Document:

<PAGE>

                                                                    Exhibit 10.1

                  CATASTROPHE QUOTA SHARE REINSURANCE AGREEMENT

                             DATED DECEMBER 23, 2002

                                      among

                            PXRE REINSURANCE COMPANY,

                              PXRE REINSURANCE LTD.

                                       and

                                   P-1 RE LTD.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                              <C>
ARTICLE I DEFINED TERMS; INTERPRETATION OF AGREEMENT..............................................................4
         1.1        Definitions...................................................................................4
         1.2        Interpretation...............................................................................10

ARTICLE II BUSINESS COVERED......................................................................................11
         2.1        Business Covered.............................................................................11
         2.2        Premiums.....................................................................................11
         2.3        Follow the Fortunes..........................................................................11
         2.4        Aggregate Limit..............................................................................11
         2.5        Reinsurance Amount...........................................................................13

ARTICLE III SUBPORTFOLIO BLOCK REQUIRED CAPITAL; REQUIRED CAPITAL................................................14
         3.1        Timing of Provisional Calculations and Notice................................................14
         3.2        Timing of Final Calculations and Notices.....................................................14
         3.3        Computation of Subportfolio Block Required Capital...........................................15
         3.4        Computation of Required Capital..............................................................15
         3.5        Computation of Subportfolio Block Participation Rate.........................................16
         3.6        Subportfolio Block Minimum Retained Amount...................................................16

ARTICLE IV PAYMENTS; CALCULATION OF AMOUNTS......................................................................17
         4.1        Settlement Dates.............................................................................17
         4.2        Cash Call Demand.............................................................................17
         4.3        Related Definitions..........................................................................18
         4.4        Limited Recourse.............................................................................21
         4.5        Indemnity Payments...........................................................................21
         4.6        Interest on Late Payments....................................................................21
         4.7        Federal Excise Tax...........................................................................21

ARTICLE V [INTENTIONALLY OMITTED]................................................................................21

ARTICLE VI RUN-OFF EXTENSION.....................................................................................22

ARTICLE VII [INTENTIONALLY OMITTED]..............................................................................23

ARTICLE VIII REPORTS TO REINSURER; INQUIRIES BY REINSURER........................................................23
         8.1        Reports......................................................................................23
         8.2        Access to Records and Audits.................................................................23
         8.3        Agreement with Calculations..................................................................24
         8.4        Disputed Calculations........................................................................24
         8.5        Availability of Information..................................................................24
         8.6        Binding Determination; Expenses..............................................................24
         8.7        Settlement...................................................................................24
         8.8        Content of Notices...........................................................................25
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                                                             <C>
ARTICLE IX COLLATERAL............................................................................................25
         9.1        Security.....................................................................................25
         9.2        Collateral Release...........................................................................25
         9.3        Final Collateral Release.....................................................................25
         9.4        Unauthorized Reinsurance.....................................................................25
         9.5        Assignments of Assets........................................................................26
         9.6        Settlements..................................................................................26
         9.7        Withdrawals from Securities Account and Regulatory Trust.....................................26
         9.8        Further Assurances...........................................................................27
         9.9        Waivers by Reinsurer.........................................................................28
         9.10       No Waiver by Company.........................................................................28
         9.11       Expenses.....................................................................................28

ARTICLE X EARLY TERMINATION......................................................................................29
         10.1       Voluntary Termination........................................................................29
         10.2       Involuntary Termination......................................................................29
         10.3       Effectiveness................................................................................30
         10.4       Settlement...................................................................................31

ARTICLE XI NOTICES  .............................................................................................31
         11.1       Notices......................................................................................31

ARTICLE XII ERRORS AND OMISSIONS.................................................................................32
         12.1       Errors and Omissions.........................................................................32

ARTICLE XIII OFFSET .............................................................................................32
         13.1       Offset.......................................................................................32

ARTICLE XIV ARBITRATION..........................................................................................33
         14.1       Binding Arbitration..........................................................................33
         14.2       Arbitration Panel............................................................................33
         14.3       Expenses.....................................................................................33
         14.4       Jurisdiction.................................................................................33
         14.5       Limitation...................................................................................34

ARTICLE XV CONFIDENTIALITY.......................................................................................34
         15.1       Confidential Information Provided to Reinsurer...............................................34
         15.2       Confidential Identities......................................................................34
         15.3       Exceptions...................................................................................34
         15.4       Compelled Disclosure.........................................................................35
         15.5       Injunctions..................................................................................35
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                             <C>
ARTICLE XVI MISCELLANEOUS........................................................................................35
         16.1       No Rescission................................................................................35
         16.2       Amendments...................................................................................36
         16.3       Governing Law................................................................................36
         16.4       Insolvency Clause............................................................................36
         16.5       Jurisdiction; Service of Process.............................................................36
         16.6       GAAP.........................................................................................37
         16.7       Currency of Calculation......................................................................37
         16.8       Wire Transfers...............................................................................37
         16.9       Damage Restriction...........................................................................37
         16.10      Headings.....................................................................................37
         16.11      Assignment...................................................................................37
         16.12      Severability.................................................................................37
         16.13      Business Day Convention......................................................................37
         16.14      Counterparts.................................................................................37
         16.15      Time of the Essence..........................................................................38
</TABLE>

SCHEDULES
---------

Settlement Schedule

Commutation and Collateral Release Schedule

                                      iii

<PAGE>

         This CATASTROPHE QUOTA SHARE REINSURANCE AGREEMENT (this "Agreement"),
dated as of the 23rd day of December, 2002, is entered into by and among PXRE
REINSURANCE COMPANY, a Connecticut insurance company ("PRC"), PXRE REINSURANCE
LTD., a Bermuda insurance company (together with PRC, the "Company") and P-1 RE
LTD., a Bermuda exempted Class 3 insurance company (the "Reinsurer").

         This Agreement sets forth the terms and conditions under which the
Reinsurer has agreed to provide reinsurance with respect to the Reinsurance
Contracts.

                   DEFINED TERMS; INTERPRETATION OF AGREEMENT

         Definitions. In this Agreement:

"2003 Initial Reinsurance Amount" has the meaning set forth in Section 2.5.

"2003 Reinsurance Amount" has the meaning set forth in Section 2.5.

"2004 Reinsurance Amount" has the meaning set forth in Section 2.5.

"Account Control Agreement" means the Account Control Agreement dated as of the
date hereof among the Company, the Reinsurer and Citibank.

"Aggregate Limit" means any of the Initial Period Aggregate Limit, Final Period
Aggregate Limit, Stub Period Aggregate Limit, Coverage Period Aggregate Limit
and Uninsured Period Aggregate Limit.

"Aggregate Modeled Year Result" has the meaning set forth in Section 3.4.

"Agreement" has the meaning set forth in the preamble to this Agreement.

"Allocated Loss Adjustment Expenses", as used in this Agreement, shall mean the
Company's costs and expenses allocable to specific claims attaching to the
Reinsurance Contracts and that are incurred in the investigation, appraisal,
adjustment, settlement, litigation, defense or appeal of such specific claims,
including statutory penalties, court costs and costs of supersedeas and appeal
bonds, and including:

         (a)      pre-judgment interest, unless included as part of the award or
                  judgment;

         (b)      post-judgment interest; and

         (c)      legal expenses and costs incurred in connection with coverage
                  questions and legal actions connected thereto, including
                  declaratory judgment expense.

Allocated Loss Adjustment Expenses shall not include the Company's office
expenses and salaries of employees of the Company.

<PAGE>

"Attachment Period" means any of the following time periods:

<TABLE>
<CAPTION>
                       Time Period                                       Referred to Herein As
                       -----------                                       ---------------------

<S>                                                                      <C>
January 1, 2003 through and including December 31, 2003                  2003 Attachment Period
January 1, 2004 through and including December 31, 2004                  2004 Attachment Period
</TABLE>

"Attachment Period Portfolio" means, for each Attachment Period, the portfolio
comprised of such Attachment Period's Property Catastrophe Subportfolio and such
Attachment Period's Specialty Subportfolio. For the avoidance of doubt, the
phrase "2003 Attachment Period Portfolio" means the Attachment Period Portfolio
for the 2003 Attachment Period.

"Attachment Period Portfolio Gain Amount" has the meaning set forth in Section
4.3.

"Attachment Period Portfolio Loss Amount" has the meaning set forth in Section
4.3.

"Auditor Engagement Letter" means the letter agreement dated the date hereof
between the Reinsurer and KPMG LLP.

"Business Day" means a day (other than a Saturday or a Sunday) on which banks
are open for commercial business in Hamilton, Bermuda and in New York, New York,
U.S.A.

"Calculation Date" has the meaning set forth in Section 3.2.

"Capital Report" has the meaning set forth in Section 3.1.

"Cash Call Demand" has the meaning set forth in Section 4.2.

"Cash Call Loss Amount" has the meaning set forth in Section 4.2.

"CATRADER Model" means AIR Worldwide Corporation's CATRADER(R) modeling
software.

"Change of Control" has the meaning set forth in Section 10.1.

"Citibank" means Citibank, N.A.

"Common Shares" means those shares of the share capital of the Reinsurer
designated as Class A Common Shares.

"Collateral" means the Securities Account and all of the cash, investment
property and other Financial Assets and other property held therein.

"Commutation Amount" has the meaning set forth in the Commutation and Collateral
Release Schedule.

"Commutation Charge" has the meaning set forth in Section 6.3.

"Commutation Notice" has the meaning set forth in Section 6.1.

"Company" has the meaning set forth in the preamble to this Agreement.

                                       5
<PAGE>

"Confidential Identities" has the meaning set forth in Section 15.2.

"Confidential Information" has the meaning set forth in Section 15.4.

"Confidential Information Provided to Reinsurer" has the meaning set forth in
Section 15.1.

"Consented Court" has the meaning set forth in Section 14.4.

"Contract Simulation Result" has the meaning set forth in Section 3.3.

"Coverage Period" has the meaning set forth in Section 2.4.

"Coverage Period Aggregate Limit" has the meaning set forth in Section 2.4.

"Expense Allowance" means an amount equal to $5,820,000 due to the Reinsurer
from the Company.

"Final Excluded Losses" has the meaning set forth in Section 4.3.

"Final Period" has the meaning set forth in Section 2.4.

"Final Period Aggregate Limit" has the meaning set forth in Section 2.4.

"Financial Assets" means, in relation to the Reinsurer, any cash or other assets
credited to a Securities Account at, or otherwise held by, Citibank to be held
upon the terms of the Account Control Agreement and securing the obligations of
the Reinsurer.

"First Attachment Period Result" has the meaning set forth in the Settlement
Schedule.

"GAAP" means generally accepted accounting principles as in effect from time to
time in the United States.

"Impaired Capital Percentage" has the meaning set forth in Section 3.5.

"Indemnity Letter" means the Indemnity Letter, dated December 5, 2002, between
the Reinsurer and Codan Services Limited and Codan Trust Company Limited.

"Independent Accountant" means an independent certified public accountant agreed
upon by the Reinsurer and the Company or, failing such agreement within 30 days
after the Reinsurer has provided notice of a dispute to the Company under
Section 8.3, determined by arbitration in accordance with the provisions of
Article XIV.

"Initial Excluded Losses" has the meaning set forth in Section 4.3.

"Initial Period" has the meaning set forth in Section 2.4.

                                       6
<PAGE>

"Initial Period Aggregate Limit" has the meaning set forth in Section 2.4.

"Initial Required Capital" means, for each Attachment Period Portfolio, 137% of
the Required Capital for such Attachment Period Portfolio with the Date of
Computation being January 1st of such Attachment Period Portfolio's Attachment
Period.

"Insurance Manager Agreement" means the Insurance Manager Agreement dated the
date hereof between the Reinsurer and Marsh Management Services (Bermuda) Ltd.

"Inuring Reinsurance" has the meaning set forth in Section 4.3.

"Investors" means the holders from time to time of the Common Shares.

"LIBOR Rate" means the rate of interest equal to the rate for U.S. dollar
deposits for a period of three months based on information presented on Telerate
Page 3750 as of 11:00 a.m. London time on the Business Day on which a payment is
due, which shall then be in effect for the succeeding period of time until such
payment is made; provided, however, if the rate described above does not appear
on the Telerate System on any applicable interest determination date, the LIBOR
Rate shall be the rate for deposits in dollars for a three month period on the
Reuters Page "LIBOR01" (or such other page as may replace the LIBOR01 Page on
that service for the purpose of displaying such rates), as of 11:00 a.m. (London
Time), on each day that the LIBOR Rate is determined hereunder. The LIBOR Rate
shall be based on an actual/360 day count basis.

"Master Services Agreement" means the Services Agreement dated the date hereof
between the Reinsurer and Codan Services Limited.

"Model" has the meaning set forth in Section 3.3.

"Modeled Contract" has the meaning set forth in Section 3.3.

"Net Attachment Period Result" has the meaning set forth in the Settlement
Schedule.

"Net Settlement Amount" has the meaning set forth in the Settlement Schedule.

"Noninuring Reinsurance Programs" has the meaning set forth in Section 4.3.

"Obligations to PRC" has the meaning set forth in Section 9.4.

"On-Going Participation Percentage" or "OPP" means, for each Attachment Period
Portfolio, until otherwise adjusted by the delivery of a Commutation Notice for
such Attachment Period Portfolio as provided herein, 100% and thereafter, such
percentage (not less than 0% nor greater than the On-Going Participation
Percentage then in effect for such Attachment Period Portfolio) as specified in
such Commutation Notice.

"P1 Portfolio" means the reinsurance portfolio of the Company constituted by the
Subportfolio Blocks for both Attachment Periods.

"Peak Required Capital" means, for each Attachment Period Portfolio, the
Required Capital for such Attachment Period Portfolio with the Date of
Computation being the July 1st of such Attachment Period Portfolio's Attachment
Period.

                                       7
<PAGE>

"Person" means any individual, corporation, partnership, limited liability
company, limited liability partnership, trust, unincorporated association, or
other legal entity, and any government or any governmental agency or political
subdivision thereof.

"PRC" means PXRE Reinsurance Company, a Connecticut domiciled Reinsurer.

"PRC Report" has the meaning set forth in Section 9.4.

"Premiums" means premiums earned and reinstatement premiums earned on the
Reinsurance Contracts included in the P1 Portfolio.

"Projected Required Capital" means, for each Attachment Period Portfolio, 142%
of the Required Capital for such Attachment Period Portfolio with the Date of
Computation being January 1st of such Attachment Period Portfolio's Attachment
Period.

