Document:

Prepared and filed by St Ives Financial

EXHIBIT 4.1

BYE-LAWS

OF

PXRE GROUP LTD.

AMENDED Bye-law 22

DECEMBER 9, 2001

and

FURTHER AMENDED

FEBRUARY 12, 2002 by the Description of Stock as attached to the

back of the Bye-Laws

AND

AMENDED Bye-Law 27

April 26, 2005

And

Amended Bye-Law 2

November 18, 2005

 

INTERPRETATION 

(1) 	In these Bye-Laws, unless the context otherwise requires, the words standing
    in the first column of the following table shall bear the meaning set opposite
    them respectively in the second column.

	WORD	MEANING
	 	 
	“Act”	The Companies Act
       1981 of Bermuda, as amended from time to time.
	 	 
	 	 
	“Auditor”	the Auditor of the
       Company for the time being and may include
       any individual or partnership.
	 	 
	“Bye-Laws”	these Bye-Laws in
       their present form or as supplemented or amended
       from time to time.
	 	 
	“Board” or
       the

“Directors” or the

“Board of Directors”	the Board of Directors
      of the Company or the Directors (including alternate Directors).
	 	 
	“capital”	the share capital
       from time to time of the Company.
	 	 
	“clear days”	in relation to the
       period of a Notice, that period excluding the
       day when the Notice is given or deemed to
       be given and the day for which it is given
       or on which it is to take effect.
	 	 
	“Code”	the Internal Revenue
       Code of 1986, as amended, of the United States.
	 	 
	“Company”	PXRE Group Ltd.
	 	 
	“competent

    regulatory 

    authority”	a competent regulatory
       authority in the jurisdiction or place
       where the shares of the Company are listed
       or quoted on a stock exchange.

1

	“Controlled
    Shares”	in reference
       to any Person means (i) all shares
       of the Company that such Person owns within the meaning
       of Section 958(a) of the Code, or is
       considered as owning by applying the rules
       of Section 958(b) of the Code, (ii) all shares
       of the Company that such Person owns by
       applying the rules of Sections 544 or 554
       of the Code or (iii) all shares of the Company
       directly, indirectly or beneficially owned
       by a Person within the meaning of Section
       13(d) of the Exchange Act (including
       any shares owned by a group of Persons
       as so defined and including any shares
       that would otherwise be excluded by Section
       13(d) of the Exchange Act).
	 	 
	“Designated
    Stock 

    Exchange”	a stock exchange which
       is an appointed stock exchange for
       the purposes of the Act in respect of which
       the shares of the Company are listed or quoted.
	 	 
	“dollars” and “$”	dollars, the legal
       currency of the United States.
	 	 
	“Exchange Act”	the Securities Exchange
       Act of 1934, as amended, of the United States.
	 	 
	“General
    Meeting”	any meeting of the
       Members of the Company. The General
       Meeting convened once in every calendar
       year in compliance with the Act, shall
    be known as the “Annual General Meeting”.
    Any General Meeting other than an Annual
    General Meeting, shall be known as a “Special General Meeting”.
	 	 
	“Maximum
    Percentage”	nine and nine-tenths percent (9.9%).
	 	 
	“Member”	a duly registered
       holder from time to time of the shares in the capital of the Company.

2

	“month”	a calendar month.
	 	 
	“9.9% Limitation”	the requirement and
       restriction that no Person shall be permitted
       to Own or Control more than nine and
       nine-tenths percent (9.9%) of the total
       combined voting power of all classes of
       shares entitled to vote at a General Meeting of
    the Company’s Members or of the
    total number of outstanding shares
    of any class of stock, except as provided
    for in these Bye-Laws or as permitted by the
    Board and provided that the 9.9% Limitation
    shall not apply to PXRE Purpose Trust.
	 	 
	“Notice”	written notice unless
       otherwise specifically stated and as further
       defined in these Bye- Laws.
	 	 
	“Office”	the registered office
       of the Company for the time being.
	 	 
	“Officer”	any individual appointed
       by the Board or by another officer to
       hold an office of the Company.
	 	 
	“Own or Control” or “Owning
       or Controling”	with respect to the
    Company’s shares, means (i) shares that
    a Person owns within the meaning of Section
    958(a) of the Code or is considered as
    owning by applying the rules of Section 958(b)
    of the Code, (ii) shares that a Person
    owns by applying the rules of Sections
    544 or 554 of the Code or (ii) shares directly,
    indirectly or beneficially owned by a Person
    within the meaning of Section 13(d) of the
    Exchange Act (including any shares
    owned by a group of Persons as so defined
    and including any shares that would
    otherwise be excluded by Section 13 (d) of the Exchange Act).

3

	“paid up”	paid up or credited as paid up.
	 	 
	“Person”	any individual, general
       or limited partnership, corporation,
       association, trust, estate, company (including
       a limited liability company)
       or any other entity or organization, including
       a government, a political subdivision
       or agency or instrumentality thereof.
	 	 
	“Register”	the principal register
       and, where applicable, any branch register
       of Members of the Company to be kept
       pursuant to the provisions of the Act.
	 	 
	“Registration
    Office”	in respect of any
       class or series of share capital, such place
       as the Board may from time to time determine
       to keep a branch register of Members
       in respect of that class or series of share
       capital and where (except in cases where the
       Board otherwise directs) the transfers or other
       documents of title for such class or series
       of share capital are to be delivered for registration.
	 	 
	“Seal”	common seal or any
       one or more duplicate seals of the Company
       (including a securities seal) for use in Bermuda
       or in any place outside Bermuda.
	 	 
	“Secretary”	any Person appointed
       by the Board to perform any of the
       duties of secretary of the Company and includes
       any assistant, deputy,
       temporary or acting secretary.
	 	 
	“Securities Act”	the Securities Act
       of 1933, as amended, of the United States.
	 	 
	“shares”	the Common Shares
       or Preferred Shares of the Company, as the case may be.
	 	 

4

	 	“Subsidiary”	any
       entity in which the Company owns, directly or indirectly,
       shares representing at least fifty percent
       (50%) of the voting power or fifty percent
       (50%) of the value of such entity.
	 	 	 	 	 
	 	“Ten
    Percent Shareholder”	 a Person
       (other than the PXRE Purpose Trust) who the Board
    determines Owns or Controls
    more than 9.9% of the total combined voting power
    of all classes of shares entitled to
    vote or of the total number of outstanding shares of any class of stock.
	 	 	 	 	 
	 	“year”	a calendar year.
	 	 	 	 	 
	(2)
	In these Bye-Laws, where not inconsistent with the context:

	 	 	 	 	 
	 	 	(a)	words denoting the
    singular include the plural and vice versa;
	 	 	 	 	 
	 	 	(b)	words denoting a gender
    include every gender;
	 	 	 	 	 
	 	 	(c)	words describing Persons
       include companies, associations and bodies of Persons whether corporate
    or not;
	 	 	 	 	 
	 	 	(d)	the word:	 
	 	 	 	 	 
	 	 	 	(i) “may” shall
    be construed as permissive; and
	 	 	 	 	 
	 	 	 	(ii) “shall” or “will” shall
    be construed as imperative;
	 	 	 	 	 
	 	 	(e)	expressions
       referring to writing shall, unless the contrary intention appears,
       be construed as including printing, lithography, photography,
       facsimile, computer generated and other modes of representing
    words or figures in a visible form;
	 	 	 	 	 
	 	 	(f)	references
       to any act, ordinance, statute or statutory provision shall be interpreted
       as relating to any statutory modification or re-enactment thereof for
    the time being in force;
	 	 	 	 	 
	 	 	(g)	unless
       otherwise provided herein words and expressions defined in the Act shall
       bear the same meanings in these Bye-Laws if not inconsistent with the
    context;

5

	 	 	(h)	a resolution
       shall be a “special resolution” when
    it has been passed by the affirmative
    vote of Members holding not less than sixty-six and two-thirds percent
    (66 2/3%) of the voting power of the then outstanding shares
    entitled to vote, cast by such Members in person or, in the
    case of such Members as are corporations, by their respective duly
    authorized representative or, where proxies are allowed, by proxy,
    at a General Meeting of which not less than twenty-one (21) clear
    days’ Notice, specifying (without prejudice to the power contained
    in these Bye-Laws to amend the same) the intention to propose
    the resolution as a special resolution, has been duly given;
	 	 	 	 
	 	 	(i)	a resolution shall
       be an “ordinary resolution” when
    it has been passed by a simple
    majority of votes cast, in person, by a representative or
    by proxy, at a General Meeting of which not less than twenty-one (21) clear
    days’ Notice has been duly given;
	 	 	 	 
	 	 	(j)	a special resolution
       shall be effective for any purpose for which an ordinary resolution
       is expressed to be required under any provision of these Bye-Laws or the
       Act; and
	 	 	 	 
	 	 	(k)	headings used in these
       Bye-Laws are for convenience only and are not to be used or
       relied upon in the construction of these Bye- Laws.

 (3) In these Bye-Laws, in calculating whether a resolution has been passed by
     a particular majority or whether a particular number of shares is represented
     at a General Meeting and, generally, for all purposes, in calculating the
     total number of votes cast or votes represented, as the case may be, the
     provisions of paragraph (4) of Bye-Law 20 hereof shall be taken into account
     in all cases in computing the number of votes cast or votes represented,
     as the case may be.

 (4) Any right or power
    of the Company under the Act or the Company’s Memorandum
     of Association or these Bye-Laws which is not expressly subject to approval
     by the Members in a General Meeting shall be exercisable by the
Board. 

SHARES AND SHARE CAPITAL 

2. 	(1) 	The authorized share capital of the Company is $380,000,000 divided
    into the following classes of shares:

	 	(i)  	350,000,000
    common shares, par value $1.00 per share (“Common Shares” );
    and
	 	 	 
	 	(ii)  	30,000,000
    preferred shares, par value $1.00 per share (“Preferred Shares” ).

 (2) Subject to paragraph (1) of Bye-Law 13, no Person shall be permitted to
     Own or Control shares in the Company to the extent that such Person or any
     other Person will be considered to Own or Control Controlled Shares, as
     the Board may determine, in excess of 9.9% of the total combined voting
     power of all classes of voting shares or of the total number of outstanding
     shares of any class of stock of the Company, nor shall any Person be permitted
     to Own or Control
Controlled Shares if the result thereof would be to render such Person or any
     other Person a Ten Percent Shareholder, provided, however, that the foregoing limitation shall not apply to
the PXRE Purpose Trust. Nor may any shares be issued, redeemed, repurchased or transferred if the effect of such issuance, redemption, repurchase or transfer would be to cause a violation of the prohibitions of this Bye-Law. To the extent that, for
any reason whatsoever and by any method howsoever, a Person, whether an existing Member or not of the Company, shall Own or Control Controlled Shares in excess of the 9.9% Limitation, then the voting rights applicable to such Controlled Shares shall
be reduced in accordance with paragraph (4) of Bye-Law 20.

COMMON SHARES 

 3. 	(1) 	Subject to
    these Bye-Laws, at a General Meeting of the Company every holder of Common
    Shares shall be entitled to one vote for each share held
by him on all matters submitted to a vote of the Company’s Members. 

 (2) The Board may in its discretion, at any time, and from time to time, issue
     or cause to be issued all or any part of the authorized but unissued Common
     Shares of the Company for consideration of such character and value as the
     Board shall in its absolute discretion from time to time fix or determine.

AUTHORITY OF BOARD TO ISSUE AND DIVIDE PREFERRED SHARES INTO DIFFERENT SERIES

4. 	(1) 	The Board may in its discretion at any time, and from time to time,
    issue or cause to be issued all or any part of the authorized but unissued
    Preferred Shares of the Company for consideration of such character and value
    as the Board shall in its absolute discretion from time to time fix or determine.

  (2) Without prejudice to the generality of paragraph (1) of this Bye-Law,
     the Board is hereby further expressly authorized at any time, and from time
     to time, to consolidate, divide or subdivide any or all of the authorized
     but unissued Preferred Shares of the Company into several series, and to
     set the par value of any of the unissued Preferred Shares, and in the resolution
     or resolutions establishing a particular series, before issuance of any
     of the shares thereof, to
  fix and determine the number of shares and the designation of such series,
     so as to distinguish it from the shares of all other series and classes,
     and to fix and determine the voting rights, preferences, qualifications,
     privileges, limitations, options, conversion rights, redemption features,
     restrictions, and other special or relative rights of such series. Each
     of such series may differ from every other series previously authorized,
     as may be determined by the Board in any or all
  respects, to the fullest extent now, or hereafter, permitted by the laws of
     Bermuda including, but not limited to, the variations between different
     series in the following respects:

	 	(a)	the distinctive
       designation of such series and the number of shares which
       shall constitute such series, which number may be increased
       or decreased (but not below the number of shares thereof then outstanding)
       from time to time by the Board;
	 	 	 	 
	 	(b)	the annual
       dividend or dividend rate for such series, and the date or dates from
       which dividends shall commence to accrue;
	 	 	 
	 	(c)	the par
       value of the shares prior to issue, provided, however, that the par value
       shall in no case be set at less than $1.00 per share;
	 	 	 
	 	(d)	the price
       or prices at which, and the terms and conditions on which, if
       any, the shares of such series may be redeemed or made redeemable;
	 	 	 	 
	 	(e)	the purchase
       or sinking fund provisions, if any, for the purchase or redemption of
       shares of such series;
	 	 	 	 
	 	(f)	the preferential
       amount or amounts, if any, payable upon shares of such series in the event
       of the liquidation, dissolution, or winding up of the Company;
	 	 	 	 
	 	(g)	the terms
       and conditions, if any, upon which shares of such series may be converted
       and the class or series of shares of the Company or other securities into
       which such shares may be converted;
	 	 	 	 
	 	(h)	the relative
       seniority, priority or junior rank of such series as to dividends
       or assets in relation to any other classes or series of shares of the
       Company then or thereafter to be issued;

	 	 	 	(i)	such other terms,
       preferences, qualifications, privileges, limitations, options,
       restrictions, and other special rights, if any, of shares of such series
       as the Board may, at the time of such resolution or resolutions, lawfully
       fix or determine;
	 	 	 	 	 
	 	 	 	(j)	cancel shares which,
       at the date of the passing of the resolution in that behalf, have
       not been taken or agreed to be taken by any Person; and
	 	 	 	 	 
	 	 	 	(k)	where any difficulty
       arises in regard to any consolidation, division or sub-division under
       this Bye-Law, the Board may settle the same as it thinks expedient
       and, in particular, may issue certificates in respect of fractions
       of shares or arrange for the sale of the shares representing fractions
       and the distribution of the net proceeds of sale (after deduction
       of the expenses of such sale) in due proportion among the
       Members who would have been entitled to the fractions, and
       for this purpose the Board may authorize a Person to transfer
       the shares representing fractions to the purchaser thereof, or resolve
       that such net proceeds be paid to the Company for the Company’s
    benefit; and such purchases shall not be bound to see to the application
    of the purchase money nor shall such Person’s title
    to the shares be affected by any irregularity or invalidity in the proceedings
    relating to the sale.
	 	 	 	 	 
	 	 	 	 	EMPLOYEE SHARE PURCHASE
	 	 	 	 	 
	5	(1	)	The Board may from time to time:
	 	 	 	 	 
	 	 	 	(a)	establish a plan or
       plans (including individual agreements) for employees, directors,
       officers, consultants and/or advisors of the Company, its subsidiaries
       or affiliates whereby the Company provides securities
       (whether restricted or otherwise), or options to purchase securities,
       or money for the purchase of, or subscription for,
       such securities and/or options, whether directly or indirectly through
       a trust established for the benefit of such employees, directors,
       officers, consultants and/or advisors; 
	 	 	 	 	 
	 	 	 	(b)	provide for the making
       by the Company of loans to Persons, other than Directors, bona
       fide in the employment of the Company or any of its Subsidiaries,
       with a view to enabling those Persons to purchase or subscribe
       for fully-paid shares in the Company, to be held by themselves by way
       of beneficial ownership; and

	 	 	 	(c)	provide
       for the giving by the Company, directly or indirectly, of financial assistance,
       whether by means of a loan, guarantee, the provision of security
       or otherwise, to its bona fide employees, or the bona fide employees
       of any of its Subsidiaries, whether or not they shall also be
       Directors, in order that they may buy shares in the Company and the
       Board may, in its discretion, from time to time require, as one
       of the terms of issue of any such shares or by contract, that any
       such employee shall be required or allowed to sell such shares to
       the Company, upon such terms and at such price as the Board may by
       such terms of issue or contract establish, when such employee
       ceases to be employed by the Company or any of its Subsidiaries.

COMPANY SHARE REPURCHASE 

 6. (1) 	Subject
    to the Act, the Company’s Memorandum of Association and these
Bye-Laws and, where applicable, the rules of any Designated Stock Exchange and/or
    any competent regulatory authority, the Company may purchase or otherwise
    acquire its own shares upon such terms and conditions as the Board shall
    determine. 

ALTERATION OF CAPITAL 

7. 	(1) 	The Company may from time to time by ordinary resolution in accordance
    with the Act:

	 	 	 	(a)	increase
       its capital by such sum, to be divided into shares of such amounts, as
       the resolution shall prescribe;
	 	 	 	 	 
	 	 	 	(b)	consolidate and divide
       all or any of its capital into shares of larger amount than its existing
       shares;
	 	 	 	 	 
	 	 	 	(c)	divide its shares
       into several classes, and without prejudice to any special rights
       previously conferred on the holders of existing shares, attach
       thereto respectively any preferential, deferred, qualified
       or special rights, privileges, conditions or such restrictions,
       which, in the absence of any such determination by the
       Company in a General Meeting, as the Directors may determine,
       provided always that where the Company issues shares
       which do not carry voting rights, the words “non-voting” shall
    appear in the designation of such shares and where
    the equity capital includes shares with different voting
    rights, the designation of each class of shares, other than those with the
    most favorable voting rights,
    must include the words “restricted voting” or “limited
    voting” ;

	 	 	 	 	 
	 	 	 	(d)	sub-divide its shares,
       or any of them, into shares of smaller amount than is fixed
       by the Memorandum of Association (subject, nevertheless,
       to the Act), and may by such resolution determine
       that, as between the holders of the shares resulting from
       such sub-division, one or more of the shares may have any
       such preferred rights or be subject to any such restrictions
       as compared with the other or others as the Company has
       power to attach to unissued or new shares;
	 	 	 	 	 
	 	 	 	(e)	change the currency denomination of its share capital; and
	 	 	 	 	 
	 	 	 	(f)	cancel any shares
       which, at the date of the passing of the resolution, have not
       been taken, or agreed to be taken, by any Person, and diminish
       the amount of its capital by the amount of the shares so canceled;
	 	 	 	 	 
	 	 	 	PROVIDED
       THAT, none of the foregoing actions shall be taken if it
       were to result in any Person (other than the PXRE Purpose Trust) violating
    the 9.9% Limitation unless the Board otherwise determines.

 (2)
      The Board may settle as it considers expedient any difficulty which arises
      in relation to any consolidation, division or subdivision
under this Bye-Law and in particular but without prejudice to the generality
of the foregoing may issue certificates in respect of fractions of shares or
arrange for the sale of the shares representing fractions and the distribution
of the net proceeds of sale (after deduction of the expenses of such sale) in
due proportion among
the Members who would have been entitled to the fractions, and for this purpose
the Board may authorize a Person to transfer the shares representing fractions
to the purchaser thereof or resolve that such net proceeds be paid to the Company
for the Company’s benefit. Such purchaser will not be bound to see to the application
of the purchase money nor shall such Person’s title to the shares be affected
by any irregularity or invalidity in the proceedings relating to the sale. 

  (3) 	The Company may from time to time by ordinary resolution in accordance
 	    with the Act reduce its authorized or issued share capital or any share
 	    premium account or other undistributable reserve in any manner permitted
 	    by
applicable law.

 (4) 	Except so far
    as otherwise provided by the conditions of issue, or by these Bye-Laws, any
    capital raised by the creation of new shares shall
 	    be treated as if it formed part of the original capital of the Company,
 	    and such shares shall be subject to the provisions contained in these
    Bye-Laws with reference to the payment of calls and installments,
 	    transfer and transmission, forfeiture, lien, cancellation, surrender,
    voting and otherwise. 

  (5) 	Subject to the Act and the 9.9% Limitation, all or any of the special
   	    rights attached to the shares or any class of shares may, unless otherwise
   	    provided by the terms of issue of the shares of that class, from time
   	    to time (whether or not the Company is being wound up) be varied, modified
   	    or abrogated either with the consent in writing of the holders of not
   	    less than sixty-six and two-thirds percent (66 2/3%) of the issued shares
   	    of that class or with the sanction of
  a special resolution passed at a separate General Meeting of the holders of
   	    the shares of that class. To every such separate General Meeting all
   	    the provisions of these Bye-Laws relating to General Meetings of the
   	    Company shall, as the case may be, apply, but so that:

	 	 	(a)	the necessary quorum shall be two or more
   Persons holding or representing by proxy not less than a majority of the issued shares
   of that class;
	 	 	 	 
	 	 	(b)	subject to the 9.9%
       Limitation and the provisions of paragraph (4) of Bye-Law 20, every holder
       of shares of the class shall be entitled on a vote to one vote for every
       such share held by him; and
	 	 	 	 
	 	 	(c)	any holder of shares
       of the class present in person or by proxy may demand a vote.

  (6) 	The special rights conferred upon the holders of any shares or class
 	    of shares shall not, unless otherwise expressly provided in the rights
 	    attaching to or the terms of issue of such shares, be deemed to be varied,
 	    modified or abrogated by the creation or issue of further shares ranking
 	    pari passu therewith.

WARRANTS 

8. 	(1) 	Subject to the 9.9% Limitation, the Board may issue warrants conferring
    the right upon the holders thereof to subscribe for any class of shares or
    securities in the capital of the Company on such terms as the Board may from
    time to time determine.

  (2) 	The Company may in connection with the issue of any shares exercise
 	    all powers of paying commission and brokerage conferred or permitted by
 	    the Act. Subject to the Act, the commission may be satisfied by the payment
 	    of cash or by the allotment of fully or partly paid shares or partly in
 	    one and partly in the other.

  (3) 	 Except as provided in these Bye-Laws, neither the Company nor any
 	    of its Subsidiaries shall directly or indirectly give financial assistance
 	    to a Person who is acquiring or proposing to acquire shares in the Company
 	    for the purpose of that acquisition whether before or at the same time
 	    as the acquisition takes place or afterwards, provided, however, that nothing in this Bye-Law shall prohibit
transactions permitted by the Act.

  
    (4) 	Except as required by applicable law, no Person shall be recognized
   	      by the Company as holding any share in the capital of the Company upon
   	      any trust and the Company shall not be bound by or required in any way
   	      to recognize (even when having Notice thereof) any equitable, contingent,
   	      future or partial interest in any share or any fractional part of a share
   	      or (except only as otherwise provided by these Bye-Laws or by applicable
   	      law) any other rights in respect of any
    share except an absolute right to the entirety thereof in the registered holder.
  

  
    (5) 	Subject to the Act and these Bye-Laws, the Board may at any time
   	      after the allotment of shares in the capital of the Company but before
   	      any Person has been entered in the Register as the holder, recognize
   	      a renunciation thereof by such recipient in favor of some other Person
   	      and may accord to any such recipient of a share a right to effect such
   	      renunciation upon and subject to such terms and conditions as the Board
   	      determines to impose.
  

SHARE CERTIFICATES 

9. 	(1) 	Every share certificate shall be issued under the Seal or a facsimile
    thereof and shall specify the number and class and distinguishing numbers
    of the shares to which it relates, and the amount paid up thereon and may
    otherwise be in such form as the Directors may from time to time determine.
    No certificate shall be issued representing shares of more than one class.
    The Board may by resolution determine, either generally or in any particular
    case or cases, that
any signatures on any such certificates (or certificates in respect of other
    securities) need not be autographic but may be affixed to such certificates
    by some mechanical means or may be printed thereon or that such certificates
    need not be signed by any Person. Every share certificate shall recite that
    the voting rights relating to such shares are subject to the limitations
    contained in these Bye-Laws.

  (2) 	 In the case of a share held jointly by several Persons, the Company
 	    shall not be bound to issue more than one certificate therefor and delivery
 	    of a certificate to one of several joint holders shall be sufficient delivery
 	    to all such holders.

  (3) 	Where a share stands in the names of two or more Persons, the Person
 	    first named in the Register shall as regards service of Notices and, subject
 	    to the provisions of these Bye-Laws, all or any other matters connected
 	    with the Company, except the transfer of the shares, be deemed the sole
 	    holder thereof.

  (4) 	Every Person whose name is entered, upon an allotment of shares,
 	    as a Member in the Register shall be entitled, without payment, to receive
 	    one certificate for all such shares of any one class, or several certificates
 	    each for one or more of such shares of such class upon payment, for every
 	    certificate after the first, of such reasonable out-of-pocket expenses
 	    as the Board from time to time determines.

  
    (5) 	 Subject to paragraph (2) hereof, share certificates shall be issued,
   	        in the case of an issue of shares within twenty-one (21) days (or such
   	        longer period as the terms of the issue provide) after allotment, or
   	        in the case of a transfer of fully or partly paid shares within twenty-one
   	        (21) days after delivery of a transfer to the Company, not being a transfer
   	        which the Company is for the time being entitled to refuse to register
   	        and does not register.
  

  
    (6) 	Notwithstanding any provision in these Bye-Laws to the contrary,
   	        a Person may by Notice to the Company elect that no certificate be issued
   	        in respect of shares registered or to be registered in his name and on
   	        receipt of such election the Company shall not be required to issue a
   	        certificate for such shares or may cancel an existing certificate without
   	        issuing another certificate in lieu thereof.
  

  
    (7) 	Upon every transfer of shares, the certificate held by the transferor
   	        shall be given up to be canceled, and shall forthwith be canceled accordingly,
   	        and a new certificate shall be issued to the transferee in respect of
   	        the shares transferred to him. If any of the shares included in the certificate
   	        so given up shall be retained by the transferor a new certificate for
   	        the balance shall be issued to him.
  

  
    (8) 	If a share certificate shall be damaged or defaced or alleged to
   	        have been lost, stolen or destroyed, a new certificate representing the
   	        same shares may be issued to the relevant Member upon request and on
   	        payment of such fee as the Designated Stock Exchange or the Board may
   	        determine to be payable, and, subject to compliance with such terms (if
   	        any) as to evidence and indemnity and to payment of the costs and reasonable
   	        out-of-pocket expenses of the Company in
      investigating such evidence and preparing such indemnity as the Board shall
   	        determine and, in case of damage or defacement, on delivery of the old
   	        certificate to the Company, provided always that where share warrants
   	        have been issued, no new share warrant shall be issued to replace one
   	        that has been lost, stolen or destroyed unless the Directors are satisfied
   	        beyond reasonable doubt that the original has been lost, stolen or destroyed.
  

REGISTER OF MEMBERS 

10. 	(1) 	The Company shall keep in one or more books a Register of its
    Members and shall enter therein the following particulars:

	 	 	(a)	the name
       and address of each Member, the number and, where appropriate, the class
       or series of shares held by such Member and the amount paid or agreed
       to be considered as paid on such shares;
	 	 	 	 
	 	 	(b)	the date on which each Person was entered in the Register; and
	 	 	 	 
	 	 	(c)	the date on which
       any Person ceased to be a Member for one year after
       such Person so ceased. 

  (2) 	Subject to the Act, the Company may keep an overseas or local or
 	    other branch register of Members resident in any place, and the Board may
 	    make and vary such regulations as it determines in respect of the keeping
 	    of any such register and maintaining a Registration Office in connection
 	    therewith. 

