Document:

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                                                                   EXHIBIT 10.35

                            STOCK PURCHASE AGREEMENT

                                     BETWEEN

                            PXRE REINSURANCE COMPANY

                                       AND

                      UNITED STATES FIRE INSURANCE COMPANY

                           DATED AS OF OCTOBER 5, 2000

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                                TABLE OF CONTENTS
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                                                                                               PAGE
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                                    ARTICLE 1

                                   DEFINITIONS

SECTION 1.01.         Certain Defined Terms .....................................................1

                                    ARTICLE 2

                                PURCHASE AND SALE

SECTION 2.01.         Purchase and Sale of the Shares............................................6
SECTION 2.02.         Purchase Price ............................................................6
SECTION 2.03.         Payment of Purchase Price .................................................7
SECTION 2.04.         Closing ...................................................................7
SECTION 2.05.         Closing Deliveries by the Seller ..........................................7
SECTION 2.06.         Closing Deliveries by the Purchaser .......................................8
SECTION 2.07.         Closing Date Statement of Assets and Closing Date Balance Sheet............8

                                    ARTICLE 3

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

SECTION 3.01.         Organization, Authority and Qualification of the Seller ...................8
SECTION 3.02.         Organization, Authority and Qualification of the Company ..................9
SECTION 3.03.         Capital Stock of the Company; Ownership of the Shares .....................9
SECTION 3.04.         Licenses ..................................................................9
SECTION 3.05.         Corporate Books and Records ..............................................10
SECTION 3.06.         No Conflict ..............................................................10
SECTION 3.07.         Governmental Consents and Approvals ......................................10
SECTION 3.08.         Statutory Financial Statements ...........................................11
SECTION 3.09.         No Undisclosed Liabilities or Encumbrances ...............................11
SECTION 3.10.         Bank Accounts ............................................................11
SECTION 3.11.         Conduct in the Ordinary Course ...........................................12
SECTION 3.12.         Litigation ...............................................................12
SECTION 3.13.         Compliance with Laws .....................................................12
SECTION 3.14.         Contracts ................................................................12
SECTION 3.15.         Employees and Agents .....................................................12
SECTION 3.16.         Powers of Attorney .......................................................13
SECTION 3.17.         Taxes ....................................................................13
SECTION 3.18.         Full Disclosure ..........................................................14
SECTION 3.19.         Brokers ..................................................................14
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                                    ARTICLE 4

                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

SECTION 4.01.         Organization and Authority of the Purchaser ..............................14
SECTION 4.02.         No Conflict ..............................................................15
SECTION 4.03.         Governmental Consents and Approvals ......................................15
SECTION 4.04.         Investment Purpose .......................................................15
SECTION 4.05.         Brokers ..................................................................15

                                    ARTICLE 5

                              ADDITIONAL AGREEMENTS

SECTION 5.01.         Conduct of Business Prior to the Closing .................................15
SECTION 5.02.         Access to Information ....................................................17
SECTION 5.03.         Confidentiality ..........................................................17
SECTION 5.04.         Regulatory and Other Authorizations; Notices and Consents ................18
SECTION 5.05.         Notice of Developments ...................................................19
SECTION 5.06.         No Solicitation or Negotiation ...........................................19
SECTION 5.07.         Assets on Closing ........................................................20
SECTION 5.08.         Pre-Closing Agreements ...................................................20
SECTION 5.09.         Release of Indemnity Obligations .........................................20
SECTION 5.10.         Maintenance of Surplus Lines Authorization ...............................20
SECTION 5.11.         Escrow Account ...........................................................20
SECTION 5.12.         Further Action ...........................................................21

                                    ARTICLE 6

                                   TAX MATTERS

SECTION 6.01.         Indemnity ................................................................21
SECTION 6.02.         Returns and Payments .....................................................22
SECTION 6.03.         Refunds ..................................................................22
SECTION 6.04.         Contests .................................................................22
SECTION 6.05.         Time of Payment ..........................................................23
SECTION 6.06.         Cooperation and Exchange of Information ..................................24
SECTION 6.07.         Conveyance Taxes .........................................................24
SECTION 6.08.         Miscellaneous ............................................................24

                                    ARTICLE 7

                              CONDITIONS TO CLOSING

SECTION 7.01.         Conditions to Obligations of the Seller ..................................25
SECTION 7.02.         Conditions to Obligations of the Purchaser ...............................26
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                                    ARTICLE 8

                                 INDEMNIFICATION

SECTION 8.01.         Survival of Representations and Warranties ...............................28
SECTION 8.02.         Indemnification by the Seller ............................................29
SECTION 8.03.         Indemnification Procedures ...............................................29
SECTION 8.04.         Indemnification by the Purchaser .........................................31
SECTION 8.05.         Indemnification Procedures ...............................................31

                                    ARTICLE 9

                             TERMINATION AND WAIVER

SECTION 9.01.         Termination...............................................................33
SECTION 9.02.         Effect of Termination.....................................................34
SECTION 9.03.         Waiver....................................................................34

                                   ARTICLE 10

                               GENERAL PROVISIONS

SECTION 10.01.        Expenses .................................................................34
SECTION 10.02.        Notices ..................................................................34
SECTION 10.03.        Public Announcements .....................................................35
SECTION 10.04.        Headings .................................................................36
SECTION 10.05.        Severability .............................................................36
SECTION 10.06.        Entire Agreement .........................................................36
SECTION 10.07.        Assignment ...............................................................36
SECTION 10.08.        No Third Party Beneficiaries .............................................36
SECTION 10.09.        Amendment ................................................................36
SECTION 10.10.        Governing Law ............................................................36
SECTION 10.11.        Counterparts .............................................................36
SECTION 10.12.        Specific Performance .....................................................37
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EXHIBITS

3.14(a)                    FORM OF ASSUMPTION AGREEMENT

3.14(b)                    FORM OF REINSURANCE AGREEMENT

3.14(c)                    FORM OF GUARANTY

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     STOCK (PURCHASE AGREEMENT, dated as of October 5, 2000, between PXRE
Reinsurance Company, a Connecticut corporation (the "Seller"), and United States
Fire Insurance Company, a New York corporation (the "Purchaser").

                              W I T N E S S E T H :

     WHEREAS the Seller owns all of the issued and outstanding shares (the
"Shares") of common stock, $12.00 par value per share (the "Common Stock"), of
Transnational Insurance Company, a Connecticut corporation (the "Company");

     WHEREAS the Company will be entering into an Assumption Agreement and a
Reinsurance Agreement (each as hereinafter defined) and distributing to the
Seller all of its remaining assets and liabilities, other than the minimum
amount of assets required to maintain its charter, Insurance License and Surplus
Lines Authorizations (each as hereinafter defined), which transactions are part
of a plan of complete liquidation of the Company intended to qualify as a
tax-free liquidation under Section 332 of the Code (as hereinafter defined);

     AND WHEREAS, subsequent to the transactions described in the preceding
paragraph, the Seller wishes to sell to the Purchaser, and the Purchaser wishes
to purchase from the Seller, the Shares, upon the terms and subject to the
conditions set forth herein;

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements and covenants hereinafter set forth, the Purchaser and the Seller
hereby agree as follows:

                                   ARTICLE 1

                                  DEFINITIONS

     SECTION 1.01.  Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:

     "Acquisition Documents" has the meaning given to it in Section 8.01.

     "Action" means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority.

     "Affiliate" or "Affiliated" means, with respect to any specified Person,
any other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified Person.

     "Agreement" or "this Agreement" means this Stock Purchase Agreement, dated
as of October 5, 2000, between the Seller and the Purchaser (including the
Exhibits hereto and the Disclosure Schedule) and all amendments hereto made in
accordance with the provisions of Section 10.09.

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     "Assumption Agreement" means the Assumption Agreement dated as of the
Closing Date between the Company, acting as ceding company, and the Seller,
acting as assuming company, in a form substantially as set forth in Exhibit
3.14(a).

     "Bankruptcy Exception" means, in respect of any agreement, contract or
commitment, any limitation thereon imposed by any bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar law affecting
creditors' rights and remedies generally and, with respect to the enforceability
thereof, by general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).

     "Business" means the business of acting as an excess and surplus line
insurer and all other business that prior to the date hereof has been conducted
by the Company.

     "Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in The City of New
York.

     "Closing" has the meaning given to it in Section 2.04.

     "Closing Date" has the meaning given to it in Section 2.04.

     "Closing Date Balance Sheet" means a balance sheet of the Company as at the
close of the Business Day prior to the Closing Date setting forth all assets of
the Company and setting forth all liabilities of the Company in accordance with
Statutory Accounting Principles.

     "Closing Date Policyholders' Surplus" means the policyholders' surplus of
the Company as set forth on the Closing Date Balance Sheet.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Common Stock" has the meaning given to it in the recitals to this
Agreement.

     "Company" has the meaning given to it in the recitals to this Agreement.

     "Confidential Compilations" means any Documents or compilations prepared by
or for the Purchaser that contain, reflect or are based on the Confidential
Data.

     "Confidential Data" means all non-public Documents and information
concerning the Company or the Business furnished to the Purchaser, or concerning
the Purchaser provided to the Seller, the Company or the Guarantor, in
connection with this Agreement or the transactions contemplated hereby.

     "Control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the

                                       2
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ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.

     "Disclosure Schedule" means the Disclosure Schedule attached hereto, dated
as of the date hereof, and forming a part of this Agreement.

     "Documents" means any books, records, files, papers, tapes, microfilms,
electronic storage media and any other documents.

     "Dollar" or "$" means United States dollars.

     "Employee Benefit Plan" has the meaning given to it by Section 3(3) of
ERISA.

     "Employee Pension Plan" has the meaning given to it by Section 3(2) of
ERISA.

     "Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership, other than
in connection with statutory deposit requirements imposed by any state insurance
regulatory authority.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

     "Escrow Account" has the meaning given to it in Section 2.03(b).

     "Escrow Amount" has the meaning given to it in Section 2.03(b).

     "Guarantor" means PXRE Group Ltd.

     "Guaranty" means the Guaranty dated as of the Closing Date between the
Company and PXRE Group Ltd. (acting as Guarantor), in a form substantially as
set forth in Exhibit 3.14(c).

     "Government Obligations" means securities, other than securities issued by
the U.S. Government National Mortgage Association, which are direct obligations
of the United States the timely payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States, which are not
callable or redeemable at the option of the issuer thereof and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of a holder of a depositary receipt, provided, however, that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the Government Obligation or the specific payment
of interest or principal of the Government Obligation evidenced by such
depository receipt.

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     "Governmental Authority" means any United States Federal, state or local or
any foreign government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, or judicial or arbitral body.

     "Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

     "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.

     "Indemnification Event" means any action, proceeding or claim for which a
Person is entitled to indemnification under Sections 8.02, 8.03, 8.04 and 8.05
of this Agreement.

     "Indemnified Party" means the party entitled to an indemnity under Section
8.02 or 8.04, as applicable, of this Agreement with respect to the occurrence of
an Indemnification Event.

     "Insurance License" means the Company's Certificate of Authority to
transact insurance business in the State of Connecticut.

     "Insurance Policy(ies)" means any agreement or policy of insurance or
indemnity, or any agreement or treaty of reinsurance, including, without
limitation, all binders, certificates, quotes, declarations, surety bonds,
performance bonds, or other bonds.

     "Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order, other requirement or rule of law.

     "Liabilities" means any and all debts, liabilities and service obligations
and related expenses, whether accrued or fixed, absolute or contingent, matured
or unmatured or determined or determinable, including, without limitation, those
arising under any Law (including, without limitation, any environmental law),
Action or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.

     "License" means any Federal, state, local or other governmental license,
consent, permit, grant or authorization that is held by the Company in a
particular jurisdiction immediately prior to the Closing Date excluding the
Insurance License and Surplus Lines Authorization.

     "Liquid Assets" means cash and Government Obligations with a final maturity
at the Closing of 5 years or less.

     "Loss" has the meaning given to it in Section 8.02.

     "Material Adverse Effect" means any circumstance, change in, or effect on
the Company or the Guarantor which, individually or in the aggregate, is, or
reasonably could be expected to be, materially adverse to (i) the Company's
Insurance License, (ii) the Company's Surplus Lines Authorizations, taken as a
whole, provided that, without limiting the foregoing, any change to, or effect
on, more than one Surplus Lines Authorization shall be deemed material,

                                       4
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or (iii) the Seller's ability to consummate the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, the parties
further agree that (a) a downgrade of the Seller's "Financial Performance
Rating" by A.M. Best Company to "B" category or lower shall constitute a
Material Adverse Effect hereunder and (b) a downgrading of PXRE Corporation's
debt securities by any Rating Organization by more than one notch shall
constitute a Material Adverse Effect hereunder.

     "N.A.I.C." means the National Association of Insurance Commissioners.

     "Person" means any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity, as well as any syndicate or
group that would be deemed to be a person under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended.

     "Public Announcement" has the meaning given to it in Section 10.03.

     "Purchase Price" has the meaning given to it in Section 2.02.

     "Purchase Price Bank Account" means a bank account in the United States to
be designated by the Seller in a written notice to the Purchaser at least five
Business Days before the Closing.

     "Purchaser" has the meaning given to it in the recitals to this Agreement.

     "Rating Organization" means any "nationally recognized statistical rating
organization" as that term is defined by the Securities and Exchange Commission
for purposes of Rule 436(g)(2) under the Securities Act of 1933, as amended.

     "Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other Federal tax statutes.

     "Reinsurance Agreement" means the Quota Share Reinsurance Agreement dated
as of the Closing Date between the Company, acting as the ceding company, and
the Seller, acting as assuming Company and reinsurer, in a form substantially as
set forth in Exhibit 3.14(b).

     "Returns" has the meaning given to it in Section 6.02.

     "Seller" has the meaning given to it in the recitals to this Agreement.

     "Seller Indemnified Party" means the party entitled to an indemnity under
Section 8.04 of this Agreement with respect to the occurrence of an
Indemnification Event.

     "Seller's Accountants" means PricewaterhouseCoopers LLP, independent
accountants of the Seller.

     "Statutory Accounting Principles" means recording accounting transactions
and preparing financial statements in accordance with the rules and procedures
prescribed or

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permitted by the state insurance regulatory agency for the state in which the
Company is domiciled.

     "Statutory Deposits" means any and all cash or securities deposits
maintained by the Company as required by a state insurance regulatory authority.

     "Statutory Financial Statement" with respect to any period means the
N.A.I.C. form of Convention Statement of Financial Condition for Fire and
Casualty Insurers prepared and filed by the Company with the Connecticut
Insurance Department as of the final day of the period with respect to which
such Convention Statement of Financial Condition pertains in accordance with the
Statutory Accounting Principles prescribed or permitted by the Connecticut
Commissioner, together with the related notes and schedules thereto.

     "Surplus Lines Authorization" means any approval, authorization or
inclusion on an approved list which permits the Company to underwrite insurance
within a jurisdiction on an excess and surplus lines basis and shall include,
where applicable, the Company's status as an eligible excess and surplus lines
insurer in any jurisdiction where the Company satisfies the applicable criteria
to be an eligible excess and surplus lines insurer in such jurisdiction and no
affirmative approval or authorization is required in such jurisdiction.

     "Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.

     "Third Party Claims" has the meaning given to it in Section 8.03.

                                   ARTICLE 2

                                PURCHASE AND SALE

     SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and subject
to the conditions of this Agreement, at the Closing, the Seller shall sell to
the Purchaser, and the Purchaser shall purchase from the Seller, the Shares.

     SECTION 2.02. Purchase Price. Subject to Section 2.03, the aggregate
purchase price for the Shares shall be an amount equal to the sum of (a) the
Closing Date Policyholders' Surplus, plus (b) $1,600,000 as a premium for the
value of the charter and licenses and the Company's status as an approved or
eligible surplus lines insurer (collectively, the "Purchase Price").

