Document:

<PAGE>

                                                                    EXHIBIT 10.2
--------------------------------------------------------------------------------

                         CDN $66,500,000 CREDIT FACILITY

                             CREDIT AGREEMENT AMONG

                        KINGSWAY FINANCIAL SERVICES INC.
                      AND KINGSWAY U.S. FINANCE PARTNERSHIP
                                  As Borrowers

                                       AND

                       The Lenders named herein as Lenders

                                       AND

                       CANADIAN IMPERIAL BANK OF COMMERCE
                             As Administrative Agent

                                       AND

                        LASALLE BANK NATIONAL ASSOCIATION
                              As Syndication Agent

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

                               CIBC WORLD MARKETS
                      As Sole Lead Arranger and Bookrunner

<PAGE>

                                TABLE OF CONTENTS

Section                                                                     Page

ARTICLE ONE

               INTERPRETATION................................................  1

Section 1.01   Definitions ..................................................  1
               (1)   "1999 Facility .........................................  1
               (2)   "Additional Compensation ...............................  2
               (3)   "Affiliate .............................................  2
               (4)   "Agents.................................................  2
               (5)   "Agreement..............................................  2
               (6)   "Alternate Base Rate....................................  2
               (7)   "Alternate Base Rate Loans..............................  2
               (8)   "Applicable Law.........................................  3
               (9)   "BA Equivalent Loans....................................  3
               (10)  "Bankers' Acceptance....................................  3
               (11)  "Borrowers..............................................  3
               (12)  "Borrowing..............................................  3
               (13)  "Borrowing Date.........................................  3
               (14)  "Branch of Account......................................  3
               (15)  "Business Day...........................................  3
               (16)  "Canadian Borrower......................................  3
               (17)  "Canadian Commitment....................................  4
               (18)  "Canadian Dollars" and "Cdn $...........................  4
               (19)  "Canadian Facility......................................  4
               (20)  "Canadian Lenders.......................................  4
               (21)  "Canadian Property and Casualty Industry Average
                       Combined Ratio........................................  4
               (22)  "Canadian Rateable Portion..............................  4
               (23)  "Capital Expenditures...................................  4
               (24)  "Capital Lease..........................................  4
               (25)  "Capital Surplus Ratio..................................  4
               (26)  "Capitalized Lease Obligations..........................  4
               (27)  "CDOR Rate..............................................  4
               (28)  "CIBC...................................................  5
               (29)  "Claims Incurred........................................  5
               (30)  "Claims Ratio" or "Loss Ratio"..........................  5
               (31)  "Closing Date...........................................  5
               (32)  "COBRA..................................................  5
               (33)  "Code...................................................  5
               (34)  "Combined Ratio.........................................  5
               (35)  "Commitment.............................................  5
               (36)  "Commonly Controlled Entity.............................  5
               (37)  "Consolidated...........................................  5
               (38)  "Contract Period........................................  5
               (39)  "Contractual Currency...................................  5
               (40)  "Controlled Group.......................................  5
               (41)  "Conversion.............................................  5
               (42)  "Conversion Date........................................  5

<PAGE>
Section                                                                  Page

                (43)   "Credit Facilities" ................................ 5
                (44)   "Default" .......................................... 6
                (45)   "Discount Proceeds" ................................ 6
                (46)   "Discount Rate" .................................... 6
                (47)   "EBITDA" ........................................... 6
                (48)   "Equivalent Amount" ................................ 6
                (49)   "ERISA" ............................................ 6
                (50)   "Event of Default" ................................. 6
                (51)   "Expense Ratio" .................................... 6
                (52)   "Financial Year" ................................... 6
                (53)   "F.R.S. Board" ..................................... 6
                (54)   "Funded Debt" ...................................... 7
                (55)   "GAAP" ............................................. 7
                (56)   "Governmental Authority" ........................... 7
                (57)   "Guarantee" ........................................ 7
                (58)   "Guaranteed Pension Plan" .......................... 7
                (59)   "Indebtedness" ..................................... 7
                (60)   "Insurance Regulatory Authority" ................... 8
                (61)   "Insurance Subsidiary" ............................. 8
                (62)   "Intercreditor Agreement" .......................... 8
                (63)   "Interest Coverage Ratio" .......................... 8
                (64)   "Interest Expense" ................................. 8
                (65)   "Interest Payment Date" ............................ 8
                (66)   "Kingsway America" ................................. 8
                (67)   "Kingsway America Guarantee" ....................... 8
                (68)   "Lenders" .......................................... 8
                (69)   "LIBO Rate" ........................................ 8
                (70)   "LIBO Rate (Reserve Adjusted)" ..................... 9
                (71)   "LIBOR Loans" ...................................... 9
                (72)   "LIBOR Period" ..................................... 9
                (73)   "LIBOR Reserve Percentage" ......................... 9
                (74)   "Lines of Business" ................................ 9
                (75)   "Loan Documents" ...................................10
                (76)   "Majority of the Lenders" ..........................10
                (77)   "Material Adverse Effect" ..........................10
                (78)   "Material Subsidiary" ..............................10
                (79)   "Maturity Date" ....................................10
                (80)   "Multiemployer Plan" ...............................10
                (81)   "Net Earned Premiums" ..............................10
                (82)   "Net Income" .......................................11
                (83)   "Northern Trust Indebtedness" ......................11
                (84)   "Net Written Premiums" .............................11
                (85)   "Outstanding Borrowings" ...........................11
                (86)   "Outstanding Obligations" ..........................11
                (87)   "Participants" .....................................11
                (88)   "PBGC" .............................................11
                (89)   "Permitted Acquisition" ............................11
                (90)   "Permitted Encumbrances" ...........................12
                (91)   "Permitted Indebtedness" ...........................12
                (92)   "Person" ...........................................13
                (93)   "Plan" .............................................13
                (94)   "Prime Rate" .......................................13

<PAGE>

Section                                                     Page

                  (95)     "Prime Rate Loans" ................13
                  (96)     "Purchase Money Obligations" ......14
                  (97)     "Quarterly Certificate" ...........14
                  (98)     "Rateable Portion" ................14
                  (99)     "Reorganization" ..................14
                  (100)    "Reportable Event" ................14
                  (101)    "Rollover" ........................14
                  (102)    "Rollover Date" ...................14
                  (103)    "Security Interest" ...............14
                  (104)    "Senior Funded Debt" ..............14
                  (105)    "Single Employer Plan" ............14
                  (106)    "Stamping Fee" ....................14
                  (107)    "Stamping Fee Margin" .............14
                  (108)    "Statutory Capital and Surplus" ...14
                  (109)    "Subordinated Debt" ...............15
                  (110)    "Subsidiaries" ....................15
                  (111)    "Tangible Net Worth" ..............15
                  (112)    "Tax" and "Taxes" .................15
                  (113)    "Tax Returns" .....................15
                  (114)    "Total Canadian Commitment" .......15
                  (115)    "Total Capitalization" ............15
                  (116)    "Total Commitment" ................15
                  (117)    "Total U.S. Commitment" ...........15
                  (118)    "U.S. Base Rate" ..................15
                  (119)    "U.S. Base Rate Loans" ............15
                  (120)    "U.S. Borrower" ...................15
                  (121)    "U.S. Commitment" .................15
                  (122)    "U.S. Dollars" ....................16
                  (123)    "U.S. Facility" ...................16
                  (124)    "U.S. GAAP" .......................16
                  (125)    "U.S. Lenders" ....................16
                  (126)    "U.S. Rateable Portion" ...........16
                  (127)    "Voting Control" ..................16

Section 1.02      Audited Financial Statements ...............16

Section 1.03      Canadian Currency ..........................16

Section 1.04      Interest Act ...............................16

Section 1.05      Change in Rates ............................16

Section 1.06      Maximum Interest Rate ......................17

Section 1.07      Headings and Table of Contents .............17

Section 1.08      References .................................17

Section 1.09      Number and Gender ..........................17

Section 1.10      Copies .....................................17

<PAGE>
Section                                                      Page

Section 1.11      Schedules ...................................18

ARTICLE TWO
                  CREDIT FACILITIES ...........................18

Section 2.01      Credit Facilities ...........................18

Section 2.02      Revolving Feature of Credit Facility ........19

Section 2.03      Lenders' Commitments ........................19

Section 2.04      Purposes of Credit Facilities ...............19

Section 2.05      Evidence of Indebtedness ....................19

Section 2.06      Illegality ..................................19

ARTICLE THREE
                  PROCEDURES APPLICABLE TO BORROWINGS .........20

Section 3.01      Notices of Borrowing ........................20

Section 3.02      Conversions .................................20

Section 3.03      Provisions relating to Bankers' Acceptances .20

Section 3.04      Provisions relating to LIBOR Loans ..........21

Section 3.05      Reliance on Oral Instructions ...............22

ARTICLE FOUR
                  PAYMENTS ....................................23

Section 4.01      Repayment ...................................23

Section 4.02      Mandatory Repayments ........................23

Section 4.03      Permanent Prepayment ........................23

Section 4.04      Payments Generally ..........................23

Section 4.05      No Credit for Trust Funds ...................23

Section 4.06      No Withholding ..............................24

ARTICLE FIVE
                  INTEREST, FEES AND EXPENSES .................24

Section 5.01      Payment of Interest .........................24
                         (1)    Rate ..........................24

<PAGE>

Section                                                                     Page

                         (2)   Calculation................................... 24

Section 5.02      Stamping Fees ............................................. 24

Section 5.03      Standby Fees .............................................. 24

Section 5.04      Upfront Fees .............................................. 24

Section 5.05      Administration Fees ....................................... 24

Section 5.06      Change in Circumstances ................................... 25
                  (1)      Reduction in Rate of Return ...................... 25
                  (2)      Taxes, Reserves, Capital Adequacy, etc ........... 25

Section 5.07      Reimbursement of Expenses ................................. 26

Section 5.08      Determination Conclusive .................................. 26

Section 5.09      Default Interest .......................................... 26

ARTICLE SIX

                  CONDITIONS PRECEDENT ...................................... 26

Section 6.01      Conditions - Initial Borrowing ............................ 26
                  (1)      Resolutions and Certificates ..................... 26
                  (2)      Financing Documentation .......................... 27
                  (3)      Delivery of Guarantee ............................ 27
                  (4)      Legal Opinions ................................... 27
                  (5)      Due Diligence .................................... 27
                  (6)      Intercreditor Agreement .......................... 27
                  (7)      Material Adverse Effect .......................... 27
                  (8)      Material Adverse Change .......................... 27
                  (9)      Fees and Disbursements ........................... 27
                  (10)     Security Interests ............................... 27
                  (11)     Consolidated Financial Statements ................ 28
                  (12)     Termination of the Northern Trust Indebtedness ... 28
                  (13)     Documentation .................................... 28

Section 6.02      Conditions - All Borrowings ............................... 28
                  (1)      Representations and Warranties True .............. 28
                  (2)      Indebtedness ..................................... 28
                  (3)      No Default ....................................... 28

Section 6.03      Waiver .................................................... 28

ARTICLE SEVEN

                  REPRESENTATIONS AND WARRANTIES ............................ 28

Section 7.01      Representation and Warranties ............................. 28
                  (1) Due Incorporation of the Canadian Borrower
                      and Subsidiaries....................................... 28
                  (2) U.S. Borrower ......................................... 28

<PAGE>

Section                                                                     Page

          (3)  Power ........................................................ 29
          (4)  Due Authorization and No Conflict - the Canadian Borrower .... 29
          (5)  Due Authorization and No Conflict - U.S. Borrower ............ 29
          (6)  Government Approval, Regulation, etc ......................... 29
          (7)  Business of the Borrowers .................................... 30
          (8)  Valid and Enforceable Obligations ............................ 30
          (9)  Title ........................................................ 30
          (10) No Actions ................................................... 30
          (11) Financial Information ........................................ 30
          (12) No Defaults or Events of Default ............................. 30
          (13) Compliance with Law .......................................... 30
          (14) Reporting Issuer ............................................. 30
          (15) Compliance with Securities Laws .............................. 31
          (16) Capital ...................................................... 31
          (17) Non-Dilution ................................................. 31
          (18) No Foreign Business .......................................... 31
          (19) Subsidiaries ................................................. 31
          (20) Taxes ........................................................ 31
          (21) Labour Matters ............................................... 32
          (22) Pensions ..................................................... 32
          (23) ERISA ........................................................ 33
          (24) Accuracy of Information ...................................... 34
          (25) Solvency ..................................................... 34
          (26) Subsidiary Status; Liabilities, etc .......................... 35
          (27) Financial Year End ........................................... 35
          (28) Guarantees ................................................... 35
          (29) Margin Stock ................................................. 35
          (30) Disclosure ................................................... 35
          (31) Governmental and Third Party Authorization; Permits .........  35

Section 7.02  Survival of Representations and Warranties..................... 36

ARTICLE EIGHT

          COVENANTS ......................................................... 36

Section 8.01 Positive Covenants.............................................. 36
          (1) Existence - Corporate ......................................... 36
          (2)  Existence - U.S. Borrower .................................... 36
          (3)  Conduct of Business .......................................... 37
          (4)  Payment of Principal, Interest and Expenses .................. 37
          (5)  Payment of Taxes and Claims .................................. 37
          (6)  Notice of Default or Event of Default ........................ 37
          (7)  Financial Statements ......................................... 37
          (8)  Quarterly Certificate ........................................ 38
          (9)  Intentionally Deleted ........................................ 38
          (10) Statutory Financial Statements ............................... 38
          (11) Other Information ............................................ 39
          (12) Books and Records ............................................ 39
          (13) Notice of Litigation ......................................... 39
          (14) Use of Proceeds .............................................. 39
          (15) Reserves ..................................................... 39

<PAGE>

Section                                                                     Page

                (16)  Securities Regulatory Filings; Certain Other Notices ...39
                (17)  Report to Other Creditors ..............................39
                (18)  Other Information ......................................39
                (19)  Insurance ..............................................39
                (20)  Access .................................................40
                (21)  Notice of Adverse Change ...............................40
                (22)  Material Contracts .....................................40
                (23)  Compliance with Laws ...................................40
                (24)  Notice of Employment Matters ...........................40
                (25)  Investments ............................................40
                (26)  Parity of Debt .........................................40
                (27)  Business of Subsidiaries ...............................40
                (28)  Senior Unsecured Debt Rating ...........................40
                (29)  Ownership of Subsidiaries ..............................41

Section 8.02    Financial Covenants ..........................................41
                (1)   Funded Debt to Total Capitalization Ratio ..............41
                (2)   Minimum Tangible Net Worth .............................41
                (3)   Combined Ratio .........................................41
                (4)   Capital Surplus Ratio ..................................41
                (5)   Interest Coverage Ratio ................................41

Section 8.03    Restrictive Covenants ........................................41
                (1)   Not to Amalgamate, etc. ................................41
                (2)   Indebtedness ...........................................41
                (3)   Negative Pledge ........................................41
                (4)   No Impairment of Upstreaming ...........................42
                (5)   No Guarantees ..........................................42
                (6)   Restrictions on Subsidiaries and Investments ...........43
                (7)   Material Contracts .....................................43
                (8)   No Speculative Transactions ............................44
                (9)   Margin Stock ...........................................44
                (10)  Carry on Business ......................................44
                (12)  Announcements ..........................................44
                (13)  Transactions with Directors, etc. ......................44
                (14)  Restricted Payments, etc. ..............................44
                (15)  Disposition of Assets ..................................45
                (16)  Capital Expenditures ...................................45
                (17)  Currency and Interest Rate Speculation .................45

ARTICLE NINE
                EVENTS OF DEFAULT ............................................46

Section 9.01    Events of Default ............................................46
                (1)   Failure to Pay Principal or Interest ...................46
                (2)   Failure to Pay Other Amounts ...........................46
                (3)   False Representations, Etc. ............................46
                (4)   Cross-Default ..........................................46
                (5)   Default in Certain Covenants ...........................46
                (6)   Default in Other Covenants .............................46
                (7)   Change in Ownership or Control .........................46

<PAGE>
Section                                                                     Page

                (8)   Insolvency .............................................47
                (9)   ERISA Prohibited Transactions ..........................47
                (10)  Pension Liability ......................................47
                (11)  Voluntary Proceedings ..................................47
                (12)  Involuntary Proceedings ................................47
                (13)  Adverse Judgments ......................................47
                (14)  Receiver, etc. .........................................48
                (15)  Execution, Distress ....................................48
                (16)  Suspension of Business .................................48
                (17)  Sale ...................................................48
                (18)  Regulatory Action ......................................48
                (19)  Impairment of Kingsway America Guarantee, etc. .........48

Section 9.02    Lenders May Waive ............................................48

Section 9.03    Remedies are Cumulative ......................................48

Section 9.04    Set-Off ......................................................49

Section 9.05    Cash Collateral Accounts .....................................49

ARTICLE TEN

                GENERAL ......................................................49

Section 10.01   Redistribution of Payments ...................................49

Section 10.02   Enforcement ..................................................49

Section 10.03   Readjustment of Obligations Among Lenders ....................49

Section 10.04   Notices ......................................................50

Section 10.05   Performance of Covenants by the Lenders ......................51

Section 10.06   Indemnity ....................................................51

Section 10.07   The Canadian Borrower Liability for the U.S. Borrower
                Obligations; Waivers, etc. ...................................51

Section 10.08   No Set-Off or Counterclaim ...................................52

Section 10.09   Severability .................................................52

Section 10.10   Time of Essence ..............................................52

Section 10.11   Assignment ...................................................52

Section 10.12   Entire Agreement .............................................52

Section 10.13   Amendments ...................................................53

Section 10.14   Law Governing ................................................53

<PAGE>

Section                                                                     Page

Section 10.15   Forum Selection and Consent to Jurisdiction ..................53

Section 10.16   Waiver of Jury Trial, etc. ...................................53

Section 10.17   Conflict .....................................................53

Section 10.18   Loan Syndication .............................................53

Section 10.19   Assignment and Acceptance ....................................54

Section 10.20   Judgment Currency ............................................54

Section 10.21   Successors and Assigns .......................................54

Section 10.22   Survival .....................................................54

Section 10.23   Non-U.S. Lenders .............................................55

ARTICLE ELEVEN
                THE AGENTS ...................................................55

Section 11.01   Appointment and Authorization ................................55

Section 11.02   Interest Holders .............................................55

Section 11.03   Documents ....................................................56

Section 11.04   Agent and Affiliates .........................................56

Section 11.05   Responsibility of Agents .....................................56

Section 11.06   Action by Administrative Agent ...............................56

Section 11.07   Notice of Events of Default ..................................57

Section 11.08   Responsibility Disclaimed ....................................57

Section 11.09   Indemnification ..............................................57

Section 11.10   Credit Decision ..............................................57

Section 11.11   Successor Agents .............................................58

Section 11.12   Delegation by Agents .........................................58

Section 11.13   Determinations by Agents .....................................58

Section 11.14   Reliance Upon Agents .........................................58

Section 11.15   Payment Protection ...........................................58

Section 11.16   Remittance of Payments .......................................59

<PAGE>
            Section                                                         Page

Section 11.17   Prompt Notice to the Lenders .................................59

Section 11.18   Counterparts .................................................59

<PAGE>

                                CREDIT AGREEMENT

          This credit agreement dated as of the 28th day of May, 2002

AMONG:

                  KINGSWAY FINANCIAL SERVICES INC., an Ontario
                  corporation (the "Canadian Borrower"),
                  and KINGSWAY U.S. FINANCE PARTNERSHIP, a Delaware
                  partnership (the "U.S. Borrower"),

                  (collectively referred to herein as the "Borrowers"
                  and each individually as a "Borrower")

                                     - and -

                  CANADIAN IMPERIAL BANK OF COMMERCE,
                  HSBC BANK CANADA, LASALLE BANK NATIONAL
                  ASSOCIATION and CANADIAN IMPERIAL BANK OF COMMERCE,
                  NEW YORK AGENCY

                  (collectively referred to herein as the "Lenders"
                  and each individually as a "Lender")

                                     - and -

                  CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative
                  Agent (the "Administrative Agent")

                                     - and -

                  LASALLE BANK NATIONAL ASSOCIATION, as Syndication
                  Agent (the "Syndication Agent")

           WITNESSES THAT for valuable consideration the parties agree as
           follows:

                                   ARTICLE ONE

                                 INTERPRETATION

Section 1.01 Definitions. For the purposes of this Agreement and where the
context does not otherwise require, the following terms shall have the following
meanings:

(1)  "1999 Facility" means the credit agreement, dated February 23, 1999, as
amended, with respect to U.S. $100,000,000 credit facilities, among the
Borrowers, Canadian Imperial Bank of Commerce, The Bank of Nova Scotia, LaSalle
National Bank and First Union National Bank, as Lenders, The Bank of Nova
Scotia, as Administrative Agent and Co-Syndication Agent, Canadian Imperial Bank
of Commerce, as Co-Syndication Agent and Documentation Agent, LaSalle National

<PAGE>

                                                                          Page 2

     Bank, as Administrative Agent and Co-Syndication Agent, and Canadian
     Imperial Bank of Commerce, New York Agency.

(2)  "Additional Compensation" has the meaning given that term in Section 5.06.

(3)  "Affiliate" of a Person means any other Person which, directly or
     indirectly, controls or is controlled by or is under common control with
     the first Person (excluding any trustee under, or any committee with
     responsibility for administering, any Plan), and for purposes of this
     definition, "control" (including with correlative meanings the terms
     "controlled by" and "under common control with") means if such other Person
     possesses, directly or indirectly,

     (a)  power to vote 10% or more of the securities (on a fully diluted basis)
          or other equity or membership interests of such Person having ordinary
          voting power for the election of directors or managing general
          partners or members;

     (b)  power to direct or cause the direction of the management and policies
          of such Person whether by contract or otherwise; or

     (c)  beneficial ownership of 10% or more of any class of voting stock of
          such Person or 10% or more of all outstanding equity interests or
          other interests of such Person.

(4)  "Agents" means collectively the Administrative Agent, the Syndication Agent
     and CIBC World Markets, as the sole lead arranger and bookrunner in respect
     of the Credit Facilities, and "Agent" means any one of them.

(5)  "Agreement" means this agreement and the schedules hereto and any
     amendments or supplements to this agreement or the schedules at any time
     and from time to time.

(6)  "Alternate Base Rate" means for any day, a rate per annum (rounded upwards,
     if necessary, to the next 1/16 of 1%) equal to the greater of:

     (a)  the U.S. Prime Rate in effect on such day; and

     (b)  the Federal Funds Effective Rate in effect on such day plus 3/4 of 1%.

     For  purposes of this definition:

     "Federal Funds Effective Rate" means, for any day, the weighted average of
     the rates on overnight federal funds transactions with members of the
     Federal Reserve System arranged by federal funds brokers, as published on
     the next succeeding Business Day by the Federal Reserve Bank of New York,
     or, if such rate is not so published for any day that is a Business Day,
     the average quotations, for the day, of such transactions received by the
     Administrative Agent from three federal funds brokers of recognized
     standing selected by it.

     "U.S. Prime Rate" means the rate of interest per annum publicly announced
     from time to time by CIBC as its prime rate in effect at its principal
     office in New York City. The U.S. Prime Rate is not intended to be the
     lowest rate of interest charged by CIBC in connection with extensions of
     credit to debtors.

(7)  "Alternate Base Rate Loans" means loans in U.S. Dollars made by a U.S.
     Lender to the U.S. Borrower on which the interest rate is calculated with
     reference to the Alternate Base Rate.

(8)  "Applicable Law" means, at any time, with respect to any Person, property,
     transaction or event, all present and future applicable laws, statutes,
     regulations, treaties, judgments and decrees and

<PAGE>

                                                                          Page 3

     (whetheror not having the force of law) all applicable official directives,
     rules, consents, approvals, by-laws, permits, authorizations, guidelines,
     orders and policies of any governmental or regulatory body or Persons
     having authority over any of the parties hereto including, without
     limitation, applicable regulatory financial ratio guidelines.

(9)  "BA Equivalent Loans" has the meaning set forth in Section 3.03(7) hereof.

(10) "Bankers' Acceptance" means a bill of exchange or draft which is drawn by
     the Canadian Borrower and:

     (i)   is issued initially in an amount of not less than Cdn $1,000,000 and
           in whole multiples of Cdn $100,000 thereafter;

     (ii)  is for a term of approximately one month, two months, three months or
           six months as stipulated by the Canadian Borrower;

     (iii) matures on a Business Day not later than the Maturity Date; and

     (iv)  is payable only in Canada.

(11) "Borrowers" means, collectively, the Canadian Borrower and the U.S.
     Borrower, and "Borrower" means either one of them.

(12) "Borrowing" means a use of the Credit Facilities by way of, in the case of
     the Canadian Borrower, a Prime Rate Loan, a U.S. Base Rate Loan, a LIBOR
     Loan, a Bankers' Acceptance or a BA Equivalent Loan, and in the case of the
     U.S. Borrower, an Alternate Base Rate Loan or a LIBOR Loan.

(13) "Borrowing Date" means a Business Day on which a Borrowing is made.

(14) "Branch of Account" means in respect of the Canadian Borrower and the
     Canadian Lenders, the main branch of CIBC located at Commerce Court West,
     Toronto, Ontario, M5L 1A2 or such other place as designated by the
     Administrative Agent, and in respect of the U.S. Borrower and the U.S.
     Lenders, means such branch as designated by the Administrative Agent from
     time to time.

(15) "Business Day" means, in respect of the funding or repayment of a Prime
     Rate Loan, U.S. Base Rate Loan, Bankers' Acceptance or BA Equivalent Loans,
     a day on which banks are open for business in Toronto, Ontario other than a
     Saturday, Sunday or legal holiday; in respect of the funding or repayment
     of an Alternate Base Rate Loan, means a day on which banks are open for
     business in New York, New York and in Toronto, Ontario other than a
     Saturday, Sunday or legal holiday; and in the case of funding or repayment
     of a LIBOR Loan, a day in which banks are open for business in Toronto,
     Ontario, New York, New York and London, England other than a Saturday,
     Sunday or legal holiday.

(16) "Canadian Borrower" means Kingsway Financial Services Inc., an Ontario
     corporation.

(17) "Canadian Commitment" means the commitment of each Canadian Lender to
     permit Borrowings by the Canadian Borrower in the aggregate amount of
     Canadian Dollars or the Equivalent Amount in U.S. Dollars set forth
     opposite such Canadian Lender's name on Schedule "A" as may be from time to
     time reduced pursuant to Section 10.03(b) and as such Schedule "A" may be
     amended from time to time in accordance with the provisions of this
     Agreement.

<PAGE>

                                                                          Page 4

(18) "Canadian Dollars" and "Cdn $" each means lawful money of Canada.

(19) "Canadian Facility" means the credit facility made available by the
     Canadian Lenders to the Canadian Borrower under Section 2.01(1).

(20) "Canadian Lenders" means, on the Closing Date, CIBC and HSBC Bank Canada
     and thereafter all financial institutions then currently participating in
     the Canadian Facility.

(21) "Canadian Property and Casualty Industry Average Combined Ratio" means such
     ratio as established on a quarterly and annual basis by the Insurance
     Bureau of Canada.

(22) "Canadian Rateable Portion" of a Canadian Lender means the quotient
     obtained by dividing that Canadian Lender's Canadian Commitment by the
     Total Canadian Commitment as set forth on Schedule "A", as Schedule "A" may
     be amended from time to time in accordance with the provisions of this
     Agreement.

(23) "Capital Expenditures" means expenditures for the purchase, lease or
     acquisition of assets required to be capitalized in accordance with GAAP
     including, without limiting the generality of the foregoing, fixed assets
     and real property.

(24) "Capital Lease" means any lease of any property (whether real, personal or
     mixed) by any Person as lessee that, in accordance with GAAP, either would
     be required to be classified and accounted for as a capital lease on a
     balance sheet of such Person or otherwise be disclosed as such in a note to
     such balance sheet.

(25) "Capital Surplus Ratio" means the aggregate of Net Written Premiums as a
     percentage of Statutory Capital and Surplus.

(26) "Capitalized Lease Obligations" means monetary obligations under agreements
     for the lease or rental of real or personal property that in accordance
     with GAAP are required to be classified and accounted for as Capital
     Leases, and, for purposes of this Agreement, the amount of such obligations
     shall be the capitalized amount thereof, determined in accordance with
     GAAP, and the stated maturity thereof shall be the date of the last payment
     of rent or any other amount due under such lease prior to the first date
     upon which such lease may be terminated by the lessee without payment of a
     penalty.

(27) "CDOR Rate" means on any date, in respect of any Bankers' Acceptance, the
     per annum rate of interest which is the rate based on the average of the
     discount rates applicable to Canadian Dollar bankers' acceptances, for a
     term equivalent to the relevant Bankers' Acceptances, appearing on the
     "Reuters Screen CDOR Page" (as defined in the International Swap Dealers
     Association, Inc. definitions as modified and amended from time to time)
     for acceptances of Schedule I banks under the Bank Act (Canada) as of 10:00
     a.m. Toronto time on such date, or if such date is not a Business Day, then
     on the immediately preceding Business Day; provided, however, that if no
     such average rate appears on the Reuters Screen CDOR Page as contemplated,
     the CDOR Rate on any date shall be calculated as the arithmetic mean of the
     rates for the term referred to above applicable to Canadian Dollar bankers'
     acceptances quoted by CIBC as at 10:00 a.m. Toronto time, on such date, or
     if such date is not a Business Day, than on the immediately preceding
     Business Day.

(28) "CIBC" means Canadian Imperial Bank of Commerce, a Canadian chartered bank.

(29) "Claims Incurred" means the aggregate of all claims paid during an
     accounting period adjusted by the change in claims reserved for that
     accounting period together with (i) the related loss

<PAGE>

                                                                          Page 5

     adjustment expense, and (ii) expenses of claims handling customarily
     recognized by the Canadian Borrower in its calculation of Claims Ratio in
     its quarterly reporting.

(30) "Claims Ratio" or "Loss Ratio" means Claims Incurred, net of reinsurance,
     expressed as a percentage of Net Earned Premiums.

(31) "Closing Date" means May 28, 2002.

(32) "COBRA" means continuation coverage described in Part 6 of Title 1 of
     ERISA.

(33) "Code" means the U.S. Internal Revenue Code of 1986, as amended, reformed
     or otherwise modified from time to time.

(34) "Combined Ratio" means the sum of the Claims Ratio plus the Expense Ratio.

(35) "Commitment" means the commitment of each Lender to permit Borrowings by
     the Borrowers in the aggregate amount of Canadian Dollars or the Equivalent
     Amount in U.S. Dollars set forth opposite such Lender's name on Schedule
     "A" as such commitment may be from time to time reduced pursuant to Section
     10.03 and as such Schedule "A" may be amended from time to time in
     accordance with this Agreement.

(36) "Commonly Controlled Entity" means an entity, whether or not incorporated,
     which is under common control with a Borrower within the meaning of Section
     4001 of ERISA or is part of a group which includes a Borrower and which is
     treated as a single employer under Section 414 of the Code.

(37) "Consolidated" means consolidated in accordance with GAAP.

(38) "Contract Period" means the term of a Bankers' Acceptance.

(39) "Contractual Currency" has the meaning set out in Section 10.20.

(40) "Controlled Group" means all members of a controlled group of corporations
     and all members of a controlled group of trades or businesses (whether or
     not incorporated) under common control which, together with a Borrower, are
     treated as a single employer under Section 414(b) or 414(c) of the Code.