INSPECTION OF REGISTER OF MEMBERS 

11. 	The Register and branch register of Members, as the case may be, shall
    be open to inspection on every business day by Members without charge or
    by any other Person, upon the maximum payment permitted under the Act, subject
    to such reasonable restrictions as the Board may impose, so that not less
    then two (2) hours in each business day be allowed for inspections, at the
    Office or such other place in Bermuda at which the Register is kept in accordance
    with the Act or, if
appropriate, upon the maximum payment permitted under the Act at the Registration
    Office. The Register, including any overseas or local or other branch register
    of Members, may, after Notice has been given by advertisement in an appointed
    newspaper and, where applicable, any other newspapers in accordance with
    the requirements of any Designated Stock Exchange to that effect, be closed
    at such times or for such periods not exceeding in the aggregate thirty (30)
    days in each year as the Board
may determine and either generally or in respect of any class or series of shares.

RECORD DATES 

12. 	Notwithstanding any provision of these Bye-Laws to the contrary, the
    Company or the Directors may fix any date as the record date for:

	 	 	(a)	determining
       the Members entitled to receive any dividend, distribution, allotment
       or issue; and
	 	 	 	 
	 	 	(b)	determining the Members
       entitled to receive Notice of and to vote at any General Meeting of the
       Company.
	 	 	 	 

TRANSFER OF SHARES 

13. 	(1) 	No transfer may be made if the effect of such transfer would
    result in the transferee or any other Person Owning or Controlling in excess
    of nine and nine tenths percent (9.9%) of all of the issued and outstanding
    shares of the Company or Owning or Controlling shares in excess of the 9.9%
    Limitation and the Board may, in its absolute discretion, refuse to register
    such transfer, provided, however, that
the foregoing limitation shall not apply to the PXRE Purpose Trust. Notwithstanding
    the foregoing, the Board may waive the restrictions set forth in this Bye-Law,
    in its discretion and on a case by case basis. One of the purposes of the
    9.9% Limitation is to prevent the Company
    from being characterized as a controlled foreign corporation, a foreign personal
    holding company or a personal holding company within the meaning of the Code.
    Nevertheless, the Board will not be liable to the Company, its Members or
    any other Person whatsoever for any errors in judgment made by it in granting
    any waiver or waivers to the foregoing restrictions in any case so long as
    it has
acted in good faith. 

  (2) 	Subject to these Bye-Laws, any Member may transfer all or any of
 	    his shares by an instrument of transfer in the usual or common form or
 	    in any other form approved by the Board.

  (3) 	The instrument of transfer shall be executed by or on behalf of the
 	    transferor. The Board may also resolve, either generally or in any particular
 	    case, upon request by the transferor, to accept mechanically executed transfers.
 	    The transferor shall be deemed to remain the holder of the share until
 	    the name of the transferee is entered in the Register in respect thereof.
 	    Nothing in these Bye-Laws shall preclude the Board from recognizing a renunciation
 	    of the
allotment or provisional allotment of any share by the allottee in favor of some
 	    other Person.

  (4) 	The Board may, in its absolute discretion, and without giving any
 	    reason therefor, refuse to register a transfer of any share issued under
 	    any share plan for employees upon which a restriction on transfer imposed
 	    thereby still subsists, and it may also refuse to register a transfer of
 	    any share to more than four (4) joint holders. Nothing in these Bye-Laws
 	    shall impair the settlement of transactions entered into through the facilities
 	    of a Designated Stock Exchange
except as provided by such exchange.

  (5) 	No transfer shall be made to an infant or to a Person of unsound
 	    mind or under other legal disability, known as such by the Company.

  (6) 	The Board, in so far as permitted by applicable law may, in its absolute
 	    discretion, at any time and from time to time transfer any share upon the
 	    Register to any branch register or any share on any branch register to
 	    the Register or any other branch register. In the event of any such transfer,
 	    the shareholder requesting such transfer shall bear the cost of effecting
 	    the transfer unless the Board otherwise determines.

  (7) 	Unless the Board otherwise agrees (which agreement may be on such
 	    terms and subject to such conditions as the Board in its absolute discretion
 	    may from time to time determine, and which agreement it shall, without
 	    giving any reason therefor, be entitled in its absolute discretion to give
 	    or withhold), no shares upon the Register shall be transferred to any branch
 	    register nor shall shares on any branch register be transferred to the
 	    Register or any other branch
register and all transfers and other documents of title shall be delivered for
 	    registration, and registered, in the case of any shares on a branch register,
 	    at the relevant Registration Office, and, in the case of any shares on
 	    the Register, at the Office or such other place in Bermuda at which the
 	    Register is kept in accordance with the Act.

    (8) 	Without limiting the generality of the preceding paragraph, the Board
   	    may decline to recognize any instrument of transfer unless:
  

	 	 	(a)	the instrument of transfer is in respect of only one class of share;
	 	 	 	 
	 	 	(b)	the instrument of
       transfer is delivered to the Office or such other place in Bermuda at
       which the Register is kept in accordance with the Act or the Registration
       Office (as the case may be) accompanied by the
       relevant share certificate(s) and such other evidence as the Board
       may reasonably require to show the right of the transferor to
       make the transfer (and, if the instrument of transfer is executed
       by some other Person on his behalf, the authority of that Person so to
       do); and
	 	 	 	 
	 	 	(c)	if applicable, it
       shall be satisfied to the Board that the proposed transfer complies
       with the federal and state securities laws of the United States.

  (9) 	If the Board refuses to register a transfer of any share in accordance
 	    with these Bye-Laws, it shall, within one hundred twenty (120) days after
 	    the date on which the transfer was delivered to the Company, send to each
 	    of
the transferor and transferee Notice of the refusal.

  (10) The registration of transfers of shares or of any class of shares may,
 	    after Notice has been given by advertisement in an appointed newspaper
 	    and, where applicable, any other newspapers in accordance with the requirements
 	    of any Designated Stock Exchange to that effect, be suspended at such times
 	    and for such periods (not exceeding thirty (30) days in any year) as the
 	    Board may determine.

TRANSMISSION OF SHARES 

14. 	(1) 	If a Member dies, the survivor or survivors where the deceased
    was a joint holder, and his legal representatives where he was a sole or
    only surviving holder, will be the only Persons recognized by the Company
    as having any title to his interest in the shares; but nothing in this Bye-Law
    will release the estate of a deceased Member (whether sole or joint) from
    any liability in respect of any share which had been solely or jointly held
    by him.

 (2) 	Subject to the
    Act, any Person becoming entitled to a share in consequence of the death
    or bankruptcy or winding-up of a Member may, upon such evidence
 	    as to his title being produced as may be required by the Board, elect
    either to become the holder of the share or to have some Person nominated
    by him
 	    registered as the transferee thereof. If he elects to become the holder
 	    he shall notify the Company in writing either at the Registration Office
 	    or Office, as the case
may be, to that effect. If he elects
to have another Person registered he shall execute a transfer of the share in
favor of that Person. The provisions of these Bye-Laws relating to the transfer
and registration of transfers of shares shall apply to such Notice or transfer
as aforesaid as if the death or bankruptcy of the Member had not occurred and
the Notice or transfer were a transfer signed by such Member. 

  Accordingly, no Person shall be registered as the holder of a share if
 	 	    the result would be that such Person or any other Person would Own or
 	 	    Control shares in excess of the 9.9% Limitation. 

  (3) 	A Person becoming entitled to a share by reason of the death or bankruptcy
 	    or winding-up of a Member shall be entitled to the same dividends and other
 	    advantages to which he would be entitled if he were the registered holder
 	    of the share. However, the Board may determine to withhold the payment
 	    of any dividend payable or other advantages in respect of such share until
 	    such Person shall become the registered holder of the share or shall have
 	    effectually
transferred such share, but, subject to the requirements of these Bye-Laws being
 	    met, such a Person may vote at meetings.

UNTRACEABLE MEMBERS 

15. 	(1) 	 Without prejudice to the rights of the Company under paragraph
    (2) of this Bye-Law, the Company may cease sending a check for dividend entitlements
    or dividend warrants by mail if such check or warrants have been left uncashed
    on two consecutive occasions. However, the Company may exercise the power
    to cease sending a check for dividend entitlements or dividend warrant after
    the first occasion on which such a check or warrant is returned undelivered.

  (2) 	The Company shall have the power to sell, in such manner as the Board
 	    shall determine, any shares of a Member who is untraceable, but no such
 	    sale shall be made unless:

	 	 	(a)	all checks or warrants
       in respect of dividends of the shares in question, being not
       less than three in total number, for any sum payable in cash to
       the holder of such shares in respect of them sent during the relevant
       period in the manner authorized by these Bye- Laws have remained uncashed;
	 	 	 	 
	 	 	(b)	so far as it is aware
       at the end of the relevant period, the Company has not at any time
       during the relevant period received any indication of the
       existence of the Member who is the holder of such shares or of
       a Person entitled to such shares by death, bankruptcy or operation of
       law; and
	 	 	 	 
	 	 	(c)	the Company, if so
       required by the rules governing the listing of shares
       on the Designated Stock Exchange, has given Notice to, and caused advertisement
       in newspapers in accordance with the requirements of, the Designated Stock
       Exchange to be made of its intention to sell such shares in the manner
       required by the Designated Stock Exchange, and a period of ninety (90)
       days or such shorter period as may be allowed by the Designated Stock
       Exchange has elapsed since the date of such advertisement. 

 

 For the purpose of the
    foregoing, the “relevant period” means
  the period commencing twelve years before the date of publication of the advertisement
  referred to in sub-paragraph (2)(c) of this Bye-Law and ending at the expiration
of the period referred to in that paragraph. 

  (3) 	To give effect to any such sale the Board may authorize a Person
 	    to transfer the said shares and an instrument of transfer signed or otherwise
 	    executed by or on behalf of such Person shall be as effective as if it
 	    had been executed by the registered holder or the Person entitled by transmission
 	    to such shares, and the purchaser shall not be bound to see to the application
 	    of the purchase money nor shall his title to the shares be affected by
 	    any irregularity or
invalidity in the proceedings relating to the sale. The net proceeds of the sale
 	    will belong to the Company and upon receipt by the Company of such net
 	    proceeds it shall become indebted to the former Member for an amount equal
 	    to such net proceeds. No trust shall be created in respect of such debt
 	    and no interest shall be payable in respect of it and the Company shall
 	    not be required to account for any money earned from the net proceeds which
 	    may be employed in the business of the Company or
as the Board shall determine. Any sale under this Bye-Law shall be valid and
 	    effective notwithstanding that the Member holding the shares sold is dead,
 	    bankrupt or otherwise under any legal disability or incapacity. 

GENERAL MEETINGS OF THE MEMBERS 

16. 	(1) 	The Board shall convene and the Company shall hold Annual General
    Meetings of the Members in accordance with the requirements of the Act and
    these Bye-Laws. The Board may, whenever it shall determine, and shall, when
    required by the Act or these Bye-Laws, convene a General Meeting, other than
    an Annual General Meeting, which shall be called a Special General Meeting.
    Except with the unanimous approval of the Board, all Annual or Special General
    Meetings of the
Company shall be held in Bermuda, but under no circumstance shall any General
    Meeting be held in the United States.

 (2)
      The Board may determine to call Special General Meetings, and Members holding
      at the date of delivery of the written Notice not less than one-tenth
 	    (1/10) of the paid up capital of the Company carrying the right of voting
 	    at General Meetings of the Company shall at all times have the right,
      by written Notice to the Board or the Secretary of the Company, to require
 	    a Special General Meeting to be called by the Board for the transaction
 	    of any business specified in such Notice; and such meeting shall be held
 	    within sixty (60) days after the deposit of such Notice. If within twenty-one
 	    (21) days of such delivery, the Board fails to proceed to convene such
 	    meeting such Members may do so in accordance with the provisions of the
 	    Act. 

NOTICE OF GENERAL MEETINGS 

 17. 	(1) 	An Annual
    General Meeting and any Special General Meeting of the Members shall be called
by not less than twenty-one (21) clear days’ Notice. 

  (2) 	Notice of every General Meeting shall be given in any manner permitted
 	    by these Bye-Laws to all Members other than those who, under the provisions
 	    of these Bye-Laws or the terms of issue of the shares they hold, are not
 	    entitled to receive such Notice from the Company.

  (3) 	Notwithstanding that a General Meeting of the Company is called by
 	    shorter Notice than that specified in this Bye-Law, it shall be deemed
 	    to have been duly called if it is so agreed:

	 	 	(a)	in the
       case of a meeting called as an Annual General Meeting, by all the Members
       entitled to attend and vote thereat;
	 	 	 	 
	 	 	(b)	in the case of any
       other General Meeting, by a majority in number of the Members having
       the right to attend and vote at the meeting, being a majority together
       holding not less than ninety-five percent (95%) in nominal value of the
       shares giving that right.

 (4)
      At any Annual or Special General Meeting of the Members, only such business
      shall be conducted as shall have been properly brought before
 	    the meeting. To be properly brought before an Annual or Special General
 	    Meeting, business must be specified in the Notice of meeting (or any
      supplement thereto) given by or at the direction of the Board, otherwise
      properly
 	    brought before the meeting by or at the direction of the Board, or otherwise
 	    properly brought before the
meeting by a Member. In addition to any other applicable requirements, for business
 	    to be properly brought before an Annual or Special General Meeting by
      a Member, the Member must have given timely Notice thereof in writing to
 	    the Secretary of the Company. To be timely, a Member’s Notice must be delivered
 	    to or mailed and received at the Registration Office of the Company, not
 	    less than sixty (60) days prior to such meeting. A Member’s Notice
 	    to the Secretary shall set forth as to each matter
the Member proposes to bring before the meeting and any material interest of
 	    the Member in such business (i) a brief description of the business desired
 	    to be brought before the meeting and the reasons for conducting such
 	    business at the meeting, (ii) the name and record address of the Member
 	    proposing
 	    such business, (iii) a representation that the Member is a holder of
 	    record of shares of the Company entitled to vote at such meeting and
 	    intends to
 	    appear in person or by proxy at the meeting
to present such proposal or nomination, (iv) the class and number of shares of the
Company which are beneficially owned by the Member, and (v) any material interest
of the Member in such business; provided, however, that Members may only
give Notice to the Secretary of matters to be brought before an Annual or Special
General Meeting for the purposes of this Bye-Law that are matters that are suitable
and appropriate for submission to General Meetings of the Members of a publicly-quoted
company as determined by the Board. 

  (5) 	Notwithstanding anything in the Bye-Laws to the contrary, no business
   	    shall be conducted at an Annual or Special General Meeting except in
   	    accordance with the procedures set forth in this Bye-Law; provided, however, that nothing in this Bye-Law shall be deemed to preclude discussion by any Member of any business properly brought before the Annual or Special General Meeting in accordance with the
  procedures herein detailed.

  (6) 	The Chairman of an Annual or Special General Meeting shall, if the
   	    facts warrant, determine and declare to the meeting that business was
   	    not properly brought before the meeting in accordance with the provisions
   	    of this Bye-Law, and if he should so determine, he shall so declare to
   	    the meeting and any such business not properly brought before the meeting
   	    shall not be transacted.

  (7) 	Any nomination or nominations of Persons for election to the Board
   	    of the Company made in accordance with the provisions of these Bye-Laws
   	    shall be deemed for the purposes of this Bye-Law to constitute business
   	    properly brought before an Annual or Special General Meeting, as the
   	    case may be.

  (8) 	The accidental omission to give Notice of a meeting or (in cases
   	    where instruments of proxy are sent out with the Notice) to send such
   	    instrument of proxy to, or the non-receipt of such Notice or such instrument
   	    of proxy by, any Person entitled to receive such Notice shall not invalidate
   	    any resolution passed or the proceedings at that meeting.

PROCEEDINGS AT GENERAL MEETINGS 

18. 	(1) 	No business shall be transacted at any General Meeting unless
    it shall have been properly brought before the Annual or Special General
    Meeting in accordance with these Bye-Laws and a quorum is present when the
    meeting proceeds to business, but the absence of a quorum shall not preclude
    the appointment, choice or election of a Chairman which shall not be treated
    as part of the business of the meeting. Except as provided to the contrary
    in these Bye-Laws, Members
representing a majority of the outstanding shares carrying the right to vote
    in the Company, represented in person or by proxy, shall constitute a quorum
    for all purposes. In calculating the amount of voting shares represented
    in person or by proxy to determine whether or not a quorum is present for
    purposes of this Bye-Law, the inspectors appointed in accordance with Bye-Law
    19 hereof, shall calculate the number of votes represented in person or by
    proxy in accordance with the provisions of
paragraph (4) of Bye-Law 20 hereof.

   (2) 	If within five
      (5) minutes (or such longer time as the Chairman of the meeting may determine
      to wait) after the time appointed for the meeting,
   	    a quorum is not present, the meeting, if convened on the requisition
   	    of Members, shall be dissolved. In any other case, it shall stand adjourned
   	    to such other day and such other time and place as the Chairman of the
   	    meeting may determine and at such adjourned meeting two Members present
   	    in person (whatever the number of
  shares held by them) shall be a quorum. The Company shall give not less than
   	    seven (7) days’ Notice of any meeting adjourned through want of
   	    a quorum and such Notice shall state that two Members present in person
   	    (whatever
  the number of shares held by them) shall be a quorum. 

  (3) 	Each Director shall be entitled to attend and speak at any General
   	    Meeting of the Company.

  (4) 	The Chairman of the Board shall preside as Chairman at every General
   	    Meeting. In his absence, the following shall preside in the order stated:
   	    the Deputy Chairman, any other Director appointed by the Board, the President,
   	    any Executive Vice President or any other Officer of the Company. If
   	    none of the foregoing is present within five (5) minutes after the time
   	    appointed for holding the meeting, or if none of them is willing to act
   	    as Chairman, the Directors present
  shall choose one of their number to act or if one Director only is present
   	    he shall preside as Chairman if willing to act. If no Director is present
   	    or if each of the Directors present declines to take the chair, the Persons
   	    present and entitled to vote shall elect one of their number to be Chairman.

  (5) 	The Chairman may, with the consent of any meeting at which a quorum
   	    is present (and shall if so directed by the meeting), adjourn the meeting
   	    from time to time and from place to place but no business shall be transacted
   	    at any adjourned meeting except business which might lawfully have been
   	    transacted at the meeting from which the adjournment took place. When
   	    a meeting is adjourned for three (3) months or more, Notice of the adjourned
   	    meeting shall be given as in the
  case of an original meeting.

  (6) 	Except as provided to the contrary in these Bye-Laws, it shall not
   	    be necessary to give any Notice of an adjournment or of the business
   	    to be transacted at an adjourned meeting.

INSPECTORS 

19. The Board may, in advance of any meeting of Members, appoint one or more
    inspectors to act at such meeting or any adjournment thereof. If the inspectors
    shall not be so appointed or if any of them shall fail to appear or act,
    the Chairman of the meeting may and on the request of any Member entitled
    to vote thereat shall, appoint inspectors. Each inspector, before entering
    upon the discharge of his duties, shall take and sign an oath faithfully
    to exercise the duties of
inspector at such meeting with strict impartiality and according to the best
    of his ability. The inspectors shall determine the number of shares outstanding
    and the voting power of each, the number of shares represented at the meeting,
    the existence of a quorum, the validity and effect of proxies, and shall
    receive votes, ballots or consents, hear and determine all challenges and
    questions arising in connection with the right to vote, count and tabulate
    all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election
    or vote with fairness to all Members. On the request of the Chairman of the
    meeting or any Member entitled to vote thereat, the inspectors shall make
    a report in writing of any challenge, request or matter determined by them
    and shall execute a certificate of any fact found by them. No Director or
    candidate for the office of Director shall act as inspector. Inspectors need
    not be Members.

VOTING AT GENERAL MEETINGS 

20. 	(1) 	 Subject to these Bye-Laws and to any special rights or other
    restrictions as to voting for the time being attached to any shares by or
    in accordance with these Bye-Laws or the Act, at any General Meeting on a
    show of hands every Member present in person or, in the case of a Member
    being a corporation, by a duly authorized representative, or by proxy, shall
    have one vote and on a vote every Member present in person or by proxy shall
    have one vote for every fully
paid share of which he is the holder.

  (2) 	Subject to these Bye-Laws and to the Act, any matter submitted to
 	    the Members at a General Meeting for approval shall be approved by an ordinary
 	    resolution of the Members provided,
however, that any matter submitted to the Members at a General Meeting for approval which relates to the amalgamation, merger or consolidation of the Company with another company or the sale, lease or exchange of all or
substantially all of the assets of the Company shall be approved by at least a majority of the voting power of the then outstanding shares entitled to vote on such matter.

  (3) 	A resolution put to the vote of a meeting shall be decided on a show
 	    of hands unless (before or on the declaration of the result of the show
 	    of hands or on the withdrawal of any other demand for a vote) a vote is
 	    demanded
by:

	 	 	(a)	the Chairman of such meeting; or
	 	 	 	 
	 	 	(b)	at least
       three (3) Members present in person or, in the case of a Member being
       a corporation,
       by its duly authorized representative, or
       by proxy, for the time being entitled to vote at the meeting; or

  

	 	 	(c)	a
       Member or Members present in person or, in the case of a Member
       being a corporation by its duly authorized representative or,
       by proxy, and representing not less than one-tenth (1/10) of the total
       voting rights of all Members having the right to vote at the meeting;
       or
	 	 
	 	 	 	 
	 	 	(d)	a Member
       or Members present in person or, in the case of a Member being a corporation
       by its duly authorized representative, or by proxy, and holding
       shares in the Company conferring a right to vote at the meeting
       being shares on which an aggregate sum has been paid up equal
       to not less than one-tenth (1/10) of the total sum paid up on all shares
       conferring that right.

A demand by a Person as proxy for a Member, or in the case of a Member being
    a corporation by its duly authorized representative, shall be deemed to be
    the same as a demand by a Member.

 (4)
      Subject to this Bye-Law, at any General Meeting each Member holding shares
      of the Company present, in person or by proxy, shall be entitled
 	    to such number of votes as otherwise indicated in this Bye-Law with respect
 	    to such shares, on a non-cumulative basis, for each such share registered
 	    in such Member’s name in the Register of Members, provided that,
 	    if and for so long as the votes conferred by the Controlled Shares of
 	    any Person
 	    shall exceed the Maximum Percentage
applicable to such Person of the votes conferred by all of the issued and outstanding
 	    shares of the Company (reduced for any votes represented by Controlled
 	    Shares that are not entitled to vote due to the terms of this Bye-Law),
 	    each share comprised in such Controlled Shares shall confer only such
 	    fraction of a vote, such that the total combined voting rights of such
 	    Controlled
 	    Shares shall be equal to the Maximum Percentage, provided, however, that
 	    the foregoing limitation shall not apply to the PXRE Purpose Trust. The
 	    calculation of such fraction shall take into account the reduction of
 	    combined voting power of the Company’s Members by a number of votes equal to any
 	    votes represented by the Controlled Shares of such Person and any other
 	    Persons that are not entitled to vote due to the terms of these Bye-Laws
 	    and shall be made as of any date and, with respect to any record date for
 	    determining the Members entitled to
vote, as of such record date, including, without limitation, for any election
 	    of directors. If, as a result of giving effect to the provisions of this
 	    Bye-Law or otherwise, the votes conferred by the Controlled Shares of a
 	    Person would otherwise represent an amount greater than the Maximum Percentage
 	    applicable to such Person, the votes conferred by the Controlled Shares
 	    of such Person shall be reduced in accordance with the foregoing provisions
 	    of this Bye-Law. Such process shall be
repeated until the votes conferred by the Controlled Shares of each Person are
 	    less than or equal to the Maximum Percentage applicable to such Person.
 	    The Board shall have sole discretion as to the applicability of this Bye-Law
 	    to any Member or Person and over the manner in which any reduction in voting
 	    power of any shares is calculated. The Board
       shall have the authority to request any or all Members to provide information
       relating
       to their ownership of Controlled Shares and if any Member fails to fully
       comply with the Board’s request to provide such information, the
       Board may make any assumptions it deems necessary in order to determine
       such Member’s ownership of Controlled Shares and to calculate reductions
       in voting powers of
shares under this Bye-Law.

  

(5)   Unless
    a vote is duly demanded and the demand is not withdrawn, a declaration by
    the Chairman that a resolution has been carried, or carried unanimously,
    or by a particular majority, or not carried by a particular majority, or
    lost, and an entry to that effect made in the minute book of the Company,
    shall be conclusive evidence of the fact without proof of the number or proportion
    of the votes recorded for or against the resolution.
  
  (6)  If
    a vote is duly demanded, the result of the vote shall be deemed to be the
    resolution of the meeting at which the vote was demanded. There shall be
    no requirement for the Chairman to disclose the voting figures on a vote.

(7)  A
    vote demanded on the election of a Chairman, or on a question of adjournment,
    shall be taken forthwith. A vote demanded on any other question shall be
    taken in such manner (including the use of ballot or voting papers) and either
    forthwith or at such time (being not later than thirty (30) days after the
    date of the demand) and place as the Chairman directs. It shall not be necessary
    (unless the Chairman otherwise directs) for Notice to be given of a vote
    not taken immediately.

(8)  The
    demand for a vote shall not prevent the continuance of a meeting or the transaction
    of any business other than the question on which the vote has been demanded,
    and, with the consent of the Chairman, it may be withdrawn at any time before
    the close of the meeting or the taking of the vote, whichever is the earlier.

(9)  Where a
    vote is taken, votes may be given either personally or by proxy.

(10)  A
      Person entitled to more than one vote on a vote need not use all his votes
      or cast all the votes he uses in the same way. Notwithstanding the preceding
      sentence, nothing herein is intended to allow for cumulative voting in
    the election of Directors and cumulative voting in the election of Directors
      is expressly prohibited.

(11) In
      the case of an equality of votes, whether on a show of hands or on a vote,
      the Chairman of such meeting shall be entitled to a second or casting vote
in addition to any other vote he may have.

(12)       Where
    there are joint holders of any share any one of such joint holders may vote,
    either in person or by proxy, in respect of such share as if he were solely
        entitled thereto, but if more than one of such joint holders be present
        at any meeting
    the vote of the senior who tenders a vote, whether in person or by proxy,
    shall be accepted to the exclusion of the votes of the other joint holders,
    and for
    this purpose seniority shall be determined by the order in which the names
        stand in the Register in respect of the joint holding. Several
  executors or administrators of a deceased Member in whose name any share stands
  shall for the purposes of this Bye-Law be deemed joint holders thereof. 

 

  (13) A Member who is a patient for any purpose relating to mental health
   	    or in respect of whom an order has been made by any court having jurisdiction
   	    for the protection or management of the affairs of Persons incapable
   	    of managing their own affairs may vote, whether on a show of hands or
   	    on a vote, by his receiver, committee, curator bonis or other Person
   	    in the nature of a receiver, committee or curator bonis appointed by
   	    such court, and such receiver, committee,
  curator bonis or other Person may vote by proxy, and may otherwise act and
   	    be treated as if he were the registered holder of such shares for the
   	    purposes of General Meetings, provided that such evidence as the Board
   	    may require of the authority of the Person claiming to vote shall have
   	    been deposited at the Office, Registration Office or such other place
   	    as the Board may designate, as appropriate, not less than forty-eight
   	    (48) hours before the time appointed for holding the meeting, or
  adjourned meeting or vote, as the case may be.

