduct material" have the meanings given them in
          the Atomic Energy Act of 1954 or in any law amendatory thereof; "spent
          fuel" means any fuel element or fuel component, solid or liquid, which
          has been used or exposed to radiation in a nuclear reactor; "waste"
          means any waste material (1) containing byproduct material and (2)
          resulting from the operation by any person or organization of any
          nuclear facility included within the definition of nuclear facility
          under paragraph (a) or (b) thereof; "nuclear facility" means

          (a)  any nuclear reactor,

          (b)  any equipment or device designed or used for (1) separating the
               isotopes of uranium or plutonium, (2) processing or utilizing
               spent fuel, or (3) handling processing or packaging waste,

          (c)  any equipment or device used for the processing, fabricating or
               alloying of special nuclear material if at any time the total
               amount of such material in the custody of the insured at the
               premises where such equipment or device is located consists of or
               contains more than 25 grams of plutonium or uranium 233 or any
               combination thereof, or more than 250 grams of uranium 235,

          (d)  any structure, basin, excavation, premises or place prepared or
               used for the storage or disposal of waste, and includes the site
               on which any of the foregoing is located, all operations
               conducted on such site and all premises used for such operations;
               "nuclear reactor" means any apparatus designed or used to sustain
               nuclear fission in a self-supporting chain reaction or to contain
               a critical mass of fissionable material;

                    (With respect to injury to or destruction of property, the
                    word "injury" or "destruction,"

                    ("property damage" includes all forms of radioactive
                    contamination of property,

                    (includes all forms of radioactive contamination of
                    property.

     V.   The inception dates and thereafter of all original policies affording
          coverages specified in this paragraph (3), whether new, renewal or
          replacement, being policies which become effective on or after 1st
          May, 1960, provided this paragraph (3) shall not be applicable to

               (i)  Garage and Automobile Policies issued by the Reassured on
                    New York risks, or

               (ii) statutory liability insurance required under Chapter 90,
                    General Laws of Massachusetts, until 90 days following
                    approval of the Broad Exclusion Provision by the
                    Governmental Authority having jurisdiction thereof.

(4)  Without in any way restricting the operation of paragraph (1) of this
     Clause, it is understood and agreed that paragraphs (2) and (3) above are
     not applicable to original liability policies of the Reassured in Canada
     and that with respect to such policies this Clause shall be deemed to
     include the Nuclear Energy Liability Exclusion Provisions adopted by the
     Canadian Underwriters' Association or the Independent Insurance Conference
     of Canada.

----------
*    NOTE. The words printed in italics in the Limited Exclusion Provision and
     in the Broad Exclusion Provision shall apply only in relation to original
     liability policies which include a Limited Exclusion Provision or a Broad
     Exclusion Provision containing those words.

<PAGE>

                    THIRD CASUALTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE CONTRACT
                           EFFECTIVE: JANUARY 1, 2007

                                    issued to

                      American Interstate Insurance Company
                               DeRidder, Louisiana
                 American Interstate Insurance Company of Texas
                                  Austin, Texas
                            Silver Oak Casualty, Inc.
                               DeRidder, Louisiana
                                       and
                 any other insurance companies which are now or
          hereafter come under the ownership, control or management of
                            Amerisafe Insurance Group

<TABLE>
<CAPTION>
                           REINSURERS                              PARTICIPATIONS
                           ----------                              --------------
<S>                                                                <C>
Allied World Assurance Company Ltd.                                     50.0%
Arch Reinsurance Company                                                10.0
Chaucer Underwriting A/S
   (for and on behalf of Chaucer Syndicates Limited 1084 & 1301)        30.0
Danish Re Underwriting Agencies ApS
   (for and on behalf of BRIT Insurance Limited)                         2.5
Danish Re Underwriting Agencies ApS
   (for Danish Re Syndicate 1400)                                        7.5
                                                                       -----
TOTAL                                                                  100.0%
                                                                       =====
</TABLE>
<PAGE>

                       INTERESTS AND LIABILITIES AGREEMENT

                                       of

                       Allied World Assurance Company Ltd.
                                Hamilton, Bermuda
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                    THIRD CASUALTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE CONTRACT
                           EFFECTIVE: JANUARY 1, 2007

                         issued to and duly executed by

                      American Interstate Insurance Company
                               DeRidder, Louisiana
                 American Interstate Insurance Company of Texas
                                  Austin, Texas
                            Silver Oak Casualty, Inc.
                               DeRidder, Louisiana
                                       and
                 any other insurance companies which are now or
          hereafter come under the ownership, control or management of
                            Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 50.0% share in the interests and
liabilities of the "Reinsurer" as set forth in the attached Contract captioned
above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time,
January 1, 2007, and shall continue in force until terminated in accordance with
the provisions of the attached Contract.

The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Hamilton, Bermuda, this 25th day of January in the year 2007.

                        /s/ Tracey Gibbons.
                        ------------------------------------------------
                        Allied World Assurance Company Ltd.

<PAGE>

                       INTERESTS AND LIABILITIES AGREEMENT

                                       of

                            Arch Reinsurance Company
                             A Nebraska Corporation
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                    THIRD CASUALTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE CONTRACT
                           EFFECTIVE: JANUARY 1, 2007

                         issued to and duly executed by

                      American Interstate Insurance Company
                               DeRidder, Louisiana
                 American Interstate Insurance Company of Texas
                                  Austin, Texas
                            Silver Oak Casualty, Inc.
                               DeRidder, Louisiana
                                       and
                 any other insurance companies which are now or
          hereafter come under the ownership, control or management of
                            Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 10.0% share in the interests and
liabilities of the "Reinsurer" as set forth in the attached Contract captioned
above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time,
January 1, 2007, and shall continue in force until terminated in accordance with
the provisions of the attached Contract.

The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Morristown, New Jersey, this 25th day of January in the year 2007.

                             /s/ Thomas G. Devine
                             ---------------------------------
                             Arch Reinsurance Company

<PAGE>

                       INTERESTS AND LIABILITIES AGREEMENT

                                       of

                            Danish Re Syndicate 1400
                                 London, England
                                     through
                       Danish Re Underwriting Agencies ApS
                               Copenhagen, Denmark
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                    THIRD CASUALTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE CONTRACT
                           EFFECTIVE: JANUARY 1, 2007

                         issued to and duly executed by

                      American Interstate Insurance Company
                               DeRidder, Louisiana
                 American Interstate Insurance Company of Texas
                                  Austin, Texas
                            Silver Oak Casualty, Inc.
                               DeRidder, Louisiana
                                       and
                 any other insurance companies which are now or
          hereafter come under the ownership, control or management of
                            Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 7.5% share in the interests and
liabilities of the "Reinsurer" as set forth in the attached Contract captioned
above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time,
January 1, 2007, and shall continue in force until terminated in accordance with
the provisions of the attached Contract.

The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Copenhagen, Denmark, this 5th day of March in the year 2007.

                          /s/ Per Ever Hansen
                          -------------------------------------------------
                          Danish Re Underwriting Agencies ApS
                          (for and on behalf of Danish Re Syndicate 1400)

<PAGE>

                       INTERESTS AND LIABILITIES AGREEMENT

                                       of

                             BRIT Insurance Limited
                                 London, England
                                     through
                       Danish Re Underwriting Agencies ApS
                               Copenhagen, Denmark
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                    THIRD CASUALTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE CONTRACT
                           EFFECTIVE: JANUARY 1, 2007

                         issued to and duly executed by

                      American Interstate Insurance Company
                               DeRidder, Louisiana
                 American Interstate Insurance Company of Texas
                                  Austin, Texas
                            Silver Oak Casualty, Inc.
                               DeRidder, Louisiana
                                       and
                 any other insurance companies which are now or
          hereafter come under the ownership, control or management of
                            Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 2.5% share in the interests and
liabilities of the "Reinsurer" as set forth in the attached Contract captioned
above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time,
January 1, 2007, and shall continue in force until terminated in accordance with
the provisions of the attached Contract.

