Document:

EXHIBIT 4.2

                          SECOND AMENDED AND RESTATED

                          REGISTRATION RIGHTS AGREEMENT

     THIS  REGISTRATION  RIGHTS  AGREEMENT  (this  "Agreement")  is amended  and
restated as of August 6, 2002,  by and among  PrimeSource  Healthcare,  Inc.,  a
Massachusetts corporation (the "Company") and the persons listed as Stockholders
in  the  signature   pages  hereto   (collectively,   the   "Stockholders"   and
individually, a "Stockholder").

     WHEREAS, on June 28, 2001, the Company entered into an Amended and Restated
Registration  Rights  Agreement  with the  Stockholders  set forth  therein (the
"Existing Registration Rights Agreement");

     WHEREAS, pursuant to that certain Purchase Agreement,  dated as of the date
hereof (the  "Purchase  Agreement"),  by and among the Company and the investors
listed on the signature pages thereto, the Company will issue shares of Series G
Preferred Stock and certain warrants exercisable for Common Stock;

     WHEREAS,  the  transactions  contemplated  by the Purchase  Agreement  will
benefit the Company; and

     WHEREAS,  the parties are willing to execute this Agreement and to be bound
by the provisions hereof.

     NOW, THEREFORE,  in consideration of the premises, the agreements set forth
below,  and the parties'  desire to further the interests of the Company and its
present and future stockholders, the parties agree as follows:

     1.   Certain Definitions.
          -------------------

     As used in this  Agreement,  the  following  terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

     "Affiliate" means, with respect to a specified Person, (a) any other person
directly or indirectly  controlling or controlled by or under direct or indirect
common  control  with such  specified  Person,  (b) any other  Person that owns,
directly or  indirectly,  five percent (5%) or more of such  specified  person's
capital stock,  (c) any employee or director of such specified  Person,  (d) any
member of the family of any Person  specified in clauses  (a),  (b), and (c), or
(e) any corporation,  limited  liability  company,  partnership,  trust or other
entity in which any Person set forth in clauses (a),  (b), (c) or (d) above,  or
member of the  family  of any such  Person,  is a  director,  officer,  trustee,
partner  or holder of more than five  percent  (5%) of the  outstanding  capital
stock thereof.  For the purposes of this  definition,  "control," when used with
respect to any specified  person,  means the power to direct the  management and
policies of such person,  directly or indirectly,  whether through the ownership
of voting securities,  by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

     "Agreement" shall have the meaning set forth in the preamble hereto.

     "Bayley"  shall have the meaning set forth in clause (k) of the  definition
of "Registrable Securities" contained herein.

     "Board of Directors" shall mean the Board of Directors of the Company.

     "Claim"  shall  mean  any  loss,  claim,  damages,   liability  or  expense
(including the reasonable costs of  investigation  and reasonable legal fees and
expenses).

     "Common  Stock" shall mean the Common Stock,  par value $.01 per share,  of
the Company.

     "Company" shall have the meaning set forth in the preamble hereto.

     "Conversion and Exchange  Agreement" shall mean that certain Conversion and
Exchange Agreement dated as of even date herewith.

     "Demand  Registration"  shall  mean a  registration  pursuant  to Section 2
hereof.

     "Effective  Time"  shall mean the time at which the merger  pursuant to the
Merger Agreement became effective.

     "Equity  Security"  shall  mean any  capital  stock of the  Company  or any
security convertible, with or without consideration, into any such stock, or any
security  carrying  any warrant or right to  subscribe  for or purchase any such
stock, or any such warrant or right.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as from time
to time amended.

     "Existing  Registration  Rights Agreement" shall have the meaning set forth
in the recitals hereto.

     "Firm Commitment Underwritten Offering" shall mean an offering in which the
underwriters  agree  to  purchase  securities  for  distribution  pursuant  to a
Registration  Statement  under the Securities Act and in which the obligation of
the  underwriters  is to purchase all the  securities  being  offered if any are
purchased.

     "GE" shall mean GE Capital Equity Investments, Inc.

     "Holder" shall mean the beneficial owner of a security. For all purposes of
this  Agreement,  the Company  shall be entitled to treat the record  owner of a
security as the  beneficial  owner of such security  unless the Company has been
given written  notice of the  existence  and identity of a different  beneficial
owner.  A Holder of  Preferred  Stock  shall be  deemed to be the  Holder of the
Common Stock into which such Preferred Stock could be converted.

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     "Indemnified Holder" shall mean any Holder of Registrable  Securities,  any
officer,  director,  employee  or agent of any such  Holder  and any  Person who
controls  any such  Holder  within  the  meaning  of  either  Section  15 of the
Securities Act or Section 20 of the Exchange Act.

     "Merger  Agreement" shall mean the Agreement and Plan of Merger dated as of
November 27, 2000,  as amended,  by and among Luxtec  Corporation,  Laser Merger
Sub, Inc. and PrimeSource Surgical Inc.

     "Misstatement"  shall mean an untrue  statement  of a  material  fact or an
omission  to state a  material  fact  required  to be stated  in a  Registration
Statement or  Prospectus or necessary to make the  statements in a  Registration
Statement, Prospectus or preliminary prospectus not misleading.

     "New Warrant  Registrable  Securities"  shall have the meaning set forth in
clause (e) of the definition of "Registrable Securities" contained herein.

     "New  Warrants"  shall mean the  warrants  issued  pursuant to the Purchase
Agreement and the Conversion and Exchange Agreement.

     "Other  Stockholders"  shall mean the Stockholders  other than the Series C
Stockholders and the Series E Stockholders.

     "Person" shall mean a natural person,  partnership,  corporation,  business
trust,  association,  joint venture or other entity or a government or agency or
political subdivision thereof.

     "Piggyback  Registration"  shall mean a registration  pursuant to Section 3
hereof.

     "Preferred  Registrable  Securities"  shall mean the  Series C  Registrable
Securities and the Series E Registrable Securities.

     "Preferred  Stock" shall mean any shares of any series of  preferred  stock
issued as of the date hereof or in the future by the Company.

     "Prospectus"  shall  mean  the  prospectus  included  in  any  Registration
Statement,  as supplemented by any and all prospectus supplements and as amended
by any and all post-effective amendments and including all material incorporated
by reference in such prospectus.

     "PSS Common Stock" shall mean the Common Stock, par value $0.001 per share,
of PrimeSource Surgical, Inc., as it existed prior to the Effective Time.

     "PSS Preferred  Stock" shall mean any series of Preferred  Stock, par value
$0.001 per share,  of Prime Source  Surgical,  Inc.,  as it existed prior to the
Effective Time.

     "PSS Unit Purchase Agreement" shall mean the Unit Purchase Agreement, dated
as of January 23, 2001, by and among PrimeSource Surgical, Inc. and stockholders
named therein.

     "Purchase  Agreement"  shall  have the  meaning  set forth in the  recitals
hereto.

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     "Registrable  Security" or  "Registrable  Securities"  shall mean:  (a) the
shares of Common  Stock  issued or  issuable  upon  conversion  of the  Series G
Preferred  Stock  (including the Common Stock issued or issuable upon conversion
of the  Series G  Preferred  Stock  issued  upon the  exchange  of the  Series E
Preferred Stock into the Series G Preferred Stock pursuant to the Conversion and
Exchange  Agreement (the "Series E Registrable  Securities")) and any securities
issued or issuable with respect to such Common Stock by way of a stock  dividend
or stock split or in connection with a combination of shares,  recapitalization,
merger, consolidation or reorganization  (collectively,  other than the Series E
Registrable Securities,  the "Series G Registrable Securities");  (b) the shares
of Common  Stock  issued upon  conversion  of the Series F Preferred  Stock into
Common  Stock  pursuant  to  the  Conversion  and  Exchange  Agreement  and  any
securities  issued or issuable  with  respect to such  Common  Stock by way of a
stock  dividend or stock split or in connection  with a  combination  of shares,
recapitalization,  merger,  consolidation or reorganization  (collectively,  the
"Series F Registrable  Securities");  (c) the shares of Common Stock issued upon
conversion  of the Series C Preferred  Stock into Common  Stock  pursuant to the
Conversion  and Exchange  Agreement and any  securities  issued or issuable with
respect to such  Common  Stock by way of a stock  dividend  or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or  reorganization  (the "Series C Registrable  Securities");  (d) the shares of
Common Stock issued or issuable upon exercise of the Warrants and any securities
issued or issuable with respect to such Common Stock by way of a stock  dividend
or stock split or in connection with a combination of shares,  recapitalization,
merger, consolidation or reorganization (collectively,  the "Warrant Registrable
Securities"); (e) the shares of Common Stock issued or issuable upon exercise of
the New  Warrants  and any  securities  issued or issuable  with respect to such
Common Stock by way of a stock  dividend or stock split or in connection  with a
combination of shares, recapitalization, merger, consolidation or reorganization
(collectively,  the "New Warrant  Registrable  Securities") (f) shares of Common
Stock issuable upon the exercise of any options granted to GE; (g) the shares of
Common  Stock  issued upon  conversion  of the Series B Preferred  Stock if such
Series B Preferred  Stock has been  issued by the  Company in  exchange  for PSS
Preferred Stock held by any of the  Stockholders on February 3, 1998; (h) shares
of Common  Stock issued at the  Effective  Time in exchange for PSS Common Stock
held by any of the  Stockholders  on February 3, 1998;  (i) any shares of Common
Stock of the Company  issued as (or issuable upon the  conversion or exercise of
any  warrant,  right or other  security  which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of the shares
referenced  in subsection  (g) and (h); (j) the shares of Common Stock  issuable
upon the exercise of that certain warrant of PrimeSource  Surgical,  Inc., which
has been assumed by the Company pursuant to the Merger Agreement, dated February
3, 1998,  issued to  Citizens  Bank of  Massachusetts  pursuant  to the  Warrant
Agreement of even date  therewith;  (k) the shares of Common Stock issuable upon
the exercise of those options,  which have been assumed by the Company  pursuant
to the Merger Agreement,  to purchase PSS Common Stock,  dated January 17, 1997,
held by John F. Rooney  ("Rooney")  and Michael K.  Bayley  ("Bayley"),  (l) the
shares of Common Stock issuable upon the exercise of those  options,  which have
been assumed by the Company  pursuant to the Merger  Agreement,  to purchase PSS
Common Stock,  dated January 30, 1998,  held by William H. Lomicka and Robert W.
Fisher;  (m) the  shares of  Common  Stock  issuable  upon the  exercise  of any
warrants  which  have  been  assumed  by the  Company  pursuant  to  the  Merger
Agreement, issued to any guarantor in connection with the Credit Agreement dated
as of February 3, 1998,  between the Company and Citizens Bank of  Massachusetts
and (n) the shares of Common  Stock  issued or  issuable  upon  exercise of that

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certain warrant for the purchase of 100,000 shares of Common Stock,  issued,  on
March 2, 2001, by the Company to Ark CLO 2000-1 Limited;  excluding in all cases
(g) through (n) above, however, any Registrable Securities sold by a Holder in a
transaction  in which such  Holder's  rights under  Section 11 are not assigned;
provided  however,  for clauses  (a)  through (e) above,  that any such share or
other security shall be deemed to be Registrable  Securities only if and so long
as it is a Transfer Restricted Security.

     "Registration"   shall   mean  a  Demand   Registration   or  a   Piggyback
Registration.

     "Registration   Expenses"  shall  mean  the  out-of-pocket  expenses  of  a
Registration, including:

          (1)  all  registration and filing fees (including fees with respect to
               filings  required  to be made with the  National  Association  of
               Securities Dealers);

          (2)  fees and expenses of compliance  with securities or blue sky laws
               (including fees and disbursements of counsel for the underwriters
               or selling holders in connection with blue sky  qualifications of
               the   Registrable   Securities   and   determinations   of  their
               eligibility for investment  under the laws of such  jurisdictions
               as the  managing  underwriters  or holders  of a majority  of the
               Registrable Securities being sold may designate);

          (3)  printing, messenger, telephone and delivery expenses;

          (4)  fees and disbursements of counsel for the Company and of not more
               than one firm of  attorneys  for the  sellers of the  Registrable
               Securities;

          (5)  expenses  of the  underwriters  and  fees  and  disbursements  of
               counsel  for  the  underwriters,  in  each  case,  to the  extent
               required  to  be  paid  pursuant  to  an  underwriting  agreement
               relating to a Registration;

          (6)  fees  and  disbursements  of  all  independent  certified  public
               accountants  of the  Company  incurred  in  connection  with such
               Registration  (including  the  expenses of any special  audit and
               "cold comfort" letters incident to such registration);

          (7)  premiums and other costs of securities  acts liability  insurance
               if the  Company so desires or if the  underwriters  so require or
               selling holders of Registrable  Securities reasonably so require;
               and

          (8)  fees and expenses of any other Persons retained by the Company.

     "Registration  Statement" shall mean any  registration  statement under the
Securities  Act on an  appropriate  form (which form shall be available  for the
sale of the  Registrable  Securities in accordance  with the intended  method or
methods of  distribution  thereof  and shall  include all  financial  statements

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<PAGE>

required by the SEC to be filed therewith) which covers  Registrable  Securities
pursuant to the provisions of this Agreement,  including the Prospectus included
in such registration statement, amendments (including post-effective amendments)
and  supplements  to such  registration  statement,  and all exhibits to and all
material incorporated by reference in such registration statement.

     "Rooney"  shall have the meaning set forth in clause (k) of the  definition
of "Registrable Securities" contained herein.

     "Securities  Act" shall mean the  Securities  Act of 1933,  as from time to
time amended.

     "SEC" shall mean the Securities and Exchange Commission.

     "Series B Preferred  Stock" shall mean the Series B  Convertible  Preferred
Stock of the Company,  $1.00 par value per share,  issued pursuant to the Merger
Agreement.

     "Series C Preferred  Stock" shall mean the Series C  Convertible  Preferred
Stock of the Company,  $1.00 par value per share,  issued pursuant to the Merger
Agreement.

     "Series C  Registrable  Securities"  shall  have the  meaning  set forth in
clause (c) of the definition of "Registrable Securities" contained herein.

     "Series C  Stockholders"  shall mean the  Stockholders  of the Common Stock
received  upon  conversion  of the  Series C  Preferred  Stock  pursuant  to the
Conversion and Exchange Agreement.

     "Series E Preferred  Stock" shall mean the Series E  Convertible  Preferred
Stock of the Company, no par value per share.

     "Series E  Registrable  Securities"  shall  have the  meaning  set forth in
clause (a) of the definition of "Registrable Securities" contained herein.

     "Series E Stockholders"  shall mean the  Stockholders of Series G Preferred
Stock  received  upon exchange of the Series E Preferred  Stock  pursuant to the
Conversion and Exchange Agreement.

     "Series F Preferred  Stock" shall mean the Series F Convertible  Redeemable
Preferred Stock of the Company, no par value per share.

     "Series F  Registrable  Securities"  shall  have the  meaning  set forth in
clause (b) of the definition of "Registrable Securities" contained herein.

     "Series F  Stockholders"  shall mean the  Stockholders  of the Common Stock
received  upon  conversion  of the  Series F  Preferred  Stock  pursuant  to the
Conversion and Exchange Agreement.

     "Series G Preferred  Stock" shall mean the Series G Convertible  Redeemable
Preferred Stock of the Company, no par value per share.

     "Series G  Registrable  Securities"  shall  have the  meaning  set forth in
clause (a) of the definition of "Registrable Securities" contained herein.

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<PAGE>

     "Series  G  Stockholders"  shall  mean  the  Stockholders  of the  Series G
Preferred Stock issued pursuant to the Purchase Agreement.

     "Stockholder" shall have the meaning set forth in the preamble hereto.

     "Transfer Restricted Security" shall mean a security that has not been sold
to or through a broker,  dealer or underwriter in a public distribution or other
public  securities  transaction  or  sold  in  a  transaction  exempt  from  the
registration  and prospectus  delivery  requirements of the Securities Act under
Rule  144  promulgated   thereunder  (or  any  successor  rule).  The  foregoing
notwithstanding,  a security shall remain a Transfer  Restricted  Security until
all stop transfer instructions or notations and restrictive legends with respect
to such security have been lifted or removed.

     "Underwriters'  Commissions"  shall mean  discounts of and  commissions  to
underwriters,   selling   brokers,   dealer   managers  or  similar   securities
professionals relating to the distribution of the Registrable Securities.

     "Underwritten   Registration"  or  "Underwritten  Offering"  shall  mean  a
registration  in which  securities of the Company are sold to an underwriter for
distribution to the public.

     "Warrant Registrable Securities" shall have the meaning set forth in clause
(d) of the definition of "Registrable Securities" contained herein.

     "Warrants"  shall  mean (i) the  warrants,  initially  exercisable  for PSS
Common  Stock,  issued  pursuant to the PSS Unit Purchase  Agreement  which have
become  exercisable for Common Stock pursuant to the Merger Agreement;  (ii) the
warrants  issued  to  Geneva  Middle  Market  Investors,  L.P.  pursuant  to  an
agreement,  dated February 9, 2001, between the Company and Geneva Middle Market
Investors,  L.P.; and (iii) the warrants  issued in connection  with the sale of
the Series E Preferred Stock.

     2.   Demand Registrations.
          --------------------

          (a)  Timing Of Demand Registrations. At any time after the date hereof
               ------------------------------
either (i) GE or (ii) the holders of at least 50% of the  Preferred  Registrable
Securities (on behalf of themselves and all permitted  assignees who are holders
of Preferred  Registrable  Securities)  may request at any time that the Company
file a Registration  Statement  under the Securities Act on an appropriate  form
(which form shall be available  for the sale of the  Registrable  Securities  in
accordance with the intended method or methods of distribution thereof and shall
include all  financial  statements  required  by the SEC to be filed  therewith)
covering the shares of Preferred Registrable  Securities that are the subject of
such request.

          (b)  Number of Demand Registrations;  Required Threshold.  The Company
               ---------------------------------------------------
shall be obligated to prepare,  file and use its best efforts to cause to become
effective  pursuant  to  this  SECTION  2 no  more  than  two  (2)  Registration
Statements in the aggregate for the holders of Preferred Registrable  Securities
(on  behalf  of each of them and all  permitted  assignees  who are  holders  of
Preferred  Registrable  Securities);  PROVIDED,  HOWEVER,  that  a  Registration
Statement  shall  not be  counted  as one of the  two (2)  Demand  Registrations

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<PAGE>

hereunder  of such  holders of Preferred  Registrable  Securities  unless (1) it
becomes   effective  and  is  maintained   effective  in  accordance   with  the
requirements  specified in SECTION 5(a) or (2) it is filed on Form S-3 under the
Securities Act. The Company shall be obligated to prepare, file and use its best
efforts to cause to become  effective  pursuant to this  SECTION 2 up to two (2)
Registration Statements on Form S-3 per year, subject to SECTION 2(a).

          (c)  Participation.  The Company shall promptly give written notice to
               -------------
all  Stockholders  of Preferred  Registrable  Securities,  Series F  Registrable
Securities, Series G Registrable Securities,  Warrant Registrable Securities and
New  Warrant  Registrable  Securities  upon  receipt  of a request  for a Demand
Registration  pursuant to SECTION 2(a),  above.  In addition,  the Company shall
include  in such  Demand  Registration  such  shares  of  Preferred  Registrable
Securities,  Series F Registrable  Securities,  Series G Registrable Securities,
Warrant Registrable  Securities and New Warrant Registrable Securities for which
it has received  written  requests to register  such shares  within  twenty (20)
calendar days after such written notice has been given. The holders of Preferred
Registrable   Securities  exercising  a  Demand  Registration  request  and  the
Stockholders  of  Series  F  Registrable   Securities  and  Warrant  Registrable
Securities  participating in a Demand  Registration  shall receive priority with
respect to the number of shares to be included in a Registration; PROVIDED, that
such  participation  may be limited in the good faith  judgment of the  managing
underwriter in an  underwritten  public offering in accordance with SECTION 2(d)
below.

          (d)  Underwriter's  Cutback.  If the public  offering  of  Registrable
               ----------------------
Securities is to be underwritten and, in the good faith judgment of the managing
underwriter, the inclusion of all the Preferred Registrable Securities, Series F
Registrable  Securities,  Series G Registrable  Securities,  Warrant Registrable
Securities  and New Warrant  Registrable  Securities  requested to be registered
hereunder would  interfere with the successful  marketing of a smaller number of
shares of such  securities,  then the number of shares of Preferred  Registrable
Securities,  Series F Registrable  Securities,  Series G Registrable Securities,
Warrant  Registrable  Securities and New Warrant Registrable  Securities,  to be
included  shall  be  reduced  to such  smaller  number,  with the  reduction  in
participation  in  such  offering  to be  borne  (i)  first,  by  the  Series  G
Stockholders  of Series G Registrable  Securities  and the  Stockholders  of New
Warrant Registrable  Securities requesting such registration pro rata based upon
the  number  of  shares  of  Series G  Registrable  Securities  and New  Warrant
Registrable Securities owned by such Stockholders until, if necessary, no Series
G Registrable  Securities and New Warrant Registrable Securities are included in
such  Registration,  (ii)  second,  by the  Series C  Stockholders  of  Series C
Registrable  Securities  requesting such  registration  until, if necessary,  no
Series C Registrable  Securities  are included in such  Registration,  and (iii)
third,  by the Series E  Stockholders  of Series E Registrable  Securities,  the
Series F Stockholders  of Series F Registrable  Securities and  Stockholders  of
Warrant Registrable  Securities requesting such registration pro rata based upon
the number of shares of Series E  Registrable  Securities,  Series F Registrable
Securities and Warrant Registrable Securities owned by such Stockholders.

