Document:

EX10.1 12-26-13

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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	________
	(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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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.

- 7 -

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

- 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

- 9 -

	
			
	___________
	(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.EX 10.2 12-26-13

Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”), is made and entered into as of December __, 2013, by and among Kingsway Financial Services Inc., a corporation incorporated under the Business Corporations Act (Ontario) (the “Company”), and the persons identified on Schedule A hereto (collectively, the “Investors” and each individually, an “Investor”).
WHEREAS, each Investor is a party to a Subscription Agreement, dated as of December 19, 2013 (the “Subscription Agreement”) with the Company, pursuant to which the Investors are purchasing an aggregate of 262,876 units of the Company (“Units”), each unit consisting of (i) 1 share of Class A Preferred Shares, Series 1 (“Series 1 Shares”), and (ii) 6.25 Series C Warrants (“Series C Warrants”); and
WHEREAS, in connection with the consummation of the transactions contemplated by the Subscription Agreement, and pursuant to the terms of the Subscription Agreement, the parties desire to enter into this Agreement in order to grant certain registration rights to the Investors as set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual and dependent covenants hereinafter set forth, the parties agree as follows:
		
	1.
	Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” has the meaning set forth in the preamble.
“Board” means the board of directors of the Company (and any successor governing body of the Company or any successor of the Company).
“Commission” means the Securities and Exchange Commission or any other federal agency administering the Securities Act and the Exchange Act at the time.
“Common Stock” means the common stock, no par value per share, of the Company and any other common equity securities issued by the Company, and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation or other corporate reorganization).
“Company” has the meaning set forth in the preamble and includes the Company’s successors by merger, acquisition, reorganization or otherwise.
“Demand Registration” has the meaning set forth in Section 2(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect from time to time.

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction.
“Investors” has the meaning set forth in the preamble.
“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
“Piggyback Registrable Securities” means the shares of Common Stock issuable upon conversion or exercise of Registrable Securities.
“Piggyback Registration” has the meaning set forth in Section 3(a).
“Prospectus” means the prospectus or prospectuses included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses.
“Registrable Securities” means (a) the Series 1 Shares, (b) any shares of Common Stock issuable upon conversion of the Series 1 Shares, (c) the Series B Warrants issued in exchange for the Series C Warrants (the “Exchange Warrants”), (d) shares of Common Stock issuable upon the exercise of the Exchange Warrants (e) any shares of Common Stock issued or issuable with respect to any Registrable Securities by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization (it being understood that for purposes of this Agreement, a Person shall be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected).  As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a Registration Statement covering such securities has been declared effective by the Commission and such securities have been disposed of pursuant to such effective Registration Statement, (ii) such securities are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, (iii) such securities are otherwise transferred and such securities may be resold without subsequent registration under the Securities Act, or (iv) such securities shall have ceased to be outstanding.
“Registration” means a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement has become effective. 
“Registration Statement” means any registration statement of the Company which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference in such Registration Statement.
“Rule 144” means Rule 144 promulgated under the Securities Act or any successor rule thereto or any complementary rule thereto (such as Rule 144A).

“Securities Act” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect from time to time.
“Selling Expenses” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities, underwriter expenses, and fees and disbursements of counsel for any holder of Registrable Securities, except for the reasonable fees and disbursements of counsel for the holders of Registrable Securities required to be paid by the Company pursuant to Section 6.
“Series 1 Shares” has the meaning set forth in the recitals.
“Series B Warrants” means warrants of the Company, each exercisable to purchase one share of Common Stock at an initial exercise price of $5.00.
“Series C Warrants” has the meaning set forth in the recitals.
“Subscription Agreement” has the meaning set forth in the recitals.
“Units” has the meaning set forth in the recitals.
		
	2.
	Demand Registration.

(a)At any time after 180 days after the date issuance of the Series 1 Shares, holders of a majority of the Registrable Securities then outstanding may request a Registration of at least 50% of the outstanding Registrable Securities (a “Demand Registration”).  Each request for a Demand Registration shall specify the approximate number of Registrable Securities required to be registered. Upon receipt of such request, the Company shall promptly (but in no event later than 15 days following receipt thereof) deliver notice of such request to all other holders of Registrable Securities who shall then have 15 days from the date such notice is given to notify the Company in writing of their desire to be included in such Registration. The Company shall cause a Registration Statement to be filed within 60 days after the date on which the initial request is given and shall use commercially reasonable efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter. The Company shall not be required to effect a Demand Registration more than once for the holders of Registrable Securities as a group; provided, that a Registration Statement shall not count as a Demand Registration requested under Section 2(a) unless and until it has become effective.

