<PAGE>

                                                       EXHIBIT 10.24

REINSURANCE
AGREEMENT      NO. 60-2110-0

               QUOTA SHARE REINSURANCE AGREEMENT
               (hereinafter referred to as the "AGREEMENT")

               between

               EMPIRE FIRE AND MARINE INSURANCE COMPANY
               Omaha, Nebraska

               EMPIRE INDEMNITY COMPANY
               Oklahoma City, Oklahoma
               (herein collectively referred to as the "COMPANY")

               and

               FIRST MERCURY INSURANCE COMPANY
               (hereinafter referred to as the "REINSURER")













               Effective:               12:01 a.m., July 1, 1996
               Term:                    Continuous


<PAGE>

                                TABLE OF CONTENTS

                                                                     Page

Article 1   Scope of Agreement  .................................       1

Article 2   Reinsuring Clause   .................................       1

Article 3   Term ................................................       2

Article 4   Retention and Limits ................................       2

Article 5   Exclusion ...........................................       2

Article 6   Premium .............................................       4

Article 7   Commission     ......................................       4

Article 8   Reports and Remittances .............................       5

Article 9   Losses and Allocated Loss Adjustment Expense.........       5

Article 10  Offset    ...........................................       7

Article 11  Definitions .........................................       7

Article 12  Territory  ..........................................       8

Article 13  Taxes  ..............................................       9

Article 14  Currency.............................................       9

Article 15  Errors and Omissions  ...............................       9

Article 16  Access to Records ...................................       9

Article 17  Insolvency ..........................................       9

Article 18  Arbitration .........................................      10


<PAGE>

Article 19  Other Reinsurance ...................................      11

Article 20  Termination  ........................................      12

Article 21  Funding of Reserves; Unearned Premium, Outstanding 
             Losses and IBNR ....................................      13

            Signing Page ........................................      14


<PAGE>


               In consideration of payment of the premium and upon the terms,
          conditions, and limitations set forth in this AGREEMENT, the parties
          agree as follows:


ARTICLE 1 SCOPE OF AGREEMENT

          By this AGREEMENT, the COMPANY obligates itself to cede to the
          REINSURER and the REINSURER obligates itself to accept the liability
          business described in this AGREEMENT.  The liability of the REINSURER
          with respect to each cession hereunder shall commence obligatory and
          simultaneously with that of the COMPANY, subject to the terms,
          conditions and limitations set forth herein.  The terms of this
          AGREEMENT shall determine the rights and obligations of the parties. 
          This AGREEMENT is solely between the COMPANY and the REINSURER.  When
          more than one COMPANY is named as a party to this AGREEMENT, the first
          COMPANY named shall be the agent of the other companies as to all
          matters pertaining to this AGREEMENT.  Performance of the obligations
          of each party under this AGREEMENT shall be rendered solely to the
          other party.  However, if the COMPANY becomes insolvent, the liability
          of the REINSURER shall be modified to the extent set forth in the
          Article entitled "Insolvency."  In no instance shall any insured of
          the COMPANY have any rights under this AGREEMENT.

ARTICLE 2 REINSURING CLAUSE

          The REINSURER agrees to indemnify the COMPANY for that amount of net
          loss reinsured hereunder after deduction of all other reinsurance,
          whether collectable or not, which the COMPANY has become obligated to
          pay or has agreed to pay arising out of any and all policies, binders
          and contracts of insurance (hereinafter referred to as "policies") for
          in force, new and renewal business underwritten on behalf of the
          COMPANY by CoverX Corporation of Southfield, Michigan, on risks
          domiciled in all those states in which the COMPANY is licensed or
          otherwise authorized to do business.

<PAGE>

ARTICLE 3 TERM

          This AGREEMENT shall become effective at 12:01 a.m., Central Daylight
          Time on July 1, 1996, and shall continue in force for an unlimited
          period subject to Article 20, Termination.  The REINSURER shall be
          subject to the same conditions as the original policies and shall
          follow, subject to the terms of this AGREEMENT, the fortunes of the
          COMPANY in respect of all business ceded hereunder.