     The Company and,  subject to the  requirements of Section 11 hereof,  other
holders of  securities  of the  Company  may  include  such  securities  in such
Registration  if,  but only if, the  managing  underwriter  concludes  that such
inclusion will not interfere with the successful  marketing of all the Preferred
Registrable Securities,  Series F Registrable Securities and Warrant Registrable
Securities requested to be included in such registration.

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<PAGE>

          (e)  Managing Underwriter. The managing underwriter or underwriters of
               --------------------
any Underwritten  Offering covered by a Demand Registration shall be selected by
GE (if GE owns a majority of the shares of Common Stock to be offered  therein),
subject to the approval of the Board of Directors,  which  approval shall not be
unreasonably withheld.

     3.   Piggyback Registrations.
          -----------------------

          (a)  Series C, Series E, Series F and Warrant Participation. Each time
               ------------------------------------------------------
the Company  decides to file a Registration  Statement  under the Securities Act
(other than registrations on Forms S-4 or S-8 or any successor form thereto, and
other than a Demand  Registration)  covering  the offer and sale by it or any of
its security  holders of any of its securities for money, the Company shall give
written notice thereof to all Stockholders of Preferred Registrable  Securities,
Series F Registrable Securities and Warrant Registrable Securities.  The Company
shall  include  in  such  Registration  such  shares  of  Preferred  Registrable
Securities,  Series F Registrable  Securities and Warrant Registrable Securities
for which it has received written requests to register such shares within twenty
(20) calendar days after such written notice has been given. If the Registration
Statement  is to cover an  Underwritten  Offering,  such  Preferred  Registrable
Securities,  Series F Registrable  Securities and Warrant Registrable Securities
shall be included in the  underwriting  on the same terms and  conditions as the
securities otherwise being sold through the underwriters.

          (b)  Other Stockholders' Participation. If (but without any obligation
               ---------------------------------
to do so) the  Company  proposes  to  register  (including  for this  purpose  a
registration  effected by the Company for stockholders of the Company other than
the  Stockholders) any of its stock or other securities under the Securities Act
in connection with the public offering of such securities solely for cash (other
than  (i)  a  registration   relating  solely  to  the  sale  of  securities  to
participants  in  a  Company  stock  option  or  stock  issuance  plan,  (ii)  a
registration  in which the only Common  Stock being  registered  is Common Stock
issuable upon conversion of debt securities  which are also being  registered or
(iii) the  Company's  first public  offering of its Common Stock  subsequent  to
March 2, 2001),  then the Company shall, at such time,  promptly give each Other
Stockholder  written notice of such  registration.  Upon the written  request of
each Other  Stockholder  given within twenty (20) calendar days after receipt of
such notice by the Company in  accordance  with  SECTION 15, the Company  shall,
subject to the  provisions  of SECTION 3(c),  cause to be  registered  under the
Securities  Act  all  of  the  Registrable   Securities  that  each  such  Other
Stockholder has requested to be registered.

          (c)  Underwriter's Cutback.  Subject to the requirements of Section 10
               ---------------------
hereof,  if in the good  faith  judgment  of the  managing  underwriter  of such
offering,  the inclusion of all of the shares of Registrable  Securities and any
other shares of Common Stock requested to be registered would interfere with the
successful  marketing  of a smaller  number of such  shares,  then the number of
shares of Registrable Securities and other shares of Common Stock to be included
in the offering shall be reduced to such smaller number,  with the participation
in such offering to be in the following order of priority: (1) first, the shares
of Common  Stock which the Company  proposes  to sell for its own  account,  (2)
second,  the  shares  of  Series  E  Registrable  Securities  of  all  Series  E
Stockholders,  (3) third,  the shares of Series C Registrable  Securities of all
Series C  Stockholders  and the Series F Registrable  Securities of all Series F
Stockholders  and  the  Stockholders  of  all  Warrant  Registrable   Securities
requested to be included,  (4) fourth,  the shares of Registrable  Securities of

                                       9
<PAGE>

Other Stockholders  requested to be included,  (5) fifth, the shares of Series G
Registrable  Securities of all Series G Stockholders and New Warrant Registrable
Securities  of all  Stockholders  requested to be included,  and (6) sixth,  any
other shares of Common Stock requested to be included.  Any necessary allocation
among the Holders of shares  within  each of (2),  (3),  (4),  (5) and (6) above
shall be pro rata among such Holders requesting such registration based upon the
number  of  shares of Common  Stock  and  Registrable  Securities  owned by such
Holders.

          (d)  Company   Control.   The  Company  may  withdraw  a  Registration
               -----------------
Statement  after  filing and after giving  notice to the Holders of  Registrable
Securities  pursuant  to SECTION  3(a),  above,  but prior to the  effectiveness
thereof;  provided,  that the  Company  shall  promptly  notify  each  Holder of
Registrable Securities in writing of any such action; and provided further, that
the Company shall bear all expenses incurred by each such Holder or otherwise in
connection with such withdrawn Registration Statement.

     4.   Hold-Back Agreements. The Company agrees:
          --------------------

          (a)  not to effect any public or private sale or  distribution  of its
Equity  Securities  during the thirty  (30)  calendar  day period  prior to, and
during the sixty (60)  calendar day period  after,  the  effective  date of each
Underwritten  Offering  made  pursuant to a Demand  Registration  or a Piggyback
Registration,  if so requested in writing by the managing underwriter (except as
part of such  Underwritten  Offering,  pursuant to registrations on Forms S-4 or
S-8 or any successor forms thereto or private  issuances of Equity Securities as
consideration  for any  acquisition  by the Company or a subsidiary of assets or
capital stock of any unaffiliated third party), and

          (b)  not to  issue  any  Equity  Securities  other  than for sale in a
registered  public  offering unless each of the Persons to which such securities
are issued has entered a written  agreement  binding on its  transferees  not to
effect any public sale or distribution  of such securities  (except for employee
stock options issued to Persons other than: directors,  officers, key employees;
or  stockholders  owning  five  percent  (5%) or more  of the  Company's  Equity
Securities) during such period,  including without limitation a sale pursuant to
Rule  144  under  the  Securities  Act  (except  as part  of  such  Underwritten
Registration, if and to the extent permitted hereunder).

     5.   Registration Procedures.
          -----------------------

     If and whenever the Company is required to register Registrable  Securities
in a Demand  Registration,  the  Company  will use all  commercially  reasonable
efforts  to effect  such  registration  to permit  the sale of such  Registrable
Securities in accordance  with the intended plan of distribution  thereof.  With
respect to both Demand  Registrations  and  Piggyback  Registrations  (except as
otherwise  specifically   provided),   the  Company  will  as  expeditiously  as
practicable:

          (a)  prepare  and  file  with  the  SEC  as  soon  as   practicable  a
Registration  Statement with respect to such Registrable  Securities and use all
commercially  reasonable efforts to cause such Registration  Statement to become
effective and remain  continuously  effective until the date that is the earlier
to occur of (1) the date six months  from the date such  Registration  Statement

                                       10
<PAGE>
was declared effective,  and (2) the date the last of the Registrable Securities
covered by such  Registration  Statement have been sold,  provided,  that before
filing a  Registration  Statement or Prospectus or any amendments or supplements
thereto, the Company shall furnish to Holders of Registrable  Securities covered
by such Registration Statement and the underwriters, if any, draft copies of all
such  documents  proposed to be filed,  which  documents  will be subject to the
review of such Holders and such underwriters, and the Company shall not file any
Registration  Statement or amendment thereto or any Prospectus or any supplement
thereto  to  which  any of  the  Holders  or the  underwriters,  if  any,  shall
reasonably object;

          (b)  prepare and file with the SEC such amendments and  post-effective
amendments  to  the  Registration   Statement,   and  such  supplements  to  the
Prospectus,  as may be requested by any underwriter of Registrable Securities or
as may be required by the rules,  regulations or instructions  applicable to the
registration  form used by the  Company  or by the  Securities  Act or rules and
regulations  thereunder to keep the Registration  Statement  effective until all
Registrable  Securities  covered  by such  Registration  Statement  are  sold in
accordance with the intended plan of distribution set forth in such Registration
Statement or supplement to the Prospectus;

          (c)  promptly notify the selling Holders of Registrable Securities and
the managing underwriter,  if any, and (if requested by any such Person) confirm
such advice in writing:

               (1) when  the  Prospectus  or any  supplement  or  post-effective
     amendment has been filed,  and, with respect to the Registration  Statement
     or any post-effective amendment, when the same has become effective,

               (2) of any request by the SEC for  amendments or  supplements  to
     the Registration Statement or the Prospectus or for additional information,

               (3) of the issuance by the SEC of any stop order  suspending  the
     effectiveness  of  the  Registration  Statement  or the  initiation  of any
     proceedings for that purpose,

               (4) if at any  time the  representations  and  warranties  of the
     Company  contemplated  by clause  (1) of  paragraph  (o) below  cease to be
     accurate in all material respects,

               (5) of  the  receipt  by the  Company  of any  notification  with
     respect  to  the  suspension  of  the   qualification  of  the  Registrable
     Securities for sale in any jurisdiction or the initiation or threatening of
     any proceeding for such purpose, and

               (6)  of  the   existence  of  any  fact  which   results  in  the
     Registration Statement, the Prospectus or any document incorporated therein
     by reference containing a Misstatement;

          (d)  make all commercially reasonable efforts to obtain the withdrawal
of any order suspending the  effectiveness of the Registration  Statement at the
earliest practicable time;

                                       11
<PAGE>
          (e)  unless the Company objects in writing on reasonable  grounds,  if
requested  by the  managing  underwriter  or the Holders of more than 50% of the
Registrable  Securities  then  outstanding,  each of such  Holders (on behalf of
itself and all permitted  assignees who are Holders of Registrable  Securities),
as  promptly as  practicable,  incorporate  in a  supplement  or  post-effective
amendment,  such  information  as the  managing  underwriter  and the Holders of
Registrable  Securities agree should be included therein relating to the sale of
the Registrable  Securities,  including,  without  limitation,  information with
respect  to the  number  of  shares  of  Registrable  Securities  being  sold to
underwriters,  the purchase price being paid therefore by such  underwriters and
with respect to any other terms of the Underwritten  Offering of the Registrable
Securities to be sold in such  offering;  and make all required  filings of such
supplement or post-effective  amendment as soon as notified of the matters to be
incorporated in such supplement or post-effective amendment;

          (f)  only with respect to Demand Registrations,  promptly prior to the
filing  of any  document  which  is to be  incorporated  by  reference  into the
Registration   Statement  or  the  Prospectus   (after  initial  filing  of  the
Registration  Statement)  provide  copies of such document to counsel to each of
the Holders of  Registrable  Securities  (on behalf of itself and all  permitted
assignees  who  are  Holders  of  Registrable  Securities)  and to the  managing
underwriter,  if any,  and  make the  Company's  representatives  available  for
discussion of such document and make such changes in such document  prior to the
filing  thereof  as  counsel  for  the  Holders  of  Registrable  Securities  or
underwriters may reasonably request;

          (g)  furnish to each selling Holder of Registrable  Securities and the
managing  underwriter,   without  charge,  at  least  one  signed  copy  of  the
Registration  Statement and any  post-effective  amendments  thereto,  including
financial  statements  and  schedules,  all  documents  incorporated  therein by
reference and all exhibits (including those incorporated by reference);

          (h)  deliver to each of the  Holders  of  Registrable  Securities  (on
behalf of each selling Holder of Registrable  Securities) and the  underwriters,
if any, without charge,  as many copies of each Prospectus (and each preliminary
prospectus)  as  such  Persons  may  reasonably   request  (the  Company  hereby
consenting to the use of each such  Prospectus  (or  preliminary  prospectus) by
each of the selling Holders of Registrable  Securities and the underwriters,  if
any, in  connection  with the  offering and sale of the  Registrable  Securities
covered by such Prospectus (or preliminary prospectus));

          (i)  prior to any public offering of Registrable  Securities,  use all
commercially  reasonable  efforts to register or qualify or coordinate  with the
selling Holders of Registrable Securities,  the underwriters,  if any, and their
respective  counsel in connection with the registration or qualification of such
Registrable  Securities for offer and sale under the securities or blue sky laws
of such  jurisdictions  as such Holders,  or such  underwriters may designate in
writing and do  anything  else  necessary  or  advisable  to enable from a legal
perspective the disposition in such jurisdictions of the Registrable  Securities
covered by the Registration Statement;

          (j)  cooperate with the selling Holders of Registrable  Securities and
the managing  underwriter,  if any, to  facilitate  the timely  preparation  and
delivery of certificates  not bearing any restrictive  legends  representing the
Registrable Securities to be sold and cause such Registrable Securities to be in

                                       12
<PAGE>
such denominations and registered in such names as the managing  underwriter may
request  at least  three  (3)  business  days  prior to any sale of  Registrable
Securities to the underwriters;

          (k)  use all commercially  reasonable efforts to cause the Registrable
Securities  covered  by the  Registration  Statement  to be  registered  with or
approved by such other governmental  agencies or authorities as may be necessary
to  enable  the  seller or  sellers  thereof  or the  underwriters,  if any,  to
consummate the disposition of such Registrable Securities;

          (l)  if the  Registration  Statement  or  the  Prospectus  contains  a
Misstatement,   prepare  a  supplement  or   post-effective   amendment  to  the
Registration  Statement or the related  Prospectus or any document  incorporated
therein by reference or file any other required  document so that, as thereafter
delivered to the purchasers of the Registrable  Securities,  the Prospectus will
not contain a Misstatement;

          (m)  use all commercially  reasonable efforts to cause all Registrable
Securities  covered by the  Registration  Statement to be listed on any national
securities  exchange on which the  Company's  securities  are  listed,  or to be
authorized  for  quotation  on Nasdaq,  if  requested  by any of the Holders (on
behalf of each Holder and all permitted assignees who are Holders of Registrable
Securities) or the managing  underwriter,  if any; PROVIDED,  HOWEVER,  that the
payment  of any  required  listing  or other  fee  shall  always be deemed to be
"commercially reasonable" for purposes of this SECTION 5(m);

          (n)  provide a CUSIP number for all  Registrable  Securities not later
than the effective date of the Registration Statement;

          (o)  enter into such agreements (including an underwriting  agreement)
and do anything else  reasonably  necessary or advisable in order to expedite or
facilitate  the  disposition  of  such  Registrable  Securities,   and  in  such
connection, whether or not the registration is an Underwritten Registration:

               (1) make such  representations  and  warranties to the Holders of
     such  Registrable  Securities  and  the  underwriters,  if  any,  in  form,
     substance  and scope as are  customarily  made by issuers  to  holders  and
     underwriters, respectively, in similar underwritten offerings;

               (2) obtain opinions of counsel to the Company and updates thereof
     (which  counsel  and  opinions  (in  form,  scope and  substance)  shall be
     reasonably  satisfactory to the managing  underwriter,  if any, and each of
     such  Holders  (on behalf of itself  and all  permitted  assignees  who are
     Holders of  Registrable  Securities))  addressed to each selling  Holder of
     Registrable  Securities and the underwriter,  if any,  covering the matters
     customarily  covered in opinions  delivered  to holders  and  underwriters,
     respectively,  in similar underwritten  offerings and such other matters as
     may be reasonably requested any of the Holders or such underwriters;

               (3) obtain "cold  comfort"  letters and updates  thereof from the
     Company's independent certified public accountants addressed to the selling
     Holders  of  Registrable  Securities  and the  underwriters,  if any,  such

                                       13
<PAGE>

     letters  to  be  in  customary  form  and  covering  matters  of  the  type
     customarily  covered in "cold comfort" letters to holders and underwriters,
     respectively, in connection with similar underwritten offerings;

               (4) if an underwriting  agreement is entered into, cause the same
     to  include  customary  indemnification  and  contribution  provisions  and
     procedures with respect to such underwriters; and

               (5) deliver such documents and  certificates as may be reasonably
     requested by each of the Holders of  Registrable  Securities  (on behalf of
     itself  and  all  permitted   assignees  who  are  Holders  of  Registrable
     Securities) and the managing  underwriter,  if any, to evidence  compliance
     with clause (1) above and with any  customary  conditions  contained in the
     underwriting agreement or other agreement entered into by the Company.

The above  shall be done at each  closing  under  such  underwriting  or similar
agreement or as and to the extent otherwise  reasonably requested by each of the
Holders  of  Registrable  Securities  (on  behalf  of itself  and all  permitted
assignees who are Holders of Registrable Securities);

          (p)  make available for inspection by  representatives  of each of the
Holders  of  Registrable  Securities  (on  behalf  of itself  and all  permitted
assignees  who  are  Holders  of  Registrable   Securities),   any   underwriter
participating in any disposition  pursuant to such Registration  Statement,  and
any attorney or accountant retained by the sellers or any such underwriter,  all
financial and other records and pertinent  corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all  information  reasonably  requested  by any such  seller or  underwriter  in
connection with the  Registration;  provided,  that any records,  information or
documents that are designated by the Company in writing as confidential shall be
kept confidential by such Persons unless disclosure of such records, information
or documents is required by court or administrative order; and

          (q)  otherwise use all commercially  reasonable efforts to comply with
all applicable  rules and regulations of the SEC relating to such  Registration,
and  make  generally  available  to its  security  holders  earnings  statements
satisfying the provisions of Section 11(a) of the Securities  Act, no later than
forty-five  (45) calendar days after the end of any twelve (12) month period (or
ninety (90) calendar  days,  if such period is a fiscal year)  commencing at the
end  of  any  fiscal  quarter  in  which  Registrable  Securities  are  sold  to
underwriters  in an  Underwritten  Offering,  or, if not sold to underwriters in
such an offering,  beginning with the first month of the Company's  first fiscal
quarter commencing after the effective date of the Registration Statement, which
statements shall cover said 12-month period.

     6.   Registration Expenses.
          ---------------------

          (a)  Demand  Registrations.  The Company  shall bear all  Registration
               ---------------------
Expenses  incurred  in  connection  with  any  Demand  Registration  and  of any
Registration which does not become or is not maintained  effective in accordance
with the  requirements  specified  in SECTION  5(a) other than any  Registration
terminated  prior to  effectiveness  at the request of, or primarily as a result

                                       14
<PAGE>

of, the actions of Holders  whose  Registrable  Securities  are included in such
registration.  Notwithstanding  the  foregoing,  the  Underwriters'  Commissions
incurred in connection with a Demand  Registration  that becomes effective shall
be  shared  by the  Holders  of the  Registrable  Securities  whose  Registrable
Securities are included in such  Registration  pro rata, in accordance  with the
aggregate amount of Registrable Securities sold by such Holders.

          (b)  Piggyback Registrations.  The Company shall bear all Registration
               -----------------------
Expenses   incurred   in   connection   with   any   Piggyback    Registrations.
Notwithstanding  the  foregoing,  the  Underwriters'   Commissions  incurred  in
connection with a Piggyback  Registration that becomes effective shall be shared
by the Company and the Holders of the Registrable  Securities whose  Registrable
Securities are included in such  Registration  pro rata, in accordance  with the
aggregate amount of Registrable Securities sold by the Company and such Holders.

          (c)  Company  Expenses.  The Company also will, in any event,  pay its
               -----------------
internal expenses (including,  without limitation,  all salaries and expenses of
its officers and employees  performing legal or accounting duties),  the expense
of any annual  audit,  the fees and  expenses  incurred in  connection  with any
listing of the  securities to be registered  on a securities  exchange,  and the
fees and  expenses of any Person,  including  special  experts,  retained by the
Company.

     7.   Indemnification.
          ---------------

          (a)  Indemnification  by Company.  The Company agrees to indemnify and
               ---------------------------
hold harmless each Indemnified Holder from and against all Claims arising out of
or based upon any Misstatement or alleged  Misstatement,  except insofar as such
Misstatement or alleged  Misstatement  was based upon  information  furnished in
writing  to the  Company by such  Indemnified  Holder  expressly  for use in the
document  containing such Misstatement or alleged  Misstatement.  This indemnity
shall not be  exclusive  and shall be in  addition  to any  liability  which the
Company may otherwise have.