(b)The Company shall not be obligated to effect any Demand Registration within 180 days after the effective date of a previous Piggyback Registration (as defined below) in which holders of Registrable Securities were permitted to register, and actually sold, at least 50% of the shares of Registrable Securities requested to be included therein. The Company may postpone for up to 90 days the filing or effectiveness of a Registration Statement for a Demand Registration if the Company’s Board determines in its reasonable good faith judgment that such Demand Registration would (i) materially interfere with a significant acquisition, corporate organization or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act; provided, that in such event the holders of a majority of the Registrable Securities initiating such Demand Registration shall be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration shall not count as the one permitted Demand Registration hereunder and the Company shall pay all registration expenses in 

connection with such registration. The Company may delay a Demand Registration hereunder only twice in any period of twelve consecutive months.

(c)If the holders of the Registrable Securities initially requesting a Demand Registration elect to distribute the Registrable Securities covered by their request in an underwritten offering, they shall so advise the Company as a part of their request made pursuant to Section 2(a), and the Company shall include such information in its notice to the other holders of Registrable Securities. The holders of a majority of the Registrable Securities initially requesting the Demand Registration shall select the investment banking firm or firms to act as the managing underwriter or underwriters in connection with such offering; provided, that such selection shall be subject to the consent of the Company, which consent shall not be unreasonably withheld or delayed.

(d)If a Demand Registration involves an underwritten offering and the managing underwriter of the requested Demand Registration advises the Company and the holders of Registrable Securities in writing that in its opinion the number of shares of Common Stock proposed to be included in the Demand Registration, including all Registrable Securities and all other shares of Common Stock proposed to be included in such underwritten offering, exceeds the number of shares of Common Stock which can be sold in such underwritten offering and/or the number of shares of Common Stock proposed to be included in such registration would adversely affect the price per share of the Registrable Securities proposed to be sold in such underwritten offering, the Company shall include in such Demand Registration (i) first, the number of shares of Common Stock that the holders of Registrable Securities propose to sell, and (ii) second, the number of shares of Common Stock proposed to be included therein by any other Persons (including shares of Common Stock to be sold for the account of the Company and/or other holders of Common Stock) allocated among such Persons in such manner as they may agree. If the managing underwriter determines that less than all of the Registrable Securities proposed to be sold can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated pro rata among the respective holders thereof on the basis of the number of Registrable Securities owned by each such holder.

3.Piggyback Registration.

(a)Whenever the Company proposes offer and sell any shares of its Common Stock in a primary offering registered under the Securities Act (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Securities Act is applicable, or a Registration Statement on Form S-4, S-8 or any successor form thereto or another form not available for registering Piggyback Registrable Securities for sale to the public), and the form of Registration Statement to be used may be used for any registration of Piggyback Registrable Securities (a “Piggyback Registration”), the Company shall give prompt written notice (in any event no later than 20 days prior to the filing of such Registration Statement) to the holders of Registrable Securities of its intention to effect such a Registration and, subject to Section 3(b), shall include in such registration all Piggyback Registrable Securities with respect to which the Company has received written requests for inclusion from the holders thereof within 10 days after the Company’s notice has been given to each such holder.  The Company may postpone or withdraw the filing or the effectiveness of a Piggyback Registration at any time in its sole discretion. A Piggyback Registration shall not be considered a Demand Registration for purposes of Section 2 of this Agreement.

