Exhibit 10.1

SUBSCRIPTION AGREEMENT FOR UNITS
INSTRUCTIONS: To properly complete this Subscription Agreement:
1 All subscribers must complete all boxes on these two face pages.
2 All persons subscribing as an accredited investor under Section 6(c)(i) of
this Subscription Agreement must complete and sign Exhibits 1 or 2 (as
applicable).
3 All persons subscribing under one or more of the exemptions enumerated in
Section 6(c)(ii) of this Subscription Agreement must initial next to the
applicable paragraph.
4 All subscribers should return their completed documents, to Kingsway Financial
Services Inc., 150 Pierce Road, 6th Floor, Itasca, Illinois, 60143, Attention:
Hassan Baqar (hbaqar@kingswayfinancial.com).

TO:        Kingsway Financial Services Inc. (the "Corporation")
The undersigned (hereinafter referred to as the "Subscriber") hereby irrevocably
subscribes for and agrees to purchase the number of units ("Units") set forth
below for the aggregate subscription price set forth below (the "Aggregate
Subscription Price"), representing a subscription price of US $25.00 per Unit,
upon and subject to the terms and conditions set forth in "Terms and Conditions
of Subscription for Units of Kingsway Financial Services Inc." attached hereto
(together with the face pages and the attached Schedules A, B, C, D, E and F and
Exhibits 1 and 2, the "Subscription Agreement"). Each Unit will consist of (i)
one class A preferred share, series 1 in the capital of the Corporation (a
"Series 1 Share") and (ii) 6.25 common share class C purchase warrants (each a
"Warrant"). Beginning on September 16, 2016, each Warrant will entitle the
Subscriber to purchase one common share in the capital of the Corporation (a
"Warrant Share") at a price of $5.00 per Warrant Share at any time prior to 5:00
p.m. (Toronto time) on September 15, 2023. A summary of the terms of the Series
1 Shares and Warrants is set forth in Schedule A. Upon their issuance, each Unit
shall be immediately severable into its constituent Series 1 Share and Warrant.
____________________________________________

(Name of Subscriber - please print)

By: ________________________________________

     (Authorized signature)

____________________________________________

(Official Capacity or Title - please print)

____________________________________________

(Please print name of individual whose signature appears above if different than
the name of the Subscriber printed above.)

____________________________________________

(Subscriber's Residential Address)

____________________________________________

____________________________________________

(Telephone Number)

____________________________________________

(E-Mail Address)
 
Number of Units:
 
 
 
Aggregate Subscription Price:
(No. of Units x US$25.00 per Unit)
 
 
 
Disclosed Beneficial Purchase Information:

If the Subscriber is signing as agent for a principal pursuant to section
3(e)(i) of this Subscription Agreement (the "Disclosed Beneficial Purchaser"),
complete the following and ensure that Exhibit 1 is completed on behalf of such
Disclosed Beneficial Purchaser or initial the applicable paragraph (ii) of
section 3(d) of this Subscription Agreement on behalf of such Disclosed
Beneficial Purchaser:

________________________________________
(Name of Disclosed Beneficial Purchaser)

________________________________________
(Disclosed Beneficial Purchaser's Residential Address and Telephone Number)
Register the Units as set forth below:

____________________________________________

(Name)

____________________________________________

(Account reference, if applicable)

____________________________________________

(Address)

____________________________________________
 
Deliver the Units as set forth below:

______________________________________
(Name)

______________________________________
(Account reference, if applicable)

______________________________________
(Contact Name)

______________________________________
(Address)

______________________________________

 

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Subscriber's Present Holdings:
The Subscriber represents that securities of the Corporation presently owned
(beneficially, directly or indirectly) by the Subscriber (or the Disclosed
Beneficial Purchaser, if applicable) or over which the Subscriber (or the
Disclosed Beneficial Purchaser, if applicable) exercises control or direction,
are as follows (please indicate "nil" if you (or the Disclosed Beneficial
Purchaser, if applicable) do not currently own or control any securities of the
Corporation):

Type of Securities Presently Owned
Number or Amount
 
 
 
 
 
 

ACCEPTANCE: The Corporation hereby accepts the subscription as set forth above
on the terms and conditions contained in this Subscription Agreement.
_____________________________________, 20___
KINGSWAY FINANCIAL SERVICES INC.
By: _________________________________

 

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TERMS AND CONDITIONS OF SUBSCRIPTION FOR
UNITS OF KINGSWAY FINANCIAL SERVICES INC.
Terms of the Offering
1.
The Subscriber acknowledges (on its own behalf and, if applicable, on behalf of
each person on whose behalf the Subscriber is contracting) that this
subscription is subject to rejection, acceptance or allotment by the Corporation
in whole or in part.

2.
The Subscriber acknowledges (on its own behalf and, if applicable, on behalf of
each person on whose behalf the Subscriber is contracting) that the Units
subscribed for by it hereunder form part of a larger issuance and sale by the
Corporation of up to 262,876 Units, for aggregate proceeds of up to US$6,571,900
(the "Offering"), but that completion of the Offering is not subject to the
Corporation receiving any minimum amount of subscriptions.

3.
For the purposes of this Subscription Agreement, the “Payment Time” shall be
3:00 p.m. on December 19, 2013 or such other time as is established by the
Corporation.

4.
At or prior to the Payment Time, the funds representing the Aggregate
Subscription Price shall be transferred by the Subscriber to Computershare Trust
Company of Canada, in trust, in accordance with the payment instructions set out
in Schedule D, for the purposes of depositing the funds representing the
Aggregate Subscription Price into escrow, and the Aggregate Subscription Price
will be held by Computershare Trust Company of Canada as escrow agent (the
“Escrow Agent”), in accordance with an escrow agreement (substantively in the
form set out as Schedule E) to be entered into among the Escrow Agent, the
Corporation and the Subscriber (the “Escrow Agreement”). Such funds shall be
held by the Escrow Agent in accordance with the Escrow Agreement until the
receipt by the Escrow Agent of a notice from the Corporation in the form set out
in the Escrow Agreement (the “Escrow Release Notice”) confirming that the
condition precedent to the release by the Escrow Agent of the funds representing
the Aggregate Subscription Price to the Corporation has been satisfied (the
“Escrow Release Condition”).

5.
Subject to, and forthwith after, the satisfaction or waiver of the Escrow
Release Condition, the funds representing the Aggregate Subscription Price will
be released by the Escrow Agent to the Corporation, pursuant to the Escrow
Agreement, and the Corporation shall issue the Series 1 Shares and Warrants
comprising the Units (the date on which such issuance occurs, the “Closing
Date”) and deliver to the Subscriber, in accordance with the instructions set
out on the face page of this Subscription Agreement, the certificates
representing such securities.