          The foregoing notwithstanding,  the Company shall not be liable to the
extent  that any such Claim  arises out of or is based  upon a  Misstatement  or
alleged Misstatement made in any preliminary  prospectus if (1) such Indemnified
Holder failed to send or deliver a copy of the  Prospectus  with or prior to the
delivery of written  confirmation of the sale of Registrable  Securities  giving
rise to such Claim and (2) the  Prospectus  would  have  corrected  such  untrue
statement or omission.

          In  addition,  the Company  shall not be liable to the extent that any
such Claim arises out of or is based upon a Misstatement or alleged Misstatement
in a Prospectus,  (x) if such Misstatement or alleged  Misstatement is corrected
in an amendment or supplement to such Prospectus and (y) having  previously been
furnished  by or on behalf of the Company  with copies of the  Prospectus  as so
amended or  supplemented,  such Indemnified  Holder  thereafter fails to deliver
such Prospectus as so amended or supplemented  prior to or concurrently with the
sale to the person who  purchased a Registrable  Security from such  Indemnified
Holder and who is asserting such Claim.

          The  Company  shall  also  provide   customary   indemnifications   to
underwriters,  selling brokers,  dealer managers and similar securities industry
professionals   participating  in  a  distribution  covered  by  a  Registration
Statement,  their  officers  and  directors  and each Person who  controls  such

                                       15
<PAGE>

Persons (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act).

          (b)  Indemnification   Procedures.   If  any   action  or   proceeding
               ----------------------------
(including  any  governmental  investigation  or  inquiry)  shall be  brought or
asserted  against an  Indemnified  Holder in respect of which  indemnity  may be
sought from the  Company,  such  Indemnified  Holder shall  promptly  notify the
Company in writing,  and the Company may assume the defense  thereof,  including
the employment of counsel reasonably satisfactory to such Indemnified Holder and
the payment of all expenses.

          Such  Indemnified  Holder  shall  have the  right to  employ  separate
counsel in any such action and to  participate in the defense  thereof,  but the
fees and  expenses  of such  separate  counsel  shall be at the  expense of such
Indemnified  Holder  unless  (1) the  Company  has  agreed  to pay such fees and
expenses, (2) the Company shall have failed to assume the defense of such action
or proceeding or has failed to employ counsel  reasonably  satisfactory  to such
Indemnified Holder in any such action or proceeding, or (3) the named parties to
any such action or proceeding  (including  any impleaded  parties)  include both
such Indemnified Holder and the Company,  and such Indemnified Holder shall have
been advised in writing by counsel that there may be one or more legal  defenses
available to such  Indemnified  Holder that are different  from or additional to
those available to the Company.

          If such  Indemnified  Holder  notifies  the Company in writing that it
elects to employ separate  counsel at the expense of the Company as permitted by
the provisions of the preceding paragraph,  the Company shall not have the right
to assume the defense of such action or proceeding on behalf of such Indemnified
Holder. The foregoing  notwithstanding,  the Company shall not be liable for the
reasonable  fees and expenses of more than one separate firm of attorneys at any
time for such Indemnified  Holder and any other Indemnified  Holders (which firm
shall be designated in writing by such  Indemnified  Holders) in connection with
any one such action or  proceeding  or  separate  but  substantially  similar or
related actions or proceedings in the same jurisdiction  arising out of the same
general allegations or circumstances.

          The Company shall not be liable for any  settlement of any such action
or  proceeding  effected  without its written  consent,  but if settled with its
written  consent,  or if there be a final judgment for the plaintiff in any such
action or  proceeding,  subject to Section 7(a), the Company agrees to indemnify
and  hold  harmless  such  Indemnified  Holders  from  and  against  any loss or
liability by reason of such settlement or judgment.

          (c)  Indemnification by Holder of Registrable Securities.  Each Holder
               ---------------------------------------------------
of Registrable Securities agrees to indemnify and hold harmless the Company, its
directors and officers and each Person,  if any, who controls the Company within
the  meaning  of either  Section 15 of the  Securities  Act or Section 20 of the
Exchange Act to the same extent as the foregoing  indemnity  from the Company to
such  Holder,  but only with  respect to  information  relating  to such  Holder
furnished  in  writing  by such  Holder  expressly  for use in any  Registration
Statement, Prospectus or preliminary prospectus. In no event, however, shall the
liability  hereunder of any selling Holder of Registrable  Securities be greater
than the dollar amount of the proceeds  received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.

                                       16
<PAGE>
          In case any action or proceeding  shall be brought against the Company
or its directors or officers or any such controlling person, in respect of which
indemnity may be sought against a Holder of Registrable Securities,  such Holder
shall  have the  rights  and duties  given the  Company  and the  Company or its
directors  or  officers  or such  controlling  person  shall have the rights and
duties given to each such Holder by Section 7(a) and Section  7(b),  above.  The
Company  shall be entitled to receive  indemnities  from  underwriters,  selling
brokers,   dealer  managers  and  similar  securities   industry   professionals
participating  in the  distribution,  to the same extent as provided  above with
respect to information so furnished in writing by such Persons  specifically for
inclusion in any Prospectus or Registration Statement.

          (d)  Contribution. If the indemnification provided for in this Section
               ------------
7 is  unavailable  to an  indemnified  party under Section 7(a) or Section 7(c),
above (other than by reason of exceptions provided in those Sections) in respect
of any Claims referred to in such Sections,  then each  applicable  indemnifying
party, in lieu of indemnifying such indemnified  party,  shall contribute to the
amount paid or payable by such  indemnified  party as a result of such Claims in
such  proportion as is  appropriate to reflect the relative fault of the Company
on the one hand and of the  Holder  of  Registrable  Securities  on the other in
connection  with the  statements or omissions  which  resulted in such Claims as
well as any other relevant equitable considerations.  The amount paid or payable
by a party as a result  of the  Claims  referred  to above  shall be  deemed  to
include,  subject to the  limitations  set forth in Section  7(b),  any legal or
other fees or  expenses  reasonably  incurred by such party in  connection  with
investigating or defending any action or claim.

          The relative fault of the Company on the one hand and of the Holder of
Registrable  Securities  on the other shall be determined by reference to, among
other  things,  whether  the  Misstatement  or alleged  Misstatement  relates to
information  supplied by the Company or by the Holder of Registrable  Securities
and  the  parties'  relative  intent,  knowledge,   access  to  information  and
opportunity to correct or prevent such Misstatement or alleged Misstatement.

          The Company and each Holder of  Registrable  Securities  agree that it
would not be just and  equitable if  contribution  pursuant to this Section 7(d)
were  determined  by pro rata  allocation  or by any other method of  allocation
which does not take account of the equitable considerations referred to above.

          Notwithstanding  the  provisions of this Section 7(d), an  Indemnified
Holder shall not be required to contribute any amount in excess of the amount by
which  (1) the  total  price at which  the  securities  that  were  sold by such
Indemnified  Holder and  distributed  to the public  were  offered to the public
exceeds  (2) the  amount  of any  damages  which  such  Indemnified  Holder  has
otherwise been required to pay by reason of such Misstatement.  No person guilty
of  fraudulent  misrepresentation  (within the  meaning of Section  11(f) of the
Securities  Act) shall be entitled to  contribution  from any person who was not
guilty of such fraudulent misrepresentation.

     8.   Requirements for Participation in Underwritten Offerings.
          --------------------------------------------------------

     No Person  may  participate  in any  Underwritten  Offering  pursuant  to a
Registration  hereunder  unless  such  Person (a)  agrees to sell such  Person's
securities on the basis provided in any  underwriting  arrangements  approved by

                                       17
<PAGE>

the Persons  entitled  hereunder to approve such  arrangements and (b) completes
and executes all questionnaires,  powers of attorney, indemnities,  underwriting
agreements and other  documents  required  under the terms of such  underwriting
arrangements.

     9.   Suspension of Sales.
          -------------------

     Upon  receipt of written  notice from the Company  that (a) a  Registration
Statement  or  Prospectus  contains  a  Misstatement  or (b)  in the  reasonable
determination of the Company, there exist circumstances not yet disclosed to the
public which would be required to be disclosed  in such  Registration  Statement
and the  disclosure  of which would be materially  harmful to the Company,  each
Holder of Registrable  Securities  shall  forthwith  discontinue  disposition of
Registrable Securities until such Holder has received copies of the supplemented
or amended  Prospectus  required by SECTION 5(l) hereof, or until such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and, if so directed by the Company, such Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Holder's  possession,  of the Prospectus  covering such  Registrable  Securities
current  at the time of  receipt  of such  notice.  The  Company  shall  use all
commercially  reasonable  efforts to minimize the length of such  suspension  of
sales,  provided,  that the Company may  require the  suspension  of sales for a
period of ninety  (90)  calendar  days in the event that the  disclosure  of any
circumstances,  in the reasonable determination of the Company, would be harmful
in any  material  respect  to the  Company.  In no  event,  however,  shall  the
aggregate period of time that the Company postpones the filing or declaration of
effectiveness  of any  Registration  Statement  pursuant to Section 5, above, or
suspends  sales of Registrable  Securities  pursuant to this Section 9 under any
Registration Statement,  taken together with all such other periods with respect
to such Registrations  Statement exceed, in the aggregate,  ninety (90) calendar
days.

     10.  Future Registration Rights Agreements.
          -------------------------------------

     Except for an  underwriting  agreement  between the Company and one or more
professional underwriters of securities, the Company shall not agree to register
any  Equity  Securities  under the  Securities  Act,  other  than  Common  Stock
registered  on Forms S-8 or S-4,  unless such  agreement  specifically  provides
that:

          (a)  the Holder of such Equity  Securities may not  participate in any
Demand Registration without the consent of each of the Series C Stockholders and
Series E Stockholders unless:

               (1) the offering of the  Registrable  Securities  is to be a Firm
     Commitment  Underwritten  Offering and the managing  underwriter  concludes
     that the  public  offering  or sale of such  Equity  Securities  would  not
     interfere  with  the  successful  marketing  of all  Series  C  Registrable
     Securities and Series E Registrable Securities requested to be sold, and

               (2) the Series C Stockholders of Series C Registrable  Securities
     and the Series E Stockholders of Series E Registrable Securities shall have
     the  right  to  participate,  to  the  extent  they  may  request,  in  any

                                       18
<PAGE>

     Registration   Statement   initiated  under  a  Demand  Registration  right
     exercised  by any of the  Series C  Stockholders  of  Series C  Registrable
     Securities (if the Series C Stockholders of Series C Registrable Securities
     hold more than 50% of the Series C Registrable Securities then outstanding)
     or Series E Stockholders of Series E Registrable  Securities (if the Series
     E  Stockholders  of Series E Registrable  Securities in the aggregate  hold
     more than 50% of the Series E  Registrable  Securities  then  outstanding),
     except that if the managing  underwriter of a public offering made pursuant
     to such a Demand  Registration  limits the number of shares of Common Stock
     to be sold, the  participation  of such Series C  Stockholders  of Series C
     Registrable  Securities,  Series E  Stockholders  of  Series E  Registrable
     Securities  and the Holders of all other shares of Common Stock (other than
     the Equity  Securities held by such Holder of Equity  Securities)  shall be
     determined as set forth in Section 2 hereof,

          (b)  the Holder of such Equity  Securities may not  participate in any
Piggyback   Registration  if  the  sale  of  Registrable  Securities  is  to  be
underwritten  unless,  if the  managing  underwriter  limits the total number of
shares to be sold, the Holders of such Equity Securities,  Series C Stockholders
of Series C Registrable  Securities  and the Series E  Stockholders  of Series E
Registrable   Securities  are  entitled  to  participate  in  such  underwritten
distribution based on the order of priority set forth in Section 3 hereof, and

          (c)  all Equity Securities  excluded from any Registration as a result
of the foregoing  limitations  may not be publicly  offered or sold for a period
(not to exceed at least thirty (30) calendar  days prior to the  effective  date
and  sixty  (60)  calendar  days  thereafter)  that  the  managing   underwriter
reasonably  determines is necessary in order to effect the Underwritten Offering
of Registrable Securities registered pursuant to this Agreement.

     11.  Assignment and Transfer of Registration Rights.
          ----------------------------------------------

          (a)  Restrictions on Transfer;  Transferee Obligations. No Stockholder
               -------------------------------------------------
may transfer, assign, sell or otherwise dispose of Registrable Securities unless
such transfer is (i) made pursuant to an effective registrations statement under
the Securities Act or (ii) is exempt from registration  under the Securities Act
and exempt from qualification  under any applicable state and foreign securities
laws.

          Each  person  (other  than  the  Company)  to  whom  the   Registrable
Securities  are  transferred  must, as a condition  precedent to the validity of
such  transfer,  acknowledge in writing to the Company that such person is bound
by the  provisions  of this  Agreement  and  that  the  transferred  Registrable
Securities  are  subject  to the  Hold-Back  provisions  of  Section  4, each as
specified  therein,  to the same extent such Registrable  Securities would be so
subject if retained by the Stockholder transferring such Registrable Securities.

          (b)  Assignment of Registration Rights. Subject to any restrictions on
               ---------------------------------
transfer under  applicable law and pursuant to other  agreements,  the rights to
cause the Company to register Registrable Securities pursuant to this SECTION 11
may be assigned (but only with all related  obligations) by an Other Stockholder
to a transferee or assignee of such  securities  who,  after such  assignment or
transfer,  holds at  least  Two  Hundred  Fifty  Thousand  (250,000)  shares  of
Registrable  Securities  (as  appropriately  adjusted  for stock  splits,  stock

                                       19
<PAGE>

dividends,  combinations  and  other  recapitalizations  subsequent  to the date
hereof); PROVIDED, that: (i) the Company is, within a reasonable time after such
transfer,  furnished  with  written  notice  of the  name  and  address  of such
transferee  or  assignee  and  the   securities   with  respect  to  which  such
registration rights are being assigned;  (ii) such transferee or assignee agrees
in  writing  to be bound by and  subject  to the  terms and  conditions  of this
Agreement, including, without limitation, the provisions of SECTION 4; and (iii)
such assignment  shall be effective only if immediately  following such transfer
the further  disposition  of such  securities  by the  transferee or assignee is
restricted  under the Securities  Act. For purposes of determining the number of
shares of Registrable  Securities held by a transferee or assignee, the holdings
of  transferees  and  assignees  of a  partnership  who are  partners or retired
partners  of  such  partnership   (including   spouses  and  ancestors,   lineal
descendants  and  siblings of such  partners or spouses who acquire  Registrable
Securities by gift, will or intestate  succession) shall be aggregated  together
and with the partnership; provided, that all assignees and transferees who would
not qualify  individually  for  assignment of  registration  rights shall have a
single  attorney-in-fact  for the purpose of  exercising  any rights,  receiving
notices or taking any action under this SECTION 11.

     12.  Termination of Rights.
          ---------------------

     No Other  Stockholder  shall be entitled to exercise any right provided for
in this Agreement after two (2) years following the  consummation of the sale of
securities  pursuant to a registration  statement filed by the Company under the
Securities Act in connection with the first firm commitment  underwritten public
offering of its Common Stock to the general public  subsequent to March 2, 2001.
In addition,  the right of any Holder to request  inclusion in any  registration
pursuant   to  SECTION  3  shall   terminate   on  the   closing  of  the  first
Company-initiated  registered  public  offering  of Common  Stock of the Company
subsequent  to March 2, 2001 if all  shares of  Registrable  Securities  held or
entitled  to be held  upon  conversion  of any  securities  by such  Holder  may
immediately be sold under Rule 144 during any ninety (90) day period, or on such
date after the closing of the first Company-initiated registered public offering
of Common  Stock of the  Company  subsequent  to March 2, 2001 as all  shares of
Registrable  Securities  held or  entitled  to be held upon  conversion  by such
Holder may immediately be sold under Rule 144 during any ninety (90) day period.

     13.  Specific Enforcement.
          --------------------

     Each Stockholder and the Company expressly agree that the Stockholders will
be irreparably  damaged if this Agreement is not specifically  enforced.  Upon a
breach or threatened  breach of the terms,  covenants and/or  conditions of this
Agreement by a Stockholder  or the Company,  the other  Stockholders  shall,  in
addition  to all  other  remedies,  be  entitled  to a  temporary  or  permanent
injunction,  without  showing any actual  damage,  and/or a decree for  specific
performance, in accordance with the provisions hereof.

     14.  Legend.
          ------

     Each  certificate  evidencing  shares  of the  Company's  Common  Stock and
Preferred  Stock  that  are  subject  to  this  Agreement  shall  bear a  legend
substantially as follows:

                                       20
<PAGE>

     "The  securities  represented  hereby  have not been  registered  under the
Securities Act of 1933, as amended,  or any state securities law, and may not be
offered,  sold, transferred or otherwise disposed of unless registered under the
Securities Act of 1933, as amended, and any applicable state securities laws, or
an exemption from such  registration  is available.  The securities  represented
hereby are subject to the terms and  conditions of a certain  Second Amended and
Restated  Registration  Rights Agreement,  dated as of August 6, 2002, a copy of
which the Company  will furnish to the holder of this  certificate  upon request
and without charge."

     15.  Notices.
          -------

     All notices,  requests,  consents and other communications  provided for or
permitted  hereunder  shall  be  made in  writing  and  shall  be  delivered  by
hand-delivery,   registered  or  certified   first-class  mail,  return  receipt
requested, or sent by telecopier or telex, addressed as follows:

          (a)  if to GE, at its address set forth on the signature pages hereto,
with a copy to Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles,
California 90071-3197, Facsimile: (213) 229-7250, Attention: Linda L. Curtis;

          (b)  if to a Stockholder of  Registrable  Securities who is not GE, at
the most current  address given by the  Stockholder to the Company in accordance
with the  provisions  hereof,  which  address  initially  is the  address of the
Stockholder set forth on the signature pates hereto; and

          (c)  if to the  Company,  initially  at its  address  set forth on the
signature pages hereto and thereafter at such other address,  notice of which is
given in accordance with the provisions  hereof,  with a copy to Skadden,  Arps,
Slate,  Meagher & Flom LLP,  300 South Grand  Avenue,  Suite 3400,  Los Angeles,
California 90071, Facsimile:  (213) 687-5600, Attn: Gregg Noel. All such notices
and  communications  shall  be  deemed  to have  been  duly  given:  at the time
delivered by hand, if personally  delivered;  five (5) business days after being
deposited in the mail,  postage  prepaid,  if mailed;  when  answered  back,  if
telexed; when receipt acknowledged, if telecopied; and on the next business day,
if timely  delivered  to an air courier  guaranteeing  overnight  delivery.  The
Company  shall  promptly  provide a list of the most  current  addresses  of the
Stockholders  given to it in accordance  with the provisions  hereof to any such
Stockholder  for the purpose of enabling such  Stockholder to  communicate  with
other such Stockholders in connection with this Agreement.

     16.  Entire Agreement and Amendments.
          -------------------------------

          (a)  This  Agreement,  together  with the Second  Amended and Restated
Co-Sale  Agreement,  dated as of even  date  herewith,  constitutes  the  entire
agreement  of  the  parties  with  respect  to the  subject  matter  hereof  and
supersedes  all prior  agreements  (including the Existing  Registration  Rights
Agreement)  with respect to the subject  matter  hereof in their  entirety.  The
parties hereto  acknowledge and agree that each such prior agreement shall be of
no force and effect with respect to the parties  hereto  following the execution
of this Agreement.

                                       21
<PAGE>

          (b)  Neither this  Agreement nor any  provision  hereof may be waived,
modified,  amended or  terminated  except by a written  agreement  signed by the
Company  and  Stockholders  owning  at  least  sixty  percent  (60%) of the then
outstanding  Registrable Securities;  provided,  however, that (i) any amendment
hereto shall  require the consent of the holders of 50% of the then  outstanding
shares of  Preferred  Registrable  Securities;  and provided  further,  that any
amendment or modification  of this Agreement that would adversely  affect any of
the expressed  rights  contained herein of any party hereto may be effected only
with the consent of such party.

     17.  Governing Law; Successors and Assigns.
          -------------------------------------

     This  Agreement  shall be governed by the laws of the State of New York and
shall bind and inure to the benefit of and be binding upon the respective heirs,
personal representatives,  executors, administrators,  successors and assigns of
the parties  (including  transferees of any shares of  Registrable  Securities).
Without  limiting the generality of the foregoing,  all covenants and agreements
of the Stockholders  shall bind any and all subsequent  holders of their shares,
and the Company agrees that it shall not transfer on its records any such shares
unless (i) the transferor  Stockholder shall have first delivered to the Company
and the other  Stockholders the written  agreement of the transferee to be bound
by this Agreement to the same extent as if such transferee had originally been a
Stockholder  hereunder and (ii) the certificate or  certificates  evidencing the
shares so transferred bear the legend specified in Section 14.

     18.  Expenses.
          --------

     If any action at law or in equity is necessary to enforce or interpret  the
terms of this  Agreement,  the prevailing  party shall be entitled to reasonable
attorneys'  fees,  costs and  necessary  disbursements  in addition to any other
relief to which such party may be entitled.