  (14) Any Person entitled under these Bye-Laws to be registered as the holder
   	    of any shares may vote at any General Meeting in respect thereof in the
   	    same manner as if he were the registered holder of such shares, provided
   	    that at least forty-eight (48) hours before the time of the holding of
   	    the meeting or adjourned meeting, as the case may be, at which he proposes
   	    to vote, he shall satisfy the Board of his entitlement to such shares,
   	    or the Board shall have previously
  admitted his right to vote at such meeting in respect thereof.

  (15) No Member shall, unless the Board otherwise determines, be entitled
   	    to attend and vote and to be counted in a quorum at any General Meeting
   	    unless he is duly registered and all calls or other sums presently payable
   	    by him in respect of shares in the Company have been paid.

  (16) If: (a) any objection shall be raised to the qualification of any voter;
   	    or (b) any votes have been counted which ought not to have been counted
   	    or which might have been rejected; or (c) any votes are not counted which
   	    ought to have been counted; the objection or error shall not vitiate
   	    the decision of the meeting or adjourned meeting on any resolution unless
   	    the same is raised or pointed out at the meeting or, as the case may
   	    be, the adjourned meeting at which
  the vote objected to is given or tendered or at which the error occurs. Any
   	    objection or error shall be referred to the Chairman of the meeting and
   	    shall only vitiate the decision of the meeting on any resolution if the
   	    Chairman decides that the same may have affected the decision of the
   	    meeting. The decision of the Chairman on such matters shall be final
   	    and conclusive.

PROXIES AND CORPORATE REPRESENTATION 

 21. 	(1) 	Any Member
    entitled to attend and vote at a meeting of the Company shall be entitled
    to appoint another Person as his proxy to attend and vote
    instead of him. A Member may appoint a proxy in respect of part only of his
    holding of shares in the Company.
    A proxy need not be a Member of the Company. 

 

  (2) 	The instrument appointing a proxy shall be in writing under the hand
   	    of the appointor or of his attorney duly authorized in writing or, if
   	    the appointor is a corporation, either under its seal or under the hand
   	    of an officer, attorney or other Person authorized to sign the same.
   	    In the case of an instrument of proxy purporting to be signed on behalf
   	    of a corporation by an officer thereof it shall be assumed, unless the
   	    contrary appears, that such officer was
  duly authorized to sign such instrument of proxy on behalf of the corporation
   	    without further evidence of the fact.

  (3) 	The instrument appointing a proxy and (if required by the Board)
   	    the power of attorney or other authority (if any) under which it is signed,
   	    or a certified copy of such power or authority, shall be delivered to
   	    such place or one of such places (if any) as may be specified for that
   	    purpose in or by way of Notice to or in any document accompanying the
   	    Notice convening the meeting (or, if no place is so specified at the
   	    Registration Office or the Office, as may be
  appropriate) not less than forty-eight (48) hours before the time appointed
   	    for holding the meeting or adjourned meeting at which the Person named
   	    in the instrument proposes to vote or, in the case of a vote taken subsequently
   	    to the date of a meeting or adjourned meeting, not less than twenty-four
   	    (24) hours before the time appointed for the taking of the vote, and
   	    in default the instrument of proxy shall not be treated as valid. No
   	    instrument appointing a proxy shall be valid after the
  expiration of one (1) year from the date named in it as the date of its execution,
   	    except at an adjourned meeting or on a vote demanded at a meeting or
   	    an adjourned meeting in cases where the meeting was originally held within
   	    one (1) year from such date. Delivery of an instrument appointing a proxy
   	    shall not preclude a Member from attending and voting in person at the
   	    meeting convened and in such event, the instrument appointing a proxy
   	    shall be deemed to be revoked.

  (4) 	Instruments of proxy shall be in any common form or in such other
   	    form as the Board may approve (provided that this shall not preclude
   	    the use of the two-way form) and the Board may send out with the Notice
   	    of any meeting, forms of instrument of proxy for use at the meeting.
   	    The instrument of proxy shall be deemed to confer authority to demand
   	    or join in demanding a vote and to vote on any amendment of a resolution
   	    put to the meeting for which it is given as the proxy
  may determine. The instrument of proxy shall, unless the contrary is stated
   	    therein, be valid as well for any adjournment of the meeting as for the
   	    meeting to which it relates.

  (5) 	A vote given in accordance with the terms of an instrument of proxy
   	    shall be valid notwithstanding the previous death or insanity of the
   	    principal, or revocation of the instrument of proxy or of the authority
   	    under which it was executed, provided that no intimation in writing of
   	    such death, insanity or revocation shall have been received by the Company
   	    at the Office or the Registration Office (or such other place as may
   	    be specified for the delivery of instruments of
  proxy in the Notice convening the meeting or other document sent therewith)
   	    at least two (2) hours before the commencement of the meeting or adjourned
   	    meeting, or the taking of the vote, at which the instrument of proxy
   	    is used.

  
  (6) 	Anything which under these Bye-Laws a Member may do by proxy he may
   	    likewise do by his duly appointed attorney and the provisions of these
   	    Bye-Laws relating to proxies and instruments appointing proxies shall
   	    apply, as the case may be, in relation to any such attorney and the instrument
   	    under which such attorney is appointed.
  

  (7) 	Any corporation which is a Member of the Company may by any authorized
   	    officer authorize such Person as it may determine to act as its representative
   	    at any meeting of the Company or any class of Members of the Company.
   	    The Person so authorized shall be entitled to exercise the same powers
   	    on behalf of such corporation as the corporation could exercise if it
   	    were an individual Member of the Company and such corporation shall for
   	    the purposes of these Bye-Laws be deemed
  to be present in person at any such meeting if a Person so authorized is present
   	    thereat. Any reference in these Bye-Laws to a duly authorized representative
   	    of a Member being a corporation shall mean a representative authorized
   	    under the provisions of this Bye-Law.

 (8)
      If a clearing house is a Member, it may authorize such Person or Persons
      as it determines to act as its representative
    or representatives
    at any meeting of the Company or at any meeting of any class of Members provided
    that, if more than one Person is so authorized, the authorization shall specify
    the number and class of shares in respect of which each such Person is so
    authorized. A Person so authorized under the provisions of this Bye-Law shall
    be entitled
    to
    exercise the same powers on behalf of the clearing house (or its nominee)
    which he represents as that clearing house (or its nominee) could exercise
    if it
    were an individual Member. For the purposes of this Bye-Law, “clearing house” means
    any clearing house or other similar body recognized by the laws of the jurisdiction
    in which the shares of the Company are listed or quoted on a Designated Stock
    Exchange. 

NOMINATION AND REMOVAL OF DIRECTORS 

 Amended Bye-Law 22 – December
    9, 2001 

22. 	(1) 	 This Bye-law 22 shall be read subject to the terms of any special
    resolution of the Members relating thereto and be it further the number of
    Directors which shall constitute the whole Board of Directors of the Company
    shall be such number (not less than three (3) or more than twelve (12)) as
    the Company may by ordinary resolution in general meeting determine. The
    Board shall be divided into three classes, Class I, Class II and Class III.
    The number of Directors
in each class shall be the whole number contained in the quotient arrived at
    by dividing the authorized number of Directors by three and if a fraction
    is also contained in such quotient, then if such fraction is one-third (1/3)
    the extra Director shall be a member of Class III and if the fraction is
    two-thirds (2/3) one of the Directors shall be member of Class III and the
    other shall be a member of Class II. Each Director shall serve for a term
    ending on the third Annual General Meeting
following the annual meeting at which such Director was elected; provided however,
    that the initial term of each Class and the classes to which the first slate
    of Directors elected hereunder belong, shall be determined by the ordinary
    resolution of Members at the time of such initial election. The foregoing
    notwithstanding, each Director shall serve until his successor shall have
    been duly elected and qualified, unless he shall resign, become disqualified,
    disabled or shall otherwise be
removed.

  (2) 	For the purpose of the preceding paragraph, reference to the first
 	    election of Directors is to the election at the 1999 Annual General Meeting
 	    of the Company. At each annual election held thereafter, the Directors
 	    chosen to succeed those whose terms then expire shall be identified as
 	    being of the same class as the Directors they succeed. If for any reason
 	    the number of Directors in the various classes shall not conform with the
 	    formula set forth in the preceding
paragraph, the Board may redesignate any Director to a different class in order
 	    that the balance of Directors in such classes shall conform thereto.

(3) A
  Director need not be a Member.

  

(4) Only Persons who are
    nominated in accordance with the following procedures
    shall be eligible for election as Directors. Nominations of Persons for election
    to the Board of the Company may be made at a meeting of Members called for
    the election of directors, or at the discretion of the Board, by any nominating
    committee or Person appointed by the Board, by any Member of the Company
    entitled to vote for the election of Director at the meeting who complies
    with the Notice procedures set forth in this Bye-Law. Such nominations, other
    than those made by or at the direction of the Board, shall be made pursuant
    to timely Notice to the Secretary of the Company. To be timely, a Member’s
    Notice shall be delivered to or mailed and received at the Office of the
    Company not less than sixty (60) days prior to such meeting. Such Member’s
    Notice to the Secretary shall set forth (a) as to each Person whom the Member
    proposes to nominate for election or re-election as a Director, (i) the name,
    age, business address and residence address of the Person, (ii) the principal
    occupation or employment of the Person, (iii) the class and number of shares
    of Common Shares of the Company which are beneficially owned by the Person,
    (iv) any other information relating to the Person that is required to be
    disclosed in solicitations for proxies for election of Directors pursuant
    to Schedule 14A of the Exchange Act, and (v) the consent of each nominee
    to serve as a Director, if so elected; and (b) as to the Member giving the
    Notice (i) the name and record address of the Member and (ii) the class and
    number of shares of capital stock of the Company which are beneficially owned
    by the Member. The Company may require any proposed nominee to furnish such
    other information as may reasonably be required by the Company to determine
    the eligibility of such proposed nominee to serve as a Director of the Company.
    No Persons shall be eligible for election as a Director of the Company unless
nominated in accordance with the procedures set forth herein.

  (5) 	The Chairman of the meeting shall, if the facts warrant, determine
   	    and declare to the meeting that a nomination was not made in accordance
   	    with the foregoing procedure, and if he should so determine, he shall
   	    so declare to the meeting and the defective nomination shall be disregarded.

  (6) 	The Directors shall (subject to any resolution of the Members to
   	    the contrary) have the power from time to time and at any time to appoint
   	    any Person as a Director to fill a casual vacancy on the Board, provided, however, that the number of Directors so appointed shall not exceed any maximum number determined from time to time by the Members in a General Meeting. Any Director so appointed by the Board
  shall hold office until the next election of the class for which such director shall have been chosen and shall then be eligible for re-election at that meeting.

  (7) 	Neither a Director nor an Alternate Director, as the case may be,
   	    shall be required to hold any shares of the Company by way of qualification
   	    and a Director or an Alternate Director (as the case may be) who is not
   	    a Member shall be entitled to receive Notice of and to attend and speak
   	    at any General Meeting of the Company and of all classes of shares of
   	    the Company.

 (8) 	Notwithstanding
    anything to the contrary in these Bye-Laws, the Members may only remove a
    Director for cause prior to the expiration
of such Director’s period of office or in any agreement between the Company
and such
Director (but without prejudice
to any claim for damages under any such agreement) at a General Meeting convened
and held in accordance with these Bye-Laws at which a majority of the holders
of shares entitled to vote thereon vote in favor of such action provided that
the Notice of any such meeting convened for the purpose of removing a Director
shall contain a statement of the intention so to do and be served on such Director
fourteen (14) days before the meeting and at such meeting such Director shall
be entitled to be heard on the motion for his removal. 

  (9) 	A vacancy on the Board created by the removal of a Director under
   	    paragraph (8) of this Bye-Law may be filled by the election or appointment
   	    by the Members at the meeting at which such Director is removed to hold
   	    office until the next election of the class for which such director shall
   	    have been chosen, but subject to any resolution of the Members to the
   	    contrary, the Board may fill any vacancy in the number left unfilled.

	 	(10)	A retiring Director shall be eligible for re-election.
	 	 	 
	 	(11)	The office of a Director shall be vacated if the Director:
	 	 	 	 
	 	 	(a)	resigns
       his office by Notice delivered to the Company at the Office or tendered
       at a meeting of the Board whereupon the Board resolves to accept such
       resignation;
       or
	 	 	 	 
	 	 	(b)	becomes of unsound
       mind (as determined by the Board in its sole discretion) or dies; or
	 	 	 	 
	 	 	(c)	without special leave
       of absence from the Board, is absent from meetings of the Board
       for four consecutive meetings, and the Board resolves that his office
       be vacated; or
	 	 	 	 
	 	 	(d)	becomes bankrupt or
       has a receiving order made against him or suspends payment or comprises
       with his creditors; or
	 	 	 	 
	 	 	(e)	is prohibited by law from being a Director; or
	 	 	 	 
	 	 	(f)	ceases to be a Director
       by virtue of any provision of the Act or is removed from office pursuant
       to this Bye-Law.
	 	 	 	 

ALTERNATE DIRECTORS 

 23. 	(1) 	Any Director
    may at any time by Notice delivered to the Office or at a meeting of the
    Directors appoint any Person to be his alternate
Director (an “Alternate Director”). Any Person so appointed shall have
all the rights and powers of the Director or Directors for whom such Person is
appointed in the alternative provided that such Person shall not be counted more
than once in determining whether or not a quorum is present. An Alternate Director
may be
removed at any time by the Director who appointed
him and, subject thereto, the office of Alternate Director shall continue until
the next annual election of Directors or, if earlier, the date on which the relevant
Director ceases to be a Director. Any appointment or removal of an Alternate
Director shall be effected by Notice signed by the appointor and delivered to
the Office or tendered at a meeting of the Board. An Alternate Director may also
be a Director in his own right and may act as alternate to more than one other
Director. An Alternate Director shall, if his appointor so requests, be entitled
to receive Notices of meetings of the Board or of committees of the Board to
the same extent as, but in lieu of, the Director appointing him and shall be
entitled to such extent to attend and vote as a Director at any such meeting
at which the Director appointing him is not personally present and generally
at such meeting to exercise and discharge all the functions, powers and duties
of his appointor as a Director and for the purposes of the proceedings at such
meeting the provisions of these Bye-Laws shall apply as if he were a Director
save that as an alternate for more than one Director his voting rights shall
be cumulative. 

 

  (2) 	An Alternate Director shall only be a Director for the purposes of
   	    the Act and shall only be subject to the provisions of the Act insofar
   	    as they relate to the duties and obligations of a Director when performing
   	    the functions of the Director for whom he is appointed in the alternative
   	    and shall alone be responsible to the Company for his acts and defaults
   	    and shall not be deemed to be the agent of or for the Director appointing
   	    him. An Alternate Director shall
  be entitled to contract and be interested in and benefit from contracts or
   	    arrangements or transactions and to be repaid expenses and to be indemnified
   	    by the Company to the same extent, as the case may be, as if he were
   	    a Director but he shall not be entitled to receive from the Company any
   	    fee in his capacity as an Alternate Director except only such part, if
   	    any, of the remuneration otherwise payable to his appointor as such appointor
   	    may by Notice to the Company from time to time
  direct.

  (3) 	Every Person acting as an Alternate Director shall have one vote
   	    for each Director for whom he acts as alternate (in addition to his own
   	    vote if he is also a Director). If his appointor is for the time being
   	    unavailable or unable to act, the signature of an Alternate Director
   	    to any resolution in writing of the Board or a committee of the Board
   	    of which his appointor is a member shall, unless the Notice of his appointment
   	    provides to the contrary, be as effective as
  the signature of his appointor.

  (4) 	An Alternate Director shall ipso facto cease to be an Alternate Director
   	    if his appointor ceases for any reason to be a Director, however, such
   	    Alternate Director or any other Person may be re-appointed by the Directors
   	    to serve as an Alternate Director provided always that, if at any meeting
   	    any Director retires but is re-elected at the same meeting, any appointment
   	    of such Alternate Director pursuant to these Bye-Laws which was in force
   	    immediately before his
  retirement shall remain in force as though he had not retired.

 DIRECTORS’ COMPENSATION 

 24.
      The amount, if any, of Directors’ fees, retainers,
awards of shares and options, or other remuneration shall from time to time be
determined by the Board. In addition, each Director shall be paid his reasonable
traveling, hotel and incidental expenses in attending and returning from meetings
of the Board or committees appointed by the Board, or any Annual General Meeting
or Special General Meeting of the Members, and shall be paid all expenses properly
and
reasonably incurred by him in the conduct of the Company’s business or
in the
discharge of his duties as a Director. Any question as to the reasonableness
of expenses as provided herein shall be a matter to be determined by the Board.
Any Director who by request, goes or resides abroad for any purposes of the Company
or who performs services which in the opinion of the Board go beyond the ordinary
duties of a Director may be paid such extra remuneration (whether by way of salary
or otherwise)
as the Board may determine, and such extra remuneration shall be in addition
to any remuneration provided for by or pursuant to any other Bye-Law. 

DIRECTORS’ AND OFFICERS’ INTERESTS 

	25	.	(1)	 	A Director may:
	 	 	 	 	 	 
	 	 	 	 	(a)	hold any other office
       or place of profit with the Company (except that of Auditor) in
       conjunction with his office of Director for such period and, subject
       to the relevant provisions of the Act, upon such terms as the Board
       may determine. Any remuneration (whether by way of salary or otherwise)
       paid to any Director in respect of any such other office
       or place of profit shall be in addition to any remuneration provided for
       by or pursuant to any other Bye-Law;
	 	 	 	 	 	 
	 	 	 	 	(b)	act by himself or
       his firm in a professional capacity for the Company (otherwise
       than as Auditor) and he or his firm may be remunerated for professional
       services as if he were not a Director;
	 	 	 	 	 	 
	 	 	 	 	(c)	continue to be or
       become a director, manager or other officer or member
       of any other Person whether or not promoted by the Company
       or in which the Company may be interested as a vendor, shareholder
       or otherwise and (unless otherwise agreed) no such Director
       shall be accountable for any remuneration or other benefits
       received by him as a director, manager or other officer or member
       of or from his interests in any such other Person. Notwithstanding
       anything contained in these Bye-Laws to the contrary,
       any Director may exercise or cause to be exercised the voting
       powers conferred by the shares in any other company held or
       owned by the Company, or exercisable by him as director of such other
       company in such manner in all respects as he may determine (including
       the exercise thereof in favor of any resolution appointing himself as
       a director, manager or other officer of such company, or voting or providing
       for the payment of remuneration to the director, managing director, joint
       managing director, deputy managing director, executive director, manager
       or other officers of such other company) and any Director may vote in
       favor of the exercise of such voting rights in the manner aforesaid notwithstanding
       that he may be, or about to be, appointed a director, manager or other
       officer of such a company, and that as such he is or may become interested
       in the exercise of such voting rights in the manner aforesaid. 

  (2) 	Subject to the Act and to these Bye-Laws, no Director or Officer
   	    or proposed Director or Officer shall be disqualified by his office from
   	    contracting with the Company or any Subsidiary, either with regard to
   	    his tenure of any office or place of profit or as vendor, purchaser or
   	    in any other manner whatever, nor shall any such contract or any other
   	    contract or arrangement in which any Director or Officer is in any way
   	    interested be liable to be avoided, nor shall any
  Director or Officer so contracting or being so interested be liable to account
   	    to the Company or the Members for any remuneration, profit or other benefits
   	    realized by any such contract or arrangement by reason of such Director
   	    or Officer holding that office or of the fiduciary relationship thereby
   	    established, provided that such Director or Officer shall disclose the
   	    nature of his interest in any contract or arrangement in which he is
   	    interested in accordance with these Bye-Laws.

  (3) 	A Director or Officer who to his knowledge is in any way, whether
   	    directly or indirectly, interested in a contract or arrangement or proposed
   	    contract or arrangement with the Company shall declare the nature of
   	    his interest at the meeting of the Board at which the question of entering
   	    into the contract or arrangement is first considered, if he knows his
   	    interest then exists, or in any other case at the first meeting of the
   	    Board after he knows that he is or has become
  so interested.

  (4) 	For the purposes of the preceding paragraph, a Director shall furnish
   	    Notice to the Board to the effect that: (a) he is a member or officer
   	    of a specified company or firm and is to be regarded as interested in
   	    any contract or arrangement which may after the date of the Notice be
   	    made with that company or firm; or (b) he is to be regarded as interested
   	    in any contract or arrangement which may after the date of the Notice
   	    be made with a specified Person who is connected
  with him; and such Notice shall be deemed to be a sufficient declaration of
   	    interest under these Bye-Laws in relation to any such contract or arrangement,
   	    provided that no such Notice shall be effective unless either it is given
   	    at a meeting of the Board or the Director or Officer takes reasonable
   	    steps to secure that it is brought up and read at the next Board meeting
   	    after it is given.

GENERAL POWERS OF THE BOARD OF DIRECTORS 

  26. 	(1) 	 The business of the Company shall be managed and conducted by
      the Board, which may exercise all powers of the Company (whether relating
      to the management of the business of the Company or otherwise) which are
      not by the Act or by these Bye-Laws required to be exercised by the Company
      in a General Meeting, subject nevertheless to the provisions of the Act
      and of these Bye-Laws and to such regulations being not inconsistent with
      such provisions as may be prescribed
  by the Company in a General Meeting.  No regulations made by the Company in
      a General Meeting shall invalidate any prior act of the Board which would
      have been valid if such regulations had not been made. The general powers
      given by this Bye-Law shall not be limited or restricted by any special
      authority or power given to the Board by any other Bye-Law.

  (2) 	Any Person contracting or dealing with the Company in the ordinary
   	    course of business shall be entitled to rely on any written or oral contract
   	    or agreement or deed, document or instrument entered into or executed
   	    as the case may be by any Officer acting on behalf of the Company and
   	    the same shall be deemed to be validly entered into or executed by the
   	    Company as the case may be and shall, subject to applicable law, be binding
   	    on the Company; provided, however, that no such
  contract or agreement or deed, document or instrument may be executed on the
  Company’s behalf within the United States unless specifically authorized
  by resolution of the Board. 

  (3) 	Without prejudice to the general powers conferred by these Bye-Laws
   	    it is hereby expressly declared that the Board shall have the following
   	    powers, namely:

	 	 	(a)	to give
       to any Person (including, without limitation, any Director, Officer, or
       employee) the right or option of requiring at a future date that an allotment
       shall be made to him of any share at par or atsuch premium as may be agreed;
    and
	 	 	 	 
	 	 	(b)	to give to any Director,
       Officer or employee of the Company an interest in any particular
       business or transaction or participation in the profits thereof
       or in the general profits of the Company either in addition to or in substitution
       for a salary or other remuneration.

 (4)
      The Board may by power of attorney appoint under the Seal any company,
      firm or Person or body of Persons, whether nominated directly or indirectly
 	    by the Board, to be the attorney or attorneys of the Company for such
      purposes
 	    and with such powers, authorities and discretions (not exceeding those
 	    vested in or exercisable by the Board under these Bye-Laws) and for such
 	    period and subject to such conditions as it may determine, and any such
 	    power of attorney may
contain such provisions for the protection and convenience of Persons dealing
 	    with any such attorney as the Board may determine, and may also authorize
 	    any such attorney to sub-delegate all or any of the powers, authorities
 	    and discretions vested in him. Such attorney or attorneys may, if so
      authorized under the Seal of the Company, execute any deed or instrument
      under their
 	    personal seal with the same effect as the affixation of the Company’s
 	    Seal. 

  (5) The Board may entrust
  to and confer upon any Director any of the powers exercisable
  by it upon such terms and conditions and with such restrictions as it may determine,
  and either collaterally with, or to the exclusion of, its own powers, and may
  from time to time revoke or vary all or any of such powers but no Person dealing
  in good faith and without Notice of such revocation or variation shall be affected
  thereby. 

 

 (6)
      All checks, promissory notes, drafts, bills of exchange and other instruments,
      whether negotiable or transferable or not, and all receipts
   	    for monies paid to the Company shall be signed, drawn, accepted, endorsed
   	    or otherwise executed, as the case may be, in such manner as the Board
   	    shall from time to time by resolution determine. The Company’s
   	    banking accounts shall be kept with such banks or other financial institutions
   	    as the Board shall from time to time
  determine. 

 (7) 	The Board may
    establish or join with other companies (including any of its Subsidiaries
    or other affiliated companies) in establishing and
   	    making contributions out of the Company’s monies to any plans or
   	    funds for providing pensions, life insurance or other benefits for employees
   	    (which expression as used in this and the following paragraph shall include
   	    any Director or ex-Director who may hold or have held any executive office
   	    or any office of profit under the Company
  or any of its Subsidiaries) and ex-employees of the Company or any of its Subsidiaries
  and their dependents or any class or classes of such Persons. 

  (8) 	The Board may pay, enter into agreements to pay or make grants of
   	    revocable or irrevocable, and either subject or not subject to any terms
   	    or conditions, pensions or other benefits to employees and ex-employees
   	    of the Company or any of its Subsidiaries and their dependents, or to
   	    any of such Persons, including pensions or benefits additional to those,
   	    if any, to which such employees or ex-employees or their dependents are
   	    or may become entitled under any such
  plan or fund as mentioned in the preceding paragraph. Any such pension or benefit
   	    may, as the Board considers desirable, be granted to an employee either
   	    before and in anticipation of or upon or at any time after his actual
   	    retirement.

  (9) 	The Board may exercise all the powers of the Company to raise or
   	    borrow money and to mortgage or charge all or any part of the undertaking,
   	    property and assets (present and future) and uncalled capital of the
   	    Company and, subject to the Act, to issue debentures, bonds and other
   	    securities, whether outright or as collateral security for any debt,
   	    liability or obligation of the Company or of any third party.

  (10) Debentures, bonds and other securities may be made assignable free from
   	    any equities between the Company and the Person to whom the same may
   	    be issued.

  (11) Any debentures, bonds or other securities may be issued at a discount
   	    (other than shares), premium or otherwise and with any special privileges
   	    as to redemption, surrender, drawings, allotment of shares, attending
   	    and voting at General Meetings of the Company, appointment of Directors
   	    and otherwise as the Board may determine by resolution.

PROCEEDINGS OF THE BOARD OF DIRECTORS 

27. 	(1) 	The Board may meet for the conduct of business, adjourn and otherwise
    regulate its meetings as it considers appropriate. Actions to be taken at
    any meeting shall be determined by a majority of votes cast, provided a quorum
    is present.

 (2)
      A meeting of the Board may be convened by the Secretary on request of the
      President or by any two (2) Directors, provided that no business
shall be transacted at a Board meeting unless not less than seven (7) clear
days’ Notice of the meeting shall be given to each Director with reasonable
details of the business to be transacted and provided further that any Director
may by Notice to the Company agree that no Notice needs, or any shorter Notice
specified in a Notice may, be given to him. The Secretary shall convene a meeting
of the Board, of which Notice may be given in writing or by telephone or in such
other manner as the Board may from time to time determine, whenever he shall
be required so
hereunder.  Any Director may waive Notice of any meeting either prospectively
or retrospectively. 

  (3) 	 The quorum necessary for the transaction of the business of the
 	    Board may be fixed by the Board and, unless so fixed at any other number,
 	    shall be a majority of the Directors. An Alternate Director shall be counted
 	    in a quorum in the case of the absence of a Director for whom he is the
 	    alternate provided that he shall not be counted more than once for the
 	    purpose of determining whether or not a quorum is present.

  (4) 	Directors may participate in any meeting of the Board by means of
 	    a conference telephone or other communications equipment through which
 	    all Persons participating in the meeting can communicate with each other
 	    simultaneously and instantaneously and, for the purpose of counting a quorum,
 	    such participation shall constitute presence at a Meeting as if those participating
 	    were present in person.

  (5) 	Any Director who ceases to be a Director at a Board meeting may continue
 	    to be present and to act as a Director and be counted in the quorum until
 	    the termination of such Board meeting if no other Director objects and
 	    if
otherwise a quorum of Directors would not be present.