"PXT" means PXRE Group Ltd.

"Regulatory Trust" means the collateral trust account established pursuant to
the Regulatory Trust Agreement to allow PRC to take statutory financial
statement credit for the reinsurance provided hereunder, in accordance with the
Connecticut Insurance Code and the New York Insurance Law.

"Regulatory Trust Agreement" means the Regulatory Trust Agreement dated as of
the date hereof among PRC, the Reinsurer and Citibank.

"Reinsurance Contract" means any contract, binder, cover note or slip evidencing
an obligation to provide reinsurance or retrocessional coverage that is included
in the P1 Portfolio, provided, however, that such coverage incepts on or between
January 1, 2003 through July 1, 2003 (with respect to the 2003 Attachment
Period) or on or between January 1, 2004 through July 1, 2004 (with respect to
the 2004 Attachment Period).

"Reinsurer" has the meaning set forth in the preamble to this Agreement.

"Reinsurer Obligations" means all obligations of the Reinsurer to the Company
under this Agreement, the Account Control Agreement and the Regulatory Trust
Agreement.

"Required Capital" has the meaning set forth in Section 3.4.

"Reserves" means, for each Attachment Period Portfolio, the reserves properly
allocable to such Attachment Period Portfolio. Such reserves shall be consistent
with those reflected in the quarterly GAAP financial statements of PXT for the
immediately preceding fiscal quarter; provided, however, that, for purposes of
the January Settlement Dates, such reserves shall be determined based upon a
reasonable estimate of the reserves for the immediately preceding December GAAP
financial statements. For the avoidance of doubt, the parties acknowledge that
Reserves shall include reserves for losses incurred but not reported.

                                       8
<PAGE>

"Securities Account" means, the securities account established pursuant to the
Account Control Agreement. The Securities Account is a "securities account" as
defined in the Uniform Commercial Code of New York.

"Service Agreements" means the Master Services Agreement, the Insurance Manager
Agreement, the Indemnity Letter, and the Auditor Engagement Letter, each as
defined in the Subscription Agreement.

"Settlement Date" has the meaning set forth in Section 4.1.

"Settlement Date Report" has the meaning set forth in Section 4.1.

"Settlement Table" means a table included in the Settlement Schedule to this
Agreement.

"Stub Period" has the meaning set forth in Section 2.4.

"Stub Required Capital" means, for each Attachment Period Portfolio, the
Required Capital for such Attachment Period Portfolio with the Date of
Computation being April 1, 2004.

"Subportfolio Block" means that group of all Reinsurance Contracts written with
respect to a particular Subportfolio with terms commencing during a particular
Attachment Period. For the avoidance of doubt, there will be four Subportfolio
Blocks: 2003 Attachment Period Specialty Subportfolio, 2004 Attachment Period
Specialty Subportfolio, 2003 Attachment Period Property Catastrophe Subportfolio
and the 2004 Attachment Period Property Catastrophe Subportfolio.

"Subportfolio Block Expenses" has the meaning set forth in Section 4.3.
"Subportfolio Block Losses" has the meaning set forth in Section 4.3.

"Subportfolio Block Minimum Retained Amount" has the meaning set forth in
Section 3.6.

"Subportfolio Block Participation Rate" has the meaning set forth in Section
3.5.

"Subportfolio Block Premiums" has the meaning set forth in Section 4.3.

"Subportfolio Block Required Capital" has the meaning set forth in Section 3.3.

"Subportfolios" mean the following subportfolios of the Company:

         (a)      "Specialty Subportfolio" consisting of all Reinsurance
                  Contracts which are classified by the Company as: (i) Aviation
                  excess of loss reinsurance and retrocessional business, (ii)
                  Satellite reinsurance and retrocessional business, (iii)
                  Marine excess of loss reinsurance and retrocessional business,
                  and (iv) Risk excess of loss reinsurance and retrocessional
                  business; and

         (b)      "Property Catastrophe Subportfolio" consisting of all
                  Reinsurance Contracts which are classified by the Company as:
                  (i) North American property catastrophe reinsurance or
                  retrocessional business; (ii) International property
                  catastrophe reinsurance or retrocessional business; and (iii)
                  London Market property catastrophe reinsurance or
                  retrocessional business.

                                       9
<PAGE>

"Subportfolio Modeled Year Result" has the meaning set forth in Section 3.3.

"Subscription Agreement" means the Subscription and Purchase Agreement dated as
of December 23, 2002 among the Reinsurer and the Investors specified therein,
relating to the sale and purchase of the Common Shares, as amended from time to
time.

"Surplus Event" has the meaning set forth in Section 10.1.

"Stub Period Aggregate Limit" has the meaning set forth in Section 2.4.

"Tail Required Capital" means, for each Attachment Period Portfolio, the
Required Capital for such Attachment Period Portfolio with the Date of
Computation being the first day following the end of such Attachment Period
Portfolio's Attachment Period.

"Transaction Documents" means this Agreement, the Subscription Agreement, the
Account Control Agreement, the Insurance Manager Agreement, the Master Services
Agreement, the Option Agreement, the Indemnity Letter and the Auditor Engagement
Letter.

"Transferred Premium" shall have the meaning set forth in Section 2.2.

"Trustee" means the trustee of the P1 Re Purpose Trust.

"Uninsured Period" has the meaning set forth in Section 2.4.

"Uninsured Period Aggregate Limit" has the meaning set forth in Section 2.4.

1.2      Interpretation.

         (a)      Any reference in this Agreement to a Section or Article number
                  refers to a Section or Article of this Agreement unless
                  otherwise indicated. Any reference in this Agreement to any
                  document or agreement defined in this Article I shall mean
                  such document or agreement as originally executed or as
                  amended or supplemented from time to time with the consent of
                  the parties hereto. Accounting terms not otherwise defined
                  herein, have the meanings assigned to them by generally
                  accepted accounting principles as in effect in the United
                  States of America, as applied on a consistent basis by the
                  relevant party.

         (b)      For the purposes of Article IX hereof only, all terms not
                  otherwise defined herein (i) relating to any Collateral, any
                  security interest in any Collateral, the Account Control
                  Agreement or Citibank as securities intermediary under the
                  Account Control Agreement and (ii) defined in the Uniform
                  Commercial Code of New York, shall have the meanings set forth
                  in such Uniform Commercial Code.

                                       10
<PAGE>

                                BUSINESS COVERED

2.1      Business Covered. Subject to the terms and conditions of this
         Agreement, Reinsurer hereby reinsures, on a risk attaching basis, the
         liability of the Company resulting from losses that arise out of all
         Reinsurance Contracts contained in each of the Subportfolio Blocks that
         constitute the P1 Portfolio, which Reinsurance Contracts have terms
         commencing during an Attachment Period.

2.2      Premiums. The Company shall cede to the Reinsurer its proportionate
         share of the Premiums, which proportionate share shall be calculated in
         accordance with Article IV. Premiums due to the Reinsurer shall be
         retained by the Company on a funds withheld basis, except for an amount
         equal to $5,820,000 which shall be transferred by the Company to the
         Reinsurer on January 1, 2003 (the "Transferred Premium"), until
         settlement in accordance with Article IV.

2.3.     Follow the Fortunes. Other than as expressly provided in this
         Agreement, all business of the Company reinsured with the Reinsurer
         under this Agreement will be subject in all respects to the same terms
         and conditions, interpretations, waivers, the exact proportions of
         premiums collected and the same modifications, alterations, and
         cancellations as the relevant Reinsurance Contracts written by the
         Company. Subject to the limits of cover under this Agreement, the
         liability of the Reinsurer with respect to the reinsurance provided
         hereunder shall follow that of the Company under and in relation to the
         relative Reinsurance Contract, including any and all Allocated Loss
         Adjustment Expenses incurred directly by the Company in connection with
         the litigation, defense and settlement of claims made against the
         Company under the relative Reinsurance Contract. The Company shall be
         the sole judge as to what constitutes a claim or loss covered under the
         Reinsurance Contracts and as to the Company's liability thereunder and
         as to the amounts which it shall be proper for the Company to pay
         thereunder, and the Reinsurer shall be bound by the judgment of the
         Company as to the liability and obligation of the Company under any of
         the Reinsurance Contracts.

2.4      Aggregate Limit.

         (a)      In no event shall the Reinsurer's maximum liability under this
                  Agreement exceed the assets held in the Securities Account
                  plus 76% of the aggregate Subportfolio Block Premiums held by
                  the Company, less any investment income earned on the
                  Collateral which remains in the Securities Account. The
                  Reinsurer's liability for losses arising under any Reinsurance
                  Contract included within the P1 Portfolio shall be determined
                  on a risk attaching basis; provided, however, the Reinsurer's
                  aggregate maximum liability for each of the Attachment Period
                  Portfolios under this Agreement shall be subject to
                  sublimitations on a loss occurring basis in the amounts set
                  forth below for each of the specified periods for such
                  Attachment Period Portfolio:

                                       11
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Period                       Period Term               Limit Name                 Aggregate Limit
----------------------------------------------------------------------------------------------------------------------
<S>                          <S>                       <S>                        <C>
Initial Period               First six months of       Initial Period Aggregate   Initial Required Capital plus 76%
                             such Attachment Period    Limit                      of the sum of the Subportfolio
                                                                                  Block Premiums for such Attachment
                                                                                  Period for the Attachment Period
                                                                                  Portfolio Reinsurance Contracts in
                                                                                  force during the Initial Period.

----------------------------------------------------------------------------------------------------------------------
Final Period                 The first six months      Final Period Aggregate     Tail Required Capital plus 76% of
                             beginning as of the end   Limit                      the sum of the Subportfolio Block
                             of such Attachment                                   Premiums for such Attachment
                             Period                                               Period for the Attachment Period
                                                                                  Portfolio Reinsurance Contracts in
                                                                                  force after December 31st of such
                                                                                  Attachment Period.
----------------------------------------------------------------------------------------------------------------------
Stub Period                  The period commencing     Stub Period Aggregate      Stub Required Capital plus 76% of
                             15 months after the       Limit                      the sum of the Subportfolio Block
                             beginning of each                                    Premiums for such Attachment
                             Attachment Period and                                Period for the Attachment Period
                             ending at the end of                                 Portfolio Reinsurance Contracts in
                             the 18th month                                       force after April 1, 2004 of such
                             following the beginning                              Attachment Period.
                             of each Attachment
                             Period
----------------------------------------------------------------------------------------------------------------------
Coverage Period              Such Attachment Period    Coverage Period            Peak Required Capital plus 76% of
                             and the first six         Aggregate Limit            the sum of the Subportfolio Block
                             months beginning as of                               Premiums for the Attachment Period
                             the end of such                                      for all Attachment Period
                             Attachment Period                                    Portfolio Reinsurance Contracts in
                                                                                  force during such Attachment
                                                                                  Period.
----------------------------------------------------------------------------------------------------------------------
Uninsured Period             With respect to each      Uninsured Period           $0.
                             Attachment Period, the    Aggregate Limit
                             period of time
                             beginning immediately
                             after the end of 18
                             month following the
                             beginning of such
                             Attachment Period
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       12
<PAGE>

         (b)      Solely for the purposes of calculating the aggregate limit
                  amounts set forth in Section 2.4(a), the Subportfolio Block
                  Premiums associated with the respective contracts shall be the
                  full twelve month premiums.

         (c)      On July 31st of each Attachment Period, the Company shall
                  calculate the Peak Required Capital for such Attachment Period
                  and deliver a written notice to the Reinsurer setting forth
                  the Peak Required Capital for such Attachment Period.

2.5      Reinsurance Amount. The Reinsurance Amount for each Attachment Period
         shall be determined in accordance with the following provisions:

         (a)      "2003 Initial Reinsurance Amount" means $195,000,000.

         (b)      "2003 Reinsurance Amount" means:

                  (i)      As of February 15, 2003, the lesser of;

                           (a)      The 2003 Initial Reinsurance Amount; or

                           (b)      Projected Required Capital for the 2003
                                    Attachment Period.

                  (ii)     As of July 31, 2003, the least of:

                           (a)      The 2003 Initial Reinsurance Amount;

                           (b)      Projected Required Capital for the 2003
                                    Attachment Period; or

                           (c)      Peak Required Capital (which shall be
                                    measured as of July 31, 2003).

         (c)      "2004 Reinsurance Amount" means the least of:

                  (i)      The 2003 Reinsurance Amount minus Attachment Period
                           Portfolio Loss Amount, if any, for the 2003 -----
                           Attachment Period Portfolio;

                  (ii)     Projected Required Capital for the 2004 Attachment
                           Period; or

                  (iii)    Peak Required Capital (which shall be measured as of
                           July 31, 2004, and, if less than (a) or (b), the 2004
                           Reinsurance Amount shall equal such Peak Required
                           Capital).

                                       13
<PAGE>

                                  ARTICLE III

              SUBPORTFOLIO BLOCK REQUIRED CAPITAL; REQUIRED CAPITAL

3.1      Timing of Provisional Calculations and Notice.

         (a)      2003 Attachment Period. On the date hereof, the Company shall
                  deliver to the Reinsurer a written notice (the "Capital
                  Report"), which shall set forth the following with respect to
                  the 2003 Attachment Period Portfolio:

                  (i)      the projected Subportfolio Block Required Capital for
                           each Subportfolio;

                  (ii)     the Subportfolio Block Minimum Retained Amount;

                  (iii)    the projected Subportfolio Block Participation Rate;

                  (iv)     the projected Initial Required Capital; and

                  (v)      the projected Peak Required Capital.

         (b)      2004 Attachment Period. Not later than November 15, 2003, the
                  Company shall deliver to the Reinsurer a new Capital Report,
                  which shall set forth the following with respect to the 2004
                  Attachment Period Portfolio:

                  (i)      the projected Subportfolio Block Required Capital for
                           each Subportfolio;

                  (ii)     the Subportfolio Block Minimum Retained Amount;

                  (iii)    the projected Subportfolio Block Participation Rate;

                  (iv)     the projected Initial Required Capital;

                  (v)      the projected Peak Required Capital; and

                  (vi)     the Tail Required Capital for the 2003 Attachment
                           Period Portfolio.