Representations, Warranties and Covenants of the Subscriber
6.
The Subscriber (on its own behalf and, if applicable, on behalf of each person
on whose behalf the Subscriber is contracting) represents, warrants and
covenants to the Corporation (and acknowledges that the Corporation and its
counsel, are relying thereon) that both at the date hereof and at the Closing
Time (as defined herein):

(a)
it has been independently advised as to restrictions with respect to trading in
the Series 1 Shares and Warrants comprising the Units and, if applicable, the
common shares in the capital of the Corporation issuable upon the conversion of
such Series 1 Shares in accordance with its terms (each a "Common Share") and
the Warrant Shares, imposed by applicable securities laws, confirms that no
representation (written or oral) has been made to it by or on behalf of the
Corporation with respect thereto, acknowledges that it is aware of the
characteristics of such Series 1 Shares and Warrants or, if applicable, the
Common Shares issuable upon the conversion of the Series 1 Shares or the Warrant
Shares, the risks relating to an investment therein and of the fact that it may
not be able to resell such Series 1 Shares or Warrants or, if applicable, the
Common Shares issuable upon the conversion of the Series 1 Shares or the Warrant
Shares except in accordance with limited exemptions under applicable securities
laws and regulatory policy until expiry of the applicable restricted period and
compliance with the other requirements of applicable law; and it agrees that, in
addition to any further legend which

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may be required by the Toronto Stock Exchange, any certificates representing the
Series 1 Shares and Warrants comprising the Units and, if applicable, the Common
Shares or the Warrant Shares, may bear the following legends indicating that the
resale of such securities is restricted:
"Unless permitted under securities legislation, the holder of this security must
not trade the security before [Insert date that is 4 months and a day after
expected Closing Date]."
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY OTHER SECURITIES LAWS. THESE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE. SUCH
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 AND ANY OTHER
APPLICABLE SECURITIES LAWS, UNLESS THE HOLDER SHALL HAVE OBTAINED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.”
and the Subscriber further acknowledges that it has been advised to consult its
own legal counsel in its jurisdiction of residence for full particulars of the
resale restrictions applicable to it;
(b)
it has not received or been provided with, nor has it requested, nor does it
have any need to receive, any offering memorandum, any prospectus, sales or
advertising literature, or any other document (other than an annual report,
annual information form, interim report, information circular or any other
continuous disclosure document, the content of which is prescribed by statute or
regulation) describing or purporting to describe the business and affairs of the
Corporation which has been prepared for delivery to, and review by, prospective
purchasers in order to assist them in making an investment decision in respect
of the Units;

(c)
it understands that the Units are being offered for sale only on a "private
placement" basis and that the sale and delivery of the Units is conditional upon
such sale being exempt from the requirements as to the filing of a prospectus or
delivery of an offering memorandum or upon the issuance of such orders, consents
or approvals as may be required to permit such sale without the requirement of
filing a prospectus or delivering an offering memorandum and, as a consequence
(i) the Subscriber is restricted from using most of the civil remedies available
under securities legislation, (ii) the Subscriber may not receive information
that would otherwise be required to be provided to it under securities
legislation, and (iii) the Corporation is relieved from certain obligations that
would otherwise apply under securities legislation;

(i)
it is an "accredited investor", as such term is defined in National Instrument
45-106 entitled "Prospectus and Registration Exemptions" ("NI 45-106")
promulgated under Canadian securities legislation, it was not created and is not
being used solely to purchase or hold securities as an accredited investor as
described in paragraph (m) of the definition of "accredited investor" in NI
45-106 and has concurrently executed and delivered a Representation Letter in
the form attached to this Subscription Agreement as Exhibit 1 and specifically
represents and warrants that one or more of the categories set forth in Appendix
A attached to the Representation Letter correctly, and in all respects,
describes the Subscriber, and will describe the Subscriber as at the Closing
Date, and the Subscriber has so indicated by initialling next to the category in
such Appendix A which so describes it; or

(ii)
it is one of the following and the Subscriber has so indicated by initialling
next to the applicable paragraph below:

 

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5     

________
(I)
an employee, "executive officer", "director" or "consultant" (as such terms are
defined in NI 45-106 and reproduced in Appendix A to Exhibit 1 of this
Subscription Agreement) of the Corporation and participation in the distribution
is "voluntary", meaning it is not induced to participate in the distribution by
expectation of employment or continued employment with, appointment or continued
appointment with, or engagement to provide services or continued engagement to
provide services to, as applicable, the Corporation or a "related entity" (as
such term is defined in NI 45-106 and reproduced in Appendix A to Exhibit 1 of
this Subscription Agreement) or in the case of an employee to a consultant,
expectation of employment or continued employment with such consultant;
________
(II)
an employee, "executive officer", "director" or "consultant" of a "related
entity" (as such terms are defined in NI 45-106 and reproduced in Appendix A to
Exhibit 1 of this Subscription Agreement) of the Corporation and participation
in the trade is voluntary (as defined above); or
________
(III)
a "permitted assign" (as such term is defined in NI 45-106 and reproduced in
Appendix A to Exhibit 1 of this Subscription Agreement) of a person referred to
in paragraphs (I) or (II) and participation in the trade is voluntary (as
defined above); and

(d)
if the Subscriber is resident in or otherwise subject to applicable securities
laws in Canada and is not purchasing as principal, it is duly authorized to
enter into this Subscription Agreement and to execute and deliver all
documentation in connection with the purchase on behalf of each beneficial
purchaser, each of whom is purchasing as principal for its own account, not for
the benefit of any other person, and not with a view to the resale or
distribution of all or any of the Units, it acknowledges that the Corporation
may be required by law to disclose to certain regulatory authorities the
identity of each beneficial purchaser of Units for whom it may be acting, and it
and each beneficial purchaser is resident in the jurisdiction set out as the
"Subscriber's Residential Address" or the "Disclosed Beneficial Purchaser's
Residential Address", as applicable, and the Subscriber is either:

(i)
deemed to be purchasing as principal under NI 45-106 because it is an
"accredited investor" as such term is defined in paragraphs (p) or (q) of the
definition of "accredited investor" in NI 45-106 and reproduced in Appendix A to
Exhibit 1 of this Subscription Agreement (provided, however, that it is not a
trust company or trust corporation registered under the laws of Prince Edward
Island that is not registered or authorized under the Trust and Loan Companies
Act (Canada) or under comparable legislation in another jurisdiction of Canada)
and has concurrently executed and delivered a Representation Letter in the form
attached hereto as Exhibit 1 and has initialled Appendix A thereto indicating
that the Subscriber satisfies one of the categories of "accredited investor" set
out in paragraphs (p) or (q) of Appendix A thereto;

(e)
it acknowledges that:

(i)
no securities commission or similar regulatory authority has reviewed or passed
on the merits of the Units;

(ii)
there is no government or other insurance covering the Units;

(iii)
there are risks associated with the purchase of the Units;

(iv)
neither the Series 1 Shares nor the Warrants are listed for trading on any stock
exchange;

(v)
there are restrictions on the Subscriber's ability to resell the Units and it is
the responsibility of the Subscriber to find out what those restrictions are and
to comply with them before selling the Units; and

 

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(vi)
the Corporation has advised the Subscriber that the Corporation is relying on an
exemption from the requirements to provide the Subscriber with a prospectus and
to sell securities through a person or company registered to sell securities
under the Securities Act (Alberta), the Securities Act (British Columbia) and
the Securities Act (Ontario) and other applicable securities laws and, as a
consequence of acquiring securities pursuant to this exemption, certain
protections, rights and remedies provided by the Securities Act (Alberta), the
Securities Act (British Columbia) and the Securities Act (Ontario and other
applicable securities laws, including statutory rights of rescission or damages,
will not be available to the Subscriber; and

(vii)
the certificates representing the Series 1 Shares and Warrants comprising the
Units will be endorsed with a legend stating that such securities will be
subject to restrictions on resale in accordance with applicable securities
legislation;

(f)
the Units have not been offered to the Subscriber (or any person on whose behalf
the Subscriber is contracting) in the United States, and any person making the
order to purchase the Units and executing and delivering this Subscription
Agreement was not in the United States when the order was placed and this
Subscription Agreement was executed and delivered, unless such person is a
dealer or other professional fiduciary organized, incorporated, or (if an
individual) resident in the United States signing on behalf of a discretionary
account or similar account (other than an estate or trust) held for the benefit
or account of a Disclosed Beneficial Purchaser which is not in the United States
or a U.S. Person (as described below);

