KINGSWAY FINANCIAL SERVICES INC (Form: 8-K, Received: 12/27/2013 09:09:53)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): December 20, 2013

KINGSWAY FINANCIAL SERVICES INC.

(Exact Name of Registrant as Specified in Its Charter)





Ontario, Canada (State or Other Jurisdiction of Incorporation)	001-15204 (Commission File Number)	Not Applicable (IRS Employer Identification No.)

45 St. Clair Ave. West, Suite 400, Toronto, Ontario, Canada M4V 1K9

(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (416) 848-1171

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

m Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

m Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

m Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

m Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01 ENTRY INTO MATERIAL DEFINITIVE AGREEMENT

The Private Placement

On December 20, 2013, Kingsway Financial Services Inc. (the “Company”) entered into Subscription Agreements (“Subscription Agreements”) to issue and sell in a private placement (the “Private Placement”) to accredited investors an aggregate of 262,876 units of the Company (“Units”), at a purchase price of $25.00 per Unit, for aggregate proceeds of approximately $6.6 million. Each Unit consists of (i) one Class A Preferred Share, Series 1 (the “Series 1 Shares”) and (ii) 6.25 Common Share Series C Warrants (the “Series C Warrants”). The Units were offered and sold without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder.

The Subscription Agreements provide that the proceeds of the Private Placement will be placed in escrow pending the closing of the Private Placement, which is expected to occur on February 3, 2014 (the “Closing”). The Company intends to use the proceeds of the Private Placement, together with cash on hand, to repay the outstanding principal amount plus accrued interest, if any, on the Company’s 7.50% Senior Notes due February 1, 2014.

The Series 1 Shares

The Series 1 Shares will be created through the filing of Articles of Amendment to the Articles of Incorporation of the Company, the terms of which were approved by the board of directors of the Company (the “Board”) on December 19, 2013, and which the Company expects to file with the Ministry of Government Services of the Province of Ontario, Canada at Closing.

Each Series 1 Share is convertible at the option of the holder thereof into 6.25 common shares of the Company, no par value (“Common Shares”), at a conversion price of $4.00 per share at any time prior to April 1, 2021. The maximum number of Common Shares issuable upon conversion of the Series 1 Shares is 1,642,975 Common Shares.

The Series 1 Shares will rank senior to all classes and series of the Company’s currently outstanding capital stock. The Company will not issue any other preferred shares that rank pari passu or senior to the Series 1 Shares while Series 1 Shares are outstanding. The holders of Series 1 Shares will, in priority to any other class or series ranking junior to the Series 1 Shares, be entitled to receive, as and when declared by the Board, fixed, cumulative, preferential cash dividends at a rate of $1.25 per Series 1 Share per annum, payable in equal quarterly installments. Dividends on outstanding Series 1 Shares will accrue from day to day commencing on the date of Closing. The cash dividend rate will increase to $1.875 per Series 1 Share per annum on a prospective basis, payable in equal quarterly installments, if the dividend cumulates for a period greater than 30 consecutive months from the date of most recent dividend payment.

For so long as the Series 1 Shares are outstanding, the Company will not, without the Required Approval (as defined below), (i) declare, pay or set apart for payment any cash dividends on shares ranking junior as to the payment of dividends to the Series 1 Shares; (ii) redeem, purchase for cancellation or otherwise retire or make any capital distribution on or in respect of any shares ranking junior as to the return of capital to the Series 1 Shares (except out of the net cash proceeds of a substantially concurrent issue of shares ranking junior as to capital to the Series 1 Shares); or (iii) redeem, purchase for cancellation or otherwise retire less than all of the Series 1 Shares, unless (A) all dividends then payable on the Series 1 Shares then outstanding and on all other shares ranking as to the payment of dividends on a parity with the Series 1 Shares have been declared and paid or monies set apart for payment and (B) after giving effect to the payment of such dividend or such redemption, purchase, retirement or capital distribution, the realizable value of the assets of the Company would not be less than the sum of the liabilities of the Company plus the amount that would be required to give effect to the rights of holders of shares (other than the Series 1 Shares) that have a right to be paid, on redemption or liquidation, ratably with or prior to holders of Series 1 Shares plus the amount required to redeem all of the then outstanding Series 1 Shares, all calculated at the date of such redemption, purchase or capital distribution, as the case may be, in accordance with applicable law. The Company will have no restriction on payments made in regards to its outstanding debt securities, options and warrants. “Required Approval” means approval by a resolution signed by all of the holders of the then outstanding Series 1 Shares or by a resolution passed by the affirmative vote of at least two thirds of the votes cast by the holders of Series 1 Shares voted in respect of such resolution at a meeting of the holders of the Series 1 Shares duly called and held for that purpose in accordance with the by-laws of the Company.

In the event of the liquidation, dissolution or winding-up of the Company, the holders of Series 1 Shares will be entitled to receive $25.00 per Series 1 Share, plus accrued but unpaid dividends thereon, whether declared or not, before any amount is paid or any assets distributed to holders of shares of the Company ranking junior as to the return of capital to the Series 1 Shares. After

payment to the holders of Series 1 Shares of the amounts so payable to them, such holders will not be entitled to share in any further payment in respect of the distribution of the assets of the Company.

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

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

The number of Common Shares into which the Series 1 Shares will be convertible will be subject to adjustment in the event of certain stock dividends, subdivisions and consolidations, rights offerings, special distributions, capital reorganizations and reclassifications of Common Shares by the Company.

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

The Series C Warrants

At the Closing, the Company expects to enter into a Common Stock Series C Warrant Agreement (the “Series C Warrant Agreement”) with Computershare Trust Company of Canada, as warrant agent (“Computershare”), governing the terms and conditions of the Series C Warrants.

The Series C Warrant Agreement provides that each Series C Warrant will entitle the holder thereof to purchase one Common Share of the Company at an exercise price of $5.00 per share at any time after September 16, 2016 and prior to the expiration of the Series C Warrants on September 15, 2023 (the “Expiration Date”). The maximum number of Common Shares that may be issued pursuant to the exercise of the Series C Warrants is 1,642,975 Common Shares. The Series C Warrants will be non-redeemable by the Company.

The Series C Warrants are subject to a mandatory exchange procedure in which the Series C Warrants will be exchanged for newly issued Common Share Series B Warrants of the Company (the “Series B Warrants”), which class of warrants of the Company are currently listed on the Toronto Stock Exchange (the “TSX”) and have substantially similar terms to the Series C Warrants. Upon notice from the Company to the warrant agent that (i) the Common Stock Series B Warrant Agreement, dated as of September 16, 2013, between the Company and Computershare has been duly amended to increase the maximum number of Series B Warrants that may be issued thereunder to allow for the issuance of a sufficient number of additional Series B Warrants to be issued in exchange for the Series C Warrants and (ii) the TSX has accepted the conditional listing of such additional Series B Warrants, if the Series B Warrants are listed on the TSX at the time of such exchange, each Series C Warrant will be automatically exchanged for a Series B Warrant without any further act or action to be taken by the warrant holder.

The exercise price and number of Common Shares issuable upon exercise of the Series C Warrants will be subject to proportionate adjustment in the event of any stock splits, stock dividends, reorganizations, recapitalizations in respect of the common stock of the Company.

Registration Rights Agreement

At the Closing, the Company also expects to enter into a Registration Rights Agreement with the purchasers of the Units in the Private Placement (the “Registration Rights Agreement”). Under the Registration Rights Agreement, commencing six months after the date of issuance of the Series 1 Shares, the holders of at least 50% of the then outstanding Series 1 Shares will be entitled to a one-time demand registration of the Series 1 Shares, the Common Shares that may be issued upon conversion of the Series 1 Shares, the Series B Warrants (post-exchange of the Series C Warrants), and the Common Shares issuable upon the exercise of the Series B Warrants. At any time after the date of issuance, if the Company proposes to file a registration statement with respect to Common Shares to be issued by the Company (other than with respect to shares issued to Company employees or in connection with acquisitions), then the holders of Series 1 Shares will have the right to cause the Company to include in such registration statement the Common Shares that may be issued upon conversion of the Series 1 Shares and the Common Shares that may be issued upon exercise of Series B Warrants (post exchange), subject to customary underwriters’ cutbacks.

The summary of the terms of the Private Placement, the Series 1 Shares, the Series C Warrants and the Registration Rights Agreement in this Current Report on Form 8-K does not purport to be complete and is qualified in its entirety by reference to the form of Subscription Agreement, the excerpt of the Articles of Amendment to the Articles of Incorporation of the Company, the form

of Series C Warrant Agreement, and the form of Registration Rights Agreement, attached to this Current Report on Form 8-K as Exhibits 10.1, 4.1, 4.2 and 10.2, respectively (collectively, the “Transaction Documents”), all of which are incorporated by reference herein. The forms of the Transaction Documents have been included to provide investors and security holders with information regarding their terms. They are not intended to provide any other factual information about the Company. The Transaction Documents contain certain representations, warranties and indemnifications resulting from any breach of such representations or warranties. Investors and security holders should not rely on the representations and warranties as characterizations of the actual state of facts because they were made only as of the respective dates of the Transaction Documents. In addition, information concerning the subject matter of the representations and warranties may change after the respective dates of the Transaction Documents, and such subsequent information may not be fully reflected in the Company’s public disclosures.