3.2      Timing of Final Calculations and Notices. Within 45 days following the
         inception of each Attachment Period (the date determined, the
         "Calculation Date"):

         (a)      the Company shall, taking into account such Attachment Period
                  Portfolio Reinsurance Contracts in force as of the Calculation
                  Date, recalculate and finalize with respect to such Attachment
                  Period Portfolio (the Date of Computation being the beginning
                  of such Attachment Period): (i) the Subportfolio Block
                  Required Capital for each Subportfolio Block, (ii) the
                  Subportfolio Block Participation Rates for each Subportfolio
                  Block and (iii) the Required Capital;

         (b)      the Company shall provide to the Reinsurer a written notice
                  setting forth the results of the recalculations required
                  pursuant to Section 3.2(a), based on the same assumptions
                  underlying the preceding Capital Report with respect to such
                  Attachment Period Portfolio such report shall also set forth
                  the Reinsurance Amount; and

                                       14
<PAGE>

         (c)      On July 31st of each Attachment Period, the Company shall
                  deliver a notice finalizing the Reinsurance Amount and Peak
                  Required Capital for such Attachment Period.

3.3      Computation of Subportfolio Block Required Capital. The "Subportfolio
         Block Required Capital" for each Subportfolio Block shall be determined
         as follows:

         (a)      For such Subportfolio Block, as of the Date of Computation,
                  each Reinsurance Contract in such Subportfolio Block that is
                  in force on such Date of Computation (each, a "Modeled
                  Contract") shall be run through, in the case of the Property
                  Catastrophe Subportfolio, the CATRADER Model or, in the case
                  of the Specialty Subportfolio, the Company's proprietary model
                  (collectively, the "Model"). The Model shall be used to
                  simulate the loss exposure of the Modeled Contact for a
                  one-year period beginning as of the Date of Computation and
                  assuming that the Modeled Contract's coverage is in force for
                  the entire one-year period following the Date of Computation.
                  Any assumptions to be made with respect to the Model shall be
                  consistent with the Company's ordinary course of business.

                  (i)      Using appropriate actuarial methodologies, the
                           Company shall use the Model to generate simulations
                           of 50,000 years for each Modeled Contract. For each
                           Modeled Contract, for each year of simulation, the
                           "Contract Simulation Result" shall be (i) the twelve
                           month Premium for such Modeled Contract, minus (ii)
                           modeled losses (if any), plus (iii) applicable
                           reinstatement premiums (if any), minus (iv) expenses
                           equal to 24% of twelve month Premium and applicable
                           reinstatement premiums for such Modeled Contract.

                  (ii)     For each simulated year, the Contract Simulation
                           Result for each Modeled Contract for such simulated
                           year shall be summed (each such result, a
                           "Subportfolio Modeled Year Result").

                  (iii)    The "Subportfolio Block Required Capital" shall be an
                           amount equal to the 50th worse year in terms of
                           losses (expressed in U.S. Dollars) of the 50,000
                           Subportfolio Modeled Year Results.

3.4      Computation of Required Capital. For each Attachment Period Portfolio,
         the "Required Capital" as of the Date of Computation shall be
         determined as follows:

         (a)      The Subportfolio Block Required Capital as of the Date of
                  Computation shall be computed for such Attachment Period's
                  Property Catastrophe Subportfolio and such Attachment Period's
                  Specialty Subportfolio solely for purposes of determining the
                  Subportfolio Modeled Year Results for each of the
                  Subportfolios (and the actuarial methodologies utilized shall
                  be appropriate in providing for the determination made
                  pursuant to paragraph (b) below).

                                       15
<PAGE>

         (b)      For each of the simulated 50,000 years, the "Aggregate Modeled
                  Year Result" shall equal the aggregate of (a) the Subportfolio
                  Modeled Year Result for each Subportfolio multiplied by (b)
                  such Subportfolio's Subportfolio Block Participation Rate.

         (c)      The Required Capital shall be an amount equal to the 50th
                  worse year in the terms of losses (expressed in U.S. Dollars)
                  of the 50,000 Aggregate Modeled Year Results.

3.5      Computation of Subportfolio Block Participation Rate.

         (a)      "Subportfolio Block Participation Rate" means, for each
                  Subportfolio Block, as of the beginning of such Subportfolio
                  Block's Attachment Period, the lesser of:

                  (i)      65% (or as otherwise mutually agreed), and

                  (ii)     the percentage resulting from dividing:

                           (a)      (i) such Subportfolio Block's Subportfolio
                                    Block Required Capital multiplied by 142%,
                                    less (ii) the Subportfolio Block Minimum
                                    Retained Amount for such Subportfolio Block;
                                    by

                           (b)      such Subportfolio Block's Subportfolio Block
                                    Required Capital multiplied by 142% (in each
                                    case, the Date of Computation being January
                                    1st of the applicable Attachment Period).

         (b)      Notwithstanding the foregoing, in the 2004 Attachment Period,
                  if the Subportfolio Block Minimum Retained Amount for such
                  Subportfolio Block is less than the Subportfolio Block Minimum
                  Retained Amount for the Subportfolio Block of the same
                  Subportfolio for 2003 Attachment Period (i.e. the 2004
                  Attachment Period Property Catastrophe Subportfolio and the
                  2003 Attachment Period Property Catastrophe Subportfolio), the
                  Subportfolio Block Participation Rate shall be the lesser of
                  (unless otherwise mutually agreed) (i) the 2003 Subportfolio
                  Block's Subportfolio Block Participation Rate as determined
                  pursuant to (a) above and (ii) the calculation performed in
                  this paragraph 3.4(a).

         (c)      On the Calculation Date in 2004, the Company shall evaluate
                  whether the Reinsurer has sufficient capital to support the
                  Projected Required Capital for the 2004 Attachment Period. If
                  the 2004 Reinsurance Amount is less than the Projected
                  Required Capital for the 2004 Attachment Period, then all
                  Subportfolio Block Participation Rates for the 2004 Attachment
                  Period shall be reduced by the Impaired Capital Percentage.
                  "Impaired Capital Percentage" means the percentage resulting
                  from dividing (i) the Projected Required Capital for 2004 less
                  the 2004 Reinsurance Amount, by (ii) the Projected Required
                  Capital for 2004.

                                       16
<PAGE>

3.6      Subportfolio Block Minimum Retained Amount. "Subportfolio Block Minimum
         Retained Amount" means, for each Subportfolio Block:

         (a)      with respect to the 2003 Attachment Period, the dollar amount
                  for such Subportfolio Block as set forth in the Capital
                  Report; and

         (b)      with respect to 2004 Attachment Period, the dollar amounts set
                  forth in the updated Capital Report, which amounts shall be
                  determined in the sole discretion of the Company, provided,
                  however, that, except in the event of a Change of Control or a
                  Surplus Event (each as defined in Section 10.1 hereof), the
                  Subportfolio Block Minimum Retained Amounts for the 2004
                  Attachment Period may not exceed 135% of the Subportfolio
                  Block Minimum Retained Amounts for the 2003 Attachment Period.

                                   ARTICLE IV

                        PAYMENTS; CALCULATION OF AMOUNTS

4.1      Settlement Dates. Each Attachment Period Portfolio shall be settled on
         the dates (each such date, a "Settlement Date") and in the proportions
         set forth on the table included in the Settlement Schedule (the
         "Settlement Table"). On each Settlement Date, the Company shall
         calculate the results with respect to each Attachment Period Portfolio
         subject to settlement on such date and provide the Reinsurer with a
         written report setting forth such results (the "Settlement Date
         Report"). For the January and March Settlement Dates, the Attachment
         Period Portfolio results shall be determined as of the immediately
         preceding December 31, and for the August Settlement Date, the
         Attachment Period Portfolio results shall be determined as of the
         immediately preceding June 30.

         (a)      If, with respect to any Attachment Period Portfolio such
                  Settlement Date Report reflects a positive Net Settlement
                  Amount, then the Company shall pay to the Reinsurer, by
                  deposit into the Securities Account on such Settlement Date.

         (b)      If, with respect to any Attachment Period Portfolio, such
                  Settlement Date Report reflects negative Net Settlement
                  Amount, then within 5 Business Days following such Settlement
                  Date, the Company shall be entitled to cause assets to be
                  withdrawn from the Securities Account and/or the Regulatory
                  Trust and to utilize and apply such assets to satisfy such
                  obligation of the Reinsurer to the Company.

         (c)      The payments due with respect to all Attachment Period
                  Portfolios settled on the same Settlement Date shall be made
                  on a net basis.

         (d)      On the second Settlement Date that occurs for each Attachment
                  Period Portfolio, the Settlement Date Report provided on such
                  second Settlement Date shall be accompanied by a certificate
                  from an Independent Accountant certifying the accuracy of the
                  calculation of such Attachment Period Portfolio Gain Amount or
                  Attachment Period Portfolio Loss Amount for such Attachment
                  Period Portfolio.

                                       17
<PAGE>
4.2      Cash Call Demand. On each of July 1, 2003, January 1, 2004, July 1,
         2004 and January 1, 2005, if, in the six month period ending on the end
         of the month immediately preceding the referenced date, (i) the
         aggregate of all loss payments that have been made by the Company (net
         of subrogation recoveries received) in such six month period with
         respect to the Reinsurance Contracts within the Attachment Period
         Portfolio(s) exceed (ii) the aggregate of all premiums collected by the
         Company with respect to the Reinsurance Contracts within the Attachment
         Period Portfolio(s) in such six month period (the portion of such
         excess, which portion is for the account of the Reinsurer, such
         determination taking into account the applicable Aggregate Limits for
         the Attachment Period Portfolio(s), being the "Cash Call Loss Amount"),
         then the Company may provide notice thereof to the Reinsurer setting
         forth information with respect to and demanding payment of the Cash
         Call Loss Amount (a "Cash Call Demand"). Within 10 Business Days
         following the Reinsurer's receipt of such Cash Call Demand, the Company
         shall be entitled to cause an amount equal to the Cash Call Loss Amount
         to be withdrawn from the Securities Account and/or the Regulatory Trust
         and to utilize and apply such assets to satisfy such obligation of the
         Reinsurer to the Company. Any such amounts paid by the Reinsurer shall
         be taken into account in determining future settlements between the
         Company and the Reinsurer in connection with applicable Attachment
         Period Portfolio Gain Amounts and Attachment Period Portfolio Loss
         Amounts.

4.3      Related Definitions. In this Agreement the following amounts will be
         measured as of the end of the month immediately preceding the
         referenced date:

         (a)      "Attachment Period Portfolio Gain Amount" means, with respect
                  to each Attachment Period Portfolio:

                  (i)      the sum of such Attachment Period Portfolio's
                           Subportfolio Block Premiums, less

                  (ii)     the sum of such Attachment Period Portfolio's
                           Subportfolio Block Losses, less

                  (iii)    the 50% of the Transferred Premium (for the
                           Settlement Dates on January 15, 2004 and January 15,
                           2005 only), less

                  (iv)     the sum of such Attachment Period Portfolio's
                           Subportfolio Block Expenses, plus

                  (v)      the 50% of the Expense Allowance (for the Settlement
                           Dates on January 15, 2004 and January 15, 2005 only);
                           plus

                  (vi)     the sum of the following:

                           (a)      if a positive number (such number, "Initial
                                    Excluded Losses"), that portion of
                                    Subportfolio Block Losses (inclusive of both
                                    losses and associated Reserves) arising from
                                    losses occurring during the Initial Period
                                    minus the Initial Period Aggregate Limit;

                           (b)      if a positive number (such number ("Final
                                    Excluded Losses"), that portion of
                                    Subportfolio Block Losses (inclusive of both
                                    losses and associated Reserves) arising from
                                    losses occurring during the Final Period
                                    minus the Final Period Aggregate Limit; and

                                       18
<PAGE>

                           (c)      if a positive number, that portion of
                                    Subportfolio Block Losses (inclusive of both
                                    losses and associated Reserves) arising from
                                    losses occurring during the Coverage Period
                                    minus the Coverage Period Aggregate Limit
                                    minus the Initial Excluded Loss minus the
                                    Final Excluded Loss. For the avoidance of
                                    doubt, it is the parties' intention that the
                                    Company shall bear all losses incurred in
                                    excess of the applicable aggregate limits.

                  If the result is zero or a negative number, there is no
                  Attachment Period Portfolio Gain Amount as of such Settlement
                  Date.

         (b)      "Attachment Period Portfolio Loss Amount" means, with respect
                  to each Attachment Period Portfolio:

                  (i)      the sum of such Attachment Period Portfolio's
                           Subportfolio Block Premiums, less

                  (ii)     the sum of such Attachment Period Portfolio's
                           Subportfolio Block Losses, less

                  (iii)    the 50% of the Transferred Premium (for the
                           Settlement Dates on January 15, 2004 and January 15,
                           2005 only), less

                  (iv)     the sum of such Attachment Period Portfolio's
                           Subportfolio Block Losses, Expenses, plus

                  (v)      the 50% of the Expense Allowance (for the Settlement
                           Dates on January 15, 2004 and January 15, 2005 only),
                           plus

                  (vi)     the sum of the following:

                           (a)      if a positive number (such number, "Initial
                                    Excluded Losses"), that portion of
                                    Subportfolio Block Losses (inclusive of both
                                    losses and associated Reserves) arising from
                                    losses occurring during the Initial Period
                                    minus the Initial Period Aggregate Limit;

                           (b)      if a positive number (such number "Final
                                    Excluded Losses"), that portion of
                                    Subportfolio Block Losses (inclusive of both
                                    losses and associated Reserves) arising from
                                    losses occurring during the Final Period
                                    minus the Final Period Aggregate Limit; and

                           (c)      if a positive number, that portion of
                                    Subportfolio Block Losses (inclusive of both
                                    losses and associated Reserves) arising from
                                    losses occurring during the Coverage Period
                                    minus the Coverage Period Aggregate Limit
                                    minus the Initial Excluded Loss minus the
                                    Final Excluded Loss. For the avoidance of
                                    doubt, it is the parties intention that the
                                    Company shall bear all losses incurred in
                                    excess of the applicable aggregate limits;

                                       19
<PAGE>

                           (d)      that portion of Subportfolio Block Losses
                                    (inclusive of both losses and associated
                                    Reserves) arising from losses occurring
                                    during the Uninsured Period.

                  (vii)    provided, that in no case may the Attachment Period
                           Portfolio Loss Amount exceed the Attachment Period
                           Reinsurance Amount.

                  If the result is zero or a positive number, there is no
                  Attachment Period Portfolio Loss Amount as of such Settlement
                  Date.