     19.  Severability.
          ------------

     If any provision of this Agreement,  or the application  thereof,  will for
any reason and to any extent be invalid or unenforceable,  the remainder of this
Agreement and  application of such  provision to other persons or  circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties  further  agree to replace such void or  unenforceable  provision of
this Agreement with a valid and enforceable  provision that will achieve, to the
extent  possible,  the  economic,  business  and other  purposes  of the void or
unenforceable provision.

     20.  Aggregation of Stock.
          --------------------

     All  shares  of  Registrable  Securities  held or  acquired  by  affiliated
entities or any  Stockholder  shall be  aggregated  together  for the purpose of
determining the availability of any rights under this Agreement.

     21.  Further Assurances.
          ------------------

     Each party agrees to cooperate  fully with the other parties and to execute
such further  instruments,  documents  and  agreements  and to give such further

                                       22
<PAGE>

written assurances as may be reasonably requested by any other party to evidence
and reflect the transactions  described  herein and  contemplated  hereby and to
carry into effect the intents and purposes of this Agreement.

     22.  Captions.
          --------

     Captions  are for  convenience  only and are not  deemed to be part of this
Agreement.

     23.  Counterparts.
          ------------

     This Agreement may be executed in two or more  counterparts,  each of which
shall be deemed an original,  but all of which together shall constitute one and
the same instrument.

     24.  Other Agreements.
          ----------------

     The Company shall not, on or after the date of this  Agreement,  enter into
any  agreement  with respect to its  securities  that is  inconsistent  with the
rights  granted to the Holders of  Registrable  Securities in this  Agreement or
otherwise conflicts with the provisions hereof.

     Other than as disclosed on Schedule A attached hereto,  the Company has not
previously  entered into any agreement with respect to its  securities  granting
any "piggy back"  registration  rights to any Person. The Company represents and
warrants to each of the Holders of Registrable  Securities  that,  except as set
forth in this Agreement or on Schedule A attached hereto, as of the date hereof,
there are no  outstanding  "demand"  registration  rights  with  respect  to the
Company's  securities.  Should the rights  granted to the Holders of Registrable
Securities  hereunder in any way conflict with the rights granted to the holders
of the Company's  securities  under any agreement listed on either Schedule A or
Schedule B, the provisions of such scheduled agreement shall be controlling.

     25.  Forms.
          -----

     All  references  in this  Agreement  to  particular  forms of  Registration
Statements  are  intended to include all  successor  forms which are intended to
replace, or to apply to similar transactions as, the forms herein referenced.

                                    * * * * *

                         (Signatures on following page)

                                       23
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have executed this Second Amended
and Restated  Registration  Rights  Agreement as of the day and year first above
written.

                                  COMPANY:

                                  PrimeSource Healthcare, Inc.

                                  By:      /s/  Bradford C. Walker
                                           ---------------------------------
                                  Name:    Bradford C. Walker
                                  Title:   President and Chief Executive Officer

                                  STOCKHOLDERS:

                                  GE Capital Equity Investments, Inc.

                                  By:      /s/  Michael S. Fisher
                                           ---------------------------------
                                  Name:    Michael S. Fisher
                                  Title:   Managing Director

                                  120 Long Ridge Road
                                  Stamford, Connecticut 06927

                                  Coleman Swenson Hoffman Booth IV L.P.

                                  By:      Its General Partner
                                           CSHB Ventures IV L.P.

                                           By:      /s/  Larry H. Coleman
                                           ---------------------------------
                                           Name:    Larry H. Coleman
                                           Title:   General Partner

                                           237 Second Avenue South
                                           Franklin, Tennessee  37064-2649

                                       24

<PAGE>

                                           ---------------------------------
                                                  John F. Rooney

                                           3700 East Columbia Street
                                           Butterfield Business Park
                                           Tucson, Arizona 85714

                                           BAM Enterprises, LLC

                                           By:
                                           ---------------------------------
                                           Name:    John F. Rooney
                                           Title:   President

                                           3700 East Columbia Street
                                           Butterfield Business Park
                                           Tucson, Arizona 85714

                                           ---------------------------------
                                                  Michael K. Bayley

                                           3700 East Columbia Street
                                           Butterfield Business Park
                                           Tucson, Arizona 85714

                                           /s/  William H. Lomicka
                                           ---------------------------------
                                                William H. Lomicka

                                           7406 N. Secret Canyon Drive
                                           Tucson, Arizona  85718

                                       25
<PAGE>

                                           Webbmont Holdings, L.P.

                                           By:    /s/  Robert W. Fisher
                                           ---------------------------------
                                           Name:  Robert W. Fisher
                                           Title: President of General Partner

                                           1355 Peachtree Street, Suite 1100
                                           Atlanta, Georgia  30309

                                           Investors Equity, Inc.

                                           By:      /s/  Robert W. Fisher
                                           ---------------------------------
                                           Name:    Robert W. Fisher
                                           Title:   President

                                           1355 Peachtree Street, Suite 1100
                                           Atlanta, Georgia 30309

                                            /s/  Virginia A. Fisher
                                           ---------------------------------
                                                 Virginia A. Fisher

                                           1355 Peachtree Street, Suite 1100
                                           Atlanta, Georgia 30309

                                           /s/  Robert N. Fisher
                                           ---------------------------------
                                                Robert Neale Fisher

                                           1355 Peachtree Street, Suite 1100
                                           Atlanta, Georgia 30309

                                           ---------------------------------
                                                  Robert J. Franz

                                           3841 South Vista Place
                                           Chandler, Arizona  85248

                                       26
<PAGE>
                                           ---------------------------------
                                                 Mary E. Franz

                                           3841 South Vista Place
                                           Chandler, Arizona  85248

                                           Geneva Middle Market Investors, L.P.

                                            By:
                                            ---------------------------------
                                            Name:    James J. Goodman
                                            Title:   President

                                            20 William Street, Suite 250
                                            Wellesley, Massachusetts  02481

                                            Citizens  Bank of  Massachusetts  as
                                            successor in interest to State
                                            Street Bank and Trust Company1

                                           By:      /s/  Fred N. Manning
                                           ---------------------------------
                                           Name:    Fred N. Manning
                                           Title:   Senior Vice President

                                           53 State Street - 8th Floor
                                           Boston, Massachusetts  02109

--------
1 State Street Bank and Trust Company is a party to this Agreement solely with
respect to Sections 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18,
19, 20, 22, 23, 24 and 25 only hereof.

                                       27
<PAGE>

                                            Ark CLO 2000-1, Limited

                                            By:
                                           ---------------------------------
                                            Name:    Lynn Tilton
                                            Title:   Collateral Manager

                                            c/o Patriarch Partners, LLC,
                                            40 Wall Street, 40th Floor,
                                            New York, New York 10005

                                            /s/  Bradford C. Walker
                                           ---------------------------------
                                                 Bradford C. Walker

                                            8207 SE 48th Street
                                            Mercer Island, Washington  98040

                                       28
<PAGE>

                                   Schedule A

     Registration   Rights  Agreement,   dated  June  3,  1996,  between  Luxtec
Corporation, a Massachusetts corporation, and the Persons identified therein.<PAGE>

                                                                   EXHIBIT 10.01

                 GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC.

                         Investment Management Agreement

         This Agreement is made as of the 8th day of April, 2002, between

1. GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC., a corporation organized
under the laws of the State of Delaware ("Manager"); and

2. PXRE RE1NSURANCE COMPANY, a corporation organized under the laws of the State
of Connecticut (the "Client").

         WHEREAS, Client desires to appoint Manager as the investment manager of
that portion of Client's assets constituting the Account (as defined below) for
fees agreed upon in Schedule A. III.;

         NOW THEREFORE, in consideration of the mutual agreements herein
contained, it is agreed as follows:

Section 1. The Account

         The cash, securities and other assets placed by Client in the account
to be managed under this Agreement (the "Account") are listed on Section l.A. of
Schedule A. Assets may be added to the Account at any time. Client will provide
notification to the Manager of any such additions. The Account will include
these assets and any changes in them resulting from transactions directed by
Manager, withdrawals and additions made by Client, or dividends, interest, stock
splits and other earnings, gains or losses on the assets.

         Assets of the Client that are not to be managed by Manager are
separately identified on Schedule A ("Unmanaged Assets"). Manager may include
these assets in its periodic reports to Client, but will exclude their value
when calculating Manager's asset management fees.

                                       1

<PAGE>

Section 2. Management of the Account

         Manager will make all investment decisions for the Account, in
Manager's sole discretion and without first consulting or notifying Client,
subject to and in accordance with the investment restrictions and guidelines
which are attached as Schedule B (the "Investment Guidelines"). If Manager
manages only a portion of Client's portfolio, unless otherwise specified by
Client in writing, Investment Guidelines' restrictions relate specifically to
the assets managed by Manager. Client may change these Investment Guidelines at
any time, but Manager will be bound by the changes only after it has received
and agreed to them in writing. Other than by the Investment Guidelines, the
insurance laws and regulations of the State of Connecticut (the "Insurance
Laws"), and the terms of this Agreement, the investments made by Manager on
behalf of the Client will not be restricted in any manner.

         Subject to the Investment Guidelines and the Insurance Laws, Manager
will have full power and authority, on behalf of Client, to instruct any
brokers, dealers or banks to buy, sell, exchange, convert or otherwise trade in
all securities, futures or other investments for the Account.

         Manager will not be responsible for giving Client investment advice or
taking any other action with respect to Unmanaged Assets.

         Client appoints Manager as the true and lawful attorney of the Client
for and in the name, place and stead of Client, in Manager's unrestricted
discretion, to operate and conduct the brokerage accounts of the Client relating
to the Account and to do and perform all and every act and thing whatsoever
requisite in furtherance of this Agreement, including the execution of all
writings related to the purchase or sale, assignments, transfers and ownership
of any stocks, bonds, commodities, or other securities. Manager is hereby fully
authorized to act and rely on the authority vested pursuant to said power of
attorney.

         Effective as of January 1, 2002, and until further notice, Manager will
provide the investment accounting services for Client as set forth in Schedule
E, and will assist Client in preparing Client's statutory Schedule D, if
applicable. Client acknowledges that Manager will provide accounting data
according to Manager's standard interpretation of accounting principles, unless
expressly instructed otherwise by Client's prior written notice.

Section 3. Transactions for the Account

         Manager will arrange for securities transactions for the Account to be
executed through those brokers, dealers or banks that Manager reasonably
believes will provide best execution. In choosing a broker, dealer or bank,
Manager will consider the broker, dealer or bank's execution capability,
reputation and access to the markets for the securities being traded for the
Account. Manager will seek competitive commission rates, but not necessarily the
lowest rates available.

                                       2

<PAGE>

         Manager may also send transactions for the Account to brokers who
charge higher commissions than other brokers, provided that Manager determines
in good faith that the amount of commissions Manager pays is reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms either of that particular transaction or Manager's overall
responsibilities with respect to all clients whose accounts Manager manages on a
discretionary basis.

         Portfolio transactions for each client account generally are completed
independently. However, if Manager decides to purchase or sell the same
securities for Client and other clients at about the same time, Manager may
combine Client's order with those of other clients if Manager reasonably
believes that it will be able to negotiate better prices or lower commission
rates or transaction costs for the combined order than for Client's order alone.
Client will pay the average price and transaction costs obtained for such
combined orders. Manager generally will allocate securities purchased or sold as
part of a combined order to Client's Account and to accounts of other clients
according to the size of the order placed for each client.

         If Manager cannot obtain execution for the total amount of the
securities in the combined orders, adjustments to the allocation will be made on
a random number generator methodology. However, Manager may increase or decrease
the amounts of securities allocated to each client if necessary to avoid having
odd or small numbers of shares held for the account of any client. Each client
that participates in a combined order will receive or pay the average share
price and/or transactions costs for all transactions executed as part of the
combined order.

         If Client directs Manager to use particular brokers, dealers or banks
to execute transactions for the Account, Manager will do so, but Manager will
not seek better execution services or prices for Client from other brokers,
dealers or banks, and Client may pay higher prices or transaction costs as a
result. Manager also may not be able to seek better execution services for
Client by combining Client's orders with those of other clients.

         Client may direct all transactions for the Account to a particular
broker, dealer or bank, by writing the name and address of that broker, dealer
or bank in the space provided on Schedule A.

Section 4. Transaction Confirmations

         Manager will instruct the brokers, dealers or banks who execute
transactions for the Account to send Client all transaction confirmations,
unless Client chooses not to receive confirmations. If Client does not wish to
receive individual confirmations, this box should be checked. \X\

                                       3

<PAGE>

         Client may elect to receive individual confirmations at any time by
giving Manager written notice.

Section 5. Custody of Account Assets

         The assets in the Account will be held for Client by the custodian
named on Schedule A (the "Custodian"). Manager will not have custody of any
Account assets. Client will pay all fees of the Custodian.

         Client will authorize the Custodian to follow Manager's instructions to
make and accept payments for, and to deliver or to receive, securities, cash or
other investments purchased, sold, redeemed, or exchanged for the Account.
Client also will instruct the Custodian to send Client and Manager monthly
statements showing the assets in and all transactions for the Account during the
month, including any payments of Manager's fees.

         Client will provide Manager with a copy of its agreement with the
Custodian, and will give Manager reasonable advance notice of any change of
Custodian.

Section 6. Reports to Client

         Manager will send Client monthly written reports showing the identity,
cost and current market value of the assets in the Account and each transaction
made for the Account during the period covered by the report, which reports
shall include the information set forth on Schedule E hereto and such other
information as Client may reasonably request from time to time. The Account's
performance will be sent monthly, quarterly or annually upon Client request.

Section 7. Account Valuation

         Manager will value the securities in the Account using independent
pricing sources. All securities in the Account that are listed and traded on a
national securities exchange or on NASDAQ shall be valued on the valuation date
at the closing price on the principal market where the securities are traded.
All other securities shall be valued in accordance with any reasonable valuation
method selected by Manager, consistent with industry accepted practices. While
GR-NEAM does its best to obtain representative market prices for all securities
in the Account, such prices do not always reflect the price actually received or
paid on the open market.

                                        4

<PAGE>

Section 8. Manager's Fees

         For Manager's services, Client will pay a percentage of the value, as
determined under Section 7 of this Agreement, of all assets in the Account
(excluding Unmanaged Assets) as of the last trading day of each calendar month.
The fees are payable at the end of each calendar quarter for services provided
by Manager during the prior three months. The percentage amount of the fees is
shown on Schedule A. In any partial quarter, the fees will be reduced pro rata
based on the number of days the Account was managed.

         Client agrees to pay Manager's fees as follows:

         / /      The Custodian will deduct the fees from Client's Account and
                  pay them to Manager each quarter. Manager will send Client and
                  the Custodian at the same time a bill showing the amount of
                  Manager's fees, the Account value on which they were based and
                  how they were calculated. The Custodian will send Client a
                  monthly statement showing all amounts paid from the Account,
                  including Manager's fees.

         /X/      Client will be billed directly by Manager and will pay
                  Manager's fees within 30 days of receiving the bill.

         If Manager invests in securities issued by money market funds or other
investment companies for the Account, these securities will be included in the
value of the Account when Manager's fees are calculated. These same assets will
be subject to additional investment management and other fees that are paid by
the investment company but ultimately borne by its shareholders. These
additional fees are described in each investment company's prospectus.

Section 9. Proxy Voting

         Proxies for securities in the Account should be voted as follows:

         / /  Client directs Manager not to vote proxies for securities held for
              the Account.

         /X/  Client directs Manager to vote all proxies for securities held
              for Client's Account in accordance with --

              /X/  Manager's own discretion
                                  or
              / /  Client's proxy voting guidelines attached as Schedule C.

                                        5

<PAGE>

         Client will direct Custodian to send promptly all proxies and related
shareholder communications to Manager and to identify them as relating to
Client's Account. Client understands that Manager will not be able to vote
proxies if they are not received on a timely basis from the Custodian as
properly identified as relating to Client's Account. Manager shall not be
responsible for voting proxies of foreign securities, and will forward them to
Client for completion.

         These proxy voting instructions may be changed at any time by notifying
Manager in writing.

Section 10. Legal Proceedings

         Manager will not advise or act for Client in any legal proceedings,
including bankruptcies or class actions, involving securities held in the
Account or issuers of those securities.

Section 11. Risk

         Manager cannot guarantee the future performance of the Account, promise
any specific level of performance or promise that its investment decisions,
strategies or overall management of the Account will be successful. The
investment decisions Manager will make for Client are subject to various market,
currency, economic, political and business risks, and will not necessarily be
profitable.

Section 12. Standard of Care; Limitation of Liability

         Except as may otherwise be provided by law, Manager will not be liable
to Client for any loss (i) that Client may suffer as a result of Manager's good
faith decisions or actions where Manager exercises the degree of care, skill,
prudence and diligence that a prudent person acting in a like fiduciary capacity
would use; (ii) caused by following Client's instructions; or (iii) caused by
the Custodian, any broker, dealer or bank to which Manager directs transactions
for the Account or any other person, except in the case of, and only to the
extent that, the negligence or willful misconduct of Manager contributed to the
loss.

         Federal and state securities laws impose liabilities under certain
circumstances on persons who act in good faith, and this Agreement does not
waive or limit Client's rights under those laws.

         Except as set forth above with respect to the Account, Manager will not
be responsible for Client's own compliance with the insurance investment laws of
Client's state of domicile Notwithstanding any other provision in this
Agreement, Manager shall not be responsible for Client's compliance with
applicable tax laws.

                                        6

<PAGE>

         In managing the Account, Manager will not consider any other
securities, cash, or other investments or assets Client owns for diversification
or other purposes. Manager shall have no responsibility whatsoever for the
management of the Unmanaged Assets or any assets of Client other than the
Account and shall incur no liability for any loss or damage which may result
from the management of such other assets.

Section 13. Client Directions

         The names and specimen signatures of each individual who is authorized
to give directions to Manager on Client's behalf under this Agreement are set
forth on Schedule D. Directions received by Manager from Client must be signed
by at least one such person. If Manager receives directions from Client which
are not signed by a person that Manager reasonably believes is authorized to do
so, Manager shall not be required to comply with such directions until it
verifies that the directions are properly authorized by Client.

         Manager shall be fully protected in relying upon any direction signed
or given by a person that Manager reasonably believes is authorized to give such
directions on Client's behalf. Manager also shall be fully protected when acting
upon an instrument, certificate, or paper that Manager reasonably believes to be
genuine and to be signed or presented by any such person or persons. Manager
shall be under no duty to make any investigation or inquiry as to any statement
contained in any writing and may accept the same as conclusive evidence of truth
and accuracy of statements contained therein.

Section 14. Confidentiality

         Except as Client and Manager otherwise agree or as may be required by
law, all information concerning the Account and services provided under this
Agreement shall be kept confidential.

Section 15. Non-Exclusive Agreement

         Manager provides investment advice to other clients and may give them
advice or take actions for them, for Manager's own accounts or for accounts of
persons related to or employed by Manager, that is different from advice
provided to or actions taken for client.

         Manager is not obligated to buy, sell or recommend for Client's Account
any security or other investment that Manager may buy, sell or recommend for
other clients or for the account of Manager or its related persons or employees.

         If Manager obtains material, non-public information about a security or
its issuer that Manager may not lawfully use or disclose, Manager will have no
obligation to disclose the information to Client or to use it for Client's
benefit.

                                       7

<PAGE>

Section 16. Term of Agreement

         Either Client or Manager may cancel this Agreement at any time upon 30
days written notice. This Agreement will remain in effect until terminated.
Termination of this Agreement will not affect (i) the validity of any action
that Manager or Client has previously taken; (ii) the liabilities or obligations
of Manager or Client for transactions started before termination; or (iii)
Client's obligation to pay Manager's fees through the date of termination. Upon
termination, Manager will have no obligation to recommend or take any action
with regard to the securities, cash or other assets in the Account.

Section 17. Agreement Not Assignable

         This Agreement may not be assigned within the meaning of the Investment
Advisers Act of 1940 (the "Advisers Act") by Manager without Client's consent.

Section 18. Governing Law

         The laws of the State of Connecticut will govern this Agreement.
However, nothing in this Agreement will be construed contrary to any provision
of the Advisers Act or the rules thereunder.

Section 19. Miscellaneous

         If any provision of this Agreement is or becomes inconsistent with any
applicable law or rule, the provision will be deemed rescinded or modified to
the extent necessary to comply with such law or rule. In all other respects,
this Agreement will continue in full force and effect. This Agreement contains
the entire understanding between Manager and Client and may not be changed
except in writing signed by both parties. Failure to insist on strict compliance
with this Agreement or with any of its terms or any continued conduct will not
be considered a waiver by either party under this Agreement.