(41) "Conversion" means the conversion of one manner of Borrowing permitted
     hereunder into another manner of Borrowing permitted hereunder.

(42) "Conversion Date" means the date upon which a Conversion is effected.

(43) "Credit Facilities" means, collectively, the Canadian Facility and the U.S.
     Facility.

(44) "Default" means any of the events described in Section 9.01 regardless of
     whether any requirement in connection with such event for the giving of
     notice, the lapse of time, or the happening of any further condition, event
     or act has been satisfied or met.

(45) "Discount Proceeds" means in respect of any Bankers' Acceptance an amount
     which is calculated by (i) dividing the face amount thereof by the sum of
     one plus the product of the (a) Discount Rate expressed in a decimal
     fraction, multiplied by (b) a fraction, the numerator of which is the
     Contract Period of such Bankers' Acceptance and the denominator of which is
     365 and (ii) deducting from the result obtained the Stamping Fee for such
     Bankers' Acceptance.

<PAGE>

                                                                          Page 6

(46) "Discount Rate" means, on any date in respect of a Bankers' Acceptance to
     be accepted by (i) a Canadian Lender that is listed in Schedule I to the
     Bank Act, the CDOR Rate at approximately 10:00 a.m. (Toronto time) on such
     Borrowing Date for Bankers' Acceptances having a comparable maturity date
     as the maturity date of such Bankers' Acceptance and (ii) for a Canadian
     Lender that is listed in Schedule II to the Bank Act, the rate determined
     by the Administrative Agent to be the lesser of (A) the CDOR Rate plus
     0.10% and (B) the discount rate (expressed as a percentage calculated on
     the basis of a year of 365 days) quoted by such Canadian Lender at 10:00
     a.m. (Toronto time) on such date as the discount rate at which it would, in
     the normal course of its business, purchase on such date bankers'
     acceptances having an aggregate face amount equal to, and with a term to
     maturity the same as, the Bankers' Acceptance to be accepted by such
     Canadian Lender on such date, and in the case of BA Equivalent Loans, means
     the CDOR Rate plus 0.10%.

(47) "EBITDA" means in respect of any period, Net Income for such period adding
     back amounts deducted in such period for Interest Expense, income taxes
     (whether paid or deferred), depreciation, amortization, and extraordinary
     losses (or deducting amounts included for extraordinary gains) all of which
     shall be determined in accordance with GAAP.

(48) "Equivalent Amount" means, on any date, the equivalent amount in Canadian
     Dollars of an amount in U.S. Dollars, or the equivalent amount in U.S.
     Dollars of an amount in Canadian Dollars, as applicable, after giving
     effect to a conversion of such currencies at the noon rate as published by
     the Bank of Canada on any given day as quoted for wholesale transactions by
     the Administrative Agent.

(49) "ERISA" means the Employee Retirement Income Security Act of 1974 of the
     United States of America, as amended from time to time together with the
     regulations thereunder having the force of law, in each case as in effect
     from time to time. References to Sections of ERISA also refer to any
     successor Section.

(50) "Event of Default" means any of the events specified in section 9.01,
     provided that any requirement in connection with such event for the giving
     of notice, the lapse of time or the happening of any further condition,
     event or act has been satisfied or met.

(51) "Expense Ratio" means the commission expense, premium tax expense and all
     general and administrative expenses (other than amounts included in general
     and administrative expenses on account of the amortization and/or
     impairment expense of goodwill) incurred during an accounting period
     expressed as a percentage of Net Earned Premiums.

(52) "Financial Year" means, with respect to any Person, the 12 month period
     ending on the fiscal-year end of such Person in each year.

(53) "F.R.S. Board" means the Board of Governors of the U.S. Federal Reserve
     System or any successor thereto.

(54) "Funded Debt" means Indebtedness for borrowed money including, without
     limitation, Capitalized Lease Obligations, Purchase Money Obligations,
     contingent liabilities under outstanding letters of credit (excluding
     undrawn letters of credit the beneficiary of which is a Borrower, Kingsway
     America, any Subsidiary of a Borrower, State National Specialty Insurance
     Company Inc., State and County Mutual Insurance Company or General
     Reinsurance Corporation) and all principal and interest and all fees
     incurred in respect of such Indebtedness.

(55) "GAAP" means generally accepted accounting principles which are in effect
     in Canada from time to time applied in a consistent manner from period to
     period.

<PAGE>

                                                                          Page 7

(56) "Governmental Authority" means any nation or government, any province,
     state, municipality, local or other political subdivision thereof and any
     agency, instrumentality or other entity thereof exercising executive,
     legislative, judicial, regulatory or administrative functions of or
     pertaining to government.

(57) "Guarantee" means, with respect to a Person, any absolute or contingent
     liability of that Person under any guarantee, agreement, endorsement (other
     than for collection or deposit in the ordinary course of business),
     discount with recourse or other obligation to pay, purchase, repurchase or
     otherwise be or become liable or obligated upon or in respect of any
     Indebtedness of any other Person and including any absolute or contingent
     obligations to:

     (i)   advance or supply funds for the payment or purchase of any
           Indebtedness of any other Person,

     (ii)  purchase, sell or lease (as lessee or lessor) any property, assets,
           goods, services, materials or supplies primarily for the purpose of
           enabling any other Person to make payment of Indebtedness or to
           assure the holder thereof against loss, or

     (iii) indemnify or hold harmless any other Person from or against any
           losses, liabilities or damages, in circumstances intended to enable
           such other Person to incur or pay any Indebtedness or to comply with
           any agreement relating thereto or otherwise to assure or protect
           creditors against loss in respect of such Indebtedness,

     but shall not include any contract of reinsurance entered into by any
     Subsidiary with any other Subsidiary.

     Each Guarantee shall be deemed to be in an amount equal to the amount of
     the Indebtedness in respect of which the Guarantee is given, unless the
     Guarantee is limited to a determinable amount in which case the amount of
     the Guarantee shall be deemed to be the lesser of the amount of the
     Indebtedness in respect of which the Guarantee is given and such
     determinable amount.

(58) "Guaranteed Pension Plan" means any pension plan maintained by a Borrower
     or Kingsway America, or to which a Borrower or Kingsway America contributes
     some or all of the benefits under which are guaranteed by PBGC.

(59) "Indebtedness" of a Person means, without duplication,

     (i)  all debts, liabilities and obligations, direct, indirect, liquidated,
          unliquidated, contingent and other, including principal, interest,
          charges and fees, which in accordance with GAAP would be classified
          upon the Person's balance sheet as liabilities including, without
          limitation, liabilities under currency and interest rate hedging
          agreements and similar agreements, all Capitalized Lease Obligations,
          Purchase Money Obligations and all Guarantees of such debts,
          liabilities and obligations; and

     (ii) all obligations secured by any Security Interest, including principal,
          interest, charges and fees, existing on property owned or acquired by
          the Person subject to such Security Interest whether or not the Person
          has assumed or otherwise become liable for the payment of such
          obligations.

(60) "Insurance Regulatory Authority" means, with respect to any Insurance
     Subsidiary, the insurance department or similar governmental authority
     charged with regulating insurance companies or insurance holding companies,
     in its jurisdiction of domicile and, to the extent that it has regulatory
     authority over such Insurance Subsidiary, in each other jurisdiction in
     which such Insurance Subsidiary conducts business or is licensed to conduct
     business.

<PAGE>
                                                                          Page 8

(61) "Insurance Subsidiary" means any Subsidiary of a Borrower the ability of
     which to pay dividends is regulated by an Insurance Regulatory Authority or
     that is otherwise required to be regulated thereby in accordance with the
     Applicable Law of its jurisdiction of domicile.

(62) "Intercreditor Agreement" means the Pari Passu Agreement, dated as of the
     date hereof, between the Lenders and certain lenders under the 1999
     Facility.

(63) "Interest Coverage Ratio" means the ratio of EBITDA to Interest Expense.

(64) "Interest Expense" means for any Person and for any period the aggregate
     amount determined in accordance with GAAP of interest expenses in respect
     of Indebtedness (other than intercompany indebtedness) including, without
     limitation, all but the principal component of expenses in respect of
     Capitalized Lease Obligations paid, accrued or scheduled to be paid or
     accrued by such Person during such period. For the purposes of this
     definition, interest expense on Capitalized Lease Obligations shall be
     calculated at the interest rate specified in the relevant leases, or if no
     such rate is specified therein, an interest rate reasonably determined in
     accordance with GAAP.

(65) "Interest Payment Date" means in respect of Prime Rate Loans, U.S. Base
     Rate Loans and Alternate Base Rate Loans, the first Business Day of each
     month and in respect of a LIBOR Loan, means the last day of the applicable
     LIBOR Period; save in respect of LIBOR Loans with LIBOR Periods of
     approximately 6 months, "Interest Payment Date" means the first Business
     Day following the 90th day of such LIBOR Period and the last day of such
     LIBOR Period.

(66) "Kingsway America" means Kingsway America Inc., a Delaware corporation.

(67) "Kingsway America Guarantee" means the unlimited and unconditional
     guarantee issued by Kingsway America in favour of the Administrative Agent,
     the Canadian Lenders and the U.S. Lenders in respect of the Outstanding
     Obligations in form and content satisfactory to the Administrative Agent.

(68) "Lenders" means, collectively, the Canadian Lenders and the U.S. Lenders,
     and "Lender" means any one of them.

(69) "LIBO Rate" means, relative to any LIBOR Loan:

     (a)  the rate of interest per annum of the offered quotations for deposits
          in U.S. Dollars for a period equal or comparable to the LIBOR Period
          in an amount comparable to the Borrowing as such rate is reported on
          the display designated as "page 3750" or "page 3740", as applicable
          (or any replacement pages) by "Telerate - The Financial Information
          Network" published by Telerate Systems, Inc. at or about 10:00 a.m.
          (London, England time) on the applicable Rate Fixing Day; or

     (b)  if a rate cannot be determined under paragraph (a) above, the rate
          determined by the Administrative Agent to be the arithmetic average
          (rounded up if necessary, to the nearest 1/16 of 1%) of such rates as
          reported on the display page designated as the page (or any
          replacement page) for the offering of deposits in U.S. Dollars (for
          example, the LIBO page in the case of United States Dollars) by
          Reuters Money Market Service (or its successor) for a period equal to
          or comparable to the LIBOR Period and in an amount comparable to the
          Advance at or about 10:00 a.m. (London, England time) on the
          applicable Rate Fixing Day provided that at least two such rates are
          reported on such page; or

     (c)  if a rate cannot be determined under either of paragraphs (a) or (b)
          above, the rate determined by the Administrative Agent for a
          particular LIBOR Period to be the arithmetic average of the rates per
          annum at which deposits in the currency in which the LIBOR Loan

<PAGE>

                                                                          Page 9

          is requested in immediately available funds are offered to the Lenders
          in the London interbank market for a period equal to or comparable to
          the LIBOR Period and an amount comparable to the Borrowing at or about
          10:00 a.m. (London, England time) on the applicable Rate Fixing Day;

     For the purposes of this definition, "Rate Fixing Day" means in respect of
     each LIBOR Period, the second Business Day before the first day of such
     LIBOR Period.

(70) "LIBO Rate (Reserve Adjusted)" means, relative to any U.S. Dollar loan to
     be made, continued or maintained as, or converted into, a LIBOR Loan for
     any LIBOR Period, a rate per annum (rounded upwards, if necessary, to the
     nearest 1/16 of 1%) determined pursuant to the following formula:

         LIBO Rate         =                 LIBO Rate
     (Reserve Adjusted)        -----------------------------------
                                 1.00 - LIBOR Reserve Percentage

     The LIBO Rate (Reserve Adjusted) for any LIBOR Period will be determined by
     the Administrative Agent on the basis of the LIBOR Reserve Percentage in
     effect two Business Days before the first day of such LIBOR Period.

(71) "LIBOR Loans" means loans in U.S. Dollars made by a Lender to a Borrower on
     which the interest rate is calculated with reference to the LIBO Rate
     (Reserve Adjusted).

(72) "LIBOR Period" means the period for computing interest from time to time on
     a LIBOR Loan as stated herein.

(73) "LIBOR Reserve Percentage" means, relative to any LIBOR Period, the reserve
     percentage, if any (expressed as a decimal) equal to the maximum aggregate
     reserve requirements (including all basic, emergency, supplemental,
     marginal and other reserves and taking into account any transitional
     adjustments or other scheduled changes in reserve requirements) specified
     under regulations issued from time to time by the F.R.S. Board and then
     applicable to assets or liabilities consisting of and including
     "Eurocurrency Liabilities", as currently defined in Regulation D of the
     F.R.S. Board, having a term approximately equal or comparable to such LIBOR
     Period.

(74) "Lines of Business" means the following lines of business: any property and
     casualty insurance, property and casualty reinsurance, premium financing,
     claims adjusting, insurance agency, and any ancillary business in which
     Kingsway America and its Subsidiaries are engaged in as of the date hereof
     or any other business substantially similar to such lines of business.

(75) "Loan Documents" means this Agreement, the Kingsway America Guarantee, the
     Intercreditor Agreement and any other document, agreement or certificate
     executed in connection herewith or therewith, including, without
     limitation, any currency or interest rate hedging agreements or any
     agreements of similar effect.

(76) "Majority of the Lenders" means Lenders with Commitments hereunder of not
     less than 60% of the Total Commitment, provided that the "Majority of the
     Lenders" means 100% of the Lenders for the purpose of voting in respect of
     any of the following matters:

     (i)  any increase in the Total Commitment or any Commitment or the amount
          of Borrowings permitted to be outstanding hereunder;

     (ii) any decrease in any interest or other rate payable hereunder or in any
          fee payable hereunder;

<PAGE>

                                                                         Page 10

     (iii)  any extension of the Maturity Date under Section 4.01(2) or any
            reduction or forgiveness of principal of, or interest on, any
            Borrowing;

     (iv)   any amendment to this definition or to Section 10.13;

     (v)    the release of the Kingsway America Guarantee;

     (vi)   any change to the types of Borrowing other than as contemplated
            hereunder;

     (vii)  any postponement of any Interest Payment Date;

     (viii) any waiver of any Event of Default under Subsections 9.01(8)(11)(12)
            or (14);

     (ix)   any amendment to this Agreement providing for mandatory prepayment
            of all or any portion of the Credit Facilities.

(77) "Material Adverse Effect" means a material adverse effect on (i) the
     business, assets, prospects or financial or other condition of a Borrower
     or Kingsway America, (ii) the Borrowers' ability to pay or perform the
     Outstanding Obligations in whole or in part in accordance with the terms
     hereof, (iii) the rights and remedies of an Agent or a Lender under the
     Loan Documents, or (iv) the business, assets or financial or other
     condition of a Subsidiary which results in a material adverse effect on a
     Borrower or Kingsway America.

(78) "Material Subsidiary" means all those Subsidiaries marked as a Material
     Subsidiary on Schedule "B" and any other Subsidiary which beneficially own
     assets of more than U.S. $5,000,000 in the aggregate.

(79) "Maturity Date" means the date which is 364 days from the Closing Date or
     if the maturity date extended in accordance with Section 4.01(2), the last
     day of any such extended period(s).

(80) "Multiemployer Plan" means a Plan which is a multiemployer plan as
     described in Section 4001(a)(3) of ERISA.

(81) "Net Earned Premiums" means with respect to any Insurance Subsidiary at any
     time, the Net Written Premiums written by such Insurance Subsidiary
     relating to that portion of the term of its insurance policies which fall
     within a given period as shown in the case of an Insurance Subsidiary
     domiciled in the United States on line 34, page 7, Part 2, column 4 of the
     Annual Statement of such Insurance Subsidiary or on the equivalent line of
     the Annual Statement in respect of Insurance Subsidiaries not domiciled in
     the United States, or the amount determined in a consistent manner for any
     date other than a date as of which an Annual Statement of such Insurance
     Subsidiary is prepared.

(82) "Net Income" means earnings of the Borrowers after deducting all expenses
     and taxes in accordance with GAAP, calculated on a Consolidated basis.

(83) "Northern Trust Indebtedness" means the indebtedness of American Country
     Holdings Inc. to The Northern Trust Company in the approximate amount of
     U.S. $10,000,000.

(84) "Net Written Premiums" means, with respect to any Insurance Subsidiary at
     any time, the amount of premiums written (after deducting or adding
     premiums on business ceded to or assumed from others) as shown in the case
     of an Insurance Subsidiary domiciled in the United States on line 34, page
     9, Part 2B, column 4 of the Annual Statement of such Insurance Subsidiary
     or on the equivalent line of the Annual Statement in respect of Insurance
     Subsidiaries not domiciled in the

<PAGE>

                                                                         Page 11

     United States, or the amount determined in a consistent manner for any date
     other than a date as of which an Annual Statement of such Insurance
     Subsidiary is prepared.

(85) "Outstanding Borrowings" means the aggregate principal amount of all
     outstanding Borrowings advanced under the Credit Facilities.

(86) "Outstanding Obligations" means without duplication the aggregate of (i)
     Outstanding Borrowings, (ii) all unpaid interest and fees thereon as herein
     provided, and (iii) all other indebtedness, liabilities and obligations
     (including without limitation under any indemnities) herein and under the
     Loan Documents and (iv) all other fees, charges and expenses required to be
     paid by a Borrower to the Agents or the Lenders or any of them, hereunder
     or under any of the Loan Documents.

(87) "Participants" has the meaning set out in Section 10.18.

(88) "PBGC" means the Pension Benefit Guaranty Corporation established pursuant
     to Subtitle A of Title IV of ERISA.

(89) "Permitted Acquisition" means (a) any acquisition with respect to which all
     of the following conditions are satisfied: (i) each business acquired shall
     be within the Lines of Business, (ii) any capital stock given as
     consideration in connection therewith shall be the capital stock of the
     Canadian Borrower, (iii) in the case of an acquisition involving the
     acquisition of control of capital stock of any Person immediately after
     giving effect to such acquisition such Person (or the surviving Person if
     the acquisition is effected through a merger or consolidation) shall be the
     Canadian Borrower or a wholly owned subsidiary of the Canadian Borrower,
     and (iv) all of the conditions and requirements of Section 8.03(6)
     applicable to such acquisition are satisfied; or (b) any other acquisition
     to which the Majority of the Lenders (or the Administrative Agent on their
     behalf) shall have given their prior written consent (which consent may be
     in their sole discretion and may be given subject to such additional terms
     and conditions as the Majority of the Lenders shall establish) and with
     respect to which all of the conditions and requirements set forth in this
     definition and in Section 8.03(6), and in or pursuant to any such consent,
     have been satisfied or waived in writing by the Majority of the Lenders (or
     the Agent on their behalf).

(90) "Permitted Encumbrances" means:

     (i)   inchoate or statutory liens or trust claims for taxes, assessments
           and other governmental charges or levies which are not delinquent or
           the validity of which are currently being contested in good faith by
           appropriate proceedings provided that there shall have been set aside
           a reserve to the extent required by GAAP in an amount which is
           reasonably adequate with respect thereto;

     (ii)  Security Interests securing Purchase Money Obligations or Capitalized
           Lease Obligations provided the Security Interest charges only the
           asset subject of the Purchase Money Obligations or Capitalized Lease
           Obligations and no other asset;

     (iii) Security Interests, other than those described in this Section
           1.01(90), the existence of which have been disclosed in writing to
           the Administrative Agent and consented to by the Administrative Agent
           and the Majority of the Lenders in writing; and

     (iv)  Security Interests securing indebtedness of Subsidiaries which are
           premium finance companies not exceeding U.S. $10,000,000 in the
           aggregate;

<PAGE>

                                                                         Page 12

     (v)     Security Interests securing indebtedness described in Section
             1.01(91)(xi);

     (vi)    Security Interests described in Schedule "C";

     (vii)   a mortgage in the principal amount of U.S. $698,987 issued by Auto
             Body Tech Inc. in favour of Republic National Bank bearing interest
             at 10% per year maturing July 2017;

     (viii)  Security Interests securing the indebtedness under the letters of
             credit described in Section 1.01(91)(xiii); and

     (ix)    Security Interests securing the indebtedness under the letters of
             credit described in Section 1.01(91)(xiv).

(91) "Permitted Indebtedness" means the following Indebtedness of the Canadian
     Borrower, the Subsidiaries or Kingsway America:

     (i)     the Outstanding Obligations;

     (ii)    current accounts payable arising in the ordinary course of business
             from the purchase of goods and services;

     (iii)   any other Indebtedness specifically permitted hereunder;

     (iv)    Capitalized Lease Obligations and Purchase Money Obligations,
             including, without limitation, Indebtedness to non-vendor third
             parties incurred to finance the acquisition of new assets;

     (v)     Indebtedness in respect of which a Majority of the Lenders have
             given their prior written consent as to existence and ranking;

     (vi)    any other Indebtedness for borrowed money not otherwise permitted
             hereunder incurred by any Subsidiary that is a premium finance
             company not exceeding U.S. $10,000,000 in the aggregate or with the
             consent of a Majority of the Lenders a greater amount;

     (vii)   Indebtedness under the 1999 Facility;

     (viii)  Indebtedness in favour of any other lender in respect of 364 day
             committed credit facilities provided such facilities are on
             substantially the same terms and conditions as the Credit
             Facilities and provided the lenders under such credit facilities
             enter into intercreditor agreements satisfactory to the Agents
             and the Lenders;

     (ix)    intercompany indebtedness, provided such indebtedness is unsecured
             and subordinated in right of collection and payment to the
             Outstanding Obligations pursuant to subordination agreements in
             form and content satisfactory to the Agents and the Lenders. In
             limitation of the foregoing, Subsidiaries of the Canadian Borrower
             domiciled in the U.S. are permitted to make intercompany loans to
             Subsidiaries of the Canadian Borrower domiciled outside of the U.S.
             only to the extent that all such intercompany loans do not exceed
             U.S. $5,000,000 in the aggregate;

     (x)     Indebtedness under currency and interest rate hedging agreements
             entered into in the normal course of business;

     (xi)    Indebtedness under the mortgage described in Subsection
             1.01(90)(vii) not to exceed U.S. $698,987;

<PAGE>

                                                                         Page 13

     (xii)   Indebtedness under the contemplated debt offering not to exceed
             U.S. $100,000,000 on terms and conditions acceptable to the
             Majority of the Lenders subject to the prior written approval of
             the Majority of the Lenders;

     (xiii)  Indebtedness under letters of credit issued by Royal Bank (UK) (not
             to exceed U.S. $175,000,000) and Canadian Imperial Bank of
             Commerce, New York Agency (not to exceed U.S. $50,000,000) on the
             application of Kingsway Reinsurance Corporation for the benefit of
             certain Subsidiaries of the Canadian Borrower, State National
             Specialty Insurance Company, State and County Mutual Insurance
             Company or General Reinsurance Corporation; and

     (xiv)   Indebtedness under the letters of credit issued on the application
             of American Country Insurance Company in the ordinary course of
             business in the aggregate amount not to exceed U.S. $3,250,000.

(92) "Person" includes an individual, a partnership, a joint venture, a trust,
     an unincorporated organization, a company, a corporation, an association, a
     government or any department or agency thereof and any other incorporated
     or unincorporated entity.

(93) "Plan" means a "pension plan", as such term is defined in Section 3(2) of
     ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
     Plan), and to which either Borrower or any of such Borrower's Subsidiaries
     or any corporation, trade or business that is, along with such Borrower, a
     member of a Controlled Group, may have liability.

(94) "Prime Rate" means an annual fluctuating rate of interest declared by CIBC
     from time to time as its prime interest rate for Canadian Dollar commercial
     loans in Canada.

(95) "Prime Rate Loans" means loans in Canadian Dollars made by a Canadian
     Lender to the Canadian Borrower on which the interest rate is calculated
     with reference to the Prime Rate.

(96) "Purchase Money Obligations" means the outstanding balance of the purchase
     price of real and/or personal property (including shares), title to which
     has been acquired or will be acquired upon payment of such purchase price,
     or Indebtedness to non-vendor third parties incurred to finance the
     acquisition of such new and not replacement real and/or personal property
     or any refinancing of such Indebtedness or outstanding balance.

(97) "Quarterly Certificate" means the officer's certificate described in
     Section 8.01(8), substantially in the form of certificate annexed as
     Schedule "D".

(98) "Rateable Portion" of a Lender means the quotient obtained by dividing that
     Lender's Commitment by the Total Commitment, all as set forth in Schedule
     "A", as Schedule "A" may be amended from time to time in accordance with
     the provisions of this Agreement.

(99) "Reorganization" means a corporate reorganization, amalgamation and/or a
     series of assets or share transfers or similar transactions.

(100)"Reportable Event" means any of the events set forth in Section 4043(b) of
     ERISA, other than those events as to which the thirty day notice period is
     waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Regulation
     2615.

(101)"Rollover" means in respect of a maturing Bankers' Acceptance or a
     maturing BA Equivalent

<PAGE>

                                                                         Page 14

     Loan, the replacement in whole or in part (i) of a maturing Bankers'
     Acceptance or BA Equivalent Loan with another Bankers' Acceptance or
     another BA Equivalent Loan, respectively, or (ii) of a maturing LIBOR Loan
     with another LIBOR Loan.

(102)"Rollover Date" means the date upon which a Rollover occurs.

(103)"Security Interest" includes a mortgage, charge, floating charge, pledge,
     hypothec, assignment, lien, interest, claim, encumbrance, conditional sale
     agreement or other title retention agreement, subordination, trust or other
     security interest or arrangement of any kind or character intended to
     create a security interest in substance regardless of whether the person
     creating the interest retains an equity of redemption and any agreement to
     provide or enter into at any time or on the happening of any event such a
     security interest or arrangement.

(104)"Senior Funded Debt" means Funded Debt other than Subordinated Debt.

(105)"Single Employer Plan" means any Plan which is covered by Title IV of
     ERISA, but which is not a Multiemployer Plan.

(106)"Stamping Fee" means, with respect to a Bankers' Acceptance, the fee
     payable in Canadian Dollars on the date of issuance thereof calculated
     (1) by multiplying the face amount of the Bankers' Acceptance by the number
     of days in the Contract Period, then (2) dividing the product thereof by
     365, then (3) multiplying the quotient by the Stamping Fee Margin.

(107)"Stamping Fee Margin" means the applicable percentage as set out in
     Schedule "E". For greater certainty, the Stamping Fee Margin varies based
     upon the senior unsecured debt rating of the Canadian Borrower.

(108)"Statutory Capital and Surplus" means, as to any Insurance Subsidiary, as
     of any date, the sum (without duplication) of the total amounts shown
     (i) with respect to an Insurance Subsidiary not legally domiciled in the
     United States, the shareholders' equity of such Insurance Subsidiary as
     determined in accordance with GAAP, and (ii) with respect to any other
     Insurance Subsidiary domiciled in the United States, on line 27, column 1,
     page 3 of the Annual Statement of such Insurance Subsidiary, or the sum of
     amounts determined in a consistent manner for any date other than one as of
     which an Annual Statement is prepared.

(109)"Subordinated Debt" of the Borrowers means Indebtedness of the Borrowers
     which has been validly and absolutely postponed and subordinated in right
     of payment and collection to the payment in full of the Outstanding
     Obligations.

(110)"Subsidiaries" means, on the Closing Date, with respect to the Borrower,
     those entities listed in Schedule "B", and, following the Closing Date, as
     to any Person, any corporation, partnership, joint venture, limited
     liability company, trust or estate of which (or in which) more than 50% of
     (a) the issued and outstanding capital stock having ordinary voting power
     to elect a majority of the board of directors of such corporation
     (irrespective of whether at the time capital stock of any other class or
     classes of such corporation will or might have voting power upon the
     occurrence of any contingency), (b) the interest in the capital or profits
     of such limited liability company, partnership or joint venture or (c) the
     beneficial interest in such trust or estate is at the time directly or
     indirectly owned or controlled by such Person, by such Person and one or
     more of its other Subsidiaries or by one or more of such Person's other
     Subsidiaries, and a Subsidiary means any one of them.

(111)"Tangible Net Worth" at any time means the shareholders equity less
     goodwill less other assets normally regarded as intangible under GAAP.

<PAGE>

                                                                         Page 15

(112)   "Tax" and "Taxes" include all present and future taxes, levies, imposts,
        stamp taxes, duties, charges to tax, fees, deductions, withholdings and
        any restrictions or conditions resulting in a charge to tax and all
        penalties, interest and other payments on or in respect thereof.

(113)   "Tax Returns" means all reports, estimates, information statements and
        returns relating to, or required to be filed in connection with, any
        Taxes pursuant to the statutes, laws, rules and regulations of any
        federal, provincial, municipal, city or foreign governmental taxing
        authority and "Tax Return" shall mean any one thereof.

(114)   "Total Canadian Commitment" means the aggregate of Canadian Commitments
        of the Canadian Lenders.

(115)   "Total Capitalization" means without duplication the aggregate of
        (i) Funded Debt plus (ii) shareholders equity, all of which shall be
        calculated in accordance with GAAP.

(116)   "Total Commitment" means the aggregate of the Commitments of the
        Lenders.

(117)   "Total U.S. Commitment" means the aggregate of U.S. Commitments of the
        U.S. Lenders.

(118)   "U.S. Base Rate" means an annual fluctuating rate of interest declared
        by CIBC from time to time as its lending rate in respect of U.S. Dollar
        commercial loans made in Canada to Canadian borrowers.

(119)   "U.S. Base Rate Loans" means loans in U.S. Dollars made by a Canadian
        Lender to the Canadian Borrower on which the interest rate is calculated
        with reference to the U.S. Base Rate.

(120)   "U.S. Borrower" means Kingsway U.S. Finance Partnership, a Delaware
        partnership.

(121)   "U.S. Commitment" means the commitment of each U.S. Lender to permit
        Borrowings by the U.S. Borrower in the aggregate amount of U.S. Dollars
        equal to the Equivalent Amount of Canadian Dollars set forth opposite
        such U.S. Lender's name on Schedule "A", as it may be from time to time
        reduced pursuant to Section 10.03(c) as such Schedule "A" may be amended
        from time to time in accordance with the provisions of this Agreement.

(122)   "U.S. Dollars" and "U.S. $" each means lawful money of the United States
        of America.

(123)   "U.S. Facility" means the credit facility made available by the U.S.
        Lenders to the U.S. Borrower under Section 2.01(2).

(124)   "U.S. GAAP" means generally accepted accounting principles which are in
        effect in the United States of America from time to time applied in a
        consistent manner from period to period.

(125)   "U.S. Lenders" means, on the Closing Date, LaSalle Bank National
        Association and Canadian Imperial Bank of Commerce, New York Agency, and
        thereafter means all financial institutions then currently participating
        in the U.S. Facility.

(126)   "U.S. Rateable Portion" of a U.S. Lender means the quotient obtained by
        dividing that U.S. Lender's U.S. Dollar Commitment by the Total U.S.
        Commitment as set forth in Schedule "A", as Schedule "A" may be amended
        from time to time in accordance with the provisions of this Agreement.

(127)   "Voting Control" means any Person or group of Persons acting in concert
        as a partnership or other group other than a Borrower or a group
        comprised solely of such Persons, that, as a result of a tender or
        exchange offer, open market purchases, privately negotiated purchases or
        otherwise,

<PAGE>
                                                                         Page 16

       becomes the "beneficial owner" (within the meaning of such term under
       Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
       securities of a Borrower representing 20% or more of the combined voting
       power of the then outstanding securities of a Borrower ordinarily (and
       apart from rights accruing under special circumstances) having the right
       to vote in the election of directors.

