Exhibit 10.31

100% QUOTA SHARE REINSURANCE AGREEMENT

THIS 100% QUOTA SHARE REINSURANCE AGREEMENT (this “Agreement”) is entered into
on October 31, 2007, by and between MGA Insurance Company, Inc., a stock
property and casualty insurance company domiciled in the State of Texas (the
“Reinsurer”), and General Agents Insurance Company of America, Inc., a stock
property and casualty insurance company domiciled in the State of Oklahoma (the
“Company”). The Reinsurer and the Company are hereinafter each sometimes
referred to individually as a “Party” and collectively as the “Parties”.

WHEREAS, GAINSCO, Inc., the parent of the Reinsurer, and the Reinsurer have
agreed to sell to Montpelier Re U.S. Holdings Ltd. all of the issued and
outstanding capital stock of the Company pursuant to that certain Stock Purchase
Agreement (the “Purchase Agreement”), dated as of August 13, 2007, by and among
GAINSCO, Inc., the Reinsurer and Montpelier Re U.S. Holdings Ltd.;

WHEREAS, pursuant to the terms of the Purchase Agreement, GAINSCO, Inc. and the
Reinsurer have agreed to cause the Reinsurer to assume and reinsure all losses
and liabilities of the Company (i) under all new and renewal policies,
certificates, contracts, binders, agreements and other proposals and evidences
of insurance issued by or on behalf of the Company and entered into, issued,
renewed or assumed by the Company prior to the Effective Date (collectively, the
“Policies”), on a net basis, to wit: the Reinsurer’s assumption of losses and
liabilities with respect to the Policies shall be subject to any and all
payments made and recoveries and recoverables with respect to the Policies
and/or the business reinsured hereunder under any reinsurance or retrocessional
treaties and agreements pursuant to which the Company ceded liability on or
prior to the Effective Date (the “Inuring Reinsurance”), (ii) resulting from a
breach or default by any reinsurer under any Inuring Reinsurance, and
(iii) under all reinsurance or retrocessional treaties and agreements pursuant
to which the Company is a party and under which it has any liability, net of the
Inuring Reinsurance (collectively, the matters described in clauses (i),
(ii) and (iii) above are referred to herein as the “Business Reinsured”); and

WHEREAS, the Company and the Reinsurer have agreed to enter into a Reinsurance
Trust Agreement in the form of Exhibit A attached hereto (as it may be amended
from time to time, the “Reinsurance Trust Agreement”) to secure the payments of
amounts at any time and from time to time due and owing by the Reinsurer to the
Company under or in connection with this Agreement and to create a trust
thereunder that complies with the Oklahoma Insurance Code.

NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations, warranties and covenants set out herein and in the Purchase
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows.

 

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ARTICLE 1

CLASSES OF BUSINESS REINSURED

1.1 Effective as of the Effective Date of this Agreement, the Company cedes to
the Reinsurer, and the Reinsurer accepts, one hundred percent (100%) of the
Company’s liability with respect to the Business Reinsured hereunder, net of any
and all amounts recoverable by or paid to the Company under the applicable
Inuring Reinsurance. The Parties intend that the Company shall bear no business,
credit or insurance risk whatsoever with respect to any of the Policies and
other liabilities reinsured hereunder or any risk whatsoever of a default or
breach by any reinsurer under any Inuring Reinsurance, and the Reinsurer shall
hold the Company harmless and indemnify it for these and all other risks with
respect to the Business Reinsured hereunder after collection of amounts owed to
the Company under the applicable Inuring Reinsurance.

1.2 The Parties expressly covenant and agree that they will cooperate with each
other in the handling of all run-off insurance business until all outstanding
losses and loss adjustment expenses have been settled and paid. While by law and
regulation the Company recognizes its primary obligations to its policyholders,
the Reinsurer recognizes that to the greatest extent possible there shall be no
cost to or involvement by the Company in servicing any run-off under the
Policies.

ARTICLE 2

COMMENCEMENT AND TERMINATION

2.1 This Agreement shall be effective at 11:59 p.m. Central Time on October 31,
2007 (the “Effective Date”). This Agreement shall remain continuously in force
until terminated according to the provisions set forth herein or until all of
the liabilities and other obligations of the Company under all Policies have
been satisfied or the Policies have expired and all other reinsurance treaties
and agreements pursuant to which the Company has any liability have expired or
been terminated and commuted.