ARTICLE 4 RETENTION AND LIMITS

          The REINSURER shall indemnify the COMPANY for 50% of the amount of net
          loss allocable to the first $1,000,000 of insurance for each
          occurrence/$10,000,000 annual aggregate, under policies of the COMPANY
          covered by this AGREEMENT plus a proportionate share of the allocated
          loss adjustment expenses.  The COMPANY shall retain for its own
          account the remaining 50% of the first $1,000,000 each
          occurrence/$10,000,000 annual aggregate; however, this requirement
          shall be satisfied if such amount is retained by the COMPANY or, if
          applicable, its affiliated COMPANIES under the common management or
          ownership or both in accordance with Article 1 of this AGREEMENT.  It
          is warranted that the maximum policy limits covered by this AGREEMENT
          are $1,000,000 each occurrence/$10,000,000 annual aggregate.  However,
          the COMPANY is permitted to obtain facultative or other reinsurance
          for limits in excess of $1,000,000.

ARTICLE 5 EXCLUSIONS

          1.   All assumed reinsurance.

          2.   All liability arising out of nuclear risks, including, without
               limitation, that described in the attached Nuclear Incident
               Exclusion Clause.

          3.   Losses directly or indirectly caused by:

               a.   War, invasion, act of foreign enemy, hostilities, or war-
                    like operations (whether war be declared or not), civil war;

               b.   Mutiny, civil commotion assuming the proportions of or
                    amounting to a popular rising, military rising,
                    insurrections, rebellion, revolution, military or usurped
                    power, or any act of any person acting on behalf or in
                    connection with any organization with activity directed
                    toward the overthrow by force of its Government.

<PAGE>

          4.   Liability arising from Insurance Loss Portfolio Transfers of any
               kind.

          5.   Retroactive liability except for Prior Acts Coverage under a
               claims-made policy.

          6.   Liability underwritten or accepted by any third party other than
               CoverX Corporation.

          7.   Liability assumed by the COMPANY as a member of a syndicate,
               pool, or underwriting association; however, this exclusion does
               not apply to participation in assigned risk plans.

          8.   Insurance Guarantee Associations as provided by the Insolvency
               Fund Exclusion Clause which is attached.

          9.   Liability of the COMPANY classified by the COMPANY as arising out
               of ERISA.

          10.  Fidelity, Surety, Libel and Slander, Credit, Financial Guarantee,
               Bankers Blanket Bond Risks and contingency risks such as
               personal injury insurances when written as such.

          11.  Liability arising out of the ownership, maintenance, operation or
               use of aircraft, air cushioned vehicles and airports or the
               installation of equipment therein.

          12.  Kidnap and Ransom and/or Extortion Coverage.

          13.  Insurance coverage for punitive or exemplary damages.
     
          14.  Security Exchange Commission Liability.

          15.  Business classified by the COMPANY as Ocean Marine or arising out
               of the operation or navigation of ships or vessels other than
               yachts or small pleasure craft.

          16.  Liability of the COMPANY classified by the COMPANY as arising
               from risks having an exposure to asbestos resulting from the
               existence, mining, handling, processing, manufacture, sale,
               distribution, storage or use of asbestos, asbestos products,
               and/or products containing asbestos.

          17.  Environmental impairment of Pollution Liability.


<PAGE>


          18.  Workers' Compensation and Employers' Liability.

          19.  Automobile Liability.

          Notwithstanding the exclusions set forth in Items 15 through 19 above,
          any reinsurance that is specifically accepted by the REINSURER from
          the COMPANY shall be covered under this AGREEMENT and subject to the
          terms hereof, except as such terms shall be modified by such
          Special Acceptance.

          In the event that the COMPANY insures such an excluded risk under its
          Policies, either because an existing insured has expanded its
          operations or because CoverX has placed such an excluded risk with the
          COMPANY, the COMPANY shall be protected by and afforded reinsurance
          under this AGREEMENT to the extent as if there were no exclusion, but
          only until the COMPANY is able to effect cancellation of such coverage
          and then not for more than forty-five (45) days from the date of
          discovery of such excluded risk by the underwriters of the COMPANY's
          home office.

ARTICLE 6 PREMIUM

          A.   The COMPANY shall pay to the REINSURER its pro rata share, being
          50% of the gross net written premiums and the REINSURER shall refund
          to the COMPANY its pro rata share of any return premiums, on
          business which is the subject matter of this AGREEMENT, less gross
          premium ceded for other reinsurance inuring to the benefit of this
          AGREEMENT as specified in Article 19, Other Reinsurance, and less the
          applicable ceding commission if any, as specified in Article 7, Ceding
          Commission.