Section 1.02 Audited Financial Statements. All references in this Agreement to
audited financial statements of a corporation, including the balance sheet and
related statements of income, retained earnings and changes in financial
position, mean Consolidated financial statements prepared by the corporation in
accordance with GAAP or U.S. GAAP, as applicable, together with an auditor's
opinion that the statements fairly present the financial position of the
corporation and the results of its operations for the Financial Year reported on
in accordance with GAAP or U.S. GAAP, as applicable. For greater certainty,
financial statements prepared in respect of the Canadian Borrower and
Subsidiaries domiciled in Canada shall be prepared in accordance with GAAP, and
financial statements of the U.S. Borrower, Kingsway America and Subsidiaries
domiciled in the United States shall be prepared in accordance with U.S. GAAP.

Section 1.03 Canadian Currency. Unless otherwise specified herein, all amounts
and values referred to in this Agreement shall be calculated in lawful money of
Canada.

Section 1.04 Interest Act. Unless otherwise specified, all annual rates of
interest referred to herein are based on a calendar year of 365 or 366 days, as
the case may be. Where a rate of interest hereunder is calculated on the basis
of a year (the "Deemed Year") which contains fewer days than the actual number
of days in the calendar year of calculation, such rate of interest shall be
expressed as a yearly rate for the purposes of the Interest Act (Canada) by
multiplying such rate of interest by the actual number of days in the calendar
year of calculation and dividing it by the number of days in the Deemed Year.

Section 1.05 Change in Rates. Any change in the Prime Rate, the U.S. Base Rate
or the Alternate Base Rate is to be effective on the date such change is
established whether or not a Borrower receives notice thereof.

Section 1.06 Maximum Interest Rate.

     (a)  In the event that any provision of this Agreement would oblige a
          Borrower to make any payment of interest or any other payment which is
          construed by a court of competent jurisdiction to be interest in an
          amount or calculated at a rate which would be prohibited by applicable
          law, regulation, order, rule or direction (a "Usury Restraint") which
          prohibits or restricts the charging, receipt or retention of interest
          or other amounts at the rates and amounts set forth herein (the
          "Stated Rate") in excess (the "Excess") of the maximum rates or amount
          (the "Maximum Rate") stipulated in the Usury Restraint, then
          notwithstanding such provision, such amount or rate shall be deemed to
          have been adjusted nunc pro tunc to the Maximum Rate, such adjustment
          to be effected, to the extent necessary, as follows:

          (i)  firstly, by reducing the amount or rate of interest required to
               be paid under Section 5.01 of this Agreement; and

          (ii) thereafter, by reducing any fees, commissions, premiums and other
               amounts which would constitute interest for the purposes of such
               Usury Restraint;

     (b)  If, notwithstanding the provisions of clause (a) of this Section and
          after giving effect to all adjustments contemplated thereby, the
          Agents, the Lenders, or any of them, shall have received an amount in
          excess of the Maximum Rate, then such Excess shall be applied by the
          Administrative Agent (on behalf of the Lenders) rateably in accordance
          with the Lenders' respective Commitments, to the reduction of the
          principal balance of the Outstanding

<PAGE>
                                                                         Page 17

          Borrowings and not to the payment of interest or if such excessive
          interest exceeds such principal balance, such Excess shall be refunded
          to the Borrowers; and

     (c)  Any amount or rate of interest referred to in this Section shall be
          determined in accordance with generally accepted actuarial practices
          and principles at an effective annual rate of interest over the term
          of this Agreement on the assumption that any charges, fees or expenses
          that fall within the meaning of "interest" (as defined in Usury
          Restraint) shall, if they relate to a specific period of time, be
          prorated over that period of time and otherwise be prorated over the
          terms of this Agreement and, in the event of dispute, a certificate of
          a Fellow of the Canadian Institute of Actuaries appointed by the
          Administrative Agent (on behalf of the Lenders) shall be conclusive
          for the purposes of such determination.

Section 1.07 Headings and Table of Contents. The division of this Agreement into
Articles and Sections and the provision of a Table of Contents and the insertion
of headings are for convenience of reference only and shall not affect the
meaning or interpretation of this Agreement.

Section 1.08 References. All references to Sections, Articles and Schedules are
to Sections and Articles of and Schedules to this Agreement. The words "hereto",
"herein", "hereof", "hereunder", "this Agreement" and similar expressions mean
and refer to this Agreement.

Section 1.09 Number and Gender. Where the context so requires, words importing
the singular include the plural and vice versa, and words importing gender
include the masculine, feminine and neuter genders.

Section 1.10 Copies. Whenever a Borrower is required by this Agreement to
deliver documentation to the Administrative Agent for distribution to the
Lenders, such Borrower shall deliver to the Administrative Agent a sufficient
number of copies of the relevant document so that each Lender is provided with
at least one copy.

Section 1.11 Schedules. The Schedules forming part of this Agreement are as
follows:

     Schedule "A" -     Commitments
     Schedule "B" -     Subsidiaries
     Schedule "C" -     Security Interests
     Schedule "D" -     Quarterly Certificate
     Schedule "E" -     Pricing Grid
     Schedule "F" -     Litigation
     Schedule "G" -     Taxes
     Schedule "H" -     Labour Matters
     Schedule "I" -     Pensions
     Schedule "J" -     Permits
     Schedule "K" -     Jurisdictions
     Schedule "L" -     Assignment and Acceptance

                                   ARTICLE TWO

                                CREDIT FACILITIES

Section 2.01 Credit Facilities.

(1)  Subject to the provisions of this Agreement, each of the Canadian Lenders
     severally agrees to make available to the Canadian Borrower such Lender's
     Canadian Commitment in respect of a

<PAGE>
                                                                         Page 18

     revolving term credit facility available by way of Prime Rate Loans,
     Bankers' Acceptances, U.S. Base Rate Loans, LIBOR Loans and BA Equivalent
     Loans.

(2)  Subject to the provisions of this Agreement, each of the U.S. Lenders
     severally agrees to make available to the U.S. Borrower such Lender's U.S.
     Commitment in respect of a revolving term credit facility available by way
     of Alternate Base Rate Loans and LIBOR Loans.

(3)  The maximum principal aggregate amount available under the Credit
     Facilities is Cdn $66,500,000 or the Equivalent Amount in U.S. Dollars.
     Prior to the Closing Date, the Borrowers shall advise the Administrative
     Agent as to the allocation of such maximum principal aggregate amount as
     between the Canadian Facility and the U.S. Facility. The Borrowers shall be
     entitled to change any such allocation at the beginning of each fiscal
     quarter of the Canadian Borrower by providing the Administrative Agent with
     notice of the desired reallocation not less than five Business Days prior
     to the first day of such fiscal quarter. Should any such reallocation
     result in the outstanding principal amount of either Credit Facility being
     in excess of the maximum principal amount permitted to be outstanding under
     such Facility, the applicable Borrower shall pay to the applicable Lender
     prior to the effective date of any such reallocation the amount necessary
     to reduce such excess to zero. If the applicable Borrower fails to reduce
     such excess to zero prior to the effective date of the reallocation, the
     applicable Lender shall have no obligation to effect the reallocation. The
     allocation on the Closing Date is as set out in Schedule "A". For greater
     certainty, the Borrowers shall be entitled to borrow from CIBC and Canadian
     Imperial Bank of Commerce, New York Agency up to the maximum aggregate
     Commitment of such Lenders and may allocate Borrowings as between such
     Lenders in accordance with this Section, notwithstanding that as at the
     Closing Date the Commitment of CIBC set out in Schedule "A" is stated to be
     zero.

(4)  The obligations of the Lenders hereunder with respect to the Credit
     Facilities are several and not joint and, accordingly, no Lender shall be
     liable to either Borrower or any other Person for any failure or delay in
     performance by any other Lender hereunder, under any Loan Document or under
     any other document, instrument or agreement contemplated hereunder. In the
     event any Lender shall fail to perform any of its obligations hereunder at
     any time, the remaining Lenders, or any one or more of them, shall have the
     option, but shall be under no obligation, to assume the obligations
     hereunder of such defaulting Lender, and if the remaining Lenders, or any
     one or more of them, shall elect to assume such defaulted obligations,
     appropriate amendments, if necessary, shall be made to this Agreement to
     reflect such assumption.

Section 2.02 Revolving Feature of Credit Facility. Subject to the limitations in
this Agreement, the Borrowers may increase or decrease Borrowings under the
Credit Facilities by borrowing, repaying and reborrowing Prime Rate Loans, U.S.
Base Rate Loans, Alternate Base Rate Loans and LIBOR Loans and by issuing,
repaying and reissuing Bankers' Acceptances.

Section 2.03 Lenders' Commitments. As nearly as may be practicable in the
circumstances, (1) the portion of the Outstanding Borrowings under the Canadian
Facility at any time provided by each Canadian Lender shall be approximately
equal to each such Lender's Canadian Rateable Portion, (2) the portion of the
Outstanding Borrowings under the U.S. Facility at any time provided by a U.S.
Lender shall be approximately equal to such Lender's U.S. Rateable Portion.

Section 2.04 Purposes of Credit Facilities. The Borrowers shall use the proceeds
of Borrowings for general corporate purposes, to repay the Northern Trust
Indebtedness and to fund Permitted Acquisitions.

Section 2.05 Evidence of Indebtedness.

     (a)  Each Lender shall maintain accounts and records evidencing the
          obligations of the Borrowers to such Lender hereunder. The Lenders'
          accounts and records shall constitute

<PAGE>

                                                                         Page 19

          prima facie evidence of the indebtedness of the Borrowers to the
          Lenders hereunder in the absence of manifest error.

     (b)  The Administrative Agent shall open and maintain on its books control
          accounts evidencing Borrowings advanced by the Lenders hereunder and
          all other amounts owed by the Borrowers to the Lenders hereunder.

Section 2.06 Illegality. If the introduction of or any change in any Applicable
Law or in the interpretation or application thereof by any court or by any
governmental authority charged with the administration thereof, makes it
unlawful or prohibited for a Lender to make, to fund or to maintain its
commitment or any portion thereof or to perform any of its obligations under
this Agreement, such Lender may, by ten days written notice to the
Administrative Agent and the Borrowers (unless the provision of the Applicable
Law requires earlier prepayment in which case the notice period shall be such
shorter period as required to comply with the Applicable Law), terminate its
obligations under this Agreement and in such event, subject to the right of any
Lender to assume the obligations of the terminating Lender, the Borrowers shall
prepay such Borrowings forthwith (or at the end of such period as the
terminating Lender in its discretion agrees), without notice or penalty (other
than breakage costs), together with all accrued but unpaid interest and fees as
may be applicable to the date of payment, or such Lender may, by written notice
to the Borrowers, convert such Borrowings forthwith into another basis of
Borrowing available under this Agreement.

                                  ARTICLE THREE

                       PROCEDURES APPLICABLE TO BORROWINGS

Section 3.01 Notices of Borrowing. Subject to the terms and conditions hereof,
the Canadian Borrower may obtain a Borrowing by way of Prime Rate Loans, U.S.
Base Rate Loans, Bankers' Acceptances or BA Equivalent Loans (including
Conversions and Rollovers) by giving the Administrative Agent notice by 10:00
a.m. (Toronto time) not less than one Business Day prior written notice of its
intention to borrow and may obtain a Borrowing by way of LIBOR Loans by giving
the Administrative Agent notice by 10:00 a.m. (Toronto time) not less than three
Business Days prior written notice of its intention to borrow.

Subject to the terms and conditions hereof, the U.S. Borrower may obtain a
Borrowing by way of Alternate Base Rate Loans by giving the Administrative Agent
not less than one Business Day prior written notice of its intention to borrow
and may obtain a LIBOR Loan by giving the Administrative Agent not less than
three Business Days prior written notice of its intention to borrow.

Section 3.02 Conversions. Subject to delivery of timely notice in accordance
with this Agreement and the other provisions of this Agreement: (i) the Canadian
Borrower may convert Prime Rate Loans into Bankers' Acceptances at any time;
(ii) the Canadian Borrower may convert Bankers' Acceptances into Prime Rate
Loans on the applicable maturity date of such Bankers' Acceptances; (iii) a
Borrower may convert LIBOR Loans into U.S. Base Rate Loans or Alternate Base
Rate Loans, as applicable, on the applicable maturity date of such LIBOR Loans;
(iv) a Borrower may convert Alternate Base Rate Loans or U.S. Base Rate Loans,
as applicable, into LIBOR Loans at any time.

Section 3.03 Provisions relating to Bankers' Acceptances.

(1)  The Canadian Borrower shall deliver to each Canadian Lender which is to
     accept Bankers' Acceptances from time to time, a supply of drafts in the
     appropriate form, executed on behalf of the

<PAGE>
                                                                         Page 20

     Canadian Borrower, but with the date, the face amount and the maturity
     thereof left blank. In the alternative, the Canadian Borrower shall provide
     to the Canadian Lenders a power of attorney with respect to Bankers'
     Acceptances. On the applicable Borrowing Date, Conversion Date, or Rollover
     Date, an accepting Lender shall withdraw one or more presigned drafts from
     its inventory thereof or act upon the power of attorney with respect to a
     draft, and complete the same by inserting the applicable Borrowing Date,
     Conversion Date or Rollover Date, the face amount thereof, and the maturity
     date thereof and, upon payment of the Stamping Fee, shall accept such
     draft, discount same at the Discount Rate, and shall remit the Discount
     Proceeds thereof to the Canadian Borrower.

(2)  If a Bankers' Acceptance is outstanding at any time that the Administrative
     Agent or the Lenders have demanded repayment of the Outstanding Obligations
     pursuant to the terms of this Agreement, the Canadian Borrower shall
     forthwith upon such demand pay to the Administrative Agent on behalf of the
     accepting Lenders, an amount equal to the face amount of such Bankers'
     Acceptance. The proceeds of such payment shall be held by the
     Administrative Agent for set-off against the liability of the Canadian
     Borrower in respect of such Bankers' Acceptance. The accepting Lenders
     shall credit the Borrowers with interest on such proceeds at the prevailing
     rate for comparative term deposits maturing on the maturity date of the
     Bankers' Acceptance.

(3)  Upon maturity of a Banker's Acceptance, the Canadian Borrower shall pay to
     the Administrative Agent an amount equal to the face amount of the maturing
     Bankers' Acceptance unless prior to the maturity date the Canadian Borrower
     shall have requested either a Rollover or a Conversion of the maturing
     Bankers' Acceptance.

(4)  Until termination or expiration of the Credit Facilities, a maturing
     Bankers' Acceptance may be renewed by a Rollover or converted into a Prime
     Rate Loan on the applicable Rollover Date or Conversion Date, provided no
     Default or Event of Default shall exist.

(5)  Should the conditions set out in Sections 3.03(3) or (4) not be satisfied,
     or should a Bankers' Acceptance not be available for a period which matures
     prior to the expiry or termination of the Canadian Facility, then the
     maturing Bankers' Acceptance shall be converted by the Administrative Agent
     and the accepting Lender into a Prime Rate Loan.

(6)  The acceptance by a Lender of a Bankers' Acceptance shall be deemed to be a
     Borrowing in an amount equal to the face amount of such Bankers' Acceptance
     for the purpose of determining: (i) the portion of the Canadian Facility
     remaining available for drawdown; (ii) the maximum level of Borrowings
     permitted to be outstanding hereunder; (iii) the portion of a Lender's
     Commitment advanced.

(7)  If a Lender is not permitted by Applicable Law, or does not by virtue of
     customary market practice, accept Bankers' Acceptances, each time a
     Borrower requests a Bankers' Acceptance such Lender shall, in lieu of
     accepting a Bankers' Acceptance make a BA Equivalent Loan ("BA Equivalent
     Loan") in an amount equal to the sum of the Discount Proceeds (plus the
     applicable Stamping Fee) which would be derived from a hypothetical sale of
     a draft accepted by it ("Notional Acceptances"). In addition, such Lender
     shall be entitled to deduct from the amount of the BA Equivalent Loan an
     amount equal to the Stamping Fee that would have been payable to it with
     regard to the Notional Acceptances with respect thereto. Other than as set
     forth in this Section 3.03(7), unless the context clearly requires
     otherwise, each reference in this Agreement to Bankers' Acceptances shall
     be deemed to include BA Equivalent Loans and all the terms and conditions
     of this Agreement with respect to Bankers' Acceptances shall be applicable
     to BA Equivalent Loans.

Section 3.04 Provisions relating to LIBOR Loans.

<PAGE>
                                                                         Page 21

(1)  Subject to availability, each LIBOR Loan shall have a LIBOR Period of
     approximately one month, two months, three months or six months at the
     option of the Borrower. A Borrower shall not be entitled to obtain a LIBOR
     Loan which matures after the Maturity Date.

(2)  The principal amount of LIBOR Loans outstanding at any time shall be not
     less than U.S. $2,000,000 and are available in whole multiples of U.S.
     $100,000.

(3)  If the Administrative Agent shall have determined in good faith that (a)
     U.S. Dollar deposits in the relevant amount and for the relevant LIBOR
     Period are not available to the Administrative Agent in the London
     interbank eurocurrency market or (b) by reason of circumstances affecting
     the London interbank eurocurrency market, adequate means do not exist for
     ascertaining the interest rate applicable hereunder to LIBOR Loans, then,
     upon notice from the Administrative Agent to the Borrowers and the Lenders,
     the obligations of all Lenders hereunder to make or continue any Borrowings
     as, or to convert any Borrowings into, LIBOR Loans shall forthwith be
     suspended until the Administrative Agent shall notify the Borrowers and the
     Lenders that the circumstances causing such suspension no longer exist and
     the Administrative Agent and the Lenders shall be entitled to convert the
     contemplated LIBOR Loan into a U.S. Base Rate Loan or Alternate Base Rate
     Loan, as applicable.

(4)  In the event any Lender shall incur any loss or expense (including any loss
     or expense incurred by reason of the liquidation or reemployment of
     deposits or other funds acquired by such Lender to make, continue or
     maintain any portion of the principal amount of any Borrowing as, or to
     convert any portion of the principal amount of any Borrowing into, a LIBOR
     Loan) as a result of

     (a)  any conversion or repayment or prepayment of the principal amount of
          any LIBOR Loans on a date other than the scheduled last day of the
          LIBOR Period applicable thereto;

     (b)  any Borrowings not being made as LIBOR Loans on the applicable
          Borrowing Date; or

     (c)  any Borrowings not being converted into LIBOR Loans on the applicable
          Conversion Date,

     then, upon the written notice of such Lender to the Borrowers (with a copy
     to the Administrative Agent), the Borrowers shall promptly (and, in any
     event, within three Business Days of receipt of such notice) pay directly
     to such Lender such amount as will (in the reasonable determination of such
     Lender) reimburse such Lender for such loss or expense. Such written notice
     shall, in the absence of manifest error, be conclusive and binding on the
     Borrowers.

(5)  Overdue amounts in respect of a LIBOR Loan (including overdue interest) may
     at the option of the Administrative Agent be either converted into a U.S.
     Base Rate Loan or Alternate Base Rate Loan, as appropriate, or considered
     to be a LIBOR Loan for one or more LIBOR Periods or durations as the
     Administrative Agent may determine, and bearing interest at the applicable
     interest rate both before and after default, Demand and judgment.

(6)  The Borrowers shall repay the principal amount of each LIBOR Loan on the
     Rollover Date unless:

     (a)  the maturing LIBOR Loan is renewed pursuant to a Rollover or converted
          pursuant to a Conversion; or

     (b)  repayment of the Outstanding Obligations shall have been accelerated
          or otherwise required to be paid at an earlier date pursuant to the
          terms hereof, in which case LIBOR Loans shall be repaid on the date
          such repayment is due.

<PAGE>
                                                                         Page 22
(7)  If on the applicable Rollover Date a LIBOR Loan is not repaid on its
     renewal pursuant to a Rollover or converted pursuant to a Conversion, the
     Lenders may convert the maturing LIBOR Loan into a U.S. Base Rate Loan or
     Alternate Base Rate Loan, as applicable.

(8)  Each Lender may, if it so elects, fulfill its obligation to make, continue
     or convert a LIBOR Loan hereunder by causing one of its foreign branches or
     Affiliates (or an international banking facility created by such Lender) to
     make or maintain such LIBOR Loan; provided, however, that such LIBOR Loan
     shall nonetheless be deemed to have been made and to be held by such
     Lender, and the obligation of a Borrower to repay such LIBOR Loan shall
     nevertheless be to such Lender for the account of such foreign branch,
     Affiliate or international banking facility.

Section 3.05 Reliance on Oral Instructions. The Lenders and the Agents shall be
entitled to act upon the oral instructions of any Person whom the Lenders or the
Agents believe is a Person a Borrower has identified as being a Person
authorized to give instructions regarding matters contemplated by this
Agreement, including, without limiting the generality of the foregoing, the
Credit Facilities. None of the Lenders nor any of the Agents shall be
responsible for any error or omission relating to such instructions. Oral
instructions shall at the request of an Agent or a Lender be immediately
confirmed in writing by the Borrowers. A Borrower may revoke the authority of
any authorized Person by notifying the Administrative Agent in writing, which
notice shall be effective on the Business Day immediately following the date of
its actual receipt by the Administrative Agent.

                                  ARTICLE FOUR

                                    PAYMENTS

Section 4.01 Repayment.

     (1) Unless the Outstanding Obligations shall have been required to be paid
at an earlier date pursuant to the terms hereof, the Borrowers shall repay the
Outstanding Obligations in full on the Maturity Date or the then applicable
maturity date if the Lenders have agreed to extend the maturity date of the
Credit Facilities in accordance with Section 4.01(2).

     (2) Upon the written request of the Borrowers to the Administrative Agent,
the Lenders shall have the right in their sole discretion by a decision of the
Majority of the Lenders to extend the maturity date of the Credit Facilities for
successive periods of 364 days. Any such written request shall be delivered by
the Borrowers and received by the Administrative Agent not more than 90 days and
not less than 60 days prior to the Maturity Date or the then applicable maturity
date. The Administrative Agent will give written notice to the Borrowers of the
decision of the Majority of the Lenders to extend or not to extend the maturity
date of the Credit Facilities within 30 days of the date that it receives the
extension request.

Section 4.02 Mandatory Repayments. If for any reason, Outstanding Borrowings
exceed the maximum principal amount permitted hereunder, including, without
limitation, as a result of currency fluctuations, the Borrowers shall forthwith
pay to the Administrative Agent for distribution to the Lenders rateably, an
amount sufficient to reduce the Outstanding Borrowings to the maximum levels
permitted hereunder.

Section 4.03 Permanent Prepayment. A Borrower shall have the right at any time
or from time to time to permanently prepay without fee or penalty all or any
Prime Rate Loans, U.S. Base Rate Loans, Alternate Base Rate Loans or BA
Equivalent Loans by providing the Administrative Agent with five day's prior
written notice of its intention to do so. A Borrower shall have the right at any
time or from time to time to permanently prepay all or any LIBOR Loans with five
days

<PAGE>
                                                                         Page 23

prior written notice of its intention to do so without fee or penalty except for
the payment of customary breakage costs. No permanent prepayment, in whole or in
part, will be permitted of any Bankers' Acceptance prior to maturity of such
Banker's Acceptance. Amounts permanently prepaid under this Section 4.03 may not
be reborrowed by either of the Borrowers.

Section 4.04 Payments Generally. Each payment under this Agreement shall be made
for value at or before 1:00 p.m. (Toronto time) on the day such payment is due,
provided that, if any such day is not a Business Day, such payment shall be
deemed for all purposes of this Agreement to be due on the Business Day next
following such day (and any such extension shall be taken into account for
purposes of the computation of interest and fees payable under this Agreement).
All payments shall be made to the Branch of Account.

Section 4.05 No Credit for Trust Funds. For greater certainty, payments of any
nature whatsoever made by a Borrower or Kingsway America to an Agent or a Lender
which the recipient is required to pay to any Person by reason of any trust
imposed by law or by any Person upon amounts received by the recipient from a
Borrower or Kingsway America, shall not be credited against, or deemed to be
payment on account of, all or any portion of the Outstanding Borrowings. All
costs and expenses incurred by any Agent or any Lender, their agents,
representatives and solicitors in connection with the repayment of such monies
to any Person shall be for the account of the Borrowers and payable on demand.
Interest shall accrue on these costs and expenses, until paid, at the Prime
Rate.

Section 4.06 No Withholding. Each interest, fee or similar payment under this
Agreement, including any penalties affected thereto, shall be made without set
off or counterclaim and without withholding for or on account of any present
future taxes or duties imposed by any federal, state, provincial or other taxing
authority. In the event a Borrower is required to deduct or withhold any amount
for or on account of any such taxes or duties, such Borrower shall pay to the
Lenders such additional amounts as may be necessary to ensure that the Lenders
receive a net amount equal to the face amount which they would have received had
such interest, fee or similar payment been made without such deduction or
withholding.

                                  ARTICLE FIVE

                           INTEREST, FEES AND EXPENSES

Section 5.01 Payment of Interest.

     (1)  Rate. The interest rate payable on Outstanding Borrowings shall vary
based upon the senior unsecured debt rating of the Canadian Borrower; provided
that in the case of a LIBOR Loan or a Bankers' Acceptance, any variance in
interest rate or in the Stamping Fee Margin shall be effective only in respect
of LIBOR Loans advanced, converted or renewed or Bankers' Acceptance accepted
following the change in rating and all Bankers' Acceptance and LIBOR Loans
outstanding on the date of a change in rating shall continue to bear interest at
the rate payable thereon on the date immediately prior to the date of the rating
change until maturity of such LIBOR Loans and Bankers' Acceptances. The
Borrowers shall pay interest on Outstanding Borrowings at the rates set out in
the grid annexed as Schedule "E".

     (2)  Calculation. Interest on Prime Rate Loans, U.S. Base Rate Loans and
Alternate Base Rate Loans shall be calculated daily and payable monthly in
arrears on each Interest Payment Date for the period commencing on the first day
of the previous month and terminating on the last day of such month, both
inclusive, and shall accrue on a daily basis on the principal amount of such
Loans remaining unpaid from time to time and on the basis of the actual number
of days elapsed on the basis of a year of 365 days, with interest on overdue
interest at the same rate. Interest on LIBOR Loans shall be paid in

<PAGE>
                                                                         Page 24

arrears on the applicable Interest Payment Date and shall be calculated on the
applicable daily balance for the actual number of days elapsed on the basis of a
year of 360 days.

Section 5.02 Stamping Fees. Upon acceptance by a Canadian Lender of a Bankers'
Acceptance or upon the advance of a BA Equivalent Loan, the Canadian Borrower
shall pay the applicable Stamping Fee to such Lender. The Stamping Fee Margin in
respect of any Bankers' Acceptance or any BA Equivalent Loan shall be determined
on the basis of the senior unsecured debt rating of the Canadian Borrower as set
out on the grid annexed as Schedule "E".

Section 5.03 Standby Fees. The Borrowers shall pay a standby fee calculated on
the unused portion of the Total Commitment. The fees payable shall be determined
on the senior unsecured debt rating of the Canadian Borrower as set out in the
grid annexed as Schedule "E". Standby Fees are calculated daily and payable
quarterly in arrears on the first Business Day of the following fiscal quarter
of the Canadian Borrower.

Section 5.04 Upfront Fees. The Borrowers shall pay to the Lenders the upfront
fees as agreed between individual Lenders and the Borrowers.

Section 5.05 Administration Fees. The Borrowers shall pay to the Administrative
Agent the administration fees as agreed between the Borrowers and the
Administrative Agent.

Section 5.06 Change in Circumstances.

     (1)  Reduction in Rate of Return. If at any time, and from time to time,
the Administrative Agent or a Lender determines, acting reasonably, that (a) any
change in any Applicable Law or any interpretation thereof after the date of
execution hereof, or (b) compliance by a Lender with any direction, requirement
or request from any regulatory authority given after the date of execution
hereof, whether or not having the force of law, has or would have, as a
consequence of such Lender's obligation under this Agreement and taking into
consideration such Lender's policies with respect to capital adequacy, the
effect of reducing the rate of return on such Lender's capital to a level below
that which such Lender could have achieved but for such change or compliance,
then from time to time, upon demand by the Administrative Agent (on behalf of
such Lender), the Borrowers shall pay such Lender such additional amounts as
will compensate such Lender for such reduction.

     (2)  Taxes, Reserves, Capital Adequacy, etc. If after the date of execution
hereof, any introduction of any Applicable Law or any change or introduction of
a change in any Applicable Law (whether or not having the force of law) or in
the interpretation or application thereof by any court or by any governmental
agency, central bank or other authority or entity charged with the
administration thereof or any change in the compliance of any Lender therewith
now or hereafter:

     (a)  subjects such Lender to, or causes the withdrawal or termination of a
          previously granted exemption with respect to, any Tax or changes the
          basis of taxation, or increases any existing Tax, on payments of
          principal, interest, fees or other amounts payable by the Borrowers to
          such Lender under this Agreement (except for taxes on the overall net
          income of such Lender),

     (b)  imposes, modifies or deems applicable any reserve, special deposit,
          deposit insurance or similar requirement against assets held by, or
          deposits in or for the account of or loans by or any other acquisition
          of funds by, an office of such Lender,

<PAGE>
                                                                         Page 25

     (c)  imposes on such Lender or expects there to be maintained by such
          Lender any capital adequacy or additional capital requirement in
          respect of any Borrowing or its Commitment hereunder or any other
          condition with respect to this Agreement, or

     (d)  imposes any Tax on reserves or deemed reserves with respect to the
          undrawn portion of the Credit Facilities,

and the result of any of the foregoing, in the sole determination of such Lender
acting reasonably, shall be to increase the cost to, or reduce the amount of
principal, interest or other amount received or receivable by such Lender
hereunder or its effective return hereunder in respect of making, maintaining or
funding a Borrowing under this Agreement such Lender shall, acting reasonably,
determine that amount of money which shall compensate such Lender for such
increase in cost or reduction in income (herein referred to as "Additional
Compensation"). Upon such Lender having determined that it is entitled to
Additional Compensation in accordance with the provisions of this Section 5.06,
such Lender shall promptly so notify the Borrowers through the Administrative
Agent, and shall provide to the Borrowers, through the Administrative Agent, a
photocopy of the relevant law, rule, guideline, regulation, treaty or official
directive and a certificate of a duly authorized officer of such Lender setting
forth the Additional Compensation and the basis of calculation thereof, which
shall be prima facie evidence of such Additional Compensation. The affected
Lender shall promptly notify the Borrowers, through the Administrative Agent,
and the Borrowers shall pay such Lender within ten Business Days of the giving
of such notice, the Additional Compensation calculated to the date of such
notification. An affected Lender shall be entitled to be paid such Additional
Compensation from time to time to the extent that the provisions of this Section
5.06 are then applicable notwithstanding that a Lender has previously been paid
Additional Compensation. If it is commercially reasonable, the affected Lender
shall make reasonable efforts to limit the incidents of any such Additional
Compensation.

Section 5.07 Reimbursement of Expenses. All statements, reports, certificates,
opinions and other documents or information required to be furnished to the
Agents or the Lenders by a Borrower or any Subsidiary under this Agreement shall
be supplied without cost to the Agents or the Lenders. The Borrowers, jointly
and severally, agree to pay promptly on demand all of the Agents' and the
Lenders' reasonable legal fees and disbursements, documentation costs and other
reasonable expenses incurred in connection with the preparation, negotiation,
documentation and operation of this Agreement and any amendment of or
supplement, waiver or modification to this Agreement, and any other document
prepared in connection herewith, whether or not any amounts are advanced under
this Agreement. In addition, the Borrowers agree to pay the reasonable legal
fees and disbursements and other expenses incurred by the Agents and the Lenders
in the enforcement or preservation of any rights under this Agreement and all
documents delivered in connection herewith (including pursuant to a work-out or
restructuring).