  (6) 	The continuing Directors or a sole continuing Director may act notwithstanding
 	    any vacancy in the Board but, if and so long as the number of Directors
 	    is reduced below the minimum number fixed by or in accordance with these
 	    Bye-Laws, the continuing Directors or Director, notwithstanding that the
 	    number of Directors is below the number fixed by or in accordance with
 	    these Bye-Laws as the quorum or that there is only one continuing Director,
 	    may act for the purpose of
filling vacancies in the Board or of summoning General Meetings of the Company
 	    but not for any other purpose.

 (7) 	The Board may
    elect a Chairman and a Deputy Chairman of its meetings and determine the
    period for which they are respectively to hold such
      office. If no Chairman or Deputy Chairman is elected, or if at any meeting
      neither
 	    the Chairman nor any Deputy Chairman is present within five (5) minutes
 	    after the time appointed for holding the same, the Directors present
      may choose one of their number to be Acting Chairman
      of the meeting. 

  (8) 	A meeting of the Board at which a quorum is present shall be competent
   	    to exercise all the powers, authorities and discretions for the time
   	    being vested in or exercisable by the Board.

  (9) 	 The Board may delegate any of its powers, authorities and discretions
   	    to committees (including, but not limited to, an Executive Committee,
   	    an Audit Committee, a Human Resources Committee, and an Investment Committee),
   	    consisting of Directors or Officers or other persons as it may determine,
   	    and they may, from time to time, revoke such delegation or revoke the
   	    appointment of and discharge any such committees either wholly or in
   	    part, and either as to Persons or
  purposes. Any committee so formed shall, in the exercise of the powers, authorities
   	    and discretions so delegated, conform to any regulations which may be
   	    imposed on it by the Board.

  (10) All acts done by any such committee in conformity with such regulations,
   	    and in fulfillment of the purposes for which it was appointed, but not
   	    otherwise, shall have like force and effect as if done by the Board,
   	    and the Board shall have power to remunerate the members of any such
   	    committee, and charge such remuneration to the current expenses of the
   	    Company.

  (11) The meetings and proceedings of any committee consisting of two (2)
   	    or more members shall be governed by the provisions contained in these
   	    Bye-Laws for regulating the meetings and proceedings of the Board so
   	    far as the same are applicable and are not superseded by any regulations
   	    imposed by the Board under the preceding paragraph.

  (12) A resolution in writing signed outside the United States by all the
   	    Directors (except such as are temporarily unable to act through ill-health
   	    or disability), (provided that such number is sufficient to constitute
   	    a quorum and further provided that a copy of such resolution has been
   	    given or the contents thereof communicated to all the Directors for the
   	    time being entitled to receive Notices of Board meetings in the same
   	    manner as Notices of meetings are required to
  be given by these Bye-Laws) shall be as valid and effectual as if a resolution
   	    had been passed at a meeting of the Board duly convened and held. Such
   	    resolution may be contained in one document or in several documents in
   	    like form each signed by one or more of the Directors and for this purpose
   	    a facsimile signature of a Director shall be treated as valid.

  (13) All acts bona fide done by the Board or by any committee or by any Person
   	    acting as a Director or member of a committee, shall, notwithstanding
   	    that it is afterwards discovered that there was some defect in the appointment
   	    of any member or the Board or such committee or Person acting as aforesaid
   	    or that they or any of them were disqualified or had vacated office,
   	    be as valid as if every such Person had been duly appointed and was qualified
   	    and had continued to be a
  Director or member of such committee.

OFFICERS 

28. 	(1) 	The Officers of the Company shall consist of the Chairman, President,
    Chief Executive Officer, Executive Vice-President(s), Senior Vice President(s),
    Vice President(s), Chief Financial Officer and Secretary and such additional
    Officers (who may or may not be Directors) as the Board may from time to
    time determine, all of whom shall be deemed to be Officers for the purposes
    of the Act and these Bye-Laws. 

  (2) 	The Officers shall have such powers and perform such duties in the
 	    management, business and affairs of the Company as may be delegated to
 	    them by the Board or another Officer from time to time.

  (3) 	The authority of any Officer of the Company so long as such Officer
 	    shall be physically present in the United States, shall be limited to maintaining
 	    an oversight and review of and providing recommendations and information
 	    to the Board, but not to any third party, regarding the affairs of the
 	    Company pertaining to any of its Subsidiaries incorporated in the United
 	    States and otherwise to enable the Company to fulfill its role as the holder
 	    of shares of such
Subsidiaries. Such Officer while physically present in the United States shall
 	    have no authority (i) to negotiate or conclude contracts in the name of
 	    the Company (or any of its Subsidiaries not incorporated in the United
 	    States) or otherwise bind the Company (or any of its Subsidiaries not incorporated
 	    in the United States), or (ii) to conduct or manage any activities of the
 	    Company (or any of its Subsidiaries not incorporated in the United States),
 	    or (iii) to act in any way which might
result in the Company (or any of its Subsidiaries not incorporated in the United
 	    States) being considered to be engaged in a trade or business in the United
 	    States within the meaning of the Code. Any purported action or contract
 	    done or made by such Officer or any other duly appointed Officer of the
 	    Company in violation of the provisions hereof shall be null and void ab
 	    initio and the Company or any of its Subsidiaries shall in no way be bound
 	    or affected by any such action or contract done or
made in violation hereof. 

  (4) 	The Directors shall, as soon as may be after each appointment or
 	    election of Directors, elect the Officers of the Company, and a Chairman
 	    and a Deputy Chairman of the Board of Directors.

  (5) 	The Officers shall receive such remuneration as the Directors may
 	    from time to time determine.

  (6) 	The Company may in accordance with the Act appoint a resident representative
 	    ordinarily resident in Bermuda and the resident representative shall maintain
 	    an office in Bermuda and comply with the provisions of the Act. The Company
 	    shall provide the resident representative with such documents and information
 	    as the resident representative may require in order to be able to comply
 	    with the provisions of the Act. The resident representative shall be entitled
 	    to have
Notice of, attend and be heard at all meetings of the Board or meetings of the
 	    Members.

 (7) 	The Secretary,
    or an Assistant Secretary, shall attend all meetings of the Members and of
    the Board (and its committees) and shall keep correct
 	    minutes of such meetings
 	    and enter the same in the proper books provided for the purpose. The
 	    Secretary shall perform such other duties as are prescribed by the Act
 	    or these Bye-Laws
 	    or as may be prescribed by the Board. 

  (8) 	The Chairman or the Deputy Chairman of the Board of Directors, as
   	    the case may be, shall act as chairman at all meetings of the Members
   	    and of the Directors at which he is present. In the absence of both the
   	    Chairman and the Deputy Chairman, a chairman shall be appointed or elected
   	    by those present at the meeting.

  (9) 	The Officers of the Company shall have such powers and perform such
   	    duties in the management, business and affairs of the Company as may
   	    be delegated to them by the Directors or another Officer from time to
   	    time.

  (10) Any provision of the Act or of these Bye-Laws requiring or authorizing
   	    a thing to be done by or to a Director and the Secretary shall not be
   	    satisfied by its being done by or to the same Person acting both as Director
   	    and as or in place of the Secretary.

REGISTER OF DIRECTORS AND OFFICERS 

29. 	(1) 	 The Board shall cause to be kept in one or more books at its
    Office a Register of Directors and Officers and shall enter therein the particulars
    required by the Act.

  (2) 	The Register of Directors and Officers shall be open to inspection
 	    at the Office of the Company on every business day, subject to such reasonable
 	    restrictions as the Board may impose, so that not less than two (2) hours
 	    in
each business day be allowed for inspection.

MINUTES 

30. 	The Board shall cause Minutes to be duly entered in books provided for
    the purpose: (i) of all elections and appointments of Officers; (ii) of the
    names of the Directors present at each meeting of the Directors and of any
    committee appointed by the Board; and (iii) of all resolutions and proceedings
    of each General Meeting of the Members, meetings of the Board and meetings
    of committees of the Board.

SEAL 

 31. 	(1) 	 The
    Company shall have one or more Seals, as the Board may determine. For the
    purpose of sealing documents creating or evidencing
securities issued by the Company, the Company may have a securities seal which
is a
facsimile of the Seal of the Company with the addition of the words “Corporate Seal” on
its face or in such other form
as the Board may approve. The Board shall provide for the custody of each Seal
and no Seal shall be used without the authority of the Board or of a committee
of the Board authorized by the Board in that regard. Except as otherwise provided
in these Bye-Laws, any instrument to which a Seal is affixed shall be signed
autographically by one Officer and the Secretary or by two Officers or by such
other Person or Persons as the Board may appoint, either generally or in any
particular case, save that as regards any certificates for shares or debentures
or other securities of the Company the Board may by resolution determine that
such signatures or either of them shall be dispensed with or affixed by some
method or system of mechanical signature. Every instrument executed in manner
provided by this Bye-Law shall be deemed to be sealed and executed with the authority
of the Board previously given. 

  (2) 	Where the Company has a Seal for use abroad, the Board may by writing
   	    under the Seal appoint any agent or committee abroad to be the duly authorized
   	    agent of the Company for the purpose of affixing and using such Seal
   	    and the Board may impose restrictions on the use thereof as it may determine.
   	    Wherever in these Bye-Laws reference is made to the Seal, the reference
   	    shall, when and so far as may be applicable, be deemed to include any
   	    such other Seal as
  aforesaid.

  (3) 	Any Officer or any Person appointed by the Board for the purpose
 	    may authenticate (by affixing the seal or otherwise) any documents affecting
 	    the constitution of the Company and any resolution passed by the Company
 	    or the Board or any committee, and any books, records, documents and accounts
 	    relating to the business of the Company, and to certify copies thereof
 	    or extracts therefrom as true copies or extracts. A document purporting
 	    to be a copy of a resolution, or
an extract from the minutes of a meeting, of the Company or of the Board or any
 	    committee which is so certified shall be conclusive evidence in favor of
 	    all Persons dealing with the Company upon the faith thereof that such resolution
 	    has been duly passed or, as the case may be, that such minutes or extract
 	    is a true and accurate record of proceedings at a duly constituted meeting. 

DESTRUCTION OF DOCUMENTS 

32. The Company shall be entitled to destroy the following documents at the following
    times:

	 	 	(a)	any share
       certificate which has been canceled at any time after the expiration of
       one (1) year from the date of such cancellation;
	 	 	 	 
	 	 	(b)	any dividend mandate
       or any variation or cancellation thereof or any notification of change
       of name or address at any time after the expiration of two (2) years from
       the date such mandate, variation, cancellation or notification was recorded
       by the Company;
	 	 	 	 
	 	 	(c)	any instrument of
       transfer of shares which has been registered at any time after the expiration
       of seven (7) years from the date of registration;

	 	 	 	 
	 	 	(d)	any allotment letters
       after the expiration of seven (7) years from the date of issue thereof;
       and
	 	 	 	 
	 	 	(e)	copies of powers of
       attorney, grants of probate and letters administration
       at any time after the expiration of seven (7) years after the of account
       to which the relevant power of attorney, grant of probate or letters of
       administration related has been closed;

and it shall conclusively be presumed in favor of the Company that every entry
    in the Register purporting to be made on the basis of any such documents
    so destroyed was duly and properly made and every share certificate so destroyed
    was a valid certificate duly and properly canceled and that every instrument
    of transfer so destroyed was a valid and effective instrument duly and properly
    registered and that every other document destroyed hereunder was a valid
    and
effective document in accordance with the recorded particulars thereof in the
    books or records of the Company; provided, however, that: (1) the foregoing provisions of this Bye-Law
shall apply only to the destruction of a document in good faith and without Notice to the Company that the preservation of such document was relevant to a claim; (2) nothing contained in this Bye-Law shall be construed as imposing upon the Company
any liability in respect of the destruction of any such document earlier than as aforesaid or in any case where the conditions of proviso (1) above are not fulfilled; and (3) references in this Bye-Law to the destruction of any document include
references to its disposal in any manner.

DIVIDENDS AND OTHER DISTRIBUTIONS 

33. 	(1) 	Subject to the Act, the Board may from time to time declare dividends
    in any currency or property to be paid to the Members. The Board may also
    make a distribution to the Members out of any contributed surplus (as ascertained
    in accordance with the Act).

  (2) 	No dividend shall be paid or other distribution made out of contributed
 	    surplus if to do so would render the Company unable to pay its liabilities
 	    as they become due or the realizable value of its assets would thereby
 	    become less than the aggregate of its liabilities and its issued share
 	    capital and share premium accounts.

  (3) 	Except in so far as the rights attaching to, or the terms of issue
 	    of, any share otherwise provide:

	 	 	(a)	all dividends
       shall be declared and paid according to the amounts paid; and
	 	 	 	 
	 	 	(b)	all dividends shall
       be apportioned and paid pro rata according to the amounts paid up on the
       shares during any portion or portions of the period in
       respect of which the dividend is paid. 
	 	 	 	 

 

  (4) 	The Board may from time to time pay to the Members such interim dividends
   	    as appear to the Board to be justified by the profits of the Company
   	    and in particular (but without prejudice to the generality of the foregoing)
   	    if at any time the share capital of the Company is divided into different
   	    classes, the Board may pay such interim dividends in respect of those
   	    shares in the capital of the Company which confer on the holders thereof
   	    deferred or non-preferential rights
  as well as in respect of those shares which confer on the holders thereof preferential
   	    rights with regard to dividends and provided that the Board acts bona
   	    fide the Board shall not incur any responsibility to the holders of shares
   	    conferring any preference for any damage that they may suffer by reason
   	    of the payment of an interim dividend on any shares having deferred or
   	    non-preferential rights and may also pay any fixed dividend which is
   	    payable on any shares of the Company quarterly or on
  any other dates, whenever such profits, in the opinion of the Board, justifies
   	    such payment.

  (5) 	The Board may deduct from any dividend or other monies payable to
   	    a Member by the Company on or in respect of any shares all sums of money
   	    (if any) presently payable by him to the Company on account of calls
   	    or otherwise.

  (6) 	No dividend or other monies payable by the Company on or in respect
   	    of any share shall bear interest against the Company.

  (7) 	Any dividend, interest or other sum payable in cash to the holder
   	    of shares may be paid by check or warrant sent through the mail addressed
   	    to the holder at his registered address or, in the case of joint holders,
   	    addressed to the holder whose name stands first in the Register in respect
   	    of the shares at his address as appearing in the Register or addressed
   	    to such Person and at such address as the holder or joint holders may
   	    in writing direct. Every such check or
  warrant shall, unless the holder or joint holders otherwise direct, be made
   	    payable to the order of the holder or, in the case of joint holders,
   	    to the order of the holder whose name stands first on the Register in
   	    respect of such shares, and shall be sent at his or their risk and payment
   	    of the check or warrant by the bank on which it is drawn shall constitute
   	    a good discharge to the Company notwithstanding that it may subsequently
   	    appear that the same has been stolen or that any endorsement
  thereon has been forged. Any one of two or more joint holders may give effectual
   	    receipts for any dividends or other monies payable or property distributable
   	    in respect of the shares held by such joint holders.

  (8) 	All dividends or bonuses unclaimed for one (1) year after having
   	    been declared may be invested or otherwise made use of by the Board for
   	    the benefit of the Company until claimed. Any dividend or bonuses unclaimed
   	    after a period of six (6) years from the date of declaration shall be
   	    forfeited and shall revert to the Company. The payment by the Board of
   	    any unclaimed dividend or other sums payable on or in respect of a share
   	    into a separate account shall not
  constitute the Company a trustee in respect thereof.

  
  (9) 	Whenever the Board has resolved that a dividend be declared or paid,
   	    the Board may further resolve that such dividend be satisfied wholly
   	    or in part by the distribution of specific assets of any kind and in
   	    particular of paid up shares, debentures or warrants to subscribe securities
   	    of the Company or any other company, or in any one or more of such ways,
   	    and where any difficulty arises in regard to the distribution the Board
   	    may settle the same as it thinks
  expedient, and in particular may issue certificates in respect of fractions
   	    of shares, disregard fractional entitlements or round the same up or
   	    down, and may fix the value for distribution of such specific assets,
   	    or any part thereof, and may determine that cash payments shall be made
   	    to any Members upon the basis of the value so fixed in order to adjust
   	    the rights of all parties, and may vest any such specific assets in trustees
   	    as may seem expedient to the Board and may appoint any
  Person to sign any requisite instruments of transfer and other documents on
   	    behalf of the Persons entitled to the dividend, and such appointment
   	    shall be effective and binding on the Members. The Board may resolve
   	    that no such assets shall be made available to Members with registered
   	    addresses in any particular territory or territories where, in the absence
   	    of a registration statement or other special formalities, such distribution
   	    of assets would or might, in the opinion of the Board, be
  unlawful or impracticable and in such event the only entitlement of the Members
   	    aforesaid shall be to receive cash payments as aforesaid. Members affected
   	    as a result of the foregoing sentence shall not be or be deemed to be
   	    a separate class of Members for any purpose whatsoever.
  

  (10) Whenever the Board has resolved that a dividend be declared or paid
   	    on any class of the share capital of the Company, the Board may further
   	    resolve either:

	 	 	(a)	that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the  shareholders
       entitled thereto will be entitled to elect to receive such  dividend (or part thereof if the Board so determines) in cash in lieu of  such allotment. In such case, the following provisions shall apply:
	 	 	 	 	 
	 	 	 	(i)	the basis of any such
       allotment shall be determined by the Board;
	 	 	 	 	 
	 	 	 	(ii)	the Board, after determining
       the basis of allotment, shall give not less than
       two (2) weeks’ Notice to the holders of the relevant shares
       of the right of election accorded to them, and shall send
       with such Notice, forms of election and specify the procedure
       to be followed and the place at which and the latest
       date and time by which duly completed forms of election must be delivered
       in order to be effective;
	 	 	 	 	 
	 	 	 	(iii)	the right of election
       may be exercised in respect of the whole or part of that
       portion of the dividend in respect of which the right of election has
       been accorded; and

	 	 	 	(iv)	the dividend
       (or that part of the dividend to be satisfied by the allotment of shares
       as aforesaid) shall not be payable in cash on shares in
       respect whereof the cash election has not been duly exercised
       (“the non-elected shares”)
    and in satisfaction thereof
    shares of the relevant class shall be allotted credited
    as fully paid up to the holders of the non- elected shares on
    the basis of allotment determined as aforesaid and for
    such purpose the Board shall capitalize and apply out of any
    part of the undivided profits of the Company (including
    profits carried and standing to the credit of any reserves
    or other special account other than the Subscription Rights
    Reserve) as the Board may determine, such sum
    as may be required to pay up in full the appropriate number
    of shares of the relevant class for allotment and distribution
    to and amongst the holders of the non-elected shares on such basis; or
	 	 	 	 
	 	 	(b)	that the
       shareholders entitled to such dividend shall be entitled toelect to receive
       an allotment of shares credited as fully paid up inlieu of
       the whole or such part of the dividend as the Board may determine. In
    such case, the following provisions shall apply:
	 	 	 	 
	 	 	 	(i)	the basis of any such
       allotment shall be determined by the Board;
	 	 	 	 	 
	 	 	 	(ii)	the Board, after determining
       the basis of allotment, shall give not less than
       fourteen (14) days’ Notice
    to the holders of the relevant shares
    of the right of election accorded to them and shall send
    with such Notice forms of election and specify the procedure
    to be followed and the place at which and the latest date
       and time by which duly completed forms of election must be delivered in
    order to be effective;
	 	 	 	 	 
	 	 	 	(iii)	the right of election
       may be exercised in respect of thewhole or part of that
       portion of the dividend in respect of which the right of election has
    been accorded; and
	 	 	 	 	 
	 	 	 	(iv)	the dividend (or that
       part of the dividend in respect of which
       a right of election has been accorded) shall not be payable
       in cash on shares in respect whereof the share election
       has been duly exercised (“the elected shares” )
    and in lieu thereof
    shares of the relevant class shall be allotted credited
    as fully paid up to the holders of the elected shares on
    the basis of allotment determined as aforesaid and for such
    purpose the Board shall capitalize and apply out of any
    part of the undivided profits of the Company (including profits
       carried and standing to the credit of any reserves or other
       special account other than the Subscription Rights Reserve)
       as the Board may determine, such sum as may be required
       to pay up in full the appropriate number of shares of
       the relevant class for allotment and distribution to and amongst
    the holders of the elected shares on such basis.

	(11)	 	(a)	The shares allotted
       under paragraph (10) of this Bye-Law shall rank pari passu in
       all respects with shares of the same class (if any) then in issue save
       only as regards participation in the relevant dividend or in any
       other distributions, bonuses or rights paid, made, declared or
       announced prior to or contemporaneously with the payment or declaration
       of the relevant dividend unless, contemporaneously
       with the announcement by the Board of their proposal under paragraph
       (10) of this Bye-Law in relation to the relevant dividend
       or contemporaneously with their announcement of the distribution,
       bonus or rights in question, the Board shall specify that the shares
       to be allotted under paragraph (10) of this Bye-Law shall rank
       for participation in such distribution, bonus or rights.
	 	 	 	 
	 	 	(b)	The Board may do all
       acts and things considered necessary or expedient to give
       effect to any capitalization under paragraph (10) of this Bye-Law, with
       full power to the Board to make such provisions as it determines
       in the case of shares becoming distributable in fractions
       (including provisions whereby, in whole or in part, fractional
       entitlements are aggregated and sold and the net proceeds distributed
       to those entitled, or are disregarded or rounded up or down
       or whereby the benefit of fractional entitlements accrues
       to the Company rather than to the Members concerned). The Board
       may authorize any Person to enter into on behalf of all Members
       interested, an agreement with the Company providing for such
       capitalization and matters incidental thereto and any agreement made
       pursuant to such authority shall be effective and binding on all concerned.

  (12) The Board may resolve in respect of any particular dividend of the Company
 	    that notwithstanding the provisions of paragraph (10) of this Bye-Law such
 	    dividend may be satisfied wholly in the form of an allotment of shares
 	    credited as fully paid up without offering any right to shareholders to
 	    elect to receive such dividend in cash in lieu of such allotment.

 (13) The Board may on
    any occasion determine that rights of election and the allotment of shares
    under paragraph (10) of this Bye-Law shall not
 	    be made available or made to any shareholders with registered addresses
 	    in any territory where, in the absence of a registration statement or
    other special formalities, the circulation of an offer of such rights
 	    of election or the allotment of shares would or might, in the opinion
    of the Board, be unlawful or impracticable, and in such event the provisions
 	    aforesaid shall be read and construed subject to such determination.
    Members
 	    affected as a result of the foregoing sentence shall not be or be deemed
 	    to be a separate class of Members for any purpose whatsoever. 

 

  (14) Any resolution declaring a dividend on shares of any class may specify
   	    that the same shall be payable or distributable to the Persons registered
   	    as the holders of such shares at the close of business on a particular
   	    date, notwithstanding that it may be a date prior to that on which the
   	    resolution is passed, and thereupon the dividend shall be payable or
   	    distributable to them in accordance with their respective holdings so
   	    registered, but without prejudice to the
  rights inter se in respect of such dividend of transferors and transferees
   	    of any such shares. The provisions of this Bye-Law shall, as the case
   	    may be, apply to bonuses, capitalization issues, distributions of realized
   	    capital profits or offers or grants made by the Company to the Members.

  (15) Before declaring any dividend, the Board may set aside out of the profits
   	    of the Company such sums as it determines as reserves which shall, at
   	    the discretion of the Board, be applicable for any purpose to which the
   	    profits of the Company may be properly applied and pending such application
   	    may, also at such discretion, either be employed in the business of the
   	    Company or be invested in such investments as the Board may from time
   	    to time determine and so that it shall
  not be necessary to keep any investments constituting the reserve or reserves
   	    separate or distinct from any other investments of the Company. The Board
   	    may also, without placing the same to reserves, carry forward any profits
   	    which it may think prudent not to distribute.

CAPITALIZATION 

 34. 	(1)	The Board
    may resolve to capitalize any part of the amount for the time being standing
    to the credit of any reserve account or to the credit
    of the profit and loss account or otherwise available for distribution by
    applying such sum in paying up (i) unissued shares, debentures or other obligations
    to be allotted or distributed fully paid pro rata to the Members or any class
    of Members or (ii) in full or partly paid shares of those Members who would
    have been
entitled to such sums if they were distributed by way of dividend or other distribution.
    In addition, the Board may, subject to the Act, resolve to capitalize any
    part of the amount for the time being standing to the credit of the Company’s
    share premium account by applying such sum in paying up unissued shares to
be issued to the Members, or class of Members, as fully paid bonus shares. 

  (2) 	The Board may settle, as it considers appropriate, any difficulty
 	    arising in regard to any distribution under the preceding paragraph and
 	    in particular may issue certificates in respect of fractions of shares
 	    or authorize any Person to sell and transfer any fractions or may resolve
 	    that the distribution should be as nearly as may be practicable in the
 	    correct proportion but not exactly so or may ignore fractions altogether,
        and may determine that cash payments shall be made to any Members in
        order to
    adjust the rights of all parties, as may seem expedient to the Board. The
    Board may appoint any Person to sign on behalf of the Persons entitled to
    participate in the distribution any contract necessary or desirable for giving
    effect thereto and such appointment shall be effective and binding upon the
    Members. 

 

ACCOUNTING RECORDS 

 35. (1) 	The Board
    shall cause true accounts to be kept of the sums of money received and expended
    by the Company, and the matters in respect of which
    such receipts and expenditures take place, and of the property, assets, credits
    and liabilities of the Company and of all other matters required by the Act
    or necessary to give a true and fair view of the Company’s affairs
and to explain its transactions. 

  (2) 	The accounting records shall be kept at the Office or, subject to
 	    the Act, at such other place or places as the Board decides outside of
 	    the United States and shall always be open to inspection by the Directors
 	    of the Company. No Member (other than a Director of the Company) shall
 	    have any right of inspecting any accounting record or book or document
 	    of the Company except as conferred by law or authorized by the Board or
 	    the Company in a General Meeting.

 (3) 	Subject to the
    Act, a printed copy of the balance sheet and profit and loss account, including
    every document required by law to be annexed
 	    thereto, made up to the end of the applicable financial year and containing
 	    a summary of the assets and liabilities of the Company under convenient
 	    headings and a statement of income and expenditures, together with a
    copy of the Auditors’ report, shall be sent to each Person entitled
    thereto at least twenty-one (21) days
before the date of the Annual General Meeting and laid before the Company at
 	    such meeting in accordance with the requirements of the Act provided
    that this Bye-Law shall not require a copy of those documents to be sent
    to
 	    any Person of whose address the Company is not aware or to more than
one of the joint holders of any shares or debentures. 

AUDIT 

36. (1) 	Subject to the Act, at the Annual General Meeting or at a subsequent
    Special General Meeting in each year, the Members shall appoint an Auditor
    to audit the accounts of the Company and such Auditor shall hold office until
    the Members appoint another Auditor. Such Auditor may be a Member but no
    Director or Officer or employee of the Company shall, during his continuance
    in office, be eligible to act as an Auditor of the Company.

 (2)
      Subject to the Act, a Person, other than a retiring Auditor, shall not
      be capable of being appointed Auditor at an Annual General Meeting
 	    unless Notice of an intention
 	    to nominate that Person to the office of Auditor has been given not less
 	    than fourteen (14) days before the Annual General Meeting and furthermore,
 	    the Company shall send a copy of any such Notice to the retiring Auditor. 