Section 20. Notices

       All notices and instructions with respect to the Account or other matters
covered by this Agreement may be sent by U.S. mail express delivery services,
facsimile, e-mail or other electronic means to Client and to Manager at the
addresses at the end of this agreement or to another address provided in
writing.

Section 21. Representations of Client

         Client represents and warrants to Manager that (a) Client is the
beneficial owner of all assets in the Account and except as specifically
identified by Client, there are no restrictions on transfer or sale of any of
those assets; (b) this Agreement has been duly authorized, executed, and
delivered by Client and is Client's valid and binding obligation; (c) the names
of the individuals who are authorized to act under this Agreement on behalf of
Client have been given to Manager in writing; (d) no government authorizations,
approvals, consents, or filings not already obtained are required in connection
with the execution, delivery, or performance of this Agreement by Client; and
(e) Client certifies that it is not an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or a plan
subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), nor a Person acting on behalf of any such plan. Client agrees to notify
Manager in writing within five (5) days after the occurrence of an event making
the above statement no longer accurate.

                                       8

<PAGE>

         Client agrees to indemnify, defend and hold harmless Manager and its
officers, directors, agents, employees, shareholders, legal representatives,
successors and assigns, from and against any and all claims, actions, suits,
damages, costs, liabilities, judgments, losses, charges, costs and expenses,
including attorneys' fees, of Manager arising from any failure by Client to
accurately disclose its status under this Section or by reason of any defect in
Client's authority to appoint Manager under this Agreement.

Section 22. Representations of Manager

       Manager represents and warrants that (i) this Agreement has been duly
authorized, executed and delivered by Manager and is its valid and binding
obligation, (ii) it is registered with the United States Securities Exchange
Commission ("SEC") as an investment advisor under the Advisors Act, and (iii)
that it has all other licenses and registrations necessary to perform its
obligations under this Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       9

<PAGE>

Section 23. Form ADV

       Client has received and reviewed a copy of Part II of Manager's Form ADV
and a copy of this Agreement.

Section 24. Independent Contractor

       The relationship of Manager to Client is and shall remain during the term
of this Agreement that of independent contractor. Manager and Client are not
partners or joint venturers with each other under this Agreement, and nothing in
this Agreement shall be construed so as to make them partners or joint
venturers, or to impose any liability as such on either of them.

AGREED TO AND ACCEPTED BY:

GENERAL RE - NEW ENGLAND                        PXRE REINSURANCE COMPANY
ASSET MANAGEMENT, INC.

/s/ Gerard T. Lynch                            /s/ James F. Dore
------------------------------------           -------------------------------
By: Gerard T. Lynch                            (Signature)
Its President
                                               James F. Dore
                                               -------------------------------
                                               (Name)

                                               Executive Vice President & Chief
                                               Financial Officer
                                               --------------------------------
                                               (Title)

Pond View Corporate Center                     399 Thornall St
76 Batterson Park Road                         Edison NJ 08837
Farmington, Connecticut 06032                  --------------------------------
                                               (Principal Address)

                                               06-1206728
                                               --------------------------------
                                               (Taxpayer Identification Number)

                                       10

<PAGE>

                                   SCHEDULE A

 I.  ACCOUNT ASSETS.

         A. Managed Assets - Client has deposited the following securities, cash
and other assets with the Custodian identified below to be managed under this
Agreement:

         B. Unmanaged Assets - Client also deposited with the Custodian the
following assets which are not to be managed under this Agreement:

II. CUSTODY OF ACCOUNT ASSETS. The assets to be managed under this Agreement and
any Unmanaged Assets will be held by:

JP Morgan Chase                           Custodial Account Number: G05140
--------------------------------                                    -----------
(Name)

4 New York Plaza, 2nd Floor               Custodian Contact: Lillian White
--------------------------------                             ------------------
(Address)

New York, NY 1004-2413                    Contact Phone Number: 212-623-5242
--------------------------------                                ---------------

-------------------------------------------------------------------------------

III. FEES. Manager's fees for services provided under this Agreement, including
assistance with Schedule D preparation provided under this Agreement shall be as
follows:

Annual fee of .20 % (twenty hundredths of one percent) of the first $200 million
of the Stat market value of the assets under management;

..15 % (fifteen hundredths of one percent) of the next $200 million of the Stat
market value of the assets under management;

..10% (ten hundredths of one percent) of the Stat market value of the remaining
assets under management.
-------------------------------------------------------------------------------

IV. BROKERAGE DIRECTION. Client directs Manager to cause all transactions for
the Account to be executed through the following broker, dealer or bank:
-------------------------------------------------------------------------------

Client has read, understands and accepts the limitations that this direction
will place on Manager's ability to seek best execution for the Account. This
direction may be changed by Client at any time by notifying Manager in writing.
-------------------------------------------------------------------------------

V. NAME OF CLIENT:                                   VI.  DATE:
PXRE REINSURANCE COMPANY

By: /s/ James F. Dore                                       4/8/02
--------------------------------                     --------------------------

                                       11

<PAGE>

                                   SCHEDULE B

                                      PXRE
                                UNMANAGED ASSETS

Bonds on Deposit for PXRE Reinsurance Company
             4/8/02   17:41

<TABLE>
<CAPTION>

                                                                                                                 Maturity
Deposit with                                      Bank Contact             Par Value  Desc                Rate     Date
------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                              <C>        <C>               <C>       <C>
Oregon Department of Insurance
440 Labor and Industries Building                                            425,000  USTN                0.06375     8/15/02
Salem, Oregon 97310
Attn: Diane Koening                                 Tony
Tel: (503) 378-4281 ex620                       503-275-3333
Fax: (503) 378-4351

California Department of Insurance
Supervisor-Securities Deposit Unit                                            32,000  CD                              6/18/03
300 Capital Mall, Suite 1300
Sacramento, CA 95814                            Bank of America
Attn: Mr. Jose                                  Clarece Basken
916-492-3225                                      916-321-4611

Office of Commissioner of Insurance             Randy Thompson
7th Floor West Tower, Floyd Building          Wachovia Bank, N.A.             90,000  UST                   0.055     2/15/08
2 Martin Luther King, Jr. Drive               Georgia Serv Center
Atlantia, Georgia 30334                           MC NC 31013
Attn: Branda                              1 West 4th St Winston-Salem
404-651-6825                                        NC 27101
                                                P 336-770-6405
                                                F 336-770-4059

Office of the Treasurer                          Fleet Bank
55 Elm Street                                    Paul Foster                 500,000  Minnesota ST          0.05000   11/1/07
Hartford, Connecticut 06106                      617-346-5569 (PH)         2,000,000  Chicago Tax-a-Cent    0.04600   6/1/05
Attn: Carol Teller                               1 Federal Street          4,925,000  FNMA                  0.05750   2/15/08
Tel: (860) 566-5050 EXT 3122                     MADE 10306 A              ---------
Fax: (860) 702-3041                              Boston MA 02110           7,425,000

Commission of Insurance
(On Deposit At Bank One)
P.O. Box 94214
Baton Rouge, Lousiana                                                         50,000  USTN                  0.055     2/15/08
Attn: Cita Christian
Tel: (225) 342-1201
Fax: (225) 342-7352

Division of Treasury
Ms. Kaitlin Crowe
1 Ashburton Place                                                            100,000  USTN                  0.06375   8/15/02
Boston, Ma 02108
Tel (617) 367-3900 X234
Fax: (617) 523-1068

Merrill Lynch                                                                402,500  FNMA                  0.0575    2/15/08
110 South Bedford Road
Mt. Kisco, NY 10549
Attn: James Cotto
Tel: 1-800-374-8498
Fax: 1-914-244-3817
COLLATERAL FOR LOC-NY

<CAPTION>

                                                            Due         SEMI
Deposit with                              Cusip             Date        ANNUAL
-----------------------------------------------------------------------------
<S>                                       <C>             <C>         <C>
Oregon Department of Insurance
440 Labor and Industries Building         912827-G5-5     Feb/Aug      13,547
Salem, Oregon 97310
Attn: Diane Koening
Tel: (503) 378-4281 ex620
Fax: (503) 378-4351

California Department of Insurance
Supervisor-Securities Deposit Unit
300 Capital Mall, Suite 1300
Sacramento, CA 95814
Attn: Mr. Jose
916-492-3225

Office of Commissioner of Insurance
7th Floor West Tower, Floyd Building      9128273X6       Feb/Aug       2,475
2 Martin Luther King, Jr. Drive
Atlantia, Georgia 30334
Attn: Branda
404-651-6825

Office of the Treasurer
55 Elm Street                             604128L71       May/Nove     12,500
Hartford, Connecticut 06106               167709AT1       Jun/Dec      46,000
Attn: Carol Teller                        31359MDJ9       Feb/Aug     141,594
Tel: (860) 566-5050 EXT 3122
Fax: (860) 702-3041

Commission of Insurance
(On Deposit At Bank One)
P.O. Box 94214
Baton Rouge, Lousiana                     9128273X8       Feb/Aug       1,375
Attn: Cita Christian
Tel: (225) 342-1201
Fax: (225) 342-7352

Division of Treasury
Ms. Kaitlin Crowe
1 Ashburton Place                         912827-G5-5     Feb/Aug       3,188
Boston, Ma 02108
Tel (617) 367-3900 X234
Fax: (617) 523-1068

Merrill Lynch                             31359MDJ9       Feb/Aug      11,572
110 South Bedford Road
Mt. Kisco, NY 10549
Attn: James Cotto
Tel: 1-800-374-8498
Fax: 1-914-244-3817
COLLATERAL FOR LOC-NY

</TABLE>
<PAGE>

INVESTMENT GUIDELINES: The investment guidelines to be followed by Manager in
managing Client's Account are set forth below:

------------------------------------------------------------------------------
NAME OF CLIENT:                                   DATE:
PXRE REINSURANCE COMPANY

By: /s/ James F. Dore                                         4/8/02
    -----------------------------------           -----------------------------

                                       12

<PAGE>

                                      PXRE
                                UNMANAGED ASSETS

Bonds on Deposit for PXRE Reinsurance Company
             4/18/02  17:41

<TABLE>
<CAPTION>

                                                                                                           Maturity
Deposit with                                    Bank Contact       Par Value      Desc             Rate      Date      Cusip
---------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                <C>          <C>                <C>     <C>         <C>
Merrill Lynch                                                       2,125,000   Illinois State     0.05875   8/1/14    452149UQ8
100 Campus Drive                                                    4,000,000   Minnesota ST       0.05      11/1/07   604128L71
Park Avenue                                                        42,500,000   UST                0.03625   8/31/03   9128277CO
Fordham Park,NJ 07932                                              ----------
973-301-7750/7792                                                  48,625,000
973-301-7751 fax
COLLATERAL FOR LLOYDS
A/C #16M10354

Banc One Oklahoma
National safe keeping services                                        300,000   Chicago Tax        0.046     6/1/05    167709AT1
Client Service Dept, 6th Floor                                                  A Cent Lo IL
100 N. Broadway, Oklahoma City, Ok 73102
Attn: Judith Watts
P - 405-231-6966
F - 405-231-6483

Chase Manhattan Bank                                                6,006,478   Federal Home       0.0473    3/1/03
New York, NY                                                                    Loan Mortg. Corp
Purchased to cover finite deal                                                  Debt
Will mature in 2 years

Bank of America                                                       150,000   FNMA               0.0575    2/15/08   31359MDJ9
BK of NYC/BOATRUST
Attn: Brenda Nichols
Mail Code: AR1-101-06-06
PO Box 1681 Little Rock
AR 72203-1681
(501)378-1913

Attn: Maria Magdalena Linera                                          500,000   PR Electric        0.049     07/01/05  745268WX6
P - (787) 722-8686 X 2220                                                       Power Authority
F - (787) 787-722-4400
P.O. Box 8330
San Juan, Puerto Rico 00910-8330
Ref - E-67 (i)
Held @ Chase

<CAPTION>

                                                 Due          SEMI
Deposit with                                     Date        ANNUAL
--------------------------------------------------------------------
<S>                                              <C>         <C>
Merrill Lynch                                    Feb/Aug      62,422
100 Campus Drive                                 May/Nove    100,000
Park Avenue                                      Feb/Aug     770,313
Fordham Park,NJ 07932
973-301-7750/7792
973-301-7751 fax
COLLATERAL FOR LLOYDS
A/C #16M10354

Banc One Oklahoma
National safe keeping services                   Jun/Dec       6,900
Client Service Dept, 6th Floor
100 N. Broadway, Oklahoma City, Ok 73102
Attn: Judith Watts
P - 405-231-6966
F - 405-231-6483

Chase Manhattan Bank                             April/Oct   142,053
New York, NY
Purchased to cover finite deal
Will mature in 2 years

Bank of America                                  Feb/Aug       4,313
BK of NYC/BOATRUST
Attn: Brenda Nichols
Mail Code: AR1-101-06-06
PO Box 1681 Little Rock
AR 72203-1681
(501)378-1913

Attn: Maria Magdalena Linera                     Oct/March    12,250
P - (787) 722-8686 X 2220
F - (787) 787-722-4400
P.O. Box 8330
San Juan, Puerto Rico 00910-8330
Ref - E-67 (i)
Held @ Chase

</TABLE>

<PAGE>

                                   PXRE Group
                    Revised Draft Investment Policy Statement

<TABLE>
<CAPTION>

                                                     Performance                                                    Permitted
Segment           Driven By                          Benchmarks              Investment Philosophy                  Investments
-------           ---------                          ----------              ---------------------                  ---------------
<S>               <C>                                <C>                     <C>                                    <C>
Excess Capital    Represents the balancing           Weighting of:           Maximize after tax reported returns    Treasury Bonds
                  portion of portfolio that is                               through investment in longer term      Agency Bonds
                  in excess of all actual and        -  Zurich Hedge         debt investments, hedge funds and      Municipal Bonds
                  projected obligations as              Fund of Funds        other limited partnerships.            Corporate Bonds
                  represented by the Liability          Index                Securities and sectors likely to       Mortgage-backed
                  and Primary Capital segments.                              aggregate with insurance portfolio       Securities
                  Represents surplus shareholder     -  Lehman Aggregate     to be avoided.                         Asset-backed
                  funds that can be more                AA Bond Index        Average maturities: none                 securities
                  aggressively invested to                                   Credit quality: Minimum BBB,           Hedge Funds
                  achieve higher returns. This       Depending on actual     Mortgage-backed and Asset-backed       Other Limited
                  portion of the portfolio           allocation in period    AA. Average AA or higher.                Partnerships
                  contains the non-bond                                      Diversification: No limit on U.S.
                  investments in hedge fund and                              Government, Agency or municipal
                  other limited partnerships.                                obligations. No more than the
                  This portion of the portfolio                              greater of $20 million or 5% of
                  is to be actively managed to                               portfolio any one corporate issuer
                  maximize reported return and                               AA or better, and no more than the
                  value across the permitted                                 greater of $10 million or 2.5% of
                  bond universe. The Hedge Fund                              portfolio for corporate issuer
                  guidelines are addressed                                   below AA, across all portfolio
                  separately.                                                segments.

</TABLE>

                               Exhibit 2 Page 6 of 9

<PAGE>

                                   PXRE Group
                           Investment Policy Statement

<TABLE>
<CAPTION>

                                                     Performance                                                    Permitted
Segment           Driven By                          Benchmarks              Investment Philosophy                  Investments
-------           ---------                          ----------              ---------------------                  ---------------
<S>               <C>                                <C>                     <C>                                    <C>
Primary Capital   Need to maintain a level of        Lehman AA               Maximize after tax reported return     Treasury Bonds
                  capital and surplus to               7 year Index          while maintaining an appropriate         U.S
                  maintain licenses, for                                     preservation of capital. Allocation    Agency Bonds
                  regulatory purposes and to                                 between bond sectors should be         Municipal Bonds
                  conduct reinsurance                                        managed so as to earn maximum          Corporate Bonds
                  operations. Amounts in this                                yields complying with overall          Mortgage-backed
                  portfolio should be adequate                               investment guidelines.                   Securities
                                                                                Securities and sectors likely to    Asset-backed
                  to cover deficit in cash flows                             aggregate with insurance portfolio       Securities
                  from operations related to                                 to be avoided.
                  expected possible large loss                                  Due to the low probability
                  events as defined in the                                   of a large loss scenario, this
                  Company's annual plan. The                                 portfolio should be actively
                  amount would be determined                                 managed to reflect a balance
                  from the Company's annual plan                             between return and liquidity and to
                  by subtracting net written                                 maximize returns in the
                  premiums, related                                          intermediate term market (1-10
                  reinstatement premiuns from                                years) with an average maturity of
                  incurred losses net of                                     7 years. The portfolio should be
                  reinsurance recoverable,                                   managed to produce investment
                   (giving affect to an                                      income, while minimizing capital
                  anticipation delay in                                      depreciation and capital losses in
                  collection, related commission                             the event of a wholesale
                  and brokerage and the                                      liquidation of this portfolio to
                  projection of related payment                              fund a large loss.
                  patterns associated with the                               Average maturity: 7 years
                  loss.)                                                     Credit quality: Average grade AA -
                  This portfolio should be                                   Minimum BBB, and minimum AA for
                  structured so as to maximize                               asset-backed and mortgage-backed.
                  after-tax reported returns,                                Diversification: No limit on U.S.
                  whilst maintaining an                                      Government, Agency or municipal
                  appropriate preservation of                                obligations. No more than the
                  capital, low credit risk, and                              greater of $20 million or 5% of
                  relatively liquid in order to                              portfolio any one corporate issuer
                  be easily converted to cash                                AA or better, and no more than the
                  and cash equivalents in the                                greater of $10 million or 2.5% of
                  event of a large loss.                                     portfolio for corporate issuer
                                                                             below AA, across all portfolio
                                                                             segments.

</TABLE>

                             Exhibit 2 Page 7 of 9

<PAGE>

                                   PXRE Group
                           Investment Policy Statement

<TABLE>
<CAPTION>

                                                     Performance                                                    Permitted
Segment           Driven By                          Benchmarks              Investment Philosophy                  Investments
-------           ---------                          ----------              ---------------------                  ---------------
<S>               <C>                                <C>                     <C>                                    <C>
Liability         Need to maintain investments       Lehman AA Bond index    Investment grade, intermediate         Treasury Bonds
Portfolio         whose duration and cash flow       with weighted           maturity bonds and money market        Agency Bonds
                  is reasonably matched to the       average duration        investments. Maintain a portfolio      Municipal Bonds
                  Company's obligations with         across Catastrophe      of laddered years or directly          Corporate Bonds
                  respect to losses and loss         and Finite and          matched to expected liabilities.       Mortgage-backed
                  expenses (net of reinsurance       Exited Lines,           Securities and sectors likely to         Securities
                  recoverable) and other             initially 2.5 years     aggregate with insurance portfolio     Asset backed
                  liabilities arising from                                   to be avoided.                           Securities
                  reinsurance agreements.                                    Average maturity: weighted average     Treasury Bills
                  This segment can vary in size                              computed quarterly.                      & Notes
                  dependent upon the status of                               Credit Quality: BBB or better.         Money Market
                  losses and therefore should be                             Average credit quality AA. Foreign,      Instruments:
                  adjusted to match the expected                             Mortgage-backed and Asset-backed         Commercial
                  cash flow requirements of the                              Securities minimum AA.                    Paper
                  Company's liabilities                                      Diversification: No limit on U.S.        Bankers'
                  quarterly.                                                 Government, Agency or municipal           Acceptances
                                                                             obligations. No more than the            Certificates
                                                                             greater of $20 million or 5% of           of Deposit
                                                                             portfolio any one corporate issuer     Foreign
                                                                             AA or better, and no more than the       Securities
                                                                             greater of $10 million or 2.5% of
                                                                             portfolio for corporate issuer
                                                                             below AA, across all portfolio
                                                                             segments.
                                                                             Foreign Securities: To match
                                                                             foreign exchange exposure

</TABLE>

                              Exhibit 2 Page 8 of 9

<PAGE>

                                   SCHEDULE C

PROXY VOTING GUIDELINES: The proxy voting guidelines to be followed by Manager
in voting securities held in the Account are set forth below:

(If none, check here  /X/.)

NAME OF CLIENT:                                     DATE:
PXRE REINSURANCE COMPANY

By: /s/ James F. Dore                                         4/8/02
    -----------------------------------           -----------------------------

                                       13

<PAGE>

                                   SCHEDULE D

                             SECRETARY'S CERTIFICATE
                             -----------------------

    I, Bruce J. Byrnes, the Secretary of PXRE REINSURANCE COMPANY, (the
"Corporation"), a Corporation organized and existing under the laws of the State
of Connecticut hereby certify that each of the following officers of the
Corporation, acting singly, is authorized in the name and on behalf of the
Corporation, to give instructions to General Re-New England Asset Management,
Inc. ("Manager") with respect to any and all matters, including investment and
reinvestment of securities, pertaining to the Investment Management Agreement
between the Corporation and Manager, and to execute and deliver any and all
documents and to take any and all other action to carry out the purposes of said
Investment Management Agreement. I further certify that the specimen signature
set forth next to the names of such officers, is the true and genuine signature
of such persons.