Section 5.08 Determination Conclusive. Each determination by the Administrative
Agent or the Lenders, as applicable, of any rate or fee shall, in the absence of
manifest error, be final, conclusive and binding on the Borrowers.

Section 5.09 Default Interest. Upon the occurrence of an Event of Default, the
Borrowers shall pay interest on Outstanding Borrowings both before and after
judgment at a rate per annum equal to the U.S. Base Rate plus 2.5%, calculated
on a daily basis and on the basis of the actual number of days elapsed, computed
from the date of occurrence of the Event of Default for so long as such Event of
Default continues. Such interest shall be payable upon Demand by the
Administrative Agent or any Lender and shall be compounded on each Interest
Payment Date.

                                   ARTICLE SIX

                              CONDITIONS PRECEDENT

<PAGE>
                                                                         Page 26

Section 6.01 Conditions - Initial Borrowing. The obligation of the Lenders to
make available the initial Borrowing under this Agreement is subject to the
terms and conditions of this Agreement and is conditional upon satisfactory
evidence being given to the Administrative Agent, the Lenders and their counsel
as to compliance with the following conditions:

     (1)  Resolutions and Certificates. The Administrative Agent shall have
received, duly executed and in form and substance satisfactory to it:

          (a)  a certified or notarial copy of the constating documents and
               by-laws of the Canadian Borrower, Kingsway America and Metro
               Claim Services Inc. together with all amendments thereto and a
               certificate of good standing for each such Person, each case
               certified as of a recent date by the appropriate governmental
               officer in its jurisdiction of organization and a copy of the
               resolutions of the board of directors of the Canadian Borrower
               and Kingsway America authorizing the execution, delivery and
               performance of the Loan Documents and any other instruments
               contemplated hereunder, certified by an appropriate officer of
               the Canadian Borrower and Kingsway America, as applicable;

          (b)  a certificate of incumbency for the Canadian Borrower and
               Kingsway America showing the names, offices and specimen
               signatures of the officers who will execute the Loan Documents
               and any other instruments contemplated hereunder and thereunder;

          (c)  a copy of the partnership agreement constituting the U.S.
               Borrower;

          (d)  a copy of the constating documents and by-laws of each partner of
               the U.S. Borrower (collectively the "Partners" and each a
               "Partner") and a copy of the resolutions of the board of
               directors of each Partner authorizing the execution, delivery and
               performance of this Agreement and any other instruments
               contemplated hereunder;

          (e)  a certificate of incumbency of each Partner showing the names,
               offices and specimen signatures of the officers who will execute
               this Agreement and any other instruments contemplated hereunder
               and thereunder;

          (f)  such additional supporting documents as the Administrative Agent
               or its counsel may reasonably request.

     (2) Financing Documentation. The Administrative Agent shall have received
certified copies of all loan and security documentation affecting the Borrowers,
Kingsway America and their Subsidiaries as at the Closing Date and the Lenders
shall be satisfied with the terms and conditions thereof.

     (3) Delivery of Guarantee. The Administrative Agent shall have received the
Kingsway America Guarantee duly executed by Kingsway America and in form and
substance satisfactory to the Administrative Agent, the Lenders and their
counsel.

     (4) Legal Opinions. The Administrative Agent shall have received from
Canadian counsel to the Canadian Borrower, favourable legal opinions in
connection with this Agreement and from United States counsel to the U.S.
Borrower and Kingsway America, favourable legal opinions in connection with this
Agreement and the Kingsway America Guarantee, in each case in form and substance
satisfactory to the Administrative Agent and the Lenders.

     (5) Due Diligence. The Agents and the Lenders shall have completed and be
satisfied with the results of their due diligence inquiries.

<PAGE>
                                                                         Page 27

     (6) Intercreditor Agreement. The Administrative Agent shall have received
the Intercreditor Agreement duly executed and delivered by all parties thereto.

     (7) Material Adverse Effect. Nothing shall have occurred nor any fact
become known which an Agent or any Lender was not previously aware of and which
could reasonably be expected to have a Material Adverse Effect.

     (8) Material Adverse Change. There shall have been no material adverse
change from the Canadian Borrower's audited Consolidated financial statements
for the financial year ending December 31, 2001.

     (9) Fees and Disbursements. The Agents and the Lenders shall have received
payment in full of all fees and out of pocket expenses payable to the Agents and
the Lenders which have become due (including fees and expenses of counsel to the
Agents).

     (10) Security Interests. All Security Interests charging any asset of the
Borrowers, Kingsway America or any Subsidiary of the Borrower shall have been
discharged other than Permitted Encumbrances and the Administrative Agent shall
have received completed PPSA and UCC-3 termination statements, as appropriate.

     (11) Consolidated Financial Statements. The Administrative Agent shall have
received Consolidated financial statements of the Canadian Borrower for the
period ending December 31, 2001, reasonably satisfactory to the Administrative
Agent.

     (12) Termination of the Northern Trust Indebtedness. The Administrative
Agent shall have received evidence that the Northern Trust Indebtedness has been
or will be paid off in full as of the Closing Date and that all Security
Interests in connection therewith have been discharged or are the subject of an
undertaking to discharge in form and substance satisfactory to the
Administrative Agent

     (13) Documentation. The Administrative Agent shall have received this
Agreement duly executed by the Borrowers together with all other ancillary and
supporting documentation as the Administrative Agents and the Lenders may
require.

Section 6.02 Conditions - All Borrowings. The obligation of the Lenders to make
available any Borrowing under this Agreement (including the initial Borrowing)
is conditional upon the following:

     (1) Representations and Warranties True. The representations and warranties
contained in Section 7.01 and in the Kingsway America Guarantee are and shall
continue to be true and correct in every material respect as if made by the
Borrowers or Kingsway America, as applicable, contemporaneously with any
Borrowing.

     (2) Indebtedness. Except for the Permitted Indebtedness, no Borrower,
Kingsway America nor any Subsidiary shall have any other Indebtedness.

     (3) No Default. No Default or Event of Default has occurred and is
continuing both immediately before and after giving effect to the Borrowing.

Section 6.03 Waiver. The terms and conditions stated in this Article Six are
inserted for the sole benefit of the Agents and the Lenders and may be waived by
them in whole or in part and with or without terms or conditions in respect of
all or any Borrowings.

                                  ARTICLE SEVEN

<PAGE>

                                                                         Page 28

                         REPRESENTATIONS AND WARRANTIES

Section 7.01 Representation and Warranties. The Borrowers jointly and severally
represent and warrant to the Agents and the Lenders that:

     (1)  Due Incorporation of the Canadian Borrower and Subsidiaries. The
Canadian Borrower is duly incorporated, organized and validly subsisting and in
good standing under the laws of Ontario. Kingsway America and each Subsidiary is
duly incorporated, organized and validly subsisting and in good standing under
the laws of its incorporating jurisdiction. The Canadian Borrower, Kingsway
America and each Subsidiary has all necessary corporate power and authority to
own its properties and assets and to carry on its business as now conducted and
is or will be duly licensed or registered or otherwise qualified in all
jurisdictions wherein the nature of its assets or the business transacted by it
makes such licensing, registration or qualification necessary, except where
failure to do so could not reasonably be expected to have a Material Adverse
Effect.

     (2)  U.S. Borrower. The U.S. Borrower is a duly constituted and validly
subsisting general partnership in good standing under the laws of Delaware of
which the Canadian Borrower and Metro Claim Services Inc., an Ontario
corporation, are the only partners. The U.S. Borrower has all necessary power
and authority to carry on business as now conducted and is or will be duly
licensed or registered or otherwise qualified in all jurisdictions wherein the
nature of its assets or the business transacted by it makes such licensing,
registration or qualification necessary except where failure to do so could not
reasonably be expected to have a Material Adverse Effect.

     (3)  Power. Each Borrower and Kingsway America has full power and capacity
to enter into, deliver and perform its obligations under this Agreement, the
Kingsway America Guarantee and all other instruments contemplated hereunder, as
applicable.

     (4)  Due Authorization and No Conflict - the Canadian Borrower. The
execution, delivery and performance by the Canadian Borrower of this Agreement,
and Kingsway America of the Kingsway America Guarantee, and all other
instruments contemplated hereunder and the consummation of the transactions
contemplated hereby and thereby

          (a) have been duly authorized by all necessary corporate action,

          (b) do not and will not conflict with, result in any breach or
              violation of, or constitute with notice, lapse of time or both, a
              default under the constating documents or by-laws of, or any
              Applicable Laws, determination or award presently in effect and
              applicable to, the Borrowers or Kingsway America, or of any
              material commitment, agreement, indenture or any other instrument
              to which a Borrower or Kingsway America is now a party or is
              otherwise bound, and

          (c) do not result in or require the creation of any Security Interest
              upon or with respect to any of the properties or assets of the
              Canadian Borrower, Kingsway America or any of their Subsidiaries.

     (5)  Due Authorization and No Conflict - U.S. Borrower. The execution and
delivery by the U.S. Borrower of this Agreement and all other instruments
contemplated hereunder and the consummation of the transactions contemplated
hereby and thereby

          (a) have been duly authorized,

          (b) do not and will not conflict with, result in any breach or
              violation of, or constitute with notice, lapse of time or both, a
              default under the partnership agreement constituting the U.S.
              Borrower or under the constating documents or by-laws of either
              Partner, or any

<PAGE>

                                                                         Page 29

              Applicable Laws, determination or award presently in effect and
              applicable to the U.S. Borrower or the Partners, or of any
              material commitment, agreement, indenture or any other instrument
              to which the U.S. Borrower or either of the Partners is now a
              party or is otherwise bound, and

          (c) do not result in or require the creation of any Security Interest
              upon or with respect to any of the properties or assets of the
              U.S. Borrower or either of the Partners.

     (6)  Government Approval, Regulation, etc. No authorization or approval or
other action by, and no notice to or filing with, any Governmental Authority or
other Person (including shareholders, if applicable) is required for the due
execution, delivery or performance by either Borrower or Kingsway America of
this Agreement, the Kingsway America Guarantee or any other instrument
contemplated hereunder other than filings under applicable securities laws and
filings with Insurance Regulatory Authorities. Neither Borrower nor Kingsway
America is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

     (7)  Business of the Borrowers. The Canadian Borrower does not carry on
any business, activity or operation of any kind whatsoever, other than the Lines
of Business.

     (8)  Valid and Enforceable Obligations. This Agreement, the Kingsway
America Guarantee and all other instruments contemplated hereunder are, or when
executed and delivered to the Administrative Agent will be, legal, valid and
binding obligations of the Borrowers and Kingsway America, as applicable,
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium and other laws affecting the enforcement of
the rights of creditors generally.

     (9)  Title. Subject to Permitted Encumbrances, each Borrower, Kingsway
America and each of the Subsidiaries has good and marketable title to its real
and personal property, free and clear of all Security Interests.

     (10) No Actions. Save as set forth in Schedule "F", there are no actions,
suits, proceedings, inquiries or investigations existing, pending or, to the
knowledge of either Borrower, threatened, affecting a Borrower, Kingsway America
or any Subsidiary in any court or before or by any federal, provincial, state or
municipal or other governmental department, commission, board, tribunal, bureau
or agency, Canadian or foreign, which are reasonably likely to materially and
adversely affect the financial condition, property, assets, operations or
business of a Borrower, Kingsway America or any Subsidiary, the ability of the
Borrowers to repay the Outstanding Obligations or any part thereof or which
could reasonably be expected to have a Material Adverse Effect.

     (11) Financial Information. Subject to any limitations stated therein, the
financial statements of the Canadian Borrower furnished to the Agents and the
Lenders under this Agreement or which were furnished to the Agents or to the
Lenders to induce them to enter into this Agreement or otherwise in connection
with this Agreement fairly present the financial condition of the Borrowers on
a Consolidated basis as at the date thereof, and no material adverse change has
occurred in their financial position between such date and the Closing Date.
Such financial statements and all other information, certificates, statutes,
reports and other papers and data furnished to the Agents and the Lenders are
accurate, complete and correct in all material respects, except that the
Borrowers do not represent or warrant that any forecast contained in any
financial projections will ultimately prove to be accurate. The Borrowers on a
Consolidated basis have no liabilities, including as to contingencies and
unusual or forward commitments, that are not disclosed in the foregoing
financial statements or the footnotes thereto or otherwise disclosed to the
Lenders in writing or incurred pursuant to this Agreement.

<PAGE>
                                                                         Page 30

     (12)  No Defaults or Events of Default. No event has occurred and is
continuing, and no circumstance exists which has not been waived, and which
constitutes a Default or Event of Default hereunder or a default or event of
default in respect of any material commitment, agreement or any other instrument
to which a Borrower, Kingsway America or any Subsidiary is now a party or is
otherwise bound, entitling any other party thereto to accelerate the maturity of
amounts of principal owing thereunder, or terminate any such material
commitment, agreement or instrument, or which could reasonably be expected to
have a Material Adverse Effect.

     (13)  Compliance with Law. None of the Borrowers, Kingsway America or the
Subsidiaries is in violation of any terms of its constating documents (including
the partnership agreement constituting the U.S. Borrower) or by-laws or of any
law, regulation, rule, order, judgment, writ, injunction, decree, determination
or award presently in effect and applicable to it, the violation of which could
reasonably be expected to have a Material Adverse Effect.

     (14)  Reporting Issuer. The Canadian Borrower is a reporting issuer (as
that term is defined in the Securities Act (Ontario)) in good standing.

     (15)  Compliance with Securities Laws. Each Borrower, Kingsway America
and each of the Subsidiaries are in compliance in all material respects with
the provisions and requirements of all Applicable Laws including, without
limitation, the completion on a proper and timely basis of all necessary filings
under any and all such Applicable Laws.

     (16)  Capital. The Canadian Borrower is authorized to issue an unlimited
number of common shares, and has issued, as of March 31, 2002, approximately
48,723,883 as fully paid and non-assessable common shares. Except for directors'
qualifying shares of Kingsway General Insurance Company and York Fire and
Casualty Insurance Company, all of the shares of all classes in the capital
stock of Kingsway America and each corporate Subsidiary and all partnership
interests in Subsidiary partnerships are directly or indirectly beneficially
owned by the Canadian Borrower. Kingsway Finance Nova Scotia ULC owns all of
the shares of all classes in the capital stock of Kingsway America. The U.S.
Borrower and Metro Claim Services Inc. collectively own all ownership interests
of Kingsway U.S. Tier II Finance Partnership which in turn owns all of the
shares of all classes in the capital stock of Kingsway Finance Nova Scotia ULC.

     (17) Non-Dilution. No Person now has any agreement, option or right capable
of becoming an agreement or option for the pledge, purchase, subscription or
issuance from any Borrower, Kingsway America or any Subsidiary of any shares of
the Canadian Borrower, Kingsway America or any Subsidiary, issued or unissued,
which will cause a change of Voting Control.

     (18)  No Foreign Business. The Borrowers do not carry on any business,
employ any employees, or own any material assets outside Canada, the United
States of America, Barbados or Bermuda.

     (19)  Subsidiaries. The Canadian Borrower does not own any shares or
voting securities of any Person directly or indirectly other than Kingsway
America and the Subsidiaries identified herein, other than equities maintained
in the Canadian Borrower's investment portfolio.

     (20)  Taxes. Except as set forth in Schedule "G", each Borrower, Kingsway
America and each Subsidiary has filed all foreign, federal, provincial and local
Tax Returns which are required to be filed and has paid all Taxes due pursuant
to such returns or pursuant to any assessment received by such Borrower,
Kingsway America or Subsidiary except such Taxes, if any, as are being contested
in good faith and as to which adequate reserves have been provided in accordance
with GAAP. All information provided in such Tax Returns pertaining to the
Borrowers, Kingsway America or any Subsidiary is true, complete, and accurate in
all material respects. The charges, accruals and reserves on the books of the
Borrowers, Kingsway America and the Subsidiaries, as applicable, in respect of
any Taxes or other

<PAGE>

                                                                         Page 31

governmental charges payable for the current or prior year which are not yet
due are adequate in accordance with GAAP to the extent that the Borrowers are
aware of them. Schedule "G" sets forth as of the Closing Date those taxable
years for which a Borrower's, Kingsway America's or a Subsidiary's Tax Returns
are currently being audited by Canada Customs and Revenue Agency and/or other
applicable Governmental Authority and any assessments or threatened assessments
otherwise outstanding. Except as set out in Schedule "G", neither Borrower, nor
Kingsway America nor any Subsidiary has received any notice of assessment of
additional taxes or any other claim of notice of any nature whatsoever that any
Tax or additional Tax is due which has not been paid or otherwise finally
settled or satisfied. Except as set out in Schedule "G", to the knowledge of the
Borrowers, there are no actions, suits, proceedings, investigations or claims,
threatened or pending, in respect of any Taxes. Except as set forth on Schedule
"G", there are no matters under discussion with any Governmental Authority
relating to any Taxes asserted by any such body. Each Borrower, Kingsway America
and each Subsidiary has withheld from its employees, customers and any other
applicable payees (and timely paid to the Governmental Authority) the proper and
accurate amount of all Taxes and other amounts required to be withheld or
collected and remitted in compliance with all Applicable Laws. There are no
liens for Taxes on the assets of any Borrower, Kingsway America or any
Subsidiary except for liens arising under Applicable Law, that are unregistered
or otherwise unperfected, for Taxes not yet due. Neither Borrower, nor Kingsway
America nor any Subsidiary has executed nor filed with Canada Customs and
Revenue Agency nor any other Governmental Authority any agreement, waiver or
other document extending or having the effect of extending the period for
assessment, reassessment or collection of any Taxes or the filing of any Tax
Returns. As of the Closing Date, the Borrowers, Kingsway America and each of
their respective Subsidiaries have no liabilities for Taxes which could
reasonably be expected to have a Material Adverse Effect.

     (21)  Labour Matters. Except as set forth in Schedule "H", there are no
strikes or other labour disputes against a Borrower, Kingsway America or any
Subsidiary that is pending or threatened. All payments due from either Borrower,
Kingsway America or any Subsidiary on account of workers compensation, Canada
Pension Plan, Quebec Pension Plan, ERISA, employee health plans, social security
and insurance of every kind and employee income tax source deductions and
vacation pay have been paid. Except as set forth in Schedule "H", neither
Borrower nor Kingsway America nor any Subsidiary has any obligation under any
collective bargaining agreement. There is no organizing activity involving
either Borrower, Kingsway America or any Subsidiary by any labour union or
group of employees. Except as set forth in Schedule "H", no labour organization
or group of employees has made a pending demand for recognition and there are
no complaints or charges against either Borrower, Kingsway America or any
Subsidiary pending or threatened to be filed with any Governmental Authority or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by either Borrower, Kingsway
America or any Subsidiary of any individual. Hours worked by and payment made
to employees of the Borrowers, Kingsway America and the Subsidiaries have not
been in violation of any applicable laws which could reasonably be expected to
have a Material Adverse Effect. The Borrowers, Kingsway America and the
Subsidiaries are in material compliance with the terms and conditions of all
collective bargaining agreements, consulting agreements, management agreements
and employee agreements and all other labour agreements.

     (22)  Pensions.  Except as set forth in Schedule "I",

           (a) all employee and employer contributions under any pension plan
               operated by the Borrower, Kingsway America or any Subsidiary have
               been made and the fund or funds established under such plans are
               funded in accordance with applicable regulatory requirements and
               the rules of such plans and there exists no going concern
               unfunded liabilities or solvency deficiencies thereunder;

           (b) no pension plan has been terminated or partially terminated or
               is insolvent or in reorganization, nor have any proceedings been
               instituted to terminate or reorganize any pension plan;

<PAGE>

                                                                         Page 32

           (c) none of the Borrowers, nor Kingsway America nor any of the
               Subsidiaries has withdrawn from any pension plan in a complete
               or partial withdrawal, nor has a condition occurred which if
               continued would result in a complete or partial withdrawal;

           (d) none of the Borrowers, nor Kingsway America nor any of the
               Subsidiaries has any withdrawal liability, including contingent
               withdrawal liability, to any pension plan;

           (e) none of the Borrowers, nor Kingsway America nor any of the
               Subsidiaries has any liability in respect of any pension plan
               other than for required insurance premiums or contributions or
               remittances which have been paid, contributed and remitted when
               due;

           (f) each Borrower, Kingsway America and each Subsidiary has made all
               contributions to its pension plans required by law or the terms
               thereof to be made by it when due and is not in arrears in the
               payment of any contribution, payment, remittance or assessment
               or in default in filing any reports, returns, statements and
               similar documents in respect of the pension plans required to be
               made or paid by it pursuant to any pension plan, any law, act,
               regulation, directive or order or any employment, union, pension,
               deferred profit sharing, benefit, bonus or other similar
               agreement or arrangement;

           (g) none of the Borrowers, nor Kingsway America nor any Subsidiary
               is liable or, to the best of its knowledge, alleged to be liable,
               to any employee or former employee, director or former director,
               officer or former officer resulting from any violation or alleged
               violation of any pension plan, any fiduciary duty, and law or
               agreement in relation to any pension plan and does not have any
               unfunded pension or like obligations (including any past service
               or experience deficiency funding liabilities), other than accrued
               obligations not yet due, for which they have made full provision
               in their books and records;

           (h) all vacation pay, bonuses, salaries and wages, to the extent
               accruing due, are properly reflected in the books and records of
               the Borrowers, Kingsway America and the Subsidiaries;

           (i) without limiting the foregoing, all of the Borrowers', Kingsway
               America's and Subsidiaries' pension plans are duly registered
               where required by, and are in compliance and good standing in
               all material respects under, all applicable laws, acts, statutes,
               regulations, orders, directives and agreements, including,
               without limitation, ERISA, the Code, the Income Tax Act (Canada),
               and the Pension Benefits Act, 1987 (Ontario), any successor
               legislation thereto, and other applicable laws of any
               jurisdiction;

           (j) there are no outstanding or pending or threatened investigations,
               claims, suits or proceedings in respect of any pension plans
               (including to assert rights or claims to benefits or that could
               give rise to any material liability);

           (k) no promises of benefit improvements have been made except where
               such improvements could not reasonably be expected to have a
               Material Adverse Effect and, in any event, no such improvements
               will result in a solvency deficiency or going concern unfunded
               liability in the affected pension plans;

           (l) all the material obligations of the Borrowers, Kingsway America
               and the Subsidiaries (including fiduciary, funding, investment
               and administration obligations) required to be performed in
               connection with the pension plans and the funding agreements
               therefor have been performed in a timely fashion;

<PAGE>

                                                                         Page 33

           (m)  there have been no improper withdrawals or applications of
                the assets of the pension plans or the benefit plans.

     (23)  ERISA. Except to the extent that any of the following could not
reasonably be expected to have a Material Adverse Effect:

           (a)  neither a Reportable Event nor an "accumulating funding
                deficiency" (within the meaning of the Code, or Section 302 of
                ERISA) has occurred during the five-year period prior to the
                date on which this representation is made or deemed made with
                respect to any Plan, and each Plan has complied in all material
                respects with the applicable provisions of ERISA and the Code.
                No termination of a Single Employer Plan has occurred and no
                lien in favour of the PBGC of a Plan has arisen during the
                five-year period prior to the date as of which this
                representation is deemed made;

           (b)  the present value of all accrued benefits under each Single
                Employer Plan in which a Borrower, Kingsway America or any
                Subsidiary is a participant (based on those assumptions used
                to fund the Plans) did not, as of the last annual valuation date
                prior to the date on which this representation is made or deemed
                made, exceed the value of the assets of such Plan allocable to
                such accrued benefits;

           (c)  none of the Borrowers, nor Kingsway America nor any  Subsidiary
                has had a complete or partial withdrawal from any Multiemployer
                Plan, nor would a Borrower, Kingsway America or any Subsidiary
                become subject to any liability under ERISA if it were to
                withdraw completely from all Multiemployer Plans as of the
                valuation date most closely preceding the date on which this
                representation is made or deemed made;

           (d)  none of the Borrowers, nor Kingsway America nor any Subsidiary
                nor any Commonly Controlled Entity has any contingent liability
                with respect to any post-retirement benefit under a Plan, other
                than liability for COBRA; and

           (e)  no such Multiemployer Plan is in "reorganization" or "insolvent"
                within the meaning of such terms as used in ERISA.

     (24)  Accuracy of Information. All factual information previously or
contemporaneously furnished by or on behalf of a Borrower, Kingsway America or
any Subsidiary in writing for purposes of or in connection with this Agreement,
the Kingsway America Guarantee or any transaction contemplated hereby is true
and accurate in every material respect and such information is not incomplete by
the omission of any material fact necessary to make such information not
misleading.

     (25)  Solvency. Both before and immediately after giving effect to any
Borrowing requested hereunder:

           (a)  the fair saleable value of the assets (as defined below) of
                each Borrower, Kingsway America and the Subsidiaries on a
                Consolidated basis exceeds the total amount of liabilities
                (including contingent, subordinated, unmatured and unliquidated
                liabilities) of such Borrower, Kingsway America and the
                Subsidiaries on a Consolidated basis, on a going-concern basis;

           (b)  the present fair saleable value (as defined below) of the assets
                of each Borrower, Kingsway America and the Subsidiaries on a
                Consolidated basis exceeds the probable total liabilities
                (including contingent, subordinated, unmatured and unliquidated
                liabilities) of such Borrower, Kingsway America and the
                Subsidiaries on a Consolidated basis as they become absolute and
                matured;

<PAGE>

                                                                         Page 34

           (c)  each Borrower, Kingsway America and the Subsidiaries on a
                Consolidated basis will be able to pay their debts, including
                contingent liabilities, as they mature and become due;

           (d)  each Borrower, Kingsway America and the Subsidiaries on a
                Consolidated basis are not, and will not be, engaged in a
                business for which their Consolidated capital is, or would be,
                unreasonably small for their Consolidated business; and

           (e)  each Borrower, Kingsway America and the Subsidiaries on a
                Consolidated basis have not incurred (by way of assumption or
                otherwise) any obligations or liabilities (contingent or
                otherwise) under this Agreement or the Kingsway America
                Guarantee, nor have they made any conveyance pursuant to or in
                connection therewith, with actual intent to hinder, delay or
                defraud either present or future creditors of such Borrower,
                Kingsway America or any of the Subsidiaries.

           For purposes of this Section, the "fair saleable value" of each
           Borrower's, Kingsway America's and the Subsidiaries' assets means the
           amount which may be realized within a reasonable time, either through
           collection or sale of such assets at the regular market value, based
           upon the amount which could be obtained for such assets within such
           period by a capable and diligent seller from an interested buyer who
           is willing (but is under no compulsion) to purchase under ordinary
           selling conditions.

     (26)  Subsidiary Status; Liabilities, etc. Immediately prior to the Closing
Date, neither the U.S. Borrower, Kingsway U.S. Tier II Finance Partnership nor
Kingsway Finance Nova Scotia ULC had any assets or liabilities other than the
1999 Facility and had performed no business other than preparing for the
transactions herein contemplated.  After giving effect to the transactions
contemplated hereby, neither the U.S. Borrower, Kingsway U.S. Tier II Finance
Partnership nor Kingsway Finance Nova Scotia ULC shall have any liabilities
except incurred pursuant to, or contemplated by, this Agreement.

     (27)  Financial Year End. The Financial Year ends of each of the Borrowers,
Kingsway America and each of their Subsidiaries is December 31.

     (28)  Guarantees. None of the Borrowers, nor Kingsway America nor any
Subsidiary has guaranteed the obligations of any Person for borrowed money, save
as identified in 8.03(5).

     (29)  Margin Stock. (a) None of the Borrowers, nor Kingsway America nor
any Subsidiary owns stock on margin except as previously disclosed to the
Administrative Agent in writing, (b) neither Borrower, nor Kingsway America nor
any Subsidiary is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Borrowing will be
used to purchase or carry any margin stock or for a purpose which violates, or
would be consistent with, F.R.S. Board Regulation T, U or X. Terms for which
meanings are provided in F.R.S. Board Regulation T, U or X or any regulations
substituted therefor, as from time to time in effect, are used in this Section
with such meanings.

     (30)  Disclosure. No representation or warranty made by a Borrower or
Kingsway America in any of the Loan Documents contains any untrue statement of
a fact or omits to state a material fact necessary in order to make the
statements contained therein, taken as a whole, not misleading in light of the
circumstances in which they are made. There is no fact known to either Borrower
which the Borrowers have not disclosed to the Agent and the Lenders which could
reasonably be expected to have a Material Adverse Effect so far as the Borrowers
can now reasonably foresee or which may materially adversely affect the ability
of the Borrowers to perform their obligations under this Agreement.

     (31)  Governmental and Third Party Authorization; Permits.

<PAGE>

                                                                         Page 35

           (a)  No consent, approval, authorization or other action by, notice
                to, or registration or filing with, any Governmental Authority
                or other Person is or will be required as a condition to or
                otherwise in connection with the due execution, delivery and
                performance by each Borrower or Kingsway America of this
                Agreement or any of the other Loan Documents to which it is or
                will be a party or the legality, validity or enforceability
                hereof or thereof, other than (i) consents, authorizations and
                filings that have been (or on or prior to the Closing Date will
                have been) made or obtained and that are (or on the Closing
                Date will be) in full force and effect, which consents,
                authorizations and filings are listed on Schedule "J", and
                (ii) consents and filings the failure to obtain or make which
                could not, individually or in the aggregate, reasonably be
                expected to have a Material Adverse Effect.

                Each of the Borrower, Kingsway America and the Subsidiaries
                has, and is in good standing with respect to, all governmental
                approvals, licenses, permits and authorizations necessary to
                conduct its business as presently conducted and to own or lease
                and operate its properties, except for those the failure to
                obtain which could not, individually or in the aggregate,
                reasonably be expected to have a Material Adverse Effect.

           (b)  Schedule "K" lists with respect to each Material Subsidiary,
                as of the Closing Date, all of the jurisdictions in which such
                Material Subsidiary holds licenses (including, without
                limitation, licenses or certificates of authority from relevant
                Insurance Regulatory Authorities), permits or authorizations to
                transact insurance and reinsurance business (collectively, the
                "Licenses"). To the knowledge of the Borrowers, (i) no such
                License is the subject of a proceeding for suspension,
                revocation or limitation or any similar proceedings; (ii) there
                is no sustainable basis for such a suspension, revocation or
                limitation; and (iii) no such suspension, revocation or
                limitation is threatened by an relevant Insurance Regulatory
                Authority. No Material Subsidiary transacts any insurance
                business, directly or indirectly, in any jurisdiction other
                than those listed on Schedule "K", where such business requires
                any license, permit or other authorization of an Insurance
                Regulatory Authority of such jurisdiction.

Section 7.02 Survival of Representations and Warranties. The representations and
warranties contained in this Article 7 shall survive the execution and delivery
of this Agreement and the making of Borrowings hereunder, regardless of any
investigation or examination made by the Agents, the Lenders or their counsel
and the Lenders shall be deemed to have relied upon each of such representations
and warranties in making available each Borrowing hereunder.