 

  (3) 	The Members, by a resolution passed by at least two-thirds of the
   	    votes cast at a General Meeting of which notice specifying the intention
   	    to pass such resolution was given, may remove the Auditor at any time
   	    before the expiration of his term of office and shall by ordinary resolution
   	    at that meeting appoint another Auditor in his stead for the remainder
   	    of his term, provided that, not less than twenty-one (21) days before
   	    the date of the meeting, notice in writing
  of the proposed resolution is given to the incumbent auditor and to the auditor
   	    proposed to be appointed.

  (4) 	Subject to the Act, the accounts of the Company shall be audited
   	    at least once in every year.

  (5) 	The remuneration of the Auditor shall be fixed by the Company in
   	    a General Meeting or in such manner as the Members may determine.

  (6) 	If the office of Auditor becomes vacant by the resignation or death
   	    of the Auditor, or by his becoming incapable of acting by reason of illness
   	    or other disability at a time when his services are required, the Directors
   	    shall as soon as practicable convene a Special General Meeting to fill
   	    the vacancy.

  (7) 	The statement of income and expenditures and the balance sheet provided
   	    for by these Bye-Laws shall be examined by the Auditor and compared by
   	    him with the books, accounts and vouchers relating thereto; and he shall
   	    make a written report thereon stating whether such statement and balance
   	    sheet are drawn up so as to present fairly the financial position of
   	    the Company and the results of its operations for the period under review
   	    and, in case information shall have been
  called for from Directors or Officers of the Company, whether the same has
   	    been furnished and has been satisfactory. The financial statements of
   	    the Company shall be audited by the Auditor in accordance with generally
   	    accepted auditing standards. The Auditor shall make a written report
   	    thereon in accordance with generally accepted auditing standards and
   	    the report of the Auditor shall be submitted to the Members in a General
   	    Meeting. The generally accepted auditing standards referred to
  herein may be those of a country or jurisdiction other than Bermuda. If so,
   	    the financial statements and the report of the Auditor should disclose
   	    this fact and name such country or jurisdiction.

  (8) 	The Auditor shall at all reasonable times have access to all books
   	    kept by the Company and to all accounts and vouchers relating thereto;
   	    and he may call on the Directors or Officers of the Company for any information
   	    in their possession relating to the books or affairs of the Company.

NOTICES

  37. 	(1) 	Any Notice from the Company to a Member shall be given in writing
    or by cable, telex or facsimile transmission message and any such Notice
    and (where appropriate) any other document may be served or delivered by
    the Company on or to any Member either personally or by sending it through
    the mail or other courier service in a prepaid envelope addressed to such
    Member at his registered address as appearing in the Register or at any other
    address supplied by him to
  the Company for the purpose or, as the case may be, by transmitting it to any
    such address or transmitting it to any telex or facsimile transmission number
    supplied by him to the Company for the giving of Notice to him or which the
    Person transmitting the Notice reasonably and bona fide believes at the relevant
    time will result in the Notice being duly received by the Member or may also
    be served by advertisement in appointed newspapers (as defined in the Act)
    or in accordance with
  the requirements of any Designated Stock Exchange. In the case of joint holders
    of a share all Notices shall be given to that one of the joint holders whose
    name stands first in the Register and Notice so given shall be deemed a sufficient
    service on or delivery to all the joint holders.

      (2)  Any
       Notice or other document:

	 	 	 	(a)	if served or delivered
       by mail, shall be sent airmail where appropriate and shall
       be deemed to have been served or delivered on the day following
       that on which the envelope containing the same, properly prepaid
       and addressed, is put into the mail; in proving such service
       or delivery it shall be sufficient to prove that the envelope or wrapper
       containing the Notice or document was properly addressed
       and put into the mail and a certificate in writing signed by the Secretary
       or other Officer of the Company or other Person appointed by
       the Board that the envelope or wrapper containing the Notice
       or other document was so addressed and put into the mail shall be conclusive
       evidence thereof; and
	 	 	 	 	 
	 	 	 	(b)	if served or delivered
       in any other manner contemplated by these Bye-Laws, shall be
       deemed to have been served or delivered at the time of personal service
       or delivery or, as the case may be, at the time of the relevant
       dispatch or transmission; and in proving such service or delivery
       a certificate in writing signed by the Secretary or other Officer of
       the Company or other Person appointed by the Board as to the fact
       and time of such service, delivery, dispatch or transmission shall be
       conclusive evidence thereof.

      (3)
    Any Notice or other document delivered or sent by mail to or left at the
    registered address of any Member in pursuance of these Bye-Laws shall, notwithstanding
    that such Member is then dead or bankrupt or that any other event has occurred,
    and whether or not the Company has Notice of the death or bankruptcy or other
    event, be deemed to have been duly served or delivered in respect of any
    share registered in the name of such Member as sole
or joint holder unless his name shall, at the time of the service or delivery
    of the Notice or document, have been removed from the Register as the
    holder of the share, and such service or delivery shall for all purposes
    be deemed a sufficient service or delivery of such Notice or document on
    all Persons interested (whether jointly with or as claiming through or under
    him) in the share. 

 

  (4) 	 A Notice may be given by the Company to the Person entitled to a
   	    share in consequence of the death, mental disorder or bankruptcy of a
   	    Member by sending it through the mail in a prepaid letter, envelope or
   	    wrapper addressed to him by name, or by the title of the representative
   	    of the deceased, or trustee of the bankrupt, or by any like description,
   	    at the address, if any, supplied for the purpose by the Person claiming
   	    to be so entitled, or (until such an
  address has been so supplied) by giving the Notice in any manner in which the
   	    same might have been given if the death, mental disorder or bankruptcy
   	    had not occurred.

  (5) 	Any Person who by operation of law, transfer or other means whatsoever
   	    shall become entitled to any share shall be bound by every Notice in
   	    respect of such share which prior to his name and address being entered
   	    on the Register shall have been duly given to the Person from whom he
   	    derives his title to such share.

  (6) 	For the purposes of these Bye-Laws, a cable or telex or facsimile
   	    transmission message purporting to come from a holder of shares or, as
   	    the case may be, a Director or Alternate Director, or, in the case of
   	    a corporation which is a holder of shares from a director or the secretary
   	    thereof or a duly appointed attorney or duly authorized representative
   	    thereof for it and on its behalf, shall in the absence of express evidence
   	    to the contrary available to the Person
  relying thereon at the relevant time be deemed to be a document or instrument
   	    in writing signed by such holder or Director or Alternate Director or
   	    in the terms in which it is received.

WINDING UP 

38. 	(1) 	The Board shall have power in the name and on behalf of the Company
    to present a petition to the court for the Company to be wound up.

  (2) 	A resolution that the Company be wound up by the court or be wound
 	    up voluntarily shall be a special resolution.

 (3) 	If the Company
    shall be wound up (whether the liquidation is voluntary or by the court)
    the liquidator may, with the authority of a special resolution
 	    and any other sanction required by the Act, divide among the Members
    in specie or kind the whole or any part of the assets of the Company and
    whether
 	    or not the assets shall consist of properties of one kind or shall consist
 	    of properties to be divided as aforesaid of different kinds, and may
    for such purpose set such
value as he deems fair upon any one or more class or classes of property and
 	    may determine how such division shall be carried out as between the Members
 	    or different classes of Members. The liquidator may, with the like authority,
 	    vest any part of the assets in trustees upon such trusts for the benefit
 	    of the Members as the liquidator with the like authority shall determine,
 	    and the liquidation of the
 	    Company may be closed and the Company dissolved, but so that no contributory
 	    shall be compelled to accept any shares or other property in respect
 	    of which there is a liability. 

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY 

39. 	(1) 	The Directors and Officers (such term to include, for the purposes
    of this Bye-Law, any individual appointed to any committee by the Board)
    for the time being acting in relation to any of the affairs of the Company
    and the liquidator or trustees (if any) for the time being acting in relation
    to any of the affairs of the Company and every one of them, and their heirs,
    executors and administrators, shall be indemnified and held harmless out
    of the assets of the
Company from and against all actions, costs, charges, losses, damages and expenses
    which they or any of them, their heirs, executors or administrators, shall
    or may incur or sustain by or by reason of any act done, concurred in or
    omitted in or about the execution of their duty, or supposed duty, or in
    their respective offices or trusts, and none of them shall be answerable
    for the acts, receipts, neglects or defaults of the others of them or for
    joining in any receipts for the sake of
conformity, or for any bankers or other Persons with whom any monies or effects
    belonging to the Company shall or may be delivered or deposited for safe
    custody, or for insufficiency or deficiency of any security upon which any
    monies of or belonging to the Company shall be deposited or invested, or
    for any other loss, misfortune or damage which may happen in the execution
    of their respective offices or trusts, or in relation thereto, provided that
    this indemnity shall not extend to
any matter in respect of any fraud or dishonesty which may attach to any of said
    individuals.

  (2) 	Each Member and the Company agree to waive any claim or right of
 	    action he or it might have, whether individually or by or in the right
 	    of the Company, against any Director or Officer on account of any action
 	    taken by such Director or Officer, or the failure of such Director or Officer
 	    to take any action, in the performance of his duties, or supposed duties,
 	    with or for the Company; provided that such waiver shall not extend to
 	    any matter in respect of any fraud or
dishonesty which may attach to such Director or Officer.  Any repeal or modification
 	    of this Bye-Law shall not adversely affect any right or protection of a
 	    Director or Officer of the Company existing immediately prior to such repeal
 	    or
modification. 

  (3) 	Expenses incurred in defending a civil or criminal action, suit or
 	    proceeding shall be paid by the Company in advance of the final disposition
 	    of such action, suit or proceeding as authorized by the Board in the specific
 	    case upon receipt of an undertaking by or on behalf of the Director, Officer,
 	    liquidator or trustee to repay such amount unless it shall ultimately be
 	    determined that the individual is entitled to be indemnified by the Company
 	    as authorized in these
Bye-Laws or otherwise pursuant to the laws of Bermuda.

NONAPPLICABILITY OF VOTING AND TRANSFER RESTRICTIONS TO
  

  CERTAIN SHAREHOLDERS OF PXRE CORPORATION 

40. 	Notwithstanding anything to the contrary in these Bye-Laws, the Maximum
    Percentage limitations on voting rights set forth in paragraph 4 of Bye-Law
    No. 20 and the 9.9% Limitation on the transfer of shares set forth in paragraph
    1 of Bye-Law No. 13 and paragraph 2 of Bye-Law No. 14 shall not apply to
    any Person Owning or Controlling more than 9.9% of the outstanding shares
    of common stock of PXRE Corporation on the date of the adoption of these
    Bye-Laws, but only
with respect to Common Shares into which shares of common stock of PXRE Corporation
    owned as of the date of the adoption of these Bye-Laws are converted pursuant
    to the Agreement and Plan of Merger, dated as of July 7, 1999, between the
    Company,
PXRE Corporation and PXRE Merger Corp. 

AMENDMENT OF BYE-LAWS

 41. 	Any amendment
    to these Bye-Laws or to the Company’s Memorandum of Association
    shall be approved by the Board and decided on by an ordinary resolution of
    the Members; provided however, that any proposed amendment to Bye-Laws 1,
    3, 4, 5, 13, 17, 18, 20, 22, 39, 40 or 41 shall be approved by the Board
    and by a special resolution of the Members. ***** 

  DESCRIPTION OF STOCK: 

  SERIES A CONVERTIBLE VOTING PREFERRED SHARES 

  ($1.00 PAR VALUE PER SHARE), 

  SERIES B CONVERTIBLE VOTING PREFERRED SHARES 

  ($1.00 PAR VALUE PER SHARE), 

  SERIES C CONVERTIBLE VOTING PREFERRED SHARES 

  ($1.00 PAR VALUE PER SHARE), 

  CLASS A CONVERTIBLE VOTING COMMON SHARES 

  ($1.00 PAR VALUE PER SHARE), 

  CLASS B CONVERTIBLE VOTING COMMON SHARES 

  ($1.00 PAR VALUE PER SHARE) 

  AND 

  CLASS C CONVERTIBLE VOTING COMMON SHARES 

($1.00 PAR VALUE PER SHARE) 

of

 PXRE GROUP
        LTD. 

 

 

 

 

 

TABLE OF CONTENTS 

	 	 	 	 	Page
	1	.	General	1
	 	 	(a)	Designation and Number	1
	 	 	(b)	Priority	1
	2	.	Certain Definitions	1
	3	.	Voting Rights	7
	 	 	(a)	General Voting Rights	7
	 	 	(c)	Consent of Series A Preferred Shares Required For Variation of	 
	 	 	 	Rights and Restrictions	9
	 	 	(d)	Consent of Series B Preferred Shares Required For Variation of	 
	 	 	 	Rights and Restrictions	10
	 	 	(e)	Consent of Series C Preferred Shares Required For Variation of	 
	 	 	 	Rights and Restrictions	12
	 	 	(f)	Consent Required for Certain Actions	13
	4	.	Dividend Rights	15
	 	 	(a)	General	15
	 	 	(b)	Form of Dividends	16
	 	 	(c)	Dividend Preference	16
	5	.	Liquidation Rights	17
	 	 	(a)	Priority	17
	 	 	(b)	Notice of Liquidation	18
	6	.	Conversion	18
	 	 	(a)	General	18
	 	 	(b)	Surrender, Election and Payment	19
	 	 	(c)	Effective Date	20
	 	 	(d)	Share Certificates	20
	 	 	(e)	Acknowledgment of Obligation	20
	 	 	(f)	Current Conversion Price	20
	 	 	(g)	Reservation of Convertible Common Shares and Common Shares	20
	 	 	(h)	Mandatory Conversion	21
	7	.	Adjustment to Conversion Price	22
	 	 	(a)	Adjustments for Recapitalizations, Etc.	22
	 	 	(b)	Adjustments for Issuances of Additional Shares	22

i

  TABLE OF CONTENTS
  

  (continued) 
  

	 	 	 	 	Page
	 	 	(c)	Certain Rules in Applying the Adjustment for Additional Share
	 
	 	 	 	Issuances
	23
	 	 	(d)	Adjustment for Development
	25
	 	 	(e)	Exclusions from the Adjustment for Additional Share Issuances
	26
	 	 	(f)	Accountants’ Certification
	26
	 	 	(g)	Other Adjustments
	26
	 	 	(h)	Consolidation, Merger or Amalgamation
	26
	 	 	(j)	Notices
	27
	8	.	Board of Directors	28
	9	.	Class A Common Shares, Class B Common Shares and Class C Common	 
	 	 	Shares	 	29
	 	 	(a)	Designation and Number of Class A, Class B and Class C	 
	 	 	 	Common Shares	29
	 	 	(b)	Priority	29
	 	 	(c)	Voting	29
	 	 	(d)	Conversion	30
	 	 	(e)	General	30

DESCRIPTION OF STOCK

	     
	     The
       relative rights, preferences and restrictions granted to or imposed upon
       the respective classes and series of Preferred Shares and Convertible
       Common Shares created by PXRE Group Ltd. and upon the holders thereof
    are set forth below.
	 	 	 
	 	1.  	General.
	 	 	 	 
	 	 	       (a)       Designation and Number. The designation of convertible Preferred Shares created by this resolution shall be:
	 	 	 	 	 
	 	 	 	       (i)       “Series A Convertible Voting Preferred Shares, $1.00 par value per share,” of the Company, allocated among two sub-series, A1 Preferred Shares and A2 Preferred Shares
(hereinafter referred to as the “Series A Preferred Shares”), and the
number of Series A Preferred Shares which the Company shall be authorized to
issue shall be 7,500 shares;
	 	 	 	 	 
	 	 	 	       (ii)       “Series
       B Convertible Voting Preferred Shares, $1.00 par value per share,” of
       the Company, allocated among two sub-series, B1 Preferred Shares and B2
       Preferred Shares
(hereinafter referred to as the “Series B Preferred Shares”), and the
number of Series B Preferred Shares which the Company shall be authorized to
issue shall be 5,000 shares; and

ii

	 
	 	 	 	       (iii)       “Series C Convertible Voting Preferred Shares, $1.00 par value per share,” of the Company, allocated among two sub-series, C1 Preferred Shares and C2 Preferred Shares
(hereinafter referred to as the “Series C Preferred Shares”), and the
number of Series C Preferred Shares which the Company shall be authorized to
issue shall be 2,500 shares.
	 	 	 	 	 
	       (b)       Priority. The Series A Preferred Shares, the Series B Preferred Shares and the Series C Preferred Shares shall rank
senior to the Common Shares, the Convertible Common Shares and all other capital shares of the Company (now or hereafter authorized or issued) other than the Trust Preferred and the Series A Preferred Shares, the Series B Preferred Shares and the
Series C Preferred Shares shall rank pari passu with each other, in each case as to dividends and as to the surplus assets of the Company available for distribution upon liquidation,
dissolution and winding-up as provided herein.
	 	 	 	 
	 	 	2.  	Certain Definitions.
	 	 	 	 
	       (a)       For
       purposes of this Description of Stock, the following terms shall have
       the meanings indicated (such definitions to be equally applicable to both
       singular and plural
forms of the terms defined):

	 	 	 
	 	 	 
	 	 	     “Affiliates” means,
        as applied to any Person, any other Person directly or indirectly controlling,
        controlled by or under common control with, that Person; provided,
        however, that with respect to Capital Z, CZI shall not be considered
        an Affiliate. For the purposes of this definition, “control” (including
        with correlative meanings, the terms “controlling”, “controlled
        by”, and “under common control with”) as applied to any
        Person, means the possession, directly or indirectly, of the power to
        direct or cause the direction of the management and policies of that
        Person, whether through ownership of voting securities or by contract
        or otherwise.
	 	 	 
	 	 	     “Assets” of
        any Person means all assets and properties of every kind, nature, character
        and description (whether real, personal or mixed, whether tangible or
        intangible, whether absolute, accrued, contingent, fixed or otherwise
        and wherever situated), including the goodwill related thereto, operated,
        owned or leased by such Person, including cash, cash equivalents, investment
        assets, accounts and notes receivable, chattel paper, documents, instruments,
        general intangibles, real estate, equipment, inventory and goods.
	 	 	 
	 	 	     “Business
          Day” means any day other than a Saturday, Sunday or a day
          on which banking institutions in the State of New York or Bermuda are
          authorized or obligated by law or executive order to close.

 

 “Capital Z” means,
      collectively, Capital Z Financial Services Fund II, L.P. and Capital Financial
      Services Private Fund II, L.P. 

 “Class IV Director” means
      a Capital Z Director or Reservoir Director or Rainwater Director. 

 “Class A Common Shares” means,
      collectively, the Class A Convertible Voting Common Shares, $1.00 par value
      per share, of the Company. 

 “Class B Common Shares” means,
      collectively, the Class B Convertible Voting Common Shares, $1.00 par value
      per share, of the Company. 

 “Class C Common Shares” means,
      collectively, the Class C Convertible Voting Common Shares, $1.00 par value
      per share, of the Company. 

“Closing” has the
meaning ascribed in the Purchase Agreement. 

 “Common Shares” means
      the Common Shares and shall also include any common shares of the Company
      hereafter issued and outstanding and any shares of the Company (other than
      the Preferred Shares and the Convertible Common Shares) of any other class
      hereafter issued and outstanding that is not preferred as to dividends
      or distribution of assets in liquidation over any other class of shares
      of the Company or has ordinary voting power
for the election of directors of the Company. 

“Company” means
PXRE Group Ltd. 

 “Company
        Securities” shall have the meaning
        given such term in the Purchase Agreement. 

  “Convertible Common Shares” means
      the Class A Common Shares, the Class B Common Shares and the Class C Common
      Shares. 

 “CZI” means
    Capital Z Investments, L.P. and Capital
Z Investments II, L.P. 

 “Description
        of Stock” means this Description of
        Stock, as amended, modified or supplemented from time to time. 

 “Exchange Act” means
      the United States Securities Exchange Act of 1934, as from time to time
      amended, and the rules, regulations and interpretations promulgated thereunder. 

 

 “Fair Market Value” with
      respect to Common Shares, on any date, shall be deemed to be the average
      of the reported closing prices for each of the five
 (5) consecutive
 trading days ending on the trading day before such date of determination. The
 reported closing price for each day shall be the reported closing price
    on the principal United States securities exchange or automated quotation
    system on which the Common Shares are then listed or admitted to trading.
    If the Common Shares are not then listed or admitted to trading on any national
    securities exchange or automated quotation system or if the closing price
    cannot be
so determined, the Fair Market Value shall be determined (x) by the written agreement
    of the Company and the respective holder and (y) in the event that no such
    agreement is reached within twenty (20) days after the date of the event
    giving rise to the need to determine the Fair Market Value, (A) by an independent
    appraiser of nationally recognized standing selected by the respective holder
    and the Company or (B) if the respective holder and the Company cannot agree
    on an appraiser within
twenty (20) days after the date of the event giving rise to the need to determine
    the Fair Market Value, each shall select an independent appraiser of nationally
    recognized standing and the two appraisers shall designate a third independent
    appraiser of nationally recognized standing, whose appraisal shall be determinative
    of such value. The cost of such appraisal shall be borne by the Company.
    The Company shall cooperate, and shall provide all necessary information
    and assistance, to
permit any determination under the preceding clauses (x) and (y). With respect
    to Convertible Common Shares, the Fair Market Value shall equal the Fair
    Market Value of the Common Shares into which such Convertible Shares are
    convertible. 

  “Fully Converted”
or “upon a Fully Converted basis” or “upon
      Full Conversion” means, with respect to any Person
as of any date, that all Preferred Shares held by such Person have been (or shall be deemed to have been, as appropriate) converted into Class A Common Shares, Class B Common Shares and/or Class C Common Shares, as the case may be, at the Current
Conversion Price as of such date and immediately thereafter such Class A Common Shares, Class B Common Shares and Class C Common Shares shall have been (or shall be deemed to have been, as appropriate) converted into Common Shares, in each case in
accordance with Section 6 of this Description of Stock. 

 “GAAP” means
United States generally accepted accounting principles, consistently applied. 

 

 “Indebtedness” means
      (a) all indebtedness of the Company and its subsidiaries, including the
      principal of,
 and premium, if any, and interest (including interest accruing after the filing
 of a petition initiating any proceeding under any state, federal or foreign
 bankruptcy laws, whether or not allowable as a claim in such proceeding) on,
 all indebtedness, whether outstanding currently or hereafter created (i) for
 borrowed money, (ii) for money borrowed by one or more other Persons and guaranteed,
 directly or indirectly, by the Company or any subsidiary  thereof,
 (iii) for money borrowed by one or more other Persons for which the Company
 or any subsidiary thereof provides security, (iv) constituting
purchase money indebtedness the payment of which the Company or any subsidiary
thereof is directly or contingently liable, (v) under any lease of any real or
personal property, which obligations are capitalized on the consolidated books
of the Company and its subsidiaries in accordance with GAAP or (vi) under any
other
arrangement under which obligations are recorded as indebtedness on the consolidated
books of the Company and its subsidiaries in accordance with GAAP and (b) any
and all modifications, refundings, deferrals, renewals or extensions of any such
indebtedness, or securities, notes or other evidences of indebtedness issued
in exchange for such indebtedness. Without limiting the generality of the foregoing,
the term “Indebtedness” shall include the Trust Preferred and any
comparable
securities
of the Company or any subsidiary thereof at any time outstanding; provided that
Indebtedness shall not include intercompany indebtedness outstanding or hereafter
created between the Company and any of its direct or indirect wholly-owned Subsidiaries
(as defined in the Purchase Agreement, but limited in this paragraph to direct
and indirect wholly owned subsidiaries) or between any two of more such direct
or indirect wholly owned
Subsidiaries of the Company. 

 “Investment
        Agreement” means the Investment Agreement
        dated as of the Closing Date (as defined in the Purchase Agreement) by
        and among the Company, the Purchasers (as defined in the Purchase Agreement)
        and such other Persons as may become a party thereto from time to time,
        as the same may be amended from time to time. 

 “Permitted
        Tender Offer Amount” means, as of any date, an amount equal to (a) 20% of the cumulative amount by which the Company’s
        consolidated net income (determined in accordance with GAAP) in any calendar
        year commencing with the year ending December 31, 2002 exceeds $50,000,000
        minus (b) the sum of all cash and the fair market value of all non-cash
        consideration paid or payable by the
Company or any Affiliate thereof in respect of redemptions, offers to purchase,
        tender offers or other acquisitions of capital stock of the Company effected
or commenced after December 10, 2001. 

  “Person” or “person” means an individual, corporation, partnership, firm, association,
joint venture, trust, unincorporated organization, limited liability company, government, governmental body, agency, political subdivision or other entity. 

  “Preferred
        Shares” means, collectively, the Series
        A Preferred Shares, the Series B Preferred Shares and the Series C Preferred
        Shares. 

 “Purchase Agreement” means
      the Share Purchase Agreement dated as of December 10, 2001 by and among
      the Company and the Purchasers, as the same may be amended from time to
      time. 

  “Purchasers” shall have the meaning given such term in the Purchase Agreement. 

“Rainwater” means
Richard E. Rainwater, an individual. 

 “Reservoir” means, collectively, Reservoir Capital Partners, L.P. and Reservoir Capital Master Fund, L.P. 

 “Securities Act” means
      the United States Securities Act of 1933, as from time to time amended,
      and the rules, regulations and interpretations promulgated thereunder. 

 “Stated
        Value” shall mean, with respect to
        each Preferred Share, $10,000.00. 

 “Tax Gross-Up” shall mean an additional cash payment to be made to any Purchaser who (i) receives a cash payment in lieu of Convertible Common Shares on the conversion of Preferred Shares
pursuant to Section 6(a)(iv) hereof, (ii) is or, in the case of a Purchaser that is a partnership for U.S. federal income tax purposes and that has a direct or indirect partner that is, then subject to U.S. federal income tax on the receipt of the
cash payment in lieu of Convertible Common Shares as ordinary income (all such persons referred to herein as “U.S. Tax Purchasers” and each, a “U.S. Tax Purchaser”) and (iii) would have realized a “long-term capital gain” or a “long-term capital loss” (within the meaning of Section 1222(3) or (4) of the Internal Revenue Code of 1986,
as amended (the “Code” ), on a sale of the Convertible Common Shares into which the Preferred Shares would otherwise have been converted,
such additional cash payment equal to an amount such that (a) the sum of (i) the Fair Market Value of the Convertible Common Shares that such U.S. Tax Purchaser would otherwise have received plus (ii) the additional cash payment hereunder, such sum
multiplied by 1 minus the highest U.S. federal income tax rate which would be applicable to any ordinary income received by a U.S. taxpayer of the same type (individual, corporation or other entity) as such U.S. Tax Purchaser, equals (b) the Fair
Market Value of the Convertible Common Shares that such U.S. Tax Purchaser would otherwise have received multiplied by 1 minus the highest U.S. federal income tax rate which is then generally applicable to “net capital gain” (within
the meaning of Section 1222(11) of the Code) received by a U.S. taxpayer of the
same type (individual, corporation or other entity) as such U.S. Tax Purchaser
in the taxable year of the conversion. 

      “Trust Preferred” shall
      mean, collectively, (i) the Junior Subordinated Deferrable Interest Debentures
      due 2027 of PXRE Corporation, (ii) the 8.85% Capital Trust Pass-through
      Securities of PXRE Capital Trust I and (iii) the PXRE Corporation Guarantee
      with respect to such Capital Trust Pass-through Securities. 