2.2 This Agreement may be terminated as follows:

(a) Immediately by mutual consent of the Company and Reinsurer;

(b) By the Company, upon written notice to the Reinsurer, if the Reinsurer is
found to be insolvent by a state insurance department or court of competent
jurisdiction, or is placed in supervision, conservation, rehabilitation or
liquidation, or has a receiver or supervisor appointed; or

(c) By the Company, upon ten (10) days’ prior written notice to the Reinsurer,
should the Oklahoma Department of Insurance require cancellation or disallow
credit for this reinsurance.

 

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2.3 Upon termination of this Agreement, the Reinsurer shall not be relieved of
or released from any obligation created by or under this Agreement in relation
to payment, expenses, reports, accounting or handling, which relate to the
Business Reinsured under this Agreement.

2.4 All Policies, books and other property related to the Business Reinsured
shall be deemed to be jointly owned by the Company and the Reinsurer; provided,
however, that such materials shall be held by the Reinsurer during the term of
this Agreement. Within thirty (30) days of the termination hereof pursuant to
Section 2.2, the Reinsurer shall provide the Company with copies of records
relating to known open claims and access to Policies, books and other property
with respect to future reported claims, without compelling the Company to resort
to any legal proceedings to secure the aforesaid property.

ARTICLE 3

RIGHTS OF THIRD PARTIES

Nothing herein shall in any manner create any obligations, establish any rights
or create any direct right of action against the Reinsurer in favor of any third
party or other person not party to this Agreement or create any privity of
contract between the policyholders and the Reinsurer.

ARTICLE 4

RETENTION AND LIMIT

The Company shall cede and the Reinsurer shall accept one hundred percent
(100%) of the Company’s liability with respect to the Business Reinsured, net of
any and all amounts recoverable by or paid to the Company under the applicable
Inuring Reinsurance.

ARTICLE 5

TRANSFER OF ASSETS

In consideration of the Reinsurer’s assumption of the reinsurance obligations
hereunder, on or before the Effective Date, the Company shall transfer to the
Reinsurer the assets listed in the Reinsurance Trust Agreement which shall have
a fair market value on the Effective Date equal to the sum of (i) one hundred
five percent (105%) of the sum of the Company’s case reserves for losses and
loss adjustment expenses and case IBNR reserves for losses and loss adjustment
expenses and the actuarially determined IBNR reserves as of June 30, 2007, all
of which are calculated net of any and all amounts ceded by the Company under
any Inuring Reinsurance, less the lesser of (A) the aggregate amount of losses
and loss adjustment expenses paid, or (B) the aggregate amount of case

 

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reserves for losses and loss adjustment expenses, plus the aggregate amount of
case IBNR reserves for losses and loss adjustment expenses, with respect to
claims closed after June 30, 2007 and before the Effective Date, with respect to
the liabilities ceded to the Reinsurer hereunder; (ii) for claims made after
June 30, 2007 and before the Effective Date in excess of $499,999 in any
individual case or in the aggregate, one hundred five percent (105%) of the sum
of case reserves for losses and loss adjustment expenses and case IBNR reserves
for losses and loss adjustment expenses for such claims, as determined as of the
month end for the most recent month for which the financial statements have been
completed prior to the Effective Date, all of which are calculated net of
amounts ceded by the Company under any Inuring Reinsurance; (iii) the total
amount of the formally disputed portions of reinsurance claims by or on behalf
of the Company which were outstanding on the Effective Date, under any Inuring
Reinsurance; and (iv) for each Inuring Reinsurance agreement pursuant to which
the Company ceded liabilities to a third party reinsurer that has an A.M. Best
Company rating on the Effective Date that is lower than “A-”, the liability
ceded to such reinsurer by the Company as determined as of the month end for the
most recent month for which the financial statements have been completed prior
to the Effective Date. The Reinsurer shall be required to record and maintain
the reserves with respect to the Policies in accordance with the same reserving
practices utilized by the Company prior to the Effective Date, and the Company
may account for such reserves on its balance sheet as net of the reserves ceded
to the Reinsurer. The monthly financial statements referenced in clause
(ii) above shall be as of a month end that is no more than thirty (30) days
prior to the Effective Date, and the monthly financial statements referenced in
clause (iv) above shall be as of a month end that is no more than forty-five
(45) days prior to the Effective Date.