                                  ARTICLE EIGHT

                                    COVENANTS

Section 8.01 Positive Covenants. From the date hereof and until the Outstanding
Obligations are repaid in full, the Borrowers will, and will cause Kingsway
America and the Subsidiaries to, observe and perform each of the following
covenants, unless compliance therewith shall have been waived in writing by the
Majority of the Lenders:

     (1)  Existence - Corporate. The Canadian Borrower will do or cause to be
done all such things as are necessary to maintain its corporate existence and
the corporate existence of Kingsway America and each Subsidiary in good
standing, to ensure that it, Kingsway America and each Subsidiary have at all
times the right and are duly qualified to conduct their businesses and to obtain
and maintain all rights, privileges and franchises necessary for the conduct of
their business, except where failure to do so could not reasonably be expected
to have a Material Adverse Effect on such businesses or on the ability of the
Canadian Borrower, Kingsway America or any Subsidiary to perform its obligations
hereunder or under the Loan Documents.

<PAGE>

                                                                         Page 36

     (2)  Existence - U.S. Borrower. The U.S. Borrower will do or cause to be
done all such things as are necessary to maintain its existence (including for
United States tax purposes, its status as a United States corporation) and the
corporate existence of each of the partners of the U.S. Borrower in good
standing, to ensure that it has at all times the right and is duly qualified to
conduct its business and to obtain and maintain all rights, privileges and
franchises necessary for the conduct of its business, except where failure to do
so could not reasonably be expected to have a Material Adverse Effect on such
business or on its ability to perform its obligations hereunder. The U.S.
Borrower will make and maintain without revocation an effective election under
the Code to be treated as a corporation for United States federal income tax
purposes; provided, however, the U.S. Borrower may fail to make such election or
may revoke such election with the prior written consent of the Majority of the
Lenders if such failure or revocation could not reasonably be expected to have a
Material Adverse Effect.

     (3)  Conduct of Business. Each Borrower will maintain, operate and use
its properties and assets, and will carry on and conduct its business (a) in
substantially the same fields of enterprise as it is currently conducted and
(b) in a proper and efficient manner so as to preserve and protect such
properties and assets and business and the profits thereof and will cause
Kingsway America and each Subsidiary to do likewise in respect of their
respective properties, assets and business.

     (4)  Payment of Principal, Interest and Expenses. The Borrowers will duly
and punctually pay or cause to be paid to the Administrative Agent and the
Lenders the Outstanding Obligations at the times and places and in the manner
provided for herein.

     (5)  Payment of Taxes and Claims. The Borrowers will pay and discharge, and
will cause Kingsway America and each Subsidiary to pay and discharge, promptly
when due all Taxes, assessments and other governmental charges or levies imposed
upon it or upon its properties or assets or upon any part thereof, as well as
all claims of any kind (including claims for labour, materials and supplies)
which, if unpaid, would by law become a lien, charge, trust or other claim upon
any such properties or assets; but neither Borrower, nor Kingsway America nor
any Subsidiary shall be required to pay any such Tax, assessment, charge or levy
or claim if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Borrower, Kingsway
America or Subsidiary, as applicable, shall have set aside on its books a
reserve to the extent required by GAAP in an amount which is reasonably adequate
with respect thereto.

     (6)  Notice of Default or Event of Default. The Borrowers shall promptly
notify the Administrative Agent and the Lenders of the occurrence of any Default
or Event of Default and shall provide the Administrative Agent and the Lenders
with a detailed statement of a senior officer of the Borrowers, without personal
liability, describing in detail the steps taken by the Borrowers to cure such
Default or Event of Default.

     (7)  Financial Statements. The Borrower will deliver to each Lender:

     (a)  As soon as available and in any event within sixty (60) days after the
          end of each of the first three fiscal quarters of each Financial Year,
          beginning with the fiscal quarter ending June 30, 2002, (i) unaudited
          Consolidated and consolidating financial statements of the Canadian
          Borrower and Kingsway America, and (ii) unaudited Consolidated and
          non-Consolidated financial statements of the U.S. Borrower, as of the
          end of such fiscal quarter consisting of balance sheets, statements of
          income, cash flows and shareholders' equity for the fiscal quarter
          then ended and for that portion of the Financial Year then ended, in
          each case setting forth comparative Consolidated figures as of the end
          of and for the corresponding period in the preceding Financial Year,
          all in reasonable detail and prepared in accordance with GAAP (subject
          to the absence of notes required by GAAP and U.S. GAAP, as applicable,
          and subject to normal year-end adjustments) applied on a basis
          consistent with that of the preceding quarter or containing disclosure
          of the effect on the financial condition

<PAGE>

                                                                         Page 37

          or results of operations of any change in the application of
          accounting principles and practices during such quarter; and

     (b)  As soon as available and in any event within one hundred and twenty
          (120) days after the end of each Financial Year, beginning with the
          Financial Year ending December 31, 2002, (i) audited Consolidated and
          unaudited consolidating financial statements of the Canadian Borrower
          and Kingsway America, and (ii) unaudited Consolidated and
          non-Consolidated financial statements of the U.S. Borrower, all as
          of the end of such Financial Year consisting of balance sheets,
          statements of cash flow, income and shareholders' equity for the
          Financial Year then ended, including the notes thereto, in each case
          setting forth comparative figures as of the end of and for the
          preceding Financial Year together with comparative projected figures
          for the Financial Year then ended, all in reasonable detail and
          certified by the independent public accounting firms regularly
          retained by the Borrowers or another independent public accounting
          firm of recognized national standing reasonably acceptable to the
          Administrative Agent, together with (y) a report thereon by such
          accountants that is not qualified as to going concern or scope of
          audit and to the effect that such financial statements present fairly
          the Consolidated financial condition and results of operations of the
          Borrowers and Kingsway America as of the dates and for the periods
          indicated in accordance with GAAP and U.S. GAAP, as applicable,
          applied on a basis consistent with that of the preceding year or
          containing disclosure of the effect on the financial condition or
          results of operations of any change in the application of accounting
          principles and  practices during such year, and (z) if required by a
          Lender, a report by such accountants to the effect that, based on and
          in connection with their examination of the financial statements of
          the Borrowers and Kingsway America, they obtained no knowledge of the
          occurrence or existence of any Default or Event of Default relating
          to accounting or financial reporting matters, or a statement
          specifying the nature and period of existence of any such Default or
          Event of Default disclosed by their audit; provided however, that
          such accountants shall not be liable by reason of the failure to
          obtain knowledge of any Default or Event of Default that would not be
          disclosed or revealed in the course of their audit examination.

     (8)  Quarterly Certificate. The Borrowers shall deliver to the
Administrative Agent not later than 60 days after the end of the last day of
each of the first three fiscal quarters of the Borrower and within 120 days
after the end of each Financial Year, a certificate of a senior officer of each
of the Borrowers, without personal liability, in form and content satisfactory
to the Administrative Agent, which is: (i) to confirm compliance by the
Borrowers with the terms and conditions hereof including the covenants contained
in Section 8.02, (ii) to include detailed calculations of the financial tests
contained in Section 8.02, (iii) to confirm that no Default or Event of Default
has occurred and is continuing and to confirm that the Borrowers are operating
in accordance with applicable regulatory financial ratio guidelines.

     (9)  Intentionally Deleted.

     (10) Statutory Financial Statements. The Borrowers will deliver to LaSalle
Bank National Association, and any other Lender who so requests:

     (a)  as soon as available and in any event within sixty (60) days after the
          end of each of the first three fiscal quarters of each Financial Year,
          beginning with the first fiscal quarter ending after the date hereof,
          a quarterly statement of each Insurance Subsidiary as of the end of
          such fiscal quarter and for that portion of the Financial Year then
          ended, in the form filed with the relevant Insurance Regulatory
          Authority, prepared in accordance with SAP; and

     (b)  as soon as available and in any event within seventy (70) days after
          the end of each Financial Year, beginning with the Financial Year
          ended December 31, 2002, an Annual Statement of each Insurance
          Subsidiary as of the end of such Financial Year and for the

<PAGE>

                                                                         Page 38

          Financial Year then ended, in the form filed with the relevant
          Insurance Regulatory Authority, prepared in accordance with SAP.

     (11) Other Information. Each Borrower shall furnish to the Administrative
Agent promptly on request such other information in its possession respecting
its financial condition and its business and operations as the Lenders may from
time to time reasonably require.

     (12) Books and Records. Each Borrower will at all times maintain proper
records and books of account and therein make true and correct entries of all
dealings and transactions relating to its business including records of any
transactions between a Borrower, Kingsway America and the Subsidiaries, and will
make the same available for inspection by the Administrative Agent and the
Lenders or any agent of the Administrative Agent or the Lenders at all
reasonable times.

     (13) Notice of Litigation. Each Borrower will give to the Administrative
Agent prompt written notice of any material action, suit, litigation, or other
proceeding which is commenced or threatened against it.

     (14) Use of Proceeds. The Borrowers shall use the proceeds of all
Borrowings for the purposes contemplated hereunder, and for no other purpose.

     (15) Reserves. The Borrowers will, and will cause Kingsway America and
the Subsidiaries to, maintain appropriate reserves for Taxes, depreciation and
other contingent expenses or liabilities in accordance with GAAP.

     (16) Securities Regulatory Filings; Certain Other Notices. The Borrowers
shall provide to the Administrative Agent a copy of each material written
communication received by either Borrower, Kingsway America or any Subsidiary
from or delivered by a Borrower, Kingsway America or any Subsidiary to (without
duplication) (a) any securities regulatory authority, including annual filings,
information circulars, directors' circulars, statements of executive
compensation and material change reports, (b) any holder of stock or
Indebtedness of a Borrower, Kingsway America or any Subsidiary, or (c) any
provincial, state or federal regulatory body, in each case, within ten days of
such receipt or delivery.

     (17) Report to Other Creditors. The Borrowers shall provide to the
Administrative Agent copies of any statement or report provided to any other
party by a Borrower, Kingsway America or a Subsidiary pursuant to the terms of
each contract or agreement relating to Indebtedness of a Borrower, Kingsway
America or a Subsidiary and not otherwise required to be provided to the
Administrative Agent pursuant to this Agreement promptly following the provision
to such other party.

     (18) Other Information. The Borrowers shall furnish to the Administrative
Agent promptly on request such other information in their possession respecting
their financial condition and their businesses and operations, and the financial
condition of Kingsway America and the Subsidiaries and their businesses and
operations, as the Administrative Agent and the Lenders may from time to time
reasonably require.

     (19) Insurance. The Borrowers shall insure and keep insured their
properties and assets and shall cause Kingsway America and the Subsidiaries to
insure and to keep insured their properties and assets, placed with such
insurers and with such coverage and against such loss or damage to the full
insurable value of such properties and assets without co-insurance as the
Administrative Agent shall reasonably require or, in the absence of such
requirement, to the extent insured against by comparable corporations engaged in
comparable businesses. The Borrowers shall pay or cause to be paid all premiums
necessary to maintain any such insurance policies in good standing as such
premiums become due and payable.

<PAGE>

                                                                         Page 39

     (20) Access. Each Borrower will permit, and will cause Kingsway America
and the Subsidiaries to permit, the Administrative Agent (on behalf of the
Lenders) through its officers or employees or through any consultants retained
by it, upon request, to have reasonable access at any reasonable time and from
time to time, to either of the Borrowers', Kingsway America's or any of the
Subsidiaries' premises and to any records, information or data in their
possession so as to enable the Administrative Agent to ascertain the state of
the Borrowers' or Kingsway America's financial condition or operations, and will
permit the Administrative Agent to make copies of and abstracts from such
records, information or data and will upon request of the Lenders deliver to the
Administrative Agent copies of such records, information or data.

     (21) Notice of Adverse Change. The Borrowers will give to the
Administrative Agent prompt written notice of any event (including, without
limitation, any proposed change in any Tax Law) which may result in a Material
Adverse Effect.

     (22) Material Contracts. The Borrowers shall, and shall cause Kingsway
America and each Subsidiary to, perform all material obligations of a Borrower,
Kingsway America or a Subsidiary as applicable pursuant to all documents,
contracts and agreements material to the operations of a Borrower, Kingsway
America or any Subsidiary.

     (23) Compliance with Laws. The Borrowers shall, and shall cause Kingsway
America and each Subsidiary to, comply in all material respects with all
Applicable Laws.

     (24) Notice of Employment Matters. The Borrowers shall promptly give notice
to the Administrative Agent and to the Lenders of the occurrence or expected
occurrence of (1) any Reportable Event with respect to any Plan or arrangement
with respect to any Plan which could reasonably be expected to result in the
incurrence by either Borrower, Kingsway America or any of the Subsidiaries of
any material liability, fine or penalty, a failure to make any required
contribution to a Plan, any lien in favour of the PBGC or a Plan, or any
withdrawal from, or the termination, reorganization or insolvency (within the
meaning of such terms as used in ERISA) of any Multiemployer Plan or (2) the
institution of any proceedings or the taking of any action by the PBGC or either
Borrower of any Commonly Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the terminating, reorganization or insolvency
(within the meaning of such terms as used in ERISA) of any Plan or which would
materially increase the contingent liability of either Borrower, Kingsway
America or any of the Subsidiaries with respect to any post-retirement Plan
benefit other than liability for COBRA.

     (25) Investments. The Borrowers shall provide to the Administrative Agent
such periodic reports in respect of investments and invested assets as the
Administrative Agent and the Lenders may reasonably request.

     (26) Parity of Debt. The Borrowers shall ensure that the Outstanding
Obligations shall rank in right of payment in priority to, or in parity with,
any other Senior Funded Debt other than Senior Funded Debt secured by Permitted
Encumbrances.

     (27) Business of Subsidiaries. The Borrowers shall ensure that Kingsway
Finance Nova Scotia ULC and Kingsway U.S. Tier II Finance Partnership do not
carry on any business other than: (a) as a financial services holding company
and (b) financing transactions relating to Funded Debt, nor shall they have any
assets or liabilities other than pursuant to or as contemplated by this
Agreement.

     (28) Senior Unsecured Debt Rating. The Canadian Borrower shall maintain
at all times a senior unsecured debt rating with Moody's or Standard & Poor's
debt rating services to be updated annually.

<PAGE>
                                                                         Page 40

     (29) Ownership of Subsidiaries. The Canadian Borrower shall at all times
hold directly or indirectly 100% of all issued and outstanding stock of all
classes, except for qualifying shares issued to directors, of Kingsway America
and all Subsidiaries of the Canadian Borrower, and a 99% partnership interest in
the U.S. Borrower.

Section 8.02 Financial Covenants.

     (1) Funded Debt to Total Capitalization Ratio. The Canadian Borrower at all
times shall maintain a ratio of Total Funded Debt to Total Capitalization on a
Consolidated basis of not greater than 0.30:1.00, calculated quarterly on the
last day of each fiscal quarter of the Canadian Borrower.

     (2) Minimum Tangible Net Worth. The Canadian Borrower shall maintain at all
times a Tangible Net Worth on a Consolidated basis of not less than
$300,000,000, calculated quarterly on the last day of each fiscal quarter of the
Canadian Borrower; provided that minimum Tangible Net Worth on a Consolidated
basis shall increase in each fiscal quarter by an amount equal to 50% of
Consolidated Net Income during each such quarter plus by an amount equal to 25%
of the proceeds of any equity issuance during each such quarter, with no
downward adjustment made for net losses.

     (3) Combined Ratio. The Canadian Borrower shall maintain at all times a
Combined Ratio on a Consolidated basis of not greater than the greater of (i)
105% and (ii) the Canadian Property and Casualty Industry Average Combined Ratio
over four consecutive quarters, calculated on the last day of each fiscal
quarter of the Canadian Borrower on a rolling four-quarter basis and in a
consistent manner.

     (4) Capital Surplus Ratio. The Canadian Borrower shall maintain at all
times a Capital Surplus Ratio on a Consolidated basis of not greater than
2.75:1.00, calculated quarterly on the last day of each fiscal quarter of the
Canadian Borrower on a rolling four-quarter basis.

     (5) Interest Coverage Ratio. The Canadian Borrower shall maintain at all
times an Interest Coverage Ratio on a Consolidated basis of not less than
3.00:1.00, calculated on the last day of each fiscal quarter of the Canadian
Borrower on a rolling four-quarter basis.

Section 8.03 Restrictive Covenants. From the date hereof and until the
Outstanding Obligations are paid in full, the Borrowers shall adhere to, and
shall cause Kingsway America and the Subsidiaries to adhere to, the following
covenants, unless waived in writing by the Majority of the Lenders:

     (1) Not to Amalgamate, etc. Neither Borrower, nor Kingsway America nor any
of the Subsidiaries shall enter into any transaction or series of related
transactions (whether by way of amalgamation, merger, winding-up, consolidation,
reorganization, reconstruction, dissolution, continuance, transfer, sale, lease
or otherwise) whereby all or substantially all of its undertaking, properties,
rights or assets would become the property of any Person other than another
Borrower, Kingsway America or a Material Subsidiary.

     (2) Indebtedness. Neither Borrower, nor Kingsway America nor any of the
Subsidiaries shall create, assume, issue or permit to exist, directly or
indirectly, any Indebtedness except for Permitted Indebtedness.

     (3) Negative Pledge. Neither Borrower, nor Kingsway America nor any of the
Subsidiaries shall create, assume, incur or suffer to exist any Security
Interest in or upon any of their respective undertakings, properties, rights or
assets (including, without limitation, insurance policies required pursuant to
Section 8.01(19)), other than Permitted Encumbrances.

     (4) No Impairment of Upstreaming. Except to the extent that an Insurance
Subsidiary is regulated by an Insurance Regulatory Authority, neither Borrower,
nor Kingsway America nor any Subsidiary shall directly or indirectly enter into,
assume or be bound by any agreement or instrument that

<PAGE>
                                                                         Page 41

restricts or limits the ability of the Borrowers, Kingsway America or any
Subsidiary to make dividend payments or other distribution in respect of its
capital stock, to repay indebtedness owed to a Borrower, Kingsway America or any
other Subsidiary, to make loans or advances to a Borrower, Kingsway America or
any Subsidiary, or to transfer any of its assets or properties to a Borrower,
Kingsway America or any Subsidiary, in each case other than such restrictions or
encumbrances existing under or by reason of the Loan Documents.

   (5)    No Guarantees. Neither Borrower, nor Kingsway America nor any of the
Subsidiaries shall be, or become liable, directly or indirectly, contingently or
otherwise, for any obligation of any other Person by Guarantee other than:

   (i)    the Guaranty Agreement effective January 1, 2001 (the "State and
          County Guaranty") issued by the Canadian Borrower in favour of State
          and County Mutual Fire Insurance Company ("State and County") in
          respect of the liabilities of:

          (A) Kingsway Reinsurance Corporation ("Kingsway Reinsurance") under
that certain 100% Quota Share Reinsurance Agreement effective January 1, 2001
(the "State and County Reinsurance Agreement") between Kingsway Reinsurance and
State and County, and

          (B) Southern United General Agency of Texas, Inc. ("General Agency")
under that certain agreement effective January 1, 2001 (the "State and County
General Agency Agreement") whereby State and County appointed General Agency, to
the extent provided therein, to act as general agent for State and County,

   (ii)   the Guaranty Agreement effective April 1, 2001 (the "State National
          Guaranty") issued by the Canadian Borrower in favour of State National
          Insurance Company, Inc. ("State National"), State National Specialty
          Insurance Company ("State National - Florida") and State and County in
          respect of the liabilities of:

          (A) Kingsway Reinsurance under that certain 100% Quota Share
Reinsurance Agreement effective April 1, 2001 between Kingsway Reinsurance and
State and County,

          (B) Lincoln General Insurance Company ("Lincoln General") under that
certain 90% Quota Share Reinsurance Agreement effective April 1, 2001 among
Lincoln General, State National and State National - Florida,

          (C) Lincoln General under that certain Excess Stop Loss Reinsurance
Agreement effective April 1, 2001 among Lincoln General, State National and
State National - Florida, and

          (D) Reliant American Insurance Company ("Reliant American") under that
certain agreement effective April 1, 2001 (the "Reliant American General Agency
Agreement") whereby State National, State National - Florida and State and
County appointed Reliant American, to the extent provided therein, to act as
general agent for State National, State National - Florida and State and County,

   (iii)  the letters of credit that may be obtained, from time to time, by
          Kingsway Reinsurance Corporation for the benefit of Old American
          County Mutual Fire Insurance Company ("Old American") to support the
          liabilities of Kingsway Reinsurance under that certain Quota Share
          Reinsurance Agreement effective October 5, 2001 between Kingsway
          Reinsurance and Old American (the "Old American Reinsurance
          Agreement"),

   (iv)   the Indemnity and Hold Harmless Agreement effective October 5, 2001
          (the "MSI Indemnity") issued by Kingsway America, on behalf of itself
          and its affiliated companies, in favour of MSI Insurance Companies
          ("MSI") in respect of the insurance policies issued in MSI's name on
          behalf of Kingsway America by West Point Underwriters,

<PAGE>
                                                                         Page 42

   (v)    the Indemnity and Hold Harmless Agreement effective February 1, 2002
          issued by the Canadian Borrower in favour of Aegis Security Insurance
          Company;

   (vi)   the letters of credit that may be obtained, from time to time, by the
          Canadian Borrower for the benefit of MSI to support the liabilities of
          Kingsway America under the MSI Indemnity Agreement,

   (vii)  the guarantee issued or to be issued by the Canadian Borrower in
          favour of the Insurance Commission of Connecticut in respect of the
          capital and surplus requirements of Lincoln General,

   (viii) the Guarantee of Kingsway America in respect of the 1999 Facility,
          and

   (ix)   as otherwise permitted hereunder.

   (6)    Restrictions on Subsidiaries and Investments. Neither Borrower, nor
Kingsway America nor any of the Subsidiaries shall directly or indirectly
acquire or invest in any body corporate or form any Subsidiary or affiliate or
invest or make a loan to any Person (other than a Person that is a Subsidiary as
at the date of this Agreement) unless no Default shall have occurred and be
continuing or would result therefrom and the following conditions are satisfied:

   (i)    Neither Borrower, nor Kingsway America nor any of the Subsidiaries
          shall acquire or attempt to acquire voting control directly or
          indirectly of the shares of any corporation unless (A) such action is
          supported or approved by the board of directors of the target
          corporation and (B) such acquisition does not place a Lender in a
          position of conflict of interest;

   (ii)   Neither Borrower, nor Kingsway America nor any Subsidiary shall make
          any investment in or enter into a venture which is outside the scope
          of its core business as at the date of this Agreement other than
          investments contained in the Canadian Borrower's equity portfolio;

   (iii)  No individual acquisition or investment shall exceed U.S.
          $50,000,000;

   (iv)   Acquisitions and investments shall not exceed U.S. $125,000,000 in the
          aggregate in any Financial Year, provided that if acquisitions in any
          Financial Year total less than U.S. $125,000,000 in the aggregate the
          Borrowers shall be entitled to carry forward 50% of the amount not so
          expended to the immediately following Financial Year;

   (v)    Prior to completion of the contemplated acquisition or investment, the
          Borrowers shall provide pro forma financial statements and a
          compliance certificate demonstrating compliance with the financial
          covenants set out in Section 8.02 certified by a senior officer of the
          Canadian Borrower, without personal liability, confirming that the
          Borrowers will not be in breach of covenants as a result of the
          contemplated investment or acquisition.

     (7) Material Contracts. Neither Borrower, nor Kingsway America nor any of
the Subsidiaries shall cancel or terminate any material contract or amend or
otherwise modify any material contract, or waive any default or breach under any
material contract, or take any other action in connection with any material
contract that could reasonably be expected to have a Material Adverse Effect. By
way of example and not in limitation of the foregoing, the Borrowers will not
consent to or enter into any amendment, supplement or other modification of any
of the terms or provisions contained in, or applicable to, (a) any documents
relating to preferred stock issued by the Canadian Borrower, (b) documents
relating to any warrant or option granted by the Canadian Borrower if the effect
of such amendment, supplement or other modification is to impose or increase any
monetary obligation on any Borrower, (c) any constating documents of either
Borrower other than any such amendment, supplement or other modification which
is immaterial or which could not reasonably be expected to have in a Material
Adverse Effect.

<PAGE>
                                                                         Page 43

     (8) No Speculative Transactions. Neither Borrower, nor Kingsway America nor
any of the Subsidiaries shall engage in any speculative transaction or any
transaction involving commodity options, futures contracts or interest rate or
currency hedging (other than currency and interest rate hedging in the ordinary
course of business consistent with prudent business management).

     (9) Margin Stock. Neither Borrower, nor Kingsway America nor any of the
Subsidiaries shall use the proceeds of any Borrowing for the purpose of
purchasing or acquiring any stock on margin.

     (10) Carry on Business. Neither the Borrower nor Kingsway America nor any
of the Subsidiaries will carry on any business other than the Lines of Business.

     (11) Margin Calls. Neither Borrower, nor Kingsway America nor any of the
Subsidiaries shall use the proceeds of any Borrowing to satisfy a margin call.

     (12) Announcements. Neither Borrower, nor Kingsway America nor any of the
Subsidiaries shall make or permit to be made by or on behalf of itself any press
release or other public announcement which mentions an Agent or a Lender without
such Agent's and such Lender's prior written consent and approval of such press
release or public announcement, which approval shall not be unreasonably
withheld or delayed, except as required by Applicable Law.

     (13) Transactions with Directors, etc. Neither Borrower nor Kingsway
America nor any of the Subsidiaries shall enter into any transaction, agreement
or arrangement with any director, officer, shareholder or any member of the
immediate family of any director, officer or shareholder, except in the ordinary
course of business and on terms no more beneficial than would be offered to
arms-length Persons.

     (14) Restricted Payments, etc.

     (a)  The Borrowers will not, and will not permit or cause Kingsway America,
          any of the Subsidiaries to, directly or indirectly, declare or make
          any dividend payment, or make any other distribution of cash, property
          or assets, in respect of any of its capital stock or any warrants,
          rights or options to acquire its capital stock, or purchase, redeem,
          retire or otherwise acquire for value any shares of its capital stock
          or any warrants, rights or options to acquire its capital stock, or
          set aside funds for any of the foregoing, except that:

         (i)   the Canadian Borrower may declare and make dividend payments or
               other distributions to holders of its common stock, in cash or in
               shares of its common stock, and may purchase, redeem, retire or
               otherwise acquire shares of its capital stock, in cash or in
               kind, in each case provided that, immediately after giving effect
               thereto, no Default or Event of Default would exist; and

         (ii)  each wholly owned Subsidiary (except the U.S. Borrower) of the
               Canadian Borrower may declare and make dividend payments or other
               distributions to the U.S. Borrower or another wholly owned
               Subsidiary of the Canadian Borrower, to the extent not prohibited
               under Applicable Law, provided that, immediately after giving
               effect thereto, no Default or Event of Default would exist; and

         (iii) the U.S. Borrower may make distributions to its partners from
               available cash (provided that the U.S. Borrower maintains its
               status as a "partnership" for Canadian tax purposes), in an
               aggregate amount not exceeding the tax liability of such partners
               actually due and owing and that is attributable to their
               ownership interests in the U.S. Borrower for each Financial Year,
               so long as (A) a certificate reasonably satisfactory to the
               Administrative Agent certified by a senior officer of the
               Canadian Borrower, without personal liability, is delivered to
               the Agent at least five Business Days prior to

<PAGE>
                                                                         Page 44

               the payment of any such distributions demonstrating in reasonable
               detail such officer's good faith reasonable estimated tax
               liabilities of such partners attributable to their ownership
               interests in the U.S. Borrower for the related Financial Year for
               which the proposed distributions is required and (B) a
               certificate of KPMG LLP (or other independent public accountants
               of nationally recognized standing), reasonably satisfactory in
               form and substance to the Agent, is delivered within 90 days
               after the end of each Financial Year for each Financial Year
               relating to all such distributions within such Financial Year,
               concurrently with the reports required to be delivered pursuant
               to Section 8.01(7) and (9), to the Administrative Agent, setting
               forth in detail the calculation of such amounts; provided,
               however, that if any such certificate demonstrates a lower tax
               liability that that which was anticipated and upon which
               distributions were paid to such partners, any future payment of
               distributions hereunder shall be decreased in an amount equal to
               the excess amount paid in respect of taxes during the prior
               Financial Year;

     (b)  The Borrowers will not, and will not permit or cause Kingsway America,
          any of the Subsidiaries to, make (or give any notice in respect of)
          any voluntary or optional payment or prepayment of principal on any
          Subordinated Indebtedness, or directly or indirectly make any
          redemption (including pursuant to any change of control provision),
          retirement, defeasance or other acquisition for value of any
          Subordinated Indebtedness, or make any deposit or otherwise set aside
          funds for any of the foregoing purposes.

     (15) Disposition of Assets. Neither Borrower, nor Kingsway America nor any
Subsidiary will, during the term of this Agreement, sell, assign, transfer,
convey, lease (as lessor), contribute or otherwise dispose of, or grant options,
warrants or other rights with respect to, any of their properties or assets,
having a value in excess of U.S. $20,000,000 in the aggregate except for
dispositions in the ordinary course of business of equities held in the Canadian
Borrower's equity portfolio.

     (16) Capital Expenditures. Neither Borrower, nor Kingsway America nor any
Subsidiary shall incur Capital Expenditures in any Financial Year in excess of
U.S. $5,000,000 in the aggregate, exclusive of Permitted Acquisitions.

     (17) Currency and Interest Rate Speculation. Neither Borrower, nor Kingsway
America nor any of the Subsidiaries shall engage in currency trading or convert
loans from one currency to another for speculative reasons, or engage in
interest rate hedging transactions for speculative reasons.