The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Copenhagen, Denmark, this 5th day of March in the year 2007.

                          /s/ Per Ever Hansen
                          ----------------------------------------------
                          Danish Re Underwriting Agencies ApS
                          (for and on behalf of BRIT Insurance Limited)

<PAGE>

                       INTERESTS AND LIABILITIES AGREEMENT

                                       of

                     Chaucer Syndicates Limited 1084 & 1301
                                 London, England
                                     through
                            Chaucer Underwriting A/S
                               Copenhagen, Denmark
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                    THIRD CASUALTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE CONTRACT
                           EFFECTIVE: JANUARY 1, 2007

                         issued to and duly executed by

                      American Interstate Insurance Company
                               DeRidder, Louisiana
                 American Interstate Insurance Company of Texas
                                  Austin, Texas
                            Silver Oak Casualty, Inc.
                               DeRidder, Louisiana
                                       and
                 any other insurance companies which are now or
          hereafter come under the ownership, control or management of
                            Amerisafe Insurance Group

The Subscribing Reinsurer hereby accepts a 30.0% share in the interests and
liabilities of the "Reinsurer" as set forth in the attached Contract captioned
above.

This Agreement shall become effective at 12:01 a.m., Local Standard Time,
January 1, 2007, and shall continue in force until terminated in accordance with
the provisions of the attached Contract.

The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.

IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:

Copenhagen, Denmark, this 27th day of March in the year 2007.

                          /s/ Torsten Brobang
                          ------------------------------------------------------
                          Chaucer Underwriting A/S
                          (for and on behalf of Chaucer Syndicates Limited 1084
                          & 1301)exv10w01

 

EXHIBIT 10.01

VALERO ENERGY CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2008)

 

 

VALERO ENERGY CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I
	 	DEFINITIONS	 	 	1	 
	1.1
	 	Accrued Benefit	 	 	1	 
	1.2
	 	Actuarial Equivalent or Actuarially Equivalent Basis	 	 	1	 
	1.3
	 	Board of Directors	 	 	1	 
	1.4
	 	Change in Control	 	 	1	 
	1.5
	 	Code	 	 	2	 
	1.6
	 	Company	 	 	2	 
	1.7
	 	Committee	 	 	2	 
	1.8
	 	Credited Service	 	 	2	 
	1.9
	 	Eligible Earnings	 	 	3	 
	1.10
	 	Final Average Compensation	 	 	3	 
	1.11
	 	Monthly Covered Compensation	 	 	3	 
	1.12
	 	Monthly FICA Amount	 	 	3	 
	1.13
	 	Normal Retirement Date	 	 	3	 
	1.14
	 	Participant	 	 	3	 
	1.15
	 	Plan	 	 	3	 
	1.16
	 	Plan of Deferred Compensation	 	 	3	 
	1.17
	 	Plan Year	 	 	3	 
	1.18
	 	Retirement	 	 	4	 
	1.19
	 	Rules	 	 	4	 
	1.20
	 	Securities Act	 	 	4	 
	1.21
	 	Separation from Service	 	 	4	 
	1.22
	 	Subsidiary	 	 	4	 
	1.23
	 	Surviving Spouse	 	 	4	 
	1.24
	 	Trust	 	 	4	 
	1.25
	 	Trustee	 	 	4	 
	1.26
	 	Valero	 	 	4	 
	1.27
	 	Valero Pension Plan	 	 	4	 
	1.28
	 	Valero Pension Plan Benefit	 	 	4	 
	ARTICLE II
	 	ELIGIBILITY	 	 	5	 
	2.1
	 	Eligibility	 	 	5	 
	2.2
	 	Frozen Participation	 	 	5	 
	2.3
	 	Renewed Eligibility	 	 	5	 
	ARTICLE III
	 	VESTING	 	 	5	 
	ARTICLE IV
	 	RETIREMENT BENEFIT	 	 	6	 
	4.1
	 	Calculation of Retirement Benefit	 	 	6	 
	4.2
	 	Form and Time of Payment	 	 	6	 
	4.3
	 	Modification of Pension	 	 	6	 
	4.4
	 	Delay of Certain Payments	 	 	7	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE V
	 	PRERETIREMENT SPOUSAL DEATH BENEFIT	 	 	7	 
	5.1
	 	Death Prior to Retirement	 	 	7	 
	5.2
	 	Beneficiary Designation Prohibited	 	 	7	 
	ARTICLE VI
	 	PROVISIONS RELATING TO ALL BENEFITS	 	 	7	 
	6.1
	 	Effect of This Article	 	 	7	 
	6.2
	 	No Duplication of Benefits	 	 	7	 
	6.3
	 	Forfeiture Upon Termination for Cause	 	 	7	 
	6.4
	 	Forfeiture for Competition	 	 	8	 
	6.5
	 	Expenses Incurred in Enforcing the Plan	 	 	8	 
	6.6
	 	No Restrictions on any Portion of Benefits	 	 	 	 
	 
	 	Determined to be Excess Parachute Payments	 	 	8	 
	6.7
	 	Benefits Upon Re-employment	 	 	8	 
	ARTICLE VII
	 	ADMINISTRATION	 	 	8	 
	7.1
	 	Committee Appointment	 	 	8	 
	7.2
	 	Committee Organization and Voting	 	 	9	 
	7.3
	 	Powers of the Committee	 	 	9	 
	7.4
	 	Committee Discretion	 	 	9	 
	7.5
	 	Reliance Upon Information	 	 	9	 
	7.6
	 	Approval of Benefit Modifications	 	 	10	 
	ARTICLE VIII
	 	ADOPTION BY SUBSIDIARIES	 	 	10	 
	8.1
	 	Procedure for and Status After Adoption	 	 	10	 
	8.2
	 	Termination of Participation By Adopting Subsidiary	 	 	10	 
	8.3
	 	Spinoff Plan	 	 	10	 
	ARTICLE IX
	 	AMENDMENT AND/OR TERMINATION	 	 	11	 
	9.1
	 	Amendment or Termination of the Plan	 	 	11	 
	9.2
	 	No Retroactive Effect on Annual Benefits	 	 	11	 
	9.3
	 	Effect of Termination	 	 	11	 
	9.4
	 	Effect of Change in Control	 	 	11	 
	ARTICLE X
	 	FUNDING	 	 	12	 
	10.1
	 	Payments from Trust	 	 	12	 
	10.2
	 	Plan May Be Funded Through Life Insurance	 	 	12	 
	10.3
	 	Required Funding of Rabbi Trust	 	 	12	 
	10.4
	 	Ownership of Assets; Release	 	 	13	 
	10.5
	 	Reversion of Excess Assets	 	 	13	 
	10.6
	 	Repurchase of Valero Stock	 	 	13	 
	10.7
	 	Participants Must Rely Only on
General Credit of the Companies	 	 	13	 
	ARTICLE XI
	 	MISCELLANEOUS	 	 	14	 
	11.1
	 	Responsibility for Distributions
and Withholding of Taxes	 	 	14	 
	11.2
	 	Limitation of Rights	 	 	14	 
	11.3
	 	Arbitration of Disputes.	 	 	15	 
	11.4
	 	Distributions to Incompetents	 	 	16	 
	11.5
	 	Nonalienation of Benefits	 	 	17	 
	11.6
	 	Severability	 	 	17	 
	11.7
	 	Notice	 	 	17	 
	11.8
	 	Gender and Number	 	 	17	 
	11.9
	 	Governing Law	 	 	17	 

iii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	11.10
	 	Effective Date	 	 	17	 

iv

 