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES

The information provided in response to Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02. The offer and sale of the Units, the Series 1 Shares and the Series C Warrants in the Private Placement were made in reliance on the exemption from registration afforded under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating the same.

ITEM 8.01 OTHER EVENTS

On December 20, 2013, the Company issued a press release announcing the Private Placement, a copy of which is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.

This Form 8-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Words such as “expects”, “believes”, “anticipates”, “intends”, “estimates”, “seeks” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect Kingsway management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including, without limitation, our potential inability to complete the Private Placement. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, please refer to the section entitled “Risk Factors” in the Company's 2012 Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise.



Item 9.01	Financial Statements and Exhibits.
Exhibit No.	Exhibit Description
4.1	Excerpt of the Articles of Amendment to the Articles of Incorporation of the Company
4.2	Form of Common Stock Series C Warrant Agreement
10.1	Form of Subscription Agreement
10.2	Form of Registration Rights Agreement
99.1	News Release Dated December 20, 2013

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



	KINGSWAY FINANCIAL SERVICES INC.


December 27, 2013	By:	/s/ Larry G. Swets, Jr.
		Larry G. Swets, Jr.
		President and Chief Executive Officer

EXHIBIT INDEX



Exhibit No.		Exhibit Description
4.1		Excerpt of the Articles of Amendment to the Articles of Incorporation of the Company
4.2		Form of Common Stock Series C Warrant Agreement
10.1		Form of Subscription Agreement
10.2		Form of Registration Rights Agreement
99.1		News Release Dated December 20, 2013

Exhibit 4.1

KINGSWAY FINANCIAL SERVICES INC.
CLASS A PREFERRED SHARES, SERIES 1
RIGHTS, PRIVILEGES RESTRICTIONS AND CONDITIONS


1	Designation and Number.

1.1

The first series of Class A Preferred Shares shall consist of four hundred thousand (400,000) Class A Preferred Shares, which shares shall be designated as Class A Preferred Shares, Series 1 (the Series 1 Shares ), and which, in addition to the rights, privileges, restrictions and conditions attached to the Class A Preferred Shares as a class, shall have attached thereto the following rights, privileges, restrictions and conditions.


1.2	The Corporation shall not issue any other preferred shares that rank pari passu or senior to the Series 1 Shares while any Series 1 Shares remain outstanding.


2	Definitions and Interpretation.


2.1	Definitions . Where used herein, the following words and phrases shall, unless there is something in the context otherwise inconsistent therewith, have the following meanings, respectively:


(a)	Act means the Business Corporations Act , (Ontario);


(b)	board of directors or directors means the board of directors of the Corporation or, if duly constituted and empowered, the executive or any other committee of the board of directors of the Corporation for the time being, and reference without further elaboration to action by the directors means either action by the directors of the Corporation as a board or action by any such committee;


(c)	business day means a day other than a Saturday, a Sunday or any other day that is treated as a holiday for the purpose of legislation in Canada or the United States or in the municipality in which the registered office of the Corporation is located;


(d)	certificate of the Corporation means a written certificate of the Corporation signed on behalf of the Corporation by any two of the officers or directors of the Corporation having knowledge of the matters therein affirmed;


(e)	Common Shares means the common shares which the Corporation is authorized to issue;


(f)	Conversion Basis means 6.25 Common Shares for each Series 1 Share converted, subject to adjustment as provided herein;


(g)	Corporation means Kingsway Financial Services Inc.;

(h)

Current Market Price means the average closing price for at least one board lot sale of the Common Shares on The New York Stock Exchange for the 30 consecutive Trading Days commencing 45 Trading Days before the date for determining the Current Market Price or, if the Common Shares are not listed or quoted on any stock exchange or over-the-counter market, such price as may be determined by the directors of the Corporation after consideration of an independent third party valuation of the Common Shares;


(i)	Dividend Payment Date means the first day of each of January, April, July and October in each year;

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(j)	Dividend Quarter means the period from but excluding a Dividend Payment Date to and including the next succeeding Dividend Payment Date;


(k)	holder means a person or, in the case of joint holders, the persons, recorded on the securities register of the Corporation as being the registered holder or holders of one or more Series 1 Shares;


(l)	Issue Date means the date of first issue of the Series 1 Shares;


(m)	Mandatory Redemption Date means April 1, 2021;

(n)

ranking as to the return of capital means ranking with respect to the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation, or other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, whether voluntary or involuntary; and ranking as to the payment of dividends means ranking with respect to the payment of dividends by the Corporation on its shares; for greater certainty, references herein to "ranking on a parity with" do not mean or include "ranking prior to"; and

(o)

Trading Day means any day on which the New York Exchange is open for trading, provided that if the Common Shares are not listed on the New York Stock Exchange on any day which is intended to be a Trading Day for the purposes hereof, "Trading Day" shall mean any day that any other stock exchange or over-the-counter market on which the Common Shares are listed or quoted, as shall be specified for such purpose by the directors, is open for trading and any reference to price on the New York Stock Exchange shall be deemed to mean price on such other exchange or over-the-counter market.


2.2	Business Day . In the event the date on which or by which any action is required to be taken by the Corporation or any holder of Series 1 Shares is not a business day, then such action shall be required or permitted to be taken on or by the next succeeding date that is a business day.


2.3	Notice .

(a)

Notice . Any notice (which term includes any communication or document) required or permitted to be given, sent, delivered or otherwise served to or upon a holder of Series 1 Shares pursuant to these share provisions shall, unless some other means is specifically required, be sufficiently given, sent, delivered or otherwise served if given, sent, delivered or served by prepaid mail and shall be deemed to be given, sent, delivered, served and received, if sent by prepaid mail, on the date of mailing thereof.

(b)

Postal Disruption . If there exists any actual or apprehended disruption of mail services in Canada or the United States in which there are holders of Series 1 Shares whose addresses appear on the books of the Corporation to be in such jurisdiction, notice may (but need not) be given to the holders in such respective jurisdictions by means of publication once in each of two successive weeks in a newspaper of general circulation published in the cities of Toronto or Chicago, as applicable. Notice given by publication shall be deemed for all purposes to be proper notice and to have been given on the day on which the first publication is completed in the city in which notice is published.

(c)

Accidental Omission . Accidental failure or omission to give notice to one or more holders of Series 1 Shares in any circumstance where notice is required to be given hereunder shall not affect the validity of the action, event or circumstance so concerned, but upon such failure or omission being discovered notice shall be given forthwith to such holder or holders and shall have the same force and effect as if given in due time.

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(d)	Business Corporations Act (Ontario) . These share provisions shall be governed by and is subject to the applicable provisions of the Act and all other laws binding upon the Corporation and, except as otherwise expressly provided herein, all terms used herein which are defined in the Act shall have the respective meanings ascribed thereto in the Act.


3	Conversion Privilege.


3.1	Right to Convert . The holders of Series 1 Shares shall have the right (the Conversion Right ), exercisable at any time, to convert all or any part of their Series 1 Shares into Common Shares at the Conversion Basis.

3.2

Exercise of Conversion Right . Any holder of Series 1 Shares desiring to exercise the Conversion Right shall complete the conversion panel, if any, on the reverse of the certificate or certificates representing the Series 1 Shares which such holder desires to convert (or such other document as may be provided by or on behalf of the Corporation for such purpose), specifying the number of Series 1 Shares to be converted, and shall present and surrender to the Corporation at its registered office the certificate or certificates representing the Series 1 Shares to be converted, naming the persons in whose name the Common Shares are to be registered, and stating the number of Common Shares to be issued to each. If any of the Common Shares are to be issued to persons other than the holder of such Series 1 Shares, all other conditions precedent to the Corporation's duty to register a transfer of shares shall also be satisfied. On the date of such delivery and if such conditions are satisfied, each person in whose name the Common Shares are to be issued as designated in the notice shall be deemed for all purposes the holder of fully paid Common Shares in the number designated in such notice (not exceeding in aggregate as among such persons the total number of Common Shares resulting from the conversion) and such persons shall be entitled to delivery by the Corporation of certificates representing their Common Shares promptly after such date. If less than all of the Series 1 Shares represented by any certificate are converted, the Corporation shall issue a new certificate for the balance without charge.


3.3	No Adjustment for Accrued Dividends . Upon the conversion of any Series 1 Shares into Common Shares there shall be no payment by the Corporation on account of any dividends accrued but unpaid on the Series 1 Shares.