(b)If a Piggyback Registration is initiated and the managing underwriter advises the Company and the holders of Piggyback Registrable Securities (if any holders of Piggyback Registrable Securities have elected to include Piggyback Registrable Securities in such Piggyback Registration) in writing that in 

its opinion the number of shares of Common Stock proposed to be included in such registration, including all Piggyback Registrable Securities and all other shares of Common Stock proposed to be included in such underwritten offering, exceeds the number of shares of Common Stock which can be sold in such offering and/or that the number of shares of Common Stock proposed to be included in any such registration would adversely affect the price per share of the Common Stock to be sold in such offering, the Company shall include in such registration (i) first, the number of shares of Common Stock that the Company proposes to sell; (ii) second, the number of shares of Common Stock requested to be included therein by holders of Registrable Securities and any holders of securities who have registration rights pari passu with the holders of Registrable Securities, allocated pro rata among all such holders on the basis of the number of shares of Common Stock owned by each such holder or in such manner as they may otherwise agree; and (iii) third, the number of shares of Common Stock requested to be included therein by holders of Common Stock (other than holders of Registrable Securities and holders of securities who have registration rights pari passu with the holders of Registrable Securities), allocated among such holders in such manner as they may agree.

(c)If any Piggyback Registration is initiated, the Company shall select the investment banking firm or firms, if any, to act as the managing underwriter or underwriters in connection with such offering.

4.Lock-up Agreement. Each holder of Registrable Securities agrees that in connection with any public offering of the Company’s Common Stock or other equity securities, and upon the request of the managing underwriter in such offering, such holder shall not, without the prior written consent of such managing underwriter, during the period commencing on 10 days prior to the effective date of such registration and ending on the date specified by such managing underwriter (such period not to exceed 90 days), (a) offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, hedge the beneficial ownership of or otherwise dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into, exercisable for or exchangeable for shares of Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired), or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing provisions of this Section 4 shall not apply to sales of Registrable Securities to be included in such offering pursuant to Section 2(a) or Section 3(a), and shall be applicable to the holders of Registrable Securities only if all officers and directors of the Company are subject to the same restrictions. Each holder of Registrable Securities agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. Notwithstanding anything to the contrary contained in this Section 4, each holder of Registrable Securities shall be released, pro rata, from any lock-up agreement entered into pursuant to this Section 4 in the event and to the extent that the managing underwriter or the Company permit any discretionary waiver or termination of the restrictions of any lock-up agreement pertaining to any officer or director.

5.Registration Procedures. If and whenever the holders of Registrable Securities request that any Registrable Securities be registered pursuant to the provisions of this Agreement, the Company shall use its commercially reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto the Company shall as soon as reasonably practicable:

(a)subject to Section 2(a) and Section 3(a), prepare and file with the Commission a Registration Statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such Registration Statement to become effective;

(b)prepare and file with the Commission such amendments, post-effective amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for a period of not less than 180 days, or if earlier, until all of such Registrable Securities have been disposed of and to comply with the provisions of the Securities Act with respect to the disposition of such Registrable Securities in accordance with the intended methods of disposition set forth in such Registration Statement;

(c)within a reasonable time before filing such Registration Statement, Prospectus or amendments or supplements thereto, furnish to one counsel selected by holders of a majority of such Registrable Securities copies of such documents proposed to be filed, which documents shall be subject to the review and comment of such counsel;

(d)notify each selling holder of Registrable Securities, promptly after the Company receives notice thereof, of the time when such Registration Statement has been declared effective or a supplement to any Prospectus forming a part of such Registration Statement has been filed;

(e)furnish to each selling holder of Registrable Securities such number of copies of the Prospectus included in such Registration Statement (including each preliminary Prospectus) and any supplement thereto (in each case including all exhibits and documents incorporated by reference therein) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller;

(f)use its commercially reasonable efforts to register or qualify such Registrable Securities under such other securities or “blue sky” laws of such jurisdictions as any selling holder reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such holders to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holders; provided, that the Company shall not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for this Section 5(f);

(g)notify each selling holder of such Registrable Securities, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such holder, the Company shall prepare a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;

(h)provide a transfer agent and registrar (which may be the same entity) for all such Registrable Securities not later than the effective date of such registration;

(i)use its commercially reasonable efforts to cause such Registrable Securities to be listed on each securities exchange on which the Common Stock is then listed or, if the Common Stock is not then 

listed, on a national securities exchange selected by the holders of a majority of such Registrable Securities;

(j)in connection with an underwritten offering, enter into such customary agreements (including underwriting and lock-up agreements in customary form) and take all such other customary actions as the holders of such Registrable Securities or the managing underwriter of such offering reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including, without limitation, making appropriate officers of the Company available to participate in “road show” and other customary marketing activities (including one-on-one meetings with prospective purchasers of the Registrable Securities); and