VALERO ENERGY CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     WHEREAS, Valero Energy Corporation (the “Company”) established the Valero Energy Corporation
Supplemental Executive Retirement Plan (the “Plan”), originally effective January 1, 1983 which
provides, for certain highly compensated, management personnel, a supplement to their benefits
under the Valero Pension Plan so as to retain their loyalty and to offer a further incentive to
them to maintain and increase their standard of performance; and

     WHEREAS, pursuant to Section 9.1, the Committee may amend the Plan at any time by an
instrument in writing; and

     WHEREAS, the Committee has determined that the Plan should be amended and restated to reflect
the spinoff of liabilities relating to eligible Employees of NuStar Energy, LLC (formerly Valero
GP, LLC) into a separate plan effective as of July 1, 2006, and to make certain other changes
consistent with Code section 409A;

     NOW, THEREFORE, the Company amends and restates the Plan as follows:

ARTICLE I

DEFINITIONS

     All defined terms used in the Valero Pension Plan shall have the same meaning for this Plan,
except as otherwise set forth below.

     1.1 Accrued Benefit. “Accrued Benefit” means, as of any given date of determination, the
Retirement benefit calculated under Section 4.1 with Final Average Compensation, but with the
offsets for benefits provided by the Valero Pension Plan and Credited Service determined as of that
date.

     1.2 Actuarial Equivalent or Actuarially Equivalent Basis. “Actuarial Equivalent” or
“Actuarially Equivalent Basis” means an equality in value of the aggregate amounts expected to be
received under different forms of payment based on the same mortality and interest rate
assumptions. For this purpose, the mortality and interest rate assumptions used in computing
benefits under the Valero Pension Plan will be used. If there is no Valero Pension Plan or
successor qualified defined benefit plan, then the actuarial assumptions to be used will be those
actuarial assumptions deemed appropriate by the actuarial firm, which last served as independent
actuary for the Valero Pension Plan prior to its termination or merger had the Valero Pension Plan
remained in existence with its last participant census.

     1.3 Board of Directors. “Board of Directors” means the Board of Directors of Valero.

     1.4 Change in Control. “Change in Control” means the occurrence of one or more of the
following events:

1

 

     (a) Change in Ownership of Valero. The acquisition by any one person, or more
than one person acting as a group (within the meaning of Code § 409A), of ownership of stock
of Valero that, together with stock held by such person or group, constitutes more than
fifty percent (50%) of the total fair market value or total voting power of the stock of
Valero.

     (b) Change in Effective Control of Valero. Either of the following:

(i) The acquisition, during any 12-month period, by any one person, or more
than one person acting as a group (within the meaning of Code § 409A), of
stock of Valero comprising thirty percent (30%) or more of the total voting
power of the stock of Valero; or

(ii) The replacement, during any 12-month period, of a majority of the
members of the Board of Directors with directors whose appointment or
election is not endorsed by the majority of the members of the Board of
Directors before the date of such appointment or election.

     (c) Change in Ownership of a Substantial Portion of Valero’s Assets. The
acquisition by any one person, or more than one person acting as a group (within the meaning
of Code § 409A), during the 12 month period ending on the date of the most recent
acquisition by such person or persons, of assets of Valero that have a total gross fair
market value equal to or more than forty percent (40%) of the total gross fair market value
of all of the assets of Valero immediately before such acquisition or acquisitions. For
purposes of this provision, “gross fair market value” means the value of the assets of
Valero, or the value of the assets being disposed of, determined without regard to any
liabilities associated with such assets.

     1.5 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     1.6 Company. “Company” means Valero and any Subsidiary adopting the Plan.

     1.7 Committee. “Committee” means the Compensation Committee of the Board of Directors.

     1.8 Credited Service. “Credited Service” means a Participant’s continuing period of
employment with a Company (whether or not contiguous), commencing on the first day for which such
Participant is paid, or entitled to payment, for the performance of duties with a Company and
terminating with the Participant’s final cessation of participation in the Plan. With respect to
any full calendar year in which a Participant receives Eligible Earnings in each payroll period as
an active employee, he shall be credited with one year of Credited Service. With respect to any
partial calendar year in which a Participant receives Eligible Earnings as an active employee (such
as the calendar year in which employment commences or participation ceases) he shall be credited
with a fraction of a year of Credited Service, in the same proportion that the number of payroll
periods during such calendar year that he received Eligible Earnings as an active employee bears to
the total number of payroll periods during such year. All partial years of Credited Service shall
be aggregated so that a Participant receives credit for all periods of

2

 

employment regardless of whether the Credited Service is interrupted. Credited Service shall
also include, and a Participant shall be credited with, such additional periods of time, if any, as
may have been agreed upon by the Participant and a Company in connection with the Participant’s
employment, termination or otherwise.

     1.9 Eligible Earnings. “Eligible Earnings” means all compensation paid or payable by a
Company to the employee in the form of base salary or wages and annual bonuses (whether paid or
payable in cash or securities or any combination thereof), including therein any amounts of such
base salary or wages and annual bonuses earned which, at the employee’s election, in lieu of a cash
payment to him, are contributed to a Plan of Deferred Compensation maintained by the Company.
During a leave of absence from work, with or without pay, such as disability leave of absence or
personal leave of absence, the Participant’s base rate of pay in effect immediately prior to the
leave of absence and his most recent annual bonus amount earned shall be used in computing his
Eligible Earnings.

     1.10 Final Average Compensation. “Final Average Compensation” means a Participant’s average
monthly Eligible Earnings from any Company for the thirty-six consecutive calendar months that give
the highest average monthly rate of Eligible Earnings for the Participant out of all calendar
months next preceding the earliest of (a) the date upon which a Participant becomes ineligible for
participation in this Plan pursuant to Section 2.2; (b) his Retirement; or (c) the termination of
the Plan.

     1.11 Monthly Covered Compensation. “Monthly Covered Compensation” means the quotient
resulting from dividing Covered Compensation by 12.

     1.12 Monthly FICA Amount. “Monthly FICA Amount” means the quotient resulting from dividing by
12 the Taxable Wage Base in effect or assumed to be in effect at the beginning of the calendar year
in which a Participant attains social security retirement age (as defined in Section 415(b)(8) of
the Code).

     1.13 Normal Retirement Date. “Normal Retirement Date” means the first day of the month
coincident with or next following the date on which the Participant attains the age of 65 years.

     1.14 Participant. “Participant” means either (a) an employee of a Company who is eligible for
and is participating in the Plan or (b) a former employee of a Company who is eligible to receive
benefits under the Plan upon such former employee’s Retirement.

     1.15 Plan. “Plan” means the Valero Energy Corporation Supplemental Executive Retirement Plan
as set forth in this document, as amended from time to time.

     1.16 Plan of Deferred Compensation. “Plan of Deferred Compensation” means the Valero Energy
Corporation Executive Deferred Compensation Plan, any successor, alternative or additional
nonqualified plan of deferred compensation, and any contributions made under a salary reduction
agreement to a Code Section 125 cafeteria plan or Code Section 401(k) cash or deferred arrangement
maintained by the Company.