      (b)
    The following terms, when used in this Description of Stock, shall have the
    meanings
    provided for such terms in the sections set forth below (such definitions
to be equally applicable to both singular and plural forms of the terms defined): 

	                                       Term	Section(s)

	Adjustment Date	7	(d)
	Additional Common Shares	7	(b)
	Adjusted Shareholders’ Equity	7	(d)
	Aggregate Voting Limitation	3	(a)
	Announcement Date	6	(g)
	Appointed Actuary	7	(d)
	Bye-Law 20(4)	3	(a)
	Capital Z Director	3(b)	(i)
	Conversion Date	6(h)	 (ii)(A)
	Conversion Date FMV	6(h)	 (ii)(A)
	Conversion Price	6	(f)
	Current Conversion Price	6	(f)
	Definitive Loss Report	7	(d)
	Discontinued Operations	7	(d)
	Dividend Due Date	4	(a)
	First Mandatory Conversion	6(h)	 (i)
	Junior Shares	4	(c)
	LD Above Deductible	7	(d)
	Loss Development	7	(d)
	Mandatory Conversion	6(h)	 (i)
	Maximum Lawful Rate	4	(c)
	NOL	7	(d)
	NYSE Rules	8	(b)
	Observer	8	(e)
	Old Conversion Price	7	(b)
	Permitted Tender Offer Amount	3(e)	(i)
	Rainwater Director	3(b)	(iv)
	Reinsuring Company	3(e)	(ix)
	Reservoir Director	3(b)	(iii)
	Second Mandatory Conversion	6(h)	 (i)
	September Financial Statement	7	(d)
	Series A Conversion Ratio	6(a)	(i)
	Series B Conversion Ratio	6(a)	(ii)
	Series C Conversion Ratio	6(a)	(iii)
	Series A Preferred Liquidation Preference	5(a)	(i)
	Series B Preferred Liquidation Preference	5(a)	(i)
	Series B Preferred Liquidation Preference	5(a)	(i)
	Conversion Ratio	6	(a)
	Series A Preferred Shares	1(a)	(i)

	                                       Term	Section(s)
	Series B Preferred Shares	1(a)(ii)
	 
	WTC Loss	7(d)	 

	 	 	 	 
	 	 	     (c)       The
         words “hereof”, “herein” and “hereunder”
    and other words of similar import refer to this Description of Stock as a whole and not to any particular Section or other subdivision.
	 	 	 	 
	 	 	     (d)       All
       dollar amounts referenced herein shall be denominated in United States
    dollars.
	 	 	 
	 	3.  	Voting Rights.
	 	 	 	 
	 	 	     (a)       General Voting Rights. Except as otherwise provided specifically herein and in the Bye-Laws or required by Bermuda law,
(i) each Preferred Share and Convertible Common Share shall have the right and power and be entitled to vote on any question or matter upon which, or in any proceeding at which, the holders of Common Shares of the Company are entitled to vote and to
be represented at and to receive notice of any meeting of shareholders, (ii) the holders of Preferred Shares, Convertible Common Shares and Common Shares shall vote together as one class and not as separate classes and (iii) each holder of Preferred
Shares and/or Convertible Common Shares shall be entitled to that number of votes for each Preferred Share and each Convertible Common Share held by such holder equal to the number of Common Shares that would be received by such holder if such
shares were Fully Converted as of the record date for the vote which is being taken or, if no such record date is established, as of the date such vote is taken or any written consent of shareholders is solicited.
	 	 	 	 	 
	 	 	 	     (i)       Subject
         to clause (iii) below and notwithstanding anything to the contrary in
         the Bye-Laws, Capital Z and each Affiliate thereof to whom or which
         (as the case may be) any Company Securities are Transferred (as such
         term is defined in the Purchase Agreement), to the extent such Transfer
         does not result in the transferring Person or any other Person being
         considered a United States Shareholder within the meaning of Section
         951(b) of the Code, without regard to Section 953(c) of the Code and
         without the application of Bye-Law 20(4), shall be exempt from the application
         of the aggregate voting limitation set forth in Bye-Law 20(4) of the
         Bye-Laws of the Company or any
similar provision in the Bye-Laws as may be in effect from time to time (collectively, “Bye-Law 20(4)”).
	 	 	 	 	 
	 	 	 	     (ii)       For
       the avoidance of doubt, the holding of Company Securities by Reservoir
       and Rainwater shall be subject to application of the aggregate voting
       limitation set forth in Bye-Law
20(4).
	 	 	 	 	 
	 	 	 	     (iii)       In
       no event shall Purchasers and their respective Affiliates be permitted
       to exercise control, collectively through the Company Securities or any
       other shares, in excess of 49.9% of the aggregate voting power of the
    Company on any
    shareholder voting matters (the “Aggregate Voting Limitation”).
    Notwithstanding the foregoing, the preceding sentence shall in no event limit
    or modify in
    any manner the rights granted to the holders of Preferred Shares and Convertible
    Common Shares under clauses (b), (c), (d), (e) and (f) of this Section 3
    and under clause (c) of Section 9 of this Description of Stock. The Aggregate
    Voting Limitation shall be applied in the manner set forth in Bye-Law 20(4)
    as if the Maximum Percentage set forth therein was equal to 49.9%. 

 

   (b) Election of Directors. The Preferred Shares and Convertible Common Shares shall not have the right and
power or be entitled to vote in the election of directors of the Company except as set forth below: 

       (i)
    so long as Capital Z and its Affiliates and their limited partners shall
    own at least 50% of the Series A Preferred Shares
  acquired by Capital Z under the Purchase Agreement (including for purposes
  of such calculation, all Class A Common Shares then held by such Persons),
  the holders of the Series A Preferred Shares and Class A Common Shares shall
  have, in addition to the other voting rights set forth herein, the exclusive
  right, voting separately as a class, to annually elect by the affirmative vote
  of the holders of at least 50% of all Series A Preferred Shares and Class A
  Common Shares, voting together, two individuals to each serve as Class IV Directors
  of the Company (each, a “Capital Z Director”);
  
          (ii)
      so long as Capital Z and its Affiliates and their limited partners shall
      own at least 20%
      but less than 50% of the Series A Preferred Shares acquired by Capital
      Z under the Purchase Agreement (including for purposes of such calculation,
      all Class A Common Shares then held by such Persons), the holders of the
      Series A Preferred Shares and Class A Common Shares shall have, in addition
      to the other voting rights set forth herein, the exclusive right, voting
      separately as a class, to annually elect by the affirmative vote of the
      holders of at least 50% of all Series A Preferred Shares and Class A Common
      Shares, voting together, one individual to serve as a Class IV Director
      of the Company; provided that in the event that Capital Z and its
      Affiliates and their limited partners shall own less than 20% of the Series
      A Preferred Shares acquired by Capital Z pursuant to the Purchase Agreement
      (including for purposes of such calculation, all Class A Common Shares
      then held by such Persons), then the holders of the Series A Preferred
      Shares shall be entitled to vote generally in the election of directors
      in accordance with Section 3(a) hereof; and  

          (iii)
      so long as Reservoir and its Affiliates and their limited partners shall
      own at least 30% of
      the Series B Preferred Shares acquired by Reservoir under the Purchase
      Agreement (including for purposes of such calculation, all Class B Common
      Shares then held by such Persons), the holders of the Series B Preferred
      Shares and Class B Common Shares shall have, in addition to the other voting
      rights set forth herein, the exclusive right, voting separately as a class,
      to annually elect by the affirmative vote of the holders of at least 50%
      of all Series B Preferred Shares and Class B Common Shares, voting together,
      one individual to serve as a Class IV Director of the Company (the “Reservoir
      Director”); provided that in the event that Reservoir and its
      Affiliates and their limited partners shall own less than 30% of the Series
      B Preferred Shares acquired by Reservoir pursuant to the Purchase Agreement
      (including for purposes of such calculation, all Class B Common Shares
      then held by such Persons), then the holders of the Series B Preferred
      Shares shall be entitled to vote generally in the election of directors
      in accordance with Section 3(a) hereof. 

 

 

        (iv)
    so long as Rainwater and his Affiliates shall own at least 60% of the Series
    C Preferred Shares acquired by Rainwater under the Purchase Agreement (including
    for purposes of such calculation, all Class C Common Shares then held by
    such Persons), the holders of the Series C Preferred Shares and Class C Common
    Shares shall have, in addition to the other voting rights set forth herein,
    the exclusive right, voting separately as a class, to annually elect by the
    affirmative vote of the holders of at least 50% of all Series C Preferred
    Shares and Class C Common Shares, voting together, one individual to serve
    as a Class IV Director of the Company (the “Rainwater Director”); provided that
    in the event that Rainwater and his Affiliates shall own less than 60% of
    the Series C Preferred Shares acquired by Rainwater pursuant to the Purchase
    Agreement (including for purposes of such calculation, all Class C Common
    Shares held by such Persons), then the holders of the Series C Preferred
    Shares shall be entitled to vote generally in the election of directors in
    accordance with Section 3(a) hereof.  

(c) Consent of Series A Preferred Shares Required For Variation of Rights
and Restrictions. So long as any Series A Preferred Shares remain issued and outstanding, unless the vote or consent of the holders of a greater number of shares shall then be required
by law overriding the provisions herein, the affirmative vote or consent of the holders of at least 50% of all of the Series A Preferred Shares at the time issued and outstanding, voting as a class, given in person or by proxy either in writing (as
may be permitted by law and the Bye-Laws) or at any special or annual meeting, shall be necessary to permit, effect or validate the taking of any of the following actions by the Company:

       (i) in any manner authorize, create, designate,
  issue or sell any class or series of capital shares or rights, options, warrants
  or other securities convertible into or exercisable or exchangeable for capital
  shares or any debt security which by its terms is convertible into or exchangeable
  for any equity security or has any other equity feature or any security that
  is a combination of debt and equity, which, in each case, as to the payment
  of dividends or distribution of assets, including, without limitation, distributions
  to be made upon a liquidation, dissolution or winding-up of the Company, is pari
  passu with or is senior to the Series A
Preferred Shares or which in any manner adversely affects the holders of the
    Series A Preferred Shares or the Class A Common Shares, or amend the terms
    of any existing class or series of capital shares if the effect of such amendment
    would be to rank such class or series senior to or pari passu with
    the Series A Preferred Shares as to dividends or distribution of assets,
    including, without limitation, distributions to be made upon a liquidation,
  dissolution or winding-up of the Company;  

  

  

     (ii)
    in any manner alter or change the terms, designations, powers, preferences
    or relative, participating,
  optional or other special rights, or the qualifications, limitations or restrictions,
  of the Series A Preferred Shares or the Class A Common Shares;
  
        (iii)
        reclassify the shares of any class or series of capital shares into shares
        of any class or series of capital shares (A) ranking, either as to payment
        of dividends, distributions of Assets or redemptions, including, without
        limitation, distributions to be made upon a liquidation, dissolution
        or winding-up of the Company, senior to or pari passu with the
        Series A Preferred Shares or (B) which in any manner adversely affects
        the rights of the holders of the Series A Preferred Shares or any powers,
        rights, privileges or preference appertaining to Common Shares or Class
        A Common Shares, as the case may be, which such holders would have after
        conversion of the Series A Preferred Shares into Class A Common Shares
        or conversion of the Class A Common Shares into Common Shares;  

          (iv)
        take any action to cause any amendment, alteration or repeal of any of
        the provisions of the Memorandum of Association or Bye-Laws, if such
        amendment, alteration or repeal would have an adverse effect on the rights
        of the holders of the Series A Preferred Shares or any powers, rights,
        privileges or preference appertaining to Common Shares or Class A Common
        Shares which such holders would have after conversion of the Series A
        Preferred Shares into Class A Common Shares or conversion of Class A
        Common Shares into Common Shares (including, without limitation, by granting
        voting rights to holders of bonds, debentures or other obligations);
        or  

          (v)
        any change to the authorized number of Preferred Shares or Convertible
        Common Shares or issuance of additional Preferred Shares or Convertible
        Common Shares.

(d) Consent of Series B Preferred Shares Required For Variation of Rights
and Restrictions.
So long as any Series B Preferred Shares remain issued and outstanding, unless
the vote or consent of the holders of a greater number of shares shall then be
required by law overriding the provisions herein, the affirmative vote or consent
of the holders of at least 50% of all of the Series B Preferred Shares at the
time issued and outstanding, voting separately as a class, given in person or
by proxy either in
writing (as may be permitted by law and the Bye-Laws) or at
any special or annual meeting, shall be necessary to permit, effect or validate
    the taking of any of the following actions by the Company:

     (i)
    in any manner authorize, create, designate, issue or sell any class or series
    of capital
  shares or rights, options, warrants or other securities convertible into or
  exercisable or exchangeable for capital shares or any debt security which by
  its terms is convertible into or exchangeable for any equity security or has
  any other equity feature or any security that is a combination of debt and
  equity, which, in each case, as to the payment of dividends or distribution
  of assets, including, without limitation, distributions to be made upon a liquidation,
  dissolution or winding-up of the Company, is pari passu with or is senior
  to the Series B Preferred Shares or which in any manner adversely affects the
  holders of the Series B Preferred Shares or the Class B Common Shares, or amend
  the terms of any existing class or series of capital shares if the effect of
  such amendment would be to rank such class or series senior to or pari passu with
  the Series B Preferred Shares as to dividends or distribution of assets, including,
  without limitation, distributions to be made upon a liquidation, dissolution
  or winding-up of the Company;
  
        (ii)
      in any manner alter or change the terms, designations, powers, preferences
      or relative, participating, optional or other special rights, or the qualifications,
      limitations or restrictions, of the Series B Preferred Shares or the Class
      B Common Shares;  

        (iii)
      reclassify the shares of any class or series of capital shares into shares
      of any class or series of capital shares (A) ranking, either as to payment
      of dividends, distributions of Assets or redemptions, including, without
      limitation, distributions to be made upon a liquidation, dissolution or
      winding-up of the Company, senior to or pari passu with the Series
      B Preferred Shares or (B) which in any manner adversely affects the rights
      of the holders of the Series B Preferred Shares or any powers, rights,
      privileges or preference appertaining to Common Shares or Class B Common
      Shares, as the case may be, which such holders would have after conversion
      of the Series B Preferred Shares into Class B Common Shares or conversion
      of the Class B Common Shares into Common Shares;  

        (iv)
      take any action to cause any amendment, alteration or repeal of any of
      the provisions of the Memorandum of Association or Bye-Laws of the Company,
      if such amendment, alteration or repeal would have an adverse effect on
      the rights of the holders of the Series B Preferred Shares or any powers,
      rights, privileges or preference appertaining to Common Shares or Class
      B Common Shares which such holders would have after conversion of the Series
      B Preferred Shares into Class B Common Shares or conversion of Class B
      Common Shares into Common Shares (including, without limitation, by granting
      voting rights to holders of bonds, debentures or other obligations); or 

 

     (v)
    any change to the authorized number of Preferred Shares or Convertible Common
    Shares or issuance
  of additional Preferred Shares or Convertible Common Shares.

(e) Consent of Series C Preferred Shares Required For Variation of Rights
and Restrictions. So long as any Series C Preferred Shares remain issued and outstanding, unless the vote or consent of the holders of a greater number of shares shall then be required
by law overriding the provisions herein, the affirmative vote or consent of the holders of at least 50% of all of the Series C Preferred Shares at the time issued and outstanding, voting separately as a class, given in person or by proxy either in
writing (as may be permitted by law and the Bye-Laws) or at any special or annual meeting, shall be necessary to permit, effect or validate the taking of any of the following actions by the Company: 

     (i)
    in any manner authorize, create, designate, issue or sell any class or series
    of capital
  shares or rights, options, warrants or other securities convertible into or
  exercisable or exchangeable for capital shares or any debt security which by
  its terms is convertible into or exchangeable for any equity security or has
  any other equity feature or any security that is a combination of debt and
  equity, which, in each case, as to the payment of dividends or distribution
  of assets, including, without limitation, distributions to be made upon a liquidation,
  dissolution or winding-up of the Company, is pari passu with or is senior
  to the Series C Preferred Shares or which in any manner adversely affects the
  holders of the Series C Preferred Shares or the Class C Common Shares, or amend
  the terms of any existing class or series of capital shares if the effect of
  such amendment would be to rank such class or series senior to or pari passu with
  the Series C Preferred Shares as to dividends or distribution of assets, including,
  without limitation, distributions to be made upon a liquidation, dissolution
  or winding-up of the Company;
  
        (ii)
      in any manner alter or change the terms, designations, powers, preferences
      or relative, participating, optional or other special rights, or the qualifications,
      limitations or restrictions, of the Series C Preferred Shares or the Class
      C Common Shares;  

        (iii)
      reclassify the shares of any class or series of capital shares into shares
      of any class or series of capital shares (A) ranking, either as to payment
      of dividends, distributions of Assets or redemptions, including, without
      limitation, distributions to be made upon a liquidation, dissolution or
      winding-up of the Company, senior to or pari passu with the Series
      C Preferred Shares or (B) which in any manner adversely affects the rights
      of the holders of the Series C Preferred Shares or any powers, rights,
      privileges or preference appertaining to Common Shares or Class C Common
      Shares, as the case may be which such holders would have after conversion
      of the Series C Preferred Shares into Class C Common Shares or conversion
      of the Class C Common Shares into Common Shares; or 

  

      (iv)
    take any action to cause any amendment, alteration or repeal of any of the
    provisions of the Memorandum of Association or Bye-Laws of the Company, if
    such amendment, alteration or repeal would have an adverse effect on the
    rights of the holders of the Series C Preferred Shares or any powers, rights,
    privileges or preference appertaining to Common Shares or Class C Common
    Shares which such holders would have after conversion of the Series C Preferred
    Shares into Class C Common Shares or conversion of Class C Common Shares
    into Common Shares (including, without limitation, by granting voting rights
    to holders of bonds, debentures or other obligations).  

     (f) Consent Required for Certain Actions. Each action or series of actions set forth below in
this Section 3(f) shall require:

(x) if Capital Z, Reservoir and Rainwater (together
  with their Affiliates and limited partners) own, in the aggregate, at least
  40% of the Preferred Shares originally purchased by them (including for the
  purposes of such calculation any Convertible Common Shares and Common Shares
  into which such Convertible Common Shares have converted), the consent of each
  of (i) holders of more than 50% of the issued and outstanding Series A Preferred
  Shares and Class A Common Shares, voting together as a single class, and (ii)
  holders of more than 50% of the issued and outstanding Series B Preferred Shares,
  Series C Preferred Shares, Class B Common Shares and Class C Common Shares,
  all voting together as a single class;
  
   (y) if the condition
        specified in clause (x) is not satisfied and Capital Z (together with
        its Affiliates and limited partners) owns at least 50% of the Preferred
        Shares purchased by it (including for the purposes of such calculation
        any Convertible Common Shares and Common Shares into which such Convertible
        Common Shares have converted), the consent of holders of more than 50%
        of the issued and outstanding Series A Preferred Shares and Class A Common
        Shares, voting together as a single class; and  

     (z) if the condition
        specified in clause (x) is not satisfied and Resevoir and Rainwater,
        collectively (together with their Affiliates and limited partners) own
        at least 50% of the Preferred Shares originally purchased by them (including
        for the purposes of such calculation any Convertible Common Shares and
        Common Shares into which such Convertible Common Shares have converted),
        the consent of holders of more than 50% of the issued and outstanding
        Series B Preferred Shares, Series C Preferred Shares, Class B Common
        Shares and Class C Common Shares, all voting together as a single class:

      (i)
    at any time before the third anniversary of the Closing, involve one or more
    redemptions, offers to purchase, tender offers or other acquisitions of capital
    stock of the Company by or on behalf of the Company collectively involving
    the payment by or on behalf of the Company or any subsidiary thereof of cash
    and/or other consideration having an aggregate fair market value in excess
    of the
    Permitted Tender Offer Amount.  

     (ii)
    result in a sale of the Company by merger, sale of Assets or consolidation
    or amalgamation where
  the per share consideration paid to the holders of Preferred Shares on an as
  converted basis is less than 200% of the Current Conversion Price;
  
        (iii)
        result in the sale or transfer of 25% or more of the Company’s Assets;  

          (iv)
        result in a voluntarily delisting of the Common Shares from the New York
        Stock Exchange;  

          (v)
        (A) at any time before the third anniversary of the Closing, involve
        or result in the incurrence of additional Indebtedness from and after
        the Closing in excess of $50,000,000 in the aggregate, and provided such
        $50,000,000 shall not be inclusive of the first $55,000,000 of any refinancing
        of the First Union Credit Agreement (as defined in the Purchase Agreement)
        and (B) at any time on or after the third anniversary of the Closing,
        involve or result in a ratio of Indebtedness to total capital (equal
        to the sum of shareholders equity plus indebtedness including Trust Preferred,
        as it appears on the Company’s balance sheet as of the date of measurement
        and prepared in accordance with GAAP) in excess of 0.25 to 1.00;  

          (vi)
        effect or attempt to effect a voluntary liquidation, dissolution or winding
        up of the Company;  

          (vii)
        result in an expansion by the Company into lines of business other than
        continuing lines of business in which the Company is currently involved;  

          (viii)
        at any time before the third anniversary of the Closing increase the
        amount of dividends and other distributions (whether of cash or other
        property or rights) paid with respect to Common Shares, at a cumulative
        annualized rate of more than 10% from the last dividend declared prior
        to the Closing, from and after the Closing (such amount, as reduced by
        the amount of all cash and the fair market value of all property and
        rights paid by or on behalf of the Company as a dividend or distribution
        with respect to Common Shares, is referred to as the “Permitted Dividend
        Amount”); 

          (ix)
        involve the purchase or renewal of retrocessional or reinsurance coverage
        from companies with a Standard & Poor’s or A.M. Best rating
        below “A-” unless, in each case, such coverage is acquired
        pursuant to a contract that requires the applicable reinsurer or retrocessionaire
        (the “Reinsuring Company”) to (A) post and
       maintain collateral in an amount equal to the aggregate limits available
       under such reinsurance
       coverage within 10 Business Days of the inception of such reinsurance
       coverage, or (B)(y) the obligations of such Reinsuring Company are guaranteed
       by a direct or indirect parent thereof having Standard &Poor’s
       and A.M. Best ratings of “A-” or better or (z) such Reinsuring
       Company has capital and surplus as of the date of purchase or renewal
       of such coverage of at least $1 billion; provided, however, that
       notwithstanding the foregoing in this clause (ix), the Company may continue
       to purchase and renew reinsurance coverage with Select Re and renew, but
       not increase, coverage with Pennsylvania Lumbermans Mutual Insurance Company,
       in each case in the ordinary course of business consistent with
past practice;  

 

  

     (x)     at
    any time before the third anniversary of the Closing, effect an acquisition
    by the Company involving aggregate consideration in excess of $50,000,000;
  
       (xi)      involve
    or result in any additional or increased investment by the Company or any
    of its Subsidiaries in any hedge funds or similar investments beyond the
    amounts held at September 30, 2001 without the prior unanimous approval of
    the Investment Committee of the Board of Directors; or

     (xii)     at
any time on or after the third anniversary of the Closing, involves or results
in (A) the payment of any dividend or other distribution (whether in cash or
other property or rights) with respect to Common Shares or (B) involves or results
in a redemption, offer to purchase, tender offer or other acquisition of capital
stock of the Company by or on behalf of the Company collectively involving the
payment by or on behalf of the Company or any subsidiary thereof of cash and/or
other consideration having an aggregate fair market value in excess of the greater
of (i)  the Permitted Tender Offer Amount and (ii) the Permitted Dividend
Amount.

          4.  Dividend
Rights.

(a)       General.
    For the purposes of this Section 4, each December 31, March 31, June 30 and
    September 30 (commencing December 31, 2001) on which any Preferred Shares
    shall be outstanding shall be deemed to be a “Dividend
Due Date”. The holders of the Preferred Shares shall be entitled to
receive, if, when and as declared by the Board of Directors out of funds legally
available therefor, cumulative dividends on each share (i) at any time such dividends
are to be paid in shares of Preferred Shares in accordance with the terms hereof,
the rate of 8% per
annum and (ii)      at any time such dividends are to
be paid in cash in accordance with the terms hereof, the rate of 8% per annum,
on the sum of (x) the Stated Value on each Preferred Share plus (y) the amount
of any accrued and unpaid dividends thereon, and no more, calculated on the basis
of a year of 360 days consisting of twelve 30-day months, payable on each Dividend
Due Date, with respect to the quarterly period ending on the day immediately
preceding such Dividend Due Date (except
that if any such date is not a Business Day, then such dividend shall be payable
    on the next Business Day following such Dividend Due Date, provided that
    for the purposes of computing such dividend payment, no interest or sum in
    lieu of interest shall accrue from such Dividend Due Date to the next Business
    Day following such Dividend Due Date). Dividends on each Preferred Share
    shall accrue and be cumulative from and after the date of issuance of such
    Preferred Share whether or not such dividends are declared and whether or
    not there shall be net profits or net assets of the Company legally available
    for the payment of such dividends. The amount of Dividends payable per share
    for each full dividend period shall be computed by dividing by four the 8%
    annual rate. The record date for the payment of dividends on the Preferred
    Shares shall in no event be more than sixty (60) days nor less than fifteen
    (15) days prior to a Dividend Due Date. Any such dividend that is to be paid
    in Preferred Shares shall be payable by delivery to such holders, at their
    respective addresses as they appear in the stock register, of certificates
    representing the appropriate number of duly authorized, validly issues, fully
    paid and nonassessable shares of Series A Preferred Shares to holders of
    Series A Preferred Shares, Series B Preferred Shares to holders of Series
    B Preferred Shares and Series C Preferred Shares to holders of Series C Preferred
    Shares. Any such dividend that is to be paid in cash shall be payable by
    delivery of such cash amounts to such holders at their respective addresses
as they appear in the stock register.  

 

      (b) Form of Dividends. Dividends payable on any Dividend Due Date shall, if declared by the
Board of Directors of the Company or any duly authorized committee thereof and regardless of when actually paid, accrue and be payable (i) prior to the third anniversary of the Closing, in Series A Preferred Shares to holders of Series A Preferred
Shares, in Series B Preferred Shares to holders of Series B Preferred Shares and in Series C Preferred Shares to holders of Series C Preferred Shares and (ii) from and after the third anniversary of the Closing, accrue and be payable in cash. The
number of Series A Preferred Shares, Series B Preferred Shares or Series C Preferred Shares, as the case may be, so payable on any Dividend Due Date as a dividend per Series A Preferred Share, Series B Preferred Share or Series C Preferred Share, as
the case may be, shall be equal to the amount of dividends that would have been payable on such share if such dividend were being paid in cash on such Dividend Due Date divided by the Stated Value. Any additional Series A Preferred Shares, Series B
Preferred Shares or Series C Preferred Shares issued pursuant to this Section 4(b) shall be governed by this resolution and shall be subject in all respects to the same terms as the Series A Preferred Shares, Series B Preferred Shares and Series C
Preferred Shares, respectively, originally issued hereunder. Notwithstanding anything in this paragraph to the contrary, at the sole election of the Company contained in a resolution of the Board of Directors or any duly authorized committee
thereof, in substitution in whole or in part for such dividends payable in Preferred Shares (pursuant to clause (i) above), such dividends may be paid in cash to the extent of any dividends that, if paid in additional Preferred Shares, would
otherwise cause the Purchasers and their Affiliates to own more than 49.9% of the capital stock of the Company on a fully diluted and Fully Converted basis. 

 (c) Dividend Preference.
      Any dividend which shall not be paid on the Dividend Due Date on which
      it shall become due shall be deemed to be “past due” until such
      dividend is paid. So long as any dividend in respect of any outstanding
      Preferred Share shall be past due at any time such dividends are to be
      paid in cash in accordance with the terms hereof, the dividend rate applicable
      to such Preferred Share shall be increased to 10% per annum compounded
      quarterly.