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<PAGE>

     SECTION 2.03. Payment of Purchase Price. The Purchase Price shall be paid
as follows:

     (a) At the Closing, the Purchaser shall pay to the Seller an amount equal
to the Purchase Price by wire transfer in immediately available federal funds to
the Purchase Price Bank Account.

     (b) The Seller shall hold $200,000 of the Purchase Price in escrow (the
"Escrow Amount") in a separate bank account (the "Escrow Account") for a period
of 6 months following the Closing, which amount represents $50,000 per state in
respect of the states of New York, California, Texas and Florida (collectively,
the "Subject States"). If within six months following the Closing, (i) the
applicable insurance regulatory authority or surplus lines association, as the
case may be, have affirmed the Company's Surplus Lines Authorization in a
Subject State, or (ii) no action has been taken by the applicable insurance
regulatory authority or surplus lines association in a Subject State that would
materially impair the Company's Surplus Lines Authorization, or (iii) the
Company's Surplus Lines Authorization has been revoked or suspended on
Non-Arbitrary Grounds and not for any reason relating to or arising out of the
pre-Closing activities of the Company by the applicable insurance regulatory
authority or surplus lines association, then, for each such Subject State,
$50,000 shall be released from escrow to the Seller. At the end of the six month
period following the Closing, the Seller shall pay to the Purchaser such portion
of the Escrow Amount which has not been released from escrow to the Seller in
accordance with the preceding sentence.

     (c) For purposes of this Agreement, "Non-Arbitrary Grounds" means any
grounds relating to (i) any inadequacies with respect to the capital of the
Company or any business plan or plan of operations for the Company submitted by
or on behalf of the Purchaser or (ii) the identity, financial condition or
regulatory history of any of the Purchaser, Fairfax Financial Holdings Limited
and their respective subsidiaries and affiliates.

     SECTION 2.04. Closing. Upon the terms and subject to the conditions of this
Agreement, the sale and purchase of the Shares contemplated by this Agreement
shall take place at a closing (the "Closing") to be held at the offices of Crum
& Forster Holdings, Inc., 305 Madison Avenue, Morristown, New Jersey 07960-1973
at 10:00 A.M. New Jersey time on the fifth Business Day following the later to
occur of (a) expiration or termination of all applicable waiting periods under
the HSR Act and (b) satisfaction or waiver of all other conditions to the
obligations of the parties set forth in Article 7, or at such other place or at
such other time or on such other date as the Seller and the Purchaser may
mutually agree upon in writing (the day on which the Closing takes place being
the "Closing Date").

     SECTION 2.05. Closing Deliveries by the Seller. At the Closing, the Seller
shall deliver or cause to be delivered to the Purchaser:

     (a) stock certificates evidencing the Shares duly endorsed in blank, or
accompanied by stock powers duly executed in blank, in form satisfactory to the
Purchaser and with all required stock transfer tax stamps affixed;

     (b) a receipt for Purchase Price;

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<PAGE>

     (c) the Closing Date Balance Sheet; and

     (d) the certificates and other documents required to be delivered pursuant
to Section 7.02.

     SECTION 2.06. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Seller:

     (a) the Purchase Price by wire transfer in immediately available funds to
the Purchase Price Bank Account; and

     (b) the certificates and other documents required to be delivered pursuant
to Section 7.01.

     SECTION 2.07. Closing Date Statement of Assets and Closing Date Balance
Sheet. The Closing Date Balance Sheet shall be prepared by the Seller in
accordance with Statutory Accounting Principles as of the close of business on
the Business Day prior to the Closing Date. The Closing Date Balance Sheet shall
reflect a Closing Date Policyholders' Surplus, determined in accordance with
Statutory Accounting Principles, which Closing Date Policyholders' Surplus shall
consist solely of (a) Liquid Assets and Statutory Deposits free and clear of all
Encumbrances, less (b) any Taxes which are set forth on the Closing Date Balance
Sheet, and shall be the minimum amount required to maintain the Company's
charter, Insurance License and Surplus Lines Authorizations, which the parties
agree is not less than $15,000,000.

                                   ARTICLE 3

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

                  As an inducement to the Purchaser to enter into this
Agreement, the Seller hereby represents and warrants to the Purchaser as
follows:

     SECTION 3.01. Organization, Authority and Qualification of the Seller. The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of Connecticut and has all necessary power and authority to enter
into this Agreement, to carry out its obligations hereunder and to consummate
the transactions contemplated hereby. The Seller is duly licensed or qualified
to do business and is in good standing as an insurance corporation in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary. The execution and
delivery of this Agreement by the Seller, the performance by the Seller of its
obligations hereunder and the consummation by the Seller of the transactions
contemplated hereby have been duly authorized by all requisite action on the
part of the Seller. This Agreement has been duly executed and delivered by the
Seller, and (assuming due authorization, execution and delivery by the
Purchaser) this Agreement constitutes a legal, valid and binding obligation of
the Seller enforceable against the Seller in accordance with its terms.

                                       8
<PAGE>

     SECTION 3.02. Organization, Authority and Qualification of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Connecticut and has all necessary power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on the Business as it has been and is currently
conducted. The Company is duly licensed or qualified to do business and is in
good standing as an insurance corporation in the State of Connecticut. All
corporate actions taken by the Company have been duly authorized, and the
Company has not taken any action that conflicts with, constitutes a default
under or results in a violation of any provision of its certificate of
incorporation or by-laws. True and correct copies of the certificate of
incorporation and by-laws of the Company, each as in effect on the date hereof,
have been delivered by the Seller to the Purchaser. The Company does not have
any Subsidiaries.

     SECTION 3.03. Capital Stock of the Company; Ownership of the Shares. (a)
The authorized capital stock of the Company consists of 300,000 shares of Common
Stock. As of the date hereof, 300,000 shares of Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable. None
of the issued and outstanding shares of Common Stock was issued in violation of
any preemptive rights. There are no options, warrants, convertible securities or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of the Company or obligating the Seller or the Company to
issue or sell any shares of capital stock of, or any other interest in, the
Company. There are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any shares of Common Stock or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any other Person. The Shares constitute all the issued and
outstanding capital stock of the Company and are owned of record and
beneficially solely by the Seller free and clear of all Encumbrances. Upon
consummation of the transactions contemplated by this Agreement and registration
of the Shares in the name of the Purchaser in the stock records of the Company,
the Purchaser, assuming it shall have purchased the Shares for value in good
faith and without notice of any adverse claim, will own all the issued and
outstanding capital stock of the Company free and clear of all Encumbrances
(except as may result from any fact or circumstances relating solely to the
Purchaser). Upon consummation of the transactions contemplated by this
Agreement, the Shares will be fully paid and nonassessable. There are no voting
trusts, stockholder agreements, proxies or other agreements or understandings in
effect with respect to the voting or transfer of any of the Shares.

     (b) The stock register of the Company accurately records: (i) the name and
address of each Person owning shares of capital stock of the Company and (ii)
the certificate number of each certificate evidencing shares of capital stock
issued by the Company, the number of shares evidenced by each such certificate,
the date of issuance thereof and, in the case of cancellation, the date of
cancellation.

     SECTION 3.04. Licenses. (a) The Company is duly licensed to conduct
insurance business in the State of Connecticut. A true and correct copy of the
Company's Insurance License to transact insurance business in the State of
Connecticut is attached to Section 3.04(a) of the Disclosure Schedule and such
Insurance License is in good standing.

     (b) The Company has a valid Surplus Lines Authorization in each of the
states set forth in Section 3.04(b) of the Disclosure Schedule.

                                       9
<PAGE>

     (c) Except as limited by state statute generally applicable to all
companies of a similar type as the Company, the Company's authority to write the
lines and classes of insurance set forth on the Insurance License attached as
Section 3.04(a) of the Disclosure Schedule is unrestricted and the Company is
not a party to any agreement or arrangement with any regulatory official or
agency limiting or restricting the Company's ability to make full use of its
Insurance License or its Surplus Lines Authorizations. Except as set forth in
Section 3.04(c) of the Disclosure Schedule, no application for an insurance
License filed within the last 12 months and no insurance License has been
withdrawn, modified, restricted or conditioned in any respect by a state
insurance regulatory authority. Except as set forth in Section 3.04(c), no
proceeding is pending or, to the knowledge of the Seller or the Company,
threatened in which any state insurance regulatory authority or any other Person
is seeking to revoke or deny the renewal of the Company's Insurance License or
any of the Surplus Lines Authorizations set forth in Section 3.04(b) of the
Disclosure Schedule.

     SECTION 3.05. Corporate Books and Records. The minute books of the Company
contain accurate records of all meetings and accurately reflect all other
material actions taken by the stockholders, Boards of Directors and all
committees of the Boards of Directors of the Company. Complete and accurate
originals of all such minute books and of the stock register of the Company have
been or will be provided by the Seller to the Purchaser.

     SECTION 3.06. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.07 have been obtained
and all filings and notifications listed in Section 3.07 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement by the Seller do not and will not (a) violate, conflict with or result
in the breach of any provision of the certificate of incorporation or by-laws
(or similar organizational documents) of the Seller or the Company, (b) conflict
with or violate (or cause an event which could have a Material Adverse Effect as
a result of) any Law or Governmental Order applicable to the Seller, the
Company, or any of their respective assets, properties or businesses, including,
without limitation, the Business and the validity of any insurance License held
by the Company, or (c) except as set forth in Section 3.06 of the Disclosure
Schedule, conflict with, result in any breach of, constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation of,
or result in the creation of any Encumbrance on any of the Shares or on any of
the assets or properties of the Seller or the Company pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which the Seller or the
Company is a party or by which any of the Shares or any of such assets or
properties is bound or affected, or which would impair the ability of the Seller
or the Company to execute, deliver or perform its obligations under this
Agreement.

     SECTION 3.07. Governmental Consents and Approvals. (a) The execution,
delivery and performance of this Agreement by the Seller do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority, except: (i) the
approvals of the Connecticut Insurance Commissioner with respect to the change
in control of the Company and the various other matters set forth on Section
3.07 of the Disclosure Schedule; (ii) the insurance department of any other
jurisdiction asserting regulatory authority over the transactions contemplated
by this Agreement which are

                                       10
<PAGE>

required by applicable Law to be obtained by the Purchaser; (iii) the
notification requirements of the HSR Act; and (iv) as described in Section 3.07
of the Disclosure Schedule.

     (b) Notices of change in control of the Company may be required by
applicable Law of other jurisdictions in which the Company has a Surplus Lines
Authorization, it being agreed that such notices will be given by Purchaser in
accordance with Section 5.04.

     SECTION 3.08. Statutory Financial Statements. (a) True and complete copies
of (i) the Statutory Financial Statements of the Company for each of the five
fiscal years ended as of December 31, 1995, December 31, 1996, December 31,
1997, December 31, 1998 and December 31, 1999, accompanied by the reports
thereon of the Seller's Accountants, have been delivered by the Seller to the
Purchaser. The Statutory Financial Statements (i) were prepared in accordance
with the books of account and other financial records of the Company, (ii)
present fairly the consolidated financial condition and results of operations of
the Company as of the dates thereof or for the periods covered thereby, (iii)
have been prepared in accordance with Statutory Accounting Principles applied on
a basis consistent with the past practices of the Company except as noted
therein and (iv) include all adjustments (consisting only of normal recurring
accruals) that are necessary for a fair presentation of the financial condition
of the Company and the results of the operations of the Company as of the dates
thereof or for the periods covered thereby.

     (b) The books of account and other financial records of the Company: (i)
reflect all items of income and expense and all assets and Liabilities required
to be reflected therein in accordance with Statutory Accounting Principles
applied on a basis consistent with the past practices of the Company; (ii) are
in all material respects complete and correct, and do not contain or reflect any
material inaccuracies or discrepancies; and (iii) have been maintained in
accordance with good business and accounting practices.

     (c) Except as disclosed in such Statutory Financial Statements, in Section
3.08(c) of the Disclosure Schedule or as otherwise set forth herein, there has
not been any change in the business, financial condition or results of
operations of the Company during the last 12 months that has had, or could
reasonably be expected to have, a Material Adverse Effect.

     SECTION 3.09. No Undisclosed Liabilities or Encumbrances. There are no
Liabilities of the Company other than Liabilities (i) relating to the Insurance
Policies which will be ceded to the Seller under the Reinsurance Agreement, (ii)
disclosed in Section 3.09 of the Disclosure Schedule, (iii) which relate to
Taxes and will be set forth on the Closing Date Balance Sheet, (iv) required by
state statute or applicable regulation regarding minimum capitalization and
deposits, or (v) that at Closing will have been assumed by the Seller. Except as
set forth in Section 3.09 of the Disclosure Schedule, neither the Shares nor any
of the assets on the Closing Date Balance Sheet are subject to any Encumbrance.

     SECTION 3.10. Bank Accounts. Section 3.10 of the Disclosure Schedule sets
forth a list of all bank accounts maintained by the Company, together with the
addresses of the banks at which such accounts are maintained and the respective
contact person for the Company at each such bank.

                                       11
<PAGE>

     SECTION 3.11. Conduct in the Ordinary Course. Since January 1, 2000, other
than as disclosed herein or in Section 3.11 of the Disclosure Schedule, the
business of the Company has been conducted in the ordinary course and consistent
with past practice.

     SECTION 3.12. Litigation. Except for (i) as set forth in Section 3.12 of
the Disclosure Schedule (which, with respect to each Action disclosed therein,
sets forth: the parties, nature of the proceeding, date and method commenced,
amount of damages or other relief sought and, if applicable, paid or granted)
and (ii) Actions relating solely to the Insurance Policies that will be ceded to
the Seller under the Reinsurance Agreement, there are no Actions by or against
the Company (or by or against the Seller or any Affiliate thereof and relating
to the Business or the Company), or affecting any of the Assets, pending before
any Governmental Authority (or, to the best knowledge of the Seller after due
inquiry, threatened to be brought by or before any Governmental Authority). None
of the matters disclosed in Section 3.12 of the Disclosure Schedule has or has
had a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement or the consummation of the transactions
contemplated hereby or thereby. Except as set forth in Section 3.12 of the
Disclosure Schedule, none of the Company, nor any of the Assets nor the Seller
is subject to any Governmental Order (nor, to the best knowledge of the Seller
after due inquiry, are there any such Governmental Orders threatened to be
imposed by any Governmental Authority) which could have or has had a Material
Adverse Effect.

     SECTION 3.13. Compliance with Laws. (a) Except as set forth in Section
3.13(a) of the Disclosure Schedule, the Company has conducted the Business in
material compliance with all Laws and Governmental Orders applicable to the
Company or any of the Assets or the Business, and the Company has not received
any notice of and is not in material violation of any such Laws or Governmental
Orders.

     (b) Section 3.13(b) of the Disclosure Schedule sets forth a brief
description of each Governmental Order applicable to the Company or any of the
Assets or the Business, and no such Governmental Order could have or has had a
Material Adverse Effect.

     SECTION 3.14. Contracts. Except for (i) Insurance Policies that will be
reinsured under the Reinsurance Agreement, (ii) the contracts set forth on
Section 3.14 of the Disclosure Schedule that will be assumed by the Seller under
the Assumption Agreement, (iii) the Statutory Deposits, and (iv) any commitments
which may be imposed by the Connecticut Insurance Commissioner in connection
with tile approval of the transactions contemplated by this Agreement, as of the
Closing Date there will be no contracts or commitments by which the Company will
be bound or to which the Company will be subject. The Assumption Agreement and
the Reinsurance Agreement are each a valid and binding obligation of the Company
and of the Seller, enforceable against each of them in accordance with its
terms, subject to the Bankruptcy Exception.

     SECTION 3.15. Employees and Agents. Except as set forth on Section 3.15 of
the Disclosure Schedule, the Company currently does not have, and will not have
on the Closing Date, any employees or independent insurance agents. The Seller
acknowledges that Purchaser is assuming no liability or responsibility with
respect to benefits payable or any other obligation owed under any Employee
Benefit Plan or Employee Pension Plan, or, other than

                                       12
<PAGE>

obligations to pay commissions to agents with respect to outstanding Insurance
Policies, which Insurance Policies and commissions will be assumed by the Seller
pursuant to the Reinsurance Agreement, for any insurance agent arrangements that
may have existed (including any commissions or fees owed in connection
therewith).