     1.17 Plan Year. “Plan Year” means the calendar year.

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     1.18 Retirement. “Retirement”, “Retires”, “Retire” or “Retired” means the first day of the
month coincident with or next following the date that a Participant incurs a Separation from
Service after having attained at least age 55 and completing at least five (5) years of Credited
Service.

     1.19 Rules. “Rules” means the Commercial Arbitration Rules of the American Arbitration
Association in effect at the date of commencement of any arbitration hereunder.

     1.20 Securities Act. “Securities Act” means the Securities Exchange Act of 1934, as amended
from time to time.

     1.21 Separation from Service. “Separation from Service” means a separation from service
within the meaning of Code section 409A.

     1.22 Subsidiary. “Subsidiary” means (i) any corporation 50% or more of whose stock having
ordinary voting power to elect directors (irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned, directly or indirectly, by Valero, and (ii) any
partnership, association, joint venture or other entity in which, Valero, directly or indirectly,
has a 50% or greater equity interest at the time.

     1.23 Surviving Spouse. “Surviving Spouse” means the spouse of a Participant who is eligible
to receive a Qualified Preretirement Survivor Annuity benefit under the Valero Pension Plan.

     1.24 Trust. “Trust” or “Trust Agreement” shall mean the Valero Energy Corporation
Supplemental Executive Retirement Plan Trust as is created by the terms and conditions of said
Trust and as may be amended from time to time.

     1.25 Trustee. “Trustee” means collectively one or more persons or corporations with trust
power which have been appointed by the Committee and have accepted the duties of Trustee of the
Trust and any and all successor or successors appointed by Valero.

     1.26 Valero. “Valero” means Valero Energy Corporation, the sponsor of this Plan, and its
successors.

     1.27 Valero Pension Plan. “Valero Pension Plan” means the Valero Energy Corporation Pension
Plan, a defined benefit plan qualified under Section 401(a) of the Code, as it may be amended from
time to time and any successor qualified defined benefit plan.

     1.28 Valero Pension Plan Benefit. “Valero Pension Plan Benefit” means the amount of monthly
benefit payable from the Valero Pension Plan which (a) in the case of an unmarried Participant, is
based upon a lifetime annuity payable to such Participant pursuant to the provisions of Article 4
of the Valero Pension Plan, or any successor provision; or, (b) in the case of a married
Participant, is based upon a joint and survivor pension of Actuarially Equivalent Value to the
pension otherwise payable to such Participant for life pursuant to the provisions of Article 4 of
the Valero Pension Plan or any successor provision.

4

 

ARTICLE II

ELIGIBILITY

     2.1 Eligibility. An employee shall become a Participant in the Plan as of the date he is
selected by the Committee for inclusion as a Participant in the Plan. Ongoing eligibility and
participation of Participants shall be determined by the Committee in its sole discretion, and no
employee shall have a right to initial or ongoing participation in this Plan.

     2.2 Frozen Participation. If, at any time, the Committee determines that an employee who is a
Participant is no longer eligible to continue to participate, and such employee is still employed
by a Company, his Accrued Benefit will be frozen as of the last day of the Plan Year prior to the
Plan Year during which he initially became ineligible to participate. He will later be entitled to
that frozen Accrued Benefit upon his Retirement (if, at the time of such Retirement, his Accrued
Benefit is vested), subject to the requirements of Articles III and IV. The frozen Accrued Benefit
will be payable at the time and in the form set forth in Article IV.

     Notwithstanding the foregoing provisions, in the event that the Participant has, as of the
date of his Retirement, accrued a vested benefit in the Valero Energy Corporation Excess Pension
Plan which is greater than his frozen accrued benefit hereunder, such Participant shall be entitled
to receive his accrued benefit under the Valero Energy Corporation Excess Pension Plan, and shall
not be eligible for any benefits hereunder. Under no circumstances shall a Participant be entitled
to benefits under both this Plan and the Valero Energy Corporation Excess Pension Plan. The
Surviving Spouse of a Participant whose Accrued Benefit is frozen at the time of the Participant’s
death shall not be entitled to any death benefit under this Plan. A Participant whose Accrued
Benefit is frozen at the time of incurring a disability shall not accrue any further Credited
Service either for accrual or vesting purposes after the disability occurs so long as the
Participant’s Accrued Benefit in this Plan is frozen. If the frozen Accrued Benefit is less than
the benefit which could otherwise be provided without this limitation, then the benefit will not
exceed the Participant’s frozen Accrued Benefit. Additionally, if any of the events described in
Article VI should occur, the Participant whose Accrued Benefit is frozen shall be subject to having
his frozen Accrued Benefit either restricted in amount or forfeited in accordance with Article VI.

     2.3 Renewed Eligibility. If an employee who is a Participant becomes ineligible to continue
to participate but remains employed by a Company, and the Committee later determines that the
employee is again eligible to participate, the Participant will be given Credited Service for the
intervening period, will have his Final Average Compensation computed as though the freeze had
never occurred, and will be treated for all purposes as though he had not had his participation
interrupted.

ARTICLE III

VESTING

     Except as otherwise set forth herein, a Participant shall vest in his Accrued Benefits
pursuant to the following vesting schedule:

5

 

	 	 	 
	Participant’s Years of	 	 
	Credited Service	 	Vested Percentage
	Less than 5
	 	0%
	or more
	 	100%

     Except as otherwise set forth herein, a Participant’s Accrued Benefit attributable to Credited
Service on or after January 1, 1996 shall vest only upon the occurrence of the Participant’s death,
disability or Retirement, and all benefits under this Plan shall be forfeited if the Participant
terminates employment from all Companies prior to death, disability or Retirement.

     The
foregoing notwithstanding, a Participant’s Accrued Benefit (whether attributable to Credited Service occurring before, on or after January 1, 1996) shall become fully vested upon: (i)
the occurrence of a Change in Control; (ii) termination of the Plan pursuant to Section 9.1; or
(iii) the termination of participation in this Plan by the Subsidiary employing the Participant, if
such Participant’s participation in the Plan is not promptly continued through employment by
another adopting Subsidiary. Upon a Participant’s Separation from Service for any reason prior to
becoming fully vested hereunder, the Participant and any Surviving Spouse shall forfeit any
interest in and under this Plan, and shall have no right to any benefit hereunder.

ARTICLE IV

RETIREMENT BENEFIT

     4.1 Calculation of Retirement Benefit. Subject to the following provisions of this Section
4.1, the provisions of Section 4.3 and Article III; the benefit payable under the Plan shall be an
amount equal to the present value of a lifetime annuity based on the sum of (i) plus (ii) minus
(iii) where (i) equals: 1.60% of the Participant’s Final Average Compensation multiplied by his
number of years of Credited Service; (ii) equals .35% multiplied by the product of his years of
Credited Service (not to exceed 35 years) times the excess of his Final Average Compensation over
the lesser of (a) 1.25 times his Monthly Covered Compensation or (b) the Monthly FICA Amount; and
(iii) equals the Participant’s Valero Pension Plan Benefit. The lump sum amount payable hereunder
shall be determined using the lump sum actuarial factors provided for, and/or used under, the
Valero Pension Plan.

     4.2 Form and Time of Payment. Effective for benefit payments commencing as a result of a
Participant’s Retirement on or after January 1, 2008, benefits shall be made in a single lump sum
payment as of the January 1 following the Participant’s Retirement.