                                  ARTICLE NINE

                                EVENTS OF DEFAULT

Section 9.01 Events of Default. Notwithstanding anything to the contrary herein,

     (a)  the right of a Borrower to obtain a further Borrowing shall cease and
          the Lenders shall have no obligation to honour any cheques or other
          orders for payment, and

<PAGE>
                                                                         Page 45

     (b)  the Outstanding Obligations shall become immediately due and payable
          to the Administrative Agent (on behalf of the Lenders) and the Lenders
          may without notice to the Borrowers apply any amounts outstanding to
          the credit of the Borrowers to repayment of the Outstanding
          Obligations, provided that, in the case of other than Sections
          9.01(8), (11), (12) and (14) (which are automatic Events of Default),
          the prior consent or direction of the Majority of the Lenders has been
          obtained by the Administrative Agent,

upon the occurrence of any of the following events:

     (1) Failure to Pay Principal or Interest - if a Borrower fails to make
punctual payment when due of any principal amount or interest payable hereunder;

     (2) Failure to Pay Other Amounts - if a Borrower fails to make punctual
payment when due of any amount payable hereunder other than principal or
interest and if such payment is not made within 10 Business Days of the day on
which such payment is due;

     (3) False Representations, Etc. - if any representation or warranty made or
given herein, in any other Loan Document, in any certificate delivered pursuant
hereto, or in any financial statements delivered pursuant hereto or thereto, as
applicable, is false or erroneous in any material respect;

     (4) Cross-Default - if a Borrower, Kingsway America or any Subsidiary
defaults in its obligations to any Person in respect of any Indebtedness in the
principal amount of U.S. $5,000,000 or greater or under any agreement relating
to any such Indebtedness and such default has not been waived within the
applicable cure period;

     (5) Default in Certain Covenants - if there is any default or failure in
the observance or performance of any covenant contained in Section 8.02;

     (6) Default in Other Covenants - if, other than in respect of covenants
contained in Section 8.02, or any covenant to pay, there is any default or
failure in the observance or performance of any other act hereby, or pursuant to
any other Loan Document, required to be done or any other covenant or condition
hereby, or pursuant to any other Loan Document, required to be observed or
performed, and the default or failure continues for 15 Business Days after
notice by the Agent to either Borrower, Kingsway America or any Subsidiary, as
applicable, specifying such default or failure;

     (7) Change in Ownership or Control - if (i) any Person acquires Voting
Control of the Canadian Borrower following the Closing Date, (ii) the Canadian
Borrower ceases to (a) be a general partner of the U.S. Borrower or (b) own
directly or indirectly 100% of the issued and outstanding voting shares in the
capital stock of Kingsway America or any Subsidiary, (iii) the Canadian Borrower
and Metro Claim Services Inc. cease to be the sole partners of the U.S.
Borrower, (iv) the Canadian Borrower ceases to be a public company or ceases to
be widely held, or (v) the U.S. Borrower is dissolved;

     (8) Insolvency - if a Borrower, Kingsway America or any Material Subsidiary
is unable to pay debts as such debts become due, or is, or is adjudged or
declared to be, or admits to being, bankrupt or insolvent;

     (9) ERISA Prohibited Transactions - (i) if any Person engages in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) if any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan, or any lien shall arise on the assets of a Borrower,
Kingsway America or any Subsidiary in favour of the PBGC or a Plan, (iii) if a
reportable event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Agent, likely to result in the
termination of such Plan for purposes of Title

<PAGE>
                                                                         Page 46

IV of ERISA, (iv) if any Single Employer Plan shall terminate for purposes of
Title IV of ERISA; (v) if a Borrower, Kingsway America or any Subsidiary shall,
or in the reasonable opinion of the Administrative Agent is likely to, incur any
liability in connection with a withdrawal from, or the insolvency or
Reorganization of, a Multiemployer Plan or (vi) if any other event or condition
shall occur or exist, with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other such events
or conditions, if any, could reasonably be expected to have a Material Adverse
Effect.

     (10) Pension Liability - with respect to any Guaranteed Pension Plan, an
ERISA Reportable Event shall have occurred and a Majority of the Lenders shall
have determined that such event reasonably could be expected to result in
liability of a Borrower, Kingsway America or any Subsidiary to the PBGC or such
Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and such
event in the circumstances occurring reasonably could constitute grounds for the
termination of such Guaranteed Pension Plan by the PBGC or for the appointment
by the appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan; or a trustee shall have been appointed by the United
States District Court to administer such Plan; or the PBGC shall have
institituted proceedings to terminate such Guaranteed Pension Plan.

     (11) Voluntary Proceedings - if a Borrower, Kingsway America or any
Subsidiary makes a general assignment for the benefit of creditors; or any
proceeding or filing is instituted or made by a Borrower, Kingsway America or
any Subsidiary seeking relief on its behalf as debtor, or to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding-up, reorganization,
arrangement, adjustment or composition of it or its debts under any similar law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its properties or assets; or a Borrower,
Kingsway America or any Subsidiary takes any corporate action to authorize any
of the actions set forth in this Section 9.01(11);

     (12) Involuntary Proceedings - if any notice of intention is filed or any
proceeding or filing is instituted or made against a Borrower, Kingsway America
or any Subsidiary in any jurisdiction seeking to have an order for relief
entered against it as debtor or to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding-up, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its properties or assets or seeking possession, foreclosure or retention, or
sale or other disposition of, or other proceedings to enforce security over, all
or a substantial part of the assets of a Borrower, Kingsway America or any
Subsidiary unless the same is being contested actively and diligently in good
faith by appropriate and timely proceedings and is dismissed, vacated or stayed
within 30 days of institution thereof;

     (13) Adverse Judgments - if one or more final judgments for the payment of
money aggregating in excess of U.S. $5,000,000 (whether or not covered by
insurance) shall be rendered against a Borrower, Kingsway America or any
Subsidiary and such Borrower, Kingsway America or such Subsidiary shall fail to
discharge the same within thirty (30) days from the date of notice of entry
thereof.

     (14) Receiver, etc. - if a receiver, liquidator, trustee, sequestrator or
other officer with like powers is appointed with respect to, or an encumbrancer
pursuant to a Security Interest or otherwise takes possession of, or forecloses
or retains, or sells or otherwise disposes of, or otherwise proceeds to enforce
security over any of the properties or assets of either Borrower, Kingsway
America or any Material Subsidiary or gives notice of its intention to do so;

     (15) Execution, Distress - if any writ, attachment, execution,
sequestration, extent, distress or any other similar process in an amount not
greater than U.S. $5,000,000 in the aggregate becomes enforceable against either
Borrower, Kingsway America or any Subsidiary or if a distress or any analogous
process is levied against any of the properties or assets of either Borrower,
Kingsway America or any

<PAGE>
                                                                         Page 47

Material Subsidiary, except where the same is being contested actively and
diligently in good faith by appropriate and timely proceedings and the
enforcement or levy has been stayed;

     (16) Suspension of Business - if a Borrower, Kingsway America or any
Material Subsidiary suspends or ceases or threatens to suspend or cease its
business;

     (17) Sale - if a Borrower, Kingsway America or any Material Subsidiary
sells or otherwise disposes of, or threatens to sell or otherwise dispose of,
all or a substantial part of its undertaking and property and assets whether in
one transaction or a series of related transactions save as permitted in this
Agreement;

     (18) Regulatory Action - if any action is taken by any regulatory body with
authority over a Borrower, Kingsway America or any Material Subsidiary to
materially limit the business activities of a Borrower, Kingsway America or any
such Material Subsidiary.

     (19) Impairment of Kingsway America Guarantee, etc. - if any Loan Document
including, without limitation, the Kingsway America Guarantee shall (except in
accordance with its terms), in whole or in part, terminate, cease to be
effective or cease to be the legally valid, binding and enforceable obligation
of any obligated party thereto or any Borrower or any other party obligated
under any Loan Document shall, directly or indirectly, contest in any manner
such effectiveness, validity, binding nature or enforceability.

Section 9.02 Lenders May Waive. The Majority of the Lenders may at any time
waive any Default or Event of Default which may have occurred, provided that no
such waiver shall extend to or be taken in any manner whatsoever to affect any
subsequent Default or Event of Default or the rights or remedies resulting
therefrom. No such waiver shall be effective unless given by the Administrative
Agent in writing with the consent of the Majority of the Lenders.

Section 9.03 Remedies are Cumulative. For greater certainty, the rights and
remedies of the Lenders and the Agents under this Agreement are cumulative and
are in addition to and not in substitution for any rights or remedies provided
by law; and any single or partial exercise by the Lenders or the Agents of any
right or remedy for a Default or Event of Default or breach of any term,
covenant, condition or agreement herein contained shall not be deemed to be a
waiver of or to alter, affect or prejudice any other right or remedy to which
the Lenders or the Agents may be lawfully entitled for the same default or
breach, and any waiver by the Lenders or the Agents of the strict observance,
performance or compliance with any term, covenant, condition or agreement herein
contained and any indulgence granted by the Lenders or the Agents shall be
deemed not to be a waiver of that or any subsequent default.

Section 9.04 Set-Off. Each of the Lenders shall be entitled at any time or from
time to time after demand or the occurrence of an Event of Default which is
continuing, without notice to set-off, consolidate and to apply any or all
deposits and any other indebtedness at any time held by or owing by such Lender
to either Borrower against and on account of the debts, liabilities or
obligations of the Borrowers to such Lender, whether or not due and payable and
whether or not such Lender has made demand therefor.

Section 9.05 Cash Collateral Accounts. Following demand or upon the occurrence
of an Event of Default which is continuing and in addition to any other rights
or remedies of the Agents and the Lenders hereunder, the Administrative Agent as
and by way of collateral security shall be entitled to deposit and retain in an
account to be maintained by the Administrative Agent on behalf of the Lenders
(bearing interest at the rates of the Administrative Agent as may be applicable
in respect of other deposits of similar amounts for similar terms) amounts which
are received by the Administrative Agent from either Borrower hereunder to the
extent such amounts may be required to satisfy any Outstanding Obligations.

<PAGE>
                                                                         Page 48
                                   ARTICLE TEN

                                     GENERAL

Section 10.01 Redistribution of Payments. If at any time the proportion which
any Lender has received or recovered in respect of its portion of any payment to
be made under this Agreement by the Borrowers for the account of such Lender or
one or more other Lenders including any moneys and/or property obtained by such
Lender in the exercise of any right of set-off, counterclaim or similar right of
such Lender is greater than its Rateable Portion, then appropriate transfers
shall be made among the Lenders through the Administrative Agent, so as to
ensure that each Lender receives its Rateable Portion of such payments.

Section 10.02 Enforcement. Each of the Lenders hereby covenants and agrees that
it shall not be entitled to take any action hereunder, including, without
limitation, any demand or declaration of a Default or an Event of Default
hereunder but that such action shall be taken only by the Administrative Agent
with the prior written agreement of the Majority of the Lenders. Each of the
Lenders further covenants and agrees that upon any such written agreement by the
Majority of the Lenders, it shall cooperate fully to the extent requested by the
Administrative Agent or the Majority of the Lenders. Each of the Lenders further
covenants and agrees that all amounts received following Default or an Event of
Default on account of the Outstanding Obligations, are held for the benefit of
all Lenders and shall be shared among the Lenders rateably according to their
Rateable Portions and that all costs of such realization, to the extent not
reimbursed, shall be shared among the Lenders rateably in accordance with their
Rateable Portions. Each of the Lenders covenant and agree not to seek, accept or
take security from any Person in respect of the Outstanding Obligations, or any
portion thereof other than the Security.

Section 10.03 Readjustment of Obligations Among Lenders.

(a)  If upon expiry of the Credit Facilities or, if sooner upon demand or the
     occurrence of an Event of Default, the Lenders shall not recover the
     Outstanding Obligations in full (the amount by which the recovered amount
     falls short of the entire amount of the Outstanding Obligations hereinafter
     called the "Shortfall"), the Shortfall shall be shared by the Lenders
     rateably in accordance with their respective Rateable Portions, and
     appropriate transfers and adjustments shall be made such that the Shortfall
     is shared, as nearly as may be practicable, in accordance with the
     respective Rateable Portions. Such adjustments and transfers shall be
     accomplished through the Administrative Agent and in a manner satisfactory
     to the Lenders concerned, acting reasonably.

(b)  Upon a permanent prepayment of a portion of the Canadian Facility pursuant
     to Section 4.03, the Canadian Commitment of each Canadian Lender shall be
     reduced rateably such that the Canadian Rateable Portion of each Canadian
     Lender following such prepayment is equal to its Canadian Rateable Portion
     immediately prior to such prepayment and the Total Commitment shall be
     reduced in an amount equal to the prepayment.

(c)  Upon a permanent prepayment of a portion of the U.S. Facility pursuant to
     Section 4.03, the U.S. Commitment of each U.S. Lender shall be reduced
     rateably such that the U.S. Rateable Portion of each U.S. Lender following
     such prepayment is equal to its U.S. Rateable Portion immediately prior to
     such prepayment and the Total Commitment shall be reduced in an amount
     equal to the prepayment.

Section 10.04 Notices. Any notice, request or other communication hereunder to
any of the parties hereto shall be in writing and be well and sufficiently given
if delivered personally or sent by prepaid registered mail to its address or by
telecopier to the number and to the attention of the person set forth below:

<PAGE>

                                                                         Page 49

          (a)  In the case of the Borrowers or Kingsway America:
               c/o Kingsway Financial Services Inc.
               5310 Explorer Drive
               Mississauga, Ontario
               L4W 5H8

               Attention: Shaun Jackson
               Telecopier No.: (905) 629-5008

          (b)  with a copy to the U.S. Borrower:
               c/o Kingsway America
               1515 Woodfield Road
               Suite 820
               Schaumburg, Illinois   60172
               Attention: James R. Zuhlke
               Telecopier No.: (847) 619-5275

          (c)  In the case of the Administrative Agent and the Lenders:
               c/o Canadian Imperial Bank of Commerce
               BCE Place, P.O. Box 500
               161 Bay Street, 8th Floor
               Toronto, Ontario M5J 2S8

               Attention: Manager of Administration
               Telecopier No.: (416) 956-3830

Any such notice shall be deemed to be given and received, if delivered, when
delivered, and if mailed, on the third Business Day following the date on which
it was mailed, unless an interruption of postal services occurs or is continuing
on or within the three Business Days after the date of mailing in which case the
notice shall be deemed to have been received on the third Business Day after
postal service resumes and if sent by telecopier on the next Business Day after
the day on which the telecopy is sent. Either party may by notice to the other,
given as aforesaid, designate a changed address or telecopier number.

Section 10.05 Performance of Covenants by the Lenders. If any of the covenants
or obligations contained herein or in any Loan Document shall not be performed
by a Borrower, Kingsway America or a Subsidiary, the Administrative Agent or
Lenders upon reasonable notice to the Borrowers may perform such covenant or
obligation and, if in so doing the Administrative Agent or any Lender spends
money or incurs liability, the amount of money so spent or liability incurred
shall be treated as a U.S. Base Rate Loan advanced to the Borrowers.

Section 10.06 Indemnity. In addition to any other indemnity provided for herein,
the Borrowers hereby jointly and severally indemnify the Agents and the Lenders
on demand against any loss (other than loss of profit), expense or liability
which the Agents or any Lender may sustain or incur as a consequence of the
action or inaction of a Borrower, Kingsway America or any Subsidiary in
connection with:

          (a)  any default in payment of the principal amount of any Borrowing
               or any part thereof or interest accrued thereon, as and when due
               and payable;

          (b)  the repayment or prepayment of any LIBOR Loan prior to the last
               day of its term;

<PAGE>

                                                                         Page 50

          (c)  any failure to fulfill on or before any Borrowing Date the
               conditions precedent to any Borrowing as provided for in this
               Agreement, if as a result of such failure such Borrowing is not
               made on such date;

          (d)  the occurrence of any Default or Event of Default;

          (e)  any misrepresentation made by a Borrower or Kingsway America
               herein or in any instrument in writing delivered to the Agents or
               any Lender in connection with this Agreement;

          (f)  the costs of enforcement of the rights of the Agents and the
               Lenders under this Agreement and the Loan Documents; and

          (g)  any determination that a Lender or an Agent is a partner or a
               joint venturer with any Borrower,

including but not limited to any loss or expense sustained or incurred in
liquidating or redeploying deposits or other funds contracted for or acquired or
used to effect or maintain such Borrowing or part thereof.

Section 10.07 The Canadian Borrower Liability for the U.S. Borrower Obligations;
Waivers, etc. In addition to, and not in limitation of, any direct liability of
the Canadian Borrower arising hereunder (including, without limitation, in
respect of any and all Outstanding Obligations of the Canadian Borrower), the
Canadian Borrower, by virtue of its status as general partner of the U.S.
Borrower, hereby expressly affirms, acknowledges and agrees for the benefit of
the Administrative Agent and the Lenders that it is liable ("Partnership
Liability") for all indebtedness and other obligations of the U.S. Borrower
(including, without limitation, in respect of any and all Outstanding
Obligations of the U.S. Borrower) under the Delaware Revised Partnership Act, 6
Del. C. Sections 15-1.01 - 1210, as the same may be amended or otherwise
modified from time to time, and in connection with such Partnership Liability
hereby expressly waives (a) promptness, diligence, notice of acceptance and any
other notice with respect to any of the Outstanding Obligations, (b) any
requirement that the Administrative Agent or any Lender exhaust any right or
take any action against the U.S. Borrower or any other Person (including any
guarantor) or entity or any collateral, if any, securing the Outstanding
Obligations and (c) any requirement of marshaling. In furtherance of (and
without limiting) the foregoing, the Canadian Borrower acknowledges and agrees
that its Partnership Liability shall exist in full force and effect regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any Outstanding Obligations of the U.S. Borrower or the rights of the
Administrative Agent or any of the Lenders with respect thereto. Moreover, the
Canadian Borrower's Partnership Liability shall be absolute, unconditional and
irrevocable irrespective of (a) any lack of validity, legality or enforceability
of this Agreement, any Loan Document or any other agreement or instrument
relating to any thereof as to any Outstanding Obligations of the U.S. Borrower;
(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Outstanding Obligations of the U.S. Borrower, or any
compromise, renewal, extension, acceleration or release with respect thereto, or
any other amendment or waiver of or any consent to departure from this Agreement
or any Loan Document; (c) any addition, exchange, release or non-perfection of
collateral, if any, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Outstanding Obligations of
the U.S. Borrower; (d) the failure of the Administrative Agent or any Lender (i)
to assert any claim or demand or to enforce any right or remedy against the U.S.
Borrower or any other Person (including any guarantor) under the provisions of
this Agreement, any Loan Document or otherwise, or (ii) to exercise any right or
remedy against any guarantor of, or collateral (if any) securing, any of the
Outstanding Obligations of the U.S. Borrower; (e) any amendment to, rescission,
waiver, or other modification of, or any consent to departure from, any of the
terms hereof or any Loan Document; (f) any defense, set-off or counterclaim
which may at any time be available to or be asserted by the U.S. Borrower
against the Administrative Agent or any Lender; (g) any limitation, impairment
or termination of the Outstanding Obligations of the U.S. Borrower for any
reason, including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to (and the Canadian Borrower hereby

<PAGE>

                                                                         Page 51

expressly waives any right to or claim of) any defense or set-off, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or any other
event or occurrence affecting, the Outstanding Obligations of the U.S. Borrower
or otherwise; or (h) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the U.S. Borrower,
any surety or any guarantor.

Section 10.08 No Set-Off or Counterclaim. The obligations of the Borrowers and
of Kingsway America to make payments hereunder and under the Loan Documents
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, any set-off, compensation,
counterclaim, recoupment, defence or other right which a Borrower or Kingsway
America may have against the Agents or any of the Lenders.

Section 10.09 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall not invalidate the remaining
provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

Section 10.10 Time of Essence. Time shall, in all respects, be of the essence of
this Agreement.

Section 10.11 Assignment. No Borrower may assign this Agreement or any part
hereof without the prior written consent of the Administrative Agent and each of
the Lenders. Subject to Section 10.18, a Lender shall be entitled to assign this
Agreement with the consent of the Administrative Agent not to be unreasonably
withheld.

Section 10.12 Entire Agreement. This Agreement, together with any other
instrument contemplated hereby, constitutes the entire agreement between the
parties with respect to the matters covered hereby and supersedes any other
prior agreements or representations.

Section 10.13 Amendments. No amendment, modification or waiver of any provision
of this Agreement or consent by the Lenders to any departure from any provision
of this Agreement is in any way effective unless it is in writing and signed by
the Borrowers, in respect of an amendment or modification, and the Majority of
the Lenders, in which event the amendment, modification, waiver or consent is
effective only in the specific instance and for the specific purpose for which
it is given.

Section 10.14 Law Governing. This Agreement shall be governed by and construed
in accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and shall be treated in all respects as an Ontario contract
and the parties hereby submit and attorn to the non-exclusive jurisdiction of
the courts of the Province of Ontario.

Section 10.15 Forum Selection and Consent to Jurisdiction. Any litigation based
hereon, or arising out of, under, or in connection with, this Agreement or any
other Loan Document, or any course of conduct, course of dealing, statements
(whether oral or written) or actions of the Administrative Agent, the Lenders or
either Borrower shall be brought and maintained exclusively in either the Courts
of Ontario, Canada, the Courts of the State of Illinois or in the United States
District Court for the Northern District of Illinois. Each Borrower hereby
expressly and irrevocably submits to the jurisdiction of the Courts of Ontario,
Canada, the Courts of the State of Illinois and of the United States District
Court for the Northern District of Illinois for the purpose of any such
litigation as set forth above and irrevocably agrees to be bound by any judgment
rendered thereby in connection with such litigation subject to any rights of
appeal. Each Borrower further irrevocably consents to service of process by a
nationally recognized overnight delivery service, or by personal service within
or without the State of Illinois. Each Borrower hereby expressly and irrevocably
waives, to the fullest extent permitted by law, any objection which it may have
or hereafter may have to the laying of venue of any such litigation brought in
any such Court referred to above and any claim that any such litigation has been
brought in an inconvenient forum. To the extent that either Borrower has or
hereafter may acquire any immunity from jurisdiction of any Court or from any

<PAGE>

                                                                         Page 52

legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, each Borrower hereby, to the fullest extent permitted by Applicable
Law, irrevocably waives such immunity in respect of its obligations under this
Agreement and each other Loan Document.

Section 10.16 Waiver of Jury Trial, etc. The Agents, the Lenders and each
Borrower hereby knowingly, voluntarily and intentionally waive any rights they
may have to a trial by jury in respect of any litigation based hereon, or
arising out of, under, or in connection with, this Agreement or any other Loan
Document, or any course of conduct, course of dealing, statements (whether oral
or written) or actions of the Agent, the Lenders or the Borrowers. Each Borrower
acknowledges and agrees that it has received full and sufficient consideration
for this provision (and each other provision of each other Loan Document to
which it is a party) and that this provision is a material inducement for the
Agents and the Lenders entering into this Agreement and each such other Loan
Document. In no event shall any Lender or any Agent be liable for any
consequential damages which may be alleged in connection herewith or the
transactions contemplated hereby.

Section 10.17 Conflict. In the event that there is any conflict between the
provisions contained in this Agreement and the provisions contained in any
document delivered pursuant hereto or in connection herewith, the provisions of
this Agreement shall have priority over and shall override the provisions
contained in the other document.

Section 10.18 Loan Syndication. With the prior written consent of the Borrowers,
not to be unreasonably withheld, each Lender shall have the right to sell,
assign, transfer or grant a participation in its Commitment, in an amount of not
less than Cdn $5,000,000 or, if less, the full amount of such Lender's
Commitment in whole or in part, to one or more Persons (the "Participants").
After the occurrence of an Event of Default, as applicable, any Lender shall be
entitled to undertake any such sale, assignment, transfer or grant of a
participation without notice to, or the consent of, either Borrower or Kingsway
America. Notwithstanding the foregoing, any Lender may sell, assign, transfer or
grant a participation in its Commitment to any other Lender or to an Affiliate
of any Lender and without the consent of the Borrowers. For the purpose of
selling, assigning, transferring or granting a participation in its Commitment,
a Lender may disclose, on a confidential basis, to a potential Participant such
information concerning the Borrowers, Kingsway America and the Subsidiaries as
such Lender considers appropriate, including information subject to any duty of
confidentiality by such Lender to the Borrowers, Kingsway America or any
Subsidiary. The Borrowers agree to execute and deliver and to cause Kingsway
America to execute and deliver such further documentation and take such further
action as the Administrative Agent or any Lender considers necessary or
advisable to give effect to such sale, assignment, transfer or grant of
participation. In the case of sale, assignment, transfer or granting of a
participation, and upon payment by the Participant to the Administrative Agent
of an administrative fee in the amount of U.S. $2,500, for the Administrative
Agent's own account and not for the account of the Lenders, the Participant
shall have, to the extent of such sale, assignment, transfer or grant of
participation, the same rights and obligations as it would have if it were a
Lender on the Closing Date and as such had executed this Agreement as required,
and from the date of delivery of the notice of participation and undertaking
described in Section 10.19, the Participant shall be a Lender hereunder. The
selling, assigning, transferring or granting Lender (the "Outgoing Lender")
shall be relieved, to the extent of the sale, assignment, transfer or grant of
participation, of its obligations hereunder with respect to its Commitment. The
Borrowers hereby acknowledge and agree that any sale, assignment, transfer or
granting of a participation will give rise to a direct obligation of the
Borrowers to the Participant. Notwithstanding the foregoing, it is understood
and agreed by each Borrower that the rights of any Outgoing Lender with respect
to a Borrowing shall be transferred to the applicable Participant pursuant to
the terms of this Section 10.18 and such Borrowing continues to be outstanding
at all times without novation.

Section 10.19 Assignment and Acceptance. A sale, assignment, transfer or grant
of participation pursuant to Section 10.18 shall be effective upon the Borrowers
and each other Lender having received

<PAGE>
                                                                         Page 53

an assignment and acceptance substantially in the form of Schedule "L" and the
Administrative Agent receiving the fee from the Participant in the amount of
U.S. $2,500. Upon any such sale, assignment, transfer or grant of participation
becoming effective, Schedule "A" to this Agreement shall be automatically
amended to reflect the amended Commitments resulting from such sale, transfer,
assignment or grant of participation without further notice or other
requirement.

Section 10.20 Judgment Currency. The obligations of the Borrowers pursuant to
this Agreement to make payments in a specific currency (the "Contractual
Currency") shall not be discharged or satisfied by any tender or recovery
pursuant to any judgment expressed in or converted into any other currency
except to the extent to which such tender or recovery shall result in the
effective receipt by the Lenders and the Administrative Agent of the full amount
of the Contractual Currency payable or expressed to be payable under this
Agreement and accordingly the obligations of the Borrowers shall be enforceable
as an alternative or additional cause of action for the purpose of recovering
the other currency of the amount (if any) by which such effective receipt shall
fall short of the Contractual Currency payable or expressed to be payable under
this Agreement and shall not be effected by judgment being offered for any other
sum due under this Agreement.

Section 10.21 Successors and Assigns. This Agreement shall be binding upon and
enure to the benefit of the parties and their respective successors and assigns.

Section 10.22 Survival. The obligations of the Borrowers under Sections 4.06,
5.05, 5.06 and 10.06 shall in each case survive any termination of this
Agreement, the payment in full of the Outstanding Obligations and the
termination of the Commitments, except to the extent otherwise expressly
provided thereto.

Section 10.23 Non-U.S. Lenders. Each U.S. Lender that is not a "United States
person" (as such term is defined in Section 7701(a)(30) of the Code) will submit
to the U.S. Borrower and the Administrative Agent on or before the Closing Date
(or, in the case of a Person that becomes a U.S. Lender after the Closing Date
by assignment promptly upon such assignment) two duly completed and signed
copies of either (i) Form 1001 of the United States Internal Revenue Service
entitling such U.S. Lender to a complete exemption from withholding on all
amounts to be received by such U.S. Lender pursuant to this Agreement or (ii)
Form 4224 of the United States Internal Revenue Service relating to all amounts
to be received by such U.S. Lender pursuant to this Agreement. Each such U.S.
Lender will, from time to time after submitting either such form, submit to the
U.S. Borrower and the Administrative Agent such additional duly completed and
signed copies of one or the other such forms (or such successor forms or other
documents as will be adopted from time to time by the relevant United States
taxing authorities) as may be (i) reasonably requested in writing by the U.S.
Borrower or the Administrative Agent and (ii) appropriate under then current
United States law or regulations to avoid United States withholding taxes on
payments in respect of any amounts to be received by such U.S. Lender pursuant
to this Agreement. Upon the reasonable request of the U.S. Borrower or the
Administrative Agent, each Lender that has not provided the forms or other
documents, as provided above, on the basis of being a "United States person"
will submit to the U.S. Borrower and the Administrative Agent a certificate to
the effect that it is such a "United States person".

        If any U.S. Lender which is not a "United States person" determines that
it is unable to submit to the U.S. Borrower and the Administrative Agent any
form or certificate that such U.S. Lender is requested to submit pursuant to the
preceding paragraph, or that it is required to withdraw or cancel any such form
or certificate, or that any such form or certificate previously submitted has
otherwise become ineffective or inaccurate, such U.S. Lender will promptly
notify the U.S. Borrower and the Administrative Agent of such fact.

                                 ARTICLE ELEVEN

<PAGE>

                                                                         Page 54

                                   THE AGENTS

Section 11.01 Appointment and Authorization.

(1) Each Lender hereby irrevocably appoints and authorizes, and hereby agrees
that it will require any assignee or transferee of any of its interests herein
to appoint and authorize, each of the Agents to be its agent and its attorney in
its name and on its behalf, to take such actions and to exercise such powers
hereunder as are delegated to the Agents by the terms hereof, together with such
powers as are reasonably incidental thereto. No Agent nor any of their
directors, officers, employees or agents shall be liable for any action taken or
omitted to be taken by any of them hereunder or in connection herewith, except
for their own gross negligence or wilful misconduct.

(2) The Agents shall have no duties or obligations other than as expressed
herein, and, without limitation, the Agents do not undertake, and the Lenders
relieve the Agents from, any implied duties, (including fiduciary duties) and
there shall not be construed against the Agents any implied covenants or terms.

Section 11.02 Interest Holders. The Agents may treat each Lender or the Person
designated in the last notice filed with it under this Section, as the holder of
all of the interests of such Lender in respect of this Agreement, until written
notice of a sale, assignment, transfer or grant pursuant to Section 10.18,
signed by such Lender (or the person designated in the last notice filed with
the Agent) and the Person designated in such written notice has been filed with
the Administrative Agent.

Section 11.03 Documents. The Agents are not, and shall not be, under any duty to
examine, enquire into or pass upon the validity, effectiveness or genuineness of
any instrument, document or communication furnished pursuant hereto or in
connection herewith, and the Agents are entitled to assume that the same are
valid, effective and genuine, have been signed or sent by the proper parties and
are what they purport to be.

Section 11.04 Agent and Affiliates. With respect to its Commitment and the
advances made by it as a Lender hereunder, the Agents have the same rights and
powers hereunder as any other Lender and may exercise the same as though they
were not the Agents, and the Agents and their Affiliates and subsidiaries may
accept deposits from, lend money to and generally engage in any kind of business
with any Borrower and its Affiliates and subsidiaries and Persons doing business
with the Borrowers and/or any of its Affiliates and/or subsidiaries as if it
were not the Agent and without any obligation to account therefor.

Section 11.05 Responsibility of Agents. The duties and obligations of the Agents
hereunder are only those expressly set forth herein or therein. The
Administrative Agent has no duty to investigate whether a Default or an Event of
Default has occurred. The Administrative Agent is entitled to assume that no
Default or Event of Default has occurred and is continuing, unless the
Administrative Agent has actual knowledge or has been notified in writing by a
Borrower of such fact or has been notified in writing by a Lender that such
Lender considers that a Default or an Event of Default has occurred and is
continuing, such notification to specify in detail the nature thereof.

Section 11.06 Action by Administrative Agent.

(a) The Administrative Agent is entitled to use its discretion with respect to:

     (i)  exercising or refraining from exercising any rights which may be
          vested in it by this Agreement or the Kingsway America Guarantee, and

     (ii) taking or refraining from taking any action or acts which it may be
          able to take under or in respect of this Agreement or the Kingsway
          America Guarantee,

<PAGE>

                                                                         Page 55

          unless the Administrative Agent has been instructed by the Majority of
          the Lenders to exercise or refrain from exercising such rights or to
          take or refrain from taking such actions; provided, however, that the
          Administrative Agent may not exercise any rights under this Agreement
          or the Kingsway America Guarantee or commence any action for the
          collection of amounts owing hereunder without the request of the
          Majority of the Lenders. Upon receiving the indemnities required
          hereunder, the Administrative Agent shall, at the request of the
          Majority of the Lenders, exercise any or all such rights and/or
          commence such action. The Administrative Agent shall incur no
          liability under or in respect of this Agreement with respect to
          anything which it may do or refrain from doing in the reasonable
          exercise of its judgment or which may seem to it to be necessary or
          desirable in the circumstances, except for its gross negligence or
          wilful misconduct;

     (b)  the Agents shall in all cases be fully protected in acting or
          refraining from acting under this Agreement and the Kingsway America
          Guarantee in accordance with the instructions of the Majority of the
          Lenders and any action taken or failure to act pursuant to such
          instructions shall be binding on all Lenders.