3.4	Adjustment of Conversion Basis . The Conversion Basis shall be subject to adjustment from time‑to‑time in accordance with the following provisions:


(a)	Stock Dividends, Subdivisions and Consolidations by Corporation . If the Corporation shall:


(i)	issue Common Shares or securities exchangeable for or convertible into Common Shares without further payment pursuant to a stock dividend to all or substantially all of the holders of Common Shares;


(ii)	make a distribution on its issued and outstanding Common Shares payable in Common Shares or securities exchangeable for or convertible into Common Shares without further payment;


(iii)	subdivide its issued and outstanding Common Shares into a greater number of Common Shares; or


(iv)	consolidate its issued and outstanding Common Shares into a smaller number of Common Shares;

(any such event being called a Common Share Reorganization ), the Conversion Basis then in effect shall be adjusted effective immediately after the record date on which the

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holders of Common Shares are determined for the purposes of the Common Share Reorganization to the Conversion Basis determined by multiplying the Conversion Basis then in effect by the fraction, the numerator of which shall be the number of Common Shares which will be issued and outstanding after the completion of such Common Share Reorganization, including in the case where securities exchangeable for or convertible into Common Shares are distributed, the number of Common Shares that would be issued and outstanding had all of such securities been exchanged for or converted into Common Shares on such record date and the denominator of which shall be the number of Common Shares issued and outstanding on such record date.

(b)

Rights Offerings by Corporation . If the Corporation shall distribute rights, options or warrants exercisable within a period of 45 days after the record date for such distribution to subscribe for or purchase Common Shares or securities exchangeable for or convertible into Common Shares at a price per Common Share or at an exchange or conversion value per Common Share in the case of securities exchangeable for or convertible into Common Shares equal to or less than 90% of the Current Market Price for the Common Shares determined as of the record date for such distribution, to all or substantially all of the holders of Common Shares (any such event being called a Rights Offering ), the Conversion Basis then in effect shall be adjusted effective immediately after the record date on which holders of Common Shares are determined for purposes of the Rights Offering to the Conversion Basis determined by multiplying:


(i)	the Conversion Basis in effect on such record date by;


(ii)	the fraction:


(A)	the numerator of which shall be the aggregate of:


(1)	the number of Common Shares issued and outstanding on such record date, and


(2)	the number of Common Shares offered pursuant to the Rights Offering or the maximum number of Common Shares for or into which the securities so offered pursuant to the Rights Offering may be exchanged or converted, as the case may be, and


(B)	the denominator of which shall be the aggregate of:


(1)	the number of Common Shares issued and outstanding on such record date, and


(2)	the number determined by dividing either:


(I)	the product of:


a.	the number of Common Shares so offered, and


b.	the price at which each one of such Common Shares is offered, or


(II)	the product of:


a.	the maximum number of Common Shares for or into which the securities so offered pursuant to the

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Rights Offering may be exchanged or converted, and


b.	the exchange or conversion value of each one of such securities so offered,

as the case may be, by the Current Market Price for the Common Shares determined as of such record date. To the extent that such options, rights or warrants are not exercised prior to the expiry date thereof, the Conversion Basis shall be re adjusted effective immediately after such expiry date to the Conversion Basis which would then have been in effect based upon the number of Common Shares or securities exchangeable for or convertible into Common Shares actually issued on the exercise of such options, rights or warrants.


(c)	Special Distributions by Corporation . If the Corporation shall distribute to all or substantially all of the holders of Common Shares:


(i)	shares of any class other than Common Shares;

(ii)

rights, options or warrants, other than rights, options or warrants referred to in paragraph 3.4(b) hereof and other than rights, options or warrants exercisable within a period of 45 days after the record date for such distribution to subscribe for or purchase Common Shares or securities exchangeable for or convertible into Common Shares at a price per Common Share or at an exchange or conversion value per Common Share greater than 90% of the Current Market Price for the Common Shares determined as of the record date for such distribution;


(iii)	evidences of indebtedness; or


(iv)	any other assets, excluding Common Shares issued by way of stock dividends and cash dividends paid out of earnings including the value of any shares or other property distributed in lieu of such cash dividends at the option of shareholders; and

such issue or distribution does not constitute a Common Share Reorganization or a Rights Offering (any such event being called a Special Distribution ), the Conversion Basis then in effect shall be adjusted effective immediately after the record date on which the holders of Common Shares are determined for the purpose of the Special Distribution to the Conversion Basis determined by multiplying the Conversion Basis in effect on the record date of the Special Distribution by:


(v)	the fraction:


(A)	the numerator of which shall be the number of Common Shares issued and outstanding on such record date multiplied by the Current Market Price for the Common Shares determined as of such record date, and


(B)	the denominator of which shall be the difference between:


(1)	the product of:


(I)	the number of Common Shares issued and outstanding on such record date, and

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(II)	the Current Market Price for the Common Shares determined as of such record date, and


(2)	the fair value, as determined by the directors of the Corporation, whose determination shall be conclusive, to the holders of Common Shares of the shares, rights, options, warrants, evidences of indebtedness or other assets issued or distributed in the Special Distribution.

(d)

Other Reorganizations by Corporation . If and whenever there is a capital reorganization of the Corporation not otherwise provided for in this subsection 3.4 or a consolidation, merger or amalgamation of the Corporation with or into another body corporate (any such event being called a Capital Reorganization ), any holder of Series 1 Shares who exercises the Conversion Right after the effective date of such Capital Reorganization shall be entitled to receive and shall accept, upon the exercise of such right, in lieu of the number of Common Shares to which such holder was theretofore entitled on conversion, the aggregate number of shares or other securities of the Corporation or of the body corporate resulting from the Capital Reorganization that such holder would have been entitled to receive as a result of such Capital Reorganization if, on the effective date thereof, such holder had been the registered holder of the number of Common Shares to which such holder was theretofore entitled upon conversion, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in paragraphs (a), (b) and (c) of this subsection 3.4; provided that no such Capital Reorganization shall be made effective unless all necessary steps shall have been taken so that the holders of Series 1 Shares shall thereafter be entitled to receive such number of such shares or other securities of the Corporation or of the body corporate resulting from the Capital Reorganization.

(e)

Reclassification by Corporation . If the Corporation shall reclassify the issued and outstanding Common Shares (such event being called a Reclassification ), the Conversion Basis shall be adjusted effective immediately after the record date of such Reclassification so that holders of Series 1 Shares who exercise the Conversion Right thereafter shall be entitled to receive the shares that such holders would have received had such Series 1 Shares been converted immediately prior to such record date, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in paragraphs (a), (b) and (c) of this subsection 3.4.


(f)	Adjustment Rules . The following rules and procedures shall be applicable to adjustments of the Conversion Basis made pursuant to this subsection 3.4:


(i)	No adjustment in the Conversion Basis shall be made in respect of any event described in this subsection 3.4 if the holders of the Series 1 Shares are entitled to participate in such event on the same terms mutatis mutandis as if such holders had converted their Series 1 Shares prior to or on the effective date or record date of such event.

(ii)

No adjustment in the Conversion Basis shall be made pursuant to this subsection 3.4 in respect of the issue from time‑to‑time of Common Shares to holders of Common Shares who exercise an option to receive substantially equivalent dividends in Common Shares or securities exchangeable for or convertible into Common Shares in lieu of receiving cash dividends, and any such issue shall be deemed not to be a Common Share Reorganization.


(iii)	No adjustment in the Conversion Basis shall be made if such adjustment would result in a decrease below the applicable unadjusted Conversion Basis other than

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in respect of a consolidation of the issued and outstanding Common Shares into a smaller number of Common Shares.

(iv)

Forthwith after any adjustment in the Conversion Basis pursuant to this subsection 3.4 the Corporation shall file with the transfer agent for the Common Shares a certificate of the Corporation certifying as to the particulars of such adjustment and, in reasonable detail, the event requiring and the manner of determining such adjustment. The Corporation shall also at such time give written notice to the holders of Series 1 Shares of the Conversion Basis following such adjustment.

(g)

Disputes . If any question arises with respect to the number of Common Shares to be issued on any exercise of the Conversion Right, it shall be conclusively determined by the auditors of the Corporation or if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by the directors of the Corporation and such determination shall bind the Corporation and all shareholders of the Corporation.


(h)	No Fractions . In any case where a fraction of a Common Share would otherwise be issuable on the conversion of one or more Series 1 Shares, the number of Common Shares to be issued to a holder on conversion of Series 1 Shares into Common Shares shall be rounded down to the nearest whole number of Common Shares so that no fractional shares are issuable.


4	Dividends.

4.1

Payment of Dividends . The holders of Series 1 Shares shall, in priority to the Common Shares and the shares of any other class or series ranking junior to the Series 1 Shares, be entitled to receive, and the Corporation shall pay thereon, as and when declared by the directors of the Corporation, out of monies of the Corporation properly applicable to the payment of dividends, fixed, cumulative, preferential cash dividends at an annual rate of US$1.25 per Series 1 Share per annum, payable in equal quarterly installments on each Dividend Payment Date. Dividends on outstanding Series 1 Shares shall accrue from day to day from the Issue Date with the initial dividend to be determined in accordance with subsection 4.2. In the event that the Corporation has not paid dividends to the holders of the Series 1 Shares for a period greater than 30 consecutive months, the fixed, cumulative, preferential cash dividend payable will then increase to an annual rate of US$1.875 per Series 1 Share per annum, payable in equal quarterly installments on each Dividend Payment Date on a prospective basis. The holders of Series 1 Shares shall not be entitled to any dividends other than or in excess of the fixed, cumulative, preferential cash dividends provided for herein. Additionally, a holder of Series 1 Shares shall not be entitled to receive a dividend on any Series 1 Shares in respect of which a notice of conversion has been delivered under subsection 3.2 if the notice is delivered prior to the date for payment of such dividend (unless the conversion right was exercised following receipt of a notice of redemption in which case such holder will be entitled to such dividends).