  Name of Officer       Title                                Signature
  ---------------       -----                                ---------

James F. Dore           EVP & CFO                       /s/ James F. Dore
--------------------    -------------------------       -----------------------

R.E.J. Jeffreys         V.P. & Asst. Treas.             /s/ R.E.J. Jeffreys
--------------------    -------------------------       -----------------------

Gerald L. Radke         President & CEO                 /s/ Gerald L. Radke
--------------------    -------------------------       -----------------------

         This Certificate shall be in effect from the date hereof until written
notice is given on behalf of the Corporation to terminate or revise it.

         IN WITNESS WHEREOF, I set my hand and seal of the Corporation.

           /s/ Bruce J. Byrnes                                 2/8/02
      ------------------------------                   ----------------------
                Secretary                                       Date

(Corporate Seal)

                                       14
<PAGE>

                                   Schedule E
                            PXRE REINSURANCE COMPANY

                        Accounting and Reporting Services

          Periodic Reporting of All Investment Income and Transactions

1.   STAT and GAAP basis reporting
2.   Review of monthly market values from reliable independent pricing sources
     by Asset Class Specialists
3.   Monthly general ledger journal entries
4.   Monthly general ledger and trial balance preparation and reconciliation to
     Statutory Schedule D Reports
5.   Monthly reconciliation to Client custodians and discrepancy resolution
6.   Monthly, quarterly and annual reporting packages delivered to Client by
     mail, electronic transfer or via website
7.   Summary and Detail Transaction Reports
8.   Investment Income Earned Report
9.   Monthly Appraisal Reports
10.  Rating of securities by Standard & Poor's, Moody's, Fitch
11.  Periodic FAS 91 Adjustments

                               Statutory Reporting

1.   Assistance in preparation of Quarterly and Annual Statutory Schedule D
     Reports
2.   Quarterly and Annual NAIC pricing and designations
3.   Securities Valuation Office ("SVO") filings

                                       15

<PAGE>

                 GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC.

                         Investment Management Agreement
                         -------------------------------

         This Agreement is made as of the 8 day of April, 2002, between

1.       GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC., a corporation
organized under the laws of the State of Delaware ("Manager"); and

2.       PXRE GROUP LTD., a corporation organized under the laws of BERMUDA (the
"Client").

         WHEREAS, Client desires to appoint Manager as the investment manager of
that portion of Client's assets constituting the Account (as defined below) for
fees agreed upon in Schedule A. III.;

         NOW THEREFORE, in consideration of the mutual agreements herein
contained, it is agreed as follows:

Section 1. The Account

         The cash, securities and other assets placed by Client in the account
to be managed under this Agreement (the "Account") are listed on Section l.A. of
Schedule A. Assets may be added to the Account at any time. Client will provide
notification to the Manager of any such additions. The Account will include
these assets and any changes in them resulting from transactions directed by
Manager, withdrawals and additions made by Client, or dividends, interest, stock
splits and other earnings, gains or losses on the assets.

         Assets of the Client that are not to be managed by Manager are
separately identified on Schedule A ("Unmanaged Assets"). Manager may include
these assets in its periodic reports to Client, but will exclude their value
when calculating Manager's asset management fees.

                                       1
<PAGE>

Section 2. Management of the Account

         Manager will make all investment decisions for the Account, in
Manager's sole discretion and without first consulting or notifying Client,
subject to and in accordance with the investment restrictions and guidelines
which are attached as Schedule B (the "Investment Guidelines"). If Manager
manages only a portion of Client's portfolio, unless otherwise specified by
Client in writing, Investment Guidelines' restrictions relate specifically to
the assets managed by Manager. Client may change these Investment Guidelines at
any time, but Manager will be bound by the changes only after it has received
and agreed to them in writing. Other than by the Investment Guidelines, the
insurance laws and regulations of the State of Connecticut (the "Insurance
Laws"), and the terms of this Agreement, the investments made by Manager on
behalf of the Client will not be restricted in any manner.

         Subject to the Investment Guidelines and the Insurance Laws, Manager
will have full power and authority, on behalf of Client, to instruct any
brokers, dealers or banks to buy, sell, exchange, convert or otherwise trade in
all securities, futures or other investments for the Account.

         Manager will not be responsible for giving Client investment advice or
taking any other action with respect to Unmanaged Assets.

         Client appoints Manager as the true and lawful attorney of the Client
for and in the name, place and stead of Client, in Manager's unrestricted
discretion, to operate and conduct the brokerage accounts of the Client relating
to the Account and to do and perform all and every act and thing whatsoever
requisite in furtherance of this Agreement, including the execution of all
writings related to the purchase or sale, assignments, transfers and ownership
of any stocks, bonds, commodities, or other securities. Manager is hereby fully
authorized to act and rely on the authority vested pursuant to said power of
attorney.

         Effective as of January 1, 2002, and until further notice, Manager will
provide the investment accounting services for Client as set forth in Schedule
E, and will assist Client in preparing Client's statutory Schedule D, if
applicable. Client acknowledges that Manager will provide accounting data
according to Manager's standard interpretation of accounting principles, unless
expressly instructed otherwise by Client's prior written notice.

Section 3. Transactions for the Account

         Manager will arrange for securities transactions for the Account to be
executed through those brokers, dealers or banks that Manager reasonably
believes will provide best execution. In choosing a broker, dealer or bank,
Manager will consider the broker, dealer or bank's execution capability,
reputation and access to the markets for the securities being traded for the
Account. Manager will seek competitive commission rates, but not necessarily the
lowest rates available.

                                       2
<PAGE>

         Manager may also send transactions for the Account to brokers who
charge higher commissions than other brokers, provided that Manager determines
in good faith that the amount of commissions Manager pays is reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms either of that particular transaction or Manager's overall
responsibilities with respect to all clients whose accounts Manager manages on a
discretionary basis.

         Portfolio transactions for each client account generally are completed
independently. However, if Manager decides to purchase or sell the same
securities for Client and other clients at about the same time, Manager may
combine Client's order with those of other clients if Manager reasonably
believes that it will be able to negotiate better prices or lower commission
rates or transaction costs for the combined order than for Client's order alone.
Client will pay the average price and transaction costs obtained for such
combined orders. Manager generally will allocate securities purchased or sold as
part of a combined order to Client's Account and to accounts of other clients
according to the size of the order placed for each client.

         If Manager cannot obtain execution for the total amount of the
securities in the combined orders, adjustments to the allocation will be made on
a random number generator methodology. However, Manager may increase or decrease
the amounts of securities allocated to each client if necessary to avoid having
odd or small numbers of shares held for the account of any client. Each client
that participates in a combined order will receive or pay the average share
price and/or transactions costs for all transactions executed as part of the
combined order.

         If Client directs Manager to use particular brokers, dealers or banks
to execute transactions for the Account, Manager will do so, but Manager will
not seek better execution services or prices for Client from other brokers,
dealers or banks, and Client may pay higher prices or transaction costs as a
result. Manager also may not be able to seek better execution services for
Client by combining Client's orders with those of other clients.

         Client may direct all transactions for the Account to a particular
broker, dealer or bank, by writing the name and address of that broker, dealer
or bank in the space provided on Schedule A.

Section 4. Transaction Confirmations

         Manager will instruct the brokers, dealers or banks who execute
transactions for the Account to send Client all transaction confirmations,
unless Client chooses not to receive confirmations. If Client does not wish to
receive individual confirmations, this box should be checked. |_|

                                       3
<PAGE>

         Client may elect to receive individual confirmations at any time by
giving Manager written notice.

Section 5. Custody of Account Assets

         The assets in the Account will be held for Client by the custodian
named on Schedule A (the "Custodian"). Manager will not have custody of any
Account assets. Client will pay all fees of the Custodian.

         Client will authorize the Custodian to follow Manager's instructions to
make and accept payments for, and to deliver or to receive, securities, cash or
other investments purchased, sold, redeemed, or exchanged for the Account.
Client also will instruct the Custodian to send Client and Manager monthly
statements showing the assets in and all transactions for the Account during the
month, including any payments of Manager's fees.

         Client will provide Manager with a copy of its agreement with the
Custodian, and will give Manager reasonable advance notice of any change of
Custodian.

Section 6. Reports to Client

         Manager will send Client monthly written reports showing the identity,
cost and current market value of the assets in the Account and each transaction
made for the Account during the period covered by the report, which reports
shall include the information set forth on Schedule E hereto and such other
information as Client may reasonably request from time to time. The Account's
performance will be sent monthly, quarterly or annually upon Client request.

Section 7. Account Valuation

         Manager will value the securities in the Account using independent
pricing sources. All securities in the Account that are listed and traded on a
national securities exchange or on NASDAQ shall be valued on the valuation date
at the closing price on the principal market where the securities are traded.
All other securities shall be valued in accordance with any reasonable valuation
method selected by Manager, consistent with industry accepted practices. While
GR-NEAM does its best to obtain representative market prices for all securities
in the Account, such prices do not always reflect the price actually received or
paid on the open market.

                                       4
<PAGE>

Section 8. Manager's Fees

         For Manager's services, Client will pay a percentage of the value, as
determined under Section 7 of this Agreement, of all assets in the Account
(excluding Unmanaged Assets) as of the last trading day of each calendar month.
The fees are payable at the end of each calendar quarter for services provided
by Manager during the prior three months. The percentage amount of the fees is
shown on Schedule A. In any partial quarter, the fees will be reduced pro rata
based on the number of days the Account was managed.

         Client agrees to pay Manager's fees as follows:

         |_|      The Custodian will deduct the fees from Client's Account and
                  pay them to Manager each quarter. Manager will send Client and
                  the Custodian at the same time a bill showing the amount of
                  Manager's fees, the Account value on which they were based and
                  how they were calculated. The Custodian will send Client a
                  monthly statement showing all amounts paid from the Account,
                  including Manager's fees.

         |x|      Client will be billed directly by Manager and will pay
                  Manager's fees within 30 days Of receiving the bill.

         If Manager invests in securities issued by money market funds or other
investment companies for the Account, these securities will be included in the
value of the Account when Manager's fees are calculated. These same assets will
be subject to additional investment management and other fees that are paid by
the investment company but ultimately borne by its shareholders. These
additional fees are described in each investment company's prospectus.

Section 9. Proxy Voting

         Proxies for securities in the Account should be voted as follows:

         |_|      Client directs Manager not to vote proxies for securities held
                  for the Account.

         |X|      Client directs Manager to vote all proxies for securities held
                  for Client's Account in accordance with --

                  |X|      Manager's own discretion

                                       or

                  |_|      Client's proxy voting guidelines attached as Schedule
                           C.

                                       5
<PAGE>

         Client will direct Custodian to send promptly all proxies and related
shareholder communications to Manager and to identify them as relating to
Client's Account. Client understands that Manager will not be able to vote
proxies if they are not received on a timely basis from the Custodian as
properly identified as relating to Client's Account. Manager shall not be
responsible for voting proxies of foreign securities, and will forward them to
Client for completion.

         These proxy voting instructions may be changed at any time by notifying
Manager in writing.

Section 10. Legal Proceedings

         Manager will not advise or act for Client in any legal proceedings,
including bankruptcies or class actions, involving securities held in the
Account or issuers of those securities.

Section 11. Risk

         Manager cannot guarantee the future performance of the Account, promise
any specific level of performance or promise that its investment decisions,
strategies or overall management of the Account will be successful. The
investment decisions Manager will make for Client are subject to various market,
currency, economic, political and business risks, and will not necessarily be
profitable.

Section 12. Standard of Care; Limitation of Liability

         Except as may otherwise be provided by law, Manager will not be liable
to Client for any loss (i) that Client may suffer as a result of Manager's good
faith decisions or actions where Manager exercises the degree of care, skill,
prudence and diligence that a prudent person acting in a like fiduciary capacity
would use; (ii) caused by following Client's instructions; or (iii) caused by
the Custodian, any broker, dealer or bank to which Manager directs transactions
for the Account or any other person, except in the case of, and only to the
extent that, the negligence or willful misconduct of Manager contributed to the
loss.

         Federal and state securities laws impose liabilities under certain
circumstances on persons who act in good faith, and this Agreement does not
waive or limit Client's rights under those laws.

         Except as set forth above with respect to the Account, Manager will not
be responsible for Client's own compliance with the insurance investment laws of
Client's state of domicile. Notwithstanding any other provision in this
Agreement, Manager shall not be responsible for Client's compliance with
applicable tax laws.

                                       6
<PAGE>

         In managing the Account, Manager will not consider any other
securities, cash, or other investments or assets Client owns for diversification
or other purposes. Manager shall have no responsibility whatsoever for the
management of the Unmanaged Assets or any assets of Client other than the
Account and shall incur no liability for any loss or damage which may result
from the management of such other assets.

Section 13. Client Directions

         The names and specimen signatures of each individual who is authorized
to give directions to Manager on Client's behalf under this Agreement are set
forth on Schedule D. Directions received by Manager from Client must be signed
by at least one such person. If Manager receives directions from Client which
are not signed by a person that Manager reasonably believes is authorized to do
so, Manager shall not be required to comply with such directions until it
verifies that the directions are properly authorized by Client.

         Manager shall be fully protected in relying upon any direction signed
or given by a person that Manager reasonably believes is authorized to give such
directions on Client's behalf. Manager also shall be fully protected when acting
upon an instrument, certificate, or paper that Manager reasonably believes to be
genuine and to be signed or presented by any such person or persons. Manager
shall be under no duty to make any investigation or inquiry as to any statement
contained in any writing and may accept the same as conclusive evidence of truth
and accuracy of statements contained therein.

Section 14. Confidentiality

         Except as Client and Manager otherwise agree or as may be required by
law, all information concerning the Account and services provided under this
Agreement shall be kept confidential.

Section 15. Non-Exclusive Agreement

         Manager provides investment advice to other clients and may give them
advice or take actions for them, for Manager's own accounts or for accounts of
persons related to or employed by Manager, that is different from advice
provided to or actions taken for Client.

         Manager is not obligated to buy, sell or recommend for Client's Account
any security or other investment that Manager may buy, sell or recommend for
other clients or for the account of Manager or its related persons or employees.

         If Manager obtains material, non-public information about a security or
its issuer that Manager may not lawfully use or disclose, Manager will have no
obligation to disclose the information to Client or to use it for Client's
benefit.

                                       7
<PAGE>

Section 16. Term of Agreement

         Either Client or Manager may cancel this Agreement at any time upon 30
days written notice. This Agreement will remain in effect until terminated.
Termination of this Agreement will not affect (i) the validity of any action
that Manager or Client has previously taken; (ii) the liabilities or obligations
of Manager or Client for transactions started before termination; or (iii)
Client's obligation to pay Manager's fees through the date of termination. Upon
termination, Manager will have no obligation to recommend or take any action
with regard to the securities, cash or other assets in the Account.

Section 17. Agreement Not Assignable

         This Agreement may not be assigned within the meaning of the Investment
Advisers Act of 1940 (the "Advisers Act") by Manager without Client's consent.

Section 18. Governing Law

         The laws of the State of Connecticut will govern this Agreement.
However, nothing in this Agreement will be construed contrary to any provision
of the Advisers Act or the rules thereunder.

Section 19. Miscellaneous

         If any provision of this Agreement is or becomes inconsistent with any
applicable law or rule, the provision will be deemed rescinded or modified to
the extent necessary to comply with such law or rule. In all other respects,
this Agreement will continue in full force and effect. This Agreement contains
the entire understanding between Manager and Client and may not be changed
except in writing signed by both parties. Failure to insist on strict compliance
with this Agreement or with any of its terms or any continued conduct will not
be considered a waiver by either party under this Agreement.

Section 20. Notices

      All notices and instructions with respect to the Account or other matters
covered by this Agreement may be sent by U.S. mail express delivery services,
facsimile, e-mail or other electronic means to Client and to Manager at the
addresses at the end of this agreement or to another address provided in
writing.

                                       8
<PAGE>

Section 21. Representations of Client

         Client represents and warrants to Manager that (a) Client is the
beneficial owner of all assets in the Account and except as specifically
identified by Client, there are no restrictions on transfer or sale of any of
those assets; (b) this Agreement has been duly authorized, executed, and
delivered by Client and is Client's valid and binding obligation; (c) the names
of the individuals who are authorized to act under this Agreement on behalf of
Client have been given to Manager in writing; (d) no government authorizations,
approvals, consents, or filings not already obtained are required in connection
with the execution, delivery, or performance of this Agreement by Client; and
(e) Client certifies that it is not an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or a plan
subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), nor a Person acting on behalf of any such plan. Client agrees to notify
Manager in writing within five (5) days after the occurrence of an event making
the above statement no longer accurate.

         Client agrees to indemnify, defend and hold harmless Manager and its
officers, directors, agents, employees, shareholders, legal representatives,
successors and assigns, from and against any and all claims, actions, suits,
damages, costs, liabilities, judgments, losses, charges, costs and expenses,
including attorneys' fees, of Manager arising from any failure by Client to
accurately disclose its status under this Section or by reason of any defect in
Client's authority to appoint Manager under this Agreement.

Section 22. Representations of Manager

      Manager represents and warrants that (i) this Agreement has been duly
authorized, executed and delivered by Manager and is its valid and binding
obligation, (ii) it is registered with the United States Securities Exchange
Commission ("SEC") as an investment advisor under the Advisors Act; and (iii)
that it has all other licenses and registrations necessary to perform its
obligations under this Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       9
<PAGE>

Section 23. Form ADV

      Client has received and reviewed a copy of Part II of Manager's Form ADV
and a copy of this Agreement.

Section 24. Independent Contractor

      The relationship of Manager to Client is and shall remain during the term
of this Agreement that of independent contractor. Manager and Client are not
partners or joint venturers with each other under this Agreement, and nothing in
this Agreement shall be construed so as to make them partners or joint
venturers, or to impose any liability as such on either of them.

AGREED TO AND ACCEPTED BY:

GENERAL RE-NEW ENGLAND                         PXRE GROUP LTD.
ASSET MANAGEMENT, INC.

/s/ Gerard T. Lynch                            /s/ Jeffrey L. Radke
-------------------------                      --------------------------------
By: Gerard T. Lynch                            (Signature)
Its President                                  Jeffrey L. Radke
                                               --------------------------------
                                               (Name)

                                               President
                                               --------------------------------
                                               (Title)

Pond View Corporate Center                     99 Front Street
76 Batterson Park Road                         --------------------------------
Farmington, Connecticut 06032                  Hamilton HM12, Bermuda
                                               --------------------------------
                                               (Principal Address)
                                                       98-0214719
                                               --------------------------------
                                               (Taxpayer Identification Number)

                                       10
<PAGE>

                                   SCHEDULE A
I.   ACCOUNT ASSETS.

         A. Managed Assets - Client has deposited the following securities, cash
and other assets with the Custodian identified below to be managed under this
Agreement:

         B. Unmanaged Assets - Client also deposited with the Custodian the
following assets which are not to be managed under this Agreement:

-------------------------------------------------------------------------------
II. CUSTODY OF ACCOUNT ASSETS. The assets to be managed under this Agreement and
any Unmanaged Assets will be held by:

                                       Custodial Account Number:
-------------------------------------                           ---------------
(Name)

        SEE ATTACHED                   Custodian Contact:
-------------------------------------                     ---------------------
(Address)
                                       Contact Phone Number:
--------------------------------------                       ------------------

-------------------------------------------------------------------------------
III. FEES. Manager's fees for services provided under this Agreement, including
assistance with Schedule D preparation provided under this Agreement shall be as
follows:

Annual fee of .20% (twenty hundredths of one percent) of the first $200 million
of the Stat market value of the assets under management;

..15% (fifteen hundredths of one percent) of the next $200 million of the Stat
market value of the assets under management;

..10% (ten hundredths of one percent) of the Stat market value of the remaining
assets under management.

The assets of PXRE REINSURANCE COMPANY, PXRE REINSURANCE LTD. AND PXRE GROUP
LTD. shall be aggregated for fee purposes.

IV. BROKERAGE DIRECTION. Client directs Manager to cause all transactions for
the Account to be executed through the following broker, dealer or bank:

Client has read, understands and accepts the limitations that this direction
will place on Manager's ability to seek best execution for the Account. This
direction may be changed by Client at any time by notifying Manager in writing.

-------------------------------------------------------------------------------
V. NAME OF CLIENT:                                         VI. DATE:
PXRE GROUP LTD.

By:   /s/ Jeffrey L. Radke                                 April 8 2002
     --------------------------                            --------------------
     J. L. Radke

-------------------------------------------------------------------------------

                                       11
<PAGE>

-------------------------------------------------------------------------------
INVESTMENT GUIDELINES: The investment guidelines to be followed by Manager in
managing Client's Account are set forth below:

-------------------------------------------------------------------------------
NAME OF CLIENT:                                            DATE:
PXRE GROUP LTD.