Section 11.07 Notice of Events of Default. If the Administrative Agent acquires
actual knowledge or is notified in writing of any Default or Event of Default,
the Administrative Agent shall promptly notify the Lenders and shall take such
action and assert such rights under this Agreement and the Kingsway America
Guarantee as the Majority of the Lenders shall request in writing, and the
Administrative Agent is not subject to any liability by reason of its acting
pursuant to any such request. If the Majority of the Lenders fail, for ten (10)
Business Days after receipt of the notice of any Default or Event of Default, to
request the Administrative Agent to take action or to assert rights under this
Agreement in respect of such Default or Event of Default, the Administrative
Agent may, but shall not be required to, subject to subsequent specific
instructions from the Majority of the Lenders, take such action or assert such
rights as it deems in its discretion advisable for the protection of the
interests of the Lenders except that, if the Majority of the Lenders have
instructed the Administrative Agent not to take such action or assert such
rights, in no event shall the Administrative Agent act contrary to such
instructions.

Section 11.08 Responsibility Disclaimed. The Agents shall be under no liability
or responsibility whatsoever as Agents:

(a)  to the Borrowers, Kingsway America or any other Person as a consequence of
     any failure or delay in the performance by, or any breach by, any Lender or
     Lenders of any of its or their obligations under this Agreement;

(b)  to any Lender or Lenders, as a consequence of any failure or delay in
     performance by, or any breach by, any Borrower, Kingsway America of any of
     their respective obligations hereunder or under the Kingsway America
     Guarantee; or

(c)  to any Lender or Lenders for

     (i)  any statements, representations or warranties in this Agreement or the
          Kingsway America Guarantee or in any other information provided
          pursuant to this Agreement or the Kingsway America Guarantee;

     (ii) the accuracy or completeness of the data made available to the Lenders
          in connection with the negotiation of this Agreement or the Kingsway
          America Guarantee; or

<PAGE>

                                                                         Page 56

     (iii)  the due execution, legality, validity, enforceability, genuineness,
            sufficiency or value of this Agreement, the Kingsway America
            Guarantee or any instrument or document furnished pursuant hereto
            or thereto.

Section 11.09 Indemnification. The Lenders agree to indemnify the Agents (to the
extent not reimbursed by the Borrowers) pro rata according to their Rateable
Portion of the Credit Facilities from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against an Agent in any way relating to or arising
out of its actions as Agent relating to this Agreement, the Kingsway America
Guarantee or any other document contemplated hereby, except that no Lender shall
be liable to an Agent for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or wilful misconduct of such Agent.

Section 11.10 Credit Decision. Each Lender represents and warrants to the Agents
that:

(a)  in making its decision to enter into this Agreement and to make its
     Commitment available to the Borrowers, it is independently taking whatever
     steps it considers necessary to evaluate the financial condition and
     affairs of the Borrowers and that it has made an independent credit
     judgment without reliance upon any information furnished by the Agents; and

(b)  so long as any portion of the Credit Facilities is being utilized by either
     Borrower, it will continue to make its own independent evaluation of the
     financial condition and affairs of the Borrowers.

Section 11.11 Successor Agents. Subject to the appointment and acceptance of a
successor Agent as provided below, (i) an Agent may resign by giving ten (10)
Business Days prior written notice to the Lenders, or (ii) a Majority of the
Lenders may terminate an Agent, at any time by giving 30 days written notice
thereof to the Lenders, the Borrowers and the Agents, as applicable. Upon any
such resignation or termination, the Majority of the Lenders and the Borrowers
shall have the right to appoint a successor Agent who shall be one of the
Lenders. If no successor Agent shall have been so appointed and shall have
accepted such appointment by the time of such resignation or termination, then
the retiring or terminated Agent may, on behalf of the Lenders appoint a
successor Agent from among the Lenders; the Borrowers hereby approving each of
the Lenders as a successor agent for purposes of this Section 11.11. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges, duties and obligations of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After any retiring Agent's resignation or termination hereunder as Agent, the
provisions of this Article Eleven shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.

Section 11.12 Delegation by Agents. With the prior approval of the Majority of
the Lenders, such approval not to be unreasonably withheld, the Agents shall
have the right to delegate any of their duties or obligations hereunder or under
any of the other Loan Documents as Agent to any Affiliate of such Agent so long
as such Agent shall not thereby by relieved of such duties or obligations.

Section 11.13 Determinations by Agents. Any determination to be made by an Agent
under this Agreement shall be made by such Agent in good faith and, if required
hereby, acting reasonably, and, if so made, shall be prima facie evidence of the
matters so determined, absent manifest error.

Section 11.14 Reliance Upon Agents. The Borrowers shall be entitled to rely upon
any certificate, notice or other document or other advice, statement or
instrument provided to it by the Administrative Agent pursuant to this
Agreement, and the Borrowers shall generally be entitled to deal with the
Administrative Agent with respect to matters under this Agreement with which the
Administrative Agent is authorized to deal (whether alone or on behalf of the
Lenders or the Majority of the Lenders) without any

<PAGE>

                                                                         Page 57

obligation whatsoever to satisfy itself as to the authority of the
Administrative Agent to act on behalf of the Lenders or the Majority of the
Lenders, as the case may be and without any liability whatsoever to the Lenders
for relying upon any certificate, notice or other document or other advice,
statement or instruction provided to it by the Agent, notwithstanding any lack
of authority of the Administrative Agent to provide the same.

Section 11.15 Payment Protection. Unless upon the date of receipt by a Lender of
any notice of Borrowing the Administrative Agent has been notified by such
Lender that such Lender will not make available to the Administrative Agent its
Rateable Portion of such Borrowing, the Administrative Agent shall be entitled
to assume that such Lender has made such portion of the Borrowing available to
the Administrative Agent on the Borrowing Date in accordance with the provisions
hereof and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrowers on such date a corresponding amount. If and to the
extent such Lender shall not have so made its Rateable Portion of the Borrowing
available to the Administrative Agent, such Lender and the Borrowers agree to
pay or repay, as the case may be, to the Administrative Agent forthwith on
demand such Lender's Rateable Portion of the Borrowing together with interest
thereon at the rate provided herein in respect of such Borrowing for each day
from the date such amount is made available to the Borrowers until the date such
amount is paid or prepaid to the Administrative Agent. The amount payable to the
Administrative Agent pursuant hereto shall be as set forth in a certificate
delivered by the Administrative Agent to such Lender and the Borrowers and shall
be prima facie evidence, for all purposes, absent manifest error. If such Lender
makes the payment to the Administrative Agent required herein, the amount so
paid shall constitute such Lender's Rateable Portion of the Borrowing for
purposes of this Agreement. The failure of any Lender to make available the
Rateable Portion of the Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make available its Rateable Portion of the
Borrowing on the Borrowing Date but no Lender shall be responsible for the
failure of any other Lender to make its Rateable Portion available on such
Borrowing Date. Nothing herein shall affect or limit any right of action a
Borrower may have under Applicable Law against the defaulting Lender.

Section 11.16 Remittance of Payments. Forthwith after receipt of any repayment
pursuant to this Agreement or payment of interest or fees hereunder, the
Administrative Agent shall remit to each Lender its Rateable Portion of such
payment in accordance with the advances made by such Lender hereunder; provided
that if the Administrative Agent, on the assumption that it will receive a
payment hereunder on the due date thereof, remits to each Lender its Rateable
Portion of such payment and the Borrowers fail to make such payment, each of the
Lenders agree to repay to the Administrative Agent forthwith on demand such
Lender's Rateable Portion of the payment made pursuant hereto together with all
reasonable costs and expenses incurred by the Administrative Agent in connection
therewith and interest thereon (at a rate of interest reasonably determined by
the Administrative Agent) for each day from the date such amount is remitted to
the Lenders, the exact amount of the repayment required to be made by the
Lenders pursuant hereto to be as set forth in a certificate delivered by the
Administrative Agent to each Lender, which certificate shall be prima facie
evidence for all purposes absent manifest error.

Section 11.17 Prompt Notice to the Lenders. Notwithstanding any other provision
herein, the Administrative Agent agrees to provide to the Lenders, with copies
where appropriate, all information, notices and reports required to be given to
the Administrative Agent by the Borrowers including, without limitation, all
information relating to the Credit Facilities, promptly upon receipt of same,
excepting therefrom information and notices relating solely to the role of
Administrative Agent hereunder.

Section 11.18 Counterparts. This Agreement may be executed by facsimile and by
one or more of the parties to this Agreement on any number of separate
counterparts, and all of the said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of copies of this Agreement signed
by all the parties shall be lodged with the Borrowers and the Administrative
Agent.

<PAGE>

                                                                         Page 58

     IN WITNESS WHEREOF the parties have executed this Agreement as of the day
and year first above written.

                                     KINGSWAY FINANCIAL SERVICES INC.

                                     By: /s/ William G. Star
                                         ------------------------------
                                         Name:  William G. Star
                                         Title: President & CEO

                                     By: /s/ W. Shaun Jackson
                                         ------------------------------
                                         Name:  W. Shaun Jackson
                                         Title: Executive Vice President & CFO

                                     KINGSWAY U.S. FINANCE PARTNERSHIP
                                     by its Partners

                                              KINGSWAY FINANCIAL SERVICES INC.

                                     By: /s/ W. Shaun Jackson
                                         ------------------------------
                                         Name:  W. Shaun Jackson
                                         Title: Executive Vice President

                                              METRO CLAIM SERVICES INC.

                                     By: /s/ W. Shaun Jackson
                                         ------------------------------
                                         Name:  W. Shaun Jackson
                                         Title: Secretary

                                     CANADIAN IMPERIAL BANK OF COMMERCE,
                                     AS CANADIAN LENDER

                                     By: /s/ Karen F. Kiskorna
                                         ------------------------------
                                         Name:  Karen F. Kiskorna
                                         Title: Director

                                     By: /s/ Lynn McDonald
                                         ------------------------------
                                         Name:  Lynn McDonald
                                         Title: Managing Director

                                     HSBC BANK CANADA,
                                     AS CANADIAN LENDER

                                     By: /s/ Martin J. Haythorne
                                         ------------------------------
                                         Name:  Martin J. Haythorne
                                         Title: Assistant Vice President,
                                                Corporate and Institutional
                                                Banking

                                     By:
                                         ------------------------------
                                         Name:
                                         Title:

<PAGE>

                                                                         Page 59

                                         LASALLE BANK NATIONAL ASSOCIATION,
                                         AS U.S. LENDER

                                         By: /s/ Bradley J. Kronland
                                             ------------------------------
                                             Name:  Bradley J. Kronland
                                             Title: Assistant Vice President

                                         By: /s/ Robert W. Frentzel
                                             ------------------------------
                                             Name:  Robert W. Frentzel
                                             Title: Senior Vice President

                                         CANADIAN IMPERIAL BANK OF COMMERCE,
                                         NEW YORK AGENCY, AS U.S. LENDER

                                         By: /s/ Nora Q. Catiis
                                             ------------------------------
                                             Name:  Nora Q. Catiis
                                             Title: Authorized Signatory

                                         By:
                                             ------------------------------
                                             Name:
                                             Title:

                                         CANADIAN IMPERIAL BANK OF COMMERCE,
                                         AS ADMINISTRATIVE AGENT

                                         By: /s/ Karen F. Kiskorna
                                             ------------------------------
                                             Name:  Karen F. Kiskorna
                                             Title: Director

                                         By: /s/ Lynn McDonald
                                             ------------------------------
                                             Name:  Lynn McDonald
                                             Title: Managing Director

<PAGE>

                                                                         Page 60

                                        LASALLE BANK NATIONAL ASSOCIATION,
                                        AS SYNDICATION AGENT

                                                 /s/ Bradley J. Kronland
                                        By:      -------------------------
                                                 Name: Bradley J. Kronland
                                                 Title: Assistant Vice President

                                                 /s/ Robert W. Frentzel
                                        By:      -------------------------
                                                 Name: Robert W. Frentzel
                                                 Title: Senior Vice President

<PAGE>

                                  SCHEDULE "A"

                                   Commitments

As at the Closing Date.

Lender                                          Commitment
------                                          ----------

Canadian Facility

Canadian Imperial Bank of Commerce              Cdn $0

HSBC Bank Canada                                Cdn $16,500,000
                                                ______________________

Total Canadian Commitment                       Cdn $16,500,000

U.S. Facility

LaSalle Bank National Association               Cdn $25,000,000

Canadian Imperial Bank of Commerce,             Cdn $25,000,000
New York Agency
                                                ______________________

Total U.S. Commitment                           Cdn $50,000,000

                                                ______________________

Total Commitment                                Cdn $66,500,000

<PAGE>
                                  SCHEDULE "D"

                              Quarterly Certificate

                                                                          [DATE]

TO:  CANADIAN IMPERIAL BANK OF COMMERCE
     as Administrative Agent for the Lenders
     as defined in the Credit Agreement dated [date]
     among Kingsway Financial Services Inc. and
     Kingsway U.S. Finance Partnership, as Borrowers
     and Canadian Imperial Bank of Commerce,
     HSBC Bank Canada, LaSalle Bank National Association and
     Canadian Imperial Bank of Commerce, New York Agency, as Lenders
     and Canadian Imperial Bank of Commerce, as Administrative Agent and
     LaSalle Bank National Association, as Syndications Agent and
     Documentation Agent (the "Credit Agreement")

Dear Sirs:

                 Re:
                        Quarter Ending

     In accordance with the Credit Agreement, I, [insert name and title of
certifying officer] hereby certify without personal liability that:

1.   I am familiar with and have examined the provisions of the Credit Agreement
and have made reasonable investigations of corporate records and inquiries of
other officers and senior personnel of the Borrower and based on the foregoing
and as of the date of this certificate:

     (a)  except as indicated below or in any Schedule annexed hereto, the
          representations and warranties contained in the Credit Agreement are
          true and correct in all material respects;

     (b)  to the best of my knowledge and belief, there is no Default or Event
          of Default under the Credit Agreement;

     (c)  the Borrowers, Kingsway America and the Subsidiaries are, and have
          been since the date of the last Quarterly Certificate delivered
          pursuant to the Credit Agreement, operating in accordance with all
          applicable regulatory financial ratio guidelines;

     (d)  to the best of my knowledge and belief, the covenants contained in the
          Credit Agreement have not been breached.

2.   That as at the last day of the fiscal quarter ending _____________________,
on a Consolidated basis,

     (w)  Funded Debt of the Canadian Borrower totalled ________________________
          calculated as follows:

          (i)   indebtedness for borrowed money ____________; plus

          (ii)  Capitalized Lease Obligations ____________; plus

          (iii) Purchase Money Obligations ____________; plus

          (iv)  outstanding letters of credit ____________ (excluding undrawn
                letters of credit the beneficiary of which is a Borrower,
                Kingsway America, a Subsidiary,

<PAGE>
               State National Specialty Insurance Company Inc., State and County
               Mutual Insurance Company or General Reinsurance Company)); plus

          (v)  fees incurred in respect of above ________________________; plus

          (vi) interest accrued in respect of above ___________________________.

     (x)  Total Capitalization of Kingsway totalled ____________________________
          calculated as follows:

          (i)  Funded Debt _____________________; plus

          (ii) Shareholders equity _________________________,

and accordingly, the ratio of Funded Debt to Total Capitalization as calculated
in accordance with the Credit Agreement is _____________________ and therefore
not greater than a maximum ratio of 0.30:1.00 required under Section 8.02(1) of
the Credit Agreement.

3.   That as at the last day of the fiscal quarter ending _____________________,
on a Consolidated basis,

     (v)  Net Written Premiums of Insurance Subsidiaries totalled _____________;

     (w)  Statutory Capital and Surplus totalled _________________________;

and accordingly, the Capital Surplus Ratio is __________ and therefore not
greater than 2.75:1.00 required under Section 8.02(4) of the Credit Agreement.

4.   That (i) Net Income (as calculated in accordance with the Credit Agreement)
in the fiscal quarter ending __________ was __________ on a Consolidated basis,
(ii) the proceeds of equity issuances available in the fiscal quarter ending
amounted to __________, and accordingly as at the last day of the fiscal quarter
ending __________ on a Consolidated basis Tangible Net Worth as calculated in
accordance with the Credit Agreement is __________ and is therefore greater than
the minimum Tangible Net Worth of Cdn $__________ required under Section 8.02(2)
of the Credit Agreement.

5.   That as at the last day of the fiscal quarter ending __________ on a
Consolidated basis,

     (w)  the Claims Ratio is __________ on a Consolidated basis, and

     (x)  the Expense Ratio is __________ on a Consolidated basis,

and accordingly, the Combined Ratio as calculated in accordance with the Credit
Agreement is __________ and accordingly less than 105% required under Section
8.02(3) of the Credit Agreement, or less than the Canadian Property and Casualty
Industry Average for the last four quarters which is __________.

6.   That as at the last day of the fiscal quarter ending __________ on a
Consolidated basis,

     (w)  EBITDA totalled __________ calculated as follows:

          (i)  Net Income __________ ; plus

          (ii) Interest Expense __________ ; plus

          (iii) depreciation __________ ; plus

          (iv) income taxes __________ ; plus

          (v)  amortization __________ ; plus/(minus)

<PAGE>

          (vi) extraordinary losses (gains) ________________

     and

     (x)  Interest Expense totalled ________________,

and accordingly, the Interest Coverage Ratio of the Canadian Borrower as
calculated in accordance with the Credit Agreement is ______, and therefore not
less than 3.00:1.00 permitted under Section 8.02(5) of the Credit Agreement.

7.  That as at the last day of the fiscal quarter ending _____________________
the senior unsecured debt rating of the Canadian Borrower is ___________________
as determined by ___________________ rating service.

Capitalized terms used herein but not defined herein have the meanings
attributed to them in the Credit Agreement.

                                        By:    _________________________________

                                        Title: _________________________________

<PAGE>
                                  SCHEDULE "E"

                                  Pricing Grid

The interest rate payable on LIBOR Loans, Prime Rate Loans, U.S. Base Rate
Loans, Alternate Base Rate Loans, the Stamping Fee payable in respect of
Bankers' Acceptances, and the Standby Fee will be based upon the senior
unsecured debt rating of the Canadian Borrower based on Standard & Poors,
Dominion Bond Rating Service or Moody's debt ratings. In the event of a split
debt rating, the lowest rating shall apply.

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                   U.S. Base Rate,
                                                 Alternate Base Rate
Senior Unsecured          LIBOR Margin and           and Prime Rate
   Debt Rating             BA Stamping Fee               Margin              Standby Fee
<S>                       <C>                    <C>                        <C>
----------------------------------------------------------------------------------------
(greater than or equal to)
A-/A3                           0.65%                     0.00%                 0.11%
----------------------------------------------------------------------------------------
BBB+/Baa1                       0.75%                     0.00%                0.125%
----------------------------------------------------------------------------------------
BBB/Baa2                        1.00%                     0.00%                 0.15%
----------------------------------------------------------------------------------------
BBB-/Baa3                       1.25%                     0.25%                 0.20%
----------------------------------------------------------------------------------------
BB+/Ba1                         1.75%                     0.75%                 0.30%
----------------------------------------------------------------------------------------
(less than or equal to)
BB/Ba2                          2.00%                     1.00%                 0.35%
----------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                   SCHEDULE "L"

                            ASSIGNMENT AND ACCEPTANCE

Reference is made to the Credit Agreement, dated as of May   , 2002 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Kingsway Financial Services Inc. and Kingsway U.S. Finance Partnership, as
the Borrowers, Canadian Imperial Bank of Commerce, individually and as
Administrative Agent and the Lenders now or hereafter parties thereto. Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.

_________________________ (the "Assignor") and (the ________________________
"Assignee") agree as follows:

1. The Assignor hereby irrevocably sells and assigns to the Assignee without
recourse to the Assignor, and the Assignee hereby irrevocably purchases and
assumes from the Assignor without recourse to the Assignor, as of the Transfer
Closing Date (as defined below), a percentage interest (the "Assigned Interest")
as set forth in Schedule I in and to the Assignor's rights and obligations under
the Credit Agreement and the other Loan Documents with respect to those credit
facilities provided for in the Credit Agreement as are set forth on Schedule 1
(individually, an "Assigned Facility"), in a principal amount for each Assigned
Facility as set forth on Schedule 1.

2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other Loan Document or
any other instrument or document furnished pursuant thereto or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto, other than that it has not created any adverse claim
upon the interest being assigned by it hereunder and that such interest is free
and clear of any such adverse claim, (b) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrowers, Kingsway America, any of its Subsidiaries or any other Credit Party
or the performance or observance by the Borrower or any of the Subsidiaries of
any of their respective obligations under the Credit Agreement, any other Loan
Document or any other instrument or document furnished pursuant thereto.

3. The Assignee (a) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance, (b) confirms that it has received a
copy of the Credit Agreement together with copies of such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance, (c) agrees that it will,
independently and without reliance upon the Assignor, the Administrative Agent
or any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant thereto, (d) appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such power and discretion under the Credit Agreement, the other
Loan Documents or any other instrument or document furnished pursuant thereto as
are delegated to the Administrative Agent by the terms thereof, together with
such powers as are incidental thereto, (e) hereby affirms the agreements of such
Assignee as a Lender contained in the Credit Agreement, and (f) agrees that it
will be bound by the provisions of the Credit Agreement and will perform in
accordance with the terms of the Credit Agreement all the obligations which by
the terms of the Credit Agreement are required to be performed by it as a
Lender.

4. The effective date of this Assignment and Acceptance shall be         , 20
(the "Transfer Effective Date"). Following the execution of this Assignment and
Acceptance, it will be delivered to the Administrative Agent for acceptance by
it and recording by the Administrative Agent pursuant to Section 10.19 of the
Credit Agreement, effective as of the Transfer Closing Date (which shall not,
unless otherwise agreed to by the Administrative Agent, be earlier than five
Business Days after the date of such acceptance and recording by the
Administrative Agent).

<PAGE>

5. Upon such acceptance and recording, from and after the Transfer Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignee whether such amounts have accrued prior to the Transfer
Closing Date or accrued subsequent to the Transfer Effective Date. The Assignor
and the Assignee shall make all appropriate adjustments in payments by the
Administrative Agent for the periods prior to the Transfer Closing Date or with
respect to the making of this assignment directly between themselves.

6. From and after the Transfer Effective Date, (a) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.

7. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.

     IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized offices on Schedule I hereto.

                                            , as Assignor

                                        By: ___________________________________
                                        Name:
                                        Title:

                                        By: ___________________________________
                                        Name:
                                        Title:

                                            , as Assignee

                                        By: ___________________________________
                                        Name:
                                        Title:

                                        By: ___________________________________
                                        Name:
                                        Title:

<PAGE>
                                SCHEDULE I to the
                            Assignment and Acceptance
                            -------------------------

               Re: Credit Agreement, dated as of May   , 2002, among
    Kingsway Financial Services Inc. and Kingsway U.S. Finance Partnership,
           as the Borrowers, and Canadian Imperial Bank of Commerce,
            individually and as Administrative Agent and the Lenders
                        now or hereafter parties thereto

Name of Assignor:
Name of Assignee:
Transfer Closing Date of Assignment:

--------------------------------------------------------------------------------
Credit Facility     Percentage of Assignor's Interest    Principal Amount of
Assigned            in Credit Facility Assigned          Commitments Assigned
--------------------------------------------------------------------------------

                    __________%                          $______________
--------------------------------------------------------------------------------

[NAME OF ASSIGNEE]                      [NAME OF ASSIGNOR]

By:_______________________________      ________________________________________
Name:                                   Name:
Title:                                  Title:

By:_______________________________      ________________________________________
Name:                                   Name:
Title:                                  Title:

Accepted for recording:                 Consented To:/1/

CANADIAN IMPERIAL BANK OF COMMERCE, (BORROWER]
As Administrative Agent

By:_______________________________      ________________________________________
Name:                                   Name:
Title:                                  Title:

By:_______________________________      ________________________________________
Name:                                   Name:
Title:                                  Title:

                                        CANADIAN IMPERIAL BANK OF
                                        COMMERCE, As Administrative Agent

                                        By:_____________________________________
                                        Name:
                                        Title:

                                        By:_____________________________________
                                        Name:
                                        Title:

________________

     /1/Consent of Borrower and Administrative Agent required only to the
extent stipulated in Section 9.4 of the Credit Agreement.

<PAGE>

            THIS CREDIT AMENDING AGREEMENT made as of the 24th day of
September, 2002.

AMONG:

                        KINGSWAY FINANCIAL SERVICES INC.
                      AND KINGSWAY U.S. FINANCE PARTNERSHIP
                                  As Borrowers

                                       AND

                       The Lenders named herein as Lenders

                                       AND

                       CANADIAN IMPERIAL BANK OF COMMERCE,
                             As Administrative Agent

                                       AND

                       LASALLE BANK NATIONAL ASSOCIATION,
                              As Syndication Agent

                 WHEREAS:

          1. Pursuant to a Credit Agreement made as of the 28th day of May, 2002
among the parties hereto (the "Credit Agreement"), the Lenders and the Agents
established certain credit facilities in favour of the Borrowers;

          2. The Agents, the Lenders and the Borrowers have agreed to amend
certain terms and conditions of the Credit Agreement in the manner hereinafter
set forth;

            FOR VALUABLE CONSIDERATION, the parties agree as follows:

                                   Article I

                           AMENDMENT TO INTERPRETATION

1.01 Amendment to Definition of Permitted Encumbrances. Sub-section
1.01(90)(viii) of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:

          "(viii) Security Interests securing the indebtedness described in
Section 1.01(91)(xiii)."

<PAGE>

                                      - 2 -

1.02 Amendment to Definition of Permitted Indebtedness. Sub-section
1.01(91)(xiii) of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:

     "(xiii) Indebtedness under the syndicated letter of credit facility
     established by Royal Bank of Canada Europe Limited as facility agent in
     favour of Kingsway Reinsurance Corporation not exceeding U.S. $350,000,000
     in respect of letters of credit to be issued on the application of Kingsway
     Reinsurance Corporation for the benefit of certain Subsidiaries of the
     Canadian Borrower, State National Specialty Insurance Company, State and
     County Mutual Insurance Company or General Reinsurance Corporation; and"

1.03 Additional Permitted Indebtedness. Sub-section 1.01(91) of the Credit
Agreement is hereby amended by (i) deleting the word "and" found at the end of
Sub-section 1.01(91)(xiii), (ii) by deleting the period found at the end of
Sub-section 1.01(91)(xiv) and replacing such period with a semi-colon, and (iii)
by adding the following as Sub-section 1.01(91)(xv) immediately following
Sub-section 1.01(91)(xiv):

     "(xv) Indebtedness not to exceed Cdn. $100,000,000 pursuant to a debenture
     offering in respect of debentures with terms of not less than 3 years and
     which mature not later than December 31, 2007 and otherwise containing
     terms and conditions satisfactory to the Majority of the Lenders."

                                   Article II

                             AMENDMENT TO COVENANTS

2.01 Amendment to the Negative Covenant. Section 8.03(5) of the Credit Agreement
is hereby amended by deleting the word "and" found at the end of sub-paragraph
(viii), by deleting sub-paragraph (ix) in its entirety, and by adding the
following immediately following Sub-section 8.03(5)(viii):

     "(ix) the guarantee issued by Kingsway America in respect of the
     Indebtedness described in Sub-section 1.01(91)(xv); and

     (x) as otherwise permitted hereunder."

                                  Article III

                     CONDITIONS PRECEDENT TO THIS AGREEMENT

3.01 Conditions Precedent. This Credit Amending Agreement shall not come into
effect and the Credit Agreement shall not amended to reflect the amendments
contemplated herein until (i) the Agent

<PAGE>

                                      - 3 -

shall have received all material documentation as determined by the Agent in its
sole discretion relating to the debenture offering described in Sub-section
1.01(91)(xv), including, without limitation, all materials filed with any
securities commission, and the Majority of the Lenders shall be satisfied with
the terms and conditions thereof, and (ii) the Indebtedness described in
Sub-section 1.01(91)(xv) of the Credit Agreement shall have received a
preliminary rating of at least BBB by each of Standard & Poor and Dominion Bond
Rating Service.

                                   ARTICLE IV

                                  MISCELLANEOUS

4.01 Nature of Amendments and Defined Terms. It is acknowledged and agreed that
the terms of this Credit Amending Agreement are in addition to and, unless
specifically provided for, shall not limit, restrict, modify, amend or release
any of the understandings, agreements or covenants as set out in the Credit
Agreement. The Credit Agreement shall henceforth be read and construed in
conjunction with this Credit Amending Agreement and the Credit Agreement
together with all of the powers, provisions, conditions, covenants and
agreements contained or implied in the Credit Agreement shall be and shall
continue to be in full force and effect. References to the "Credit Agreement" or
the "Agreement" in the Credit Agreement or in any other document delivered in
connection with, or pursuant to, the Credit Agreement, shall mean the Credit
Agreement, as amended hereby. Capitalized terms utilized in this agreement but
not defined in this Agreement shall have the meanings ascribed to such terms in
the Credit Agreement.

4.02 Assignment. This Credit Amending Agreement shall enure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns but shall not be assignable by the Borrowers or either of them without
the prior written consent of the Agents and Lenders.

4.03 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

4.04 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and shall be treated in all respects as an Ontario contract
and the parties hereby submit and attorn to the non-exclusive jurisdiction of
the courts of the Province of Ontario.

<PAGE>

                                      - 4 -

4.05 Further Assurances. The Borrowers shall from time to time and at all times
hereafter, upon every reasonable request from the Agents or the Lenders, make,
do, execute and deliver or cause to be made, done, executed and delivered, all
such further acts, deeds and assurances and things as may be necessary in the
opinion of the Agents for more effectually implementing and carrying out the
true intent and meaning of this Credit Amending Agreement.

4.06 Counterparts. This Credit Amending Agreement may be executed in any number
of counterparts, each of which shall constitute an original and all of which,
taken together, shall constitute one and the same agreement.

     IN WITNESS WHEREOF the parties hereto have executed this Credit Amending
Agreement.

                                      KINGSWAY FINANCIAL SERVICES INC.

                                      By: /s/ William G. Star
                                          ------------------------
                                          Name: William G. Star
                                          Title: President & CEO

                                      By: /s/ W. Shaun Jackson
                                          ------------------------
                                          Name: W. Shaun Jackson
                                          Title: Executive Vice President & CFO

                                      KINGSWAY U.S. FINANCE PARTNERSHIP
                                      by its Partners
                                          KINGSWAY FINANCIAL SERVICES INC.

                                      By: /s/ W. Shaun Jackson
                                          ------------------------
                                          Name: W. Shaun Jackson
                                          Title: Executive Vice President & CFO

                                      METRO CLAIM SERVICES INC.