(k)furnish to each selling holder of Registrable Securities and each underwriter, if any, with (i) a legal opinion of the Company’s outside counsel, dated the effective date of such Registration Statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), in form and substance as is customarily given in opinions of the Company’s counsel to underwriters in underwritten public offerings; and (ii) a “comfort” letter signed by the Company’s independent certified public accountants in form and substance as is customarily given in accountants’ letters to underwriters in underwritten public offerings;

(l)without limiting Section 5(f) above, use its commercially reasonable efforts to cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the holders of such Registrable Securities to consummate the disposition of such Registrable Securities in accordance with their intended method of distribution thereof;

(m)notify the holders of Registrable Securities promptly of any request by the Commission for the amending or supplementing of such Registration Statement or Prospectus or for additional information;

(n)advise the holders of Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued;

(o)permit any holder of Registrable Securities which holder, in its sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such Registration Statement and to require the insertion therein of language, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included;

(p)otherwise use its commercially reasonable efforts to take all other steps necessary to effect the registration of such Registrable Securities contemplated hereby.

6.Expenses. All expenses (other than Selling Expenses) incurred by the Company in complying with its obligations pursuant to this Agreement and in connection with the registration and disposition of Registrable Securities, including, without limitation, all registration and filing fees, expenses of any audits incident to or required by any such registration, fees and expenses of complying with securities and “blue sky” laws, printing expenses, fees and expenses of the Company’s counsel and accountants and reasonable 

fees and expenses of one counsel for the holders of Registrable Securities participating in a Demand Registration as a group (selected by the holders of a majority of the Registrable Securities initially requesting such registration), shall be paid by the Company. All Selling Expenses relating to Registrable Securities registered pursuant to this Agreement shall be borne and paid by the holders of such Registrable Securities, in proportion to the number of Registrable Securities registered for each such holder.

7.Indemnification.

(a)The Company shall indemnify and hold harmless, to the fullest extent permitted by law, each holder of Registrable Securities, such holder’s officers, directors, managers, members, partners, stockholders and Affiliates, each underwriter, broker or any other Person acting on behalf of such holder of Registrable Securities and each other Person, if any, who controls any of the foregoing Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against all losses, claims, actions, damages, liabilities and expenses, joint or several, to which any of the foregoing Persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, actions, damages, liabilities or expenses arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 promulgated under the Securities Act) or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation or alleged violation by the Company of the Securities Act or any other similar federal or state securities laws or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance; and shall reimburse such Persons for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, action, damage or liability, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder’s failure to deliver a copy of the Registration Statement, Prospectus, free-writing prospectus (as defined in Rule 405 promulgated under the Securities Act) or any amendments or supplements thereto (if the same was required by applicable law to be so delivered) after the Company has furnished such holder with a sufficient number of copies of the same prior to any written confirmation of the sale of Registrable Securities.

(b)In connection with any registration in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify and hold harmless, the Company, each director of the Company, each officer of the Company who shall sign such Registration Statement, each underwriter, broker or other Person acting on behalf of the holders of Registrable Securities and each Person who controls any of the foregoing Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any losses, claims, actions, damages, liabilities or expenses resulting from any untrue or alleged untrue statement of material fact contained in the Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 promulgated under the Securities Act) or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided, that the obligation to indemnify shall be several, not joint and several, for each holder and shall be limited to the net proceeds (after underwriting fees, commissions or discounts) actually received by such holder from the sale of Registrable Securities pursuant to such Registration Statement.

(c)Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in this Section 7, such indemnified party shall, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action. The failure of any indemnified party to notify an indemnifying party of any such action shall not (unless such failure shall have a material adverse effect on the indemnifying party) relieve the indemnifying party from any liability in respect of such action that it may have to such indemnified party hereunder. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and to assume the defense of the claims in any such action that are subject or potentially subject to indemnification hereunder, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after written notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided, that if (i) any indemnified party shall have reasonably concluded that there may be one or more legal or equitable defenses available to such indemnified party which are additional to or conflict with those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity provided hereunder, or (ii) such action seeks an injunction or equitable relief against any indemnified party or involves actual or alleged criminal activity, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party without such indemnified party’s prior written consent (but, without such consent, shall have the right to participate therein with counsel of its choice) and such indemnifying party shall reimburse such indemnified party and any Person controlling such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which is reasonably related to the matters covered by the indemnity provided hereunder. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. In such instance, the conflicting indemnified parties shall have a right to retain one separate counsel, chosen by the holders of a majority of the Registrable Securities included in the registration, at the expense of the indemnifying party.