          B.   When the reinsurance of in-force policies is specified in Article
          2, Reinsurance Clause, the REINSURER shall receive its pro rata share
          of the unearned premium on such business subject to the conditions
          specified in Paragraph A above.  In the event of a change in the
          reinsurance cession quota or a change in the REINSURER's share, this
          procedure shall be applied accordingly.

ARTICLE 7 CEDING COMMISSION

          A.   The REINSURER shall allow the COMPANY a ceding commission in
          accordance with the attached Schedule A on all premiums ceded to the
          REINSURER hereunder.  The COMPANY shall allow the REINSURER return
          commission on return premiums at the same rate.


<PAGE>


          B.   It is expressly agreed that the ceding commission allowed the
          COMPANY includes provision for all dividends, commissions, taxes,
          assessments, and all other expenses of whatever nature, except
          allocated loss adjustment expense.

ARTICLE 8 REPORTS AND REMITTANCES

          A.   Reinsurance Premium - within 45 days after the close of each
          month, the COMPANY shall render to the REINSURER a report of the gross
          net written premium and unearned premiums for the month with respect
          to business covered hereunder summarizing the reinsurance premiums and
          commissions applicable.

          B.   Within 15 days after the close of each month the COMPANY shall
          render to the REINSURER a claims summary, on a form acceptable to the
          REINSURER, giving details of any losses paid and outstanding,
          allocated loss adjustment expenses, salvage and recoveries.

          The COMPANY shall include a summary sheet with "A" and "B" above,
          reflecting the net balance.  The net balance due shall be payable by
          the debtor party within 75 days after the close of the month involved.
          The net balance will be adjusted by inclusion of the REINSURER's part
          of losses settled, allocated loss adjustment expenses, salvage and
          other recoveries, through the most current month at the time of
          payment.

ARTICLE 9 LOSSES AND ALLOCATED LOSS ADJUSTMENT EXPENSE

          A.   The COMPANY shall promptly notify the REINSURER of all claims
               which:

               1.   Originate from fatal injuries,

               2.   Originate from bodily injuries as specified below:

                    a.   Serious brain damage,
                    b.   Spinal injuries resulting in partial or total
                         paralysis,
                    c.   Amputations or permanent loss of use of upper or lower
                         extremities,
                    d.   All other injuries likely to result in a serious
                         permanent disability,
                    e.   Severe burn injuries involving 25% or more of the body,
                    f.   Loss of sight of one or both eyes,
                    g.   Multiple fractures,
                    h.   Sexual abuse or molestation,


<PAGE>

          and will also promptly notify the REINSURER of other applicable
          reinsurance that would affect the REINSURER's liability.

          B.   The COMPANY, as its sole discretion, may commence, continue,
          defend, compromise, settle, or withdraw from any action, suit or
          prosecution and generally do such matters relating to any loss, claim
          or damage which, in its judgement, may be beneficial.  The COMPANY
          agrees to investigate and conduct diligently the defense of all claims
          arising under its policies with respect to which this AGREEMENT
          applies.  The COMPANY shall have original and primary responsibility
          for all claim settlements.  However, the REINSURER shall have the
          right and opportunity to be associated at its own expense with the
          COMPANY in the defense of any claim, suit, or proceeding which might
          involve the REINSURER's obligations under this AGREEMENT and the
          COMPANY and the REINSURER shall cooperate in every respect in the
          defense of any such claim, suit or proceeding, but the REINSURER shall
          not have any obligation to assume the defense of any claim.

          C.   The REINSURER shall proportionally share with the COMPANY all
          allocated loss adjustment expense.  The term "allocated loss
          adjustment expense" shall mean sums actually disbursed by the COMPANY
          in payment of allocated expenses to investigate, appraise, adjust,
          settle, arbitrate, defend or resist claims for losses, whether valid
          or not, including court costs (when such costs are not included in the
          judgment) and interest accrued after judgement.  Such expenses shall
          not include sums paid to attorneys as retainer nor salaries of
          officials and employees of the COMPANY, and shall exclude office or
          overhead expenses of the COMPANY.  In the event of salvage,
          subrogation, a verdict, award, or judgement is reduced or reversed by
          an appeal taken by the COMPANY or other recovery, the REINSURER shall
          share in such recovery in the same proportion as the Quota Share
          amount.