____[check if applicable]
(g)
it is not a U.S. Person (as defined in Regulation S under the United States
Securities Act of 1933, as amended (the "U.S. Securities Act"), which definition
includes, but is not limited to, an individual resident in the United States, an
estate or trust of which any executor or administrator or trustee, respectively,
is a U.S. Person and any partnership or corporation organized or incorporated
under the laws of the United States) and is not purchasing the Units on behalf
of, or for the account or benefit of, a person in the United States or a U.S.
Person;

____[check if applicable]
(h)
it has not purchased the Units as a result of any form of directed selling
efforts in the United States, as such term is defined in Regulation S under the
U.S. Securities Act;

____[check if applicable]
(i)
it is aware that the Series 1 Shares and Warrants comprising the Units have not
been registered under the U.S. Securities Act or the securities laws of any
state and that these securities may not be offered or sold in the United States
without registration under the U.S. Securities Act or compliance with
requirements of an exemption from registration and the applicable laws of all
applicable U.S. states and acknowledges that, except pursuant to the
registration rights agreement, the Corporation has no present intention of
filing a registration statement under the U.S. Securities Act in respect of any
of the Units;

(j)
it undertakes and agrees that it will not offer or sell any of the Series 1
Shares or Warrants comprising the Units in the United States unless such
securities are registered under the U.S. Securities Act and the securities laws
of all applicable states of the United States or an exemption from such
registration requirements is available, and further that it will not resell such
Series 1 Shares or Warrants or, if applicable, the Common Shares issuable upon
the conversion of the Series 1 Shares or the Warrant Shares issuable upon the
exercise of the Warrants, except in accordance with the provisions of applicable
securities legislation, regulations, rules, policies and orders and stock
exchange rules;

 

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(k)
it understands and acknowledges that the Corporation (i) is under no obligation
to be or to remain a "foreign issuer", as such term is defined in the U.S.
Securities Act, (ii) may not, at the time the Subscriber sells the Units or at
any other time, be a foreign issuer, and (iii) may engage in one or more
transactions that could cause the Corporation not to be a foreign issuer;

(l)
if it is not an individual, it pre-existed the offering of the Units and has a
bona fide business purpose other than the investment in the Units and was not
created, formed or established solely or primarily to acquire securities, or to
permit purchases of securities without a prospectus, in reliance on an exemption
from the prospectus requirements of applicable securities legislation;

(m)
if the Subscriber is resident in or otherwise subject to applicable securities
laws in the United States, the Subscriber is an "accredited investor" as defined
in Rule 501(a) under the U.S. Securities Act. The Subscriber agrees to furnish
any additional information requested by the Corporation or any of its affiliates
to assure compliance with applicable U.S. federal and state securities laws in
connection with the purchase and sale of the Units. The Subscriber acknowledges
that it has completed the investor questionnaire contained in Exhibit 2 and that
the information contained therein is complete and accurate as of the date
thereof and is hereby affirmed as of the date hereof. Any information that has
been furnished or that will be furnished by the Subscriber to evidence its
status as an accredited investor is accurate and complete, and does not contain
any misrepresentation or material omission.

(n)
other than consummating the transactions contemplated hereunder, the Subscriber
has not directly or indirectly, nor has any person acting on behalf of or
pursuant to any understanding with such Subscriber, executed any purchases or
sales, including Short Sales, of the securities of the Corporation during the
period commencing as of the time that such Subscriber first received a term
sheet (written or oral) from the Corporation or any other person representing
the Corporation setting forth the material terms of the transactions
contemplated hereunder and ending immediately prior to the execution hereof.
Notwithstanding the foregoing, in the case of a Subscriber that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Subscriber’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Subscriber’s assets, the representation set
forth above shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase the Units
covered by this Subscription Agreement. Other than to other persons party to
this Subscription Agreement, such Subscriber has maintained the confidentiality
of all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future. “Short Sales” means all
“short sales” as defined in Rule 200 of Regulation SHO under the Securities
Exchange Act of 1934, as amended (but shall not be deemed to include the
location and/or reservation of borrowable shares of common stock of the
Corporation).

(o)
if it is a corporation, partnership, trust, unincorporated association or other
entity, it has the legal capacity to enter into and be bound by this
Subscription Agreement and further certifies that all necessary approvals of
directors, trustees, fiduciaries, shareholders, partners, stakeholders, holders
of voting securities or otherwise have been given and obtained;

(p)
if it is an individual, it is of the full age of majority and is legally
competent to execute this Subscription Agreement and take all action pursuant
hereto;

(q)
the entering into of this Subscription Agreement and the transactions
contemplated hereby will not result in a violation of any of the terms or
provisions of any law applicable to the Subscriber (or any person on whose
behalf the Subscriber is contracting), or if the Subscriber (or any person on
whose behalf the Subscriber is contracting) is not a natural person, any of such
person's charter, bylaws or similar constituent documents, or any agreement to
which such person is a party or by which it is bound;

 

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(r)
this Subscription Agreement has been duly and validly authorized, executed and
delivered by and constitutes a legal, valid, binding and enforceable obligation
of the Subscriber;

(s)
in the case of a subscription by it for Units acting as agent for a principal,
it is duly authorized to execute and deliver this Subscription Agreement and all
other necessary documentation in connection with such subscription on behalf of
such principal and this Subscription Agreement has been duly authorized,
executed and delivered by or on behalf of, and constitutes a legal, valid and
binding agreement of, such principal;

(t)
it has such knowledge and experience in financial and business affairs as to be
capable of evaluating the merits and risks of its investment in the Units and is
able to, and agrees to, bear the economic risk of loss of its investment or,
where it is not purchasing as principal, each beneficial purchaser is able to,
and agrees to, bear the economic risk of loss of its investment;

(u)
it acknowledges and agrees that the Corporation makes no representations or
warranties with respect to its business or the businesses of its subsidiaries or
the transactions contemplated hereby other than those specifically set forth
herein and, in making its investment decision, the Subscriber has relied solely
upon publicly available information relating to the Corporation (including
information available in public filings with the Securities and Exchange
Commission) and not upon any verbal or written representation as to fact or
otherwise made by or on behalf of the Corporation;

(v)
the Units will be acquired by the Subscriber solely for the account of the
Subscriber, for investment purposes only and not with a view to the distribution
thereof.

(w)
if required by applicable securities legislation, regulations, rules, policies
or orders or by any securities commission, stock exchange or other regulatory
authority, the Subscriber will execute, deliver, file and otherwise assist the
Corporation in filing, such reports, undertakings and other documents with
respect to the issue of the Units including, without limitation: (A) this
Subscription Agreement; and (B) if the Subscriber, or if applicable, the
Disclosed Beneficial Purchaser, is an accredited investor, a Representation
Letter in the form attached as Exhibits 1 or 2 hereto (as applicable);

(x)
the acquisition of the Units hereunder by the Subscriber (and each person on
whose behalf the Subscriber is contracting) will not result in the Subscriber
(or any such person) becoming a "control person" in respect of the Corporation,
as defined under applicable securities laws;

(y)
no person has made to the Subscriber (or any person on whose behalf the
Subscriber is contracting) any written or oral representations (i) that any
person will resell or repurchase the Units (except in accordance with the
articles of the Corporation), or (ii) that any person will refund the purchase
price of the Units, or (iii) as to the future price or value of the Units;