     SECTION 3.16. Powers of Attorney. Section 3.16 of the Disclosure Schedule
sets forth a list of all powers of attorney granted by the Company that have not
expired or been revoked prior to the date hereof.

     SECTION 3.17. Taxes. (a) (i) All returns and reports in respect of Taxes
required to be filed with respect to the Company (including the consolidated
Federal income tax return and any other Tax return that includes the Company on
a consolidated or combined basis) have been timely filed; (ii) all Taxes
required to be shown on such returns and reports or otherwise due have been
timely paid, except for Taxes which are set forth on the Closing Date Balance
Sheet; (iii) all such returns and reports (insofar as they relate to the
activities or income of the Company) are true, correct and complete in all
material respects; (iv) no adjustment relating to such returns has been proposed
formally or informally by any Tax authority (insofar as either relates to the
activities or income of the Company or could result in liability of the Company
on the basis of joint and/or several liability) and, to the best knowledge of
the Seller and the Company (after reasonable investigation), no basis exists for
any such adjustment; (v) there are no pending or, to the best knowledge of the
Seller and the Company (after reasonable investigation), threatened actions or
proceedings for the assessment or collection of Taxes against the Company or
that could result in liability of the Company on the basis of joint and/or
several liability with any corporation that was included in the filing of a
return with the Seller on a consolidated or combined basis; (vi) no consent
under section 341(f) of the Code has been filed with respect to the Company;
(vii) there are no tax liens on any assets of the Company; (viii) the Seller,
the Company or any Affiliate is not a party to any agreement or arrangement that
would result, separately or in the aggregate, in the actual or deemed payment by
the Company of any "excess parachute payments" within the meaning of section
280G of the Code (without regard to section 280G(b)(4) of the Code); (ix) from
and after December 11, 1996, the Company has been and continues to be a member
of the affiliated group (within the meaning of Section 1504(a)(1) of the Code)
for which the Seller files a consolidated return as the common parent, and has
not been includible in any other consolidated return for any taxable period for
which the statute of limitations has not expired; (x) the Company has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code; (xi) to its knowledge the Company is not doing
business in or engaged in a trade or business in any jurisdiction in which it
has not filed all required income or franchise tax returns; and (xii) the
Company is not subject to any accumulated earnings tax penalty or personal
holding company tax.

     (b) Except as disclosed with reasonable specificity in Section 3.17 of the
Disclosure Schedule: (i) there are no outstanding waivers or agreements
extending the statute of limitations for any period with respect to any Tax to
which the Company may be subject; (ii) the Company does not have any (A) income
reportable for a period ending after the Closing Date but attributable to a
transaction (e.g., an installment sale) occurring in or a change in accounting
method made for a period ending on or prior to the Closing Date that resulted in
a deferred

                                       13
<PAGE>

reporting of income from such transaction or from such change in accounting
method (other than a deferred intercompany transaction), or (B) deferred gain or
loss arising out of any deferred intercompany transaction; (iii) there are no
requests for information from a Governmental Authority currently outstanding
that could affect the Taxes of the Company; (iv) there are no proposed
reassessments of any property owned by the Company or other proposals that could
increase the amount of any Tax to which a Company would be subject; (v) the
Company is not obligated under any agreement with respect to industrial
development bonds or other obligations with respect to which the excludability
from gross income of the holder for Federal income tax purposes could be
affected by the transactions contemplated hereunder; (vi) no power of attorney
that is currently in force has been granted with respect to any matter relating
to Taxes that could affect the Company; and (vii) the Company is not a party to
any tax sharing or tax allocation agreement.

     SECTION 3.18. Full Disclosure. (a) The Seller is not aware of any facts
pertaining to the Company which have or which are reasonably likely to have a
Material Adverse Effect and which have not been disclosed in this Agreement, the
Disclosure Schedule or the Statutory Financial Statements or otherwise disclosed
to the Purchaser by the Seller in writing.

     (b) No representation or warranty of the Seller in this Agreement, nor any
statement or certificate furnished or to be furnished to the Purchaser pursuant
to this Agreement, or in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not materially misleading.

     SECTION 3.19. Brokers. Other than Protectogon Incorporated, whose fees are
the responsibility of the Purchaser, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Seller.

                                   ARTICLE 4

                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     As an inducement to the Seller to enter into this Agreement, the Purchaser
hereby represents and warrants to the Seller as follows:

     SECTION 4.01. Organization and Authority of the Purchaser. The Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement by the Purchaser, the
performance by the Purchaser of its obligations hereunder and the consummation
by the Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite action on the part of the Purchaser. This Agreement
has been duly executed and delivered by the Purchaser, and (assuming due
authorization, execution and

                                       14
<PAGE>

delivery by the Seller) this Agreement constitutes a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms.

     SECTION 4.02. No Conflict. The execution, delivery and performance of this
Agreement by the Purchaser do not and will not (a) violate, conflict with or
result in the breach of any provision of the certificate of incorporation or
by-laws (or similar organizational documents) of the Purchaser, (b) conflict
with or violate any Law or Governmental Order applicable to the Purchaser, or
(c) conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the assets or properties of the
Purchaser pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Purchaser is a party or by which any of such assets or
properties are bound or affected which would have a material adverse effect on
the ability of the Purchaser to consummate the transactions contemplated by this
Agreement.

     SECTION 4.03. Governmental Consents and Approvals. (a) The execution,
delivery and performance of this Agreement by the Purchaser do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority, except (i) as set
forth in Section 4.03 of the Disclosure Schedule and (ii) the notification
requirements of the HSR Act.

     (b) Notices of the change in control of the Company may be required by
applicable Law of other jurisdictions in which the Company has an insurance
License, it being agreed that such notices will be given by Purchaser in
accordance with Section 5.04.

     SECTION 4.04. Investment Purpose. The Purchaser is acquiring the Shares
solely for investment purposes and not with a view to the resale, distribution
or other disposition thereof or any part thereof or any interest therein.

     SECTION 4.05. Brokers. Other than Protectogon Incorporated, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser.

                                   ARTICLE 5

                              ADDITIONAL AGREEMENTS

     SECTION 5.01. Conduct of Business Prior to the Closing. (a) The Seller
covenants and agrees that, except as set forth in this Section, between the date
hereof and the time of the Closing, neither the Seller nor the Company shall
take any action which would be inconsistent with delivering to Purchaser a
corporation as otherwise contemplated in this Agreement.

                                       15
<PAGE>

     (b) As amplification and not limitation of the foregoing, except as
otherwise provided for by the terms of this Agreement, the Seller will not
permit the Company, without the prior written consent of the Purchaser, to:

     (i)     issue or sell, or commit to issue or sell, any shares of its
             capital stock;

     (ii)    grant or commit to grant any options, warrants or rights to
             subscribe for, purchase, or otherwise acquire any shares of its
             capital stock;

     (iii)   issue or commit to issue any securities convertible into or
             exchangeable for shares of its capital stock;

     (iv)    except as set forth in Section 5.01(iv) of the Disclosure Schedule,
             either declare, set aside, pay or commit to pay any dividend or
             other distribution with respect to its capital stock or transfer
             any asset for any other purpose;

     (v)     directly or indirectly redeem, purchase or otherwise acquire or
             dispose of, or commit to acquire or dispose of, any shares of its
             capital stock;

     (vi)    effect a split, modification or reclassification of its capital
             stock or a recapitalization of the Company;

     (vii)   change the certificate of incorporation or by-laws of the Company;

     (viii)  make, or agree to make, any borrowings or any guarantee, or agree
             to guarantee, the borrowings of any other Person;

     (ix)    enter into any new Insurance Policies or reinsurance agreements,
             except as may be specifically contemplated in this Agreement;

     (x)     take any action that would have the effect of impairing the
             validity of the Insurance License or Surplus Lines Authorizations,
             other than actions contemplated in this Agreement;

     (xi)    hire any employees;

     (xii)   except as set forth herein, take any action not which would be
             inconsistent with delivering to the Purchaser a corporation as
             otherwise contemplated in this Agreement; or

     (xiii)  make any election with respect to Taxes other than as set forth on
             Section 5.01(xiii) of the Disclosure Schedule.

     Further, after preparation and delivery of the Closing Date Balance Sheet,
the Seller shall not, nor shall the Seller permit the Company to, take any
action which would cause or require any changes to the information set forth in
the Closing Date Balance Sheet without the Purchaser's prior written consent.

                                       16
<PAGE>

     SECTION 5.02. Access to Information. (a) From the date hereof until the
Closing, upon reasonable notice, the Seller shall cause the Company and each of
the Company's officers, directors, employees, agents, representatives,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, accountants, counsel, financing sources and representatives of the
Purchaser reasonable access, during normal business hours, to the offices, other
facilities, books and records of the Company and to those officers, directors,
employees, agents, accountants and counsel of the Company who have any knowledge
relating to the Company or the Business and (ii) furnish to the officers,
employees and authorized agents, accountants, counsel, financing sources and
representatives of the Purchaser such additional financial and operating data
and other information regarding the assets and goodwill of the Company and the
Business (or legible copies thereof at the Purchaser's expense) as the Purchaser
may from time to time reasonably request.

     (b) In order to facilitate the resolution of any claims made against or
incurred by the Seller prior to the Closing or for any other reasonable purpose,
for a period of seven years after the Closing, the Purchaser shall (i) retain
the books and records of the Company relating to periods prior to the Closing in
a manner reasonably consistent with the prior practice of the Company and (ii)
upon reasonable notice, afford the officers, employees and authorized agents and
representatives of the Seller reasonable access (including the right to make
photocopies, at the Seller's expense), during normal business hours, to such
books and records.

     (c) In order to facilitate the resolution of any claims made by or against
or incurred by the Purchaser or the Company after the Closing or for any other
reasonable purpose, for a period of seven years following the Closing, the
Seller shall (i) retain the books and records of the Seller which relate to the
Company and its operations for periods prior to the Closing and which shall not
otherwise have been delivered to the Purchaser or the Company and (ii) upon
reasonable notice, afford the officers, employees and authorized agents and
representatives of the Purchaser or the Company reasonable access (including the
right to make photocopies, at the expense of the Purchaser or the Company),
during normal business hours, to such books and records.

     SECTION 5.03. Confidentiality. Each of the parties agrees to, and shall
cause its respective agents, representatives, Affiliates, employees, officers
and directors to (i) treat and hold as confidential (and not disclose or provide
access to any Person other than such Person's accountants and attorneys) all
Confidential Data and Confidential Compilations, (ii) in the event that such
party or any such agent, representative, Affiliate, employee, officer or
director becomes legally compelled to disclose any such information, provide the
other party with prompt written notice of such requirement so that such party
may seek a protective order or other remedy or waive compliance with this
Section 5.03, (iii) in the event that such protective order or other remedy is
not obtained, or such party waives compliance with this Section 5.03, furnish
only that portion of such confidential information which is legally required to
be provided and exercise its best efforts to obtain assurances that confidential
treatment will be accorded such information, (iv) promptly furnish (prior to,
at, or as soon as practicable following, the Closing) to the other party any and
all copies (in whatever form or medium) of all such Confidential Data and
Confidential Compilations, other than any and all records reasonably necessary
to process claims, then in the possession of such party or any of its agents,
representatives, Affiliates, employees, officers and directors and, except as
otherwise required by

                                       17
<PAGE>

Section 5.02(c), destroy any and all additional copies then in the possession of
such party or any of its agents, representatives, Affiliates, employees,
officers and directors of such information and of any analyses, compilations,
studies or other documents prepared, in whole or in part, on the basis thereof;
provided, however, that this sentence shall not apply to any information that,
at the time of disclosure, is available publicly and was not disclosed in breach
of this Agreement by such party, its agents, representatives, Affiliates,
employees, officers or directors. Each party agrees and acknowledges that
remedies at law for any breach of its obligations under this Section 5.03 are
inadequate and that in addition thereto the other party shall be entitled to
seek equitable relief, including injunction and specific performance, in the
event of any such breach.

     SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.
(a) Each party hereto will use all commercially reasonable efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
that may be or become necessary for its execution and delivery of, and the
performance of its obligations pursuant to, this Agreement, including, without
limitation, any required approvals of the Connecticut Insurance Department, and
will cooperate fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Each party hereto agrees to make
an appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby as soon as reasonably
practicable after the date hereof and to supply promptly any additional
information and documentary material that may be requested pursuant to the HSR
Act. The Purchaser agrees to make its initial filing pursuant to Connecticut
Insurance Code Section 38a-130 (the "Form A Filing") within ten (10) Business
Days of the execution of this Agreement and to respond promptly to any request
by the Connecticut Insurance Department for any additional information and
documentary material in connection therewith. The Purchaser agrees to provide a
draft of the Form A Filing (and each amendment or supplement thereto) to the
Seller for its review and to consult with the Seller relating to any issues
arising as a result of the Seller's review, prior to the submission by the
Purchaser of the Form A Filing to the Connecticut Insurance Department; provided
that such consultation does not delay the timely filing of the Form A Filing or
any amendments or supplements thereto and it being agreed that the final
determination as to the content of such filings or any amendments or supplements
thereto shall remain solely with the Purchaser. The Purchaser agrees to provide
the Seller with copies of the Form A Filing and each amendment or supplement
thereto in final form upon the submission thereof to the Connecticut Insurance
Department. The Seller and the Purchaser each agree to timely make all other
appropriate filings with the Connecticut Insurance Department and such other
filings as may be required under the insurance laws of any other state or
jurisdiction in which the Company does business. Notwithstanding the foregoing,
the Seller and the Purchaser agree that the Purchaser will not provide to the
Seller those portions of the Form A Filing that contain any confidential or
personal information about the Purchaser's or the Company's directors or
officers unless such information is specifically at issue with the Connecticut
Insurance Department and forms a material basis for any final adverse action
taken by the Connecticut Insurance Department in response to the Form A Filing.

     (b) To the extent that any notices of the change in control of the Company
may be required by applicable Law of any jurisdiction in which the Company has a
Surplus Lines Authorization, promptly following the Closing the Purchaser shall
file any such notices that may be required and, upon filing, provide the Seller
with copies of any such filings;

                                       18
<PAGE>

provided, however, that with respect to any notices or filings made in any of
the Subject States, the Purchaser agrees to provide a draft of such notice or
filing (and each amendment or supplement thereto) to the Seller for its review
and to consult with the Seller relating to any issues arising as a result of the
Seller's review, prior to the submission by the Purchaser of such notice or
filing with the insurance regulatory authorities in the Subject State; provided
that such consultation does not delay the timely filing of such notice or filing
or any amendments or supplements thereto and it being agreed that the final
determination as to the content of such filings or any amendments or supplements
thereto shall remain solely with the Purchaser. Notwithstanding the foregoing,
the Seller and the Purchaser agree that the Purchaser will not provide to the
Seller those portions of such filings that contain any confidential or personal
information about the Purchaser's or the Company's directors or officers unless
such information is specifically at issue with the insurance regulatory
authorities in the Subject State and forms a material basis for any final
adverse action taken by such insurance regulatory authorities in response to
such filing.

     (c) The parties hereto will not knowingly take any action that will have
the effect of delaying, impairing or impeding the receipt of any required
authorizations, consents, orders or approvals.

     (d) The Purchaser and the Seller will use all their respective reasonable
efforts to assist one another in obtaining any consents referred to in Sections
7.01(f) and 7.02(f), including, without limitation, providing to such parties
such financial statements and other financial information with respect to the
Purchaser as such parties may reasonably request, if and to the extent such
information may reasonably be required; provided, however, that neither the
Purchaser nor the Seller shall be obligated with respect to such assistance (i)
to expend any funds except the payment of the fees and expenses of any
applicable attorneys, consultants or other advisors retained by it and
applicable filing fees and other costs required by Governmental Authorities, or
(ii) to take any actions with respect to its respective businesses or the
Business of the Company which, in its reasonable judgment, is materially
adverse.