          D.   Where a judgement has been entered against the COMPANY which
          results in the liability of the REINSURER under this AGREEMENT, and
          the COMPANY does not wish to appeal such judgement, or the possibility
          of subrogation exists and the COMPANY elects not to subrogate, the
          COMPANY will nevertheless prosecute such appeal or subrogation at the
          request of the REINSURER and the REINSURER shall pay all the expenses
          thereof.  If the appeal or subrogation is successful, the COMPANY
          shall share proportionately in the recovery and, the COMPANY shall    
          bear its proportion of the expenses, such proportion being determined
          by the relationship of the COMPANY's net retention to the total
          gross amount of the judgement.


<PAGE>



ARTICLE 10     OFFSET

               The COMPANY or the REINSURER may offset any balance due the other
               party under this AGREEMENT or any others previously or
               subsequently entered into between them.

ARTICLE 11     DEFINITIONS

               A.   NET LOSS

               The term "net loss" shall mean all amounts which the COMPANY has
               paid or has become liable to pay in the settlement of claims or
               losses, payment of benefits or satisfaction of verdicts, awards,
               or judgements for which it is liable, including prejudgement
               interest or delay damages, and excess of original policy limits
               and extra contractual obligations (as specified in their
               respective articles) after deduction of all net recoveries,
               salvages and amounts due from other reinsurance which inures to
               the benefit of the REINSURER under this AGREEMENT, whether
               collectible or not.  However, in the event of the insolvency of
               the COMPANY, "net loss" shall mean the amount of loss which the
               COMPANY has incurred or for which it is liable, including
               prejudgement interest or delay damages, and excess of original
               policy limits and extra contractual obligation (as specified in
               their respective articles) after deduction of all net recoveries,
               salvages and amounts due from other reinsurance which inures to
               the benefit of the REINSURER under this AGREEMENT, whether
               collectible or not, and payment by the REINSURER shall be made to
               the liquidator, receiver or statutory successor of the COMPANY in
               accordance with the provisions of the article entitled
               "Insolvency."

               Net Loss shall exclude Allocated Loss Adjustment Expense unless
               Allocated Loss Adjustment Expense is included as part of the
               policy limit under the COMPANY's original policy.  If Allocated
               Loss Adjustment Expense is included within the policy limit,
               Allocated Loss Adjustment Expense will be included in the
               definition of Net Loss.

               B.   PREJUDGEMENT INTEREST OR DELAY DAMAGES

               This term shall mean interest or damages added to a settlement,
               verdict, award or judgement based on the amount of time prior to
               the settlement, verdict, award or judgement that the claim or
               loss occurred, whether or not made a part of the settlement,
               verdict, award or judgement.

               C.   OCCURRENCE

<PAGE>

               The term "Occurrence" means the happening of one or a series of
               related or consequential accidents, acts, errors, omissions or
               mistakes arising out of one event regardless of the number of
               persons, claimants, insureds, policies or coverage involved,
               which results in loss payable by the COMPANY, under its policy or
               policies.  All loss or series of losses having a common origin or
               traceable to the same accident, omission, error, mistake,
               injurious condition or occurrence, shall be construed to be the
               result of one occurrence.  The COMPANY shall be the sole judge of
               what constitutes one occurrence under this definition.

               D.   SALVAGE

               This term shall mean any recovery made by the COMPANY in
               connection with a claim or loss less all expenses paid by the
               COMPANY other than payments to any salaried employee of the
               COMPANY making such recovery.  Salvage recoveries shall be
               apportioned between the COMPANY and the REINSURER in the same
               ratio as the payment of loss.

               E.   GROSS NET WRITTEN PREMIUMS

               This term shall mean the COMPANY's gross original premiums on
               policies which are the subject matter of this AGREEMENT, prior to
               any deductions except applicable return premiums and premiums
               ceded for reinsurance which inures to the benefit of this
               AGREEMENT as specified in the Article entitled "Other
               Reinsurance."

               F.   POLICIES

               The term "Policies" shall mean policies, contracts, and binders
               of insurance issued by the COMPANY, including endorsements
               thereto.

ARTICLE 12     TERRITORY

               The REINSURER shall be liable only in respect to policies written
               and providing coverage within the United States of America,
               except for such incidental foreign exposure as may be covered
               under the territorial provisions of these policies.

<PAGE>

ARTICLE 13     TAXES

               The COMPANY shall pay taxes on premium ceded under this
               AGREEMENT.  If the REINSURER is obligated to pay any taxes on
               such premiums, the COMPANY shall reimburse the REINSURER;
               however, the COMPANY shall not be required to pay the same
               tax twice.