(z)
the Aggregate Subscription Price which will be advanced by the Subscriber to the
Escrow Agent hereunder and pursuant to the Escrow Agreement, will not represent
proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering)
and Terrorist Financing Act (Canada) (the "PCMLA") and the Subscriber
acknowledges that the Corporation may in the future be required by law to
disclose the Subscriber's name and other information relating to this Agreement
and the Subscriber's subscription hereunder, on a confidential basis, pursuant
to the PCMLA; and to the best of its knowledge (i) none of the subscription
funds to be provided by the Subscriber (A) have been or will be derived from or
related to any activity that is deemed criminal under the laws of Canada, the
United States of America, or any other jurisdiction, or (B) are being tendered
on behalf of a person or entity who has not been identified to the Subscriber,
and (ii) it shall promptly notify the Corporation if the Subscriber discovers
that any of such representations ceases to be true, and to provide the
Corporation with appropriate information in connection therewith; and

(aa)
the Subscriber (including any person on whose behalf the Subscriber is
contracting) has been encouraged to obtain independent legal, income tax and
investment advice with respect to this subscription for Units and accordingly,
has had the opportunity to acquire an understanding of the meanings of all terms
contained herein

 

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9     

relevant to the Subscriber (and each person on whose behalf the Subscriber is
contracting) for purposes of giving representations, warranties and covenants
under this Subscription Agreement.
Closing
7.
The Subscriber agrees, by not later than the Payment Time, to: (a) deliver this
duly completed and executed Subscription Agreement, including Exhibit 1, to the
Corporation at Kingsway Financial Services Inc., 150 Pierce Road, 6th Floor,
Itasca, Illinois, 60143, Attention: Hassan Baqar, at e-mail:
hbaqar@kingswayfinancial.com; and (b) deliver a duly completed and executed
Escrow Agreement (and such other documents required in connection therewith) to
the Corporation in accordance with (a) above; and (c) transfer the Aggregate
Subscription Price to the Escrow Agent in accordance with the payment
instructions set out in Schedule D. The Aggregate Subscription Price will be
held by the Escrow Agent to be delivered to the Corporation pursuant to the
Escrow Agreement.

8.
The sale of the Units pursuant to this Subscription Agreement will be completed
at the offices of Norton Rose Fulbright Canada LLP, the Corporation's counsel,
in Toronto, Ontario at 8:00 a.m. or such other time as is established by the
Corporation (the "Closing Time") on the Closing Date.

9.
The Corporation shall be entitled to rely on an executed copy of this
Subscription Agreement delivered via facsimile or electronically (including
e-mail), and acceptance by the Corporation of such executed copy of this
Subscription Agreement shall be legally effective to create a valid and binding
agreement between the Subscriber and the Corporation in accordance with the
terms hereof. In addition, this Subscription Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same document. If less than a complete copy of this
Subscription Agreement is delivered to the Corporation at the Payment Time, the
Corporation shall be entitled to assume that the Subscriber accepts and agrees
with all of the terms and conditions of this Subscription Agreement on the pages
not delivered at the Payment Time unaltered.

General
10.
The Subscriber, on its own behalf and (if applicable) on behalf of others for
whom it is contracting hereunder, agrees that the representations, warranties
and covenants of the Subscriber herein will be true and correct both as of the
Subscriber's execution of this Subscription Agreement and as of the Closing Time
and will survive the completion of the issuance of the Units. The
representations, warranties and covenants of the Subscriber herein are made with
the intent that they be relied upon by the Corporation and its counsel in
determining the eligibility of a purchaser of Units and the Subscriber agrees to
indemnify and save harmless the Corporation and its affiliates, shareholders,
directors, officers, employees, counsel and agents against all losses, claims,
costs, expenses and damages or liabilities which any of them may suffer or incur
which are caused or arise from a breach thereof. The Subscriber undertakes to
immediately notify the Corporation at Kingsway Financial Services Inc., 150
Pierce Road, 6th Floor, Itasca, Illinois, 60143, Attention: Hassan Baqar, at
e-mail: hbaqar@kingswayfinancial.com, of any change in any statement or other
information relating to the Subscriber set forth herein which takes place prior
to the Closing Time.

11.
The obligations of the parties hereunder are subject to acceptance of the terms
of the Offering by the Toronto Stock Exchange and any other required regulatory
approvals.

12.
The Subscriber acknowledges that this Subscription Agreement and the Schedules
and Exhibits hereto require the Subscriber to provide certain personal
information to the Corporation. Such information is being collected by the
Corporation for the purposes of completing the Offering, which includes, without
limitation, determining the Subscriber's eligibility (or that of any Disclosed
Beneficial Purchaser) to purchase the Units under applicable securities laws,
preparing and registering certificates representing the Units to be issued to
the Subscriber and completing filings required by any stock exchange or
securities regulatory authority. The Subscriber's personal information (and that
of any Disclosed Beneficial Purchaser) may be disclosed by the Corporation to
(a) stock exchanges or securities regulatory authorities (including the OSC as
defined below),

 

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

10     

(b) the Corporation's registrar and transfer agent, (c) Canadian tax
authorities, and (d) any of the other parties involved in the Offering,
including legal counsel, and may be included in closing books in connection with
the Offering. By executing this Subscription Agreement, the Subscriber (on its
own behalf and on behalf of any Disclosed Beneficial Purchaser for whom it is
contracting hereunder) consents to the foregoing collection, use and disclosure
of the Subscriber's (and any Disclosed Beneficial Purchaser's) personal
information. The Subscriber (on its own behalf and on behalf of any Disclosed
Beneficial Purchaser for whom it is contracting hereunder) also consents to the
filing of copies or originals of any of the Subscriber's documents delivered in
connection with this Subscription Agreement as may be required to be filed with
any stock exchange or securities regulatory authority in connection with the
transactions contemplated hereby and expressly consents to the collection, use
and disclosure of the Subscriber's (and any Disclosed Beneficial Purchaser's)
personal information by the Toronto Stock Exchange for the purposes identified
by such exchange, from time to time. The Subscriber (on its own behalf and on
behalf of any Disclosed Beneficial Purchaser for whom it is contracting
hereunder) further acknowledges that it has been notified by the Corporation (a)
of the requirement to deliver to the Ontario Securities Commission (the "OSC")
the full name, residential address and telephone number of the purchaser of the
securities, the number and type of securities purchased, the total purchase
price, the exemption relied upon and the date of distribution; (b) that this
information is being collected indirectly by the OSC under the authority granted
to it in securities legislation; (c) that this information is being collected
for the purposes of the administration and enforcement of the securities
legislation of Ontario; and (d) that the Administrative Support Clerk can be
contacted at Ontario Securities Commission, Suite 1903, Box 55, 20 Queen Street
West, Toronto, Ontario M5H 3S8, or at (416) 593-3684, and can answer any
questions about the OSC's indirect collection of this information.
13.
The Subscriber acknowledges and agrees that all costs incurred by the Subscriber
(including any fees and disbursements of any counsel retained by the Subscriber)
relating to the sale of the Units to the Subscriber shall be borne by the
Subscriber.

14.
The Subscriber acknowledges that it has consented to and requested that all
documents evidencing or relating in any way to the sale of the Units be drawn up
in the English language only. Le soussigné reconnaît par les présentes avoir
consenti et exigé que tous les documents faisant foi ou se rapportant de quelque
manière à la vente d’actions soient rédigés en anglais seulement.

15.
The contract arising out of this Subscription Agreement and all documents
relating thereto is governed by and construed in accordance with the laws of the
Province of Ontario and the federal laws of Canada applicable therein. The
parties irrevocably attorn to the exclusive jurisdiction of the courts of the
Province of Ontario.

16.
Time is of the essence hereof.

17.
This Subscription Agreement represents the entire agreement of the parties
hereto relating to the subject matter hereof, except in respect of the Aggregate
Subscription Price being held in escrow by the Escrow Agent, which will be
governed by the Escrow Agreement, and there are no representations, covenants or
other agreements relating to the subject matter hereof, except as stated or
referred to herein.