         (c)      "Subportfolio Block Premiums" means, with respect to each
                  Subportfolio Block, the product of:

                  a.       all Premiums earned on Reinsurance Contracts included
                           in such Subportfolio, times

                  b.       Subportfolio Block Participation Rate applicable to
                           such Subportfolio Block.

         (d)      "Subportfolio Block Losses" means, with respect to each
                  Subportfolio Block, the product of:

                  a.  (i)   all loss payments that have been made on Reinsurance
                            Contracts included in such Subportfolio, net of
                            recoveries fo subrogation and Inuring Reinsurance,
                            plus

                      (ii)  all outstanding Reserves, at the time of such
                            calculation, related to Reinsurance Contracts
                            included in such Subportfolio, net of recoveries for
                            subrogation and Inuring Reinsurance,

                  times

                  b.        Subportfolio Block Participation Rate applicable to
                            such Subportfolio Block.

                  "Noninuring Reinsurance Programs" of the Company shall mean
                  (i) the excess of loss reinsurance programs of the Company
                  existing at the date hereof and all renewals thereof effected
                  on terms materially similar to terms existing at the date
                  hereof, determined in the Company's sole discretion, and (ii)
                  the Facultative Obligatory Quota Share Reinsurance Agreement
                  between the Company and Select Re Ltd., taken together, which
                  retrocessional coverage protection shall be solely for the
                  account of the Company. In the event the Company should
                  determine to purchase retrocessional coverage additional to
                  its Noninuring Reinsurance Programs, the Company shall so
                  notify the Reinsurer, which may then elect to participate
                  along with the Company in the purchase of any such additional
                  loss protection. If the Reinsurer elects to participate in the
                  purchase of such additional loss protection, the Reinsurer and
                  Company agree to amend this Agreement to provide for such
                  purchase, and the payment for such purchase by the Reinsurer
                  and such additional reinsurance shall be considered "Inuring
                  Reinsurance."

                                       20
<PAGE>

         (e)      "Subportfolio Block Expenses" means, with respect to each
                  Subportfolio Block, 24% of Subportfolio Block Premiums.

4.4      Limited Recourse. The Company shall not have any recourse, direct or
         indirect, under this Agreement or any of the Transaction Documents or
         any certificate or other writing delivered in connection herewith or
         therewith against (i) the Reinsurer or any of its assets, except those
         assets maintained in the Securities Account and the Regulatory Trust,
         (ii) the Trustee in its individual capacity, (iii) any partner, owner,
         beneficiary, agent, officer, director, employee or agent of the Trustee
         in its individual capacity or of Codan Services Limited or of Marsh
         Management Services (Bermuda) Limited, except as any such Person may
         have expressly agreed (it being understood that the Trustee has no such
         obligations in its individual capacity), and (iv) any Investor or any
         other owner of a beneficial interest in the Reinsurer, in respect of
         the obligations of the Reinsurer under this Agreement or any of the
         Transaction Documents.

4.5      Indemnity Payments. If the Reinsurer becomes obligated to provide
         indemnification to a party that is providing services to the Reinsurer
         pursuant to one of the Service Agreements, and (i) if an action or
         inaction by the Company was the direct or indirect cause of the
         liability or expense that gave rise to such requirement to provide such
         indemnity, then the Company shall pay (or reimburse the Reinsurer for)
         the amount of such indemnity, (ii) if an action or inaction by the
         Reinsurer that was consented to, approved or directed by the Investors
         was the direct or indirect cause of the liability or expense that gave
         rise to such requirement to provide such indemnity, then the Reinsurer
         shall pay the amount of such indemnity, and (iii) if neither (i) nor
         (ii) is applicable, the Company shall pay (or reimburse the Reinsurer
         for) one-half of the amount of such indemnity.

4.6      Interest on Late Payments. To the extent that any amount payable by
         either party under this Agreement is not paid when due, the party owing
         such amount shall pay such amount plus interest at the LIBOR Rate plus
         4% from (and including) the date such amount was due hereunder until
         (but excluding) the date that such amount is paid.

4.7      Federal Excise Tax. The Company shall bear the responsibility for and
         pay to the Internal Revenue Service any United States Federal Excise
         Tax which are applicable to Premiums or remittances under this
         Agreement to the appropriate authorities.

                                   ARTICLE V

                             [INTENTIONALLY OMITTED]

                                       21
<PAGE>

                                   ARTICLE VI

                                RUN-OFF EXTENSION

6.1      On each Commutation Date, the Reinsurer shall have the option to cease
         participation in both Attachment Period Portfolio's Attachment Period
         Portfolio Gain and Attachment Period Portfolio Loss as of, in the case
         of the August 15 Commutation Date, the immediately preceding June 30,
         and, in the case of the March 31 Commutation Date (as such date may be
         accelerated), the immediately preceding December 31 by delivering
         notice to the Company to such effect on or prior to such Commutation
         Date. Such Commutation Notice shall specify the on-going percentage
         interest (the "On-Going Participation Percentage") of the Reinsurer in
         the continued development of the Attachment Period Portfolios. No later
         than 5 days prior to each Commutation Date, the Company shall deliver
         notice to the Reinsurer setting forth the Commutation Amount, if any,
         for such Commutation Date and a statement setting forth for each
         Attachment Period Portfolio, such Attachment Period Portfolio's
         Attachment Period Portfolio Gain, Attachment Period Portfolio Loss, and
         Reserves for such immediately preceding June 30 or December 31, as the
         case may be. The Company shall include in such notice an explanation as
         to how it determined the Commutation Amount, provided, however, that
         the Reinsurer shall have no right to contest the validity or
         appropriateness of such determination, which shall be the sole
         discretion of the Company.

6.2      The Commutation Amount shall be an amount determined in accordance with
         the Commutation and Collateral Release Schedule.

6.3      Upon delivery of a Commutation Notice, the Reinsurer shall pay a
         "Commutation Charge" determined as follows to the Company:

         (a)      If the Reinsurer delivers such notice with respect to the
                  first Commutation Offer Date, the Commutation Charge shall
                  equal (i) 100% minus the On-Going Participation Percentage,
                  multiplied by (ii) the Commutation Amount.

         (b)      If the Reinsurer delivers such notice with respect to the
                  second Commutation Offer Date, the Commutation Charge shall
                  equal (i) the On-Going Participation Percentage in effect
                  prior to such Commutation Date minus the On-Going
                  Participation Percentage, multiplied by (ii) the Commutation
                  Amount.

         (c)      If the Reinsurer delivers such notice with respect to any
                  Commutation Date after the second Commutation Date, the
                  Commutation Charge shall be $0.

6.4      On the Commutation Date, the Company shall release from the Collateral
         Account to the Reinsurer an amount equal to the balance in the
         Collateral Account multiplied by one minus a fraction the numerator of
         which is the On-Going Participation Percentage (as adjusted to reflect
         the Commutation Notice) and the denominator of which is the On-Going
         Participation Percentage for the immediately preceding June 30 or
         December 31, as the case may be. The Company shall deduct the
         Commutation Charge, if any, from the amount released from the
         Collateral Account.

                                       22
<PAGE>

                                  ARTICLE VII

                             [INTENTIONALLY OMITTED]

                                  ARTICLE VIII

                  REPORTS TO REINSURER; INQUIRIES BY REINSURER

8.1      Reports. In addition to each Settlement Date Report, PRC Report (as
         described in Section 9.4) and other reports required herein to be
         provided by the Company, the Company shall provide to the Reinsurer:

         (a)      within 15 days after the end of each calendar month to which
                  this Agreement applies, a bordereau of treaties authorized
                  and/or bound within the P1 Portfolio (on a cumulative to date
                  basis). The Company shall make a good faith effort to identify
                  all such treaties for which a loss event has occurred as of
                  the date such bordereau is sent to the Reinsurer. Unless the
                  Reinsurer notifies the Company of an objection within 30 days
                  of the Reinsurer's receipt of such bordereau, such bordereau
                  shall be conclusive as to whether or not a contract is
                  included in the P1 Portfolio and the allocation of such
                  contract to a Subportfolio Block, notwithstanding any errors
                  in the modeling, assumptions or reporting; the Reinsurer,
                  however, reserves its right to seek redress for wrongful
                  inclusion, exclusion or allocation of treaties if the Company
                  has acted with gross negligence or not in good faith;

         (b)      within 45 days after the end of each calendar quarter to which
                  this Agreement applies, the Company's estimate of the
                  Attachment Period Portfolio Gain Amount or Attachment Period
                  Portfolio Loss Amount with respect to each Attachment Period
                  Portfolio for the period up to the date of such estimate;

         (c)      on or prior to the May 31 after the end of each calendar year
                  to which this Agreement applies, the audited financial
                  statements of the Company for such calendar year, prepared by
                  the Company in accordance with applicable United States
                  statutory accounting principles (with respect to PRC) and
                  Bermuda statutory accounting principles (with respect to PXRE
                  Reinsurance Ltd.) and reviewed by the Company's regularly
                  engaged independent certified public accountant;

         (d)      on or prior to the April 15 after the end of each calendar
                  year to which this Agreement applies, a copy of the Annual
                  Report on Form 10-K filed by PXT with the United States
                  Securities and Exchange Commission; and

         (e)      within 60 days after the end of each calendar year to which
                  this Agreement applies, the information necessary for the
                  Reinsurer to comply with Section 7(i) of the Subscription
                  Agreement.

                                       23
<PAGE>

8.2      Access to Records and Audits. After receipt of a Settlement Date
         Report, Cash Call Demand or audited financial statement of the Company,
         the Reinsurer or its authorized representatives shall, at the expense
         of the Reinsurer, have the right at any reasonable time and in a
         reasonable manner to make inquiries of officers of the Company
         responsible therefor regarding, and the right to review, audit and
         inspect the books and records of the Company relating to, the P1
         Portfolio and the calculations in such reports and the components
         thereof and at the expense of the Reinsurer, make copies of the
         records, documents and other media, and to discuss the same with the
         Company's officers responsible therefor, during normal business hours
         of the Company and in a manner that is not disruptive to the operations
         in the ordinary course of business of the Company, subject to the
         confidentiality provisions set forth in Article XV hereof.

8.3      Agreement with Calculations. The Reinsurer shall be deemed to have
         agreed to the calculations set forth in any Settlement Date Report
         unless, within 20 Business Days of receipt thereof, the Reinsurer
         notifies the Company in writing that the Reinsurer disputes any such
         calculations.

8.4      Disputed Calculations. If the Reinsurer gives notice of a dispute to
         the Company pursuant to Section 8.3, and if the Reinsurer or its
         designated representative and the Company are unable to agree upon such
         disputed calculation within 30 days after the Reinsurer has given
         notice of such dispute, such dispute shall be determined by an
         Independent Accountant; provided, however, that the Reinsurer may defer
         submission of such a dispute to the Independent Accountant pending the
         completion of an audit pursuant to Section 8.2. For the avoidance of
         doubt, such a dispute may relate only to such calculations, and shall
         not relate to the accuracy or actuarial certainty of Reserves.

8.5      Availability of Information. The Reinsurer and the Company shall on
         request promptly make available to the Independent Accountant, at the
         Company's offices, such assistance, documents and information as such
         Independent Accountant may require for the purpose of resolving the
         dispute and shall use their reasonable efforts to obtain a prompt
         resolution of the dispute.

8.6      Binding Determination; Expenses. In each case under this Agreement, the
         Independent Accountant shall be deemed to act as an expert and not as
         an arbitrator, and its determination shall be conclusive and binding
         upon the Reinsurer and the Company. The expenses of any determination
         by the Independent Accountant under this Article VIII shall be borne
         (i) by the Company if the determination of the Independent Accountant
         is that the difference between the disputed calculation as calculated
         by the Company and the corresponding calculation as calculated by the
         Independent Accountant is an amount that is greater (regardless of
         which calculation is higher) than 2% of the disputed Attachment Period
         Portfolio Gain Amount or Attachment Period Portfolio Loss Amount in
         effect in connection with such calculation, and (ii) by the Reinsurer
         if the determination of the Independent Accountant is that such
         difference is less than or equal to 2% of the disputed Attachment
         Period Portfolio Gain Amount or Attachment Period Portfolio Loss Amount
         in effect in connection with such calculation.

                                       24
<PAGE>
8.7      Settlement. If as a result of the determination of the Independent
         Accountant it is established that an overpayment or an underpayment to
         the Reinsurer by the Company or by the Reinsurer to the Company has
         occurred, the party which received the overpayment (or made the
         underpayment) shall pay the amount of the overpayment or underpayment
         as follows:

         (a)      In the case of an overpayment by the Reinsurer or an
                  underpayment by the Company, the Company shall pay the amount
                  of the overpayment or underpayment to the Reinsurer within 5
                  Business Days of the Independent Accountant's determination,
                  with interest thereon (from the date of such overpayment or
                  underpayment) at the LIBOR Rate, and

         (b)      In the case of an overpayment by the Company or an
                  underpayment by the Reinsurer, the Reinsurer shall pay the
                  amount of the overpayment or underpayment to the Company on
                  the Settlement Date next following the Independent
                  Accountant's determination (or, if there is no such Settlement
                  Date, within 5 Business Days of the Independent Accountant's
                  determination), with interest thereon (from the date of such
                  overpayment or underpayment) at the LIBOR Rate.

8.8      Content of Notices. All notices to be provided by the Company, setting
         forth any payment amounts, shall include the calculations that were
         made by the Company hereunder in order to determine such payment
         amounts.

                                   ARTICLE IX

                                   COLLATERAL

9.1      Security. The Reinsurer shall enter into the Account Control Agreement
         and the Regulatory Trust Agreement and, in connection therewith,
         establish a securities account and a collateral trust account,
         respectively, for the benefit of the Company, with respect to the
         reinsurance provided pursuant to this Agreement. The Reinsurer hereby
         grants to the Company, as security for the payment and performance in
         full of all Reinsurer Obligations, (i) a security interest in, and
         pledges and assigns to the Company, all of the Collateral, and (ii) the
         sole beneficial interest in the Regulatory Trust.

9.2      Collateral Release. The Company shall order the release from the
         Securities Account of Collateral on the dates and the amounts set forth
         in the Commutation and Collateral Release Schedule and as otherwise
         expressly provided herein.

9.3      Final Collateral Release. The Company shall order the release of all
         assets in the Securities Account and the Regulatory Trust at such time
         when all Reinsurer Obligations have been paid in full.