     SECTION 5.05. Notice of Developments. Prior to the Closing, the Seller
shall promptly notify the Purchaser in writing of (i) all events, circumstances,
facts and occurrences arising subsequent to the date of this Agreement which are
reasonably likely to result in any breach of a representation or warranty or
covenant of the Seller in this Agreement or which could have the effect of
making any representation or warranty of the Seller in this Agreement untrue or
incorrect in any respect and (ii) all other material developments affecting the
assets, Liabilities, business, financial condition, operations, or results of
operations of the Company or the Business. Both prior to and during the six
months following the Closing, each of the Seller, on the one hand, and the
Purchaser, on the other hand, shall promptly notify the other of, and provide
copies of, any notice or written communication or any request for additional
information or documentary materials by any Governmental Authority in connection
with the transactions contemplated hereby, and shall promptly provide such other
party with copies of any written communications and materials filed by such
party in response to such Governmental Authority's notice, communication or
request.

     SECTION 5.06. No Solicitation or Negotiation. The Seller agrees that
between the date of this Agreement and the earlier of (i) the Closing and (ii)
the termination of

                                       19
<PAGE>

this Agreement, none of the Seller, the Company, nor any of their respective
Affiliates, officers, directors, representatives or agents will (a) solicit,
initiate, consider, encourage or accept any other proposals or offers from any
Person (i) relating to any acquisition or purchase of all or any portion of the
capital stock of the Company or assets of the Company, (ii) to enter into any
business combination with the Company or (iii) to enter into any other
extraordinary business transaction involving or otherwise relating to the
Company, or (b) participate in any discussions, conversations, negotiations and
other communications regarding, or furnish to any other Person any information
with respect to, or otherwise cooperate in any way, assist or participate in,
facilitate or encourage any effort or attempt by any other Person to seek to do
any of the foregoing. The Seller immediately shall cease and cause to be
terminated all existing discussions, conversations, negotiations and other
communications with any Persons conducted heretofore with respect to any of the
foregoing. The Seller agrees not to, and to cause the Company not to, without
the prior written consent of the Purchaser, release any Person from, or waive
any provision of, any confidentiality or standstill agreement to which the
Seller or the Company is a party.

     SECTION 5.07. Assets on Closing. Immediately prior to the Closing, the
Seller shall cause the Company to have policyholders' surplus, determined in
accordance with Statutory Accounting Principles, equal to the Closing Date
Policyholders' Surplus, which Closing Date Policyholders' Surplus shall consist
solely of (a) Liquid Assets and Statutory Deposits free and clear of all
Encumbrances, less (b) any Taxes which are set forth on the Closing Date Balance
Sheet, and shall be the minimum amount required to maintain the Company's
charter, Insurance License and Surplus Lines Authorizations, which the parties
agree is not less than $15,000,000.

     SECTION 5.08. Pre-Closing Agreements. The Seller covenants that on or prior
to the Closing Date the Seller shall have caused the Assumption Agreement and
the Reinsurance Agreement to be duly executed and delivered. In addition, in
connection therewith, the Seller covenants that PXRE Group Ltd. shall duly
execute and deliver the Guaranty upon the Closing.

     SECTION 5.09. Release of Indemnity Obligations. The Seller covenants and
agrees, on or prior to the Closing, to execute and deliver to the Company, for
the benefit of the Company, a general release and discharge, in form and
substance satisfactory to the Purchaser releasing and discharging the Company
from any and all obligations to indemnify the Seller or otherwise hold it
harmless pursuant to any agreement or other arrangement entered into prior to
the Closing.

     SECTION 5.10. Maintenance of Surplus Lines Authorization. The Seller will
not permit the Company to voluntarily abandon or relinquish any Surplus Lines
Authorization that the Company currently has or may obtain prior to the Closing.

     SECTION 5.11. Escrow Account. The Seller covenants and agrees that the
funds deposited in the Escrow Account will be disbursed only in accordance with
the release provisions set out in Section 2.03(b).

                                       20
<PAGE>

     SECTION 5.12. Further Action. Each of the parties hereto shall use all
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.

                                   ARTICLE 6

                                  TAX MATTERS

     SECTION 6.01. Indemnity. (a) Except as otherwise provided in Section 6.04
or to the extent of any current liability reserve for Taxes on the Closing Date
Balance Sheet, the Seller agrees to indemnify and hold harmless the Purchaser
and the Company against the following Taxes and against any loss, damage,
liability or expense, including reasonable fees for attorneys and other outside
consultants, incurred in contesting or otherwise in connection with any such
Taxes: (i) Taxes imposed on the Company with respect to taxable periods ending
on or before the Closing Date; (ii) with respect to taxable periods beginning
before the Closing Date and ending after the Closing Date, Taxes imposed on the
Company which are allocable, pursuant to Section 6.01(b), to the portion of such
period ending on the Closing Date; (iii) Taxes imposed on any member of any
affiliated group with which the Company files or has filed a Return on a
consolidated or combined basis for a taxable period ending on or before the
Closing Date; and (iv) Taxes imposed on the Purchaser or the Company as a result
of any breach of warranty or misrepresentation under Section 3.17. The Purchaser
shall be responsible for Taxes and associated expenses not allocated to the
Seller pursuant to the first sentence hereof.

     (b) In the case of Taxes that are payable with respect to a taxable period
that begins before the Closing Date and ends after the Closing Date, the portion
of any such Tax that is allocable to the portion of the period ending on the
Closing Date shall be:

     (i)     in the case of Taxes that are either (A) based upon or related to
             income or receipts, or (B) imposed in connection with any sale or
             other transfer or assignment of property (real or personal,
             tangible or intangible) (other than conveyances pursuant to this
             Agreement, as provided under Section 6.07), deemed equal to the
             amount which would be payable if the taxable year ended with the
             Closing Date; and

     (ii)    in the case of Taxes imposed on a periodic basis with respect to
             the assets of the Company, or otherwise measured by the level of
             any item, deemed to be the amount of such Taxes for the entire
             period (or, in the case of such Taxes determined on an arrears
             basis, the amount of such Taxes for the immediately preceding
             period), multiplied by a fraction the numerator of which is the
             number of calendar days in the period ending on the

                                       21
<PAGE>

             Closing Date and the denominator of which is the number of calendar
             days in the entire period.

     SECTION 6.02. Returns and Payments. (a) From the date of this Agreement
through and after the Closing Date, the Seller shall prepare and file or
otherwise furnish in proper form to the appropriate Governmental Authority (or
cause to be prepared and filed or so furnished) in a timely manner all Tax
returns, reports and forms ("Returns") relating to the Company that relate to
any taxable period ending on or before the Closing Date (and the Purchaser shall
do the same with respect to any Return that relates to any taxable period that
ends after the Closing Date). Returns of the Company not yet filed for any
taxable period that begins before the Closing Date shall be prepared in a manner
consistent with past practices employed with respect to the Company (except to
the extent counsel for the Seller renders a legal opinion that there is no
reasonable basis in law therefor or determines that a Return cannot be so
prepared and filed without being subject to penalties). With respect to any
Return required to be filed by the Purchaser or the Seller with respect to the
Company and as to which an amount of Tax is allocable to the other party under
Section 6.01(b), the filing party shall provide the other party and its
authorized representatives with a copy of such completed Return and a statement
certifying the amount of Tax shown on such Return that is allocable to such
other party pursuant to Section 6.01(b), together with appropriate supporting
information and schedules at least 20 Business Days prior to the due date
(including any extension thereof) for the filing of such Return, and such other
party and its authorized representatives shall have the right to review and
comment on such Return and statement prior the filing of such Return.

     (b) The Seller shall pay or cause to be paid when due and payable all Taxes
with respect to the Company for any taxable period ending on or before the
Closing Date to the extent such Taxes exceed the amount, if any, reserved for
such Taxes as current tax payable on the Closing Date Balance Sheet; anti the
Purchaser shall so pay or cause to be paid Taxes for any taxable period after
the Closing Date (subject to its right of indemnification from the Seller by the
date set forth in Section 6.05 for Taxes attributable to the portion of any Tax
period that includes the Closing Date pursuant to Sections 6.01(a)(ii) and
6.01(b)).

     SECTION 6.03. Refunds. Any Tax refund (including any interest with respect
thereto) relating to the Company for any taxable period (or portion thereof)
ending on or before the Closing Date (except for any refund included in the
Closing Date Balance Sheet, which shall be the property of the Purchaser, and if
paid to the Seller, shall be paid over promptly to the Purchaser) shall be the
property of the Seller, and if received by the Purchaser or the Company shall be
paid over promptly to the Seller. Notwithstanding the foregoing sentence, any
Tax refund (or equivalent benefit to the Seller through a reduction in Tax
liability) for a period (or portion thereof) ending on or before the Closing
Date arising out of the carryback of a loss or credit incurred by the Company in
a taxable period (or portion thereof) beginning after the Closing Date shall be
the property of the Purchaser and, if received by the Seller, shall be paid over
promptly to the Purchaser.

     SECTION 6.04. Contests. (a) After the Closing, the Purchaser shall promptly
notify the Seller in writing of any written notice of a proposed assessment or
claim in an audit or administrative or judicial proceeding of the Purchaser or
of any of the Company which, if determined adversely to the taxpayer, would be
grounds for indemnification under this

                                       22
<PAGE>

Article 6; provided, however, that a failure to give such notice will not affect
the Purchaser's right to indemnification under this Article 6 except to the
extent, that the Seller suffers material prejudice by reason of such failure.

     (b) In the case of an audit or administrative or judicial proceeding that
relates to periods ending on or before the Closing Date, provided that the
Seller acknowledges in writing its liability under this Agreement to hold the
Purchaser and the Company harmless against the full amount of any adjustment
which may be made as a result of such audit or proceeding that relates to
periods ending on or before the Closing Date (or, in the case of any taxable
year that includes the Closing Date, against an adjustment allocable under
Section 6.01 (b) to the portion of such year ending on or before the Closing
Date), the Seller shall have the right at its expense to participate in and
control the conduct of such audit or proceeding but only to the extent that such
audit or proceeding relates solely to a potential adjustment for which the
Seller has acknowledged its liability; the Purchaser also may participate in any
such audit or proceeding and, if the Seller does not assume the defense of any
such audit or proceeding, the Purchaser may defend the same in such manner as it
may deem appropriate, including, but not limited to, settling such audit or
proceeding after giving twenty days' prior written notice to the Seller setting
forth the terms and conditions of settlement. In the event that issues relating
to a potential adjustment for which the Seller has acknowledged its liability
are required to be dealt with in the same proceeding as separate issues relating
to a potential adjustment for which the Purchaser would be liable, the Purchaser
shall have the right, at its expense, to control the audit or proceeding with
respect to the latter issues.

     (c) With respect to issues relating to a potential adjustment for which
both the Seller (as evidenced by its acknowledgment under this Section 6.04) and
the Purchaser or the Company could be liable, (i) each party may participate in
the audit or proceeding, and (ii) the audit or proceeding shall be controlled by
that party which would bear the burden of the greater portion of the sum of the
adjustment and any corresponding adjustments that may reasonably be anticipated
for future Tax periods. The principle set forth in the immediately preceding
sentence shall govern also for purposes of deciding any issue that must be
decided jointly (including, without limitation, choice of judicial forum) in
situations in which separate issues are otherwise controlled under this Article
6 by the Purchaser and the Seller.

     (d) Neither the Purchaser nor the Seller shall enter into any compromise or
agree to settle any claim pursuant to any Tax audit or proceeding which would
adversely affect the other party without the written consent of the other party,
which consent may not be unreasonably withheld. The Purchaser and the Seller
agree to cooperate, and the Purchaser agrees to cause the Company to cooperate,
in the defense against or compromise of any claim in any audit or proceeding.

     SECTION 6.05. Time of Payment. Payment by the Seller or the Purchaser of
any amounts due under this Article 6 in respect of Taxes shall be made within
three Business Days following an agreement between the Seller and the Purchaser
that an indemnity amount is payable, an assessment of a Tax by a taxing
authority, or a "determination" as defined in Section 1313(a) of the Code, but
in any event no earlier than five Business Days and no later than three Business
Days before the due date of the payment of such Taxes. If liability under this
Article 6 is in respect of costs or expenses other than Taxes, payment by the
Seller of any

                                       23
<PAGE>

amounts due under this Article 6 shall be made within five Business Days after
the date when the Seller has been notified by the Purchaser that the Seller has
a liability for a determinable amount under this Article 6 and is provided with
calculations or other materials supporting such liability.

     SECTION 6.06. Cooperation and Exchange of Information. Upon the terms set
forth in Section 5.02 of this Agreement, the Seller and the Purchaser will
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Return, amended Return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes, participating in or conducting any audit or other proceeding in respect
of Taxes or making representations to or furnishing information to parties
subsequently desiring to purchase any of the Company or any part of the Business
from the Purchaser. Such cooperation and information shall include providing
copies of relevant Returns or portions thereof, together with accompanying
schedules, related work papers and documents relating to rulings or other
determinations by Tax authorities. The Seller shall make its employees available
on a basis mutually convenient to both parties to provide explanations of any
documents or information provided hereunder. Each of the Seller and the
Purchaser shall retain, and each of the Seller and the Purchaser, for so long as
they own the Shares, shall cause the Company to retain, all Returns, schedules
and work papers, records and other documents relating to Tax matters of the
Company for each taxable period first ending after the Closing Date and for all
prior taxable periods until the later of (i) the expiration of the statute of
limitations of the taxable periods to which such Returns and other documents
relate, without regard to extensions except to the extent notified by the other
party in writing of such extensions for the respective Tax periods, and (ii) six
years following the due date (without extension) for such Returns. Any
information obtained under this Section 6.06 shall be kept confidential in
accordance with Section 5.03 except as may be otherwise necessary in connection
with the filing of Returns or claims for refund or in conducting an audit or
other proceeding.

     SECTION 6.07. Conveyance Taxes. The Seller shall be liable for and shall
hold the Purchaser harmless against any real property transfer or gains, sales,
use, transfer, value added, stock transfer, and stamp taxes, any transfer,
recording, registration, and other fees, and any similar Taxes which become
payable in connection with the transactions contemplated by this Agreement, and
shall file such applications and documents as shall permit any such Tax to be
assessed and paid on or prior to the Closing Date in accordance with any
available pre-sale filing procedure. The Purchaser shall execute and deliver all
instruments and certificates necessary to enable the Seller to comply with the
foregoing.

     SECTION 6.08. Miscellaneous. (a) The Seller and the Purchaser agree to
treat all payments made by either of them to or for the benefit of the other
(including any payments to the Company) under this Article 6, under other
indemnity provisions of this Agreement and for any misrepresentations or
breaches of warranties or covenants as adjustments to the Purchase Price or as
capital contributions for Tax purposes and that such treatment shall govern for
purposes hereof except to the extent that the Laws of a particular jurisdiction
provide otherwise, in which case such payments shall be made in an amount
sufficient to indemnify the relevant party on an after-Tax basis.

     (b) Notwithstanding any provision in this Agreement to the contrary, the
obligations of the Seller to indemnify and hold harmless the Purchaser and the
Company

                                       24
<PAGE>

pursuant to this Article 6, and the representations and warranties contained in
Section 3.17, shall terminate at the close of business on the 60th day following
the expiration of the applicable statute of limitations with respect to the Tax
liabilities in question (giving effect to any waiver, mitigation or extension
thereof).

     (c) From and after the date of this Agreement, the Seller shall not without
the prior written consent of the Purchaser (which consent shall not be
unreasonably withheld) make, or cause or permit to be made, any Tax election or
change in tax accounting method that would affect the Company. From and after
the Closing Date, the Purchaser shall not without the prior written consent of
the Seller (which consent shall not be unreasonably withheld) make, or cause or
permit to be made, any Tax election or change in tax accounting method that
would affect the Seller's tax treatment of this transaction or cause the Seller
to have an obligation under this Article 6 that it would not otherwise have had
but for such election or change.