ARTICLE 6

ASSIGNMENTS, ASSESSMENTS, FINES, PENALTIES AND EXPENSES

6.1 This Agreement shall apply to risks assigned to the Company under any
assigned risk plan if, in the reasonable judgment of the Company, such risks
were assigned to the Company because of the business reinsured hereunder.

6.2 With respect to the Business Reinsured hereunder, after consideration of any
and all amounts recoverable by or paid to the Company under the applicable
Inuring Reinsurance, this Agreement shall apply to and the Reinsurer shall
immediately reimburse the Company one hundred percent (100%) for any assessments
made against the Company pursuant to those laws and regulations creating
obligatory funds (including, without limitation, insurance guaranty and
insolvency funds), pools (including catastrophe pools), board and bureau fees,
joint underwriting associations, FAIR plans and similar plans, and any
assessments made pursuant to the Oklahoma Property and Insurance Guaranty
Association Act, or any successor statute thereto. Amounts owed by the Reinsurer
under this Article shall be payable directly by the Reinsurer to the Company
upon demand by the Company. The Reinsurer shall be entitled to receive from the
Company on or prior to March 31st of each year during the term hereof (or such
date on which such premium taxes are paid) a sum equal to the premium tax
credit, if any, that

 

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is allowed to the Company with respect to such assessments. The premium tax
credit allowed the Reinsurer hereunder is to be on a pro rata and first-in,
first-out basis. The Company shall promptly return to the Reinsurer the amount
of any assessment refunded to or credited to the Company pursuant to the
Oklahoma Property and Insurance Guaranty Association Act.

6.3 The Reinsurer shall also pay promptly and directly to the Company any fines,
penalties and any other charges incurred by the Company in respect of the
Business Reinsured hereunder unless such fines, penalties or other charges have
been finally determined by a court of competent jurisdiction, after the
exhaustion of all appeals, to have been a direct result of the actual fraud or
violation of any criminal law by the Company after the Effective Date.

6.4 The Reinsurer is responsible for and shall promptly pay all expenses
attributable to the facilities provided and services rendered with respect to
the Business Reinsured under this Agreement. These expenses include, without
limitation, salaries and all other benefits of all employees of the Reinsurer;
transportation, lodging and meals of employees of the Reinsurer; postage and
delivery charges; EDP hardware, software and programming expenses; all taxes on
premium and policy fees for the Business Reinsured hereunder; adjustment
expenses (both allocated and unallocated) arising from claims on the Business
Reinsured under this Agreement; expenses associated with the provision of office
space, equipment and other facilities necessary for the operations of the
Reinsurer; and reasonable legal and auditing expenses incurred at the direction
of the Reinsurer or in complying with the provision of the Oklahoma Insurance
Code and any regulations applicable to or affecting the Company with respect to
the Business Reinsured hereunder.

ARTICLE 7

ACCOUNTS AND REPORTS

In order to facilitate the handling of the Business Reinsured under this
Agreement, the Reinsurer agrees to furnish the Company with reports with respect
to the Business Reinsured under this Agreement as needed or reasonably requested
by the Company to prepare its quarterly and annual statements to regulatory
authorities and such other reports as the Company shall reasonably request from
time to time. All amounts due to the Company or the Reinsurer hereunder shall be
accounted for on a quarterly basis by the Reinsurer and shall be settled on a
cash basis consistent with the terms hereof. Upon the termination hereof, a
final accounting and cash settlement shall be completed within eighteen
(18) months of the effective date of termination, or at such date at which all
claims and liabilities reinsured hereunder have been extinguished.

 

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ARTICLE 8

LOSS AND LOSS ADJUSTMENT EXPENSE

8.1 After consideration of any and all amounts recoverable by or paid to the
Company under the applicable Inuring Reinsurance, the Reinsurer shall assume one
hundred percent (100%) of the risks covered by this Agreement and shall be
liable for and pay directly to the insureds on behalf of the Company one hundred
percent (100%) of all claims, losses, judgments, interest on judgments,
settlements whether under strict policy conditions or because of compromise, and
expenses incurred by the Company (including, without limitation, costs, expenses
and fees, including attorneys’ fees and expenses, resulting from a declaratory
judgment or injunctive action brought by an insured or other person). The
Reinsurer shall be credited with one hundred percent (100%) of any amount
received by the Company as salvage or recovery.