  Notwithstanding anything to the contrary set forth in this Section 4,
 	 	    if at any time during which any Preferred Share remains outstanding the
 	 	    dividend rate payable thereon exceeds the highest rate of interest permissible
 	 	    under any law which a court of competent jurisdiction shall, in a final
 	 	    determination, deem applicable hereto (the “Maximum
Lawful Rate”), then in such event and so long as the Maximum
Lawful Rate would be so exceeded, the dividend rate of in respect of Preferred
Shares shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the dividend rate payable thereon is less than the Maximum Lawful Rate, dividends shall continue to accrue thereon at the Maximum Lawful Rate until such time as the
total dividends earned are equal to the total dividends which would have been earned had the dividend rate on such Preferred Share been (but for the operation of this paragraph) the dividend rate payable since the Closing. 

  Dividends paid on Preferred Shares in an amount less than the total amount
 	 	    of such dividends at the time accumulated and payable on such shares
 	 	    shall be allocated pro rata on a share-by-share basis among all such
 	 	    Preferred
Shares at the time outstanding. 

  The rights of Series A Preferred Shares, the Series B Preferred Shares
 	 	    and Series C Preferred shares shall rank pari passu with each other with respect to the right to receive dividends, and such Preferred Shares shall rank senior in all respects to Common Shares, the Convertible Common Shares and all other classes
and series of capital shares of the Company, including without limitation other classes and series of preferred shares other than the Trust Preferred (collectively, “Junior
Shares”).

 If a dividend upon any
    Preferred Shares, or any other outstanding preferred stock of the Company
    ranking on a parity with the Preferred
  Shares as to dividends, is in arrears, all dividends or other distributions
    declared upon each series of such stock may only be declared pro rata so
    that in all cases
  the amount of dividends or other distributions declared per share of each such
  series bear to each other the same ratio that the accumulated and unpaid dividends
  per
  share on the shares of each such series bear to each other. Except as set forth
  above, if a dividend upon any Preferred Shares, or any other outstanding stock
  of the Company ranking on a parity with the Preferred Shares as to dividends,
  is in arrears: (i) no dividends, in cash, stock or other property, may be paid
  or declared and set aside for payment or any other distribution made upon any
  stock of the Company ranking junior to the Preferred Shares as to dividends;
  (ii) no stock of the
  Company ranking on a parity with the Preferred Shares as to dividends may be
  (A) redeemed pursuant to a sinking fund or otherwise, except (1) by means of
  a redemption pursuant to which all outstanding shares of Preferred Shares and
  all stock of the Company ranking on a parity with the Preferred Shares as to
  dividends are redeemed or pursuant to which a pro rata redemption is made from
  all holders of the Preferred Shares and all stock of the Company ranking on
    a parity with the Preferred Shares as to dividends (in each case, only so
    long
  as the Preferred Shares is otherwise redeemable pursuant hereto), the amount
  allocable to each series of such stock being determined on the basis of the
    aggregate liquidation preference of the outstanding shares of each series
    and the shares
  of each series being redeemed only on a pro
  rata basis or (2) by conversion of such stock ranking on a parity with the
    Preferred Shares as to dividends into, or exchange of such stock for, Junior
    Shares or
  (B) purchased or otherwise acquired for any consideration by the Company except
  (1) pursuant to an acquisition made pursuant to the terms of one or more offers
  to purchase all of the outstanding shares of the Preferred Shares and all stock
  of the Company ranking on a parity with the Preferred Shares as to dividends
  (which offers
  shall describe such proposed acquisition of all such stock ranking on a parity
  with the Preferred Shares), which offers shall each have been accepted by the
  holders of more than 50% of the shares of each series or class of stock receiving
  such offer outstanding at the commencement of the first of such purchase offers,
  or (2) by
    conversion of such stock ranking on a parity with the Preferred Shares as to
    dividends into, or exchange of such stock for, Junior Stock; and (iii) no stock
    ranking junior to the Preferred Shares as to dividends may be redeemed, purchased
    or otherwise acquired for consideration (including pursuant to sinking fund
    requirements) except by conversion into or exchange for Junior Shares.

	 
	 	 
	 	5.  	Liquidation Rights.
	 	 	 	 
	 	 	     (a)  Priority. In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary:
	 	 	 	 	 
	 	 	 	     (i)       before
       any payment or distribution of the Assets of the Company (whether from
       paid in share capital, share premium or surplus) shall be made to or set
       apart for the holders of Junior Shares or any other shares of the Company
       other than Trust Preferred, the holders, on a pari passu basis,
of the shares of (A) Series A Preferred Shares shall be entitled to receive from
the Assets of the Company, payment in cash of an amount equal to the aggregate
of the Stated Value per share of each issued and outstanding Series A Preferred
Share plus all accrued and unpaid dividends thereon (the “Series A
Preferred Liquidation Preference”), (B) Series B Preferred Shares shall
be entitled to receive from the Assets of the Company, payment in cash of an
amount equal to the aggregate of the Stated Value per share of the issued and
outstanding  Series B Preferred Shares plus all accrued and unpaid dividends
thereon (the “Series B Preferred Liquidation Preference”) and (C) Series
C Preferred Shares shall be entitled to receive from the Assets of the Company,
payment in cash of an  amount equal to the aggregate of the Stated Value per
share of each issued and outstanding Series C Preferred Share plus all accrued
and unpaid dividends thereon (the “Series C Preferred Liquidation Preference”).
If the Assets distributable upon such liquidation, dissolution or winding-up
of the Company shall be insufficient to permit payment to the respective holders
of the shares of Series A Preferred Shares, Series B Preferred Shares and Series
C Preferred Shares of
the
full preferential amounts as set forth in this Section 5(a)(i), then such Assets
    shall be distributed ratably among the shares of Series A Preferred Shares,
    the Series B Preferred Shares and the Series C Preferred Shares; and  

     (ii)
    any proceeds remaining after payment of the Series A Preferred Liquidation
    Preference, the
  Series B Preferred Liquidation Preference and the Series C Preferred Liquidation
  Preference shall be distributed ratably among the Common Shares, the Convertible
  Common Shares and other classes of shares of the Company in accordance with
  the relevant rights and restrictions thereof, if any.
  

  (b) Notice
            of Liquidation. Subject to any other requirement under
            law, written notice of any liquidation, dissolution or winding up
            of the Company, stating the payment date or dates when and the place
            or places where the amounts distributable in such circumstances shall
            be payable, shall be given (not less than thirty (30) days prior
            to any payment date stated therein), to the holders of record of
            the Preferred Shares at their respective addresses as the same shall
            appear on the register of shareholders of the Company.

  6. Conversion.
    The following provisions are subject to compliance with applicable law, and
    if the exercise of these rights would violate relevant law, such rights set
    out below will be suspended until such rights can be exercised in compliance
    with applicable law:

  (a) General.
    Each holder of Preferred Shares shall have the right, at the option of such
    holder, at any time to convert, upon the terms and provisions of this Section
    6, one or more Series A Preferred Shares, Series B Preferred Shares or Series
    C Preferred Shares into fully paid and nonassessable Class A Common Shares,
    Class B Common Shares or Class C Common Shares, respectively, or any class
    of shares or other securities into which such Class A Common Shares, Class
    B Common Shares or Class C Common Shares shall have been changed or any class
    of shares or other securities resulting from a reclassification thereof. 

     (i) Such conversion
  of Series A Preferred Shares to Class A Common Shares shall be made at the
  conversion rate of one Series A Preferred Share for a number of Class A Common
  Shares equal to a fraction (the “Series A Conversion Ratio”), (i)
  the numerator of which is equal to the Series A Preferred Liquidation Preference
  on a per share basis and (ii) the denominator of which is equal to the Current
  Conversion Price in effect at such time. The Class A Common Shares issuable
  upon conversion of the Series A Preferred Shares, when such Class A Common
  Shares shall be issued in accordance with the terms hereof, shall be duly authorized,
  validly issued, fully paid and nonassessable Class A Common Shares. 
        (ii)
          Such conversion of Series B Preferred Shares to Class B Common Shares
          shall be made at a conversion rate of one Class B Preferred Share for
          a number of Class B Common Shares equal to a fraction (the “Series
          B Conversion Ratio”), (i) the numerator of which is equal the
          Series B Liquidation Preference on
a per share basis and (ii) the denominator of which is equal to the Current Conversion
    Price in effect at such time. The Class B Common Shares issuable upon conversion
    of the Series B Preferred Shares, when such Class B Common Shares shall be
    issued in accordance with the terms hereof, shall be duly authorized, validly
    issued, fully paid and nonassessable Class B Common Shares.      

 

 

      (iii) Such
    conversion of Series C Preferred Shares to Class C Common Shares shall be
    made at a conversion rate of one Class C Preferred Share for a number of
    Class C Common Shares equal to a fraction (the “Series C Conversion Ratio”),
    (i) the numerator of which is equal the Series C Liquidation Preference on
    a per share basis and (ii) the denominator of which is equal to the Current
    Conversion Price in effect at such time. The Class C Common Shares issuable
    upon conversion of the Series C Preferred Shares, when such Class C Common
    Shares shall be issued in accordance with the terms hereof, shall be duly
    authorized,
validly issued, fully paid and nonassessable Class C Common Shares. 

      (iv)
    To the extent necessary to prevent the Purchasers and their Affiliates from
    owning more than 49.9% of the capital shares of the Company upon a fully
    diluted and Fully Converted basis, subject to the provisions of Section 7(i)
    hereof, the Company shall have the right (but not the obligation) to make
    a cash payment in lieu of a payment in Class A Common Shares, Class B Common
    Shares
or Class C Common Shares, as the case may be, equal to the Fair Market Value
    at the time of such conversion of the Common Shares that the Purchasers would
    have received upon Full Conversion in excess of the 49.9% limitation. Such
    right must be exercised, if at all, and the cash payment and related Tax
Gross-Up must be paid, at the time of such conversion. 

      (b) Surrender, Election and Payment.
      Each Preferred Share may be converted by the holder thereof during normal
      business hours on any Business Day by surrender of such Preferred Share,
      accompanied by written evidence of the holder’s election to convert
      such Preferred Share, to the Company at its office designated pursuant
      to the Bye-Laws of the Company (or, if such conversion is in connection
      with an underwritten public offering of Common Shares, at the location
      at which the underwriting agreement requires that such Common Shares (or
      Preferred Shares) be delivered). Payment
of the conversion price for the Convertible Common Shares specified in such election
      shall be made by applying to such payment an aggregate number of Preferred
      Shares equal to the number obtained by dividing (x) the number of Class
      A Common Shares, Class B Common Shares or Class C Common Shares, as the
      case may be, specified in such election by (y) the Series A Conversion
      Ratio, the Series B Conversion Ratio or the Series C Conversion Ratio,
      respectively. Such holder shall thereupon be
entitled to receive the number of Convertible Common Shares specified in such
      election.

      (c) Effective Date.
    Each conversion of Preferred Shares pursuant to Section 6(c) hereof shall
    be deemed to have been effected immediately prior to the close of business
    on the
Business Day on which such Preferred Shares shall have been surrendered to the
    Company as provided in Section 6(c) hereof, and such conversion shall be
    at the Current Conversion Price in effect at such time. On each such day
    that the conversion of Preferred Shares is deemed effected, the person or
    persons in whose name or names any certificate or certificates for Class
    A Common Shares, Class B Common Shares or Class C Common Shares, as the case
    may be, are issuable upon such
conversion, as provided in Section 6(e) hereof, shall be deemed to have become
    the holder or holders of record of such Class A Common Shares, Class B Common
    Shares or Class C Common Shares, as the case may be.

 

 (d) Share Certificates.
    As promptly as practicable after the conversion of any Preferred  Shares,
    in whole or in part, and in any event within ten (10) Business Days thereafter,
    the Company at its expense (including the payment by it of any applicable
    issue, stamp or other taxes on the issue of the Convertible Common Shares
    or on the
share certificate therefor, other than any income or capital gains taxes) will
    cause to be issued in the name of and delivered to the holder thereof or
    as such holder may direct, a certificate or certificates for the number of
    Class A
Common Shares, Class B Common Shares or Class C Common Shares, as the case may
    be, to which such holder shall be entitled upon such conversion on the effective
  date of such conversion.

 (e) Acknowledgment of Obligation. The Company will, at the time of or at any time after each
conversion of Preferred Shares, upon the request of the holder thereof or of any Common Shares issued upon such conversion, acknowledge in writing its continuing obligation to afford to such holder all rights, if any, to which such holder shall
continue to be entitled; provided, that if any such holder shall fail to make any such request, the failure shall not affect the continuing obligations of the Company to afford such rights
to such holder.

 (f) Current Conversion Price.
      The term “Conversion Price” shall mean initially
$15.69. The term “Current Conversion Price” as used herein shall mean
the Conversion Price, as the same may be adjusted from time to time as hereinafter
provided (including, without limitation, pursuant to Section 7 hereof), in effect
at
any given time; provided, however, that the Current Conversion Price shall not be lower than the par value of the Class A Common
Shares, the Class B Common Shares or the Class C Common Shares. In determining the Current Conversion Price, the result shall be expressed to the nearest $0.01, but any such lesser amount shall be carried forward and shall be considered at the time
of (and together with) the next subsequent adjustment which, together with any adjustments to be carried forward, shall amount to $0.01 per Class A Common Share, Class B Common Share or Class C Common Share more.

 (g) Reservation of
    Convertible Common Shares and Common Shares. The Company shall at all times
    reserve and keep available out of authorized but unissued the maximum number
    of Convertible Common Shares and Common Shares into which all Preferred Shares
    and Convertible Common Shares, respectively, from time to time issued and
  outstanding are convertible.

      (h) Mandatory Conversion. The following conversion provisions shall also be applicable to the
Preferred Shares: 

      (i)
    If not previously converted, all of the issued and outstanding A1 Preferred
    Shares, B1 Preferred Shares and C1 Preferred Shares, inclusive of all dividends
    paid in Preferred Shares in accordance with this Description of Stock, will
    be mandatorily converted into Class A Common Shares, Class B Common Shares
    or Class C Common Shares, respectively, on the third anniversary of the Closing
    (the “First Mandatory Conversion”). If not previously converted
    by the Purchasers, all of the issued and outstanding A2 Preferred Shares,
    B2 Preferred Shares and C2 Preferred Shares inclusive of all dividends paid
    in Preferred Shares in accordance with this Description of Stock, will be
    mandatorily converted into Class A Common Shares, Class B Common Shares or
    Class C Common Shares, respectively, on the sixth anniversary of the Closing
    (the “Second
Mandatory Conversion”, and collectively with the First Mandatory Conversion,
the “Mandatory Conversion”).
To the extent that less than all of the Preferred Shares to be converted are
converted (for whatever reason) the Convertible Common Shares issued in such
Mandatory Conversion shall be allocated among the holders on a pro rata basis.

     (ii)
  The conversion price used in connection with the First Mandatory Conversion
    shall be determined as follows: 

      (A)
    if the Current Conversion Price as of the date of the First Mandatory Conversion
    (the “Conversion
        Date”) is equal to or less than the
        Fair Market Value of the Common Shares as of the Conversion Date (the “Conversion
        Date FMV”), the Current
Conversion Price used in the First Mandatory Conversion shall be the Conversion
        Price as of the Conversion Date; 

      (B)
    if the Current Conversion Price as of the Conversion Date is greater than
    the
    Conversion Date FMV, the conversion price used in the First Mandatory Conversion
    shall equal the sum of (x) the product obtained by multiplying the Conversion
    Date FMV by 0.8 plus (y) the product obtained by multiplying the Current
    Conversion Price as of the Conversion Date by 0.2.

     (iii)
    The conversion price used in connection with the Second Mandatory Conversion
    shall be the Current Conversion Price as of the date of the Second Mandatory
  Conversion. 

     (iv)
    The mechanics for conversion and other provisions relating to the conversion
    of Preferred Shares set forth elsewhere in this Section 6 and in Section
    7
hereof shall apply to the automatic conversion of Preferred Shares pursuant to
    this Section 6(h). 

 

 7.  	Adjustment to Conversion Price. 

The Conversion Price shall be adjusted, from time to time, as follows: 

      (a) Adjustments for Recapitalizations, Etc. In case the Company shall (i) subdivide its
outstanding Common Shares, (ii) combine the issued and outstanding Common Shares into a smaller number of shares, (iii) issue by reclassification of Common Shares, any shares of the Company or (iv) pay a dividend or make a distribution on the
outstanding Common Shares in capital shares of the Company, then, in any such case, the Current Conversion Price in effect immediately prior to such action shall be adjusted to a price such that if the holder of a Preferred Share were to Fully
Convert such Preferred Share immediately after such action, such holder would be entitled to receive the number of shares of the Company which such holder would have owned immediately following such action had such Preferred Shares been converted
immediately prior thereto (with any record date requirement being deemed to have been satisfied), and, in any such case, such Conversion Price shall thereafter be subject to further adjustments under this Section 7. An adjustment made pursuant to
this Section 7(a) shall become effective retroactively immediately after the effective date.

      (b) Adjustments for Issuances of Additional Shares.
      Subject to the exceptions referred to in Section 7(e) hereof, in case the
      Company shall at any time or from time to time after the date hereof issue
      any additional Common Shares (“Additional Common Shares”) either
      (i) for no consideration or (ii) for a consideration per share that is
      either (A) less than 95% of the Fair Market Value of the Common Shares
      on the last day prior to the date of announcement of such issuance in a
      registered public offering or (B) less than the Fair Market Value of the
      Common Shares in a
private transaction, then (in the case of either clause (i) or (ii)), and thereafter
      successively upon each such issuance, the Current Conversion Price shall
      be adjusted pursuant to the following formula:

	NCP = OCP
	x OB + X
	 	  
	 	OA
	 	

	where	NCP	=	the new Current Conversion
        Price
	 	 	 	 
	 	OCP	=	the existing Current
        Conversion Price immediately before the new issue (the “Old Conversion
        Price”)
	 	 	 	 
	 	OB	=	the total outstanding
        Common Shares (on a fully diluted basis immediately before
        the new issue)
	 	 	 	 
	 	X	=	number of Common Shares
        issuable at Fair Market Value of the Common Shares for the
        total consideration to be received for the new issue
	 	 	 	 
	 	OA	=	the total outstanding
        Common Shares (on a fully diluted basis) immediately after the
        new issue;
	 	 	 	 

 

  

	provided, however, that any such adjustment shall be made only if such adjustment results in a Current Conversion Price less than the Current Conversion Price in
effect immediately prior to the issuance of such Additional Common Shares. The Company may, but shall not be required to, make any adjustment of the Current Conversion Price if the amount of such adjustment shall be less than one percent (1%) of the
Current Conversion Price immediately prior to such adjustment, but any adjustment that would otherwise be required then to be made which is not so made shall be carried forward and shall be made at the time of (and together with) the next subsequent
adjustment which, together with any adjustments so carried forward, shall amount to not less than one percent (1%) of the Current Conversion Price immediately prior to such adjustment.
	 	 	 
	     (c)     Certain
   Rules in Applying the Adjustment for Additional Share Issuances. For purposes of any adjustment as provided in
Section 7(b) hereof, the following provisions shall also be applicable:
	 	 	 	 
	 	 	     (i)       Cash
         Consideration. In case of the issuance of Additional Common Shares
         for cash, the consideration received by the Company therefor shall be
          deemed to be the cash proceeds received by the Company for such Additional
         Common Shares after deducting any commissions or other expenses paid
         or incurred by the Company for any underwriting of, or otherwise in
         connection with the issuance of such
Additional Common Shares.
	 	 	 	 
	 	 	     (ii)       Non-Cash Consideration. In case of the issuance of Additional Common Shares for a consideration other than cash, or a consideration a part of which
shall be other than cash, the amount of the consideration other than cash so received or to be received by the Company shall be deemed to be the value of such consideration at the time of its receipt by the Company as determined in good faith by the
Board, except that where the non-cash consideration consists of the cancellation, surrender or exchange of outstanding obligations of the Company (or where such obligations are otherwise converted into Common Shares), the value of the non-cash
consideration shall be deemed to be the principal amount of the obligations canceled, surrendered, satisfied, exchanged or converted. If the Company receives consideration, part or all of which consists of publicly traded securities
(i.e., in lieu of cash), the value of such non-cash consideration shall be the aggregate fair market value of such securities (based on the latest reported sale price regular way) as of the
close of the day immediately preceding the date of their receipt by the Company.
	 	 	 	 
	 	 	 	     (iii)     Options, Warrants, Convertibles, Etc.
	 	 	 	 
	 	 	 	     (A)
      In case of the issuance, whether by distribution or sale to holders of
      its
      Common Shares or to others, by the Company of (i) any security (other than
      Preferred Shares and Convertible Common Shares) that is convertible into
    Common Shares or (ii) any rights, options or warrants to
purchase Common Shares, if inclusion thereof in calculating adjustments under
    this Section 7 would result in a Current Conversion Price lower than if excluded,
    the Company shall be deemed to have issued, for the consideration described
    below, the number of Common Shares into which such convertible security may
    be converted when first convertible, or the number of Common Shares deliverable
    upon the exercise of such rights, options or warrants when first exercisable,
    as
the case may be (and such shares shall be deemed to be Additional Common Shares
    for purposes of Section 7(b) hereof).  
	 	 	 	 
	 

 

      (B)
      The consideration deemed to be received by the Company at the time of the
      issuance
    of such convertible securities or such rights, options or warrants shall
    be the consideration so received determined as provided in Section 7(c)(i)
    and (ii) hereof plus (x) any consideration or adjustment payment to be received
    by the Company in connection with such conversion or, as applicable, (y)
    the
aggregate price at which Common Shares are to be delivered upon the exercise
    of such rights, options or warrants when first exercisable (or, if no price
    is specified and such shares are to be delivered at an option price related
    to the Fair Market Value of the subject Common Shares, an aggregate option
    price bearing the same relation to the Fair Market Value of the subject Common
    Shares at the time such rights, options or warrants were granted). 

       (C)
    If, subsequently, (1) such number of shares into which such convertible security
        is convertible, or which are deliverable upon the exercise of such rights,
        options or warrants, is increased or (2) the conversion or exercise price
        of such convertible security, rights, options or warrants is decreased,
  then the calculations under the preceding two sentences (and any resulting
      adjustment to the Current Conversion Price under Section 7(b) hereof) with
      respect
  to
        such convertible security, rights, options or warrants, as the case may
  be, shall be recalculated as of the time of such issuance but giving effect
      to such changes (but any
    such recalculation shall not result in the Current Series A Conversion Price
        being higher than that which would be calculated without regard to such
  issuance). 

        (D)
      On the expiration or termination of such rights, options or warrants, or
      rights
    to convert, the Current Conversion Price hereunder shall be readjusted (up
    or down as the case may be) to such Current Conversion Price as would have
    been obtained had the adjustments made with respect to the issuance of such
    rights, options, warrants or convertible securities been made upon the basis
    of the
delivery of only the number of Common Shares actually delivered upon the exercise
    of such rights, options or warrants or upon the conversion of any such securities
    and at the actual exercise or
conversion prices (but any such recalculation shall not result in the Current
    Conversion Price being higher than that which would be calculated without
    regard to such issuance). 

 

      (iv) Number of Shares Outstanding. The number of Common Shares at the time outstanding shall exclude all
Common Shares then owned or held by or for the account of the Company but shall include the aggregate number of Common Shares at the time deliverable in respect of outstanding convertible securities, rights, options and warrants; provided, that to
the extent that such rights, options, warrants or conversion privileges are not exercised, such Common Shares shall be deemed to be outstanding only until the expiration dates of the rights, warrants, options or conversion privileges or the prior
cancellation thereof. 

         (d)
Adjustment for Development.
      The Current Conversion Price shall be adjusted upwards or downwards as
      of each Adjustment Date (as defined below) by multiplying the Current Conversion
      Price immediately prior to such adjustment date by a fraction (i) the numerator
      of which is (x) Adjusted Shareholders’ Equity minus (y) the cumulative
amount of any Loss Development (as defined below) recognized after the Closing in
excess of $7,000,000 (the “LD Above Deductible”) and (ii) the denominator of which is the Adjusted Shareholders’ Equity,
it being understood that no adjustment pursuant to this Section 7(d) shall be
made if such adjustment shall increase the initial Conversion Price as adjusted
by the provisions of this Section 7 other than those contained in this Section
7(d). The LD Above Deductible shall be
applied on an after-tax basis The term “Adjusted Shareholders’ Equity” shall mean the common shareholders’ equity,
as reflected in the GAAP financial statements of the Company as of September
30, 2001 (the “September Financial Statement”), provided that such shareholders’ equity
shall be adjusted by substituting the loss and expense reserves set forth in
the Definitive Loss Reserve Report (as defined below) for the corresponding reserves
set forth in the September Financial Statement. The term “Adjustment
Dates” shall
mean the dates of completion of the annual audit and reserve review of the Company by the Company’s
duly appointed auditor with respect to the years ended December 31, 2001, 2002
and 2003 and the term “Adjustment Date” shall mean any of such dates of completion, as well as the dates of completion of any reserve audit requested by the Purchasers. The term “Loss Development” shall mean
(i) any net positive or adverse loss and loss expense reserve development (including without limitation as a result of uncollectible reinsurance, net of any allowance for uncollectible reinsurance recorded as of September 30, 2001, reinstatement
premiums and any adjustments in profit commissions and ceding commissions) on reserves for losses incurred on or prior to September 30, 2001 and loss adjustment expenses related thereto and established with respect to (x) the losses and loss
adjustment expenses related to the events of September 11, 2001 (the “WTC Loss”), (y) lines of business other than the Discontinued Operations and the WTC Loss in an amount not to exceed $12,000,000 on an after-tax basis and (z) the
Discontinued Operations (defined below), in each case as set forth in the loss reserve report delivered to the Purchasers on December 10, 2001 (the “Definitive Loss Reserve Report”);
and (ii) any liability or loss (other than legal fees and expenses) arising out
of material litigation existing at
the time of Closing. The term “Discontinued Operations” shall mean
(i) Lloyds’ Syndicate 1224, (ii) the excess and surplus lines insurance
business assumed from Transnational Insurance Company and (iii) the casualty
business underwritten by PXRE Direct Underwriting Managers, Inc. The Purchasers
shall have the right to request a reserve audit at any time they should reasonably
believe it necessary. The reserve audit shall be performed by an independent
actuary
mutually acceptable to the Company and the Purchasers (the “Appointed
Actuary”). Upon conclusion of the reserve audit, the Appointed Actuary
shall issue a written reserve opinion and the conclusion set forth in such reserve
opinion shall be binding upon the Company and the Purchasers. The expense of
any reserve audit requested by the Purchasers shall be borne by the Purchasers.

 

      (e) Exclusions from the Adjustment for Additional Share Issuances.
      No adjustment of the Current Conversion Price under Section 7(b) hereof
      shall be made as a result of or in connection with (i) the issuance of
      Common Shares upon conversion of the Convertible Common Shares, (ii) the
      issuance or grant of any options, warrants or other
rights convertible into capital shares of the Company to employees, officers
      and directors of the Company pursuant to restricted stock agreements or
      stock options or other equity compensation plans (such plans having been
      approved by the
shareholders of the Company), or the issuance of the Company’s capital shares
thereunder, in an amount not to exceed 500,000 Common Shares per calendar year
and 2,100,000 Common Shares in the aggregate (subject to adjustment pursuant
to Section 7(a)) or (iii) issuances in connection with an underwritten public
offering of Common Shares at a price 95% or more of the Fair Market Value at
the time of such offering.