9.4      Unauthorized Reinsurance. The Reinsurer's obligations to PRC shall be
         secured by the Regulatory Trust, as more fully described below. The
         parties hereto intend that the Regulatory Trust be structured to allow
         PRC to reflect on its statutory financial statements a reduction in
         liability for the reinsurance ceded by PRC to the Reinsurer pursuant to
         this Agreement. At such time when PRC shall first establish on its
         books Reserves with respect to the Reinsurance Contracts within the
         scope of this Agreement, PRC shall provide to the Reinsurer a report
         (the "PRC Report") setting forth the portion of such Reserves which PRC
         reasonably believes is for the account of the Reinsurer (such portion
         being the "Obligations to PRC"). Within 10 days following the date of
         such PRC Report, the Reinsurer shall deposit assets into the Regulatory
         Trust in an amount equal to the amount of the Obligations to PRC set
         forth in such PRC Report in excess of any funds withheld by PRC
         hereunder. Within 30 days after the end of each calendar quarter to
         which this Agreement applies, PRC shall provide to the Reinsurer an
         updated PRC Report setting forth the updated Obligations to PRC. Within
         5 days following the date of each such updated PRC Report the Reinsurer
         shall instruct Citibank to:

                                       25
<PAGE>

                  (i)      move funds from the Securities Account to the
                           Regulatory Trust such that the amount of assets in
                           the Regulatory Trust securing the Obligations to PRC,
                           after such deposit, is equal to the amount of the
                           Obligations to PRC; or

                  (ii)     release assets from the Regulatory Trust back to the
                           Securities Account by such amounts as PRC reasonably
                           determines (in its sole discretion) are no longer
                           required to secure the Obligations to PRC; provided,
                           however, that in no event shall the amount of the
                           assets held in the Regulatory Trust be less than the
                           Obligations to PRC in excess of any funds withheld by
                           PRC hereunder.

         At all times during the term of this Agreement, the Reinsurer shall
         have on deposit in the Regulatory Trust assets in an amount equal to
         the Obligations to PRC that are to be secured by the Regulatory Trust.

9.5      Assignments of Assets. The Reinsurer, prior to depositing assets into
         the Securities Account or the Regulatory Trust, shall execute
         assignments, endorsements in blank or transfer legal title to Citibank
         in its capacity of securities intermediary of the Securities Account or
         trustee of the Regulatory Trust, as applicable, of all assets, in order
         that the Company, or Citibank upon the direction of the Company, may
         whenever necessary negotiate any such assets without consent or
         signature from the Reinsurer or any other Person.

9.6      Settlements. All settlements of account between the Company and the
         Reinsurer shall be made in cash or its equivalents.

9.7      Withdrawals from Securities Account and Regulatory Trust. The assets in
         the Securities Account and the Regulatory Trust may be withdrawn by the
         Company at any time, notwithstanding any other provision in this
         Agreement, and shall be utilized and applied by the Company or any
         successor by operation of law of the Company, including, without
         limitation, any liquidator, rehabilitator, receiver or conservator of
         the Company, without diminution because of insolvency on the part of
         the Company or the Reinsurer, only for the following purposes:

         (a)      to reimburse the Company for the Reinsurer's share of premiums
                  returned to counterparties of the Reinsurance Contracts on
                  account of cancellations of such Reinsurance Contracts if not
                  otherwise paid by the Reinsurer;

                                       26
<PAGE>

         (b)      to reimburse the Company for the Reinsurer's share of losses
                  paid by the Company pursuant to the provisions of the
                  Reinsurance Contracts if not otherwise paid by the Reinsurer;

         (c)      where the Company has received notification of termination of
                  the Securities Account or Regulatory Trust, and where any of
                  the Reinsurer's Obligations under this Agreement remain
                  unliquidated and undischarged, 10 days prior to such
                  termination, to deposit funds in a separate account with the
                  Company in an amount (including, but not limited to, amounts
                  for Reserves) at least equal to the deduction, for reinsurance
                  ceded, from the Company's liabilities for Reinsurance
                  Contracts ceded under this Agreement; and

         (d)      to pay other amounts due to the Company under this Agreement.

         The Company shall promptly return to the Reinsurer any amounts
         withdrawn that are in excess of the actual amount required.

9.8      Further Assurances.

         (a)      The Reinsurer shall do, make, execute and deliver all such
                  additional and further acts, things, deeds, assurances and
                  instruments as the Company may reasonably and with specificity
                  require to perfect, or more completely to vest in and assure
                  to the Company, its rights under this Article IX or in any of
                  the Collateral or the assets in the Regulatory Trust,
                  including, without limitation:

                  (i)      obtaining governmental and other third party consents
                           and approvals specifically requested by the Company;
                           and

                  (ii)     taking any actions required by Section 8-106 and/or
                           Section 9-106 of the Uniform Commercial Code, as
                           applicable in each relevant jurisdiction, with
                           respect to the Collateral or giving the Company
                           "control" (as such term is defined in, respectively,
                           such Section 8-106 and Section 9-106) of the
                           Collateral.

         (b)      The Reinsurer irrevocably authorizes the Company at any time
                  and from time to time in the sole discretion of the Company,
                  and appoints the Company as its attorney-in-fact, to act on
                  behalf of the Reinsurer (i) to execute on behalf of the
                  Reinsurer as debtor and to file financing statements necessary
                  or desirable in the Company's sole discretion to perfect and
                  to maintain the perfection and priority of interest of the
                  Company in the Securities Account and property therein and
                  (ii) to file a carbon, photographic or other reproduction of
                  this Agreement or any financing statement with respect to the
                  Securities Account and property therein as a financing
                  statement in such offices as the Company in its sole
                  discretion deems necessary or desirable to perfect and to
                  maintain the perfection and priority of the interests of the
                  Company in the Securities Account and property therein. This
                  appointment is coupled with an interest and is irrevocable.

                                       27
<PAGE>

9.9      Waivers by Reinsurer. The Reinsurer waives demand, notice, protest,
         notice of acceptance of this Agreement, notice of credit extended,
         Collateral or assets received or delivered or other action taken in
         reliance hereon and all other demands and notices of any description.
         With respect to the obligations of the Reinsurer hereunder and the
         Collateral and the Regulatory Trust, the Reinsurer assents to any
         extension or postponement of the time of payment by the Reinsurer or
         any other indulgence, to any substitution, exchange or release of or
         failure to perfect any security interest in any Collateral, to the
         addition or release of any Person primarily or secondarily liable, to
         the acceptance of partial payment thereon and the settlement,
         compromising or adjusting of any thereof, all in such manner and at
         such time or times as the Company may deem advisable.

9.10     No Waiver by Company. All rights and remedies of the Company with
         respect to the obligations of the Reinsurer hereunder, the Collateral
         or the Regulatory Trust shall be cumulative and may be exercised
         singularly, alternatively, successively or concurrently at such time or
         at such times as the Company deems expedient. The Company shall not be
         deemed to have waived any of its rights upon or under the obligations
         of the Reinsurer hereunder, the Collateral or the Regulatory Trust
         unless such waiver shall be in writing and signed by the Company. No
         delay or omission on the part of the Company in exercising any right
         shall operate as a waiver of such right or any other right. A waiver on
         any one occasion shall not be construed as a bar to or waiver of any
         right on any future occasion. The Company shall not be required to
         marshal any present or future collateral security (including but not
         limited to the assets in the Regulatory Trust or the Collateral) for,
         or other assurances of payment of, the obligations of the Reinsurer
         hereunder or any of them or to resort to such collateral security or
         other assurances of payment in any particular order, and all of its
         rights hereunder and in respect of such collateral security and other
         assurances of payment shall be cumulative and in addition to all other
         rights, however existing or arising. To the extent that it lawfully
         may, the Reinsurer hereby agrees that it will not invoke any law
         relating to the marshalling of collateral which might cause delay in or
         impede the enforcement of the Company's rights under this Agreement or
         under any other instrument or agreement evidencing or securing any
         Reinsurer Obligations, and, to the extent that it lawfully may, the
         Reinsurer hereby irrevocably waives the benefits of all such laws (but
         nothing in this sentence is intended to waive any right of the parties
         to engage in any dispute resolution procedure provided for in this
         Agreement). The Company agrees that it will not re-hypothecate any of
         the assets in the Regulatory Trust or the Collateral to secure
         obligations of the Company.

9.11     Expenses. Any and all expenses, including reasonable attorneys' fees
         and disbursements, incurred or paid by the Company in protecting,
         preserving or enforcing the Company's rights with respect to any of the
         Collateral or the Regulatory Trust shall constitute obligations secured
         by the Collateral and the Regulatory Trust. Upon the final payment and
         satisfaction in full in cash of all of the Reinsurer Obligations and
         after making any payments required by Section 9-608(a)(1)(C) and
         Section 9-615(a)(3)(A) of the Uniform Commercial Code, any excess shall
         be returned to the Reinsurer.

                                       28
<PAGE>

                                   ARTICLE X

                                EARLY TERMINATION

10.1     Voluntary Termination. The Reinsurer may terminate the reinsurance
         coverage under this Agreement upon the occurrence of a Change of
         Control or Surplus Event, provided, however, that the Reinsurer
         provides the Company with at least 10 days' prior written notice of its
         intention to terminate. The Company shall provide the Reinsurer with
         written notice of a potential Change of Control or Surplus Event no
         later than 30 days prior to the occurrence of such event.

         "Change of Control" means (i) the acquisition by any "person" (as such
         term is used in Sections 13(d) and 14(d) of the United States
         Securities and Exchange Act of 1934) directly or indirectly, of
         securities of the Company representing 50% or more of the combined
         voting power of PXT then outstanding securities; or (ii) approval by
         the stockholders of PXT of (A) any merger, sale, consolidation,
         amalgamation or similar transaction involving PXT with any other
         corporation, other than a merger, consolidation or amalgamation in
         which the Company is the surviving entity or a merger, consolidation or
         amalgamation which results in the holders of the voting securities of
         PXT outstanding immediately prior thereto holding immediately
         thereafter securities representing more than 55% of the combined voting
         power of the voting securities of PXT or such surviving entity
         outstanding immediately after such merger, consolidation or
         amalgamation, or (B) any sale or other disposition (in one transaction
         or a series of related transactions) of all, or substantially all, of
         the assets of PXT.

         "Surplus Event" means any public or private sale by PXT or its
         affiliates of equity or debt securities that results in an increase of
         at least $150 million in the combined statutory capital and surplus of
         the Company.

10.2     Involuntary Termination. The Company or the Reinsurer may terminate the
         reinsurance coverage under this Agreement by notice to the other party
         at any time upon the happening of circumstances set forth in (a) below,
         and the party with respect to which the circumstances set forth in (b)
         below have not occurred may terminate the reinsurance coverage under
         this Agreement by notice to the other party at any time upon the
         happening of circumstances set forth in (b) below with respect to such
         other party:

         (a)      any Person having lawful authority over either party and whose
                  directives or other regulations are binding upon either party
                  (including, without limitation, an insurance regulator) orders
                  the Company to cease writing or reinsuring the Reinsurance
                  Contracts or orders the Reinsurer to cease reinsuring the
                  Reinsurance Contracts; or

         (b)      a party commencing any case or other proceeding relating to
                  such party under any bankruptcy, reorganization, arrangement,
                  insolvency, conservatorship, receivership, readjustment of
                  debt, dissolution or liquidation or similar law of any
                  jurisdiction, now or hereafter in effect, or if any such case
                  or other proceeding shall be commenced against a party, and
                  such party indicates its approval thereof, consent thereto or
                  acquiescence therein or such case or other proceeding shall
                  not have been dismissed within ninety (90) days following the
                  filing thereof, or a party shall make an assignment for the
                  benefit of creditors or shall petition or apply for the
                  appointment of a trustee or other custodian, liquidator or
                  receiver of such party or of any substantial part of the
                  assets of such party.

                                       29
<PAGE>

10.3     Effectiveness.

         (a)      Any termination of the reinsurance coverage pursuant to
                  Section 10.1:

                  (i)      shall be effective for the Attachment Period in which
                           the closing of the transaction causing a Change of
                           Control or Surplus Event occurs, and every
                           Reinsurance Contract bound by the Company on or after
                           the date of the closing of the transaction causing
                           the Change of Control or Surplus Event, as the case
                           may be, shall be excluded from such Attachment Period
                           Portfolio for all purposes herein (and, if necessary,
                           the Attachment Period Portfolio Loss and Attachment
                           Period Portfolio Gain Amounts shall be retroactively
                           adjusted to reflect such exclusion and appropriate
                           adjusting payments made); and

                  (ii)     shall not affect the obligations of the parties with
                           respect to:

                           (a)      Reinsurance Contracts bound by the Company
                                    prior to the date of the closing of the
                                    transaction causing the Change of Control or
                                    Surplus Event, nor for any Attachment Period
                                    Portfolio prior to the Attachment Period in
                                    which such closing occurs; and

                           (b)      those obligations which are otherwise
                                    expressly payable hereunder notwithstanding
                                    such termination.

         (b)      Unless otherwise required by law, any termination of the
                  reinsurance coverage pursuant to Section 10.2:

                  (i)      shall be effective for the Attachment Period in which
                           the date of receipt of termination notice by the
                           non-terminating party occurs, and every Reinsurance
                           Contract bound by the Company on or after the date of
                           receipt of notice shall be excluded from such
                           Attachment Period Portfolio for all purposes herein
                           (and, if necessary, the Attachment Period Portfolio
                           Loss and Attachment Period Portfolio Gain Amounts
                           shall be retroactively adjusted to reflect such
                           exclusion and appropriate adjusting payments made);
                           and

                  (ii)     shall not affect the obligations of the parties with
                           respect to:

                           (a)      Reinsurance Contracts bound by the Company
                                    prior to the date of receipt of such
                                    termination notice by the non-terminating
                                    party, nor for any Attachment Period
                                    Portfolio prior to the Attachment Period in
                                    which such closing occurs; and

                                       30
<PAGE>

                           (b)      obligations which are otherwise expressly
                                    payable hereunder notwithstanding such
                                    termination.