                                      By: /s/ W. Shaun Jackson
                                          ------------------------
                                          Name: W. Shaun Jackson
                                          Title: Secretary

                                      CANADIAN IMPERIAL BANK OF COMMERCE,
                                      AS CANADIAN LENDER

                                      By: /s/ Karen F. Kiskorna
                                          ------------------------
                                          Name: Karen F. Kiskorna
                                          Title: Director

                                      By: /s/ Lynn McDonald
                                          ------------------------
                                          Name: Lynn McDonald
                                          Title: Managing Director

<PAGE>

                                     - 5 -

                                  HSBC BANK CANADA,
                                  AS CANADIAN LENDER

                                  By: /s/ Marin J. Haythorne
                                      -------------------------
                                      Name: Martin J. Haythorne
                                      Title: Assistant Vice President,
                                             Corporate and Institutional Banking

                                  By: ------------------------
                                      Name:
                                      Title:

                                  LASALLE BANK NATIONAL ASSOCIATION,
                                  AS U.S. LENDER

                                  By: /s/ Bradley J. Kronland
                                      -------------------------
                                      Name: Bradley J. Kronland
                                      Title: Assistant Vice President

                                  By: /s/ Robert W. Frentzel
                                      ------------------------
                                      Name: Robert W. Frentzel
                                      Title: Senior Vice President

                                  CANADIAN IMPERIAL BANK OF COMMERCE,
                                  NEW YORK AGENCY, AS U.S. LENDER

                                  By: /s/ Nora Q. Catiis
                                      --------------------
                                      Name: Nora Q. Catiis
                                      Title: Authorized Signatory

                                  By: --------------------
                                      Name:
                                      Title:

                                  CANADIAN IMPERIAL BANK OF COMMERCE,
                                  AS ADMINISTRATIVE AGENT

                                  By: /s/ Karen F. Kiskorna
                                      -----------------------
                                      Name: Karen F. Kiskorna
                                      Title: Director

                                  By: /s/ Lynn McDonald
                                      -------------------
                                      Name: Lynn McDonald
                                      Title: Managing Director

<PAGE>

                                      - 6 -

                                     LASALLE BANK NATIONAL ASSOCIATION,
                                     AS SYNDICATION AGENT

                                     By: /s/ Bradley J. Kronland
                                         -------------------------
                                         Name: Bradley J. Kronland
                                         Title: Assistant Vice President

                                     By: /s/ Robert W. Frentzel
                                         ------------------------
                                         Name: Robert W. Frentzel
                                         Title: Senior Vice President

<PAGE>

                                      - 7 -

     THIS SECOND CREDIT AMENDING AGREEMENT made as of the 24th day of September,
2002.

A M O N G:

                        KINGSWAY FINANCIAL SERVICES INC.
                      AND KINGSWAY U.S. FINANCE PARTNERSHIP
                                  As Borrowers

                                       AND

                       The Lenders named herein as Lenders

                                       AND

                       CANADIAN IMPERIAL BANK OF COMMERCE,
                             As Administrative Agent

                                       AND

                       LASALLE BANK NATIONAL ASSOCIATION,
                              As Syndication Agent

     WHEREAS:

     1. Pursuant to a Credit Agreement made as of the 28th day of May, 2002
among the parties hereto as amended by a credit amending agreement dated
September 24th, 2002 (the "Credit Agreement"), the Lenders and the Agents
established certain credit facilities in favour of the Borrowers;

     2. The Agents, the Lenders and the Borrowers have agreed to amend certain
terms and conditions of the Credit Agreement in the manner hereinafter set
forth;

     FOR VALUABLE CONSIDERATION, the parties agree as follows:

                                   ARTICLE V

                           AMENDMENT TO INTERPRETATION

5.01 Additional Permitted Indebtedness. Sub-section 1.01(91) of the Credit
Agreement is hereby amended by (i) deleting the word "and" found at the end of
Sub-section 1.01(91)(xiv), (ii) by deleting the period found at the end of
Sub-section 1.01(91)(xv) and replacing such period with a semi-colon, and (iii)
by adding the following as Sub-section 1.01(91)(xvi) immediately following
Sub-section 1.01(91)(xv):

<PAGE>

                                      - 8 -

     "(xvi) Indebtedness not to exceed US $74,750,000 in connection with the
     2,990,000 preferred securities issued by Kingsway Financial Capital Trust I
     (the "Trust Preferred Securities Issuance"), provided that (i) the Trust
     Preferred Securities Issuance shall have received a preliminary rating of
     at least BB+ by Standard & Poor, (ii) there is no redemption of the
     preferred securities into cash without the prior written consent of the
     Majority of the Lenders, (iii) a default under the Credit Agreement is not
     a default or an event of default in respect of such Indebtedness and
     acceleration of the Outstanding Obligations does not result in an
     acceleration of the obligations under the debentures issued in connection
     with the Trust Preferred Securities Issuance (the "Debentures"), (iv) no
     cash dividends may be repaid or preference shares redeemed so long as a
     Default or Event of Default has occurred and is continuing under the Credit
     Agreement and (v) the terms and conditions of the Trust Preferred
     Securities Issuance are otherwise satisfactory to the Majority of the
     Lenders."

                                   ARTICLE VI

                              AMENDMENT OF COVENANT

6.01 Amendment to Funded Debt to Total Capitalization Ratio. Section 8.02(1)
of the Credit Agreement is hereby deleted in its entirety and replaced with the
following:

     "(1) Funded Debt to Total Capitalization Ratio. The Canadian Borrower shall
     maintain at all times a ratio of Funded Debt to Total Capitalization on a
     Consolidated basis of not greater than 0.30:1.00, calculated quarterly on
     the last day of each fiscal quarter of the Canadian Borrower provided that
     for the purposes of this covenant only, the Debentures shall not be
     included in the calculation of Funded Debt, but shall be included in the
     calculation of Total Capitalization."

6.02 Amendment to Negative Covenant. Section 8.03(5) of the Credit Agreement is
hereby amended by deleting sub-paragraph (x) in its entirety and by adding the
following immediately following Sub-section 8.03(5)(ix):

     "(x) the guarantees issued by the U.S. Borrower and Canadian Borrower in
          connection with the Trust Preferred Securities Issuance, and

     (xi) as otherwise permitted hereunder."

<PAGE>

                                      - 9 -

                                  Article VII

                     CONDITIONS PRECEDENT TO THIS AGREEMENT

7.01 Conditions Precedent. This Second Credit Amending Agreement shall not come
into effect and the Credit Agreement shall not be amended to reflect the
amendments contemplated herein until the Agent shall have received (i) all
material documentation as determined by the Agent in its sole discretion
relating to the Trust Preferred Securities Issuance, including, without
limitation, all materials filed with any securities commission, and the Agent
and the Lenders shall be satisfied with the terms and conditions thereof; and
(ii) an intercreditor agreement with Kingsway Financial Capital Trust I in
respect of the obligations of the Borrowers or their Subsidiaries to Kingsway
Financial Capital Trust I in connection with the Debentures, to provide, among
other things, for subordination of the Debentures to the payment in full of the
Outstanding Obligations.

                                  Article VIII

                                  MISCELLANEOUS

8.01 Nature of Amendments and Defined Terms. It is acknowledged and agreed that
the terms of this Second Credit Amending Agreement are in addition to and,
unless specifically provided for, shall not limit, restrict, modify, amend or
release any of the understandings, agreements or covenants as set out in the
Credit Agreement. The Credit Agreement shall henceforth be read and construed in
conjunction with this Second Credit Amending Agreement and the Credit Agreement
together with all of the powers, provisions, conditions, covenants and
agreements contained or implied in the Credit Agreement shall be and shall
continue to be in full force and effect. References to the "Credit Agreement" or
the "Agreement" in the Credit Agreement or in any other document delivered in
connection with, or pursuant to, the Credit Agreement, shall mean the Credit
Agreement, as amended hereby. Capitalized terms utilized in this agreement but
not defined in this Agreement shall have the meanings ascribed to such terms in
the Credit Agreement.

8.02 Assignment. This Second Credit Amending Agreement shall enure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns but shall not be assignable by the Borrowers or either of
them without the prior written consent of the Agents and Lenders.

8.03 Severability. Any provision of this Second Credit Amending Agreement which
is prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

<PAGE>

                                     - 10 -

8.04 Governing Law. This Second Credit Amending Agreement shall be governed by
and construed in accordance with the laws of the Province of Ontario and the
laws of Canada applicable therein and shall be treated in all respects as an
Ontario contract and the parties hereby submit and attorn to the non-exclusive
jurisdiction of the courts of the Province of Ontario.

8.05 Further Assurances. The Borrowers shall from time to time and at all times
hereafter, upon every reasonable request from the Agents or the Lenders, make,
do, execute and deliver or cause to be made, done, executed and delivered, all
such further acts, deeds and assurances and things as may be necessary in the
opinion of the Agents for more effectually implementing and carrying out the
true intent and meaning of this Second Credit Amending Agreement.

8.06 Counterparts. This Second Credit Amending Agreement may be executed in any
number of counterparts, each of which shall constitute an original and all of
which, taken together, shall constitute one and the same agreement.

          IN WITNESS WHEREOF the parties hereto have executed this Second Credit
Amending Agreement.

                                  KINGSWAY FINANCIAL SERVICES INC.

                                  By:       /s/  William G. Star
                                          -------------------------------------
                                          Name:  William G. Star
                                          Title:  President & CEO

                                  By:       /s/  W. Shaun Jackson
                                          -------------------------------------
                                          Name:  W. Shaun Jackson
                                          Title:  Executive Vice President & CFO

                                  KINGSWAY U.S. FINANCE PARTNERSHIP
                                  by its Partners

                                          KINGSWAY FINANCIAL SERVICES INC.

                                  By:       /s/  W. Shaun Jackson
                                          -------------------------------------
                                          Name:  W. Shaun Jackson
                                          Title:  Executive Vice President & CFO

                                          METRO CLAIM SERVICES INC.

                                  By:       /s/  W. Shaun Jackson
                                          -------------------------------------
                                          Name:  W. Shaun Jackson
                                          Title:  Secretary

<PAGE>

                                     - 11 -

                                  CANADIAN IMPERIAL BANK OF COMMERCE,
                                  AS CANADIAN LENDER

                                  By: /s/ Karen F. Kiskorna
                                      ------------------------
                                      Name: Karen F. Kiskorna
                                      Title: Director

                                  By: /s/ Lynn McDonald
                                      ------------------------
                                      Name: Lynn McDonald
                                      Title: Managing Director

                                  HSBC BANK CANADA,
                                  AS CANADIAN LENDER

                                  By: /s/ Marin J. Haythorne
                                      -------------------------
                                      Name: Martin J. Haythorne
                                      Title: Assistant Vice President,
                                             Corporate and Institutional Banking

                                  By: -------------------------
                                      Name:
                                      Title:

                                  LASALLE BANK NATIONAL ASSOCIATION,
                                  AS U.S. LENDER

                                  By: /s/ Bradley J. Kronland
                                      -------------------------
                                      Name: Bradley J. Kronland
                                      Title: Assistant Vice President

                                  By: /s/ Robert W. Frentzel
                                      -------------------------
                                      Name: Robert W. Frentzel
                                      Title: Senior Vice President

                                  CANADIAN IMPERIAL BANK OF COMMERCE,
                                  NEW YORK AGENCY, AS U.S. LENDER

                                  By: /s/ Nora Q. Catiis
                                      --------------------
                                      Name: Nora Q. Catiis
                                      Title: Authorized Signatory

                                  By: --------------------
                                      Name:
                                      Title:

<PAGE>

                                     - 12 -

                                           CANADIAN IMPERIAL BANK OF COMMERCE,
                                           AS ADMINISTRATIVE AGENT

                                           By: /s/  Karen F. Kiskorna
                                               -------------------------
                                               Name:  Karen F. Kiskorna
                                               Title: Director

                                           By: /s/  Lynn McDonald
                                               -------------------------
                                               Name:  Lynn McDonald
                                               Title: Managing Director

                                           LASALLE BANK NATIONAL ASSOCIATION,
                                           AS SYNDICATION AGENT

                                           By: /s/ Bradley J. Kronland
                                               -------------------------
                                               Name:  Bradley J. Kronland
                                               Title: Assistant Vice President

                                           By: /s/  Robert W. Frentzel
                                               -------------------------
                                               Name:  Robert W. Frentzel
                                               Title: Senior Vice President

<PAGE>

                                     - 13 -

     THIS THIRD CREDIT AMENDING AGREEMENT made as of the 30th day of October,
2002.

A M O N G:

                        KINGSWAY FINANCIAL SERVICES INC.
                      AND KINGSWAY U.S. FINANCE PARTNERSHIP
                                  As Borrowers

                                       AND

                       The Lenders named herein as Lenders

                                       AND

                       CANADIAN IMPERIAL BANK OF COMMERCE,
                             As Administrative Agent

                                       AND

                       LASALLE BANK NATIONAL ASSOCIATION,
                              As Syndication Agent

     WHEREAS:

     1. Pursuant to a Credit Agreement made as of the 28th day of May, 2002
among the parties hereto as amended by a credit amending agreement dated
September 24th, 2002 and a second credit amending agreement also dated
September 24th, 2002 (collectively the "Credit Agreement"), the Lenders and the
Agents established certain credit facilities in favour of the Borrowers;

     2. The Agents, the Lenders and the Borrowers have agreed to amend certain
terms and conditions of the Credit Agreement in the manner hereinafter set forth
with effect as of September 24th, 2002;

            FOR VALUABLE CONSIDERATION, the parties agree as follows:

                                   ARTICLE IX

                             AMENDMENT TO COVENANTS

9.01 Amendment to Financial Covenant. Sub-section 8.02(4) of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:

<PAGE>

                                     - 14 -

     "(4) Capital Surplus Ratio. The Canadian Borrower shall maintain at all
     times a Capital Surplus Ratio on a Consolidated basis calculated
     quarterly on the last day of each fiscal quarter of the Canadian
     Borrower on a rolling four-quarter basis as follows:

          (i)  from the Closing Date to and including June 30, 2002 of not
               greater than 2.75:1.00;

          (ii) from July 1, 2002 to and including December 31, 2002 of not
               greater than 3.50:1.00; and

         (iii) thereafter of not greater than 2.75:1.00."

                                   ARTICLE X

                                  MISCELLANEOUS

10.01 Nature of Amendments and Defined Terms. It is acknowledged and agreed
that the terms of this Third Credit Amending Agreement are in addition to and,
unless specifically provided for, shall not limit, restrict, modify, amend or
release any of the understandings, agreements or  covenants as set out in the
Credit Agreement. The Credit Agreement shall henceforth be read and construed
in conjunction with this Third Credit Amending Agreement and the Credit
Agreement together with all of the powers, provisions, conditions, covenants
and agreements contained or implied in the Credit Agreement shall be and shall
continue to be in full force and effect. References to the "Credit Agreement"
or the "Agreement" in the Credit Agreement or in any other document delivered
in connection with, or pursuant to, the Credit Agreement, shall mean the Credit
Agreement, as amended hereby. Capitalized terms utilized in this agreement but
not defined in this Agreement shall have the meanings ascribed to such terms in
the Credit Agreement.

10.02 Assignment. This Third Credit Amending Agreement shall enure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns but shall not be assignable by the Borrowers or either
of them without the prior written consent of the Agents and Lenders.

10.03 Severability. Any provision of this Third Credit Amending Agreement
which is prohibited or unenforceable in any jurisdiction shall not invalidate
the remaining provisions hereof and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.

10.04 Governing Law. This Third Credit Amending Agreement shall be governed
by and construed in accordance with the laws of the Province of Ontario and the
laws of Canada applicable therein and shall

<PAGE>

                                     - 15 -

be treated in all respects as an Ontario contract and the parties hereby submit
and attorn to the non-exclusive jurisdiction of the courts of the Province of
Ontario.

10.05 Further Assurances. The Borrowers shall from time to time and at all times
hereafter, upon every reasonable request from the Agents or the Lenders, make,
do, execute and deliver or cause to be made, done, executed and delivered, all
such further acts, deeds and assurances and things as may be necessary in the
opinion of the Agents for more effectually implementing and carrying out the
true intent and meaning of this Third Credit Amending Agreement.

10.06 Counterparts. This Third Credit Amending Agreement may be executed in any
number of counterparts, each of which shall constitute an original and all of
which, taken together, shall constitute one and the same agreement.

          IN WITNESS WHEREOF the parties hereto have executed this Third
Credit Amending Agreement.

                                         KINGSWAY FINANCIAL SERVICES INC.

                                         By: /s/  William G. Star
                                             ------------------------
                                         Name:  William G. Star
                                         Title: President & CEO

                                         By: /s/ W. Shaun Jackson
                                             ------------------------
                                         Name:  W. Shaun Jackson
                                         Title: Executive Vice President & CFO

                                         KINGSWAY U.S. FINANCE PARTNERSHIP
                                         by its Partners
                                             KINGSWAY FINANCIAL SERVICES INC.

                                         By: /s/ James R. Zuhlke
                                             ------------------------
                                             Name: James R. Zuhlke
                                             Title: Manager

                                             METRO CLAIM SERVICES INC.

                                         By: /s/ W. Shaun Jackson
                                             ------------------------
                                             Name:  W. Shaun Jackson
                                             Title: Secretary

<PAGE>

                                     - 16 -

                                 CANADIAN IMPERIAL BANK OF COMMERCE,
                                 AS CANADIAN LENDER

                                 By: /s/ Ralph Sehgal
                                     ---------------------------
                                     Name:  Ralph Sehgal
                                     Title: Executive Director

                                 By: /s/ Mark Chandler
                                     ---------------------------
                                     Name:  Mark Chandler
                                     Title: Executive Director

                                 HSBC BANK CANADA,
                                 AS CANADIAN LENDER

                                 By: /s/ Martin J. Haythorne
                                     ---------------------------
                                     Name:  Martin J. Haythorne
                                     Title: Assistant Vice President,
                                            Corporate and Institutional Banking

                                 By: ---------------------------
                                     Name:
                                     Title:

                                 LASALLE BANK NATIONAL ASSOCIATION,
                                 AS U.S. LENDER

                                 By: /s/ Bradley J. Kronland
                                     ---------------------------
                                     Name:  Bradley J. Kronland
                                     Title: Assistant Vice President

                                 By: /s/ Robert W. Frentzel
                                     ---------------------------
                                     Name:  Robert W. Frentzel
                                     Title: Senior Vice President

                                 CANADIAN IMPERIAL BANK OF COMMERCE,
                                 NEW YORK AGENCY, AS U.S. LENDER

                                 By: /s/ George Knight
                                     ---------------------------
                                     Name:  George Knight
                                     Title: Managing Director,
                                            CIBC World Markets Corp., as agent

                                 By:
                                     ---------------------------
                                     Name:
                                     Title:

<PAGE>

                                     - 17 -

                                             CANADIAN IMPERIAL BANK OF COMMERCE,
                                             AS ADMINISTRATIVE AGENT

                                             By: /s/ Ralph Sehgal
                                                 -------------------------
                                                 Name:  Ralph Sehgal
                                                 Title: Executive Director

                                             By: /s/ Geoff Bond
                                                 -------------------------
                                                 Name:  Geoff Bond
                                                 Title: Managing Director

                                             LASALLE BANK NATIONAL ASSOCIATION,
                                             AS SYNDICATION AGENT

                                             By: /s/ Bradley J. Kronland
                                                 -------------------------
                                                 Name:  Bradley J. Kronland
                                                 Title: Assistant Vice President

                                             By: /s/ Robert W. Frentzel
                                                 -------------------------
                                                 Name: Robert W. Frentzel
                                                 Title: Senior Vice President<PAGE>

                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT, dated as of this 5th day of November, 2002, and
having an "Effective Date" of September 1, 2002, is by and between SCHOOL
SPECIALTY, INC., a Wisconsin corporation (the "Company") and DAVID J. VANDER
ZANDEN ("Employee").

                                    RECITALS

     The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to accept employment with the
Company on the terms and conditions set forth herein.

     This Employment Agreement supercedes and cancels any other prior employment
agreements or understandings, written or oral, between the Company and the
Employee.

     NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:

                                   AGREEMENTS

     1.   Employment and Duties. The Company hereby agrees to employ the
          Employee and the Employee hereby accepts employment as the Chief
          Executive Officer and President of the Company and agrees to devote
          his full business time and efforts to the diligent and faithful
          performance of his duties as Chief Executive Officer and President of
          the Company hereunder under the direction of the Board of Directors of
          the Company. Such duties shall be performed from headquarters in the
          Greenville, Wisconsin, area. Throughout the term of this Agreement,
          the Employee shall be recommended by the Board of Directors of the
          Company, to its shareholders as a suitable candidate for a position on
          the Board of Directors of the Company.

     2.   Term of Employment. Unless sooner terminated as hereinafter provided,
          the term of the Employee's employment hereunder shall commence with
          and only with the Effective Date and shall continue for a period of
          three (3) years (the "Term"). This Agreement may be terminated prior
          to the end of the Term in the manner provided herein. In the event
          that this agreement is not terminated pursuant to the terms of this
          Agreement, following the first year of the Term of three (3) years or
          the first year of any renewal terms thereof, said agreement shall
          extend for successive renewal terms of three (3) years each measured
          from the date of renewal, unless either party shall notify the other
          party of their desire to not renew the term of this agreement, with
          said notice to be made no later than ninety (90) days prior to the
          expiration of the first year of the Term of this agreement or any then
          effective first

<PAGE>

          year of any renewal term thereof.

     3.   Compensation. For all services rendered by Employee, the Company shall
          compensate Employee as follows:

          (a)  Base Salary. Effective on the date hereof, the annual base salary
               payable to Employee shall be Four Hundred Twenty Five Thousand
               Dollars ($425,000.00) per year or such greater amount as
               determined from time to time by the Board of Directors of the
               Company (but not reviewed less frequently than on an annual
               basis), payable on a regular basis in accordance with the
               Company's standard payroll procedures, but not less than monthly.
               It is understood that the base salary is a minimum amount, and
               shall not be reduced during the term of this Agreement.

          (b)  Incentive Bonus. During the initial term and any extensions
               thereof, Employee shall be eligible to receive an incentive bonus
               based upon his participation in the Company's current senior
               management bonus program or successor senior management bonus
               programs, when effective. The first and last years of employment
               will be prorated.

          (c)  Perquisites, Benefits, and Other Compensation. During the initial
               term and any extensions thereof, Employee shall be entitled to
               receive all perquisites and benefits as are customarily provided
               by the Company to its executive employees, subject to such
               changes, additions, or deletions as the Company may make
               generally from time to time, as well as such other perquisites or
               benefits as may be specified from time to time by the Board of
               Directors or the Chief Executive Officer of the Company.
               Throughout the term of this Agreement, and during any period of
               salary continuation hereunder, the Employee and his family shall
               continue to be covered under all health insurance coverage of the
               Company afforded its senior management, at the then effective
               cost sharing arrangement between the Employee and the Company.
               Notwithstanding anything to the contrary in this Agreement or any
               documents relating to qualified or non-qualified stock options,
               all such outstanding stock options which were outstanding on the
               Effective Date and are unvested at the time of termination of
               employment of the Employee with the Company shall be vested in
               full upon such termination, unless such termination is
               effectuated by the Company for cause or is effected by the
               Employee without cause.

     4.   Covenants and Conditions.

          (a)  The Employee will acquire information and knowledge respecting
               the intimate and confidential affairs of the Company in the
               various phases of its business. Accordingly, the Employee agrees
               that he shall not for a period of two (2) years following the
               termination of his employment with the Company, use for himself
               or disclose to any person not employed by the Company any such
               knowledge or information heretofore acquired or

                                                                          Page 2

<PAGE>

               acquired during the term of this employment hereunder including
               but not limited to the prescribed requirements of ss.134.90 of
               the Wisconsin Statutes, as hereinafter amended from time to time.
               Nothing in this agreement shall be construed to limit or
               supersede the common law of torts or statutory or other
               protection of trade secrets where such law provides the Company
               with greater protections or protections for a longer duration
               than that provided in this section 4 of this Agreement.

          (b)  The Employee agrees that all memoranda, notes, records, papers,
               or other documents and all copies thereof relating to the
               Company's operations or business, some of which may be prepared
               by him, and all objects associated therewith (such as models and
               samples) in any way obtained by him shall be the Company's
               property. This shall include, but is not limited to, documents
               and objects concerning any process, apparatus, or product
               manufactured, used, developed, investigated, or considered by the
               Company. The Employee shall not, except for Company use, copy or
               duplicate any of the aforementioned documents or objects, nor
               remove them from the Company's facilities, nor use any
               information concerning them except for the Company's benefit,
               either during his employment or thereafter. The Employee agrees
               that he will deliver all of the aforementioned documents and
               objects that may be in his possession to the Company on
               termination of his employment, or at any other time on the
               Company's request, together with his written certification of
               compliance, except for those documents and objects received as a
               director of the Company.

     5.   Death or Disability of the Employee. The Employee's employment shall
          terminate immediately upon his death. In the event the Employee
          becomes physically or mentally disabled so as to qualify for
          disability payments under the then current disability coverage for
          full time employees of the Company, the Company may at its option
          terminate his employment upon not less than thirty (30) days written
          notice. The Company's right to terminate the Employee's employment
          pursuant to the preceding sentence shall cease in the event the notice
          of termination provided for therein shall not be given during the
          period of the Employee's disability or within ninety (90) days after
          such disability ceases. In the event of termination, the Company shall
          be obligated to pay the Employee's salary under paragraph 3 hereof,
          net of the gross amount of Long Term disability benefits received by
          the Employee, through the balance of the term of this Agreement and
          any then currently effective extension thereof.

     6.   Termination and Severance Compensation. The Company reserves the right
          to immediately terminate the Employee's employment under this
          agreement should any of the following occur:

          (a)  The Employee's commission of a felony that is an act which, in
               the opinion of the Board of Directors, is either abhorrent to the
               community or is an intentional act, which the Board of Directors
               considers materially damaging

                                                                          Page 3

<PAGE>

               to the reputation of the Company or its successors or assigns.

          (b)  The Employee's breach of or failure to perform his obligations in
               accordance with the terms and conditions of this agreement.
               However the right of the Company to terminate the employment of
               the Employee under the terms of this paragraph 6(b) shall be
               conditioned upon the Company promptly providing to the Employee a
               written notice which describes the Employee's breach of or
               failure to perform his obligations in accordance with the terms
               and conditions of this agreement. The Employee shall have thirty
               (30) days from the date of the Company's issuance of this notice
               to cure the described breach or failure. Notwithstanding the
               above described language, should the Company issue more than one
               (1) notice in any twelve (12) month period under the terms of
               this paragraph 6(b), the Employee shall have no cure rights for
               such breach or failure to perform.

          (c)  The death of the Employee.

          (d)  The disability of the Employee, as described in Section 5 above.

          Should the term of the Employee's employment with the Company be
          terminated pursuant to the terms of Sections 6(c), 6(d), and 7 herein,
          the Company shall pay to the Employee the Base Salary described in
          Section 3(a) for the balance of the then effective term of this
          Agreement.

     7.   Rights and Obligations of Successors. In the event that any of the
          following events occur, a "Change in Control" shall be deemed to occur
          for the purpose of this Agreement: (a) any person or group of persons
          acting in concert becomes the beneficial owner, directly or indirectly
          (excluding ownership by or through employee benefit plans), of
          securities of the Company representing fifty percent (50%) or more of
          the combined voting power of the Company's then outstanding
          securities; (b) the Company is combined (by merger, share exchange,
          consolidation, or otherwise) with another corporation and as a result
          of such combination less than seventy five percent (75%) of the
          outstanding securities of the surviving or resulting corporation are
          owned in the aggregate by the former shareholders of the Company; or
          (c) any person or group of persons acting in concert obtains direct or
          indirect control of the Board of Directors of the Company, other than
          the current shareholders of the Company. The Employee shall have the
          right to terminate his employment under the terms of this Agreement
          for a period of sixty (60) days following the Change in Control. In
          the event that the Employee shall not so elect to terminate this
          Agreement, then this agreement shall be assignable and transferable by
          the Company to any subsidiary or affiliate or to any subsidiary or
          affiliate of the Company affiliated with the Change in Control and
          shall inure to the benefit of and be binding upon the Employee and his
          heirs and personal representatives and the Company and its successors
          and assigns. In the event the Employee elects to terminate employment,
          the Employee shall be paid through the term of this Agreement and any
          then currently effective extension

                                                                          Page 4

<PAGE>

          thereof.

     8.   [This Section is intentionally blank.]

     9.   Covenant Not to Compete. In consideration of the employment hereunder,
          the Employee hereby agrees that during the term of his employment by
          the Company and for the longer of (a) a period of twenty four (24)
          months following the termination of his employment with the Company,
          or (b) the length of time which the Employee receives base salary
          payments under this Agreement under the provisions of Section 6 of
          this Agreement, the Employee will not either directly or indirectly
          own, have proprietary interest (except for less than 5% of any listed
          company or company traded in the over-the-counter market) of any kind
          in, be employed by, or serve as a consultant to or in any other
          capacity for any firm, other than the Company and its subsidiaries,
          engaged in the manufacture and distribution of school supplies,
          equipment, furniture or other products made and distributed by the
          Company or any of the Company's present or future subsidiary
          corporations (acquired during the term of this Agreement) during the
          period of the Employee's employment in the area where they are engaged
          in business without the express written consent of the Company. The
          Employee agrees that a breach of the covenant contained herein will
          result in irreparable and continuing damage to the Company for which
          there will be no adequate remedy at law and in the event of any breach
          of such agreement, the Company shall be entitled to injunctive and
          such other and further relief including damages as may be proper.

     10.  Notice. All notices, demands and other communications hereunder shall
          be deemed to have been duly given, if delivered by hand or mailed,
          certified or registered mail with postage prepaid:

          To the Company:   School Specialty, Inc.
                            P.O. Box 1579
                            Appleton, WI 54912-1579
                            Attention: Mary Kabacinski, Chief Financial Officer
                            Fax: (920) 882-5863

          With a copy to:   Joseph F. Franzoi IV, Esq.
                            Franzoi & Franzoi, S.C.
                            514 Racine Street
                            Menasha, WI 54952
                            Fax: (920) 725-0998

          To Employee:      David J. Vander Zanden
                            W2810 Oakridge Drive
                            Appleton WI 54915

          or to such other address as the person to whom notice is to be given
          may have specified in a notice duly given to the sender as provided
          herein. Such notice, request, claim, demand, waiver, consent, approval
          or other communication shall

                                                                          Page 5

<PAGE>

          be deemed to have been given as of the date so delivered, telefaxed,
          mailed or dispatched and, if given by any other means, shall be deemed
          given only when actually received by the addressees.

     10.  Entire Agreement; Amendment; Waiver. This Agreement (including any
          documents referred to herein) sets forth the entire understanding of
          the parties hereto with respect to the subject matter contemplated
          hereby. Any and all previous agreements and understandings between or
          among the parties regarding the subject matter hereof, whether written
          or oral, are superseded by this Agreement. This Agreement shall not be
          amended or modified except by a written instrument duly executed by
          each of the parties hereto. Any extension or waiver by any party of
          any provision hereto shall be valid only if set forth in an instrument
          in writing signed on behalf of such party.

     11.  Expenses. Each party hereto will pay their respective fees, expenses
          and disbursements of their agents, representatives, accountants and
          counsel incurred in connection with the subject matter of this
          Agreement, and its enforcement.

     12.  Governing Law. This Agreement shall in all respects be construed
          according to the laws of the State of Wisconsin, without regard to its
          conflict of laws principles.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.

                                        COMPANY:

                                        SCHOOL SPECIALTY, INC.

                                        /s/ Leo C. McKenna
                                        ---------------------------------------
                                        Leo C. McKenna, Chairman of the Board

                                        EMPLOYEE:

                                        /s/ David J. Vander Zanden
                                        ---------------------------------------
                                        David J. Vander Zanden, Individually

                                                                          Page 6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00045-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00045-of-00352.parquet"}]]