      (f) Accountants’ Certification. Whenever the Current Conversion Price is adjusted as
provided in this Section 7, the Company will promptly obtain a certificate of the Chief Financial Officer of the Company setting forth the Current Conversion Price as so adjusted, the computation of such adjustment and a brief statement of the facts
accounting for such adjustment, and will mail to the holders of Series A Preferred Shares a copy of such certificate. The holders of the Preferred Shares may within sixty (60) days object to the calculation of the Current Conversion Price by
providing written notice to the Company in accordance with the Bye-Laws of the Company, which notice will set forth the basis of such objection. Such objection shall be submitted to the Company’s auditor for review (at the expense of the Company) and the determination of the Company’s
auditor shall be binding. 

      (g) Other Adjustments.
    In case any event shall occur as to which any of the provisions of this Section
    7 are not strictly applicable but the failure to make any adjustment would
    not fairly protect the conversion rights represented by the Preferred Shares
    in accordance with the essential intent and principles of Sections 6 and
    7 hereof, then,
in each such case, upon the request of the holders of a majority of the Preferred
    Shares, the Company shall appoint a firm of independent public accountants
    of recognized national standing selected by the Board (who may be the regular
    auditors of the Company), which shall give their opinion upon the adjustment,
    if any, on a basis consistent with the essential intent and principles established
    in Sections 6 and 7 hereof, necessary to preserve, without dilution, the
    conversion rights
represented by the Preferred Shares. Upon receipt of such opinion, the Company
    will promptly mail copies thereof to the holders of the Preferred Shares
    and shall make the adjustments described therein.

	 
	     (h)      Consolidation, Merger or Amalgamation.
       If the Company shall at any time consolidate with or merge into another
       corporation (where the Company is not the continuing corporation after
       such merger or consolidation) or if the Company is amalgamated, or the
       Company shall sell, transfer or lease all or substantially all of its
       Assets, or the Company shall change
its Common Shares into property other than capital shares of the Company, then,
       in any such case, the holder of a Preferred Share shall thereupon (and
       thereafter) be entitled to receive, upon the Full Conversion of such Preferred
       Shares in whole or in part, the securities or other property to which
       (and upon the same terms and with the same rights as) a holder of the
       number of Common Shares deliverable upon Full Conversion of such Preferred
       Share would have been entitled if such Full
Conversion had occurred immediately prior to such consolidation, merger or amalgamation,
       such sale of Assets or such change (with any record date requirement being
       deemed to have been satisfied), and such conversion rights shall thereafter
       continue to be subject to further adjustments under this Section 7, without
       limiting any other rights of holders of Preferred Shares. The Company
       shall take such steps in connection with such consolidation, merger or
       amalgamation, such sale of Assets or such
change as may be necessary to assure such holder that the provisions of the shares
       of Preferred Shares shall thereafter continue to be applicable in relation
       to any securities or property thereafter deliverable upon the conversion
       of the Preferred Shares, including, but not limited to, obtaining a written
       obligation to supply such securities or property upon such conversion
    and to be so bound by the Preferred Shares
	 	 	 
	     (i)      If
       any adjustment to the Current Conversion Price pursuant to this Section
       7 would result in the Purchasers and their Affiliates being able to convert
       into more than 49.9% of the capital shares of the Company upon a fully
       diluted and Fully Converted basis, the Company shall have the right (but
       not the obligation) to elect (within 5 business days of the date of the
       event giving rise to such adjustment) to make a
cash payment in lieu of effecting such adjustment to the Current Conversion Price.
       Such cash payment shall equal the sum of the Fair Market Value as of the
       date of conversion of the Common Shares that the Purchasers would have
       received in excess of the 49.9% limitation upon the Full Conversion of
       their Preferred Shares as of the date of such adjustment plus the related
       Tax Gross-Up. Such cash payment shall be allocated pro rata among the
       Preferred Shares and shall be payable upon conversion of
any such Preferred Shares pursuant to Section 6 of this Description of Stock.
	 	 	 
	       (j)      Notices. In case at any time:
	 	 	 	 
	 	 	       (i)      the
       Company shall take any action which would require an adjustment in the
    Current Conversion Price pursuant to Section 7(a) or (c); or
	 	 	 	 
	 	 	       (ii)      the
       Company shall authorize the granting to the holders of its Common Shares
    of any distributions on Common Shares as set forth in Section 7(a); or

      (iii)
      there shall be any reorganization, reclassification or change of Common
      Shares
    (other than a change in par value or, if and when permitted by law, from
    par value to no par value or from no par value to par value), or any consolidation,
    merger or amalgamation to which the Company is a party and for which approval
    of any shareholders of the Company is required, or any sale,
transfer or lease of all or substantially all of the Assets of the Company; or 

      (iv)
    there shall be a voluntary dissolution, liquidation or winding-up of the
    Company; 

then, in any one or more of such cases, unless the matter is to be determined
    at a general meeting of shareholders, the Company shall give written notice
    to the holders of the Preferred Shares, not less than ten (10) days before
    any record date or other date set for definitive action, of the date on which
    such action, distribution, reorganization, reclassification, change, sale,
    transfer, lease, consolidation, merger, amalgamation, dissolution, liquidation
    or winding-up
shall take place, as the case may be. Such notice shall also set forth such facts
    as shall indicate the effect of any such action (to the extent such effect
    may be known at the date of such notice) on the Current Conversion Price
    and the kind and amount of the shares and other securities and property deliverable
    upon conversion of the Preferred Shares. Such notice shall also specify any
    date as of which the holders of the Common Shares of record shall be entitled
    to exchange their Common
Shares for securities or other property deliverable upon any such reorganization,
    reclassification, change, sale, transfer, lease, consolidation, merger, amalgamation,
    dissolution, liquidation or winding-up, as the case may be. 

      8. Board of Directors. (a) Each of the Purchasers acknowledge that any persons designated by
the Purchasers to serve on the Board of Directors who are not employees or officers of one of the Purchasers or of the general partner or managing partner of such Purchaser or of an entity listed on Schedule B hereto, or in the case of any Purchaser
who is an individual, such individual, must be reasonably acceptable to the Board of Directors of the Company.

      (b)
    Until such time as the Purchasers (together with their Affiliates and limited
    partners) no longer beneficially own in the aggregate at
 	 	    least 50% of the Preferred Shares acquired by such Persons under
    the Purchase Agreement (including for the purposes of such calculation, the
 	 	    Convertible Common Shares held by such Persons), the Board of Directors
 	 	    shall consist of eleven directors. 

      (c) 	So long as Reservoir and Rainwater collectively (together
with respective Affiliates and their limited partners) beneficially owns 20%
or more of the Preferred Shares acquired by Reservoir and Rainwater under the
Purchase Agreement or the terms of this Description of Stock (including for purposes
of such calculation, all Class B Common Shares and Class C Common Shares then
held by such Persons), a Reservoir Director or Rainwater Director (at Reservoir’s
election) shall serve on each of the committees of the Board of Directors; provided that
a Reservoir Director or Rainwater Director shall not serve on the Audit Committee
of the Board of Directors if such person does not meet the requirements of the
rules and regulations of the
       New York Stock Exchange (the “NYSE Rules”), or on the Compensation
       Committee if as a result the Company could not avail itself of the available
       exemptions of the Internal Revenue Code of 1986, as amended, or Section
       16(b) of the Exchange Act, including Rule 16b-3 thereunder or any successor
       rule.

	 
	       (d)       So
       long as Capital Z (together with its Affiliates and their limited partners)
       together beneficially owns 20% or more of the Preferred Shares acquired
       by Capital Z under the Purchase Agreement or the terms of this Description
       of Stock (including for purposes of such calculation, all Class A Common
       Shares then held by such Persons), one of the Capital Z Directors shall
       serve on each of the committees of the Board of
Directors; provided a Capital Z Director shall not serve on the Audit Committee of the Board of Directors if such person does not meet the requirements of the rules and regulations of the
NYSE Rules or on the Compensation Committee if as a result the Company could not avail itself of the available exemptions of the Internal Revenue Code of 1986, as amended, or Section 16(b) of the Exchange Act, including Rule 16b-3 thereunder or any
successor rule.
	 	 	 	 
	       (e)       Whether
       or not Capital Z, Reservoir or Rainwater designates any member of the
       Board of Directors, each of Capital Z, Reservoir and Rainwater, so long
       as either (together with its Affiliates and their limited partners) continues
       to beneficially own 20% or more of the Preferred Shares acquired by Capital
       Z, Reservoir or Rainwater, as the case may be, under the Purchase Agreement
       or the terms of this Certificate of Designations
(including for the purposes of such calculation, the Convertible Common Shares
       held by such Persons), may designate one individual (each, an “Observer”) to attend all meetings of
the Board of Directors (and any committees thereof) in a non-voting observer capacity. Each Observer shall be entitled to receive all notices, reports, presentations and materials as if the Observer were a member of the Board. Each Observer may be
required to deliver a confidentiality agreement reasonably required by the Company, and shall be subject to removal from any meeting or barred from review of any information relating to (i) the Company’s relationship with the persons or series
represented by such person at the Board’s option or (ii) if the Company
reasonably believes upon the advice of counsel that such exclusion is necessary
to preserve the attorney-client privilege. Such confidentiality agreement shall
not limit the right of the such Observer to share with Capital Z, Reservoir or
Rainwater, as the case may be (or any of its Affiliates, as the case may be)
any confidential information relating to the Company disclosed to such Observer
provided that Capital
Z, Reservoir or Rainwater, as the case may be (or its Affiliates, as the case
may be) maintains confidential information confidential to the same extent as
such Observer is required under such confidentiality agreement.
	 	 	 
	      9.      Class A Common Shares, Class B Common Shares and Class C Common Shares
	 	 	 	 
	 	 	               (a)      Designation and Number of Class A, Class B and Class C Common Shares. The designation of Convertible Common Shares by this resolution shall
be:

  

         (i)  
      “Class A Common Shares, $1.00 par value,” of the Company, and the number
      of Class A Common Shares which the Company shall be authorized to issue
shall be 20,000,000 shares;

       (ii)      “Class
        B Common Shares, $1.00 par value,” of the Company, and the number
        of Class B Common Shares which the Company shall be authorized to issue
        shall   be 16,666,666 and 2/3 shares; and

         (iii)     “Class
      C Common Shares, $1.00 par value,” of the Company, and the number of
      Class C Common Shares which the Company shall be authorized to issue shall
      be 13,333,333 and 1/3 shares;

       (b)     Priority.
    The Convertible Common Shares shall rank pari passu with the Common
    Shares.

       (c)     Voting.

         (i)        Except
    as otherwise provided specifically herein and in the Bye-Laws or required
    by Bermuda law, (A) each Convertible Common Share shall have the right and
    power and be entitled to vote on any question or matter upon which, or in
    any proceeding at which, the holders of Common Shares of the Company are
    entitled to vote and to be represented at and to receive notice of any meeting
    of shareholders (except for election or removal of directors of the Company,
    as to which the Convertible Common Shares shall only be able to vote for
    election or removal of Class IV Directors as set forth in Section 3 of this
    Description of Stock), the
    holders of Preferred Shares, Convertible Common Shares and Common Shares
    shall vote together as one class and not as separate classes and (C) each
    holder of Convertible Common Shares shall be entitled to that number of votes
    for each Convertible Common Share held by such holder equal to the number
    of Common Shares that would be received by such holder if such Preferred
  Share were Fully Converted pursuant to Section 9(d) hereof. 

        (ii)     Notwithstanding
      the foregoing, the Class A Common Shares, the Class B Common Shares and the Class
      C Common Shares shall be entitled to vote with the Series A Preferred Shares,
      Series B Preferred Shares and Series C Preferred Shares in the election of the
      Capital Z Directors, respectively, the Reservoir Director and the Rainwater Director,
      respectively, in each case as set forth in Section 3 of this Description of
      Stock.

       (d)     Conversion.
    Convertible Common Shares shall automatically convert into Common Shares
    on a one-for-one ratio upon a transfer of record ownership thereof to any
    Person other than (i) Capital Z, Reservoir, Rainwater, or any of their respective
    Affiliates or limited partners (including without limitation in connection
with a public offering of such shares) or (ii) a Person approved by the Board
    in its sole discretion. Convertible Common Shares may be converted at the
    option of the holder thereof into Common Shares on
    a one-for-one ratio at any time that such holder would be entitled to vote
    Preferred Shares generally in the election of directors in accordance with
clause (b)(ii), (b)(iii) or (b)(iv) of Section 3 of this Description of Stock.  

       (e)     General.
    Except as provided for in this Section 9 or elsewhere in this Description
    of Stock, the Convertible Common Shares shall have the same rights, preferences
    and restrictions as the Common Shares.THE  SECURITIES  REPRESENTED  BY  THIS CONVERTIBLE PROMISSORY NOTE HAVE NOT BEEN
REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR  INVESTMENT  AND  NOT  WITH  A  VIEW  TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION  THEREOF.  NO  SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE  REGISTRATION  STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM  SATISFACTORY  TO  THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE  SECURITIES  ACT  OF  1933,  AS  AMENDED.

                           CONVERTIBLE PROMISSORY NOTE
                           ---------------------------

US$60,000.00                                                       July 29, 2005

     For  value received, RAPIDTRON, INC., a Nevada corporation (the "Company"),
                                                                      -------
promises  to pay to CERES FINANCIAL LIMITED, a BVI company, of Walkers Chambers,
P.O.  Box  92,  Mill  Mall,  Road  Town,  Tortola,  British  Virgin Islands (the
"Holder"),  the  principal  sum  of  U.S.  Sixty  Thousand  and  00/100  Dollars
 ------
(US$60,000.00).  Interest  shall  accrue  from  the  date  of  this  Convertible
Promissory  Note (this "Note") on the unpaid principal amount at a rate equal to
                        ----
eight  percent (8%) per annum, compounded annually.  This Note is subject to the
following  terms  and  conditions.

     1.   MATURITY.  Unless  converted  as provided in Section 2, this Note will
          --------
automatically mature and be due and payable on September 30, 2005 (the "Maturity
                                                                        --------
Date").  Subject  to  Section  2  below,  interest shall accrue on this Note but
----
shall  not  be  due  and  payable  until the Maturity Date.  Notwithstanding the
foregoing,  the  entire unpaid principal sum of this Note, together with accrued
and  unpaid  interest thereon, shall become immediately due and payable upon the
insolvency  of  the  Company,  the  commission  of  any act of bankruptcy by the
Company, the execution by the Company of a general assignment for the benefit of
creditors,  the  filing by or against the Company of a petition in bankruptcy or
any  petition for relief under the federal bankruptcy act or the continuation of
such petition without dismissal for a period of ninety (90) days or more, or the
appointment  of  a  receiver  or  trustee  to take possession of the property or
assets  of  the  Company.

     2.   CONVERSION; PAYMENT; ETC.
          ------------------------

          (a)     This  Note  shall  be  convertible at any time, in whole or in
part,  at  the  option  of  the  Holder,  into  such  number  of  fully paid and
nonassessable  shares  of  Common  Stock  of  the Company ("Common Stock") as is
determined  by  dividing (i) the entire principal amount of, and at the Holder's
option  accrued  interest on, this Note on the date of such optional conversion,
by (ii) a conversion price equal to the lesser of (i) US$0.175 per share or (ii)
seventy-five  percent (75%) of the lowest closing bid price for the Common Stock
(as  reported  by  Bloomberg)  in  any  of the five (5) trading days immediately
preceding  the  conversion  date.

          (b)     The  conversion price shall be subject to adjustment from time
     to  time  as  hereinafter  provided  in  this  Section  2(b):

          (i)       If the Company at any time divides the outstanding shares of
                    its Common Stock into a greater number of shares (whether
                    pursuant to a stock split, stock dividend or otherwise), and
                    conversely, if the outstanding shares of its Common Stock
                    are combined into a smaller number of shares, the conversion
                    price in effect immediately prior to

                                      - 1 -
<PAGE>
                    such division or combination shall be proportionately
                    adjusted to reflect the reduction or increase in the value
                    of each such common share.

          (ii)      If any capital reorganization or reclassification of the
                    capital stock of the Company, or consolidation or merger of
                    the Company with another corporation, or the sale of all or
                    substantially all of its assets to another corporation shall
                    be effected in such a way that holders of the Company's
                    Common Stock shall be entitled to receive stock, securities
                    or assets with respect to or in exchange for such Common
                    Stock, then, as a condition of such reorganization,
                    reclassification, consolidation, merger or sale, Holder
                    shall have the right to purchase and receive upon the basis
                    and upon the terms and conditions specified in this
                    debenture and in lieu of the shares of the Common Stock of
                    the Company immediately theretofore purchasable and
                    receivable upon the exercise of the rights represented
                    hereby, such shares of stock, other securities or assets as
                    would have been issued or delivered to Holder if Holder had
                    exercised this debenture and had received such shares of
                    Common Stock immediately prior to such reorganization,
                    reclassification, consolidation, merger or sale. The Company
                    shall not effect any such consolidation, merger or sale
                    unless prior to the consummation thereof the successor
                    corporation (if other than the Company) resulting from such
                    consolidation or merger or the corporation purchasing such
                    assets shall assume by written instrument executed and
                    mailed to the Holder at the last address of the Holder
                    appearing on the books of the Company the obligation to
                    deliver to the Holder such shares of stock, securities or
                    assets as, in accordance with the foregoing provisions, the
                    Holder may be entitled to purchase.

          (iii)     If  and  whenever  the  Company  shall (1) issue or sell any
                    shares of its Common Stock for a consideration per share
                    less than the conversion price in effect immediately prior
                    to the time of such issuance or sale, (2) issue or sell any
                    warrants, options or other rights to acquire shares of its
                    Common Stock at a purchase price less than the conversion
                    price in effect immediately prior to the time of such
                    issuance or sale or (3) issue or sell any other securities
                    that are convertible into shares of its Common Stock for a
                    purchase or exchange price less than the conversion price in
                    effect immediately prior to the time of such issuance or
                    sale then, upon such issuance or sale, the conversion price
                    shall be reduced to the price at which such shares of Common
                    Stock are being issued or sold by the Company or the price
                    at which such other securities are exercisable or
                    convertible into shares of the Company's Common Stock.

          (c)     No  fractional  shares  of the Company's capital stock will be
issued  upon  conversion of this Note.  In lieu of any fractional share to which
the  Holder  would  otherwise be entitled, the Company will pay to the Holder in
cash  the  amount of the unconverted principal and interest balance of this Note
that  would  otherwise be converted into such fractional share.  Upon conversion
of  this  Note pursuant to this Section 2, the Holder shall surrender this Note,
duly  endorsed, at the principal offices of the Company or any transfer agent of
the  Company.  At  its  expense,  the  Company  will,  as  soon  as  practicable
thereafter,  issue  and  deliver  to  such  Holder,  at such principal office, a
certificate  or  certificates  for  the number of shares to which such Holder is
entitled  upon  such conversion, together with any other securities and property
to which the

                                      - 2 -
<PAGE>
Holder  is entitled upon such conversion under the terms of this Note, including
a  check payable to the Holder for any cash amounts payable as described herein.
Upon  conversion  of  this  Note  and  the  deliveries required pursuant to this
Section  2  in  connection  with  such  conversion,  the Company will be forever
released from all of its obligations and liabilities under this Note with regard
to  that  portion  of  the principal amount and accrued interest being converted
including without limitation the obligation to pay such portion of the principal
amount and accrued interest.

NOTWITHSTANDING ANY OTHER PROVISION HEREOF, NO HOLDER SHALL CONVERT THIS NOTE OR
ANY  PORTION  THEREOF,  IF  AS A RESULT OF SUCH CONVERSION THE HOLDER WOULD THEN
BECOME  A  "TEN  PERCENT  BENEFICIAL  OWNER" (AS DEFINED IN RULE 16A-2 UNDER THE
SECURITIES  EXCHANGE  ACT  OF  1934,  AS  AMENDED) OF COMMON STOCK.  FOR GREATER
CERTAINTY,  THE  NOTE SHALL NOT BE CONVERTIBLE BY THE HOLDER TO THE EXTEND THAT,
IF,  AFTER  GIVING  EFFECT  TO  SUCH  CONVERSION, THE HOLDER OF SUCH SECURITIES,
TOGETHER  WITH  ITS AFFILIATES, WOULD IN AGGREGATE BENEFICIALLY OWN, OR EXERCISE
CONTROL  OR DIRECTION OVER THAT NUMBER OF VOTING SECURITIES OF THE COMPANY WHICH
IS  10%  OR GREATER OF THE TOTAL ISSUED AND OUTSTANDING VOTING SECURITIES OF THE
COMPANY,  IMMEDIATELY  AFTER  GIVING  EFFECT  TO  SUCH  CONVERSION.

          (d)     PAYMENT  OF INTEREST.  Upon conversion of the entire principal
                  --------------------
amount  of  this  Note into the Company's capital stock, any interest accrued on
this  Note  that  is  not by reason of Section 2 hereof simultaneously converted
into  Common  Stock  shall  be  immediately  paid  to  the  Holder.

          (e)     PAYMENT.  All  payments  shall  be made in lawful money of the
                  -------
United  States  of  America  at such place as the Holder hereof may from time to
time  designate  in  writing to the Company.  Payment shall be credited first to
the  accrued  interest  then  due  and  payable  and  the  remainder  applied to
principal.  This  Note  may not be prepaid at any time without the prior written
consent  of  the  Holder.

          (f)     SECURITY.  This  Note  is  secured  by  a security interest in
                  --------
substantially  all  of  the  Company's tangible and intangible assets (including
intellectual  property)  (collectively, the "Collateral"), granted to the Holder
under  a  Security  Agreement  dated July 29, 2005. A default under the terms of
this  Note  shall  also  constitute  a  default  under  the  Security Agreement.

     3.   DUE ON SALE CLAUSE.   The Holder shall have the right, at its sole
          -----------------
option,  to  declare  this  Note immediately due and payable irrespective of the
Maturity  Date  specified  herein,  upon  the  following  events:

          (a)     Twenty business days prior to the effective date of any Change
of Control transaction undertaken without the prior written consent of the
Holder, which consent the Holder shall have no obligation to give. A "Change of
Control Transaction" means (i) any sale of equity securities or securities
convertible into equity securities of the Company; (ii) any merger,
consolidation, statutory share exchange or acquisition transaction involving the
Company; (iii) any sale of substantially all of the assets of the Company; or
(iv) any similar transaction involving the issuance, cancellation or
restructuring of equity securities of the Company unless, following the
completion of such transaction, the then existing shareholders of Company own or
control, directly or indirectly, at least 50% of the voting power or liquidation
rights of Company or the successor of such merger, consolidation or statutory
share exchange.

          (b)     If the Company shall sell, convey, transfer, assign or further
encumber the Collateral or any part thereof or any interest therein, whether
legal or equitable, in any manner (whether voluntarily or involuntarily) not
permitted under the Security Agreement, without the prior written consent of the
Holder, which consent the Holder shall have no obligation to give. Any consent
by the Holder to such a transfer may be predicated upon such terms, conditions
and

                                      - 3 -
<PAGE>
covenants as may be deemed advisable or necessary in the sole discretion of the
Holder, including, but not limited to, the right to (i) require the transferee's
assumption of personal liability on the debt hereunder, (ii) approve the form
and substance of all transfer and assumption documents, (iii) change the
interest rate, date of maturity and amount and/or schedule of payments hereunder
and (iv) charge a fee based on a percentage of the original principal amount of
this Note. The granting of permission for a transferee of the Collateral to
assume this Note shall not in any manner be deemed a consent to any subsequent
transfer, and the Holder shall retain the right to consent to such subsequent
transfer or transfers on the terms and conditions stated above. Consent to one
such transfer shall not be deemed to be a waiver of the right of such consent to
further or successive transfers. No assumption or consent to any subsequent
transfer shall be deemed to constitute a release of the Company's obligations
hereunder.

     4.   TRANSFER; SUCCESSORS AND ASSIGNS.
          --------------------------------

          (a)     The  terms  and  conditions  of  this  Note shall inure to the
benefit  of  and  be  binding  upon the respective successors and assigns of the
parties.  This  Note  may  be  transferred, or divided into two or more Notes of
smaller  denomination,  subject  to  the  following  conditions.  The Holder, by
acceptance  hereof,  agrees  to  give  written  notice  to  the  Company  before
transferring  this  Note of such Holder's intention to do so, describing briefly
the  manner  of  the  proposed  transfer.  Promptly  upon receiving such written
notice,  the  Company shall present copies thereof to the Company's counsel.  If
in  the  opinion  of the Company's counsel the proposed transfer may be effected
without  constituting  a  violation  of  the  applicable  U.S.  state or federal
securities  laws, then the Company, as promptly as practicable, shall notify the
Holder  of such opinion, whereupon the Holder shall be entitled to transfer this
Note,  provided  that  an  appropriate  legend  may  be  endorsed  on  this Note
respecting  restrictions  upon  transfer  thereof  necessary or advisable in the
opinion  of  counsel  satisfactory  to  the Company to prevent further transfers
which  would  be  in  violation of  such securities laws or adversely affect the
exemptions  relied upon by the Company.  To such effect, the Company may request
that  the  intended  transferee execute an investment letter satisfactory to the
Company  and  its  counsel.

          (b)     A  register of the issuance and transfer of this Note shall be
kept  at the office of the Company, and this Note may be transferred only on the
books  of  the  Company  maintained  at  its  office.  Each transfer shall be in
writing  signed  by  the  then  registered  Holder  hereof or the Holder's legal
representatives  or successors, and no transfer hereof shall be binding upon the
Company  unless in writing and duly registered on the register maintained at the
Company's  office.  Upon transfer of this Note, the transferee, by accepting the
Note, agrees to be bound by the provisions, terms, conditions and limitations of
this  Note  and  the Convertible Note and Warrant Purchase Agreement between the
Company  and  the  Holder  dated  effective  as  of  July  29,  2005.

          (c)     If  in  the opinion of the counsel referred to in this Section
4,  the  proposed  transfer or disposition of the Note described in the Holder's
written  notice  given  pursuant  to  this Section 4 may not be effected without
registration  or  without  adversely affecting the exemptions relied upon by the
Company,  the  Company  shall promptly give written notice to the Holder and the
Holder  will  limit  its  activities  and  restrict  its  transfer  accordingly.

     5.   GOVERNING LAW.  This  Note  and  all  acts  and  transactions pursuant
          -------------
hereto  and  the rights and obligations of the parties hereto shall be governed,
construed  and  interpreted  in  accordance  with  the  laws  of  the  State  of
California,  without  giving  effect  to  principles  of  conflicts  of  law.

     6.   NOTICES.  Any  notice  required  or permitted by this Note shall be in
          -------
writing  and shall be deemed sufficient upon delivery, when delivered personally
or  by  a  nationally-

                                      - 4 -
<PAGE>
recognized  delivery  service  (such  as Federal Express or UPS), or seventy-two
(72)  hours  after  being deposited in the U.S. mail, as certified or registered
mail,  with  postage  prepaid,  addressed  to  the  party to be notified at such
party's  address  as  set  forth  herein  or as subsequently modified by written
notice.

     7.   AMENDMENTS AND WAIVERS.  Any  term  of  this  Note may be amended only
          ----------------------
with the written consent of the Company and the Holder.  Any amendment or waiver
effected  in  accordance  with this Section 7 shall be binding upon the Company,
the  Holder  and  each  transferee  of  the  Note.

     Company hereby waives presentment for payment, notice of dishonor, protest
and notice of protest. If this Note is not paid when due, the Company agrees to
pay all costs of collection, including reasonable attorneys' fees.

     THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.

                                      RAPIDTRON, INC.

                                      By:
                                             -------------------------------
                                      Its:
                                             -------------------------------

                                      Address: 3151 Airway Ave., Bldg. Q,
                                      Costa Mesa, CA 92626

                                      - 5 -

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