4.2	Dividends for a Partial Quarter . The amount of the dividend or amount calculated by reference to the dividend for any period which is less than a Dividend Quarter with respect to any Series 1 Share:


(a)	for the period from the Issue Date to the first Dividend Payment Date;


(b)	which is redeemed or purchased during such Dividend Quarter; or


(c)	where assets of the Corporations are distributed to the holders of Series 1 Shares pursuant to section 8.1 hereof during such Dividend Quarter;

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shall be equal to the amount (rounded to the nearest 1/10th of one cent) calculated by multiplying US$0.3125 (or US$0.46875 in the event that the fixed, cumulative, preferential cash dividend payable has increased in accordance with section 4.1) by a fraction of which the numerator is the number of days in such Dividend Quarter that such Series 1 Share has been outstanding (excluding the Dividend Payment Date at the beginning of such Dividend Quarter if such Series 1 Share was outstanding on that date and including the date of redemption, purchase or distribution or the Dividend Payment Date at the end of such Dividend Quarter if such Series 1 Share was outstanding on that date) and the denominator is the number of days in such Dividend Quarter (excluding the Dividend Payment Date at the beginning thereof and including the Dividend Payment Date at the end thereof).

4.3

Payment Procedure . The Corporation shall pay the dividends on the Series 1 Shares (less any tax required to be deducted or withheld by the Corporation) by electronic funds transfer or by cheque(s) drawn on a chartered bank or trust company and payable in lawful money of the United States at any branch of such bank or trust company in Canada or the United States, or in such other manner, not contrary to applicable law, as the Corporation shall reasonably determine. The delivery or mailing of any cheque to a holder of Series 1 Shares (in the manner provided for in subsection 2.3) or the electronic transfer of funds to an account specified by such holder shall be a full and complete discharge of the Corporation’s obligation to pay the dividends to such holder to the extent of the sum represented thereby (plus the amount of any tax required to be and in fact deducted and withheld by the Corporation from the related dividends as aforesaid and remitted to the proper taxing authority), unless such cheque is not honoured when presented for payment. Subject to applicable law, dividends which are represented by a cheque which has not been presented to the Corporation’s bankers for payment or that otherwise remain unclaimed for a period of six years from the date on which they were declared to be payable may be reclaimed and used by the Corporation for its own purposes.


4.4	Cumulative Payment of Dividends . If on any Dividend Payment Date the dividends accrued to such date are not paid in full on all of the Series 1 Shares then outstanding, such dividend, or the unpaid part thereof, shall be paid on a subsequent date or dates determined by the directors on which the Corporation shall have sufficient monies properly applicable to the payment of such dividends.


5	Redemption.

5.1

Early Redemption . Subject to the provisions of the Act, these articles and the provisions of this section 5.1 and of section 7.1 hereof, the Corporation may, any time after the date that is two years from the date of issuance of the Series 1 Shares, upon giving notice as hereinafter provided, redeem at any time or from time‑to‑time all or any part of the then outstanding Series 1 Shares, on payment for each Series 1 Share of US$28.75 together with the amount equal to all dividends, if any, accrued and unpaid thereon, whether or not declared, up to and including the date specified for redemption (the whole amount constituting and being hereinafter referred to as the Early Redemption Price ).

5.2

Partial Redemption . In case only a part of the Series 1 Shares are at any time to be redeemed, the Series 1 Shares so to be redeemed shall be selected by lot or, if the directors of the Corporation so determine, on a pro rata basis, disregarding fractions, according to the number of Series 1 Shares held by each holder thereof. If only a part of the Series 1 Shares represented by any certificate shall be redeemed, a new certificate representing the balance of such Series 1 Shares shall be issued to the holder at the expense of the Corporation.

5.3

Mandatory Redemption . Subject to the provisions of the Act, these articles and the provisions of this section 5.3 and of section 7.1 hereof, the Corporation shall, upon giving notice as hereinafter provided, redeem on the Mandatory Redemption Date all of the then outstanding Series 1 Shares, on payment for each Series 1 Share of US$25.00 together with the amount equal to all dividends, if any, accrued and unpaid thereon, whether or not declared, up to and including the date specified

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for redemption (the whole amount constituting and being hereinafter referred to as the Redemption Price ).

5.4

Method of Redemption . In any case of redemption of Series 1 Shares, the Corporation shall, not less than 30 nor more than 60 days before the date specified for redemption, send to each holder of Series 1 Shares to be redeemed notice of the intention of the Corporation to redeem such Series 1 Shares. Such notice shall set out the number of Series 1 Shares held by the holder which are to be redeemed, the Redemption Price or Early Redemption Price, as applicable, the date specified for redemption, and the place at which holders of Series 1 Shares may present and surrender such Series 1 Shares for redemption. On and after the date specified for redemption, the Corporation shall pay or cause to be paid to or to the order of the holders of the Series 1 Shares to be redeemed the Redemption Price or Early Redemption Price, as applicable, for each Series 1 Share to be redeemed on presentation and surrender, at the registered office of the Corporation or any other place specified in the notice of redemption, of the certificate or certificates representing the Series 1 Shares called for redemption. Payment in respect of Series 1 Shares being redeemed shall be made by cheques payable in lawful money of the United States at par at any branch of the Corporation's bankers for the time being. The Corporation shall have the right at any time after the giving of notice of redemption to deposit the aggregate Redemption Price or Early Redemption Price, as applicable, of the Series 1 Shares called for redemption or of such of the Series 1 Shares which are represented by certificates which have not at the date of such deposit been surrendered by the holders thereof in connection with such redemption, to a special account in any chartered bank or any trust company named in such notice or in a subsequent notice to the holders of the Series 1 Shares in respect of which the deposit is made, to be paid without interest to or to the order of the respective holders of Series 1 Shares called for redemption upon presentation and surrender to such bank or trust company of the certificates representing such Series 1 Shares. Upon such deposit being made or upon the date specified for redemption, whichever is the later, the Series 1 Shares in respect of which such deposit shall have been made shall be and be deemed to be redeemed and the rights of the holders thereof shall be limited to receiving, without interest, their proportionate part of the amount so deposited upon presentation and surrender of the certificate or certificates representing their Series 1 Shares being redeemed. Any interest on any such deposit shall belong to the Corporation. From and after the date specified for redemption in any notice of redemption, the Series 1 Shares called for redemption shall cease to be entitled to dividends and to participate in the assets of the Corporation and the holders thereof shall not be entitled to exercise any of their other rights as holders in respect thereof unless payment of the Redemption Price or Early Redemption Price, as applicable, shall not be made upon presentation and surrender of the certificates in accordance with this section 5.4, in which case the rights of the holders thereof shall remain unaffected. Redemption monies which are represented by a cheque which has not been presented to the drawee for payment or which otherwise remain unclaimed (including monies held on deposit in a special account as provided for above) for a period of six years from the date specified for redemption shall be forfeited to the Corporation. Holders of Series 1 Shares receiving a notice of redemption may, if so desired, exercise the Conversion Right in respect of the Series 1 Shares to be redeemed at any time prior to the date fixed for redemption of such Series 1 Shares unless payment of the Redemption Price or Early Redemption Price, as applicable, shall not be made upon presentation and surrender of the certificates in accordance with this section 5.4, in which case the rights of the holders shall remain unaffected.


6	Purchase for Cancellation.

6.1

Right to Purchase . Subject to the provisions of the Act, these articles and to the provisions of section 7.1 hereof, the Corporation may at any time or from time‑to‑time purchase for cancellation all or any part of the outstanding Series 1 Shares at any price by invitation for tenders addressed to all of the holders of Series 1 Shares then outstanding or in any other manner provided that the price for each Series 1 Share so purchased for cancellation shall not exceed the Redemption Price plus costs of purchase.

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6.2

Pro Rata Purchase . If, in response to an invitation for tenders under the provisions of this section 6, more Series 1 Shares are tendered at a price or prices acceptable to the Corporation than the Corporation is prepared to purchase, then the Series 1 Shares to be purchased by the Corporation shall be purchased to the next lowest whole share as nearly as may be pro rata according to the number of Series 1 Shares tendered by each holder who submits a tender to the Corporation or as otherwise may be required by applicable law, provided that when Series 1 Shares are tendered at different prices, the pro rating shall be effected only with respect to Series 1 Shares tendered at the price at which more Series 1 Shares are tendered than the Corporation is prepared to purchase after the Corporation has purchased all of the Series 1 Shares tendered at lower prices.