By:   /s/ Jeffrey L. Radke                                 April 8, 2002
     --------------------------                            --------------------
     J. L. Radke

-------------------------------------------------------------------------------

                                       12
<PAGE>

                                   PXRE Group
                    Revised Draft Investment Policy Statement

<TABLE>
<CAPTION>

                                                       Performance
 Segment                Driven By                       Benchmarks              Investments Philosophy         Permitted Investments
 -------                ---------                       ----------              ----------------------         ---------------------
<S>              <C>                                <C>                      <C>                                   <C>
Excess Capital   Represents the balancing portion    Weighting of:            Maximize after tax reported          Treasury Bonds
                 of portfolio that is in excess                               returns through investment in        Agency Bonds
                 of all actual and projected         -  Zurich Hedge          longer term debt investments,        Municipal Bonds
                 obligations as represented by          Fund of Funds         hedge funds and other limited        Corporate Bonds
                 the Liability and Primary              Index                 partnerships. Securities and         Mortgage-backed
                 Capital segments. Represents                                 sectors likely to aggregate with     Securities
                 surplus shareholder funds that      -  Lehman Aggregate      insurance portfolio to be            Asset-backed
                 can be more aggressively               AA Bond Index         avoided. Average maturities:         securities
                 invested to achieve higher                                   none Credit quality: Minimum         Hedge Funds
                 returns. This portion of the        Depending on actual      BBB, Mortgage-backed and             Other Limited
                 portfolio contains the non-bond     allocation in period     Asset-backed AA. Average AA or       Partnerships
                 investments in hedge fund and                                higher. Diversification: No
                 other limited partnerships. This                             limit on U.S Government, Agency
                 portion of the portfolio is to                               or municipal obligations. No
                 be actively managed to maximize                              more than the greater of $20
                 reported return and value across                             million or 5% of portfolio any
                 the permitted bond universe. The                             one corporate issuer AA
                 Hedge Fund guidelines are                                    or better, and no more than the
                 addressed separately.                                        greater of $10 million or 2.5%
                                                                              of portfolio for corporate
                                                                              issuer below AA, across all
                                                                              portfolio segments.
</TABLE>

                              Exhibit 2 Page 6 of 9

<PAGE>

                                   PXRE Group
                           Investment Policy Statement

<TABLE>
<CAPTION>

                                                       Performance
 Segment                Driven By                       Benchmarks            Investments Philosophy          Permitted Investments
 -------                ---------                       ----------            ----------------------          ---------------------
<S>              <C>                                <C>                    <C>                                   <C>
Primary Capital  Need to maintain a level of         Lehman AA              Maximize after-tax reported          Treasury Bonds U.S.
                 capital and surplus to maintain         7 year Index       return while maintaining an          Agency Bonds
                 licenses, for regulatory                                   appropriate preservation of          Municipal Bonds
                 purposes and to conduct                                    capital. Allocation between bond     Corporate Bonds
                 reinsurance operations. Amounts                            sectors should be managed so as      Mortgage-backed
                 in this portfolio should be                                to earn maximum yields complying     Securities
                 adequate to cover deficit in                               with overall investment              Asset-backed
                 cash flows from operations                                 guidelines. Securities and           Securities
                 related to expected possible                               sectors likely to aggregate with
                 large loss events as defined in                            insurance portfolio to be
                 the Company's annual plan. The                             avoided. Due to the low
                 amount would be determined from                            probability of a large loss
                 the Company's annual plan by                               scenario, this portfolio should
                 subtracting net written                                    be actively managed to reflect a
                 premiums, related reinstatement                            balance between return and
                 premiums from incurred losses                              liquidity and to maximize
                 net of reinsurance recoverable,                            returns in the intermediate term
                 (giving affect to an                                       market (1-10 years) with an
                 anticipation delay in                                      average maturity of 7 years. The
                 collection, related commission                             portfolio should be managed to
                 and brokerage and the projection                           produce investment income, while
                 of related payment patterns                                minimizing capital depreciation
                 associated with the loss. This                             and capital losses in the event
                 portfolio should be structured                             of a wholesale liquidation of
                 so as to maximize after-tax                                this portfolio to fund a large
                 reported returns, whilst                                   loss. Average maturity: 7 years
                 maintaining an appropriate                                 Credit quality: Average grade AA
                 preservation of capital, low                               - Minimum BBB. and minimum AA
                 credit risk, and relatively                                for asset-backed and
                 liquid in order to be easily                               mortgage-backed.
                 converted to cash and cash                                 Diversification: No limit on US.
                 equivalents in the event of a                              Government, Agency or municipal
                 large loss.                                                obligations. No more than the
                                                                            greater of $20 million or 5% of
                                                                            portfolio any one corporate
                                                                            issuer AA or better, and no more
                                                                            than the greater of $10 million
                                                                            or 2.5% of portfolio for
                                                                            corporate issuer below AA,
                                                                            across all portfolio segments.

</TABLE>

                             Exhibit 2 Page 7 of 9

<PAGE>

                                   PXRE Group
                           Investment Policy Statement

<TABLE>
<CAPTION>

                                                       Performance
 Segment                Driven By                       Benchmarks            Investments Philosophy          Permitted Investments
 -------                ---------                       ----------            ----------------------          ---------------------
<S>              <C>                                 <C>                      <C>                                   <C>
Liability        Need to maintain investments        Lehman AA Bond           Investment grade, intermediate       Treasury Bonds
Portfolio        whose duration and cash flow is     index with               maturity bonds and money market      Agency Bonds
                 reasonably matched to the           weighted average         investments. Maintain a              Municipal Bands
                 Company's obligations with          duration across          portfolio of laddered years or       Corporate Bonds
                 respect to losses and loss          Catastrophe and          directly matched to expected         Mortgage-backed
                 expenses (net of reinsurance        Finite and               liabilities. Securities and          Securities
                 recoverable) and other              Exited Lines,            sectors likely to aggregate with     Asset backed
                 liabilities arising from            initially 2.5            insurance portfolio to be            Securities
                 reinsurance agreements. This        years                    avoided. Average maturity:           Treasury Bills &
                 segment can vary in size                                     weighted average computed            Notes
                 dependent upon the status of                                 quarterly. Credit Quality: BBB       Money Market
                 losses and therefore should be                               or better. Average credit            Instruments:
                 adjusted to match the expected                               quality AA. Foreign,                 Commercial Paper
                 cash flow requirements of the                                Mortgage-backed and Asset-backed     Bankers'
                 Company's liabilities quarterly.                             Securities minimum AA.               Acceptances
                                                                              Diversification: No limit on U.S.    Certificates of
                                                                              Government, Agency or municipal      Deposit
                                                                              obligations. No more than the        Foreign
                                                                              greater of $20 million or 5% of      Securities
                                                                              portfolio any one corporate
                                                                              issuer AA or better, and no more
                                                                              than the greater of $10 million
                                                                              or 2.5% of portfolio for
                                                                              corporate issuer below AA,
                                                                              across all portfolio segments.
                                                                              Foreign Securities: To match
                                                                              foreign exchange exposure

</TABLE>

                             Exhibit 2 Pages 8 of 9

<PAGE>

                                   SCHEDULE C

--------------------------------------------------------------------------------
PROXY VOTING GUIDELINES: The proxy voting guidelines to be followed by Manager
in voting securities held in the Account are set forth below:

(If none, check here |X|)

-------------------------------------------------------------------------------
NAME OF CLIENT:                                            DATE:
PXRE Group Ltd.

By:   /s/ Jeffrey L. Radke                                 April 8, 2002
     --------------------------                            --------------------
     Jeffrey L. Radke

-------------------------------------------------------------------------------

                                       13
<PAGE>

                                   SCHEDULE D

                            SECRETARY'S CERTIFICATE
                            -----------------------

I, I. S. Outerbridge, the Assistant Secretary of PXRE Group LTD, (the
"Corporation"), a Corporation organized and existing under the laws of BERMUDA
hereby certify that each of the following officers of the Corporation, acting
singly, is authorized in the name and on behalf of the Corporation, to give
instructions to General Re-New England Asset Management, Inc. ("Manager") with
respect to any and all matters, including investment and reinvestment of
securities, pertaining to the Investment Management Agreement between the
Corporation and Manager, and to execute and deliver any and all documents and to
take any and all other action to carry out the purposes of said Investment
Management Agreement. I further certify that the specimen signature set forth
next to the names of such officers, is the true and genuine signature of such
persons.

 Name of Officer                   Title                      Signature

JEFFREY L. RADKE                 PRESIDENT              /s/  Jeffrey L. Radke
-----------------               -----------             -----------------------

LEATRICE J. ROMAN            ASSIST. CONTROLLER         /s/ Leatrice J. Roman
-----------------            ------------------         -----------------------

-----------------            ------------------         -----------------------

         This Certificate shall be in effect from the date hereof until written
notice is given on behalf of the Corporation to terminate or revise it.

         IN WITNESS WHEREOF, I set my hand and seal of the Corporation.

 /s/ I. S. Outerbridge                                         April 8, 2002
---------------------------------------                       ----------------
         Assistant Secretary                                       Date

[SEAL]

                                       14
<PAGE>

                                   Schedule E
                                 PXRE Group LTD.

                        Accounting and Reporting Services

          Periodic Reporting of All Investment Income and Transactions

1.    STAT and GAAP basis reporting
2.    Review of monthly market values from reliable independent pricing sources
      by Asset Class Specialists
3.    Monthly general ledger journal entries
4.    Monthly general ledger and trial balance preparation and reconciliation to
      Statutory Schedule D Reports
5.    Monthly reconciliation to Client custodians and discrepancy resolution
6.    Monthly, quarterly and annual reporting packages delivered to Client by
      mail, electronic transfer or via website
7.    Summary and Detail Transaction Reports
8.    Investment Income Earned Report
9.    Monthly Appraisal Reports
10.   Rating of securities by Standard & Poor's, Moody's, Fitch
11.   Periodic FAS 91 Adjustments

                               Statutory Reporting

1.    Assistance in preparation of Quarterly and Annual Statutory Schedule D
      Reports
2.    Quarterly and Annual NAIC pricing and designations
3.    Securities Valuation Office ("SVO") filings

                                       15
<PAGE>

                               CUSTODY OF ACCOUNT ASSETS
                               -------------------------

 1)      Nations Funds
         Bank of America Collateral Acct for
         PXRE Reinsurance Ltd. (2)
         P0 Box 34602, Charlotte
         NC 28254 4602

         Custodial Account Number:             857675
         Custodian Contact:                    Anna Cannon
         Contact Phone Number:                 704 386 5601

2)       JP Morgan
         For PXRE Reinsurance Ltd.
         2001 Bryan Street 11th Floor
         Dallas, TX 75201

         Custodial Account Number:             PXRE Reinsurance Ltd. P 312909.2
         Custodian Contact:                    Christopher Greene
         Contact Phone Number:                 214 946 8477

3)       JP Morgan
         4 New York Plaza, 2nd Floor
         New York, NY 10004-2413

         Custodial Account Number:             PXRE Reinsurance Ltd. G08509
         Custodian Contact:                    John Dipalo
         Contact Phone Number:                 212 623 0781

4)       JP Morgan
         4 New York Plaza, 2nd Floor
         New York, NY 10004-2413

         Custodial Account Number:            PXRE Group Ltd. G08510
         Custodian Contact:                   John Dipalo
         Contact Phone Number:                212 623 0781

<PAGE>

                 GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC.

                         Investment Management Agreement
                         -------------------------------

         This Agreement is made as of the 8th day of April, 2002, between

1.      GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC., a corporation
organized under the laws of the State of Delaware ("Manager"); and

2.      PXRE REINSURANCE LTD., a corporation organized under the laws of
Bermuda (the "Client").

         WHEREAS, Client desires to appoint Manager as the investment manager of
that portion of Client's assets constituting the Account (as defined below) for
fees agreed upon in Schedule A. III.;

         NOW THEREFORE, in consideration of the mutual agreements herein
contained, it is agreed as follows:

Section 1. The Account

         The cash, securities and other assets placed by Client in the account
to be managed under this Agreement (the "Account") are listed on Section I.A.
of Schedule A. Assets may be added to the Account at any time. Client will
provide notification to the Manager of any such additions. The Account will
include these assets and any changes in them resulting from transactions
directed by Manager, withdrawals and additions made by Client, or dividends,
interest, stock splits and other earnings, gains or losses on the assets.

         Assets of the Client that are not to be managed by Manager are
separately identified on Schedule A ("Unmanaged Assets"). Manager may include
these assets in its periodic reports to Client, but will exclude their value
when calculating Manager's asset management fees.

                                       1
<PAGE>

Section 2. Management of the Account

         Manager will make all investment decisions for the Account, in
Manager's sole discretion and without first consulting or notifying Client,
subject to and in accordance with the investment restrictions and guidelines
which are attached as Schedule B (the "Investment Guidelines"). If Manager
manages only a portion of Client's portfolio, unless otherwise specified by
Client in writing, Investment Guidelines' restrictions relate specifically to
the assets managed by Manager. Client may change these Investment Guidelines at
any time, but Manager will be bound by the changes only after it has received
and agreed to them in writing. Other than by the Investment Guidelines, the
insurance laws and regulations of the State of Connecticut (the "Insurance
Laws"), and the terms of this Agreement, the investments made by Manager on
behalf of the Client will not be restricted in any manner.

         Subject to the Investment Guidelines and the Insurance Laws, Manager
will have full power and authority, on behalf of Client, to instruct any
brokers, dealers or banks to buy, sell, exchange, convert or otherwise trade in
all securities, futures or other investments for the Account.

         Manager will not be responsible for giving Client investment advice or
taking any other action with respect to Unmanaged Assets.

         Client appoints Manager as the true and lawful attorney of the Client
for and in the name, place and stead of Client, in Manager's unrestricted
discretion, to operate and conduct the brokerage accounts of the Client relating
to the Account and to do and perform all and every act and thing whatsoever
requisite in furtherance of this Agreement, including the execution of all
writings related to the purchase or sale, assignments, transfers and ownership
of any stocks, bonds, commodities, or other securities. Manager is hereby fully
authorized to act and rely on the authority vested pursuant to said power of
attorney.

         Effective as of January 1, 2002, and until further notice, Manager will
provide the investment accounting services for Client as set forth in Schedule
E, and will assist Client in preparing Client's statutory Schedule D, if
applicable. Client acknowledges that Manager will provide accounting data
according to Manager's standard interpretation of accounting principles, unless
expressly instructed otherwise by Client's prior written notice.

Section 3. Transactions for the Account

         Manager will arrange for securities transactions for the Account to be
executed through those brokers, dealers or banks that Manager reasonably
believes will provide best execution. In choosing a broker, dealer or bank,
Manager will consider the broker, dealer or bank's execution capability,
reputation and access to the markets for the securities being traded for the
Account. Manager will seek competitive commission rates, but not necessarily the
lowest rates available.

                                       2
<PAGE>

         Manager may also send transactions for the Account to brokers who
charge higher commissions than other brokers, provided that Manager determines
in good faith that the amount of commissions Manager pays is reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms either of that particular transaction or Manager's overall
responsibilities with respect to all clients whose accounts Manager manages on a
discretionary basis.

         Portfolio transactions for each client account generally are completed
independently. However, if Manager decides to purchase or sell the same
securities for Client and other clients at about the same time, Manager may
combine Client's order with those of other clients if Manager reasonably
believes that it will be able to negotiate better prices or lower commission
rates or transaction costs for the combined order than for Client's order alone.
Client will pay the average price and transaction costs obtained for such
combined orders. Manager generally will allocate securities purchased or sold as
part of a combined order to Client's Account and to accounts of other clients
according to the size of the order placed for each client.

         If Manager cannot obtain execution for the total amount of the
securities in the combined orders, adjustments to the allocation will be made on
a random number generator methodology. However, Manager may increase or decrease
the amounts of securities allocated to each client if necessary to avoid having
odd or small numbers of shares held for the account of any client. Each client
that participates in a combined order will receive or pay the average share
price and/or transactions costs for all transactions executed as part of the
combined order.

         If Client directs Manager to use particular brokers, dealers or banks
to execute transactions for the Account, Manager will do so, but Manager will
not seek better execution services or prices for Client from other brokers,
dealers or banks, and Client may pay higher prices or transaction costs as a
result. Manager also may not be able to seek better execution services for
Client by combining Client's orders with those of other clients.

         Client may direct all transactions for the Account to a particular
broker, dealer or bank, by writing the name and address of that broker, dealer
or bank in the space provided on Schedule A.

Section 4. Transaction Confirmations

         Manager will instruct the brokers, dealers or banks who execute
transactions for the Account to send Client all transaction confirmations,
unless Client chooses not to receive confirmations. If Client does not wish to
receive individual confirmations, this box should be checked. |_|

                                       3
<PAGE>

         Client may elect to receive individual confirmations at any time by
giving Manager written notice.

Section 5. Custody of Account Assets

         The assets in the Account will be held for Client by the custodian
named on Schedule A (the "Custodian"). Manager will not have custody of any
Account assets. Client will pay all fees of the Custodian.

         Client will authorize the Custodian to follow Manager's instructions to
make and accept payments for, and to deliver or to receive, securities, cash or
other investments purchased, sold, redeemed, or exchanged for the Account.
Client also will instruct the Custodian to send Client and Manager monthly
statements showing the assets in and all transactions for the Account during the
month, including any payments of Manager's fees.

         Client will provide Manager with a copy of its agreement with the
Custodian, and will give Manager reasonable advance notice of any change of
Custodian.

Section 6. Reports to Client

         Manager will send Client monthly written reports showing the identity,
cost and current market value of the assets in the Account and each transaction
made for the Account during the period covered by the report, which reports
shall include the information set forth on Schedule E hereto and such other
information as Client may reasonably request from time to time. The Account's
performance will be sent monthly, quarterly or annually upon Client request.

Section 7. Account Valuation

         Manager will value the securities in the Account using independent
pricing sources. All securities in the Account that are listed and traded on a
national securities exchange or on NASDAQ shall be valued on the valuation date
at the closing price on the principal market where the securities are traded.
All other securities shall be valued in accordance with any reasonable valuation
method selected by Manager, consistent with industry accepted practices. While
GR-NEAM does its best to obtain representative market prices for all securities
in the Account, such prices do not always reflect the price actually received or
paid on the open market.

                                       4
<PAGE>

Section 8. Manager's Fees

         For Manager's services, Client will pay a percentage of the value, as
determined under Section 7 of this Agreement, of all assets in the Account
(excluding Unmanaged Assets) as of the last trading day of each calendar month.
The fees are payable at the end of each calendar quarter for services provided
by Manager during the prior three months. The percentage amount of the fees is
shown on Schedule A. In any partial quarter, the fees will be reduced pro rata
based on the number of days the Account was managed.

         Client agrees to pay Manager's fees as follows:

         |_|        The Custodian will deduct the fees from Client's Account and
                  pay them to Manager each quarter. Manager will send Client and
                  the Custodian at the same time a bill showing the amount of
                  Manager's fees, the Account value on which they were based and
                  how they were calculated. The Custodian will send Client a
                  monthly statement showing all amounts paid from the Account,
                  including Manager's fees.

         |X|      Client will be billed directly by Manager and will pay
                  Manager's fees within 30 days of receiving the bill.

         If Manager invests in securities issued by money market funds or other
investment companies for the Account, these securities will be included in the
value of the Account when Manager's fees are calculated. These same assets will
be subject to additional investment management and other fees that are paid by
the investment company but ultimately borne by its shareholders. These
additional fees are described in each investment company's prospectus.

Section 9. Proxy Voting

         Proxies for securities in the Account should be voted as follows:

         |_|      Client directs Manager not to vote proxies for securities held
                  for the Account.

         |X|      Client directs Manager to vote all proxies for securities held
                  for Client's Account in accordance with --

                  |X|      Manager's own discretion

                                       or

                  |_|      Client's proxy voting guidelines attached as Schedule
                           C.

                                       5
<PAGE>

         Client will direct Custodian to send promptly all proxies and related
shareholder communications to Manager and to identify them as relating to
Client's Account. Client understands that Manager will not be able to vote
proxies if they are not received on a timely basis from the Custodian as
properly identified as relating to Client's Account. Manager shall not be
responsible for voting proxies of foreign securities, and will forward them to
Client for completion.

         These proxy voting instructions may be changed at any time by notifying
Manager in writing.

Section 10. Legal Proceedings

         Manager will not advise or act for Client in any legal proceedings,
including bankruptcies or class actions, involving securities held in the
Account or issuers of those securities.

Section 11. Risk

         Manager cannot guarantee the future performance of the Account, promise
any specific level of performance or promise that its investment decisions,
strategies or overall management of the Account will be successful. The
investment decisions Manager will make for Client are subject to various market,
currency, economic, political and business risks, and will not necessarily be
profitable.