     4.3 Modification of Pension. The Committee shall have the right to modify the calculation of
the benefit payable as to any Participant as it may desire from time to time; provided, however,
that any such modification shall not result in a reduction of the benefit payable below the amount
set forth above in Section 4.1. The amount of the benefits payable to a Participant under this
Plan may be modified by written agreement entered into between the Participant and a Company and
approved pursuant to Section 7.6. If so modified, the provisions

6

 

of such written agreement shall prevail in determining the amount of the benefits payable to
the Participant under this Plan. In addition, benefits payable under this Plan to any Participant
shall not affect any other right or entitlement a Participant may have by contract or otherwise,
except as may be provided in any such contract.

     4.4 Delay of Certain Payments. With respect to any Participant who is a “Specified Employee”,
as defined in Code section 409A and the regulations and rulings issued thereunder, any benefit that
becomes payable by reason of such Participant’s Separation from Service shall not commence prior to
the date that is six (6) months following such Participant’s separation from service. The
provisions of this Section 4.4 shall not apply (a) with respect to any benefit that becomes payable
due to the death of the Participant, or (b) if, at the time of such Participant’s Separation from
Service, no stock of the Company is publicly traded on an established securities market or
otherwise.

ARTICLE V

PRERETIREMENT SPOUSAL DEATH BENEFIT

     5.1 Death Prior to Retirement. In the event that a Participant who has attained age 55 and
completed five years of Credited Service dies while employed by a Company but has not Retired, the
Participant’s Surviving Spouse shall receive a Surviving Spouse benefit under the Plan, which shall
be payable in the form of a lump sum as of the date of the Participant’s death and shall be equal
to fifty percent (50%) of the amount the Participant would have received under Section 4.1 if he
had Retired on his date of death.

     5.2 Beneficiary Designation Prohibited. Since the only death benefit payable under the Plan
is to a Surviving Spouse as provided in Section 5.1 above, no Participant shall have the right to
designate a beneficiary to receive any benefits hereunder.

ARTICLE VI

PROVISIONS RELATING TO ALL BENEFITS

     6.1 Effect of This Article. The provisions of this Article will control over all other
provisions of this Plan.

     6.2 No Duplication of Benefits. It is not intended that there be any duplication of benefits.
Therefore, in no event will a Participant and such Participant’s Surviving Spouse qualify for
separate benefit payments under Articles IV and V.

     6.3 Forfeiture Upon Termination for Cause. If the Committee finds, after full consideration
of the facts presented on behalf of both the Company and a Participant, that the Participant was
discharged by a Company for fraud, embezzlement, theft, commission of a felony, proven dishonesty
in the course of his employment by a Company which damaged the Company, or for disclosing trade
secrets of a Company, the entire Accrued Benefit of the Participant will be forfeited even though
it may have been previously vested, and the Participant and any Surviving Spouse shall have no
right to a benefit hereunder. The decision of the Committee as to the cause of a former
Participant’s discharge and the damage done to the

7

 

Company will be final and binding on all parties. No decision of the Committee will affect
the finality of the discharge of the Participant by the Company in any manner. Notwithstanding the
foregoing, no forfeiture should be permitted pursuant to this Section following Plan termination or
a Change in Control unless pursuant to arbitration consistent with the provisions of Section 11.3.

     6.4 Forfeiture for Competition. If the Committee finds, after full consideration of the facts
presented on behalf of the Company and a Participant, that the Participant, at any time within two
years following his termination of employment from all Companies and without written consent of a
Company, directly or indirectly owns, operates, manages, controls or participates in the ownership
(other than through ownership of less than 5% of the voting equity securities or other interests of
a publicly traded entity), management, operation or control of or is employed by, or is paid as a
consultant or other independent contractor by a business which competes with the Company, and if
the Participant continues to be so engaged sixty (60) days after written notice has been given to
him: (a) the Participant shall, upon the demand of the Committee, repay to Valero the full amount
of the payment previously made to the Participant hereunder; or (b) if the Participant has not yet
received the payment of his vested Accrued Benefit, the Participant and any Surviving Spouse shall
forfeit any rights under this Plan and shall not be entitled to receive any benefit hereunder.

     6.5 Expenses Incurred in Enforcing the Plan. Valero will pay a Participant for all reasonable
legal fees and expenses incurred by him in successfully contesting or disputing his termination of
employment by a Company or in successfully seeking to obtain or enforce any benefit provided by
this Plan if such termination occurs or a benefit is payable following a Change in Control.

     6.6 No Restrictions on any Portion of Benefits Determined to be Excess Parachute Payments.
Notwithstanding that any benefit received or to be received by a Participant in connection with a
Change in Control, or the termination of his employment by a Company, would not be deductible,
whether in whole or in part, by a Company or any affiliated company, as a result of Section 280G of
the Code, the benefit payable under this Plan shall nevertheless not be reduced.

     6.7 Benefits Upon Re-employment. If a former employee who received a benefit under this Plan
for his past service is re-employed by the Company, and participates in the Plan during such period
of re-employment, the amount of his benefit upon his subsequent Retirement will be based on his
total Credited Service, and will be reduced by the amount of the previous payment made hereunder.

ARTICLE VII

ADMINISTRATION

     7.1 Committee Appointment. The members of the Compensation Committee of the Board of
Directors shall serve as the Committee; provided, that the Board of Directors will have the sole
discretion to remove any one or more Committee members and appoint one or more

8

 

replacement or additional Committee members from time to time. Each Committee member will
serve until his or her resignation or removal.

     7.2 Committee Organization and Voting. The Committee shall be organized and shall conduct its
business in accordance with the bylaws of Valero, provided, however, that a member
of the Committee who is also a Participant will not vote or act on any matter relating to himself
or which is otherwise reasonably likely to enhance the benefits payable to such Participant
hereunder.

     7.3 Powers of the Committee. The Committee will have the exclusive responsibility for the
general administration of this Plan according to the terms and provisions of this Plan and will
have all powers necessary to accomplish those purposes, including but not by way of limitation the
right, power and authority:

     (a) to make rules and regulations for the administration of this Plan;

     (b) to construe all terms, provisions, conditions and limitations of this Plan;

     (c) to correct any defect, supply any omission or reconcile any inconsistency that may
appear in this Plan;

     (d) to determine all controversies relating to the administration of this Plan,
including but not limited to:

     (1) differences of opinion arising between a Company and a Participant except
when the difference of opinion relates to the entitlement to, the amount of or the
method or timing of payment of a benefit affected by a Change of Control, in which
event it shall be decided only pursuant to arbitration as set forth in Section 11.3,
and

     (2) any question it deems advisable to determine in order to promote the
uniform administration of this Plan for the benefit of all interested parties; and

     (e) to delegate powers of investment and administration, as well as those clerical and
recordation duties of the Committee, as it deems necessary or advisable for the proper and
efficient administration of this Plan.

     7.4 Committee Discretion. The Committee in exercising any power or authority granted under
this Plan or in making any determination under this Plan may use its sole discretion and judgment.
Any decision made or any act or omission, by the Committee in good faith shall be final and binding
on all parties and, except as otherwise set forth in Sections 6.4, 6.5 and 7.3(d)(1), shall not be
subject to de novo review.

     7.5 Reliance Upon Information. The Committee will not be liable for any decision or action
taken in good faith in connection with the administration of this Plan. Without limiting the
generality of the foregoing, any decision or action taken by the Committee when it relies upon
information supplied it by any officer of the Company, the Company’s legal counsel, the

9

 

Company’s actuary, the Company’s independent accountants or other advisors in connection with
the administration of this Plan will be deemed to have been taken in good faith.