7	Restrictions on Dividends and Retirement and Issue of Shares.


7.1	So long as any of Series 1 Shares are outstanding, the Corporation shall not, without the prior approval of the holders of the Series 1 Shares given as specified in section 10.1 hereof:


(a)	declare, pay or set apart for payment any dividend on the Common Shares or any other shares of the Corporation ranking as to the payment of dividends junior to the Series 1 Shares (other than stock dividends in shares of the Corporation ranking as to dividends junior to the Series 1 Shares);


(b)	redeem, purchase for cancellation or otherwise retire or make any capital distribution on or in respect of the Common Shares or any other shares of the Corporation ranking as to the return of capital junior to the Series 1 Shares (except out of the net cash proceeds of a substantially concurrent issue of shares ranking as to capital junior to the Series 1 Shares); or


(c)	redeem, purchase for cancellation or otherwise retire less than all of the Series 1 Shares;

unless:


(i)	all dividends then payable on the Series 1 Shares then outstanding and on all other shares of the Corporation ranking as to the payment of dividends on a parity with the Series 1 Shares shall have been declared and paid or monies set apart for payment; and

(ii)

after giving effect to the payment of such dividend or such redemption, purchase, retirement or capital distribution, the realizable value of the assets of the Corporation would not be less than the sum of the liabilities of the Corporation plus the amount that would be required to give effect to the rights of holders of shares (other than the Series 1 Shares) that have a right to be paid, on redemption or liquidation, rateably with or prior to holders of Series 1 Shares plus the amount required to redeem all of the then outstanding Series 1 Shares, all calculated at the date of such redemption, purchase or capital distribution, as the case may be, in accordance with the then applicable provisions of the Act.


8	Liquidation, Dissolution or Winding Up.

8.1

In the event of the liquidation, dissolution or winding‑up of the Corporation or other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, the holders of Series 1 Shares shall be entitled to receive from the assets of the Corporation an amount equal to US$25.00 for each Series 1 Share together with the amount equal to all accrued but unpaid dividends thereon, whether declared or not, before any amount shall be paid by the Corporation or any assets of the Corporation shall be distributed to holders of the Common Shares or any other

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shares of the Corporation ranking as to the return of capital junior to the Series 1 Shares. After payment to the holders of Series 1 Shares of the amounts so payable to them, such holders shall not be entitled to share in any further payment in respect of the distribution of the assets of the Corporation.


9	Modification of Series.


9.1	The rights, privileges, restrictions and conditions attached to the Series 1 Shares may be added to, changed, removed or otherwise amended only with the prior approval of the holders of the Series 1 Shares given as specified in section 10.1 hereof, in addition to any vote or authorization required by the Act or these provisions.


10	Approval of Holders of Series 1 Shares.


10.1	The approval of the holders of Series 1 Shares with respect to any matters referred to in these provisions may be given as specified below:

(a)

Approval and Quorum . Except as otherwise provided herein, any approval required to be given by holders of Series 1 Shares may be given in such manner as may then be required by law, subject to a minimum requirement that such approval be given by a resolution signed by all of the holders of the then outstanding Series 1 Shares or by a resolution passed by the affirmative vote of at least two thirds of the votes cast by the holders of Series 1 Shares who voted in respect of that resolution at a meeting of the holders of the Series 1 Shares called and held for that purpose in accordance with the by‑laws of the Corporation at which the holders of at least one tenth of the then outstanding Series 1 Shares are present in person or represented by proxy; provided that, if at any such meeting a quorum is not present within one half hour after the time appointed for such meeting, the meeting shall be adjourned to the same day in the next week at the same time and to such place as the chairman of the meeting may determine and, subject to the provisions of the Act, it shall not be necessary to give notice of such adjourned meeting. At such adjourned meeting, holders of Series 1 Shares then present in person or represented by proxy shall constitute a quorum and may transact the business for which the meeting was originally called and a resolution passed thereat by the affirmative vote of not less than two‑thirds of the votes cast at such meeting shall constitute the approval of the holders of Series 1 Shares.

(b)

Votes . On every poll taken at any meeting of the holders of Series 1 Shares, each holder of Series 1 Shares shall be entitled to one vote in respect of the greater of (i) each US$1.00 stated capital added to the stated capital account for the Series 1 Shares in respect of the issue of each such share and (ii) each US$1.00 of the liquidation preference or redemption preference (excluding any amount payable in respect of accrued but unpaid dividends) attached to each such share (and if the liquidation preference and redemption preference are not the same at the applicable time, then the greater of the two).

Subject to the foregoing, the formalities to be observed with respect to proxies, the giving of notice and the conduct of any such meeting or any adjourned meeting shall be those from time‑to‑time prescribed in the Act and the by‑laws of the Corporation with respect to meetings of shareholders.


11	Voting Rights.


11.1	The holders of Series 1 Shares shall not be entitled as such (except as hereinbefore or hereinafter specifically provided or as otherwise may be required by the Act) to receive notice of or to attend any meeting of shareholders of the Corporation and shall not be entitled to vote at any such meeting.

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12	Deemed Amendment.

12.1

If at any time after the Issue Date there are no Series 1 Shares outstanding, then the authorized capital of the Corporation shall be deemed to be automatically amended to remove the Series 1 Shares as shares which the Corporation is authorized to issue and as a series of the Class A Preference Shares and the designation "Class A Preference Shares, Series 1" may be used in respect of any series of Class A Preference Shares created subsequent to any such amendment.


13	Withholding Taxes and Transfer Taxes

13.1

Withholding Taxes . Notwithstanding any other provision of these share provisions, the Corporation may deduct and withhold from any payment, distribution, issuance or delivery (whether in cash or other property) to be made pursuant to these share provisions any amounts required or permitted by law to be deducted or withheld from any such payment, distribution, issuance or delivery and shall remit any such amounts to the relevant tax authority as required. If the cash component of any payment, distribution, issuance or delivery to be made pursuant to these share provisions is less than the amount that the Corporation is so required or permitted to deduct or withhold, the Corporation shall be permitted to deduct and withhold from any non-cash payment, distribution, issuance or delivery to be made pursuant to these share provisions any amounts required or permitted by law by to be deducted and withheld from any such payment distribution, issuance or delivery and to dispose of such property in order to remit any amount require to be remitted to any relevant tax authority. Notwithstanding the foregoing, the amount of any payment, distribution, issuance or delivery made to a holder of Series 1 Shares pursuant to these share provisions shall be considered to be the amount of the payment, distribution, issuance or delivery received by such holder plus any amount deducted or withheld pursuant to this section 12. Holders of Series 1 Shares shall be responsible for all withholding taxes under Part XIII of the Income Tax Act (Canada), an any successor or replacement provision of similar effect, in respect of any payment, distribution, issuance or delivery made or credited to them pursuant to these share provisions and shall indemnify and hold harmless the Corporation on an after-tax basis for any taxes imposed on any payment, distribution, issuance or delivery made or credited to them pursuant to these share provisions.

13.2

Transfer Taxes . For greater certainty, and notwithstanding any other provision of these share provisions, the Corporation shall not be required to pay any tax which may be imposed upon the person or persons to whom Series 1 Shares are issued in connection with the conversion of Series 1 Shares into Common Shares in respect of the issuance of such Common Shares or the certificates therefor, or which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in the name or names other than that of the holder of the Series 1 Shares, or deliver such certificate unless the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

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Exhibit 4.2

KINGSWAY FINANCIAL SERVICES INC.

COMMON STOCK SERIES C WARRANT AGREEMENT

This Common Stock Warrant Agreement (this “ Agreement ”), dated as of [ ___ ], 2013, between Kingsway Financial Services Inc., a corporation incorporated under the Business Corporations Act (Ontario) (the “ Company ”) and Computershare Trust Company of Canada, a trust company licensed to carry on business in all Provinces of Canada (collectively in such capacity, together with any successor appointed pursuant to the terms of this Agreement, the “ Warrant Agent ”).

WHEREAS, the Company proposes to issue Series C warrants (each, a “ Series C Warrant ”) initially exercisable to purchase one share of the common stock of the Company, no par value per share (each, a “ Common Share ”);

WHEREAS, Series C Warrants are being issued in connection with a unit offering by the Company (the “ Offering ”) in which the Company offered units (“ Units ”), each consisting of 6.25 Class A Series 1 preferred shares and 6.25 Series C Warrants to purchase one Common Share per each Series C Warrant;

WHEREAS each Series C Warrant entitles the holder to purchase one Common Share for an exercise price that is equal to US$5.00;

WHEREAS the Company may issue additional Series C Warrants at such other times as the Company may determine;

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, registration, transfer, exchange, exercise and cancellation of the Series C Warrants and other matters as expressly provided herein.