Section 12. Standard of Care; Limitation of Liability

         Except as may otherwise be provided by law, Manager will not be liable
to Client for any loss (i) that Client may suffer as a result of Manager's good
faith decisions or actions where Manager exercises the degree of care, skill,
prudence and diligence that a prudent person acting in a like fiduciary capacity
would use; (ii) caused by following Client's instructions; or (iii) caused by
the Custodian, any broker, dealer or bank to which Manager directs transactions
for the Account or any other person, except in the case of, and only to the
extent that, the negligence or willful misconduct of Manager contributed to the
loss.

         Federal and state securities laws impose liabilities under certain
circumstances on persons who act in good faith, and this Agreement does not
waive or limit Client's rights under those laws.

         Except as set forth above with respect to the Account, Manager will not
be responsible for Client's own compliance with the insurance investment laws of
Client's state of domicile Notwithstanding any other provision in this
Agreement, Manager shall not be responsible for Client's compliance with
applicable tax laws.

                                       6
<PAGE>

         In managing the Account, Manager will not consider any other
securities, cash, or other investments or assets Client owns for diversification
or other purposes. Manager shall have no responsibility whatsoever for the
management of the Unmanaged Assets or any assets of Client other than the
Account and shall incur no liability for any loss or damage which may result
from the management of such other assets.

Section 13. Client Directions

         The names and specimen signatures of each individual who is authorized
to give directions to Manager on Client's behalf under this Agreement are set
forth on Schedule D. Directions received by Manager from Client must be signed
by at least one such person. If Manager receives directions from Client which
are not signed by a person that Manager reasonably believes is authorized to do
so, Manager shall not be required to comply with such directions until it
verifies that the directions are properly authorized by Client.

         Manager shall be fully protected in relying upon any direction signed
or given by a person that Manager reasonably believes is authorized to give such
directions on Client's behalf. Manager also shall be fully protected when acting
upon an instrument, certificate, or paper that Manager reasonably believes to be
genuine and to be signed or presented by any such person or persons. Manager
shall be under no duty to make any investigation or inquiry as to any statement
contained in any writing and may accept the same as conclusive evidence of truth
and accuracy of statements contained therein.

Section 14. Confidentiality

         Except as Client and Manager otherwise agree or as may be required by
law, all information concerning the Account and services provided under this
Agreement shall be kept confidential.

Section 15. Non-Exclusive Agreement

         Manager provides investment advice to other clients and may give them
advice or take actions for them, for Manager's own accounts or for accounts of
persons related to or employed by Manager, that is different from advice
provided to or actions taken for Client.

         Manager is not obligated to buy, sell or recommend for Client's Account
any security or other investment that Manager may buy, sell or recommend for
other clients or for the account of Manager or its related persons or employees.

         If Manager obtains material, non-public information about a security or
its issuer that Manager may not lawfully use or disclose, Manager will have no
obligation to disclose the information to Client or to use it for Client's
benefit.

                                       7
<PAGE>

Section 16. Term of Agreement

         Either Client or Manager may cancel this Agreement at any time upon 30
days written notice. This Agreement will remain in effect until terminated.
Termination of this Agreement will not affect (i) the validity of any action
that Manager or Client has previously taken; (ii) the liabilities or obligations
of Manager or Client for transactions started before termination; or (iii)
Client's obligation to pay Manager's fees through the date of termination. Upon
termination, Manager will have no obligation to recommend or take any action
with regard to the securities, cash or other assets in the Account.

Section 17. Agreement Not Assignable

         This Agreement may not be assigned within the meaning of the Investment
Advisers Act of 1940 (the "Advisers Act") by Manager without Client's consent.

Section 18. Governing Law

         The laws of the State of Connecticut will govern this Agreement.
However, nothing in this Agreement will be construed contrary to any provision
of the Advisers Act or the rules thereunder.

Section 19. Miscellaneous

         If any provision of this Agreement is or becomes inconsistent with any
applicable law or rule, the provision will be deemed rescinded or modified to
the extent necessary to comply with such law or rule. In all other respects,
this Agreement will continue in full force and effect. This Agreement contains
the entire understanding between Manager and Client and may not be changed
except in writing signed by both parties. Failure to insist on strict compliance
with this Agreement or with any of its terms or any continued conduct will not
be considered a waiver by either party under this Agreement.

Section 20. Notices

       All notices and instructions with respect to the Account or other matters
covered by this Agreement may be sent by U.S. mail express delivery services,
facsimile, e-mail or other electronic means to Client and to Manager at the
addresses at the end of this agreement or to another address provided in
writing.

Section 21. Representations of Client

                                       8
<PAGE>

         Client represents and warrants to Manager that (a) Client is the
beneficial owner of all assets in the Account and except as specifically
identified by Client, there are no restrictions on transfer or sale of any of
those assets; (b) this Agreement has been duly authorized, executed, and
delivered by Client and is Client's valid and binding obligation; (c) the names
of the individuals who are authorized to act under this Agreement on behalf of
Client have been given to Manager in writing; (d) no government authorizations,
approvals, consents, or filings not already obtained are required in connection
with the execution, delivery, or performance of this Agreement by Client; and
(e) Client certifies that it is not an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or a plan
subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), nor a Person acting on behalf of any such plan. Client agrees to notify
Manager in writing within five (5) days after the occurrence of an event making
the above statement no longer accurate.

         Client agrees to indemnify, defend and hold harmless Manager and its
officers, directors, agents, employees, shareholders, legal representatives,
successors and assigns, from and against any and all claims, actions, suits,
damages, costs, liabilities, judgments, losses, charges, costs and expenses,
including attorneys' fees, of Manager arising from any failure by Client to
accurately disclose its status under this Section or by reason of any defect in
Client's authority to appoint Manager under this Agreement.

Section 22. Representations of Manager

       Manager represents and warrants that (i) this Agreement has been duly
authorized, executed and delivered by Manager and is its valid and binding
obligation, (ii) it is registered with the United States Securities Exchange
Commission ("SEC") as an investment advisor under the Advisors Act; and (iii)
that it has all other licenses and registrations necessary to perform its
obligations under this Agreement.

                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

                                       9
<PAGE>

Section 23. Form ADV

       Client has received and reviewed a copy of Part II of Manager's Form ADV
and a copy of this Agreement.

Section 24. Independent Contractor

       The relationship of Manager to Client is and shall remain during the term
of this Agreement that of independent contractor. Manager and Client are not
partners or joint venturers with each other under this Agreement, and nothing in
this Agreement shall be construed so as to make them partners or joint
venturers, or to impose any liability as such on either of them.

AGREED TO AND ACCEPTED BY:

GENERAL RE-NEW ENGLAND                         PXRE REINSURANCE LTD.
ASSET MANAGEMENT, INC.

/s/ Gerard T. Lynch                            /s/ Jeffrey L. Radke
-------------------------                      --------------------------------
By: Gerard T. Lynch                            (Signature)
Its President                                  Jeffrey L. Radke
                                               --------------------------------
                                               (Name)

                                               President
                                               --------------------------------
                                               (Title)

Pond View Corporate Center                     99 Front Street
76 Batterson Park Road                         --------------------------------
Farmington, Connecticut 06032                  Hamilton HM12, Bermuda
                                               --------------------------------
                                               (Principal Address)
                                                       98-0214718
                                               --------------------------------
                                               (Taxpayer Identification Number)

                                       10
<PAGE>

                                   SCHEDULE A
I.   ACCOUNT ASSETS.

         A. Managed Assets - Client has deposited the following securities, cash
and other assets with the Custodian identified below to be managed under this
Agreement:

         B. Unmanaged Assets - Client also deposited with the Custodian the
following assets which are not to be managed under this Agreement:

-------------------------------------------------------------------------------
II. CUSTODY OF ACCOUNT ASSETS. The assets to be managed under this Agreement and
any Unmanaged Assets will be held by:

                                       Custodial Account Number:
-------------------------------------                           ---------------
(Name)

        SEE ATTACHED                   Custodial Contact:
-------------------------------------                     ---------------------
(Address)
                                       Contact Phone Number:
--------------------------------------                       ------------------

-------------------------------------------------------------------------------
III. FEES. Manager's fees for services provided under this Agreement, including
assistance with Schedule D preparation provided under this Agreement shall be as
follows:

Annual fee of .20% (twenty hundredths of one percent) of the first $200 million
of the Stat market value of the assets under management;

..15% (fifteen hundredths of one percent) of the next $200 million of the Stat
market value of the assets under management;

..10% (ten hundredths of one percent) of the Stat market value of the remaining
assets under management.

The assets of PXRE REINSURANCE COMPANY, PXRE REINSURANCE LTD. AND PXRE GROUP
LTD. shall be aggregated for fee purposes.

IV. BROKERAGE DIRECTION. Client directs Manager to cause all transactions for
the Account to be executed through the following broker, dealer or bank:

Client has read, understands and accepts the limitations that this direction
will place on Manager's ability to seek best execution for the Account. This
direction may be changed by Client at any time by notifying Manager in writing.

-------------------------------------------------------------------------------
V. NAME OF CLIENT:                                         VI. DATE:
PXRE REINSURANCE LTD.

By:   /s/ Jeffrey L. Radke                                 April 8, 2002
     --------------------------                            --------------------
     Jeffrey L. Radke

-------------------------------------------------------------------------------

                                       11
<PAGE>

-------------------------------------------------------------------------------
INVESTMENT GUIDELINES: The investment guidelines to be followed by Manager in
managing Client's Account are set forth below:

-------------------------------------------------------------------------------
NAME OF CLIENT:                                            DATE:
PXRE REINSURANCE LTD.

By:   /s/ Jeffrey L. Radke                                 April 8 2002
     --------------------------                            --------------------
     Jeffrey L. Radke

-------------------------------------------------------------------------------

                                       12
<PAGE>

                                   PXRE Group
                    Revised Draft Investment Policy Statement

<TABLE>
<CAPTION>

                                                       Performance
 Segment                Driven By                       Benchmarks          Investment Philosophy             Permitted Investments
 -------                ---------                       ----------          ---------------------             ---------------------
<S>              <C>                                <C>                     <C>                                  <C>
Excess Capital   Represents the balancing portion   Weighting of:           Maximize after tax reported          Treasury Bonds
                 of portfolio that is in excess                             returns through investment in        Agency Bonds
                 of all actual and projected        -  Zurich Hedge         longer term debt investments,        Municipal Bonds
                 obligations as represented by         Fund of Funds        hedge funds and other limited        Corporate Bonds
                 the Liability and Primary             Index                partnerships. Securities and         Mortgage-backed
                 Capital segments.                                          sectors likely to aggregate with     Securities
                 Represents surplus shareholder     -  Lehman Aggregate     insurance portfolio to be            Asset-backed
                 funds that can be more                AA Bond Index        avoided.                             securities
                 aggressively invested to                                   Average maturities: none             Hedge Funds
                 achieve higher returns. This       Depending on actual     Credit quality: Minimum BBB,         Other Limited
                 portion of the portfolio           allocation in period    Mortgage-backed and Asset-backed     Partnerships
                 contains the non-bond                                      AA. Average AA or higher.
                 investments in hedge fund and                              Diversification: No limit on U.S.
                 other limited partnerships.                                Government, Agency or municipal
                 This portion of the portfolio                              obligations. No more than the
                 is to be actively managed to                               greater of $20 million or 5% of
                 maximize reported return and                               portfolio any one corporate
                 value across the permitted                                 issuer AA or better, and no more
                 bond universe. The Hedge Fund                              than the greater of $10 million
                 guidelines are addressed                                   or 2.5% of portfolio for
                 separately.                                                corporate issuer below AA, across
                                                                            all portfolio segments.

</TABLE>

                              Exhibit 2 Page 6 of 9
<PAGE>

                                   PXRE Group
                           Investment Policy Statement

<TABLE>
<CAPTION>

                                                       Performance
 Segment                Driven By                       Benchmarks            Investment Philosophy           Permitted Investments
 -------                ---------                       ----------            ---------------------           ---------------------
<S>              <C>                                 <C>                    <C>                                  <C>
Primary Capital   Need to maintain a level of        Lehman AA               Maximize after tax reported         Treasury Bonds U.S.
                  capital and surplus to maintain        7 year Index        return while maintaining an         Agency Bonds
                  licenses, foe regulatory                                   appropriate preservation of         Municipal Bonds
                  purposes and to conduct                                    capital.                            Corporate Bonds
                  reinsurance operations. Amounts                            Allocation between bond sectors     Mortgage-backed
                  in this portfolio should be                                should be managed so as to earn     Securities
                  adequate to cover deficit in                               maximum yields complying with       Asset-backed
                  cash flows from operations                                 overall investment guidelines.      Securities
                  related to expected possible                               Securities and sectors likely to
                  large loss events as defined in                            aggregate with insurance
                  the Company's annual plan. The                             portfolio to be avoided.
                  amount would be determined from                            Due to the low probability of a
                  the Company's annual plan by                               large loss scenario, this
                  subtracting net written                                    portfolio should be actively
                  premiums, related reinstatement                            managed to reflect a balance
                  premiums from incurred losses                              between return and liquidity and
                  net of reinsurance recoverable,                            to maximize returns in the
                  (giving affect to an                                       intermediate term market (1-10
                  anticipation delay in                                      years) with an average maturity
                  collection, related commission                             of 7 years. The portfolio should
                  and brokerage and the projection                           be managed to produce investment
                  of related payment patterns                                income, while minimizing capital
                  associated with the loss. This                             depreciation and capital losses
                  portfolio should be structured                             in the event of a wholesale
                  so as to maximize after-tax                                liquidation of this portfolio to
                  reported returns, whilst                                   fund a large loss.
                  maintaining an appropriate                                 Average maturity: 7 years Credit
                  preservation of capital, low                               quality: Average grade AA -
                  credit risk, and relatively                                Minimum BBB, and minimum AA for
                  liquid in order to be easily                               asset-backed and
                  converted to cash and cash                                 mortgage-backed.
                  equivalents in the event of a                              Diversification: No limit on
                  large loss.                                                U.S. Government, Agency or
                                                                             municipal obligations. No more
                                                                             than the greater of $20 million
                                                                             or 5% of portfolio any one
                                                                             corporate issuer AA or better,
                                                                             and no more than the greater of
                                                                             $10 million or 2.5% of portfolio
                                                                             for corporate issuer below AA,
                                                                             across all portfolio segments.

 </TABLE>

                              Exhibit 2 Page 7 of 9

<PAGE>

                                   PXRE Group

                           Investment Policy Statement
<TABLE>
<CAPTION>

                                                        Performance
 Segment                Driven By                       Benchmarks            Investment Philosophy           Permitted Investments
 -------                ---------                       ----------            ---------------------           ---------------------
<S>              <C>                                 <C>                    <C>                                  <C>
 Liability       Need to maintain investments        Lehman AA Bond         Investment grade, intermediate       Treasury Bonds
 Portfolio       whose duration and cash flow is     index with             maturity bonds and money market      Agency Bonds
                 reasonably matched to the           weighted average       investments. Maintain a              Municipal Bands
                 Company's obligations with          duration across        portfolio of laddered years or       Corporate Bonds
                 respect to losses and loss          Catastrophe and        directly matched to expected         Mortgage-backed
                 expenses (net of reinsurance        Finite and             liabilities.                         Securities Asset
                 recoverable) and other              Exited Lines,          Securities and sectors likely to     backed
                 liabilities arising from            initially 2.5          aggregate with insurance             Securities
                 reinsurance agreements.             years                  portfolio to be avoided              Treasury Bills &
                 This segment can vary in size                              Average maturity: weighted           Notes Money
                 dependent upon the status of                               average computed quarterly.          Market
                 losses and therefore should be                             Credit Quality: BBB or better.       Instruments:
                 adjusted to match the expected                             Average credit quality AA.           Commercial Paper
                 cash flow requirements of the                              Foreign, Mortgage-backed and         Bankers'
                 Company's liabilities quarterly.                           Asset-backed Securities minimum      Acceptances
                                                                            AA.                                  Certificates of
                                                                            Diversification: No limit on US.     Deposit Foreign
                                                                            Government, Agency or municipal      Securities
                                                                            obligations. No more than the
                                                                            greater of $20 million or 5% of
                                                                            portfolio anyone corporate
                                                                            issuer AA or better, and no
                                                                            more than the greater of $10
                                                                            million or 2.5% of portfolio for
                                                                            corporate issuer below AA,
                                                                            across all portfolio segments.
                                                                            Foreign Securities: To match
                                                                            foreign exchange exposure

</TABLE>

                              Exhibit 2 Page 8 of 9
<PAGE>

                                   SCHEDULE C

--------------------------------------------------------------------------------
PROXY VOTING GUIDELINES: The proxy voting guidelines to be followed by Manager
in voting securities held in the Account are set forth below:

(If none, check here |X|)

-------------------------------------------------------------------------------
NAME OF CLIENT:                                            DATE:
PXRE REINSURANCE LTD.

By:   /s/ Jeffrey L. Radke                                 April 8, 2002
     --------------------------                            --------------------
     Jeffrey L. Radke

-------------------------------------------------------------------------------

                                       13
<PAGE>

                                   SCHEDULE D

                            SECRETARY'S CERTIFICATE
                            -----------------------

I, DAVID J. DOYLE, the Secretary of PXRE REINSURANCE LTD, (the "Corporation"), a
Corporation organized and existing under the laws of BERMUDA hereby certify that
each of the following officers of the Corporation, acting singly, is authorized
in the name and on behalf of the Corporation, to give instructions to General
Re-New England Asset Management, Inc. ("Manager") with respect to any and all
matters, including investment and reinvestment of securities, pertaining to the
Investment Management Agreement between the Corporation and Manager, and to
execute and deliver any and all documents and to take any and all other action
to carry out the purposes of said Investment Management Agreement. I further
certify that the specimen signature set forth next to the names of such
officers, is the true and genuine signature of such persons.

 Name of Officer                   Title                      Signature

JEFFREY L. RADKE                 PRESIDENT              /s/  Jeffrey L. Radke
-----------------               -----------             -----------------------

LEATRICE J. ROMAN            ASSIST. CONTROLLER         /s/ Leatrice J. Roman
-----------------            ------------------         -----------------------

-----------------            ------------------         -----------------------

         This Certificate shall be in effect from the date hereof until written
notice is given on behalf of the Corporation to terminate or revise it.

         IN WITNESS WHEREOF, I set my hand and seal of the Corporation.

 /s/ DAVID J. DOYLE                                            April 8, 2002
---------------------------------------                       ----------------
              Secretary                                            Date

[SEAL]

                                       14
<PAGE>

                                   Schedule E
                              PXRE REINSURANCE LTD.

                        Accounting and Reporting Services

          Periodic Reporting of All Investment Income and Transactions

1.    STAT and GAAP basis reporting
2.    Review of monthly market values from reliable independent pricing sources
      by Asset Class Specialists
3.    Monthly general ledger journal entries
4.    Monthly general ledger and trial balance preparation and reconciliation to
      Statutory Schedule D Reports
5.    Monthly reconciliation to Client custodians and discrepancy resolution
6.    Monthly, quarterly and annual reporting packages delivered to Client by
      mail, electronic transfer or via website
7.    Summary and Detail Transaction Reports
8.    Investment Income Earned Report
9.    Monthly Appraisal Reports
10.   Rating of securities by Standard & Poor's, Moody's, Fitch
11.   Periodic FAS 91 Adjustments

                               Statutory Reporting

1.    Assistance in preparation of Quarterly and Annual Statutory Schedule D
      Reports
2.    Quarterly and Annual NAIC pricing and designations
3.    Securities Valuation Office ("SVO") filings

                                       15
<PAGE>

                            CUSTODY OF ACCOUNT ASSETS
                            -------------------------

1)     Nations Funds
       Bank of America Collateral Acct for
       PXRE Reinsurance Ltd. (2)
       PO Box 34602, Charlotte
       NC 28254 4602

       Custodial Account Number:             857675
       Custodian Contact:                    Anna Cannon
       Contact Phone Number:                 704 386 5601

 2)    JP Morgan
       For PXRE Reinsurance Ltd.
       2001 Bryan Street 11th Floor
       Dallas, TX 75201

       Custodial Account Number:             PXRE Reinsurance Ltd. P 312909.2
       Custodian Contact:                    Christopher Greene
       Contact Phone Number:                 212 946 8477

 3)    JP Morgan
       4 New York Plaza, 2nd Floor
       New York, NY 10004-2413

       Custodial Account Number:             PXRE Reinsurance Ltd. G08509
       Custodian Contact:                    John Dipalo
       Contact Phone Number:                 212 623 0781

 4)    JP Morgan
       4 New York Plaza, 2nd Floor
       New York, NY 10004-2413

       Custodial Account Number:             PXRE Group Ltd. G08510
       Custodian Contact:                    John Dipalo
       Contact Phone Number:                 212 623 0781

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