ARTICLE 14     CURRENCY
     
               All payments under this AGREEMENT shall be made in United States
               currency.

ARTICLE 15     ERRORS AND OMISSIONS

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

               B.   The liability of the REINSURER under this AGREEMENT or any
               exhibits or endorsements attached thereto shall in no event
               exceed the limits specified therein, nor be extended to cover any
               risks, perils, or classes of insurance generally or specifically
               excluded therein.

ARTICLE 16     ACCESS TO RECORDS

               The REINSURER or its designated representative shall have free
               access at all reasonable times to all records of the COMPANY
               which pertain to the reinsurance provided hereunder.

ARTICLE 17     INSOLVENCY

               A.   In the event of the insolvency of the COMPANY, this
               reinsurance shall be payable directly to the COMPANY or to its
               liquidator, receiver, conservator or statutory successor on the
               basis of the liability of the COMPANY without diminution because
               of the insolvency of the  COMPANY or because the liquidator,
               receiver, conservator or statutory successor of the COMPANY has
               failed to pay all or a portion of any claim.  It is agreed,
               however, that the liquidator, receiver, conservator or statutory
               successor of the COMPANY shall give written notice to the
               REINSURER of the pendency of a claim against the COMPANY
               indicating the policy or bond reinsured, which claim would
               involve a possible liability on the part of the REINSURER within
               a reasonable time after such claim is filed in the conversation 


<PAGE>
               or liquidation proceeding or in the receivership, and that during
               the pendency of such claim, the REINSURER may investigate such
               claim and interpose, at its own expense, in the proceeding where
               such claim is to be adjudicated any defense or defenses which it
               may deem available to the COMPANY or its liquidator, receiver,
               conservator or statutory successor.  The expense thus incurred by
               the REINSURER shall be chargeable, subject to the approval of the
               court, against the COMPANY as part of the expense of conservation
               or liquidation to the extent of a pro rata share of the benefit
               which may accrue to the COMPANY solely as a result of the defense
               undertaken by the REINSURER.

               B.   Where two or more REINSURERS are involved in the same claim
               and a majority in interest elect to interpose defense to such
               claims, the expense shall be apportioned in accordance with the
               terms of the reinsurance contract as though such expense had been
               incurred by the COMPANY.

               C.   As to all reinsurance made, ceded, renewed or otherwise
               becoming effective under this Agreement, the reinsurance shall be
               payable as set forth above by the REINSURER to the COMPANY or to
               its liquidator, receiver, conservator or statutory successor
               (except as provided by Sections 4118(a)(I)(A) and 1114-C- of the
               New York Insurance Law or) except (I) where the AGREEMENT
               specifically provides another payee in the event of the
               insolvency of the COMPANY, and (ii) where the REINSURER, with the
               consent of the direct insured or insureds, have assumed such
               policy obligations of the COMPANY as direct obligations of the
               REINSURER to the payees under such policies and in substitution
               for the obligations of the COMPANY to such payees.  Then, and in
               that event only, the COMPANY, with the prior approval of the
               certificate of assumption on New York risks by the Superintendent
               of Insurance of the State of New York, is entirely released from
               its obligation and the REINSURER pays any loss directly to payees
               under such policy.

ARTICLE 18     ARBITRATION

               A.   Any dispute or other matter in question between the COMPANY
               and the REINSURER arising out of or relating to the formation,
               interpretation, performance or breach of this Agreement, whether
               such dispute arises before or after termination of this
               Agreement, shall be settled by arbitration.  Arbitration shall be
               initiated by the delivery of a written notice of demand for
               arbitration by one party to the other within a reasonable time
               after the dispute has arisen.


<PAGE>

               B.   Each party shall appoint an individual as arbitrator and 
               the two so appointed shall then appoint a third arbitrator.  If
               either party refuses or neglects to appoint an arbitrator within
               sixty (60) days after receiving a written request to do so, the
               other party may appoint the second arbitrator.  If the two
               arbitrators do not agree on a third arbitrator within sixty (60)
               days of their appointment, each of the arbitrators shall nominate
               three individuals.  Each arbitrator shall then decline two of the
               nominations presented by the other arbitrator.  The third 
               arbitrator shall then be chosen from the remaining two 
               nominations by drawing lots.  The arbitrators shall be active or
               former officers of insurance or reinsurance companies or have 
               recognized expertise in insurance or reinsurance law or 
               regulation.  The arbitrators shall not have a personal or 
               financial interest in the result of the arbitration.