The foregoing recitals are made as representations and statements of fact by the Company and not by the Warrant Agent;

NOW THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.1 Definition of Terms . As used in this Agreement, the following capitalized terms shall have the following respective meanings:

(a) “ Applicable Securities Laws ” shall mean the Securities Act, the Exchange Act (as defined below), applicable U.S. state securities laws and the securities laws of applicable Canadian provinces and territories;

(b) “ Authenticated ” means (a) with respect to the issuance of a Warrant Certificate (as defined in this Agreement), one which has been duly signed by the Company and authenticated by manual signature of an authorized officer of the Warrant Agent, (b) with respect to the issuance of an Uncertificated Warrant (as defined below), one in respect of which the Warrant Agent has completed all Internal Procedures (as defined below) such that the particulars of such Uncertificated Warrant as required by Section 3.2 are entered in the register of holders of Series C Warrants, “ Authenticate ”, “ Authenticating ” and “ Authentication ” have the appropriate correlative meanings;

(c) “ Beneficial Holder ” shall mean any person or entity that holds beneficial interests in a Warrant Certificate (as defined in this Agreement) or an Uncertificated Warrant;

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(d) “ Business Day ” shall mean day other than a Saturday, Sunday or other day on which banks in the State of New York or the Province of Ontario, Canada are authorized by law to remain closed;

(e) “ Certificated Warrant ” means a Series C Warrant evidenced by a writing or writings substantially in the form of Schedule “A” attached hereto;

(f) “ Clearing Agency ” means CDS Clearing and Depository Services Inc., its successors and permitted assigns (“ CDS ”), the Depository Trust Company or any other organization registered as a “clearing agency” pursuant to the securities legislation of any province or territory of Canada, as in effect from time to time, and any additional qualified clearing agency that carries on business within or outside Canada for Warrantholders resident in the relevant jurisdiction, or any of the foregoing, as the context may require, all as may be designated by the Company from time to time;

(g) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended;

(h) “ Exercise Price ” means US$5.00 (as the same may be hereafter adjusted pursuant to Article V );

(i) “ Expiration Date ” shall mean 5:00 p.m., Eastern time, on September 15, 2023 or such earlier date as may be specified by the Company, or if such day is not a Business Day, the next succeeding day which is a Business Day;

(j) “ Internal Procedures ” means procedures internal to the Warrant Agent necessary to carry out its duties as warrant agent under this Agreement;

(k) “ Issue Date ” means, with respect to a Series C Warrant, the date that such Series C Warrant is issued by the Company;

(l) “ Participant ” means a broker, dealer, bank or other financial institution or other person who maintains an account for clearing and holding securities, including Series C Warrants, with a Clearing Agency and on whose behalf a Clearing Agency or its nominee holds Series C Warrant;

(m) “ SEC ” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act;

(n) “ Uncertificated Warrant ” means any Series C Warrant which is not a Certificated Warrant;

(o) “ Warrant Shares ” shall mean Common Shares and any other securities purchased or purchasable upon exercise of the Series C Warrants (and, if the context requires, securities which may thereafter be issued by the Company in respect of any such securities so purchased, by means of any subdivisions or combinations of its capital stock, or recapitalizations, reclassifications or the like); and

(p) “ Warrantholders ”, “ Holders ” or “ holders ” means the persons for the time being entered in a register of holders described in Section 3.3(f) hereof as holders of Series C Warrants.

ARTICLE II.

APPOINTMENT OF WARRANT AGENT

Section 2.1 Appointment . The Company hereby appoints the Warrant Agent to act as agent for the Company for the Series C Warrants in accordance with the instructions hereinafter set forth in this Agreement, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.

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ARTICLE III.

WARRANTS

Section 3.1 Issuance of Warrants . The Series C Warrants will be issued on the terms and subject to the conditions of this Agreement in the amounts and to the Holders determined pursuant to the terms of the Offering and at such other times as the Company may determine. On such dates, the Company will deliver a written order to the Warrant Agent, authorizing the issuance and delivery of Series C Warrants. An unlimited amount of Series C Warrants can be created and authorized to be certified and issued, from time to time, as the Company may determine hereunder, upon and subject to the terms and conditions of this Agreement. All Series C Warrants will rank pari passu , whatever may be the actual dates of the issuance thereof.

Section 3.2 Form of Warrant .

(a) The Series C Warrants may be issued in both certificated and uncertificated form. All Series C Warrants issued in certificated form shall be evidenced by a warrant certificate (including all replacements issued in accordance with this Agreement), substantially in the form attached hereto as Schedule “A” or in such other form as may be approved by the Company and the Warrant Agent (a “ Warrant Certificate ”), which shall be dated as of the Issue Date, shall bear such distinguishing letters, numbers and legends as the Company may, with the approval of the Warrant Agent, prescribe, and shall be issuable in any whole number denomination. Series C Warrants issued to the Clearing Agency may be in uncertificated form and shall be evidenced on the register of Warrantholders to be maintained by the Warrant Agent.

(b) Each Warrant Certificate may be engraved, lithographed or printed (the expression “printed” including for purposes hereof both original typewritten material as well as mimeographed, mechanically, photographically, photostatically or electronically reproduced, typewritten or other written material), or partly in one form and partly in another, as the Company may determine.

Section 3.3 Execution of Warrant Certificates .

(a) The Warrant Certificates shall be signed on behalf of the Company by its Chief Executive Officer, its President or any Executive Vice President (each, an “ Appropriate Officer ”). Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of any such Appropriate Officer and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any Appropriate Officer.

(b) If any Appropriate Officer who shall have signed any of the Warrant Certificates shall cease to be such Appropriate Officer before the Warrant Certificates so signed shall have been countersigned by the Warrant Agent or disposed of by the Company, such Warrant Certificates nevertheless may be countersigned and delivered or disposed of as though such Appropriate Officer had not ceased to be such Appropriate Officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper Appropriate Officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Agreement any such person was not such Appropriate Officer.

(c) Authentication of Warrant Certificates . No Warrant Certificate will be issued or, if issued, such Warrant Certificate will not be valid or entitle the holder to the benefits hereof until it has been Authenticated on behalf of the Warrant Agent substantially in the form of the certificate attached hereto as Schedule “A” or in such other form as may be approved by the Company and the Warrant Agent. Such Authentication shall be conclusive evidence that such Warrant Certificate has been duly issued hereunder and that the holder or holders are entitled to the benefits of this Agreement.

(d) The Warrant Agent shall Authenticate Uncertificated Warrants (whether upon original issuance, exchange, registration of transfer, or otherwise) by completing its Internal Procedures and the Company shall, and hereby

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acknowledges that it shall, thereupon be deemed to have duly and validly issued such Uncertificated Warrants under this Agreement. Such Authentication shall be conclusive evidence that such Uncertificated Warrant has been duly issued hereunder and that the holder or holders are entitled to the benefits of this Agreement. The register shall be final and conclusive evidence as to all matters relating to Uncertificated Warrants with respect to which this Agreement requires the Warrant Agent to maintain records or accounts. In case of differences between the register at any time and any other time the register at the later time shall be controlling, absent manifest error.

(e) Authentication Not Representation . The Authentication by the Warrant Agent of any Warrant Certificate or Uncertificated Warrants issued hereunder will not be construed as a representation or warranty by the Warrant Agent as to the validity of this Agreement or such Warrant Certificate or Uncertificated Warrants (except with respect to the due Authentication thereof) or as to the performance by the Company of its obligations under this Agreement and the Warrant Agent will in no respect be liable or answerable for the use made of any Warrant Certificate or of the consideration therefor, except as otherwise specified herein.

(f) The Warrant Agent shall keep, at an office designated for such purpose in Ontario, Canada, or at any other place designated by the Company with the approval of the Warrant Agent, books (the “ Warrant Register ”) in which, subject to such reasonable regulations as it may prescribe, it shall register the Series C Warrants and exchanges and transfers of outstanding Series C Warrants in accordance with the procedures set forth in Section 6.1 of this Agreement, all in form satisfactory to the Company and the Warrant Agent. No service charge shall be made for any exchange or registration of transfer of the Series C Warrants, but the Company may require payment of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed on the Registered Holder (as defined below) in connection with any such exchange or registration of transfer. The Warrant Agent shall have no obligation to effect an exchange or register a transfer unless and until any payments required by the immediately preceding sentence have been made.

(g) Prior to due presentment for registration of transfer or exchange of any Series C Warrant in accordance with the procedures set forth in this Agreement, the Company and the Warrant Agent may deem and treat the person in whose name any Series C Warrant is registered upon the Warrant Register (the “ Registered Holder ” of such Series C Warrant) as the absolute owner of such Series C Warrant (notwithstanding any notation of ownership or other writing on a Warrant Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, any distribution to the holder thereof and for all other purposes, and neither the Warrant Agent nor the Company shall be affected by notice to the contrary.

(h) Once an Uncertificated Warrant has been Authenticated, the information set forth in the Warrant Register with respect thereto at the time of Authentication may be altered, modified, amended, supplemented or otherwise changed only to reflect exercise or proper instructions to the Warrant Agent from the holder as provided herein, except that the Warrant Agent may act unilaterally to make purely administrative changes internal to the Warrant Agent and changes to correct errors. Each person who becomes a holder of an Uncertificated Warrant, by his, her or its acquisition thereof shall be deemed to have irrevocably (i) consented to the foregoing authority of the Warrant Agent to make such error corrections and (ii) agreed to pay to the Warrant Agent, promptly upon written demand, the full amount of all loss and expense including without limitation reasonable legal fees of the Company and the Warrant Agent plus interest, at an appropriate then prevailing rate of interest to the Warrant Agent, sustained by the Company or the Warrant Agent as a proximate result of such error if but only if and only to the extent that such present or former holder realized any benefit as a result of such error and could reasonably have prevented, forestalled or minimized such loss and expense by prompt reporting of the error or avoidance of accepting benefits thereof whether or not such error is or should have been detected in a timely fashion and corrected by the Warrant Agent; provided, that no person who is a bona fide purchaser shall have any such obligation to the Company or to the Warrant Agent.