     7.6 Approval of Benefit Modifications. The Chief Executive Officer (“CEO”) of Valero shall
have authority to approve enhancements to the Credited Service, or other modifications to the
benefits, of any Participant or prospective Participant under the Plan in connection with the
employment, retention, retirement or termination of a Participant; provided however, that any such
modification made with respect to the benefits of the CEO or President of Valero shall be
recommended to and approved by the Board of Directors.

ARTICLE VIII

ADOPTION BY SUBSIDIARIES

     8.1 Procedure for and Status After Adoption. Any Subsidiary of Valero at the date of adoption
of this Plan, and any entity becoming a Subsidiary of Valero after such date of adoption, may adopt
this Plan by appropriate action of its board of directors or other governing body. Any power
reserved under this Plan to the Company may be exercised separately by each such Subsidiary
adopting the Plan; provided, however, that (i) powers reserved under this Plan to the Board of
Directors or the Committee shall be exercised only by the Board of Directors of Valero or Committee
thereof and (ii) powers reserved under this Plan to Valero shall be exercised only by Valero. Each
Subsidiary adopting the Plan delegates to Valero exclusive administrative responsibility for the
Plan. However, Valero may allocate the costs of Plan benefits among the Companies in any reasonable
manner such that each Company shall bear the costs of participation by those Participants who are
or were employees of such Company. Each Subsidiary, by adopting this Plan, and in consideration of
the like undertakings of the other adopting Subsidiaries, agrees that the obligations and
liabilities of the Company(ies) for the payment of benefits to any Participants (and to any person
claiming through a Participant) hereunder shall be the joint and several obligation of each
Subsidiary adopting the Plan, not solely of the Company employing or previously employing a
Participant. Accordingly, each such adopting Subsidiary agrees that, to the extent permitted
under-Section 10.4, each Participant (and any person claiming through a Participant) shall have
recourse and a right of action to enforce benefits payable under this Plan against any and all
Companies contemporaneously participating in the Plan during the period of such Participant’s
Credited Service.

     8.2 Termination of Participation By Adopting Subsidiary. Any Subsidiary adopting this Plan
may, by appropriate action of its board of directors or other governing body, terminate its
participation in this Plan. The Committee may, in its discretion, also terminate a Subsidiary’s
participation in this Plan at any time. The termination of the participation in this Plan by a
Subsidiary will not, however, affect the rights of any Participant who is working or has worked for
the Subsidiary as to benefits previously vested under Article III of this Plan.

     8.3 Spinoff Plan. Notwithstanding the foregoing, effective as of July 1, 2006, all benefits
accrued under this Plan with respect to Participants employed by NuStar Energy, LLC, formerly,
Valero GP, LLC (“NuStar”) were spun off into a separate plan sponsored by NuStar, now known as the
NuStar Supplemental Executive Retirement Plan (“NuStar SERP”). In this regard, effective as of
July 1, 2006, NuStar established what is now known as the NuStar

10

 

Pension Plan, a defined benefit plan qualified under Code section 401(a), which will provide
benefits to eligible employees of NuStar with respect to service earned by eligible employees of
NuStar and its participating affiliated companies from and after July 1, 2006. It is the intent of
the Company that the NuStar SERP assumed the current liabilities of this Plan with respect to such
Participants, and shall provide a single supplemental benefit to such employees that is based upon
the benefits such Participant receives under the Valero Pension Plan, as well as the NuStar Pension
Plan. From and after July 1, 2006, employees of NuStar who had been participating in this Plan
ceased participating in this Plan. This Plan shall have no liability of any kind to such
individuals. Additionally, from and after July 1, 2006, NuStar ceased being a participating
Subsidiary under this Plan.

ARTICLE IX

AMENDMENT AND/OR TERMINATION

     9.1 Amendment or Termination of the Plan. The Committee may amend or terminate this Plan at
any time by an instrument in writing without the consent of any Company.

     9.2 No Retroactive Effect on Annual Benefits. No amendment will affect the rights of any
Participant to the Retirement benefit provided in Article IV previously accrued by the Participant
or will change a Participant’s rights under any provision relating to a Change of Control after a
Change of Control has occurred without his consent. However, the Board of Directors retains the
right at any time to change in any manner the Retirement benefit provided in Article IV but only as
to accruals after the date of the amendment.

     9.3 Effect of Termination. If this Plan is terminated, the accrued benefit of all
Participants shall immediately become fully vested, and the benefit of each Participant (determined
as of the date of the Plan termination and calculated in the manner provided in this Plan) shall,
except as provided in Section 9.4, be paid at the time it would otherwise be paid under the terms
of the Plan.

     9.4 Effect of Change in Control. In the event of a Change in Control, the accrued benefit of
all Participants in the Plan shall immediately become fully vested. Additionally, the Committee
may, within the period beginning thirty (30) days prior to the effective date of the Change in
Control, and ending twelve (12) months after the effective date of the Change in Control, make an
irrevocable decision to terminate the Plan (and all deferred compensation plans maintained by
Valero which must be aggregated with the Plan under Code section 409A) and distribute all benefits
to Participants. In the event of such termination following a Change in Control, the accrued
benefits of each Participant (determined as of the date of Plan termination and calculated in the
manner provided for in this Plan) shall be distributed in the form of a lump sum payment within
twelve (12) months following the termination of this Plan. In the absence of such Plan
termination, a Change in Control shall not alter the time and manner of the payment of benefits
hereunder, and all benefits shall be paid at the time and in the manner as they would otherwise be
paid in accordance with the provisions of this Plan.

11

 

ARTICLE X

FUNDING

     10.1 Payments from Trust. As set forth in Section 8.1, the Companies are jointly and
severally liable to pay the benefits due under this Plan; however should they fail to do so when a
benefit is due, the Participant, Surviving Spouse or other person entitled to payment of a benefit
hereunder may apply for payment of such benefit to the Trustee of the Trust, which shall pay such
benefit in accordance with the provisions of the Trust Agreement. In any event, if the Trust fails
to pay for any reason, the Companies shall remain jointly and severally liable for the payment of
all benefits provided by this Plan.

     10.2 Plan May Be Funded Through Life Insurance. It is specifically recognized that Valero
may, but is not required to, purchase life insurance so as to accumulate assets sufficient to fund
obligations under this Plan and that Valero may, but is not required to contribute any policy or
policies it may purchase and any amount it finds desirable to the Trust or any other trust
established to accumulate assets to fund obligations under this Plan. However, under all
circumstances, the Participants will have no rights in or to any such policies.