8.2 The Company hereby authorizes and empowers the Reinsurer to accept notice of
and investigate any claim arising with respect to the Business Reinsured, to
pay, adjust, settle, resist or compromise any such claim. All such loss
settlements, whether under strict policy conditions or by way of compromise,
shall be unconditionally binding upon the Company. However, should the Company
be ordered or instructed by the Oklahoma Department of Insurance or any other
regulatory agency of competent jurisdiction to take any action or refrain from
taking any action with regard to any claim, and prompt notice of such order or
instruction is provided by the Company to the Reinsurer, the Reinsurer shall be
bound by and shall follow the order or instructions of such regulatory agency as
though the Reinsurer were subject to such order or instruction. The Reinsurer
will exercise the authority granted hereunder in good faith and toward the end
of paying any and all valid claims with respect to the Business Reinsured.

8.3 The Company will promptly notify the Reinsurer of any claim, suit or action
brought against the Company under any of the Policies or any reinsurance or
retrocessional treaty or agreement pursuant to which the Company may have any
liability when actually notified of a claim, suit or action against the Company,
and will promptly furnish to the Reinsurer all summons, citations, complaints,
petitions, counterclaims and other pleadings and legal instruments served upon
the Company in connection therewith. The Company hereby further authorizes and
empowers the Reinsurer to dispose of any salvage received as the result of any
loss settlement with respect to the Business Reinsured, and to enforce any right
of the Company against any person or organization for damages or equitable
relief for any loss with respect to the Business Reinsured, employing legal
counsel where necessary, and all sums received as a result thereof will be
treated as current loss recoveries by the Company and the Reinsurer. The Company
further agrees to furnish the Reinsurer, upon request, any and all legal
instruments necessary to implement the foregoing authorizations. Upon request,
the Reinsurer shall furnish to the Company any and all documents and
correspondence relating to the subject matter hereof.

 

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8.4 All records pertaining to claims with respect to the Business Reinsured
shall be deemed to be jointly owned records of the Company and the Reinsurer,
and shall be made available to the Company or the Reinsurer and their respective
representatives and any duly appointed examiner for any state within the United
States. The Company and the Reinsurer agree that they will not destroy any such
records in their possession without the prior written approval of the other,
except that the Company and the Reinsurer shall not be required to retain files
longer than required by the guidelines set by the applicable regulatory
authorities.

8.5 The Reinsurer shall establish a separate claim register or other method of
registering claims arising under the Business Reinsured so that all claims may
be segregated and identified separate and apart from other records of the
Reinsurer, with such claims register to identify each claim on an individual
case basis both as to the identity of the insured(s) and the claimant(s) and the
reserve for loss and loss adjustment expenses. Such claim register shall be kept
in a form whereby the Company can, at any time, determine the status of any
claim arising under the Business Reinsured hereunder. Such records shall reflect
the amount of reserves established for the individual claim and the date when
each such reserve was established, and if closed, whether such claim was closed
with or without payment, and if with payment, the amount paid thereon and any
reinsurance recoveries with respect to such claim.

8.6 After consideration of any and all amounts recoverable by or paid to the
Company under the applicable Inuring Reinsurance, the Reinsurer shall be liable
for one hundred percent (100%) of the loss adjustment expenses incurred by the
Company in connection with claims and settlements under the Business Reinsured,
including, without limitation, all attorney’s fees, other litigation expenses
and interest on judgments and all other expenses (including, without limitation,
attorney’s fees and costs incurred in a declaratory judgment or injunctive
action with an insured or other person), but not including office expenses or
salaries of the Company’s regular employees. The Reinsurer shall be credited
with one hundred percent (100%) of any recoveries of such loss adjustment
expense.

ARTICLE 9

LOSS IN EXCESS OF POLICY LIMITS/ECO

9.1 In the event that the Company pays or is held liable to pay an amount of
loss in excess of its Policy limit, but otherwise within the terms of its Policy
(hereinafter called “loss in excess of policy limits”) or any punitive,
exemplary, compensatory or consequential damages other than loss in excess of
policy limits (hereinafter called “extra contractual obligations”) in relation
to handling a claim reinsured hereunder or anything else related to the Business
Reinsured hereunder, one hundred percent (100%) of the loss in excess of policy
limits and/or one hundred percent (100%) of the extra contractual obligations
shall be added to the Company’s loss, if any, under the Policy involved, and the
sum thereof shall be reinsured one hundred percent (100%) under this Agreement,
net of any and all amounts recoverable by or paid to the Company under the
applicable Inuring Reinsurance.