18.
The terms and provisions of this Subscription Agreement are binding upon and
enure to the benefit of the Subscriber and the Corporation and their respective
heirs, executors, administrators, successors and assigns; provided that, except
for as otherwise herein provided, this Subscription Agreement is not assignable
by any party hereto without prior written consent of the other parties.

19.
The Subscriber, on its own behalf and, if applicable, on behalf of others for
whom it is contracting hereunder, agrees that this subscription is made for
valuable consideration and may not be withdrawn, cancelled, terminated or
revoked by the Subscriber, on its own behalf and, if applicable, on behalf of
others for whom it is contracting hereunder.

 

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

11     

20.
Neither this Subscription Agreement nor any provision hereof shall be modified,
changed, discharged or terminated except by an instrument in writing signed by
the party against whom any waiver, change, discharge or termination is sought.

21.
The invalidity, illegality or unenforceability of any provision of this
Subscription Agreement does not affect the validity, legality or enforceability
of any other provision hereof.

22.
The headings used in this Subscription Agreement have been inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this Subscription Agreement or any provision hereof.

23.
The covenants, representations and warranties contained herein shall survive the
closing of the transactions contemplated hereby.

24.
In this Subscription Agreement (including Schedules A, B, C, D, E and F and
Exhibits 1 and 2), references to "$" are to United States dollars unless
otherwise indicated.

 

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

SCHEDULE "A"
KINGSWAY FINANCIAL SERVICES INC. UNIT OFFERING SUMMARY
The following summary of the principal terms of the Offering is qualified in its
entirety by reference to the terms and conditions of the Series 1 Shares
(attached as Schedule B), the warrant agreement between the Corporation and
Computershare Trust Company of Canada (attached as Schedule C) and the
Subscription Agreement relating thereto. Prior to making any investment, the
forms of such documents should be reviewed carefully. If the terms described in
this summary are inconsistent with or contrary to the terms of such documents,
such documents will control.
The Offering
Amount to be Raised
US$6,571,900.

Type of Security
Units, each consisting of (i) one Series 1 Share, and (ii) 6.25 Warrants.

Issue Price
US$25.00 per Unit.

Number of Units to be Issued
262,876 Units.

Use of Proceeds
The proceeds shall be used for the repayment of the Corporation’s senior notes
due February 1, 2014 (the “Senior Notes”). Proceeds of the Offering will be held
in escrow, to be released simultaneously upon the redemption of the Senior
Notes.

Preferred Shares
Ranking
The Series 1 Shares will rank senior to all classes and series of the
Corporation’s currently outstanding capital stock. The Corporation shall not
issue any other preferred shares that rank pari passu or senior to the Series 1
Shares while Series 1 Shares are outstanding.

Future Issuances
The total outstanding Series 1 Shares, including Series 1 Shares issued in this
private placement, is limited to US$10 million.

Dividends
The holders of Series 1 Shares will, in priority to any other class or series
ranking junior to the Series 1 Shares, be entitled to receive, as and when
declared by the directors of the Corporation, fixed, cumulative, preferential
cash dividends at a rate of US$1.25 per Series 1 Share per annum, payable in
equal quarterly installments. Dividends on outstanding Series 1 Shares will
accrue from day to day from the date of issuance of the Series 1 Shares. The
cash dividend rate shall be revised to US$1.875 per Series 1 Share per annum on
a prospective basis, payable in equal quarterly installments, if the dividend
cumulates for a period greater than 30 consecutive months from the date of most
recent dividend payment.

Restrictions on Payments
For so long as the Series 1 Shares are outstanding, the Corporation will not,
without the Required Approval, (i) declare or pay any cash dividends on shares
ranking junior as to the payment of dividends to the Series 1 Shares; (ii)
redeem or retire or make any capital distribution on or in respect of any shares
ranking junior as to the return of capital to the Series 1 Shares (except out of
the net cash proceeds of a substantially concurrent issue of shares ranking
junior as to capital to the Series 1 Shares); or (iii) redeem, purchase for
cancellation or otherwise retire less than all of the

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

13     

Series 1 Shares, unless (A) all dividends then payable on the Series 1 Shares
then outstanding and on all other shares ranking as to the payment of dividends
on a parity with the Series 1 Shares have been declared and paid or monies set
apart for payment; and (B) after giving effect to the payment, the realizable
value of the assets of the Corporation would not be less than the sum of the
liabilities of the Corporation plus the amount that would be required to give
effect to the rights of holders of shares (other than the Series 1 Shares) that
have a right to be paid, on redemption or liquidation, rateably with or prior to
holders of Series 1 Shares plus the amount required to redeem all of the then
outstanding Series 1 Shares, all calculated at the date of such redemption,
purchase or capital distribution, as the case may be, in accordance with
applicable law. For avoidance of doubt, the Corporation will have no restriction
on payments made in regards to its outstanding debt securities, options and
warrants.
“Required Approval” means approval by a resolution signed by all of the holders
of the then outstanding Series 1 Shares or by a resolution passed by the
affirmative vote of at least two thirds of the votes cast by the holders of
Series 1 Shares voted in respect of such resolution at a meeting of the holders
of the Series 1 Shares duly called and held for that purpose in accordance with
the by-laws of the Corporation.
Liquidation
In the event of the liquidation, dissolution or winding-up of the Corporation,
the holders of Series 1 Shares will be entitled to receive US$25.00 per Series 1
Share, plus accrued but unpaid dividends thereon, whether declared or not,
before any amount shall be paid or any assets distributed to holders of shares
of the Corporation ranking junior as to the return of capital to the Series 1
Shares. After payment to the holders of Series 1 Shares of the amounts so
payable to them, such holders shall not be entitled to share in any further
payment in respect of the distribution of the assets of the Corporation.

Mandatory Redemption
The Corporation will redeem all outstanding Series 1 Shares on April 1, 2021 for
the price of US$25.00 per Series 1 Share, plus accrued but unpaid dividends
thereon, whether or not declared, up to and including the date specified for
redemption.

Early Redemption
On and after the date that is two years from the date of issuance of the Series
1 Shares, upon 30 day notice to the holders thereof, the Corporation may redeem
all or any part of the then outstanding Series 1 Shares for the price of
US$28.75 per Series 1 Share, plus accrued but unpaid dividends thereon, whether
or not declared, up to and including the date specified for redemption.

Voting
The holders of Series 1 Shares will not be entitled to receive notice of or to
attend any meeting of shareholders of the Corporation and will not be entitled
to vote at any such meeting.

Conversion
Each Series 1 Share may be converted into 6.25 shares of common stock, no par
value (“Common Shares”), at a conversion price of US$4.00 per Common Share.

Anti-Dilution
The number of Common Shares into which the Series 1 Shares will be convertible
will be subject to adjustment in the event of certain stock

 

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

14     

dividends, subdivisions and consolidations, rights offerings, special
distributions, capital reorganizations and reclassifications of Common Shares by
the Corporation.
Registration Rights
The holders of Series 1 Shares, after 6 months from issuance, will be entitled
to a one-time demand registration of the Series 1 Shares, the Common Shares that
may be issued upon conversion of the Series 1 Shares, the Series B Warrants
(post exchange, see “Warrant Exchange” below), and Common Shares underlying the
Series B Warrants. If at any time after the date of issuance the Corporation
proposes to file a registration statement with respect to Common Shares to be
issued by the Corporation (other than with respect to shares issued to
Corporation employees or in connection with acquisitions), then the holders of
Series 1 Shares will have the right to cause the Corporation to include in such
registration statement the Common Shares that may be issued upon conversion of
the Series 1 Shares and the Common Shares that may be issued upon exercise of
Series B Warrants (post exchange), subject to customary underwriters’ cutbacks.