     10.3 Required Funding of Rabbi Trust. Subject to any limitations under applicable law, Valero
will make contributions of cash or other assets sufficient to fund the Trust on an actuarially
sound basis so as to ensure that at all times assets within the Trust equal or exceed the Actuarial
Equivalent of Accrued Benefits of all Participants under the Plan, assuming the Accrued Benefits to
be fully vested (whether they are or not). As of the end of each Plan Year, Valero shall cause the
actuary who last performed the annual actuarial evaluation of the Valero Pension Plan, to determine
the Actuarial Equivalent of the Accrued Benefits of all Plan Participants, assuming the Accrued
Benefits to be fully vested (whether they are or not) as of the end of the preceding Plan Year.
This annual determination shall be performed by the actuary, as soon as practicable following the
close of the Plan Year, and the actuary shall prepare and provide to Valero a written report
detailing the Accrued Benefits of the Participants. If such report shows that the Plan assets are
less than the Actuarial Equivalent of the Accrued Benefits, then Valero, commencing within 60 days
of receipt of the written report from the actuary, shall, subject to any limitations under
applicable law, contribute to the Trust (which contribution may be made, at Valero’s sole
discretion, in up to four quarterly installments, the last such installment to be made not later
than December 31 of the Plan Year during which, such report is received) such assets that it may
choose in its sole discretion in an amount necessary to ensue that the sum of (i) the fair market
value of the Trust assets as of the end of such preceding Plan Year, and (ii) the fair market value
of such contributions as of the date each such contribution is made, equals or exceeds the
Actuarial Equivalent of the Accrued Benefits of all Participants so reported, assuming the Accrued
Benefits to be fully vested (whether they are or not) as of the end of the prior Plan Year. All
Participants shall be entitled to a copy of the report prepared by the actuary and likewise shall
be furnished a schedule of Trust assets reflecting Valero’s satisfaction of its funding obligation
under this Section 10.3, such report to be furnished to each Plan Participant within 30 days
following the due date of Valero’s final contribution to the Trust for the Plan Year, if any may be
required for the particular Plan Year.

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     10.4 Ownership of Assets; Release. All policies of insurance or other assets contributed to
the Trust (or to any other trust established for the purpose of funding benefits hereunder)
pursuant to Sections 10.2, 10.3 or otherwise shall be contributed by Valero, and all such policies
or other assets shall be owned solely by Valero immediately prior to such contribution. No Company,
other than Valero, shall contribute policies or assets to the Trust. As an internal accounting
matter, as between Valero and the other Companies, Valero may charge or allocate all or any part of
such contributions to other Companies in any reasonable manner determined by Valero in accordance
with generally accepted accounting principles, and may record the amounts so allocated as
obligations owing among Valero and such Companies. Valero may also allocate or distribute assets
received by it from the Trust pursuant to Section 10.5 hereof to other Companies in any reasonable
manner determined by Valero in accordance with generally accepted accounting principles. However,
notwithstanding the fact that a Company may be deemed to have a claim against Valero with respect
to such contributions or distributions, no Company (other than Valero) shall at any time own or be
deemed to own or have any contingent, reversionary or other beneficial interest in any portion of
the policies and other assets held in the Trust or any claim, against the Trustee or otherwise,
with respect thereto. Each Company (other than Valero), by its adoption of this Plan, and in
consideration of the mutual covenants herein contained, for itself, its successors, assigns,
representatives, administrators, trustees and other persons claiming by, through or under such
Company, hereby irrevocably and forever releases and relinquishes (i) any and all rights, claims
and interests (beneficial, reversionary, actual, contingent or otherwise), known or unknown,
asserted or unasserted, which it has or may have, or may hereafter have, in or with respect to the
Trust, the Trust Fund (as such term is defined in the Trust Agreement) and the policies and assets
now or hereafter from time to time contributed or contributable thereto, held therein or thereby,
or distributable therefrom or thereby, and (ii) any claim, demand, action or cause of action
whatsoever which it has or may have, or may hereafter have, against the Trustee, its successors or
assigns, with respect thereto.

     10.5 Reversion of Excess Assets. Assets held pursuant to the Trust shall not be loaned to any
Company. However, Valero may, at any time, request the actuary who last performed the annual
actuarial valuation of the Valero Pension Plan to determine the Actuarial Equivalent of the Accrued
Benefits, assuming the Accrued Benefits to be fully vested (whether they are or not), as of the end
of the previous Plan Year. If the fair market value of the assets held in the Trust, as determined
by the actuary, exceeds the Actuarial Equivalent of the Accrued Benefits of all such Participants
by not less than 25%, then Valero may direct the Trustee to return to Valero that part of the
assets which is in excess of 125% of the Actuarial Equivalent of the Accrued Benefits. Following
the termination of the Plan and the final distribution of all Accrued Benefits and the full
satisfaction of all obligations of the Plan and the Trust, any remaining assets in the Trust shall
revert to Valero.

     10.6 Repurchase of Valero Stock. In order to facilitate diversification of Plan assets,
Valero shall be entitled, from time to time, upon notice to the Trustee, to repurchase shares of
Valero equity securities held in the Trust. Such repurchases shall be made for cash or in exchange
for other assets having a fair market value, as determined by the Trustee, equal to the fair market
value of such Valero securities at such date of purchase.

     10.7 Participants Must Rely Only on General Credit of the Companies. The provisions of
Sections 10.2 and 10.3 notwithstanding, it is specifically recognized by the

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Companies and the Participants that this Plan is an unsecured corporate commitment and that
each Participant (and any Surviving Spouse or other person claiming through a Participant) must
rely upon the general credit of the Companies for the fulfillment of their obligations under this
Plan. Nothing contained in this Plan or in the Trust Agreement will constitute a representation,
covenant or guarantee by any Company that the policies and assets transferred to the Trust (or any
other trust established for the purpose of funding benefits hereunder) or the general assets of
such Company (or Companies) will be sufficient to pay any or all benefits under this Plan Neither
this Plan nor the Trust creates any secured or priority position, preferential right, lien, claim,
encumbrance, right, title or other interest of any kind in any Participant in any policy or other
asset held by any Company, contributed to the Trust (or any other trust established for the purpose
of funding benefits hereunder) or otherwise designated to be used for payment of any obligations
created in this Plan. No policy or other specific asset of any Company has otherwise been or will
be set aside, or has been or will be pledged in any way for the performance of obligations under
this Plan, which would remove the policy or asset from being subject to the claims of the general
creditors of the respective Company. The Trust Agreement (and any other agreement entered into to
fund obligations under this Plan) shall specify that, with respect to their benefits under this
Plan, the Participants (and any Surviving Spouse or other person claiming through a Participant)
are only unsecured general creditors.

ARTICLE XI

MISCELLANEOUS

     11.1 Responsibility for Distributions and Withholding of Taxes. Valero shall calculate the
amount of any distribution payable to a Participant hereunder, and the amounts of any deductions
required with respect to federal, state or local tax withholding, and shall withhold or cause the
same to be withheld. However, any and all taxes payable with respect to any distribution or benefit
hereunder shall be the sole responsibility of the Participant, not of Valero or any Company,
whether or not Valero or any Company shall have withheld or collected from the Participant any sums
required to be so withheld or collected in respect thereof and whether or not any sums so withheld
or collected shall be sufficient to provide for any such taxes. Without limitation of the
foregoing, and except as may otherwise be provided in any separate employment, severance or other
agreement between the Participant and any Company, the individual Participant or Surviving Spouse,
as the case may be, shall be solely responsible for payment of any excise, income or other tax
imposed (i) upon any payment hereunder which may be deemed to constitute an “excess parachute
payment” pursuant to Section 4999 of the Code, or (ii) based upon any theory of “constructive
receipt” of any lump-sum or other amount hereunder.

     11.2 Limitation of Rights. Nothing in this Plan will be construed:

     (a) to give a Participant or other person claiming through him any right with respect
to any benefit except in accordance with the terms of this Plan or an agreement modifying
rights under this Plan;

     (b) to limit m any way the right of the Company to terminate a Participant’s employment
with the Company at any time;

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     (c) to evidence any agreement or understanding, expressed or implied, that the Company
will employ a Participant in any particular position or for any particular remuneration; or

     (d) to give a Participant or any other person claiming through him any interest or
right under this Plan other than that of any unsecured general creditor.