10.4     Settlement. If the reinsurance coverage is terminated pursuant to this
         Article X, then Settlement shall occur on within 45 days of the
         calendar quarter immediately following the one year anniversary of (i)
         the closing of the transaction causing the Change of Control or Surplus
         Event, in the case of a Voluntary Termination and (ii) receipt of the
         notice of termination by the non-terminating party, in the case of an
         Involuntary Termination, in both cases in accordance with the
         settlement procedures under Article IV, it being understood and agreed
         that between the date of the circumstance (as specified in the
         foregoing clauses (i) and (ii)) giving rise to any termination and the
         date of Settlement as herein provided, all interim Settlements shall be
         made consistent with the provisions governing the same, without
         diminution or alteration except as may be expressly therein provided.
         Notwithstanding the foregoing, in no event shall the provisions of this
         Section 10.4 be construed in a way to effectively delay a Settlement
         Date from a date on which it would otherwise, in accordance with the
         other provisions of this Agreement, have been scheduled to occur. All
         Reserves included in any Settlement hereunder shall be consistent with
         the Reserves reflected in the Company's GAAP financial statements as of
         the end of the immediately preceding calendar quarter. Upon final
         settlement hereunder, the Company shall cause the release to the
         Reinsurer of any Collateral remaining in the Securities Account.

                                   ARTICLE XI

                                     NOTICES

11.1     Notices. Any notice or information to be given, delivered or provided
         pursuant to this Agreement to any of the parties shall be in writing
         and be deemed received, served, delivered or provided if they are (i)
         delivered by hand, when delivered in person against written receipt,
         (ii) by prepaid mail, on the third Business Day after deposit in the
         United States or international mail, (iii) by recognized express
         courier, on the next day after deposit with such courier or (iv) by
         facsimile transmission, on the date of confirmation of receipt, to the
         following address or facsimile number:

         (a)      in the case of the Reinsurer, by copies to:

                  P-1 Re Ltd.
                  Clarendon House
                  2 Church Street
                  Hamilton HM 12
                  Bermuda
                  Attention:  The Secretary

                                       31
<PAGE>

                  and

                  Marsh Management Services (Bermuda) Ltd.
                  P.O. Box HM 1826
                  Hamilton HM HX
                  Bermuda

         (b)      in the case of the Company, by copies to:

                  PXRE Reinsurance Company
                  399 Thornall Street
                  Edison, NJ  08837
                  Attn:  President

                  and
                  PXRE Reinsurance Ltd.
                  Swan Building
                  26 Victoria Street
                  Hamilton HM 12
                  Bermuda
                  Attn:  President

         or to such other address or facsimile number and/or for the attention
         of any other individual and/or copied to any other Person designated
         pursuant to a written notice provided in accordance with this Article
         XI.

                                  ARTICLE XII

                              ERRORS AND OMISSIONS

12.1     Errors and Omissions. Errors or omissions on the part of the Company or
         the Reinsurer shall not invalidate the reinsurance under this
         Agreement. However, the Company or the Reinsurer, as the case may be,
         shall be obligated to correct any such error or omission promptly after
         discovery thereof.

                                  ARTICLE XIII

                                     OFFSET

13.1     Offset. Amounts owing between the Company and the Reinsurer under this
         Agreement may be set off against each other, but neither the Company
         nor the Reinsurer shall have the right to set off against any amount
         owing by that party under this Agreement any amount owed to that party
         under any other agreement.

                                       32
<PAGE>

                                  ARTICLE XIV

                                   ARBITRATION

14.1     Binding Arbitration. As a condition precedent to any right of action
         hereunder (except for the exercise of any rights or remedies available
         to the Company in respect of the Collateral or the Regulatory Trust),
         any dispute arising out of the interpretation, performance or breach of
         this Agreement, including the formation or validity thereof, shall be
         determined by binding arbitration. Each party irrevocably submits to
         binding arbitration in New York, New York, under the commercial
         arbitration rules then in effect of the American Arbitration
         Association. The arbitration panel shall consist of three arbitrators,
         one to be appointed by the Company, one to be appointed by the
         Reinsurer and the third to be appointed by the common agreement of the
         two arbitrators appointed by the Company and the Reinsurer; provided,
         however, that such submission shall not prejudice or delay the Company
         or Citibank in the exercise of any rights or remedies available to
         either of them under or in respect of any of the Collateral or the
         Regulatory Trust. The accuracy and actuarial certainty of Reserves
         shall not be subject to dispute or arbitration hereunder.

14.2     Arbitration Panel. The arbitrators shall hold a hearing in New York,
         New York to resolve the issues at which each party may be represented
         by counsel. In determining the resolution of any issue, the decision of
         a majority of the arbitrators shall control. The disposition by a
         majority of the arbitrators shall be final and binding upon the parties
         to this Agreement. The arbitrators shall have no power to award
         punitive or consequential damages but may award attorneys' fees in
         favor of the prevailing party. The arbitrators shall be required to
         agree that the identities of the parties and the nature and existence
         of the arbitration proceedings shall be kept confidential.

14.3     Expenses. Except as otherwise provided in the arbitrators' award or the
         commercial arbitration rules then in effect of the American Arbitration
         Association, the reasonable fees and expenses of any such arbitration
         shall be borne equally by the parties or as they otherwise may agree.

14.4     Jurisdiction. A judgment on the arbitrators' award may be entered in
         any court having jurisdiction over the parties. The parties hereby
         consent to the non-exclusive jurisdiction of the United States District
         Court located in the Borough of Manhattan, New York, New York, for such
         purposes, provided, however, that, if (but only if) such United States
         District Court does not have jurisdiction, the parties hereby consent
         to the non-exclusive jurisdiction of the courts of the State of New
         York in the Borough of Manhattan for such purposes (such United States
         District Court or, in the absence of jurisdiction, any such court of
         the State of New York, being herein referred to as a "Consented
         Court"). Each party irrevocably waives any objection which it may have
         at any time to the laying of venue of any suit, action or proceeding
         arising out of or relating to the enforcement of any judgment of the
         arbitrators brought in a Consented Court, irrevocably waives any claim
         that any such suit, action or proceeding brought in such Consented
         Court has been brought in an inconvenient forum and further irrevocably
         waives the right to object, with respect to such claim, suit, action or
         proceeding brought in such Consented Court for the enforcement of any
         judgment of the arbitrators, that such Consented Court does not have
         jurisdiction over such party.

                                       33
<PAGE>

14.5     Limitation. The provisions of this Article XIV shall not apply to any
         legal action by the Company against the Reinsurer or an Investor with
         respect to their obligations under the confidentiality provisions of
         any agreement or applicable law, including without limitation the
         provisions of Article XV hereof.

                                   ARTICLE XV

                                 CONFIDENTIALITY

15.1     Confidential Information Provided to Reinsurer. The Reinsurer
         acknowledges that the information provided from time to time by the
         Company to the Reinsurer in connection with this Agreement is
         confidential and proprietary ("Confidential Information Provided to
         Reinsurer") to the Company. Accordingly, the Reinsurer agrees that all
         Confidential Information Provided to Reinsurer shall be kept
         confidential by the Reinsurer and that the Reinsurer shall not disclose
         or cause to be disclosed such information to third parties; provided,
         however, that Confidential Information Provided to Reinsurer may be
         disclosed by the Reinsurer (i) to its advisors who have agreed to be
         bound by the terms of this Article XV, (ii) to examiners, auditors and
         investigators having regulatory authority over the Reinsurer, (iii) to
         each Investor (it being acknowledged that each such Investor will be
         bound by the confidentiality provisions of the Subscription Agreement
         and any other confidentiality agreement to which it is a party with the
         Reinsurer or the Company), (iv) as required by applicable law, and (v)
         in circumstances in which the Reinsurer has obtained the Company's
         written consent prior to such disclosure. It is acknowledged that any
         breach by an Investor of the confidentiality obligations of such
         Investor under any agreement with the Company to which such Investor is
         a party will be a breach by such Investor but will not be a breach by
         the Reinsurer or any other Investor of its obligations under this
         Article XV.

15.2     Confidential Identities. The Company agrees that the identity of the
         Investors (the "Confidential Identities") is confidential. Accordingly,
         the Confidential Identities shall be kept confidential by the Company
         and the Company shall not disclose or cause to be disclosed such
         Confidential Identities to third parties; provided, however, that the
         Confidential Identities may be disclosed by the Company (i) to its
         advisors who have agreed to be bound by the terms of this Article XV,
         (ii) to examiners, auditors and investigators having regulatory
         authority over the Company, (iii) to each Investor and their
         representatives, (iv) as required by applicable law, and (v) in
         circumstances in which the Company has obtained the written consent of
         the applicable Investor prior to such disclosure.

15.3     Exceptions. The term "Confidential Information Provided to Reinsurer,"
         as used in this Article XV, shall not include (i) information that is
         in the public domain at the time the Confidential Information Provided
         to Reinsurer is provided or becomes known hereunder; (ii) information
         that becomes part of the public domain through no act or omission of
         the Reinsurer or any third party to which the Reinsurer is permitted to
         provide Confidential Information Provided to Reinsurer hereunder; or
         (iii) information that is disclosed to the Reinsurer by a third party
         (other than an Investor or representative of an Investor, unless such
         Investor or representative of an Investor has such knowledge
         independently of this Agreement), provided, however, that the Reinsurer
         does not have actual knowledge that such third party is prohibited from
         disclosing such information; (iv) information that the Reinsurer can
         demonstrate, to the satisfaction of the Company, was already in its
         possession at the time the Confidential Information Provided to
         Reinsurer is provided or becomes known hereunder; or (v) information
         which the Reinsurer can demonstrate, to the satisfaction of the
         Company, is independently developed by the Reinsurer without reference
         to, or use of, the Confidential Information Provided to Reinsurer. The
         term "Confidential Identities," as used in this Article XV, shall not
         include the identity of an Investor if it is in the public domain that
         such Person is an Investor at the time the Confidential Identity is
         disclosed or becomes known hereunder or if such identity becomes part
         of the public domain through no act or omission of the Company or any
         third party to which the Company is permitted to disclose the
         Confidential Identities hereunder or if such identity is disclosed to
         the Company by a third party, provided, however, that the Company does
         not have actual knowledge that such third party is prohibited from
         disclosing such identity.

                                       34
<PAGE>

15.4     Compelled Disclosure. In the event that the Reinsurer or the Company
         becomes, on the advice of its own legal counsel, legally compelled
         (whether by any subpoena, interrogatory, deposition, request for
         documents order, writ or other legal process) to disclose any
         Confidential Information Provided to Reinsurer or Confidential
         Identities, respectively (Confidential Information Provided to
         Reinsurer or Confidential Identities also being referred to herein as
         the "Confidential Information"), the Reinsurer or the Company, shall,
         if it may lawfully do so, immediately notify the other party hereto of
         the receipt of such legal process whereupon such other party may seek
         an appropriate protective order or other relief. The Reinsurer or
         Company may disclose any Confidential Information in accordance with
         such legal process in the event that the other party fails to obtain
         any protective order or other relief but shall disclose only that
         portion of the Confidential Information which is necessary to comply
         with such legal process after taking reasonable steps in an effort to
         ensure that the portion of the Confidential Information so disclosed
         will be treated confidentially by the party to which it has been so
         disclosed.

15.5     Injunctions. Given the sensitive nature of the Confidential
         Information, the Reinsurer and Company agree that the other party may
         be irreparably damaged by any unauthorized disclosure thereof. The
         Reinsurer and Company therefore agree that either of them may enforce
         the provisions of this Article XV by legal action against the other,
         including injunctive and other equitable relief.

                                       35
<PAGE>
                                  ARTICLE XVI

                                  MISCELLANEOUS

16.1     No Rescission. The Reinsurer's obligations under this Agreement (i) are
         irrevocable and not subject to rescission, irrespective of the validity
         or enforceability of any of the Reinsurance Contracts or the
         Subscription Agreement or the validity or value of the Common Shares,
         and (ii) shall not be released or discharged other than by payment and
         performance hereunder.

16.2     Amendments. This Agreement may not be amended except by a writing
         executed by the Reinsurer and the Company. The Reinsurer shall not
         make, and the Reinsurer shall use its best efforts to cause others not
         to make, any amendment to its Memorandum of Association, Bye-laws or
         the Subscription Agreement without the prior written consent of the
         Company, such consent to not be unreasonably withheld provided,
         however, the Reinsurer shall be entitled to amend its Memorandum of
         Association, Bye-laws or the Subscription Agreement without the consent
         of the Reinsured to the extent such amendment does not, or will not,
         have a material adverse effect on the ability of the Reinsurer to
         perform its obligations hereunder.

16.3     Governing Law. This Agreement shall be governed by and construed in
         accordance with the laws of the State of New York (without reference to
         its choice of law principles and not including its insurance regulatory
         laws).

16.4     Insolvency Clause. In the event of insolvency of the Company, the
         reinsurance under this Agreement shall be payable by the Reinsurer to
         the Company or to its liquidator, receiver or statutory successor on
         the basis of the liability of the Company under the Reinsurance
         Contracts without diminution because of the insolvency of the Company
         except as provided by law or except where a Reinsurance Contract
         specifically provides another payee of such reinsurance in the event of
         the insolvency of the Company.

16.5     Jurisdiction; Service of Process.

         (a)      In the event PRC alleges that the Reinsurer has failed to
                  perform its obligations under this Agreement, the Reinsurer,
                  at the request of PRC, shall promptly:

                  (i)      submit to the jurisdiction of the arbitration panel
                           described in Article XIV or of any court of competent
                           jurisdiction in any state of the United States;

                  (ii)     comply with all requirements necessary to give such
                           arbitration panel or court jurisdiction; and

                  (iii)    abide by the final decision of such arbitration panel
                           or court, or any appellate court in the event of an
                           appeal.

         (b)      The Reinsurer hereby designates the Insurance Commissioner of
                  the State of Connecticut as its lawful attorney upon whom may
                  be served any lawful process in any action, suit or proceeding
                  instituted by or on behalf of PRC provided, however, that if
                  PRC makes series of process on the Insurance Commissioner of
                  the State of Connecticut, it will provide a copy of such
                  service of process to the Reinsurer in accordance with the
                  notice requirement of Article XI.

                                       36
<PAGE>

         (c)      This Section 16.5 is not intended to conflict with or
                  override, and is expressly subject to, the obligation of the
                  parties to this Agreement to arbitrate certain disputes as
                  provided in this Agreement.

16.6     GAAP. All calculations made pursuant to this Agreement shall be made in
         accordance with GAAP.

16.7     Currency of Calculation. All amounts shall be calculated and payable in
         U.S. dollars. All premiums, losses and other amounts originally
         expressed in a foreign currency shall be converted to U.S. dollars at
         the exchange rate used by the Company in accordance with the books and
         records of the Company.