Warrants
Warrant Exercise
Each Warrant will be exercisable for 1 Warrant Share at an exercise price of
US$5.00.

Exercise Period
The Warrants will be exercisable beginning on September 16, 2016 and will expire
on September 15, 2023.

Redemption
The Warrants will not be redeemable by the Corporation.

Anti-Dilution
The exercise price and number of Warrant Shares purchasable under the Warrants
will be subject to proportionate adjustment in the event of any stock splits,
stock dividends, reorganizations, recapitalizations in respect of the common
stock of the Corporation.

Warrant Exchange
The Warrants will be automatically exchanged for Series B Warrants of the
Corporation after receipt of required approvals, including the approval of the
holders of the Series B Warrants. The terms of the Series B Warrants are exactly
the same as stated for Warrants. The Series B Warrants are listed on the TSX.
The Warrants will not be listed on any exchange.

 

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

SCHEDULE "B"
CLASS A PREFERRED SHARE, SERIES 1 TERMS AND CONDITIONS

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

SCHEDULE "C"
WARRANT AGREEMENT

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

SCHEDULE "D"
PAYMENT INSTRUCTIONS

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

SCHEDULE "E"
FORM OF ESCROW AGREEMENT

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

SCHEDULE "F"
FORM OF REGISTRATION RIGHTS AGREEMENT

 
    

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

EXHIBIT 1
REPRESENTATION LETTER
(FOR CANADIAN RESIDENT ACCREDITED INVESTORS)
TO:    Kingsway Financial Services Inc. (the "Corporation")
(Capitalized terms not specifically defined in this Exhibit have the meaning
ascribed to them in the Subscription Agreement to which this Exhibit is
attached)
In connection with the execution by the undersigned Subscriber of the
Subscription Agreement which this Representation Letter forms a part of, the
undersigned Subscriber hereby represents, warrants, covenants and certifies to
the Corporation that:
1.
the undersigned Subscriber is resident in the jurisdiction set out as the
"Subscriber's Residential Address" on the face page of the Subscription
Agreement and if the undersigned Subscriber is purchasing as agent for a
Disclosed Beneficial Purchaser, the Disclosed Beneficial Purchaser is resident
in the jurisdiction set out as the "Disclosed Beneficial Purchaser's Residential
Address" on the face page of the Subscription Agreement;

2.
the undersigned Subscriber is either (a) purchasing the Units as principal for
its own account, (b) deemed to be purchasing the Units as principal in
accordance with section 2.3(2) or (4) of National Instrument 45-106 entitled
"Prospectus and Registration Exemptions" ("NI 45-106"), or (c) acting as agent
for a Disclosed Beneficial Purchaser who is purchasing the Units as principal
for its own account;

3.
the undersigned Subscriber (or if the undersigned Subscriber is purchasing as
agent for a Disclosed Beneficial Purchaser, the Disclosed Beneficial Purchaser)
is an "accredited investor" within the meaning of NI 45-106 by virtue of
satisfying the indicated criterion as set out in Appendix A to this
Representation Letter;

4.
the undersigned Subscriber (or if the undersigned Subscriber is purchasing as
agent for a Disclosed Beneficial Purchaser, the Disclosed Beneficial Purchaser)
was not created, and is not used, solely to purchase or hold securities as an
accredited investor as described in paragraph (m) of the definition of
"accredited investor" in NI 45-106; and

5.
upon execution of this Representation Letter by the undersigned Subscriber, this
Representation Letter, including Appendix A hereto, shall be incorporated into
and form a part of the Subscription Agreement.

Dated: ___________________, 20_____.
___________________________________________
Print name of Subscriber
By:    _______________________________________
Signature
___________________________________________
Print name of Signatory (if different from the Subscriber)
___________________________________________
Title

IMPORTANT: PLEASE INITIAL THE APPLICABLE PROVISION(S) IN
APPENDIX A ON THE FOLLOWING PAGES

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

APPENDIX A
TO EXHIBIT 1
NOTE: PLEASE MARK YOUR INITIALS BESIDE THE APPLICABLE CATEGORY OR CATEGORIES OF
"ACCREDITED INVESTOR" TO WHICH YOU BELONG.
Accredited Investor (defined in NI 45-106) means:
________
(a)
a Canadian financial institution, or a Schedule III bank; or
________
(b)
the Business Development Bank of Canada incorporated under the Business
Development Bank of Canada Act (Canada); or
________
(c)
a subsidiary of any person referred to in paragraphs (a) or (b), if the person
owns all of the voting securities of the subsidiary, except the voting
securities required by law to be owned by directors of that subsidiary; or
________
(d)
a person registered under the securities legislation of a jurisdiction of Canada
as an adviser or dealer, other than a person registered solely as a limited
market dealer under one or both of the Securities Act (Ontario) or the
Securities Act (Newfoundland and Labrador); or
________
(e)
an individual registered or formerly registered under the securities legislation
of a jurisdiction of Canada as a representative of a person referred to in
paragraph (d); or
________
(f)
the Government of Canada or a jurisdiction of Canada, or any crown corporation,
agency or wholly owned entity of the Government of Canada or a jurisdiction of
Canada; or
________
(g)
a municipality, public board or commission in Canada and a metropolitan
community, school board, the Comité de gestion de la taxe scolaire de l'île de
Montréal or an intermunicipal management board in Québec; or
________
(h)
any national, federal, state, provincial, territorial or municipal government of
or in any foreign jurisdiction, or any agency of that government; or
________
(i)
a pension fund that is regulated by the Office of the Superintendent of
Financial Institutions (Canada) a pension commission or similar regulatory
authority of a jurisdiction of Canada; or
________
(j)
an individual who, either alone or with a spouse, beneficially owns financial
assets having an aggregate realizable value that before taxes, but net of any
related liabilities, exceeds C$1,000,000; or
________
(k)
an individual whose net income before taxes exceeded C$200,000 in each of the
two most recent calendar years or whose net income before taxes combined with
that of a spouse exceeded C$300,000 in each of the two most recent calendar
years and who, in either case, reasonably expects to exceed that net income
level in the current calendar year; or
 
(Note: if individual accredited investors wish to purchase through wholly-owned
holding companies or similar entities, such purchasing entities must qualify
under section (t) below, which must be initialled.)
________
(l)
an individual who, either alone or with a spouse, has net assets of at least
C$5,000,000; or
________
(m)
a person, other than an individual or investment fund, that has net assets of at
least C$5,000,000 as shown on its most recently prepared financial statements;
or
________
(n)
an investment fund that distributes or has distributed its securities only to
 
 
(i) a person that is or was an accredited investor at the time of the
distribution,

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

- 2 -

 
 
(ii) a person that acquires or acquired securities in the circumstances referred
to in sections 2.10 [minimum amount investment] or 2.19 [additional investment
in investment funds] of NI 45-106, or
 
 
(iii) a person described in paragraph (i) or (ii) that acquires or acquired
securities under section 2.18 [investment fund reinvestment] of NI 45-106; or
________
(o)
an investment fund that distributes or has distributed securities under a
prospectus in a jurisdiction of Canada for which the regulator or, in Québec,
the securities regulatory authority, has issued a receipt; or
________
(p)
a trust company or trust corporation registered or authorized to carry on
business under the Trust and Loan Companies Act (Canada) or under comparable
legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on
behalf of a fully managed account managed by the trust company or trust
corporation, as the case may be; or
________
(q)
a person acting on behalf of a fully managed account managed by that person, if
that person
 
 
(i) is registered or authorized to carry on business as an adviser or the
equivalent under the securities legislation of a jurisdiction of Canada or a
foreign jurisdiction, and
 
 
(ii) in Ontario, is purchasing a security that is not a security of an
investment fund; or
________
(r)
a registered charity under the Income Tax Act (Canada) that, in regard to the
trade, has obtained advice from an eligibility adviser or an adviser registered
under the securities legislation of the jurisdiction of the registered charity
to give advice on the securities being traded; or
________
(s)
an entity organized in a foreign jurisdiction that is analogous to any of the
entities referred to in paragraphs (a) to (d) or paragraph (i) in form and
function; or
________
(t)
a person in respect of which all of the owners of interests, direct, indirect or
beneficial, except the voting securities required by law to be owned by
directors, are persons that are accredited investors (as defined in NI 45-106);
or
________
(u)
an investment fund that is advised by a person registered as an adviser or a
person that is exempt from registration as an adviser; or
________
(v)
a person that is recognized or designated by the securities regulatory authority
or, except in Ontario and Québec, the regulator as an accredited investor.