               C.   The arbitration hearings shall be held in Omaha, Nebraska,
               or such other place as may be mutually agreed.  Each party shall
               submit its case to the arbitrators within sixty (60) days of the
               selection of the third arbitrator or within such longer period as
               may be agreed upon by the arbitrators.  The arbitrators shall not
               be obliged to follow judicial formalities or the rules of
               evidence except to the extent required by governing law, that is,
               the state law of the situs of the arbitration as herein agreed;
               they shall make their decisions according to the practice of the
               reinsurance business.  The decision rendered by a majority of the
               arbitrators shall be final and binding on both parties.  Such
               decision shall be a condition precedent to any right of legal
               action arising out of the arbitrated dispute which either party
               may have against the other.  Judgement upon the award rendered
               may be entered in any court having jurisdiction thereof.

               D.   Each party shall pay the fee and expenses of its own
               arbitrator and one-half of the fee and expenses of the third
               arbitrator.  All other expenses of the arbitration shall be
               equally divided between the parties.  In certain circumstances,
               the arbitrators may apportion to one of the parties with all of
               the costs of the arbitration.

               E.   Except as provided above, arbitration shall be based,
               insofar as applicable, upon the procedures of the American
               Arbitration Association.

ARTICLE 19     OTHER REINSURANCE

               It is understood that the COMPANY shall have the right to effect
               facultative or treaty reinsurance on business covered by this
               AGREEMENT.


<PAGE>

               The REINSURER'S pro rata share of the cost of such reinsurance
               net of ceding commission shall be deducted from the REINSURER'S
               premium prior to the pplication of any commission allowance.

ARTICLE 20     TERMINATION

               A.   This AGREEMENT may be terminated by either party, effective
               at the end of any calendar year, upon giving to the other party
               not less than 90 days prior to the notice of cancellation in
               writing by certified mail.

               Except as provided for in Paragraph B. of this article,
               termination initiated by either party, (the COMPANY or the
               REINSURER), shall give the other party its choice of cancellation
               on either a runoff or cutoff basis as described below:

                    1.   "Cutoff basis" - In the event of termination on a
                         cutoff basis the REINSURER shall have no liability with
                         respect to loss occurrences happening after the
                         effective time and date of cancellation.

                    2.   "Runoff basis" - In the event of termination on a
                         runoff basis, the REINSURER shall remain liable for
                         occurrences arising out of covered policies in force at
                         the date of cancellation until expiration, cancellation
                         or next renewal of such policies, but in no case shall
                         this reinsurance be extended for a period longer than
                         one year after the date of cancellation of this
                         AGREEMENT.

               B.   Should at any time the REINSURER or the COMPANY:

                    1.   Be 100% reinsured without the previous written consent
                         of the other party.

                    2.   Default in payment due under the terms of this
                         AGREEMENT.

                    3.   Amalgamate with or have its shares purchased by any
                         other company, corporation, individual or individuals
                         for the purpose of gaining control.

                    4.   Agree to any arrangement which would end its separate
                         existence.


<PAGE>

                    5.   Have proceedings instituted or filed against them by
                         any insurance regulatory authority for bankruptcy,
                         rehabilitation, conservation, liquidation or
                         dissolution.

                    6.   Reach mutual agreement to do so.

               This AGREEMENT may be terminated by either the REINSURER or the
               COMPANY upon giving 30 days notice of cancellation in writing by
               certified mail to the other party.  In the event of termination
               under the provisions of this paragraph the REINSURER shall remain
               liable for loss arising from occurrences happening prior to the
               effective time and date of cancellation, but shall have no
               liability with respect to loss occurrences happening after that
               time.

               C.   When all reinsurance is expired or terminated, but in case
               for more than one year after the date of such expiration or
               termination, the REINSURER shall return to the COMPANY the
               reinsurance premium unearned, if any, calculated on the monthly
               pro rata basis, less the commission previously allowed thereon.