16.8     Wire Transfers. All payments required under this Agreement shall be
         made in U.S. dollars by wire transfer in immediately available funds in
         accordance with such wire transfer instructions as either party may
         from time to time provide to the other in writing at least 10 Business
         Days before any such payment is due.

16.9     Damage Restriction. In no event shall any party hereto have the right
         to seek or recover punitive or consequential damages hereunder.

16.10    Headings. Headings herein are for convenience of reference and shall
         have no effect on the interpretation of this Agreement.

16.11    Assignment. Neither the Reinsurer nor the Company may assign its rights
         hereunder without the consent of the other. The Reinsurer shall have
         the right to novate and assign its rights and obligations hereunder to
         another reinsurer in whole or in part at any time; provided, however,
         that such novation and assignment shall be subject to the reinsurer
         being acceptable to the Company, in its sole discretion, and such
         novation and assignment shall not result in any adverse accounting
         treatment to the Company. The novation and assignment shall be subject
         to the same terms and provisions as provided in this Agreement.

16.12    Severability. The provisions of this Agreement are severable and if any
         one clause or provision hereof shall be held invalid or unenforceable
         in whole or in part in any jurisdiction, then such invalidity or
         unenforceability shall affect only such clause or provision, or part
         thereof, in such jurisdiction, and shall not in any manner affect such
         clause or provision in any other jurisdiction, or any other clause or
         provision of this Agreement in any jurisdiction, except where the
         severing of any such clause or provision would cause the agreements
         herein to fail of their essential purpose.

16.13    Business Day Convention. If any payment under this Agreement is due and
         payable on a day which is not a Business Day, or if any notice or
         report is required to be given on a day which is not a Business Day,
         such payment shall be due and payable or such notice or report shall be
         given on the next succeeding Business Day.

                                       37
<PAGE>

16.14    Counterparts. This Agreement may be executed in separate counterparts,
         and all such counterparts taken together shall constitute one
         agreement. A facsimile of an executed Agreement shall have the same
         effect as the original Agreement.

16.15    Time of the Essence.  Time is of the essence in this Agreement.

                        [Signatures Follow on Next Page]

                                       38
<PAGE>

         IN WITNESS WHEREOF, the Company and the Reinsurer have executed this
Catastrophe Quota Share Reinsurance Agreement as of the date first above
written.

PXRE REINSURANCE COMPANY

By:
      --------------------------------------
Name:
Title:

By:
      --------------------------------------
Name:
Title:

PXRE REINSURANCE LTD.

By:
      --------------------------------------
Name:
Title:

By:
      --------------------------------------
Name:
Title:

P-1 RE LTD.

By:
      --------------------------------------
Name:
Title:

By:
      --------------------------------------
Name:
Title:

                                       39
<PAGE>

                               Settlement Schedule

The table below sets forth the "Net Settlement Amount" for each Attachment
Period Portfolio for each Settlement Date.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
   Attachment       15-Jan-04    15-August-04    15-Jan-05    15-August-05   31-March-06   15-August-06  31-March-07
Period Portfolio
---------------------------------------------------------------------------------------------------------------------
<S>                <C>           <C>             <C>          <C>            <C>           <C>           <C>
      2003             NAPR           DIP           DIP           DIP            DIP           DIP           DIP
---------------------------------------------------------------------------------------------------------------------
      2004                                          NAPR          DIP            DIP           DIP           DIP
---------------------------------------------------------------------------------------------------------------------
</TABLE>

This table, for the sake of brevity, does not reflect the Settlement Dates after
March 31, 2007(1). A Settlement Date shall occur each August 15 and March 31(1)
thereafter. Each such Settlement Date shall provide for the Net Settlement
Amount being the DIP on such Settlement Date.

-----------------------------------
"Net Attachment Period Result" or "NAPR" means, for each Attachment Period
Portfolio, for each Settlement Date, the Attachment Period Portfolio Gain minus
the Attachment Period Portfolio Loss for such Attachment Period Portfolio as
calculated for such Settlement Date.

"First Attachment Period Result" or "FAPR" means, for each Attachment Period
Portfolio, the Net Attachment Period Result for such Attachment Period Portfolio
as of its first Settlement Date plus the Delta in Profit for such Attachment
Period Portfolio as of its second Settlement Date.

"Delta in Profit" or "DIP" means, for each Attachment Period Portfolio, for each
Settlement Date after the first Settlement Date, (A) the Net Attachment Period
Result for such Settlement Date minus the Net Attachment Period Result for such
Attachment Period Portfolio as of the immediately preceding Settlement Date
multiplied by (B) the On-Going Participation Percentage for such Attachment
Period Portfolio then in effect.

--------
(1)  or, if earlier, the date upon which PXT files its Annual Report on
     Form 10-K with the SEC

                                      A-1

<PAGE>

                   Commutation and Collateral Release Schedule

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                     Commutation Date                                           Commutation Amount
----------------------------------------------------------------------------------------------------------------------
August, 20, 2005                                             An amount set by the Company in its sole discretion
----------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>
five days after the March 31, 2006 Settlement Date (as       The least of:
such date may be adjusted).                                  (a) an amount equal to 20% of the Reserves allocable to
                                                             the P1 Portfolio;

                                                             (b) an amount equal to 10% of 2003 Initial Required
                                                             Capital; or

                                                             (c) an amount determined in the Company's discretion.
----------------------------------------------------------------------------------------------------------------------
August 20, 2006                                              $0
----------------------------------------------------------------------------------------------------------------------
five days after the March 31, 2007 Settlement Date (as       $0
such date may be adjusted) and each Settlement Date
thereafter.
----------------------------------------------------------------------------------------------------------------------
five days after each successive Settlement Date.             $0
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                  Collateral Release Date                                 Amount of Collateral Released
                                                                        An amount (if positive) equal to:
<S>                                                          <C>
----------------------------------------------------------------------------------------------------------------------
February 15, 2003                                            2003 Initial Reinsurance Amount minus 2003 Reinsurance
                                                             Amount plus any investment income earned on the
                                                             Collateral not previously distributed.
----------------------------------------------------------------------------------------------------------------------
August 15, 2003                                              2003 Reinsurance Amount (as of 2/15/03) minus 2003
                                                             Reinsurance Amount (as of 7/31/03) plus any investment
                                                             income earned on the Collateral not previously
                                                             distributed.
----------------------------------------------------------------------------------------------------------------------
August 15, 2004                                              FAPR for the 2003 Attachment Period Portfolio plus any
                                                             investment income earned on the Collateral not
                                                             previously distributed.
----------------------------------------------------------------------------------------------------------------------
August 15, 2004                                              2003 Reinsurance Amount minus ($75 million + the 2004
                                                             Reinsurance Amount) plus any investment income earned
                                                             on the Collateral not previously distributed.
----------------------------------------------------------------------------------------------------------------------
August 15, 2005                                              FAPR for 2004 Attachment Period Portfolio plus any
                                                             investment income earned on the Collateral not
                                                             previously distributed.
----------------------------------------------------------------------------------------------------------------------
August 15, 2005                                              The balance in the Collateral Account in excess of
                                                             $75,000,000 (or such lesser amount as the Company may
                                                             elect in its sole discretion) plus any investment
                                                             income earned on the Collateral not previously
                                                             distributed.
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       A-2
<PAGE>

<TABLE>
<S>                                                          <C>
----------------------------------------------------------------------------------------------------------------------
March 31, 2006 Settlement Date (as such date                 Any investment income earned on the Collateral not
may be adjusted).                                            previously distributed, plus the balance in the
                                                             Collateral Account in excess of (a) $50,000,000 (or such
                                                             lesser amount as the Company may elect in its sole
                                                             discretion) multiplied by (b) the OPP in effect following
                                                             the immediately preceding Commutation Date.
----------------------------------------------------------------------------------------------------------------------
August 15, 2006                                              Any investment income earned on the Collateral not
                                                             previously distributed, plus the balance in the
                                                             Collateral Account in excess of (a) $50,000,000 (or
                                                             such lesser amount as the Company may elect in its sole
                                                             discretion) multiplied by (b) the OPP in effect
                                                             following the immediately preceding Commutation Date.
----------------------------------------------------------------------------------------------------------------------
March 31, 2007 Settlement Date (as such date                 Any investment income earned on the Collateral not
may be adjusted) and each August 15 and                      previously distributed, plus the balance in the
March 31 Settlement Date thereafter.                         Collateral Account in excess of (a) $25,000,000 (or such
                                                             lesser amount as the Company may elect in its sole
                                                             discretion) multiplied by (b) the OPP in effect following
                                                             the immediately preceding Commutation Date.
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       A-3Exhibit 10.77

<PAGE>

                                             as of October 15, 2002

Workflow Management, Inc.
240 Royal Palm Way
Palm Beach, Florida  33480

Attention: Michael L. Schmickle, Chief Financial Officer

     Re:  Limited Waiver and Amendment

Ladies and Gentlemen:

     Reference is hereby made to the Amended and Restated Credit Agreement,
dated as of March 10, 2000 (as heretofore amended and in effect on the date
hereof, the "Credit Agreement"), by and among WORKFLOW MANAGEMENT, INC., a
Delaware corporation, and DATA BUSINESS FORMS LIMITED, a corporation organized
and existing under the laws of Ontario (the "Borrowers"), the lending
institutions from time to time party thereto (the "Lenders"), FLEET NATIONAL
BANK, as administrative agent for itself and the other Lenders (the "Agent"),
BANK ONE, N.A., as syndication agent, and BANK OF AMERICA, COMERICA BANK and
UNION BANK OF CALIFORNIA, N.A., as co-agents for the Lenders. Capitalized terms
used herein without definition shall have the meanings assigned to such terms in
the Credit Agreement.

     Reference is further made to a certain Limited Waiver and Amendment dated
as of July 16, 2002, as amended by a certain Amendment No. 1 to Limited Waiver
and Amendment dated as of August 15, 2002 (collectively, the "July 16 Limited
Waiver"), by and among the Borrowers, the Agent, and the Lenders. The agreement
of the Agent and the Lenders to waive the Specified Defaults (as defined in the
July 16 Limited Waiver) expires on October 15, 2002. The Borrowers have
requested that the Lenders continue to waive each of the Specified Defaults and
also any Events of Defaults under Section 8.09(b) (Senior Leverage Ratio) of the
Credit Agreement through January 15, 2003 (the "Senior Leverage Defaults") and
amend certain provisions of the Credit Agreement, and the Agent and the Lenders
have agreed to do so, but only upon the terms and conditions set forth herein.

     1. Waivers. Subject to the satisfaction of the conditions set forth below,
for the period commencing on October 15, 2002 (the "Closing Date") and ending on
the Waiver Termination Date (as defined below) only (the "Limited Waiver
Period"), the Agent and the Required Lenders hereby agree to waive each of the
Specified Defaults and the Senior Leverage Defaults.

     2. Amendments. Subject to the satisfaction of the conditions set forth
below, from and after the date of this letter agreement, the Credit Agreement is
hereby amended as follows:

          (a) The following paragraphs are inserted into the Credit Agreement as
     Section 3.03(i) and 3.03(j):

               "(i) On the Business Day following the date of receipt by
               Workflow and/or any of its Subsidiaries of any payment of
               principal and/or interest received in respect of the Insider
               Notes, the Dollar Term Loans shall be prepaid on such date by an

<PAGE>

               amount equal to 100% of such payments. Such prepayment shall be
               applied to the scheduled installments of principal due on the
               Dollar Term Loans in the inverse order of maturity.

               (j) On the Business Day following the date of receipt by Workflow
               and/or any of its Subsidiaries of the proceeds of any state or
               federal tax refund or any other extraordinary proceeds outside
               the ordinary course of business, the Dollar Term Loans shall be
               prepaid on such date by an amount equal to 100% of such proceeds.
               Such prepayment shall be applied to the scheduled installments of
               principal due on the Dollar Term Loans in the inverse order of
               maturity.

          (b) The following paragraphs are inserted into the Credit Agreement as
     Section 7.01(j) and (k):

               "(j) No later than Thursday of each calendar week, a rolling
               13-week cash flow forecast with a comparison of actual to
               projected cash flows for the previous week and an explanation of
               any material variances between actual and projected items and
               otherwise in form and substance reasonably satisfactory to the
               Agent and the Lenders.

               (k) As soon as practicable, but not later than November 30, 2002,
               Workflow shall deliver to the Agent and the Lenders its annual
               business plan reflecting the decision of the Board of Directors
               of Workflow after giving due consideration to the results of the
               findings of Borrowers' Advisors (i.e. cost reductions and
               enhanced EBITDA), which shall be comprised of integrated
               financial statements (balance sheet, income statement, statement
               of cash flows), covenant calculations, two year projections and
               an action plan as to treatment of the remaining earn out
               payments, a detailed discussion of the differences between the
               business plan and the findings and recommendations of the
               Borrowers' Advisors and the reasons therefor, and otherwise in
               form and substance reasonably satisfactory to the Agent and the
               Lenders.

          (c) The following sections are hereby inserted into the Credit
     Agreement at the end of Section 7:

               7.20 Special Committee. Through January 15, 2003, Workflow shall
               maintain a Special Committee of its Board of Directors which
               shall supervise the Borrowers' Advisors in developing
               recommendations to Workflow's Board of Directors regarding
               various restructuring and other strategies and financial
               alternatives. Through January 15, 2003, representatives of the
               Special Committee shall update the Agent and the Lenders and/or
               their consultants telephonically on a bi-weekly basis with
               respect to the status of the diligence process being performed by
               the Borrowers' Advisors, the restructuring and other strategies
               and financial alternatives being considered, and such other
               matters as the Agent and the Lenders and/or their consultants may
               reasonably request.

               7.21 Advisors Report. On or before November 15, 2002, the
               Borrowers' Advisors shall have each completed their diligence and
               issued a final recommendation to the Special Committee and the
               Special Committee shall have informed the Agent and the Lenders
               of such recommendation.