 

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9.2 An extra contractual obligation shall be deemed to have occurred on the same
date as the loss covered or alleged to be covered under the Policy involved.

9.3 Notwithstanding any provision herein, this Agreement shall not apply to any
loss incurred by the Company which has been finally determined by a court of
competent jurisdiction, after the exhaustion of any appeals, to have been the
result of (i) any actual fraud or the violation of any criminal law by the
Company after the Effective Date, or (ii) any officer or director of the Company
acting unlawfully in collusion with any individual, corporation or any other
organization or party involved in the presentation, defense or settlement of any
claim covered hereunder.

ARTICLE 10

ERRORS AND OMISSIONS

The Company shall not be prejudiced, in any way, by any omission through
clerical error, accident or oversight to cede to the Reinsurer any Policy, loss
or liability of any kind rightly falling under the terms of this Agreement, or
by erroneous cancellation, either partial or total, of any cession, or by
omission to report, or by erroneously reporting any losses, or by any other
error or omission, but any such error or omission shall be corrected immediately
upon discovery.

ARTICLE 11

ACCESS TO RECORDS

The Reinsurer and its duly appointed representatives shall have access at any
and all reasonable times to such books and records of the Company as shall
reflect premium and loss transactions of the Company and the Business Reinsured
hereunder, for the purpose of obtaining any and all information concerning this
Agreement or the subject matter hereof. Likewise, the Company and its duly
appointed representatives shall have access at any and all reasonable times to
such books and records of the Reinsurer as shall reflect premium and loss
transactions of the Company and the Business Reinsured hereunder, for the
purpose of obtaining any and all information concerning this Agreement or the
subject matter hereof.

ARTICLE 12

INSOLVENCY

12.1 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 claims.

 

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12.2 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 reinsured),
which claim would involve a possible liability on the part of the Reinsurer,
within thirty (30) days after such claim is filed in the insolvency,
conservation or liquidation proceeding or in the receivership, and that during
the pendency of such claim, the Reinsurer may investigate such claims and
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses that 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.

12.3 Where two or more reinsurers are involved in the same claim and a majority
in interest thereof elect to interpose any defenses to such claim, the expense
shall be apportioned in accordance with the terms of this Agreement as though
such expense had been incurred by the Company.

12.4 It is further understood and agreed that, in the event of the insolvency of
the Company, the reinsurance under this Agreement shall be payable directly by
the Reinsurer to the Company or to its liquidator, receiver, conservator or
statutory successor, except (i) as provided by applicable law, (ii) where this
Agreement specifically provides another payee of such reinsurance in the event
of the insolvency of the Company, and (iii) where the Reinsurer with the consent
of the direct insured or insureds has assumed such Policy obligations of the
Company as direct obligations of the Reinsurer to the payees under such Policies
and in substitution for the obligation of the Company to such payees.

ARTICLE 13

HOLD HARMLESS PROVISIONS

13.1 Notwithstanding any provision contained herein, as respects all matters
related to this Agreement, in addition to those specific provisions insulating
the Company from specific risks hereunder, the Reinsurer hereby covenants and
agrees to reimburse and hold the Company harmless from and against every claim,
demand, liability, loss, damage, cost, charge, attorneys’ fees, expense, suit,
order, judgment and adjudication of whatever kind or character regarding (i) the
Reinsurer’s obligations under this Agreement and (ii) after consideration of any
and all amounts recoverable by or paid to the Company under the applicable
Inuring Reinsurance, the Business Reinsured hereunder (including, without
limitation, underwriting losses, credit losses, run-off expenses and all legal
fees and expenses incurred by the Company in asserting its rights

 

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under this Agreement or the Reinsurance Trust Agreement) whether or not such
claim, demand, loss, damage, cost, charge, attorneys’ fees, expense, suit,
order, judgment or liability is within the terms of Policies reinsured
hereunder.

13.2 The Reinsurer may not offset any balances on account of losses, loss
adjustment expenses or any other amounts due to the Reinsurer from the Company,
other than amounts owed pursuant to the terms of this Agreement.