ARTICLE 21     FUNDING OF RESERVES; UNEARNED PREMIUM OUTSTANDING LOSSES AND IBNR

               If a jurisdiction of the United States will not permit the
               COMPANY, in the statements required to be filed with its
               regulatory authority(ies), to receive full credit as admitted
               reinsurance for any of the REINSURER'S share of obligations, the
               COMPANY will forward to the REINSURER a statement showing the
               proportion of such reserves which is applicable to the REINSURER.
               Upon receipt of such statement, the REINSURER hereby agrees to
               fund such reserves in respect of unearned premium, know
               outstanding losses that have been reported to the REINSURER and
               allocated loss adjustment expense relating thereto, losses and
               allocated loss adjustment expense paid by the COMPANY but not
               recovered from the REINSURER, plus reserves for losses incurred
               but not reported, as shown in the statement prepared by the
               COMPANY (hereinafter referred to as "Reinsurer's Obligations") by
               funds withheld, a trust fund, or a Letter of Credit.  The
               REINSURER shall have the option of determining the method of
               funding, provided it is acceptable to the insurance regulatory
               authorities having jurisdiction over the COMPANY's reserves, and
               provided REINSURER give COMPANY and the regulatory authorities
               sufficient notice to obtain regulatory approval of the funding
               mechanism in a timely manner.


<PAGE>

               When funding by a Letter of Credit, the REINSURER agrees to apply
               for and secure timely delivery to the COMPANY of a clean,
               irrevocable and unconditional Letter of Credit issued by a bank
               and containing provisions acceptable to the insurance regulatory
               authorities having jurisdiction over the COMPANY's reserves in an
               amount equal to the REINSURER's proportion of said reserves. 
               Such Letter of Credit shall be issued for a period of not less
               than one (1) year, and shall be automatically extended for one
               year from its date of expiration or any future expiration date,
               unless sixty (60) days prior to any expiration date, the issuing
               bank shall notify the COMPANY by certified or registered mail
               that the issuing bank elects not to consider the Letter of Credit
               extended for any additional period.

               The REINSURER and COMPANY agree that the Letters of Credit, trust
               funds or funds withheld provided by the REINSURER pursuant to the
               provisions of this Agreement may be drawn upon at any time,
               notwithstanding any other provision of this Agreement, and be
               used by the COMPANY or any successor, by operation of law, of the
               COMPANY including, without limitation, any liquidator,
               rehabilitator, receiver or conservator of the COMPANY for the
               following purposes, unless otherwise provided for in a separate
               trust agreement:

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

               2.   To make refund of any sum which is in excess of the actual
                    amount required to pay the REINSURER's Obligations under
                    this Agreement;

               3.   To fund an account with the COMPANY for the REINSURER's
                    Obligations.  Such cash deposit shall be held in an
                    interest bearing account separate form the COMPANY's other
                    assets, and interest thereon not in excess of the prime     
                    rate shall accrue to the benefit of the REINSURER.

               4.   To pay the REINSURER's share of any other amounts the
                    COMPANY claims are due under this Agreement.

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


<PAGE>

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

               At annual intervals, or more frequently as agreed but never more
               frequently than quarterly, the COMPANY shall prepare a specific
               statement of the REINSURER's Obligations, for the sole purpose of
               amending the Letter of Credit, the funds withheld or the trust
               fund, in the following manner.

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

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


<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
in duplicate by their duly authorized representatives.


In New York, New York this first day of February, 1997.



                              FIRST MERCURY INSURANCE COMPANY



                              \s\ RICHARD H. SMITH      
                              President



                              \s\ THOMAS B. DULAPA   
                              Secretary


And in Omaha, Nebraska this first day of February, 1997.


                              EMPIRE FIRE AND MARINE INSURANCE
                              COMPANY/EMPIRE INDEMNITY COMPANY



                              \s\ AMY S. BONES     
                              Senior Vice President


          
                              \s\ DOMINIC A. WEBER    
                              Vice President


<PAGE>

INSOLVENCY FUNDS EXCLUSION CLAUSE


This AGREEMENT excludes all liability of the COMPANY arising by contract,
operation of law, or otherwise, from its participation or membership, whether
voluntary or involuntary, in any insolvency fund.  "Insolvency fund" includes
any guaranty fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which provides for
any assessment of or payment or assumption by the COMPANY of part or all of any
claims, debt, charge, fee, or other obligation of an insurer, or its successors
or assigns, which has been declared by any competent authority to be insolvent,
or which is otherwise deemed unable to meet any claim, debt, charge, fee or
other obligation in whole or in part.