<PAGE>

          (d) The table set forth in Section 8.09(a) of the Credit Agreement is
     hereby amended by deleting the last row of the table containing the Period
     "October 31, 2002 and thereafter" and the Leverage Ratio "3.75 : 1.00" and
     substituting the following in its place:

               -----------------------------------------------------------------
               October 31, 2002 through                         4.60:1.00
               January 30, 2003
               -----------------------------------------------------------------
               January 31, 2003 and thereafter                  3.75:1.00
               -----------------------------------------------------------------

          (e) The table set forth in Section 8.14 is hereby deleted, and the
     following table inserted in its place:

               -----------------------------------------------------------------
                     Month                           Minimum Consolidated EBITDA
               -----------------------------------------------------------------
               May, 2002                                       $2,507,000
               -----------------------------------------------------------------
               June, 2002                                      $4,745,000
               -----------------------------------------------------------------
               July, 2002                                      $8,953,000
               -----------------------------------------------------------------
               August, 2002                                    $12,076,000
               -----------------------------------------------------------------
               September, 2002                                 $14,796,000
               -----------------------------------------------------------------
               October, 2002                                   $19,027,000
               -----------------------------------------------------------------
               November, 2002                                  $22,079,000
               -----------------------------------------------------------------
               December, 2002                                  $24,836,000
               -----------------------------------------------------------------

         For purposes of this Section 8.14, Consolidated EBITDA shall be
         calculated without giving effect to professional fees (including,
         without limitation, those of the Borrowers' Advisors) incurred in
         connection with the restructuring of the Obligations.

               (f) The following section is hereby inserted into the Credit
          Agreement at the end of Section 8:

                    8.15 Insider Notes. Workflow and its Subsidiaries shall not
                    waive, amend, extend, renew, or otherwise modify the terms
                    and conditions of the Insider Notes without the written
                    consent of the Agent.

               (g) The provisions of Section 9.03(a) are hereby deleted in their
          entirety and the following substituted in their stead:

                                      -4-
<PAGE>

                    (a) default in the due performance or observance by it of
                    any term, covenant or agreement contained in Section
                    7.01(f)(x), 7.01(j), 7.01(k), 7.11, 7.18, 7.19, 7.20, 7.21
                    or 8,

               (h) The following new section is hereby added after Section 9.11:

                    9.12 Business Consultants. The termination of engagement of
                    the Borrowers' Advisors or the modification of the scope of
                    their duties, in each case on or before January 15, 2003,
                    without the prior written consent of the Required Lenders.

               (i) The following definition is inserted into Section 10 of the
          Credit Agreement after the definition of "Borrower" and before the
          definition of "Borrowing":

                    "Borrowers' Advisors" shall have the meaning set forth in
                    Section 7.19 hereof.

               (j) The following definition is inserted into Section 10 of the
          Credit Agreement after the definition of "Interest Rate Protection
          Agreement" and before the definition of "Investment":

                    "Insider Notes" means those certain promissory notes payable
                    to Workflow or its Subsidiaries listed on Schedule 3.03(i)
                    hereto.

               (k) Exhibit "A" attached to this letter agreement shall be
          inserted into the Credit Agreement as Schedule 3.03(i).

     3. Waiver Termination Date, etc. The foregoing waivers and amendments shall
not apply to any other provision of the Credit Agreement, shall be limited
precisely as written and shall terminate on the earlier to occur of the
following (the "Waiver Termination Date"): (a) January 15, 2003, (b) the failure
of the Borrowers to comply with the terms of this letter agreement, and (c) the
occurrence of a Default or an Event of Default (other than the Specified
Defaults or the Senior Leverage Defaults) under the Credit Agreement. From and
after the Waiver Termination Date, the Specified Defaults and Senior Leverage
Defaults shall be Events of Default for all purposes of the Credit Agreement and
the other Credit Documents unless such Events of Default are waived in writing
by the Required Lenders, or the Credit Agreement is amended to provide
otherwise, in each case, effective on or prior to the Waiver Termination Date.
The Agent and the Lenders expressly reserve all rights and remedies available to
them from and after the Waiver Termination Date as a result of the Specified
Defaults, the Senior Leverage Defaults, and as a result of any Defaults or
Events of Default other than the Specified Defaults and the Senior Leverage
Defaults.

     4. Condition to Effectiveness. The limited waivers and amendments set forth
in this letter agreement shall become effective upon the satisfaction of the
following conditions:

          (a) The Borrowers and the Guarantors shall have executed and delivered
     to the Agent account control agreements with Bank of America and Fleet
     National Bank in form and substance satisfactory to the Agent, with respect
     to each of the bank accounts maintained by the Borrowers and the
     Guarantors, and such agreements shall be in full force and effect.

                                      -5-
<PAGE>

          (b) The Agent and the Lenders shall have received a 13-week cash flow
     forecast for the Borrowers in form and substance reasonably satisfactory to
     the Agent and the Lenders.

          (c) All promissory notes payable to the Borrowers and their respective
     Subsidiaries, including the several promissory notes evidencing loans made
     to members of management and directors of Workflow and all intercompany
     promissory notes, shall have been delivered to the Agent as collateral
     security for the Obligations pursuant to the terms of the applicable
     Security Documents.

          (d) The Borrowers shall have paid all reasonable expenses of the
     Agent, the Agent's counsel and their respective professional advisors for
     which invoices have been issued as of the Closing Date.

          (e) The Agent shall have received a copy of this letter agreement,
     duly executed by each of the Borrowers, the Agent and the Required Lenders.

          (f) The Agent shall have received evidence of appropriate corporate or
     other entity approvals and other evidence of the enforceability of this
     letter agreement, in each case satisfactory to the Agent in form and
     substance (provided that the Agent shall not require legal opinions in
     connection with the same).

     5. Waiver Fee. The Borrowers shall pay a waiver fee (the "Waiver Fee") to
the Agent for the pro-rata accounts of the Lenders in an amount of 0.15% of the
sum of (i) the Total Revolving Commitment as of the Closing Date, and (ii)
aggregate amount of Dollar Term Loans outstanding as of the Closing Date. The
Waiver Fee shall be fully earned and non-refundable as of the Closing Date, and
shall be paid to the Agent on or before the Waiver Termination Date.

     6. No Present Claims. The Borrowers and the Guarantors acknowledge and
agree that, based upon the facts and circumstances existing as of the date
hereof: (i) the Borrowers and Guarantors have no claim or cause of action
against any of the Lenders or the Agent (or any of their directors, officers,
employees, agents or affiliates); (ii) the Borrowers and the Guarantors have no
offset right, counterclaim or defense of any kind against any of the
Obligations, indebtedness or liabilities to the Lenders and the Agent; and (iii)
each of the Lenders and the Agent has heretofore performed and satisfied in a
timely manner all of its obligations to the Borrowers, and the Guarantors, if
any. The Lenders and the Agent wish (and the Borrowers and Guarantors agree) to
eliminate any possibility that any past conditions, acts, omissions, events,
circumstances or matters would impair or otherwise adversely affect any of their
rights, interests, contracts, collateral security or remedies. Therefore, the
Borrowers and the Guarantors unconditionally release, waive and forever
discharge (a) any and all liabilities, obligations, duties, promises or
indebtedness of any kind of any of the Lenders or the Agent to the Borrowers and
the Guarantors, except the obligations to be performed by the Lenders or the
Agent hereafter as expressly stated in this Agreement and the other Credit
Documents, and (b) all claims, offsets, causes of action, suits or defenses of
any kind whatsoever (if any), whether known or unknown, which the Borrowers
and/or Guarantors might otherwise have against any of the Lenders or the Agent
or any of their directors, officers, employees, agents or affiliates for their
respective

                                      -6-
<PAGE>

actions or omissions occurring prior to the date hereof, in either case (a) or
(b) above, on account of any condition, act, omission, event, contract,
liability, obligation, indebtedness, claim, cause of action, defense,
circumstance or matter of any kind whatsoever which existed, arose or occurred
at any time prior to the date hereof.

     7. Miscellaneous. No waiver herein granted or agreement herein made shall
extend beyond the Limited Waiver Period, nor shall anything contained herein be
deemed to imply any willingness of the Agent or the Lenders to agree to, or
otherwise prejudice any rights of the Agent or the Lenders with respect to, any
similar waivers, amendments or agreements that may be requested for any future
period. This agreement shall constitute a "Credit Document". Except as
specifically waived or amended hereby, each of the terms and conditions of the
Credit Agreement and the other Credit Documents are hereby ratified and
confirmed and shall remain in full force and effect. Nothing contained herein
shall in any way prejudice, impair or effect any rights or remedies of the
Lenders or the Agent under the Credit Agreement and the other Credit Documents.

     This letter agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.

     THIS LETTER AGREEMENT SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICTS OF LAW).

     Please acknowledge your acceptance of the foregoing by executing and
returning this letter agreement to the attention of Brian Valenti, Vice
President, at Fleet National Bank, 100 Federal Street, Boston, Massachusetts
02110.

                                 Very truly yours,

                                 FLEET NATIONAL BANK, as Agent and as a Lender

                              By:         /s/ Fleet National Bank
                                 -----------------------------------------------
                                 Name:
                                 Title:

                                      -7-
<PAGE>

                                 BANK ONE, N.A.

                              By          /s/ Bank One, N.A.
                                 -----------------------------------------------
                                 Name:
                                 Title:

                                      -8-
<PAGE>

                                 COMERICA BANK

                              By          /s/ Comercia Bank
                                 -----------------------------------------------
                                 Name:
                                 Title:

                                      -9-
<PAGE>

                                 BANK OF AMERICA

                              By          /s/ Bank of America
                                 -----------------------------------------------
                                 Name:
                                 Title:

                                      -10-
<PAGE>

                                 UNION BANK OF CALIFORNIA, N.A.

                              By /s/ Union Bank of California, N.A.
                                 -----------------------------------------------
                                 Name:
                                 Title:

                                      -11-
<PAGE>

                                 NATIONAL CITY BANK

                              By   /s/ National City Bank
                                 -----------------------------------------------
                                 Name:
                                 Title:

                                      -12-
<PAGE>

                                 LASALLE BANK NATIONAL ASSOCIATION

                              By:  /s/ LaSalle Bank National Association
                                 -----------------------------------------------
                                 Name:
                                 Title:

                                      -13-
<PAGE>

                                 CHEVY CHASE BANK, F.S.B.

                              By   /s/ Chevy Chase Bank, F.S.B.
                                 -----------------------------------------------
                                 Name:
                                 Title:

                                      -14-
<PAGE>

ACCEPTED, AGREED AND ACKNOWLEDGED:

WORKFLOW MANAGEMENT, INC.

By       /s/ Michael L. Schmickle
   ---------------------------------------------------------
Name:    Michael L. Schmickle
Title:   Executive Vice President & Chief Financial Officer

DATA BUSINESS FORMS LIMITED

By       /s/ D.M. Odell
  ----------------------------------------
Name:    D.M. Odell
Title:   President

By       /s/ Paul O'Shea
  ----------------------------------------
Name:    Paul O'Shea
Title:   Secretary and Treasurer

IGETSMART.COM, INC.

By       /s/ Michael L. Schmickle
  ----------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

PSE DATA PRODUCTS, INC.

By       /s/ Michael L. Schmickle
  ----------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

DOCUMENT OPTIONS COMPANY

By       /s/ Michael L. Schmickle
  ----------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

                                      -15-
<PAGE>

WORKFLOW DIRECT, INC.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

SFI OF DELAWARE, LLC

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

SFI OF ILLINOIS, INC.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

SFI OF PUERTO RICO, INC.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

WORKFLOW MANAGEMENT
ACQUISITION II CORP.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   President

OEI PROPERTIES, INC.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

                                      -16-
<PAGE>

WFMI, INC.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   President

WORKFLOW OF FLORIDA, INC.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   President

DIRECTPRO LLC

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

DIRECTPRO WEST, LLC

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

UNITED ENVELOPE, LLC

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

POCONO ENVELOPE CORP.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

                                      -17-
<PAGE>

WORKFLOW MANAGEMENT ACQUISITION
CORPORATION

By       /s/ James E. Hurley
   -----------------------------------------
Name:    James E. Hurley
Title:   Vice President

UNIVERSAL FOLDING BOX CO., INC.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

PREMIER GRAPHICS, INC.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

FREEDOM GRAPHIC SERVICES, INC.

By       /s/ Michael L. Schmickle
  ------------------------------------------
Name:    Michael L. Schmickle
Title:   Vice President

#809938

                                      -18-
<PAGE>

                                Schedule 3.03(i)

                            Schedule of Insider Notes
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
        Name of                Date of            Face Amount of           Outstanding              Due Date
   Officer/Director        Promissory Note            Note              Principal Balance
                                                                           (Excluding
                                                                        Accrued Interest,
                                                                             If Any)
-----------------------  ----------------------------------------------------------------------------------------
<S>                        <C>                    <C>                    <C>                    <C>
Gus J. James, II           May 25, 2001           $200,000.00            $199,992.17            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
F. Craig Wilson*           May 25, 2001           $200,000.00            $199,992.17            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Thomas A. Brown, Sr.*      May 25, 2001           $200,000.00            $199,992.17            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Peter J. Pakuris**         May 25, 2001           $200,000.00            $186,059.66            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Claudia S. Amlie**         May 25, 2001           $165,716.53            $165,716.53            February 1, 2003
-----------------------------------------------------------------------------------------------------------------
Claudia S. Amlie**         May 25, 2002           $299,951.37            $299,951.37            February 1, 2003
-----------------------------------------------------------------------------------------------------------------
Steve R. Gibson            May 25, 2001           $500,000.00            $414,322.10            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Steve R. Gibson            September 2, 2000      $400,000.00            $399,934.69            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Thomas B. D'Agostino, Jr.  May 25, 2001           $500,000.00            $414,322.10            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Thomas B. D'Agostino, Jr.  September 1, 2000      $50,000.00             $49,995.00             January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Michael L. Schmickle       May 25, 2001           $200,000.00            $165,716.53            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Michael L. Schmickle       September 1, 2000      $20,000.00             $19,998.00             January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Thomas B. D'Agostino, Sr.  May 25, 2001           $1,000,000.00          $828,662.79            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
Thomas B. D'Agostino, Sr.  September 1, 2000      $1,000,000.00          $999,814.32            January 2, 2003
-----------------------------------------------------------------------------------------------------------------
John Conway**              September 1, 1999      $50,000.00             $49,995.00             August 31, 2000
-----------------------------------------------------------------------------------------------------------------
Richard M. Schlanger**     January 16, 2001       $53,359.90             $53,359.90             January 16, 2003
-----------------------------------------------------------------------------------------------------------------
Michael Mento              September 1, 2000      $20,000.00             $11,998.57             January 2, 2003
-----------------------------------------------------------------------------------------------------------------
</TABLE>

*Member of the Special Committee
** Former Officer, Director or Employee

                                      -19-

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