     11.3 Arbitration of Disputes.

     A. It is agreed that any and all disputes, claims, (whether tort, contract, statutory or
otherwise) and/or controversies which relate, in any manner to the Plan shall be submitted to final
and binding arbitration. The claims covered by this agreement to arbitrate include, but are not
limited to, those which relate to the following:

     a. The application and interpretation of the Plan.

     b. Forfeitures pursuant to Section 6.5 or 6.6 of the Plan.

     c. Eligibility for and the calculation of benefits from the Plan.

     d. That in interpreting or applying the provisions of the Plan, the Company has treated
the Participant unfairly or discriminated against the Participant in connection with a
work-related injury, disease or death, or claim for benefits under the Plan in violation of
the Texas Commission on Human Rights Act, Title VII of the Civil Rights Act of 1964, as
amended, The Equal Pay Act of 1963, as amended, the Americans with Disabilities Act, the Age
Discrimination in Employment Act of 1967, as amended, the Rehabilitation Act of 1973, as
amended, or any other provision forbidding discrimination in employment on any basis.

     e. That Valero or the Committee in interpreting or applying the provisions of the Plan,
breached any contract or covenant (express or implied), committed a tort or act of
discrimination (including, but not limited to race, sex, religion, national origin, age,
marital status, or medical condition, handicap or disability), or violated any federal,
state or other governmental law, statute, regulation, or ordinance.

     f. That a Company has discharged or in any manner discriminated against the Participant
because the Participant in good faith filed a claim, hired a lawyer to represent him or her
in a claim, instituted, or caused to be instituted, in good faith, any proceeding under the
Plan or the TWCA, or has testified in any such proceeding.

     B. This Arbitration provision is expressly made pursuant to and shall be governed by the
Federal Arbitration Act, 9 U.S.C. §§ 1-14. Except to the extent herein modified, all arbitration
proceedings shall be conducted in accordance with the Rules. The parties hereto agree that,
pursuant to Section 9 of the Federal Arbitration Act, a judgment of the United States District
Court for the Western District of Texas, San Antonio Division, or of any other court of competent
jurisdiction, may be entered upon an award made pursuant to arbitration.

15

 

     C. The neutral arbitrator (“Arbitrator”) shall be appointed in the manner prescribed in Rule
13 of the Rules. The decision of the Arbitrator selected thereunder shall be final and binding on
all parties.

     D. Except as may be modified by the Arbitrator for good cause shown, the following procedures
shall be followed in addition to those set forth within the Rules themselves. (1) At least twenty
(20) days before the arbitration, the parties must exchange lists of witnesses, including any
experts, and copies of all exhibits intended to be used at the arbitration. Except for good cause,
the Arbitrator may refuse to allow into evidence the testimony of any witness not timely disclosed.
In addition, except for good cause, the Arbitrator may exclude from evidence any exhibit not
previously tendered to the opposing parry in a timely fashion. (2) Each party may take the
deposition of one individual and any or all expert witnesses designated by another party.
Additional discovery, including but not limited to interrogatories and requests for production of
documents, medical or psychological examinations, may be had, upon a showing of substantial need,
where the Arbitrator so orders. (3) The Arbitrator shall apply the substantive law (and the law of
remedies, if applicable) of the State of Texas, or federal law or both as applicable to the
claim(s) asserted. (4) The Arbitrator shall have the authority to entertain a motion to dismiss
and/or a motion for summary judgment by any party and shall apply the standards governing such
motions under the Federal Rules of Civil Procedure. (5) Rule 31 of the Rules is amended to allow
for the use of sworn depositions taken in conformity with the Federal Rules of Civil Procedure. (6)
The results of the arbitration shall be confidential and shall not be publicly released or reported
by the Arbitrator or by either parry.

     E. The Participant (or other person claiming through him) shall pay one half of the fees and
cost of the Arbitrator. Funds or other appropriate security shall be posted by each party for its
share of the Arbitrator’s fee, in an amount and manner determined by the Arbitrator, ten (10) days
before the first day of hearing. Each party shall pay for its own cost and attorneys fees, if any.
However, if any parry prevails on a statutory claim which affords the prevailing party attorney’s
fees, or if there is a written agreement providing for fees, the Arbitrator may award reasonable
fees to the prevailing party.

     F. This agreement to arbitrate shall survive the termination of Participant’s employment. It
can only be revoked or modified by a writing signed by the parties which specifically states an
intent to revoke or modify the provisions of this Section 11.3.

     G. Should one or more provisions of this Section 11.3 be rendered or declared invalid by
reason of any existing or subsequently enacted legislation, or by a decree of a court of competent
jurisdiction, such invalidation of such provision or provisions hereof shall not affect the
remaining portions of this agreement to arbitrate.

     H. Any arbitration proceeding commenced under this Section 11.3 shall, to the extent
practicable, be consolidated with any arbitration proceeding relating to the same or similar facts
and circumstances between the Trustee and Valero pursuant to the Trust Agreement.

     11.4 Distributions to Incompetents. Should a Participant or a Surviving Spouse be incompetent
at the time any payment is due hereunder, as determined by the Committee in its sole discretion,
Valero is authorized to make such payment to the guardian or conservator of the

16

 

incompetent Participant or Surviving Spouse or directly to the Participant or Surviving Spouse
or to apply those funds for the benefit of the incompetent Participant or Surviving Spouse in any
manner the Committee determines in its sole discretion.

     11.5 Nonalienation of Benefits. No right or benefit provided in this Plan will be
transferable by the Participant, except upon his death to a Surviving Spouse as provided in this
Plan. No right or benefit under this Plan will be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber, or charge the same will be void. No right or benefit under this Plan will in any
manner be liable for or subject to any debts, contracts, liabilities or torts of the person
entitled to such benefits. If any Participant or any Surviving Spouse becomes bankrupt or attempts
to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit under this
Plan, that right or benefit will, in the discretion of the Committee, cease. In that event, the
Committee may have Valero hold or apply the right or benefit or any part of it to the benefit of
the Participant or Surviving Spouse, his or her spouse, children or other dependents or any of them
in any manner and in any proportion the Committee believes to be proper in its sole and absolute
discretion, but is not required to do so.

     11.6 Severability. If any term, provision, covenant or condition of this Plan is held to be
invalid, void or otherwise unenforceable, the rest of this Plan will remain in full force and
effect and will in no way be affected, impaired or invalidated.

     11.7 Notice. Any notice or filing required or permitted to be given to a Company, the
Committee or a Participant will be sufficient if in writing and hand delivered or sent by U.S. mail
to the principal office of Valero, acting on behalf of the Company or Committee, or to the
residential mailing address of the Participant. Notice will be deemed to be given as of the date of
hand delivery or if delivery is by mail, as of the date shown on the postmark.

     11.8 Gender and Number. If the context requires it, words of one gender when used in this
Plan will include the other gender, and words used in the singular or plural will include the
other.

     11.9 Governing Law. The Plan will be construed, administered and governed in all respects by
the laws of the State of Texas.

     11.10 Effective Date. Except as otherwise provided herein, this amendment and restatement of
the Plan is effective as of January 1, 2008.

     IN WITNESS WHEREOF, Valero has executed this amendment and restatement of the Plan effective
as of the Effective Date provided for herein.

	 	 	 	 	 	 	 
	 	 	VALERO ENERGY CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 /s/ William R. Klesse	 	 
	 

	 	 	 	 

	 	 

17

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