(d)If the indemnification provided for hereunder is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations; provided, that the maximum amount of liability in respect of such contribution shall be limited, in the case of each holder of Registrable Securities, to an amount equal to the net proceeds (after underwriting fees, commissions or discounts) actually received by such seller from the sale of Registrable Securities effected pursuant to such registration. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contribution pursuant hereto were determined by pro rata allocation or by any other method or allocation which does 

not take account of the equitable considerations referred to herein. No Person guilty or liable of fraudulent misrepresentation shall be entitled to contribution from any Person.

8.Participation in Underwritten Registrations. No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; provided, that no holder of Registrable Securities included in any underwritten registration shall be required to make any representations or warranties to the Company or the underwriters (other than representations and warranties regarding such holder, such holder’s ownership of its shares of Common Stock to be sold in the offering and such holder’s intended method of distribution) or to undertake any indemnification obligations to the Company or the underwriters with respect thereto, except as otherwise provided in Section 7.

9.Rule 144 Compliance. With a view to making available to the holders of Registrable Securities the benefits of Rule 144 under the Securities Act and any other rule or regulation of the Commission that may at any time permit a holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3 (or any successor form), the Company shall:

(a)make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the Registration Date;

(b)use commercially reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act, at any time after the Company has become subject to such reporting requirements; and

(c)furnish to any holder so long as the holder owns Registrable Securities, promptly upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed or furnished by the Company as such holder may reasonably request in connection with the sale of Registrable Securities without registration.

10.Termination. This Agreement shall terminate and be of no further force or effect when there shall no longer be any Registrable Securities outstanding; provided, that the provisions of Section 6 and Section 7 shall survive any such termination.

11.Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11).

	
		
	If to the Company:
	Kingsway Financial Services Inc.
150 Pierce Road, 6th Floor
Itasca, IL 60143
Facsimile: (847) 952-4830
E-mail: hbaqar@kingswayfinancial.com
Attention:  Hassan Baqar

	with a copy to:
	McDermott Will & Emery LLP 
340 Madison Avenue
New York, New York 10173
Facsimile: (646) 390-1209
E-mail: jrubinstein@mwe.com
Attention: Joel L. Rubinstein, Esq.

	If to any Investor, to such Investor’s address as set forth on Schedule A hereto.

12.Entire Agreement. This Agreement, together with the Subscription Agreement and any related exhibits and schedules thereto, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. Notwithstanding the foregoing, in the event of any conflict between the terms and provisions of this Agreement and those of the Subscription Agreement, the terms and conditions of this Agreement shall control.

13.Successor and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Each Investor may assign its rights hereunder to any purchaser or transferee of Registrable Securities; provided, that such purchaser or transferee shall, as a condition to the effectiveness of such assignment, be required to execute a counterpart to this Agreement agreeing to be treated as an Investor whereupon such purchaser or transferee shall have the benefits of, and shall be subject to the restrictions contained in, this Agreement as if such purchaser or transferee was originally included in the definition of an Investor herein and had originally been a party hereto.

14.No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

15.Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

16.Amendment, Modification and Waiver. Except as otherwise provided herein, the provisions of this Agreement may only be amended, modified, supplemented or waived with the prior written consent of the Company and the holders of a majority of the Registrable Securities. No waiver by any party or parties shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

17.Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

18.Remedies. Each holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Company acknowledges that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and the Company hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

19.Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction). Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States or the courts of the State of New York in each case located in the city of New York and County of New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

20.Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby. Each party to this Agreement certifies and acknowledges that (a) no representative of any other party has represented, expressly or otherwise, that such other party would not seek to enforce the foregoing waiver in the event of a legal action, (b) such party has considered the implications of this waiver, (c) such party makes this waiver voluntarily, and (d) such party has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 20.

21.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement on the date first written above.
	
		
	 
	KINGSWAY FINANCIAL SERVICES INC.

	 
	

By_____________________
Name:
Title:

[Signature page to Registration Rights Agreement]

	
		
	 
	[INVESTOR NAME]

	 
	

By_____________________
Name:
Title:

[Signature page to Registration Rights Agreement]

Schedule A
Investors

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