     (d) For purposes of this Article 6, "the Purchaser" and "the Seller",
respectively, shall include each member of the affiliated group of corporations
of which it is or becomes a member (other than the Company, except to the extent
expressly referenced).

     (e) Each of the Purchaser and the Seller shall be entitled to recover
professional fees and related costs that it may reasonably incur to enforce the
provisions of this Article 6.

                                   ARTICLE 7

                              CONDITIONS TO CLOSING

     SECTION 7.01. Conditions to Obligations of the Seller. The obligations of
the Seller to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:

     (a) Representations, Warranties and Covenants. The representations and
warranties of the Purchaser contained in this Agreement shall have been true and
correct when made and shall be true and correct in all material respects as of
the Closing, with the same force and effect as if made as of the Closing Date,
other than such representations and warranties as are made as of another date,
which shall be true and correct as of such date (provided, however, that if any
portion of any representation or warranty is already qualified by materiality,
for purposes of determining whether this Section 7.01 (a) has been satisfied
with respect to such portion of such representation or warranty, such portion of
such representation or warranty as so qualified must be true and correct in all
respects), and the covenants and agreements contained in this Agreement to be
complied with by the Purchaser on or before the Closing shall have been complied
with in all material respects, and the Seller shall have received a certificate
from the Purchaser to such effect signed by a duly authorized officer thereof;

     (b) No Proceeding or Litigation; Illegality. No Action shall have been
commenced by or before any Governmental Authority against either the Seller or
the Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated by this

                                       25
<PAGE>

Agreement which, in the reasonable, good faith determination of the Seller, is
likely to render it impossible or unlawful to consummate such transactions;
provided, however, that the provisions of this Section 7.01 (b) shall not apply
if the Seller has directly or indirectly solicited or encouraged any such
Action. No statute, rule or regulation shall have been enacted or promulgated by
any Governmental Authority and be in effect, which in each case restrains or
prohibits the consummation of the purchase and sale of the Shares;

     (c) Resolutions of the Purchaser. The Seller shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of the
Purchaser, of the resolutions duly and validly adopted by the Board of Directors
of the Purchaser evidencing its authorization of the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby;

     (d) Incumbency Certificate of the Purchaser. The Seller shall have received
a certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying the names and signatures of the officers of the Purchaser authorized
to sign this Agreement and the other documents to be delivered hereunder; and

     (e) HSR Act. Any waiting period (and any extension thereof) under the HSR
Act applicable to the purchase of the Shares contemplated hereby shall have
expired or shall have been terminated.

     (f) Consents and Approvals. All of the consents, approvals and orders of
Governmental Authorities and the third party consents set forth in Section 3.07
of the Disclosure Schedule shall have been duly obtained, made or given and
shall be in full force and effect, without the imposition upon the Seller of any
material condition, restriction or required undertaking (other than conditions,
restrictions or undertakings customarily required by insurance regulatory
authorities in transactions such as the Purchaser's acquisition of the Shares)
not expressly set forth in applicable statutes and regulations.

     SECTION 7.02. Conditions to Obligations of the Purchaser. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:

     (a) Representations, Warranties and Covenants. (i) The representations and
warranties of the Seller contained in this Agreement shall have been true and
correct when made and shall be true and correct in all material respects as of
the Closing with the same force and effect as if made as of the Closing, other
than such representations and warranties as are made as of another date, which
shall be true and correct as of such date (provided, however, that if any
portion of any representation or warranty is already qualified by materiality,
for purposes of determining whether this Section 7.02(a) has been satisfied with
respect to such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects), except where the failure to be true and correct would not,
individually or in the aggregate, have a Material Adverse Effect, and (ii) the
covenants and agreements contained in this Agreement to be complied with by the
Seller on or before the Closing shall have been complied with in all material
respects, and the Purchaser shall have received a certificate of the Seller to
such effect signed by a duly authorized officer thereof;

                                       26
<PAGE>

     (b) No Proceeding or Litigation; Illegality. No Action shall have been
commenced or threatened by or before any Governmental Authority against either
the Seller or the Purchaser, seeking to restrain or materially and adversely
alter the transactions contemplated hereby which, in the reasonable good faith
determination of the Purchaser, is likely to render it impossible or unlawful to
consummate the transactions contemplated by this Agreement or which could have a
Material Adverse Effect or otherwise render inadvisable, in the reasonable good
faith determination of the Purchaser, the consummation of the transactions
contemplated by this Agreement; provided, however, that the provisions of this
Section 7.02(b) shall not apply if the Purchaser has solicited or encouraged any
such Action. No statute, rule or regulation shall have been enacted or
promulgated by any Governmental Authority and be in effect, which in each case
restrains or prohibits the consummation of the purchase and sale of the Shares;

     (c) Resolutions of the Seller. The Purchaser shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of the
Seller, of the resolutions duly and validly adopted by the Board of Directors of
the Seller evidencing their authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby;

     (d) Incumbency Certificate of the Seller. The Purchaser shall have received
a certificate of the Secretary or an Assistant Secretary of the Seller
certifying the names and signatures of the officers of the Seller authorized to
sign this Agreement and the other documents to be delivered hereunder;

     (e) Consents and Approvals. The Purchaser and the Seller shall have
received, each in form and substance satisfactory to the Purchaser in its
reasonable good faith determination, all authorizations, consents, orders and
approvals of all Governmental Authorities and officials and all third party
consents and estoppel certificates which the Purchaser in its reasonable good
faith determination deems necessary for the consummation of the transactions
contemplated by this Agreement, including, without limitation, all
authorizations, consents and approvals of the Connecticut Insurance Commissioner
required to be obtained in order to permit the consummation by the Seller of the
transactions contemplated by this Agreement, the Reinsurance Agreement, the
Assumption Agreement and the Guaranty shall have been obtained;

     (f) Resignations of the Company's Directors. The Purchaser shall have
received the resignations, effective as of the Closing, of all the directors and
officers of the Company, except for such persons as shall have been designated
in writing prior to the Closing by the Purchaser to the Seller;

     (g) Organizational Documents. The Purchaser shall have received a copy of
(i) the certificate of incorporation, as amended (or similar organizational
documents), of the Company, certified by the secretary of state of Connecticut,
as of a date not earlier than five Business Days prior to the Closing Date and
accompanied by a certificate of the Secretary or Assistant Secretary of the
Company, dated as of the Closing Date, stating that no amendments have been made
to such certificate of incorporation (or similar organizational documents) since
such date, and (ii) the by-laws (or similar organizational documents) of the
Company certified by the Secretary or Assistant Secretary of the Company;

                                       27
<PAGE>

     (h) Minute Books. The Purchaser shall have received a copy of the minute
books and stock register of the Company, certified by their respective
Secretaries or Assistant Secretaries as of the Closing Date;

     (i) Good Standing; Qualification to Do Business. The Purchaser shall have
received good standing certificates for the Company from the Connecticut
Insurance Department dated as of a date not earlier than fifteen Business Days
prior to the Closing Date;

     (j) Release of Indemnity Obligations. The Purchaser shall have received the
general release and discharge from the Seller referred to in Section 5.10 in
form and substance satisfactory to the Purchaser in its reasonable good faith
determination;

     (k) Other Agreements. The Purchaser shall have received fully executed
originals of the Assumption Agreement, the Reinsurance Agreement and the
Guaranty;

     (l) No Liabilities. At the Closing, the Company will have no Liabilities
other than Liabilities (i) relating to the Insurance Policies which have been
ceded to the Seller under the Reinsurance Agreement, (ii) disclosed in Section
3.09 of the Disclosure Schedule, (iii) which relate to Taxes and are set forth
on the Closing Date Balance Sheet, or (iv) required by state statute or
applicable regulation regarding minimum capitalization and deposits.

     (m) No Material Adverse Effect. No event or events shall have occurred, or
be reasonably likely to occur, which, individually or in the aggregate, have, or
could have, a Material Adverse Effect; and

     (n) HSR Act. Any waiting period (and any extension thereof) under the HSR
Act applicable to the purchase of the Shares contemplated hereby shall have
expired or shall have been terminated.

                                   ARTICLE 8

                                INDEMNIFICATION

     SECTION 8.01. Survival of Representations and Warranties. The
representations, warranties, covenants and agreements of the parties hereto
contained in this Agreement, and all statements contained in this Agreement, the
Exhibits to this Agreement, the Disclosure Schedule and any certificate,
Statutory Financial Statement, or report or other documents delivered pursuant
to this Agreement or in connection with the transactions contemplated by this
Agreement (collectively, the "Acquisition Documents"), shall survive the Closing
until the fourth anniversary of the Closing Date; provided, however, that the
representations and warranties dealing with Tax matters shall survive as
provided in Section 6.08(b) applicable to such claims. Neither the period of
survival nor the liability of either party with respect to such party's
representations and warranties shall be reduced by any investigation made at any
time by or on behalf of the other party. If written notice of a claim has been
given prior to the expiration of the applicable representations and warranties
by either party

                                       28
<PAGE>

to the other in accordance with Sections 8.03 and 8.05, then the relevant
representations and warranties shall survive as to such claim, until such claim
has been finally resolved.

     SECTION 8.02. Indemnification by the Seller. (a) The Company, the
Purchaser, its Affiliates and their successors and assigns, and the officers,
directors, employees and agents of the Company, the Purchaser, its Affiliates
and their successors and assigns (each an "Indemnified Party") shall be
indemnified and held harmless by the Seller for any and all Liabilities, losses,
damages, claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, reasonable attorneys' and consultants' fees and
expenses) actually suffered or incurred by them (hereinafter a "Loss"), arising
out of or resulting from: (i) to the extent not covered by the Reinsurance
Agreement, any policyholder contract issued by the Company prior to the Closing
Date; (ii) any claim or cause of action of any third party to the extent arising
out of any action, inaction, event, condition, liability or obligation of the
Seller occurring or existing prior to the Closing; (iii) the breach of, or
failure by, the Seller to perform, any covenant, agreement or undertaking on the
Seller's part contained in the Acquisition Documents; (iv) the breach of any
representation or warranty of the Seller contained in the Acquisition Documents;
(v) the letter of credit issued on the Company's behalf by Merrill Lynch for the
benefit of AXA Reinsurance Company identified as LOC#MLC3116; (vi) the Lease
Agreement for a certain premises located at 9201 Arboretum Parkway, Suite 250,
Richmond, Virginia and the Partial Sub-Lease of 1,393 rentable square feet
thereof to Arrowhead General Insurance Agency; or (vii) any liability of the
Company incurred prior to the Closing (whether known or unknown at the time of
execution of this Agreement) or arising out of any act, omission or event
occurring with respect to the Company prior to the Closing in excess of any
provision therefore in the Closing Date Balance Sheet, including (without
limitation) any guarantee fund assessment or similar obligation levied against
the Company to the extent such assessment is related to the pre-Closing
operations of the Company; provided, however, that any indemnification with
respect to Taxes shall be governed solely as set forth in Article 6.

     (b) To the extent that the Seller's undertakings set forth in this Section
8.02 may be unenforceable, the Seller shall contribute the maximum amount that
it is permitted to contribute under applicable law to the payment and
satisfaction of all Losses incurred by the Purchaser and the Company.

     SECTION 8.03. Indemnification Procedures. (a) An Indemnified Party shall
give the Seller prompt notice of any matter which an Indemnified Party has
determined has given or could give rise to a right of indemnification under this
Agreement stating the amount of the Loss, if known, and method of computation
thereof, and containing a reference to the provisions of this Agreement in
respect of which such right of indemnification is claimed or arises. The
obligations and Liabilities of the Seller under this Article 8 with respect to
Losses arising from any claim, assertion, event or proceeding by or in respect
of a third party of which such Indemnified Party has knowledge concerning any
liability or damage as to which such Indemnified Party may request
indemnification under this Article 8 ("Third Party Claims") shall be governed by
and contingent upon the following additional terms and conditions: if an
Indemnified Party shall receive notice of any Third Party Claim, the Indemnified
Party shall give the Seller prompt notice of such Third Party Claim; provided,
however, that the failure to provide such notice shall not release the Seller
from any of its obligations under this Article 8

                                       29
<PAGE>

except to the extent the Seller is materially prejudiced by such failure and
shall not relieve the Seller from any other obligation or Liability that it may
have to any Indemnified Party otherwise than under this Article 8. If the Seller
acknowledges in writing its obligation to indemnify the Indemnified Party
hereunder against any Losses that may result from such Third Party Claim, then
the Seller shall be entitled to assume and control the defense of such Third
Party Claim at its expense and through counsel of its choice if it gives notice
of its intention to do so to the Indemnified Party within ten Business Days of
the receipt of such notice from the Indemnified Party provided that the Seller
vigorously and diligently pursues such defense in good faith and keeps the
Indemnified Party and its attorneys reasonably informed as to the progress of
the defense and any proposed settlement. If Seller elects to assume the defense
of any such claim or proceeding, the Indemnified Party may participate in such
defense, but in such case the expenses of the Indemnified Party shall be paid by
the Indemnified Party. Notwithstanding the forgoing, if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the reasonable good faith judgment of the Indemnified Party,
for the same counsel to represent both the Indemnified Party and the Seller,
then the Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Seller. In the event the Seller exercises the right to
undertake any such defense against any such Third Party Claim as provided above,
the Indemnified Party shall cooperate with the Seller in such defense and make
available to the Seller, at the Seller's expense, all witnesses, pertinent
records, materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably required
by the Seller. Similarly, in the event the Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Seller shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party, at the Seller's expense, all such witnesses,
records, materials and information in the Seller's possession or under the
Seller's control relating thereto as is reasonably required by the Indemnified
Party.

     (b) If the Seller elects to direct the defense of any such claim or
proceeding, the Indemnified Party shall not pay, or permit to be paid, any part
of any claim or demand arising from such asserted liability (i) unless the
Seller consents in writing to such payment, which consent will not be
unreasonably withheld, but, if such consent is not given in the case of a
settlement proposal, the Seller will post a letter of credit from a bank
reasonably satisfactory to the Purchaser in the amount of such proposed
settlement, or (ii) unless the Seller, subject to the last sentence of this
Section 8.03(c), withdraws from the defense of such asserted liability, or (iii)
unless a final judgment from which no appeal may be taken by or on behalf of the
Seller is entered against the Indemnified Party for such liability or (iv)
unless there is a material risk if such asserted liability is not paid that an
injunction or other equitable relief will be granted which will materially
adversely affect the business of the Purchaser or the Company or there is a
material risk of the seizure of any material asset of the Purchaser or the
Companies or a material risk that a lien or liens will be imposed on any such
material asset. The Seller shall have the right, in its reasonable, good faith
discretion and with the advice of counsel, to settle any such claim without the
prior written consent of the Indemnified Party provided such settlement includes
a general release to all Indemnified Parties and does not impose any injunction
or other equitable relief on any of the Indemnified Parties. If the Seller shall
fail to defend any claim or proceeding that it has a duty to defend hereunder,
or if after commencing or undertaking any such defense, shall fail to diligently
prosecute and defend or withdraws from such defense, or if the Seller cannot
reasonably defend the Indemnified Party due to conflicts of interest or
conflicts

                                       30
<PAGE>

between the defense that it must assert on behalf of the Indemnified Parties and
the defense it must assert to protect its interests in such claim or proceeding,
the Indemnified Party shall have the right to undertake the defense or
settlement thereof, at the Seller's expense. If the Indemnified Party assumes
the defense of any such claim or proceeding pursuant to this Section 8.03(b)
which the Seller had the duty to defend hereunder, and proposes to settle such
claim or proceeding prior to a final judgment thereon or to forego any appeal
with respect thereto, then the Indemnified Party shall give the Seller prompt
written notice thereof and the Seller shall have the right to participate in the
settlement or assume or reassume the defense of such claim or proceeding subject
to the conditions set forth above; provided that if the Seller does not assume
or reassume the defense within ten (10) Business Days or any earlier time that
such offer to settle expires, then the Indemnified Party can settle such claim
in good faith without the consent of the Seller.