For the purposes hereof and the Subscription Agreement:
"affiliate" means an issuer connected with another issuer because
(a)
one of them is the subsidiary of the other, or

(b)
each of them is controlled by the same person;

"bank" means a bank named in Schedule I or II of the Bank Act (Canada);
"Canadian financial institution" means
(a)
an association governed by the Cooperative Credit Associations Act (Canada) or a
central cooperative credit society for which an order has been made under
section 473(1) of that Act, or

(b)
a bank, loan corporation, trust company, trust corporation, insurance company,
treasury branch, credit union, caisse populaire, financial services cooperative,
or league that, in each case, is authorized by an enactment of Canada or a
jurisdiction of Canada to carry on business in Canada or a jurisdiction of
Canada;

"consultant" means for an issuer, a person, other than an employee, executive
officer, or director of the issuer or of a related entity of the issuer, that

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

- 3 -

(a)
is engaged to provide services to the issuer or a related entity of the issuer,
other than services provided in relation to a distribution,

(b)
provides the services under a written contract with the issuer or a related
entity of the issuer, and

(c)
spends or will spend a significant amount of time and attention on the affairs
and business of the issuer or a related entity of the issuer

and includes
(d)
for an individual consultant, a corporation of which the individual consultant
is an employee or shareholder, and a partnership of which the individual
consultant is an employee or partner; and

(e)
for a consultant that is not an individual, an employee, executive officer, or
director of the consultant, provided that the individual employee, executive
officer, or director spends or will spend a significant amount of time and
attention on the affairs and business of the issuer or a related entity of the
issuer;

"control person" has the same meaning as in securities legislation;
"director" means
(a)
a member of the board of directors of a company or an individual who performs
similar functions for a company, and

(b)
with respect to a person that is not a company, an individual who performs
functions similar to those of a director of a company;

"eligibility adviser" means
(a)
a person that is registered as an investment dealer and authorized to give
advice with respect to the type of security being distributed, and

(b)
in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in
good standing with a law society of a jurisdiction of Canada or a public
accountant who is a member in good standing of an institute or association of
chartered accountants, certified general accountants or certified management
accountants in a jurisdiction of Canada provided that the lawyer or public
accountant must not:

(i)
have a professional, business or personal relationship with the issuer, or any
of its directors, executive officers, founders, or control persons, and

(ii)
have acted for or been retained personally or otherwise as an employee,
executive officer, director, associate or partner of a person that has acted for
or been retained by the issuer or any of its directors, executive officers,
founders or control persons within the previous 12 months;

"executive officer" means, for an issuer, an individual who is
(a)
a chair, vice-chair or president,

(b)
a vice-president in charge of a principal business unit, division or function
including sales, finance or production, or

(c)
performing a policy-making function in respect of the issuer;

"financial assets" means
(a)
cash,

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

- 4 -

(b)
securities, or

(c)
a contract of insurance, a deposit or an evidence of a deposit that is not a
security for the purposes of securities legislation;

"foreign jurisdiction" means a country other than Canada or a political
subdivision of a country other than Canada;
"founder" means, in respect of an issuer, a person who,
(a)
acting alone, in conjunction, or in concert with one or more persons, directly
or indirectly, takes the initiative in founding, organizing or substantially
reorganizing the business of the issuer, and

(b)
at the time of the distribution or trade is actively involved in the business of
the issuer;

"fully managed account" means an account of a client for which a person makes
the investment decisions if that person has full discretion to trade in
securities for the account without requiring the client's express consent to a
transaction;
"holding entity" means a person that is controlled by an individual;
"individual" means a natural person, but does not include
(a)
a partnership, unincorporated association, unincorporated syndicate,
unincorporated organization or a trust, or

(b)
a natural person in the person's capacity as trustee, executor, administrator or
other legal personal representative;

"investment fund" means a mutual fund or a non-redeemable investment fund, and,
for greater certainty in British Columbia, includes an employee venture capital
corporation that does not have a restricted constitution, and is registered
under Part 2 of the Employee Investment Act (British Columbia), R.S.B.C. 1996 c.
112, and whose business objective is making multiple investments and a venture
capital corporation registered under Part 1 of the Small Business Venture
Capital Act (British Columbia), R.S.B.C. 1996 c.429 whose business objective is
making multiple investments;
"jurisdiction" means a province or territory of Canada except when used in the
term "foreign jurisdiction";
"local jurisdiction" means the jurisdiction in which the applicable Canadian
securities regulatory authority is situate;
"mutual fund" has the meaning ascribed to it under the securities legislation of
the local jurisdiction;
"non-redeemable investment fund" means an issuer,
(a)
whose primary purpose is to invest money provided by its securityholders,

(b)
that does not invest:

(i)
for the purpose of exercising or seeking to exercise control of an issuer, other
than an issuer that is a mutual fund or a non-redeemable investment fund, or

(ii)
for the purpose of being actively involved in the management of any issuer in
which it invests, other than an issuer that is a mutual fund or a non-redeemable
investment fund, and

(c)
that is not a mutual fund;

"permitted assign" means, for a person that is an employee, executive officer,
director or consultant of an issuer or of a related entity of the issuer,

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

- 5 -

(a)
a trustee, custodian, or administrator acting on behalf of, or for the benefit
of the person,

(b)
a holding entity of the person,

(c)
a RRSP, RRIF or TFSA of the person,

(d)
a spouse of the person,

(e)
a trustee, custodian, or administrator acting on behalf of, or for the benefit
of the spouse of the person,

(f)
a holding entity of the spouse of the person, or

(g)
a RRSP, RRIF or TFSA of the spouse of the person;

"person" includes
(a)
an individual,

(b)
a corporation,

(c)
a partnership, trust, fund and an association, syndicate, organization or other
organized group of persons, whether incorporated or not, and

(d)
an individual or other person in that person's capacity as a trustee, executor,
administrator or personal or other legal representative;

"regulator" means, for the local jurisdiction, the person referred to in
Appendix D of National Instrument 14-101 opposite the name of the local
jurisdiction;
"related entity" means, for an issuer, a person that controls or is controlled
by the issuer or that is controlled by the same person that controls the issuer;
"related liabilities" means
(a)
liabilities incurred or assumed for the purpose of financing the acquisition or
ownership of financial assets, or

(b)
liabilities that are secured by financial assets;

"Schedule III bank" means an authorized foreign bank named in Schedule III of
the Bank Act (Canada);
"spouse" means an individual who,
(a)
is married to another individual and is not living separate and apart within the
meaning of the Divorce Act (Canada), from the other individual,

(b)
is living with another individual in a marriage-like relationship, including a
marriage-like relationship between individuals of the same gender, or

(c)
in Alberta, is an individual referred to in paragraph (a) or (b), or is an adult
interdependent partner within the meaning of the Adult Interdependent
Relationships Act (Alberta); and

"subsidiary" means an issuer that is controlled directly or indirectly by
another issuer and includes a subsidiary of that subsidiary.
Control
Other than in respect of the definitions of "holding entity" or "related entity"
above, a person (first person) is considered to control another person (second
person) if

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

- 6 -

(a)
the first person beneficially owns or, directly or indirectly, exercises control
or direction over securities of the second person carrying votes which, if
exercised, would entitle the first person to elect a majority of the directors
of the second person, unless that first person holds the voting securities only
to secure an obligation,

(b)
the second person is a partnership, other than a limited partnership, and first
person holds more than 50% of the interests of the partnership, or

(c)
the second person is a limited partnership and the general partner of the
limited partnership is the first person.