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Section 3.4 Uncertificated Warrants issued to Clearing Agency.

(a) No Warrant Certificate shall be issued in respect of Uncertificated Warrants held in the name of the Clearing Agency, except where physical certificates evidencing ownership in such securities are required or as set out herein or as may be requested by the Clearing Agency, as determined by the Company, from time to time. Such Uncertificated Warrants will initially be registered on the Warrant Register maintained by the Warrant Agent in the name of the Clearing Agency.

(b) Re-registrations of interests in, and transfers of, Uncertificated Warrants by the beneficial owners thereof shall be made only through the Clearing Agency and any person transferring Series C Warrants in such manner shall be deemed to have transferred to the transferee all of such person’s rights and obligations in respect thereof; all transferees of such Series C Warrants shall be deemed to have received and accepted such transfer and be deemed to have agreed to be bound by the provisions of this Agreement.

(c) The Company may terminate the application of this Section 3.4 in its sole discretion in which case all Uncertificated Warrants shall as soon as reasonably practicable thereafter be evidenced in certificated form and registered in the name of a person other than a Clearing Agency.

(d) The Company and the Warrant Agent may deal with the Clearing Agency for all purposes (including the making of payments and the delivery of any notice, report or other communication) as the registered holder of the Uncertificated Warrants and as the authorized representative of the respective beneficial holders of such Warrants.

(e) To the extent that the provisions of this Section 3.4 conflict with any other provisions of this Agreement, the provisions of this Section 3.4 shall prevail.

(f) Transfers of beneficial ownership in any Uncertificated Warrant will be effected only (i) with respect to the interest of a Participant, through records maintained by the Clearing Agency or its nominee for such Uncertificated Warrants, and (ii) with respect to the interest of any person other than a Participant, through records maintained by Participants. Beneficial owners of Uncertificated Warrants who are not Participants but who desire to sell or otherwise transfer ownership of or any other interest in such Uncertificated Warrants may do so only through a Participant.

(g) The rights of beneficial owners of Uncertificated Warrants shall be limited to those established by applicable law and agreements between the Clearing Agency and Participants and between such Participants and such beneficial owners and must be exercised through a Participant in accordance with the rules and procedures of the Clearing Agency.

(h) Subject to Subsection 3.4(i) , neither the Company nor the Warrant Agent shall be under any obligation to deliver to any Participant or beneficial owner of Uncertificated Warrants, nor shall any Participant or beneficial owner of Uncertificated Warrants have any right to require the delivery of, a certificate or other instrument evidencing any interest in Series C Warrants.

(i) If there are Uncertificated Warrants and any of the following events occur:

(i) the Clearing Agency or the Company has notified the Warrant Agent that (i) the Clearing Agency is unwilling or unable to continue as the depository or (ii) the Clearing Agency ceases to be a clearing agency in good standing under applicable laws and, in either case, the Company is unable to locate a qualified successor depository within 90 days of delivery of such notice; or

(ii) the Company or the Clearing Agency is required by applicable law, or otherwise determines, to take the action contemplated in this Subsection 3.4(i) ;

then one or more definitive fully registered Warrant Certificates shall be, in exchange for such Uncertificated Warrants, issued and delivered by the Warrant Agent in accordance with the instructions provided by the Clearing Agency pursuant to Subsection 3.4(j) .

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(j) Fully registered Warrant Certificates issued pursuant to Subsection 3.4(i) , shall be registered in such names and in such denominations as the Clearing Agency shall instruct the Warrant Agent, provided that the aggregate number of Series C Warrants represented by such Warrant Certificates shall be equal to the aggregate number of the Uncertificated Warrants exchanged. Neither the Company nor the Warrant Agent shall be liable for any delay in delivery of such instructions and may conclusively act and rely on, and shall be protected in acting and relying on, such instructions. Upon exchange of an Uncertificated Warrant for one or more Warrant Certificates in definitive form, such Uncertificated Warrant shall be cancelled by the Warrant Agent.

(k) If definitive Warrant Certificates have been issued and thereafter the Company advises the Warrant Agent of the availability of book-based entry or other electronic issuance with a Clearing Agency in regard to such Series C Warrants, the Warrant Agent and the Company may agree to allow for the re-registration of such definitive Warrant Certificates under such procedure. Upon surrender by any such Warrantholder of its definitive Warrant accompanied by instructions for re-registration of the Warrant under such procedure, such Warrant shall thereafter be re-registered under such procedure and be subject to the foregoing provisions of this Section 3.4 and Subsection 3.4(m) , mutatis mutandis . The Company shall pay all expenses incurred by the Warrant Agent and the reasonable fees of the Warrant Agent associated with any termination of the use of such procedure and of any such re-registration of the definitive Series C Warrants under such procedure.

(l) Notwithstanding anything herein or in the terms of the Series C Warrants to the contrary, neither the Company nor the Warrant Agent nor any agent thereof shall have any responsibility or liability for (i) the records maintained by the Clearing Agency or Participants relating to the Series C Warrants or the accounts maintained by them, (ii) maintaining, supervising or reviewing any records relating to such Series C Warrants, (iii) any advice or representation made or given by the Clearing Agency or Participants with respect to the rules and regulations of the Clearing Agency or the Participants, or (iv) any action to be taken by the Clearing Agency or the Participants or any failure by the Clearing Agency or the Participants to take any action.

(m) The provisions of Section 6.1 with respect to the transfer of Series C Warrants are subject to the provisions of this Section 3.4 .

ARTICLE IV.

TERMS AND EXERCISE OF WARRANTS

Section 4.1 Exercise Period and Expiration . Subject to the provisions of the Series C Warrants and this Agreement and regardless of the Issue Date, Series C Warrants may be exercised by the Holder thereof at any time and from time to time on or after September 16, 2016, and terminating at 5:00 p.m., Eastern time, on the Expiration Date. Any Series C Warrant not exercised prior to 5:00 p.m., Eastern time, on the Expiration Date, shall become permanently and irrevocably null and void at 5:00 p.m., Eastern time, on the Expiration Date, and all rights thereunder and all rights in respect thereof under this Agreement shall cease at such time.

Section 4.2 Exercise of Warrants.

(a) Exercise of Certificated Warrants . The holder of any Certificated Warrant may at any time and from time to time on or after September 16, 2016 until 5:00 p.m., Eastern time, on the Expiration Date, exercise the right thereby conferred, to be issued Warrant Shares by surrendering to the Warrant Agent at its office in Toronto, Ontario or to any other person or at any other place designated by the Company with the approval of the Warrant Agent, during normal business hours on a Business Day, the Warrant Certificate evidencing such Series C Warrant and a duly completed and executed notice of exercise substantially in the form set out in such Warrant Certificate, together with a certified cheque, bank draft or money order in lawful money of the United States, payable to or to the order of the Company in an amount equal to the Exercise Price (as the same may be hereafter adjusted pursuant to Article V ) multiplied by the number of Warrant Shares subscribed for.

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Any notice of exercise referred to in this section, shall be signed by the Warrantholder, or its executors or administrators or other legal representatives or an attorney of the Warrantholder, duly appointed by an instrument in writing satisfactory to the Warrant Agent.

(b) Exercise of Uncertificated Warrants . The beneficial owner of Uncertificated Warrants who desires to exercise Series C Warrants must do so by causing a Participant to deliver to the Clearing Agency on behalf of the entitlement holder, notice of the owner’s intention to exercise Series C Warrants in a manner acceptable to the Clearing Agency. Forthwith, upon receipt by the Clearing Agency of such notice, as well as payment for the Exercise Price multiplied by the number of Warrant Shares subscribed for, the Clearing Agency shall deliver to the Warrant Agent confirmation of its intention to exercise Series C Warrants (“Confirmation”) in a manner acceptable to the Warrant Agent, including by electronic means through the book entry registration system.

Payment representing the Exercise Price multiplied by the number of Warrant Shares subscribed for must be provided to the appropriate office of the Participant in a manner acceptable to it. A notice in the form acceptable to the Participant and payment for such beneficial holder should be provided to the Participant sufficiently in advance so as to permit the Participant to deliver notice and payment to the Clearing Agency and for the Clearing Agency in turn to deliver notice and payment to the Warrant Agent prior to the Expiration Date. The Clearing Agency will initiate the exercise by way of Confirmation and forward the Exercise Price multiplied by the number of Warrant Shares subscribed for electronically to the Warrant Agent and the Warrant Agent will execute the exercise by issuing to the Clearing Agent through the book entry registration system the Common Shares to which the exercising Warrantholder is entitled pursuant to the exercise. Any expense associated with the exercise process will be for the account of the entitlement holder exercising the Series C Warrants and/ or the Participant exercising the Series C Warrants on its behalf.

By causing a Participant to deliver notice to the Clearing Agency, a Warrantholder shall be deemed to have irrevocably surrendered his or her Series C Warrants so exercised and appointed such Participant to act as his or her exclusive settlement agent with respect to the exercise and the receipt of Warrant Shares in connection with the obligations arising from such exercise.