     SECTION 8.04. Indemnification by the Purchaser. (a) The Seller, its
Affiliates and their respective successors and assigns, and the officers,
directors, employees and agents of the Seller and its Affiliates (each a "Seller
Indemnified Party") shall be indemnified and held harmless by the Purchaser for
any and all Losses suffered or incurred by such Seller Indemnified Party by
reason of or in connection: (i) any claim or cause of action of any third party
to the extent arising solely out of any action, inaction, event, condition,
liability or obligation of the Purchaser or the Company occurring or existing
following the Closing and not having occurred or having existed prior to the
Closing; (ii) the breach of, or failure by the Purchaser to perform, any
covenant, agreement or undertaking on the Purchaser's part contained in the
Acquisition Documents; or (iii) the breach of any representation or warranty of
the Purchaser contained in the Acquisition Documents; provided, however, that
any indemnification with respect to Taxes shall be governed solely as set forth
in Article 6.

     (b) To the extent that the Purchaser's undertakings set forth in this
Section 8.04 may be unenforceable, the Purchaser shall contribute the maximum
amount that it is permitted to contribute under applicable law to the payment
and satisfaction of all Losses incurred by the Seller, its Affiliates and their
respective successors and assigns, and the officers, directors, employees and
agents of the Seller and its Affiliates.

     SECTION 8.05. Indemnification Procedures. (a) A Seller Indemnified Party
shall give the Purchaser notice of any matter which a Seller Indemnified Party
has determined has given or could give rise to a right of indemnification under
this Agreement stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and Liabilities of the Purchaser under this Article 8
with respect to Losses arising from any claim, assertion, event or proceeding by
or in respect of a third party of which such Seller Indemnified Party has
knowledge concerning any liability or damage as to which such Seller Indemnified
Party may request indemnification under this Article 8 ("Third Party Claims")
shall be governed by and contingent upon the following additional terms and
conditions: if a Seller Indemnified Party shall receive notice of any Third
Party Claim, the Seller Indemnified Party shall give the Purchaser prompt notice
of such Third Party Claim; provided, however, that the failure to provide such
notice shall not release the Purchaser from any of its obligations under this
Article 8 except to the extent the Purchaser is materially prejudiced by such
failure and shall not relieve the Purchaser from any other

                                       31
<PAGE>

obligation or Liability that it may have to any Seller Indemnified Party
otherwise than under this Article 8. If the Purchaser acknowledges in writing
its obligation to indemnify the Seller Indemnified Party hereunder against any
Losses that may result from such Third Party Claim, then the Purchaser shall be
entitled to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice if it gives notice of its intention to
do so to the Seller Indemnified Party within ten Business Days of the receipt of
such notice from the Seller Indemnified Party provided that the Purchaser
vigorously and diligently pursues such defense in good faith and keeps the
Seller Indemnified Party and its attorneys reasonably informed as to the
progress of the defense and any proposed settlement. If the Purchaser elects to
assume the defense of any such claim or proceeding, the Seller Indemnified Party
may participate in such defense, but in such case the expenses of the Seller
Indemnified Party shall be paid by the Seller Indemnified Party. Notwithstanding
the forgoing, if there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the reasonable good faith judgment
of the Seller Indemnified Party, for the same counsel to represent both the
Seller Indemnified Party and the Purchaser, then the Seller Indemnified Party
shall be entitled to retain its own counsel, in each jurisdiction for which the
Seller Indemnified Party determines counsel is required, at the expense of the
Purchaser. In the event the Purchaser exercises the right to undertake any such
defense against any such Third Party Claim as provided above, the Indemnified
Party shall cooperate with the Purchaser in such defense and make available to
the Purchaser, at the Purchaser's expense, all witnesses, pertinent records,
materials and information in the Indemnified Party's possession or under the
Indemnified Party's control relating thereto as is reasonably required by the
Purchaser. Similarly, in the event the Seller Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Purchaser shall cooperate with the Seller Indemnified Party in such defense and
make available to the Seller Indemnified Party, at the Purchaser's expense, all
such witnesses, records, materials and information in the Purchaser's possession
or under the Purchaser's control relating thereto as is reasonably required by
the Seller Indemnified Party.

     (b) If the Purchaser elects to direct the defense of any such claim or
proceeding, the Seller Indemnified Party shall not pay, or permit to be paid,
any part of any claim or demand arising from such asserted liability (i) unless
the Purchaser consents in writing to such payment, which consent will not be
unreasonably withheld, but, if such consent is not given in the case of a
settlement proposal, the Purchaser will post a letter of credit from a bank
reasonably satisfactory to the Seller in the amount of such proposed settlement,
or (ii) unless the Purchaser, subject to the last sentence of this Section
8.05(b), withdraws from the defense of such asserted liability, or (iii) unless
a final judgment from which no appeal may be taken by or on behalf of the
Purchaser is entered against the Seller Indemnified Party for such liability or
(iv) unless there is a material risk if such asserted liability is not paid that
an injunction or other equitable relief will be granted which will materially
adversely affect the business of the Seller or there is a material risk of the
seizure of any material asset of the Seller or a material risk that a lien or
liens will be imposed on any such material asset. The Purchaser shall have the
right, in its reasonable, good faith discretion and with the advice of counsel,
to settle any such claim without the prior written consent of the Seller
Indemnified Party provided such settlement includes a general release to all
Seller Indemnified Parties and does not impose any injunction or other equitable
relief on any of the Seller Indemnified Parties. If the Purchaser shall fail to
defend any claim or proceeding that it has a duty to defend hereunder, or if
after commencing or undertaking any such defense, shall fail to diligently
prosecute and defend or withdraws from such defense, or if

                                       32
<PAGE>

the Purchaser cannot reasonably defend the Seller Indemnified Party due to
conflicts of interest or conflicts between the defense that it must assert on
behalf of the Seller Indemnified Parties and the defense it must assert to
protect its interests in such claim or proceeding, the Seller Indemnified Party
shall have the right to undertake the defense or settlement thereof, at the
Purchaser's expense. If the Seller Indemnified Party assumes the defense of any
such claim or proceeding pursuant to this Section 8.05(b) which the Purchaser
had the duty to defend hereunder, and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then the Seller Indemnified Party shall give the Purchaser
prompt written notice thereof and the Purchaser shall have the right to
participate in the settlement or assume or reassume the defense of such claim or
proceeding subject to the conditions set forth above; provided that if the
Purchaser does not assume or reassume the defense within ten (10) Business Days
or any earlier time that such offer to settle expires, then the Seller
Indemnified Party can settle such claim in good faith without the consent of the
Purchaser.

                                   ARTICLE 9

                             TERMINATION AND WAIVER

     SECTION 9.01. Termination. This Agreement may be terminated at any time
prior to the Closing:

     (a) by the Purchaser if, between the date hereof and the time scheduled for
the Closing: (i) an event or condition occurs that has resulted in or that may
be expected to result in a Material Adverse Effect, (ii) any representation or
warranty of the Seller contained in this Agreement shall not have been true and
correct in all material respects when made (provided, however, that if any
portion of any representation or warranty is already qualified by materiality,
for purposes of determining whether this Section 9.01(a) has been satisfied with
respect to such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects), (iii) the Seller shall not have complied with any covenant or
agreement to be complied with by it and contained in this Agreement; or (iv) the
Seller or the Company makes a general assignment for the benefit of creditors,
or any proceeding shall be instituted by or against the Seller or the Company
seeking to adjudicate any of them a bankrupt or insolvent, or seeking
liquidation, winding up or reorganization, arrangement, adjustment, protection,
relief or composition of its debts under any Law relating to bankruptcy,
insolvency or reorganization; or

     (b) by either the Seller or the Purchaser if the Closing shall not have
occurred by January 31, 2001; provided, however, that the right to terminate
this Agreement under this Section 9.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement shall have been the
cause of, or shall have resulted in, the failure of the Closing to occur on or
prior to such date; or

                                       33
<PAGE>

     (c) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable; or

     (d) by the mutual written consent of the Seller and the Purchaser.

     SECTION 9.02. Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.01, this Agreement shall forthwith become
void and there shall be no liability on the part of either party hereto except
(i) as set forth in Sections 5.03, 10.01 and 10.03 and (ii) that nothing herein
shall relieve either party from liability for any breach of this Agreement.

     SECTION 9.03. Waiver. Either party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.

                                   ARTICLE 10

                               GENERAL PROVISIONS

     SECTION 10.01. Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.

     SECTION 10.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by fax, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
10.02):

                                       34
<PAGE>

                  (a) if to the Seller:

                               PXRE Reinsurance Company
                               399 Thornhall Street, 14th Floor
                               Edison, New Jersey  08837

                               Fax:  (732) 906-9157
                               Attention:  James F. Dore

                      with a copy to:

                               Morgan Lewis & Bockius LLP
                               101 Park Avenue
                               New York, New York  10178

                               Fax:  (212) 309-6273
                               Attention: F. Sedgwick Browne

                  (b) if to the Purchaser:

                               United States Fire Insurance Company
                               P.O. Box 1973
                               305 Madison Avenue
                               Morristown, New Jersey  07960-1973

                               Fax:  (973) 490-6612
                               Attention:  Mary Jane Robertson

                      with a copy to:

                               Shearman & Sterling
                               Commerce Court West
                               199 Bay Street, Suite 4405
                               Toronto, Ontario  M5L 1E8

                               Fax:  (416) 360-2958
                               Attention:  Brice T. Voran

     SECTION 10.03. Public Announcements. Except as required by Law, neither
party to this Agreement shall make or issue, or cause to be made or issued, any
statement, article, advertising, public announcement (including, without
limitation, any announcements made via electronic mail or any postings on the
Internet or World Wide Web), press releases or similar publicity (collectively,
a "Public Announcement") in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media without the
prior written consent of the other party, and the parties shall cooperate as to
the timing and contents of any such Public Announcement. Neither party to this
Agreement shall use the name or any trademark or logo of the other party without
the prior written consent of such other party.

                                       35
<PAGE>

     SECTION 10.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.

     SECTION 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.

     SECTION 10.06. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersedes all prior agreements and undertakings, both written and
oral, between the Seller and the Purchaser with respect to the subject matter
hereof and thereof.

     SECTION 10.07. Assignment. This Agreement may not be assigned by operation
of law or otherwise without the express written consent of the Seller and the
Purchaser (which consent may be granted or withheld in the sole discretion of
the Seller or the Purchaser); provided, however, that the Purchaser may assign
this Agreement to an Affiliate of the Purchaser without the consent of the
Seller but such assignment shall not relieve the Purchaser of its obligations
hereunder.

     SECTION 10.08. No Third Party Beneficiaries. Except for the provisions of
Article 8 relating to Indemnified Parties, this Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.

     SECTION 10.09. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the Seller
and the Purchaser or (b) by a waiver in accordance with Section 9.03.

     SECTION 10.10. Governing Law. This Agreement shall be governed by the laws
of the State of New York, excluding (to the greatest extent permissible by law)
any rule of law that would cause the application of the laws of any jurisdiction
other than the State of New York. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or federal court sitting in the Borough of Manhattan, City of New York.

     SECTION 10.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

                                       36
<PAGE>

     SECTION 10.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.

                                       37
<PAGE>

     IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.

                      PXRE REINSURANCE COMPANY

                      By: /s/  JAMES F. DORE
                          ----------------------------------------
                           Name:       James F. Dore
                           Title:      Executive Vice President and
                                       Chief Financial Offer

                      UNITED STATES FIRE INSURANCE COMPANY

                      By:              /s/  MARY JANE ROBERTSON
                          ----------------------------------------
                           Name:       Mary Jane Robertson
                           Title:      Executive Vice President and
                                       Chief Financial Officer

                      By:              /s/  VALERIE J. GASPARIK
                          ----------------------------------------
                           Name:       Valerie J. Gasparik
                           Title:      Vice President and Secretary

<PAGE>

                           DISCLOSURE SCHEDULE TO THE

                            STOCK PURCHASE AGREEMENT

                                     BETWEEN

                            PXRE REINSURANCE COMPANY

                                       AND

                      UNITED STATES FIRE INSURANCE COMPANY

This Disclosure Schedule is delivered in connection with the execution and
delivery of the Stock Purchase Agreement between PXRE Reinsurance Company
("SELLER") and United States Fire Insurance Company ("PURCHASER") dated as of
October 4, 2000 ("AGREEMENT"). Capitalized terms used herein but not defined
shall have the meanings set forth in the Agreement. The disclosure of any
information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by Seller in the Agreement or that it is material, nor shall
such information be deemed to establish a level or standard of materiality for
purposes of such disclosure or the Agreement.

Any disclosure made under the heading of one section of this Disclosure Schedule
may apply to and/or qualify disclosures made under one or more sections.

<PAGE>

                   SECTION 3.04(A) OF THE DISCLOSURE SCHEDULE

                            CERTIFICATE OF AUTHORITY

Attached hereto is a true and correct copy of the Certificate of Authority of
the Company in the State of Connecticut.

<PAGE>

                              STATE OF CONNECTICUT

                              INSURANCE DEPARTMENT

THIS IS TO CERTIFY, THAT Transnational Insurance Company

having complied with the laws of the State of Connecticut, is licensed to
transact in this state until the first day of May 2001 , unless this license be
sooner revoked, the lines of insurance numbered: 01 02 03 04 05 06 07 08 09 10
11 12 13 14 l5 16 17 18 19

<TABLE>

<S>                                                                   <C>
   1.  Fire, Extended Coverage, and Other Allied Lines                16.  Burglary and Theft
   2.  Homeowners Multiple Peril                                      17.  Boiler and Machinery
   3.  Commercial Multiple Peril                                      18.  Credit
   4.  Earthquake                                                     19.  Reinsurance
   5.  Growing Crops                                                  20.  Life Non-Participating
   6.  Ocean Marine                                                   21.  Life Participating
   7.  Inland Marine                                                  22.  Variable Life Non-Participating
   8.  Accident and Health                                            23.  Variable Life Participating
   9.  Workman's Compensation                                         24.  Variable Annuities
  10.  Liability other than Auto (B. I. and P.D.)                     25.  Title
  11.  Auto Liability (B .I. and P.D.)                                26.  Fraternal Benefit Society
  12.  Auto Physical Damage                                           27.  Mortgage
  13.  Aircraft (All Perils)                                          28.
  14.  Fidelity and Surety                                            29.
  15.  Glass                                                          30.
</TABLE>

                              Witness my hand and official seal, at Hartford,

                                          this            / day of May, 2000

Certificate of Authority and Compliance                  Insurance Commissioner

<PAGE>

                   SECTION 3.04(B) OF THE DISCLOSURE SCHEDULE

                   APPROVED NON-ADMITTED SURPLUS LINES INSURER
<TABLE>

<S>                        <C>                         <C>
   1.  ARIZONA             14.  MINNESOTA              27.  PUERTO RICO
   2.  CALIFORNIA          15.  MISSISSIPPI            28.  SOUTH CAROLINA
   3.  COLORADO            16.  MISSOURI               29.  TENNESSEE
   4.  DELAWARE            17.  MONTANA                30.  TEXAS
   5.  FLORIDA             18.  NEVADA                 31.  US VIRGIN ISLANDS
   6.  IDAHO               19.  NEW JERSEY             32.  UTAH
   7.  IOWA                20.  NEW MEXICO             33.  VERMONT
   8.  KANSAS              21.  NEW YORK               34.  VIRGINIA
   9.  KENTUCKY            22.  NORTH CAROLINA         35.  WISCONSIN
  10.  MARYLAND            23.  NORTH DAKOTA
  11.  LOUISIANA           24.  OHIO
  12.  MASSACHUSETTS       25.  OKLAHOMA
  13.  MICHIGAN            26.  PENNSYLVANIA
</TABLE>

                       ELIGIBLE AS A SURPLUS LINES INSURER

The broker is responsible for evaluating the financial strength of the Company
in the following states:

<TABLE>

<S>                                           <C>
   1.  ALABAMA                                8.  OREGON
   2.  DISTRICT OF COLUMBIA                   9.  SOUTH DAKOTA
   3.  GEORGIA                               10.  WASHINGTON
   4.  HAWAII                                11.  WEST VIRGINIA
   5.  ILLINOIS                              12.  WYOMING
   6.  INDIANA                               13.  GUAM
   7.  NEBRASKA
</TABLE>

<PAGE>

                   SECTION 3.04(C) OF THE DISCLOSURE SCHEDULE

                          LICENSES SUSPENDED OR REVOKED

NONE

<PAGE>

                     SECTION 3.06 OF THE DISCLOSURE SCHEDULE

                                   NO CONFLICT

The consent of the lenders under a certain First Amended & Restated Credit
Agreement dated as of August 31, 1999 among PXRE Corporation, as Borrower, PXRE
Group LTD and PXRE (Barbados) LTD, as Guarantors, certain lenders and First
Union National Bank, as Agent (the "First Union Credit Agreement") is required
prior to the consummation of the transactions contemplated hereby.