In respect of the definitions of "holding entity" and "related entity" above, a
person (first person) is considered to control another person (second person) if
the first person, directly or indirectly, has the power to direct the management
and policies of the second person by virtue of
(a)
ownership of or direction over voting securities in the second person,

(b)
a written agreement or indenture,

(c)
being the general partner or controlling the general partner of the second
person, or

(d)
being a trustee of the second person.

All monetary references in this Exhibit 1 are in Canadian Dollars.

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EXHIBIT 2
ACCREDITED INVESTOR QUESTIONNAIRE
(FOR U.S. RESIDENT ACCREDITED INVESTORS)
TO:        Kingsway Financial Services Inc. (the "Corporation")
(Capitalized terms not specifically defined in this Exhibit have the meaning
ascribed to them in the Subscription Agreement to which this Exhibit is
attached)
In connection with the execution by the undersigned Subscriber of the
Subscription Agreement which this Accredited Investor Questionnaire (the
“Questionnaire”) forms a part of, the undersigned Subscriber hereby represents,
warrants, covenants and certifies to the Corporation that:
1.
the undersigned Subscriber will notify the Corporation immediately of any
material change in any statement made in Appendix A hereto occurring prior to
the closing of the private placement offering contemplated by the Corporation;

2.
the undersigned Subscriber has such knowledge and experience in financial and
business matters that the undersigned Subscriber is capable of evaluating the
merits and risks of the prospective investment in the Corporation, and the
undersigned Subscriber has the ability to bear the economic risks of the
investment;

3.
the undersigned Subscriber has had the opportunity to receive adequate
information concerning the legal, business and financial conditions of the
Corporation to make an informed decision regarding an investment in the
Corporation;

4.
the undersigned Subscriber understands that the Units have not been registered
under the Securities Act of 1933, as amended (the "Act"), and cannot be sold
unless subsequently registered under the Act or an exemption from such
registration is available; and

5.
upon execution of this Questionnaire by the undersigned Subscriber, this
Questionnaire, including Appendix A hereto, shall be incorporated into and form
a part of the Subscription Agreement.

Dated:             , 20___.
_________________________________________
Print name of Subscriber
By: ______________________________________
Signature
__________________________________________
Print name of Signatory (if different from the Subscriber)
___________________________________________
Title

IMPORTANT: PLEASE INITIAL THE APPLICABLE PROVISION(S) IN
APPENDIX A ON THE FOLLOWING PAGES

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- 8 -

APPENDIX A
TO EXHIBIT 2
NOTE: PLEASE MARK YOUR INITIALS BESIDE THE APPLICABLE CATEGORY OR CATEGORIES OF
"ACCREDITED INVESTOR" TO WHICH YOU BELONG.
Accredited Investor (defined in Rule 501 of Regulation D under the Securities
Act of 1933 (the "Securities Act")) means:

___________
(a)
a bank as defined in section 3(a)(2) of the Securities Act or a savings and loan
association or other institution as defined in section 3(a)(5)(A) of the
Securities Act, whether acting in an individual or fiduciary capacity; or
___________
(b)
a broker or dealer registered pursuant to section 15 of the Securities Exchange
Act of 1934; or
___________
(c)
an insurance company as defined in section 2(13) of the Securities Act; or
___________
(d)
an investment company registered under the Investment Company Act of 1940; or
___________
(e)
a business development company as defined in section 2(a)(48) of the Investment
Company Act of 1940; or
___________
(f)
a Small Business Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small Business Investment Act
of 1958; or
___________
(g)
a plan established and maintained by a state or its political subdivisions, or
any agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, provided that such employee benefit plan has total
assets in excess of $5,000,000; or
___________
(h)
an employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, provided that the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, and the plan fiduciary is
either a bank, savings and loan association, insurance company or registered
investment adviser or provided that the employee benefit plan has total assets
in excess of $5,000,000 or, if a self-directed plan, the investment decisions
are made solely by persons that are Accredited Investors; or
___________
(i)
a private business development company as defined in section 202(a)(22) of the
Investment Advisers Act of 1940; or
___________
(j)
an organization described in section 501(c)(3) of the Internal Revenue Code of
1986, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the Units, with total assets in
excess of $5,000,000; or
___________
(k)
a director, executive officer, or general partner of the issuer of the
securities being offered or sold, or any director, executive officer, or general
partner of a general partner of that issuer; or
___________
(l)
a natural person with an individual net worth, or joint net worth with that
person’s spouse, that exceeds $1,000,000 [For purposes of this item (l), "net
worth" means the excess of total assets at fair market value (including personal
and real property, but excluding the estimated fair market value of a person's
primary home) over total liabilities. Total liabilities excludes any mortgage on
the primary home in an amount of up to the home's estimated fair market value as
long as the mortgage was incurred more than 60 days before the Units are
purchased, but includes (i) any mortgage amount in excess of the home's fair
market value and (ii) any mortgage amount that was borrowed during the 60-day
period before the closing date for the sale of Securities for the purpose of
investing in the Units.]; or

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___________
(m)
a natural person with an individual income in excess of $200,000 in each of the
two most recent years and a reasonable expectation of reaching the same income
level in the current year [For purposes of this item (m), "income" means annual
adjusted gross income, as reported for federal income tax purposes, plus (i) the
amount of any tax-exempt interest income received; (ii) the amount of losses
claimed as a limited partner in a limited partnership; (iii) any deduction
claimed for depletion; (iv) amounts contributed to an IRA or Keogh retirement
plan; (v) alimony paid; and (vi) any amount by which income from long-term
capital gains has been reduced in arriving at adjusted gross income pursuant to
the provisions of Section 1202 of the Internal Revenue Code of 1986, as
amended.]; or
___________
(n)
a natural person with joint income with that person’s spouse in excess of
$300,000 in each of the two most recent years and a reasonable expectation of
reaching the same income level in the current year; or
___________
(o)
a trust, with total assets in excess of $5,000,000, not formed for the specified
purpose of acquiring the Units, whose purchase is directed by a sophisticated
person as described in Rule 506(b)(2)(ii) of Regulation D under the Securities
Act; or
___________
(p)
an entity in which all of the equity owners are accredited investors, as defined
in Rule 501 of Regulation D under the Securities Act.
___________
(q)
a natural person qualified to invest in the Units because such person has,
either alone or with such person’s representative or representatives, such
knowledge and experience in financial and business matters that such person is
capable of evaluating the merits and risks of such investment.

For the purposes hereof:

"executive officer" means the president, any vice president in charge of a
principal business unit, division or function (such as sales, administration or
finance), any other officer who performs a policy making function, or any other
person who performs similar policy making function for the issuer. Executive
officers of subsidiaries may be deemed executive officers of the issuer if they
perform such policy making functions for the issuer.