13.3 The Reinsurer shall administer the Business Reinsured and the Reinsurer
shall be responsible for one hundred percent (100%) of the cost of said
administration pursuant to the terms of the Administrative Agreement executed
simultaneously herewith. If return premiums or other funds need to be returned
to premium finance companies, policyholders or sub-agents, the Reinsurer shall
pay these amounts if the successor or administrator does not.

13.4 The Reinsurer shall not sue, or seek arbitration, against the Company for
any acts of any agent of the Company for any monies which such agent owes unless
the Company has actually received those monies after the Effective Date and has
wrongfully not remitted them to the Reinsurer; and the Reinsurer shall indemnify
the Company for any damages, liabilities and expenses incurred by reason of any
agent’s acts or failure to act that is not otherwise recoverable under the
Inuring Reinsurance. The Reinsurer shall not seek to recover from, or offset
against, the Company any sums, whether premiums or other monies, which any agent
of the Company was unable or unwilling to remit to the Company or the Reinsurer.

ARTICLE 14

REINSURANCE TRUST AGREEMENT

The Reinsurer shall immediately secure its obligations under this Agreement
pursuant to a trust account established under the Reinsurance Trust Agreement,
with a qualified United States financial institution, to be executed by the
Reinsurer and the Company. The assets deposited in the trust account shall be
valued according to their current fair market values and shall consist only of
cash (United States legal tender) and other types of assets identified in the
Reinsurance Trust Agreement; provided, however, none of the assets deposited
into the trust account shall consist of investments issued by the parent,
subsidiary or affiliate of the Reinsurer. Notwithstanding any provision in this
Agreement, the assets held in the trust account shall only be withdrawn,
utilized and applied in accordance with the terms and conditions of the
Reinsurance Trust Agreement.

 

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ARTICLE 15

REGULATORY MATTERS

15.1 In confirmation of the liabilities assumed by the Reinsurer under this
Agreement, the Reinsurer hereby assumes one hundred percent (100%) of all
liability and responsibility for any premiums that are in the course of
collection.

15.2 The Reinsurer agrees, at no cost to the Company, to take those actions
(including, without limitation, modifications in how funds are handled and how
accounts are cleared and settled) and enter into those arrangements necessary to
ensure that the Company suffers no adverse impact because of this reinsurance
program, including any impact for unapproved and unsecured reinsurance balances,
and is in compliance with the laws of the State of Oklahoma or any other state
where the Company is admitted to do an insurance or reinsurance business and the
regulations promulgated by any governmental entity thereof, including the
Oklahoma Department of Insurance, in so far as this reinsurance program is
concerned.

15.3 If at any time during the term of this Agreement, the Reinsurer is not
licensed or accredited to transact the business of insurance or reinsurance in
the State of Oklahoma, the Reinsurer agrees that it shall submit to a court of
competent jurisdiction within the United States, shall agree to comply with all
requirements necessary to give such court jurisdiction, shall designate an agent
upon whom service of process may be effected, and shall agree to abide by the
final decision of such court or an appellate court to which such court’s
decision is appealed.

ARTICLE 16

ARBITRATION

16.1 As a condition precedent to any right of action hereunder, in the event of
any dispute or difference of opinion hereafter arising between the Company and
the Reinsurer with respect to this Agreement or under the Reinsurance Trust
Agreement, or with respect to the Parties’ obligations hereunder or thereunder,
it is hereby mutually agreed that such dispute or difference of opinion shall be
submitted to arbitration.

16.2 One arbiter (an “Arbiter”) shall be chosen by the Company and one Arbiter
shall be chosen by the Reinsurer and an umpire (an “Umpire”) shall be chosen by
the Arbiters, all of whom shall be active or retired disinterested executive
officers of property and casualty insurance or reinsurance companies.

16.3 In the event that a party fails to choose an Arbiter within thirty
(30) days following a written request by either party to the other to name an
Arbiter, the party who has chosen its Arbiter may choose the unchosen Arbiter.
Thereafter, the Arbiters shall choose an Umpire before entering upon
arbitration. If the Arbiters fail to agree upon the selection for the Umpire
within thirty (30) days following their appointment, each Arbiter shall name
three nominees, of whom the other shall decline two, and the decision shall be
made by drawing lots.