<PAGE>

                     SECTION 3.07 OF THE DISCLOSURE SCHEDULE

                        GOVERNMENT CONSENTS AND APPROVALS

A.  Governmental Approvals

The Seller and the Company will need to obtain the approval of the Connecticut
Department of Insurance with respect to the following:

     1.   Payment of an extraordinary liquidating dividend from the Company to
          the Seller for purposes of reducing the Company's capital to the
          minimum amount required to maintain the Company's charter, Insurance
          License and Surplus Lines Authorizations;

     2.   Termination of the Intercompany Pooling Agreement between the Company
          and the Seller as of December 31, 1999.

     3.   Approval of the Reinsurance Agreement and the Assumption Agreement
          between the Company and the Seller;

     4.   Termination of the Management Agreement between the Seller and the
          Company.

B.  Third Party Approvals

Approval of the Lenders under the First Union Credit Agreement.

Approval of Landlord under Virginia Lease (as defined in Section 3.14 of the
Disclosure Schedule) will be necessary to assign the Virginia Lease to Seller
without recourse to the Company.

<PAGE>

                   SECTION 3.08(C) OF THE DISCLOSURE SCHEDULE

1. As of March 31, 2000, the Company ceased underwriting any new insurance
business and has been running off its outstanding Insurance Policy liabilities.

<PAGE>

                     SECTION 3.09 OF THE DISCLOSURE SCHEDULE

                             UNDISCLOSED LIABILITIES

A letter of credit issued on the Company's behalf by Merrill Lynch for the
benefit of AXA Reinsurance Company, identified as LOC #MLC3116 (the "LOC"), is
outstanding in the face amount of $586,988.79. To collateralize the LOC, the
Company has deposited securities with Merrill Lynch with an aggregate value of
$782,800.00 (the "LOC Collateral"). Prior to the Closing, the Company and Seller
will use commercially reasonable efforts to replace the LOC with a new letter of
credit from the Seller and to have the LOC Collateral released. If the Company
is unsuccessful in its efforts to replace the LOC and release the LOC
Collateral, the Seller hereby agrees that it shall indemnify the Company and the
Purchaser in accordance with Section 8.02 of the Agreement for any and all
Liabilities arising out of the LOC.

<PAGE>

                     SECTION 3.10 OF THE DISCLOSURE SCHEDULE

                                  BANK ACCOUNTS

TRANSNATIONAL

LIST OF FINANCIAL INSTITUTIONS

1)       First Union National Bank
         Newark, NJ  07191

         Contact:     Joe Difrancesco
                      First Union National Bank
                      1339 Chestnut St., 3rd Floor
                      Philadelphia, PA  19107

         Accounts:    20-3023744042-7  DDA/Lockbox
                      20-7995001502-2  Controlled Disbursement
                      2556003630  Money Market

2)       Chase Manhattan Bank
         4 New York Plaza, 4th Floor
         New York, NY  10004
         Contact:  Sean Greeley

         Accounts:    910-2-633204  Cash flows thru for investments
                      G05142 - Investments managed by Phoenix Home Life

         Chase Manhattan Bank
         One Chaseside
         Bournemouth, Dorset, JK BH77ZQ
         Contact:  Debbie Venn
         011-441-202-341-868

         Accounts:    15111362  USD Cash

3)       Brown Brothers Harriman & Co.
         Investors Services
         63 Wall St.
         New York, NY  10005
         Contact:  Jerry Longo  (212) 493-7902

         Accounts:    7865082  Special Deposits
                      8912230  Fees

4)       Mariner Investment Group Inc.
         65 East 55th Street
         New York, NY  10022
         Contact:  Dennis Winter
         (212) 758-8378

<PAGE>

                               STATUTORY DEPOSITS

A list of statutory deposits and the financial institutions at which they are
held is attached hereto.

<PAGE>

<TABLE>
<CAPTION>

                                       DEPOSITORY BANK
           9/29/2000                     INFORMATION                   PAR
------------------------               -----------------         ---------------
<S>                                   <C>                        <C>
Insurance Commissioner of CT                                     3,000,000  USTN
Office of the Treasurer                                            600,000
55 Elm Street                                                    ---------
Hartford, Connecticut  06106                                     3,600,000
Attn:  Carol Teller
Tel: (860) 566-5050 Ext. 3122         Paul Foster@FleetBank
Fax: (860) 702-3041                   617-346-5569

Merrill Lynch (Collateral                                          500,000 NEVADA ST
for LOC NY)                                                        282,800 Chicago IL Tax
110 South Bedford Road                                             INCRM All
Mt. Kisco, NY  10549
Attn:  James Cotto
Tel:  1-800-374-8698
Fax:  1-914-666-0841

Trust Under Res. 41 of NY             Rick Barnes FUN Corp Trust 2,500,000  Municipal
Ins. Dept.                            First Union National Bank             PA State
Barns, Muni NY Ins. dep.              (973) 868-7161
25 Beaver Street New York, NY         (973) 682-4531/4538
10004
T  212-480-5463
F  212 480-5550

LA Commissioner of Insurance                                       100,000  USTN
P.O. Box 94214
Baton Rouge, Louisiana
Attn:  Cila Christian
Tel  225-342-12021
Fax  225-342-7352
Statutory Deposits Required by
the LA
  Commissioner of Insurance

Commonwealth of Massachusetts                                      700,000 Nevada St.
Division of Insurance
Treasury Department
1 Ashburton Place, 12 Floor
Boston MA  02108
Attn:  Kevin Whalen
Tel  617-367-3900  ext. 234
Fax  617-523-1068
no longer bank of Boston-Kevin
will provide info.

South Carolina                        Wachovia Bank                150,000 UST
Department of Insurance               Tel  803-737-6115
Ms. Roberta V. Jenkins                Fax  803-737-6232
P.O.Box 100105
Columbia, SC  29202-3105

New Mexico Public                     Bank of Santa Fe             100,000 Chicago Ill
Regulation Commission                 Attn:  Alan Snow                     Tax A Cent
Ms. Loretta A. Trujillo               PO Box 2027                  100,000 Chicago Ill
1120 Paseo de Paralla                 Santa Fe, New Mexico                 Tax A Cent
PO Box 1269                           87504-2027
Santa Fe, New Mexico  87504           (505) 984-0466
Fax  505-827-4734
Tel  505-827-4524

Bank One Oklahoma                     Judith Watts                 300,000 Chicago Ill
National Safekeeping Service          P  405-231-6966                      Tax A Cent
Client Service Dept. 6th Floor        F  405-231-6483
100 N. Broadway, Oklahoma City        Bryan Peaks -
OK  73102                             Client Service
                                      1-800-888-0824
                                      F  405-231-6001
</TABLE>

<TABLE>
<CAPTION>

                                                                                  BI-ANNUAL
           9/29/2000                 RATE      MATURITY        QSIP #              INCOME
------------------------            --------   -----------   --------------      ---------
<S>                                  <C>       <C>          <C>                   <C>
Insurance Commissioner of CT         0.058     10/31/2000   912827-V6-6O/A        86,250
Office of the Treasurer              0.056     02/15/2006   912827-W81 F/A        16,875
55 Elm Street
Hartford, Connecticut  06106
Attn:  Carol Teller
Tel: (860) 566-5050 Ext. 3122
Fax: (860) 702-3041

Merrill Lynch (Collateral            0.05      05/15/2006   641459D82   M/N       12,500
for LOC NY)                          0.053     06/01/2007   167709AV6   A/O        7,424
110 South Bedford Road
Mt. Kisco, NY  10549
Attn:  James Cotto
Tel:  1-800-374-8698
Fax:  1-914-666-0841

Trust Under Res. 41 of NY            0.068     11/01/2013  709140 FT-9  N/M       84,375
Ins. Dept.
Barns, Muni NY Ins. dep.
25 Beaver Street New York, NY
10004
T  212-480-5463
F  212 480-5550

LA Commissioner of Insurance         0.075     11/01/2001  912827-D-35M/N          3,750
P.O. Box 94214
Baton Rouge, Louisiana
Attn:  Cila Christian
Tel  225-342-12021
Fax  225-342-7352
Statutory Deposits Required by
the LA
  Commissioner of Insurance

Commonwealth of Massachusetts        0.05      05/15/2006  641459D82  M/N         17,500
Division of Insurance
Treasury Department
1 Ashburton Place, 12 Floor
Boston MA  02108
Attn:  Kevin Whalen
Tel  617-367-3900  ext. 234
Fax  617-523-1068
no longer bank of Boston-Kevin
will provide info.

South Carolina                       0.059     09/30/2002  912823329  M/S          4,406
Department of Insurance
Ms. Roberta V. Jenkins
P.O.Box 100105
Columbia, SC  29202-3105

New Mexico Public                    0.053     06/01/2007  167709AV6  D/J          2,625
Regulation Commission
Ms. Loretta A. Trujillo              0.053     06/01/2007  167709AV6  D/J          2,625
1120 Paseo de Paralla
PO Box 1269
Santa Fe, New Mexico  87504
Fax  505-827-4734
Tel  505-827-4524

Bank One Oklahoma                    0.053     06/01/2007  167709AV6  M/S          7,875
National Safekeeping Service
Client Service Dept. 6th Floor
100 N. Broadway, Oklahoma City
OK  73102

</TABLE>

<PAGE>

                     SECTION 3.11 OF THE DISCLOSURE SCHEDULE

                   CONDUCT IN THE ORDINARY COURSE OF BUSINESS

See Section 3.08(c) of the Disclosure Schedule

<PAGE>

                     SECTION 3.12 OF THE DISCLOSURE SCHEDULE

                                   LITIGATION

NONE.

<PAGE>

                   SECTION 3.13(A) OF THE DISCLOSURE SCHEDULE

                              COMPLIANCE WITH LAWS

NONE.

<PAGE>

                   SECTION 3.13(B) OF THE DISCLOSURE SCHEDULE

                                GOVERNMENT ORDERS

NONE.

<PAGE>

                     SECTION 3.14 OF THE DISCLOSURE SCHEDULE

                                    CONTRACTS

1.       Lease Agreement for a certain premises located at 9201 Arboretum
         Parkway, Suite 250, Richmond, Virginia (the "Virginia Lease"); and a
         partial sub-Lease of 1,393 rentable square feet thereof to Arrowhead
         General Insurance Agency. Prior to the Closing, the Company and the
         Seller shall use commercially reasonable efforts to obtain the consent
         of the landlord to the assignment to the Seller of the Virginia Lease
         without recourse to the Company. If the Company is unsuccessful in its
         efforts to assign the Virginia Lease without recourse to the Seller,
         the Seller hereby agrees that it shall indemnify the Company and the
         Purchaser in accordance with Section 8.02 of the Agreement for any and
         all Liabilities arising out of the Virginia Lease.

<PAGE>

                     SECTION 3.15 OF THE DISCLOSURE SCHEDULE

                              EMPLOYEES AND AGENTS

NONE.

<PAGE>

                     SECTION 3.16 OF THE DISCLOSURE SCHEDULE

                               POWERS OF ATTORNEY

NONE.

<PAGE>

                     SECTION 3.17 OF THE DISCLOSURE SCHEDULE

                                      TAXES

Section 3.17(b)

(i) The Company filed as amendment to its United States federal income tax
return for the 1996 tax year.

(ii)   none

(iii)  none

(iv)   none

(v)    none

(vi)   none

(vii) The Company is a party to an Amended and Restated Tax Sharing Agreement,
dated August 23, 1993, between PXRE Corporation and the members of the
consolidated group of corporations of which it is a parent, pursuant to Addendum
3 of such Agreement, dated December 11, 1996.

<PAGE>

                     SECTION 4.03 OF THE DISCLOSURE SCHEDULE

Connecticut Department of Insurance

New York Department of Insurance

<PAGE>

                 SECTION 5.01 (B)(IV) OF THE DISCLOSURE SCHEDULE

Prior to the Closing, the Company will pay an extraordinary liquidating dividend
to the Seller for purposes of reducing the Company's capital to the minimum
amount required to maintain the Company's charter, Insurance License and Surplus
Lines Authorizations, which the parties agree is not less than $15,000,000.

<PAGE>

                SECTION 5.01(B)(XIII) OF THE DISCLOSURE SCHEDULE

                                  TAX ELECTIONS

NONE.

<PAGE>

                              OFFICER'S CERTIFICATE

                                PXRE CORPORATION

         THIS CERTIFICATE is delivered in conjunction with the proposed sale by
PXRE Reinsurance Company ("PXRE") of all of the outstanding common stock of
Transnational Insurance Company ("Transnational") to United States Fire
Insurance Company ("USFIC") pursuant to a Stock Purchase Agreement, dated as of
October 4, 2000 (THE "STOCK PURCHASE AGREEMENT"). Reference is hereby made to
the First Amended and Restated Credit Agreement, dated as of October 31, 1999
(as amended, the "Credit Agreement"), among PXRE Corporation, PXRE Group Ltd.,
and PXRE (Barbados) Ltd., the Lenders from time to time parties thereto, and
First Union National Bank as Agent. Capitalized terms used herein without
definition shall have the meanings given to them in the Credit Agreement.

         The undersigned does hereby certify that (i) all representations and
warranties of the Borrower contained in the Credit Agreement and the other
Credit Documents are true and correct as of the date hereof both immediately
before and after given effect to the consummation of the sale of Transnational,
(ii) no Default or Event of Default has occurred and is continuing, both
immediately before and after given effect to the consummation of the sale of
Transnational, (iii) the fair market value of the Capital Stock of Transnational
does not exceed ten (10%) percent of Combined Statutory Capital and Surplus as
of the last day of the fiscal quarter ending on or immediately prior to the date
of the sale of Transnational, and (iv) the fair market value of the Capital
Stock of Transnational aggregated with the fair market value of all other assets
disposed of pursuant to Section 7.4(vi) of the Credit Agreement does not exceed
thirty (30%) percent of Combined Statutory Capital and Surplus as of the end of
the immediately preceding fiscal quarter prior to the sale of Transnational. For
the purposes of clauses (iii) and (iv) of the preceding sentence, the fair
market value of Transnational was determined by giving effect to the
extraordinary dividend to be paid to PXRE and by reference to the purchase price
which USFIC has agreed to pay PXRE pursuant to the Stock Purchase Agreement.

                  IN WITNESS WHEREOF, the undersigned has executed and delivered
this Certificate this 29th day of November, 2000.

                          PXRE CORPORATION

                          By:      /s/  JAMES F. DORE
                                ------------------------------------------
                          Name:  James F. Dore
                          Title:    Executive Vice President & Chief Financial
                                    Officer<PAGE>

                                                                   EXHIBIT 10.39

                             REINSURANCE AGREEMENT
                                    BETWEEN
                            RANGER INSURANCE COMPANY
                                      AND
                       THE NORTH RIVER INSURANCE COMPANY
                          EFFECTIVE NOVEMBER 15, 1999
<PAGE>

                                     INDEX

<Table>
<Caption>
ARTICLE    DESCRIPTION                                                   PAGE
-------    -----------                                                   ----
<C>        <S>                                                           <C>
   1       Business Covered............................................    1
   2       Term........................................................    1
   3       Territory...................................................    1
   4       Limit of Liability..........................................    1
   5       Excess of Loss Reinsurance..................................    1
   6       Ultimate Net Loss...........................................    1
   7       Cash Call Provision.........................................    2
   8       Extra Contractual Obligations...............................    2
   9       Excess of Policy Limits.....................................    2
  10       Follow the Fortunes.........................................    2
  11       Errors and Omissions........................................    3
  12       Ceding Commission...........................................    3
  13       Reports and Remittances.....................................    3
  14       Arbitration.................................................    3
  15       Insolvency..................................................    4
  16       Offset......................................................    4
  17       Currency....................................................    4
  18       Assignment..................................................    4
  19       Regulatory Approvals........................................    4
  20       Books and Records...........................................    4
  21       Counterparts................................................    5
  22       Governing Law...............................................    5
  23       Headings....................................................    5
  24       Entire Agreement, Amendments and Waivers....................    5
  25       Validity and Enforceability of Agreement....................    5
</Table>
<PAGE>

                             REINSURANCE AGREEMENT

     This Reinsurance Agreement ("Agreement") is effective as of November
15,1999 by and between The North River Insurance Company, a New Jersey insurance
company (hereinafter known as the "COMPANY") and Ranger Insurance Company, a
Delaware insurance company (hereinafter known as the "REINSURER").

     WHEREAS, the Reinsurer desires to reinsure certain BUSINESSOWNERS PACKAGE
POLICIES FOR THE SELF STORAGE WAREHOUSING PROGRAM of the Company and the Company
desires that the Reinsurer reinsure such business to the extent and upon the
terms and conditions set forth herein;

     NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:

ARTICLE ONE -- BUSINESS COVERED

     The COMPANY obligates itself to cede one hundred percent (100%) of direct
written premiums and the REINSURER obligates itself to accept one hundred
percent (100%) of direct written premiums, as reinsurance, from the COMPANY for
all businesses classified (?) AS RANGER SELF STORAGE WAREHOUSE PROGRAM BUSINESS
under any and all binders, policies and contracts of insurance arranged or
brokered through Ranger Insurance Managers, Inc.,) a subsidiary of the
Reinsurer, for the COMPANY, which incept, renew or have an anniversary date on
or after 12:01 a.m. Eastern Time on November 15, 1999 and such polices which may
hereafter come into force during the term of this Agreement (hereinafter
referred to as "Policy" or "Policies" as appropriate), subject to exclusions,
limitations and conditions herein.

ARTICLE TWO -- TERM

     This Agreement shall take effect as of 12:01 a.m., Eastern Time, November
15, 1999, and shall continue in full force and effect until all obligations and
liabilities incurred by the REINSURER and the COMPANY under the Agreement are
fully performed and discharged. The COMPANY may terminate this Agreement by
providing the REINSURER ninety (90) days prior written at any time. All
remaining liabilities under this Agreement may be commuted at any time, however,
subject to and upon agreement by both the COMPANY and the REINSURER.

ARTICLE THREE -- TERRITORY

     This Agreement shall cover wherever the COMPANY'S Policies cover.

ARTICLE FOUR -- LIMIT OF LIABILITY

     The COMPANY shall cede and the REINSURER shall accept, as reinsurance, one
hundred percent (100%) of the liability of all paid losses, associated allocated
loss adjustment expense, case reserve and any attributable IBNR including
associated allocated loss adjustment expense pertaining to the Policies covered
as defined in Article One of this Agreement.

ARTICLE FIVE -- EXCESS OF LOSS REINSURANCE

     The REINSURER warrants to obtain and to maintain in effect during the term
of this Agreement, reinsurance coverage up to the full limit of liability for
all policies covered as defined in Article One of this Agreement, in which the
COMPANY is identified as a "named insured" for any paid loss and paid allocated
loss adjustment expense arising out of all business covered as defined in
Article One of this Agreement.

ARTICLE SIX -- ULTIMATE NET LOSS

     "Ultimate Net Loss" shall mean the actual loss paid or payable by the
COMPANY in settlement of losses or liability including any extra contractual
obligations loss as defined in Article Eight-Extra Contractual Obligations
and/or excess of original policy limits loss as defined in Article Nine-Excess
of Policy Limits, after making

                                        1
<PAGE>

deduction for all recoveries, all salvages and all claims upon other
reinsurances and shall include all allocated loss adjustment expense, legal
expense, and all legal expense paid as a result of any declaratory judgement
actions brought to determine the COMPANY'S defense and/or indemnification
obligations under the Policies subject to this Agreement and all other expenses
arising from the handling and/or settlement of claims other than salaries of
employees (staff counsel shall not be considered salaried employees for the
purposes of this Agreement) and office expenses of the COMPANY. Any declaratory
judgment action expenses shall be deemed to have been fully incurred on the same
date as the original loss or effective date of the policy giving rise to the
action.

ARTICLE SEVEN -- CASH CALL PROVISION

     Should the payment due from the Reinsurer exceed one hundred thousand
dollars ($100,000) as respects any one loss, the Company may give the Reinsurer
notice of payment made or its intention to make payment on a certain date. The
Reinsurer shall remit to the Company within 5 business days upon request for
payment of Ultimate Net Loss according to Article Six of this Agreement.

ARTICLE EIGHT -- EXTRA CONTRACTUAL OBLIGATIONS

     This Agreement shall protect the Company for 100% of Extra Contractual
Obligations, as set forth in Article Six, Ultimate Net Loss. The term "extra
contractual obligations" is defined as those liabilities not covered under any
other provision of this Agreement and which arise from the handling of any claim
on the Policies, such liabilities arising because of, but not limited to,
failure by the COMPANY to settle within policy limits, or by reason of alleged
or actual negligence, fraud, misconduct or bad faith in rejecting an offer of
settlement or in the preparation of the defense or in the trial of any action
against its insured or reinsured or in the preparation or prosecution of an
appeal consequent upon such action.

     The date on which any extra contractual obligation is incurred by the
COMPANY shall be deemed, in all circumstances, to be the date of the original
loss or the effective date of the policy.

ARTICLE NINE -- EXCESS OF POLICY LIMITS

     With respect to third party insurance of any kind this Agreement shall
protect the COMPANY for 100% in connection with Ultimate Net Loss as defined in
Article Six, in excess of the limit of any of the Policies, such loss in excess
of the limit having been incurred because of failure by the COMPANY to settle
within the policy limits or by reason of alleged or actual negligence,
misconduct, fraud or bad faith in rejecting an offer of settlement or in the
preparation of the defense or in the trial of any action against its insured or
reinsured or in the preparation or prosecution of an appeal consequent upon such
action.

     For the purposes of this Article Nine, the word "loss" shall mean any
amounts for which the COMPANY would have been contractually liable to pay had it
not been for the limit of the Policy.

ARTICLE TEN -- FOLLOW THE FORTUNES

     It is agreed that any reinsurance afforded hereunder is subject to the
terms and conditions of the Policy or Policies and automatically follows all
changes in coverage and all endorsements made a part of such Policy or Policies,
or any of the COMPANY'S evidences of liability subject to the other terms and
conditions of this Agreement, as set forth herein. Any increase in limits of
liability made in such Policy or Policies are automatically binding upon the
REINSURER from the date such increase is effective, subject always to the limits
and retention as set forth herein and other terms and conditions of this
Agreement.

     The liability of the REINSURER shall be subject in all respects to all
general and specific stipulation, clauses, waivers, extensions, modifications
and endorsements of any of the COMPANY'S Policies, subject to the other terms
and conditions of this Agreement as set forth herein.

     Should any regulatory or other legal restriction of any state require a
modification of any Policy to which this Agreement applies, the liability of the
REINSURER shall follow that of the COMPANY under all other terms and conditions
of this agreement.

                                        2
<PAGE>

ARTICLE ELEVEN -- ERRORS AND OMISSIONS

     Inadvertent delays, errors or omissions made in connection with this
Agreement shall not relieve either party from any liability which would have
attached had such delay, error or omission not occurred, provided that such
error or omission shall be rectified as soon as commercially reasonable after
discovery by the COMPANY or the REINSURER.

ARTICLE TWELVE -- CEDING COMMISSION

     The COMPANY shall receive a commission allowance of thirty three and a half
percent (33.5%) of the direct written premium of the Policies subject to this
Agreement.

ARTICLE THIRTEEN -- REPORTS AND REMITTANCES

     The Reinsurer shall render a monthly bordereau account within thirty (30)
days after each calendar month end. This account shall summarize premiums,
return premiums, allowances for commissions, losses paid, and loss adjustment
expenses paid and salvage recovered. The account shall also reflect the net
balance due by either party. The net balance due by either party shall be paid
by the debtor party within thirty (30) days from the date of the report. Company
agrees that the monthly bordereau discussed above will net both the premiums,
commission, paid loss and loss adjustment expenses, under the reinsurance
bordereau pursuant to this Agreement. A single accounting statement will be
provided to Company. Individual risk coding required by any rating bureau or
state regulatory authority will be provided in electronic format acceptable to
the Company. It is understood that the Company is not to be required to process
individual policy transactions and that the Reinsurer is wholly responsible for
individual risk processing, billing, collection of premiums and compliance.

ARTICLE FOURTEEN -- ARBITRATION

     Any and all disputes arising out of or relating to this Agreement shall be
submitted for resolution to an independent arbitrator mutually agreed to by the
COMPANY and the REINSURER, upon the written request of the COMPANY or the
REINSURER. If the parties are unable to mutually agree upon an arbitrator within
ten (10) calendar days after delivery of a written request for arbitration, the
COMPANY and the Reinsurer shall each nominate three (3) individuals who have
never been affiliated with any of the parties and who are present or former
executive officers of an insurance or reinsurance company and decline two (2) of
the three (3) individuals nominated by the other, and the list of the remaining
nominees shall be submitted to a court of competent jurisdiction and the court
shall select the arbitrator from among the names submitted. If a party fails to
nominate three (3) individuals within thirty (30) calendar days after being
requested to do so, the other party shall also appoint the second arbitrator and
the two arbitrators shall select the third arbitrator. If the two arbitrators
fail to agree upon the appointment of a third arbitrator within thirty (30)
calendar days after their nominations, the third arbitrator shall be chosen by
the manager of the American Arbitration Association and such third arbitrator
shall be a person who is an active or retired disinterested officer of an
insurance or reinsurance company.

     Each party shall submit its case to the arbitrator(s) within thirty (30)
calendar days after the date of appointment of the arbitrator(s). The
arbitrator(s) shall make its determination with regard to the custom and usage
of the insurance and reinsurance business and render a written decision solely
as to the issue presented in the notice of arbitration within sixty (60)
calendar days after such submission. The majority decision of the arbitrators
shall be final and binding in all respects upon all parties hereto. Judgment
upon any award may only be entered in a Federal court of competent jurisdiction
located in the State of New Jersey; provided, however, that if such judgment
cannot be entered in such a Federal court expeditiously, such judgment only then
may be entered in a state court of competent jurisdiction located in the State
of New Jersey. Arbitration hereunder shall take place in New Jersey unless the
COMPANY and the REINSURER agree otherwise. Except as otherwise provided herein,
the COMPANY and the REINSURER shall jointly and equally bear the costs, fees,
disbursements and other expenses of the arbitrator.

     It is agreed that the jurisdiction of the arbitrators to make or render any
decision or award shall be limited by the limit of liability expressly herein
before set forth, and that the arbitrators shall have no jurisdiction to make
any decision or render any award exceeding such expressly stated limit of
liability of the REINSURER, nor do
                                        3
<PAGE>

they have the jurisdiction to authorize any punitive, exemplary or consequential
damage awards between the parties hereto.

ARTICLE FIFTEEN -- INSOLVENCY

     In the event of the insolvency, liquidation or rehabilitation of the
COMPANY or the appointment of a conservator, receiver, liquidator or statutory
successor of the COMPANY, an allocable portion of the reinsurance coverage
provided hereunder shall be payable by the REINSURER directly to the COMPANY or
to its conservator, receiver, liquidator or statutory successor, on the basis of
the liability of the COMPANY without diminution because of such insolvency,
liquidation, rehabilitation or appointment or because such conservator,
liquidator or statutory successor has failed to pay all or a portion of any
claims. In any such event, such reinsurance coverage shall be payable
immediately upon demand, with reasonable provision for verification, on the
basis of claims allowed against the COMPANY by any court of competent
jurisdiction or by any conservator, receiver, liquidator or statutory successor.
In any such event, the conservator, receiver, liquidator or statutory successor
of the COMPANY shall give written notice to the REINSURER of the pendency of
each claim against the COMPANY on the Policies within a reasonable time after
each such claim is filed in the insolvency, liquidation or rehabilitation
proceeding. During the pendency of any such claim, the REINSURER may, at its own
expense, investigate such claim and interpose in the proceeding in which such
claim is to be adjudicated any defense or defenses which the REINSURER may
reasonably deem available to the COMPANY or its conservator, receiver,
liquidator or statutory successor. The expenses incurred in connection therewith
by the REINSURER shall be chargeable, subject to court approval, against the
COMPANY as part of the expense of such insolvency, liquidation or rehabilitation
to the extent of any benefit which accrues to the COMPANY solely as a result of
the defense or defenses undertaken by the REINSURER.

ARTICLE SIXTEEN -- OFFSET

     The COMPANY and the REINSURER may offset any balance or amount due from one
party to the other under the terms of this Agreement. The party asserting the
right of offset may exercise such right at any time with written approval from
the COMPANY, whether the balances due are related to premiums or losses. In the
event of insolvency of either party, the right of offset shall only be allowed
in accordance with the provisions of the controlling insurance law.

ARTICLE SEVENTEEN -- CURRENCY

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

ARTICLE EIGHTEEN -- ASSIGNMENT

     This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any right hereunder may be assigned by any party without the
prior written consent of the other party affected thereby, which consent shall
not be unreasonably withheld.

ARTICLE NINETEEN -- REGULATORY APPROVALS

     This Agreement may be subject to the non-disapproval or approval of certain
state insurance departments and, if so, may be subject to such terms and
conditions thereof as may be required by such state insurance departments to
alter or amend this agreement. Any amendments thereof, shall not change the
substance and or intent to this Agreement and the parties shall deem the
amendments acceptable.

ARTICLE TWENTY -- BOOKS AND RECORDS

     The COMPANY and the REINSURER and their respective duly authorized
representatives shall, at all reasonable times, each be permitted access to all
books and records of the other pertaining to the Policies reinsured pursuant to
the provisions of this Agreement.
                                        4
<PAGE>

ARTICLE TWENTY-ONE -- COUNTERPARTS

     This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original for all purposes and all of which shall be deemed,
collectively, one and the same instrument and agreement.

ARTICLE TWENTY-TWO -- GOVERNING LAW

     This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey without regard to its principles of choice of
law.

ARTICLE TWENTY-THREE -- HEADINGS

     The headings of the Articles and paragraphs herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.

ARTICLE TWENTY-FOUR -- ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS

     This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, between
the parties hereto. No supplement, modification, amendment or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.

ARTICLE TWENTY-FIVE -- VALIDITY AND ENFORCEABILITY OF AGREEMENT

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

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by their respective officers hereunto duly authorized
as of the date first written above.

<Table>
<S>                                                <C>

The North River Insurance Company                  Ranger Insurance Company
By:         /s/ KATHLEEN MCNAMARA                  By:        /s/ JERRY B. MACKEY
-----------------------------------------          ----------------------------------------
Name:  Kathleen McNamara                           Name:  Jerry B. Mackey
-----------------------------------------          ----------------------------------------
Title: CFO                                         Title: CVO
-----------------------------------------          ----------------------------------------
</Table>

                                        5

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