 

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16.4 Each party shall present its case to the Arbiters and Umpire within a
reasonable amount of time after selection of the Umpire, unless the period is
extended by the Arbiters and the Umpire in writing or at a hearing in Chicago,
Illinois. The Arbiters and Umpire shall consider this Agreement as an honorable
engagement, as well as a legal obligation, and they are relieved of all judicial
formalities and may abstain from following the strict rules of law regarding the
entering of evidence. The decision in writing by a majority of the Arbiters and
Umpire when filed with the parties shall be final and binding on the parties.
Judgment upon the final decision of the Arbiters and Umpire may be entered in
any court of competent jurisdiction.

16.5 The costs of the arbitration, including the fees of the Arbiters and the
Umpire, shall be borne equally unless the Arbiters and Umpire shall decide
otherwise.

ARTICLE 17

SAVINGS CLAUSE

If any law or regulation of any federal, state or local government of the United
States of America, or the ruling of officials having supervision over insurance
companies, should prohibit or render illegal this Agreement, or any portion
hereof, as to risks or properties located in the jurisdiction of such authority,
either the Company or the Reinsurer may upon written notice to the other suspend
or abrogate this Agreement insofar as it relates to risks or properties located
within such jurisdiction to such extent as may be necessary to comply with such
law, regulation or ruling. Such illegality shall in no way affect any other
portion hereof, provided however, that the Company may terminate or suspend this
Agreement insofar as it relates to the business to which such law, regulation or
ruling may apply.

ARTICLE 18

MISCELLANEOUS

18.1 This Agreement shall be subject to and construed under the laws of the
State of Delaware. It is agreed that the venue of any controversy arising out of
this Agreement, or any breach thereof, shall be in the Chicago, Illinois.

18.2 All notices required to be given hereunder shall be deemed to have been
duly given by personally delivering such notice in writing or by mailing it,
certified mail, return receipt requested, with postage prepaid. Any Party may
change the address to which notices and other communications hereunder are to be
sent to such Party by giving the other Party written notice thereof in
accordance with this provision.

 

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18.3 The address of the Company, for the purpose of providing notice under this
Agreement, is One Constitution Plaza, Fifth Floor, Hartford, Connecticut 06103.
The address of the Reinsurer for the purpose of providing notice under this
Agreement is 3333 Lee Parkway, Suite 1200, Dallas, Texas 75219-5134.

18.4 This Agreement shall be binding upon the Parties hereto, together with
their respective successors and permitted assigns. The Reinsurer may not assign
any of its rights or obligations under this Agreement without the prior written
consent of the Company.

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

18.6 This Agreement may be amended, modified or supplemented only by a written
instrument executed by all Parties hereto.

18.7 This Agreement is the entire agreement between the Parties and supersedes
any and all previous agreements, written or oral, and amendments thereto with
respect to the Business Reinsured, and there are no understandings between the
Parties with respect to the subject matter hereof other than as expressed in
this Agreement.

18.8 A waiver by the Company or the Reinsurer of any breach or default by the
other Party under this Agreement shall not constitute a continuing waiver or a
waiver by the Company or the Reinsurer of any subsequent act in breach or of
default hereunder.

18.9 Headings used in this Agreement are for reference purposes only and shall
not be deemed a part of this Agreement.

18.10 The Parties hereto intend all provisions of this Agreement to be enforced
to the fullest extent permitted. Accordingly, should a court of competent
jurisdiction or an arbitration panel determine that the scope of any provision
is too broad to be enforced as written, the Parties intend that the court or
arbitration panel should reform the provision to such narrower scope as it
determines to be enforceable under present or future law; such provision shall
be fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision were never a part hereof; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance.

18.11 Any offset taken with respect to amounts due to either the Reinsurer or
the Company hereunder shall be strictly limited to amounts due to or from such
Parties pursuant to this Agreement.

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IN WITNESS WHEREOF, the Parties hereto by their duly authorized representatives
have executed this 100% Quota Share Reinsurance Agreement to be effective as of
the Effective Date as provided herein.

 

MGA INSURANCE COMPANY, INC. By:   /s/ Glenn W. Anderson Name:   Glenn W.
Anderson Title:   President and Chief Executive Officer GENERAL AGENTS INSURANCE
COMPANY OF AMERICA, INC. By:   /s/ Daniel J. Coots Name:   Daniel J. Coots
Title:   Senior Vice President