Any notice which the Clearing Agency determines to be incomplete, not in proper form or not duly executed shall for all purposes be void and of no effect and the exercise to which it relates shall be considered for all purposes not to have been exercised thereby. A failure by a Participant to exercise or to give effect to the settlement thereof in accordance with the Warrantholder’s instructions will not give rise to any obligations or liability on the part of the Company or Warrant Agent to the Participant or the Warrantholder.

(c) Any exercise referred to in this section, shall require that the entire Exercise Price for Warrant Shares subscribed must be paid at the time of subscription and such Exercise Price and original exercise notice executed by the Registered Holder the Confirmation from the Clearing Agency must be received by the Warrant Agent prior to the Expiration Date.

(d) Notwithstanding the foregoing in this Section 4.2 , Series C Warrants may only be exercised pursuant to this Section 4.2 by or on behalf of a Registered Holder, except the Clearing Agency, as applicable, who makes the certifications set forth on the exercise notice.

Section 4.3 Intentionally deleted.

Section 4.4 Effect of Exercise .

(a) Effect of Exercise . Upon the exercise of any Certificated Warrants or Uncertificated Warrants in accordance with Section 4.2 hereof, the Warrant Shares thereby issuable shall be deemed to have been issued, and the person or persons to whom such Warrant Shares are to be issued shall be deemed to have become the holder or holders of record thereof, on the Business Day on which such Series C Warrant is validly exercised (or deemed to be validly exercised in accordance with Article IV hereof), unless the transfer registers for the Warrant Shares are closed on

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that date, in which case such Warrant Shares shall be deemed to have been issued and such person or persons shall be deemed to have become the holder or holders of record thereof on the date on which such transfer registers are reopened, but such Warrant Shares shall be issued on the basis of the number of Warrant Shares to which such person or persons were entitled on such exercise date.

(b) Exercise of Certificated Warrants . As soon as reasonably practicable, and in any event not later than five (5) Business Days after the surrender to the Warrant Agent of Warrant Certificates and instructions received in good order in accordance with Section 4.2 , the Warrant Agent shall mail by way of first class insured mail to the person or persons in whose name or names the Warrant Shares thereby issued have been issued, at his, her, its or their respective addresses, or, if so specified, cause to be delivered to such person or persons at the place where the Warrant Certificates evidencing such Series C Warrants were surrendered, certificates representing the Warrant Shares so issued.

(c) Exercise of Uncertificated Warrants . As soon as reasonably practicable, and in any event not later than five (5) Business Days after the Clearing Agency has initiated the exercise by way of Confirmation and has delivered the Exercise Price multiplied by the number of Warrant Shares subscribed for electronically to the Warrant Agent, the Warrant Agent will execute the exercise by issuing to the Clearing Agent through the book entry registration system the Common Shares to which the exercising Warrantholder is entitled pursuant to the exercise, the Warrant Agent shall cause the share position of the Clearing Agency on the register of Common Shares to be increased by the number of Warrant Shares issued in connection with the exercise of such Uncertificated Warrants.

(d) Issue to Other than Holder . If any Warrant Shares issuable pursuant to any Series C Warrants are to be issued to a person or persons other than the Warrantholder, the Warrantholder must pay to the Company or to the Warrant Agent on its behalf an amount equal to all exigible transfer taxes or other government charges, and neither the Company nor the Warrant Agent will be required to issue or deliver any such Warrant Shares unless or until such amount has been so paid or the Warrantholder has established to the satisfaction of the Company that such taxes and charges have been paid or that no such taxes or charges are owing.

Section 4.5 Reservation of Shares . The Company hereby agrees that at all times there shall be reserved for issuance and delivery upon exercise of Series C Warrants such number of Warrant Shares as may be from time to time issuable upon exercise in full of the Series C Warrants, such that the Company may validly and legally issue all Warrant Shares in compliance with this Section. All Warrant Shares shall be duly authorized, and when issued upon such exercise, shall be validly issued, fully paid and non-assessable. If at any time prior to the Expiration Date the number and kind of authorized but unissued shares of the Company’s capital stock shall not be sufficient to permit exercise in full of the Series C Warrants, the Company will promptly take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares to such number of shares as shall be sufficient for such purposes. The Company agrees that its issuance of Series C Warrants shall constitute full authority to its officers who are charged with the issuance of Warrant Shares to issue Common Shares upon the exercise of the Series C Warrants. Without limiting the generality of the foregoing, the Company will not increase the stated or par value per share, if any, of the Common Shares above the Exercise Price in effect immediately prior to such increase in stated or par value.

Section 4.6 Listing . Prior to the issuance of any Warrant Shares upon exercise of the Series C Warrants, the Company shall use reasonable best efforts to secure the listing of such Common Shares or other Warrant Shares upon each national securities exchange, stock market or automated quotation system, if any, upon which Common Shares (or securities of the same class as such other Warrant Shares, if applicable) are then listed (subject to official notice of issuance upon exercise of the Series C Warrants) and shall use reasonable best efforts to maintain, so long as any other Common Shares (or, as applicable, other securities) shall be so listed, such listing of all Warrant Shares from time to time issuable upon the exercise of the Series C Warrants.

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Section 4.7 Compliance with Law .

(a) If any Warrant Shares are required under any federal, provincial or state law or applicable governing rule or regulation of any national securities exchange, to be registered with or approved by any governmental authority or listed on any such national securities exchange before such shares may be issued upon exercise, the Company will use its reasonable best efforts to cause such shares to be duly registered or approved by such governmental authority or listed on the relevant national securities exchange, as the case may be.

(b) The Series C Warrants shall not be exercisable and the Company shall not be obligated to issue Warrant Shares unless, at the time a holder seeks to exercise the Series C Warrants, a prospectus relating to Warrant Shares is current and a registration statement for the Warrant Shares is effective or qualified or the issuance of Warrant Shares is deemed to be exempt under the securities laws of the jurisdiction of residence of the holder of the Series C Warrants.

Section 4.8 Partial Exercise of Warrants; Fractions.

(a) Partial Exercise . The holder of any Series C Warrants may exercise his or her right to acquire a number of whole Common Shares less than the aggregate number which the holder is entitled to acquire. In the event of any exercise of a number of Series C Warrants less than the number which the holder is entitled to exercise, the holder of Series C Warrants upon such exercise shall, in addition, be entitled to receive, without charge therefor, a new Warrant Certificate(s), bearing the same legend, if applicable, or other appropriate evidence of Series C Warrants, in respect of the balance of the Series C Warrants held by such holder and which were not then exercised.

(b) Fractions . The Company shall not be required to issue fractional Warrant Shares in satisfaction of its obligations hereunder and no cash or other consideration will be paid in lieu of fractional Warrant Shares. Any subscription for fractional Warrant Shares will be deemed to be a subscription for the next lowest whole number of Warrant Shares.

ARTICLE IV(a)

EXCHANGE OF SERIES C WARRANTS FOR SERIES B WARRANTS

Section 4.1(a) Exchange of Series C Warrants for Series B Warrants . In the event that prior to the Expiration Date the Company provides notice to the Warrant Agent that (i) the Series B Warrant Agreement has been amended to increase the maximum number of warrants issuable to allow for the issuance of a sufficient number of Series B Warrants; and (ii) the Toronto Stock Exchange (the “ TSX ”) has accepted the conditional listing of such additional Series B Warrants, if the Series B Warrants are listed on the TSX at the time of such exchange, then each Series C Warrant shall be automatically exchanged for a Series B Warrant without any further act or action to be taken or performed by the Warrantholder. Upon completion of the exchange, the Series C Warrants will become null and void and will not need to be surrendered to the Warrant Agent for cancellation. The Warrant Agent will reduce the Series C Warrant register to zero and will issue the Series B Warrants to the Holders indicated on the Warrant Register. All rights in respect of the Series C Warrants under this Agreement shall cease at such time.

ARTICLE V.

ADJUSTMENT OF SHARES OF COMMON STOCK

PURCHASABLE AND OF EXERCISE PRICE

The Exercise Price and the number and kind of Warrant Shares shall be subject to adjustment from time to time upon the happening of certain events as provided in this Article V .

Section 5.1 Adjustment of Exercise Price and Warrant Shares . The Exercise Price and number of Warrant Shares purchasable under the Series C Warrants are subject to adjustment from time to time as set forth in this Section 5.1 .

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(a) In case the Company shall at any time:


(i)	subdivide the outstanding Common Shares into a larger number of shares other than pursuant to Section 5.1 (b), the Exercise Price in effect immediately prior to such subdivision shall be proportionately decreased, effective from and after the record date of such subdivision; and


(ii)	combine the outstanding Common Shares into a smaller number of shares by a reverse split or otherwise, the Exercise Price in effect immediately prior to such combination shall be proportionately increased, effective from and after the record date of such combination.

Upon any adjustment in the Exercise Price pursuant to this Section 5.1(a) , the holder of any Series C Warrant shall thereafter be entitled to purchase, at the adjusted Exercise Price, the number of Warrant Shares, rounded down to the nearest whole share, obtained by multiplying the number of Warrant Shares purchasable hereunder immediately prior to such adjustment by the Exercise Price in effect immediately prior to such adjustment, and dividing the product thereof by the Exercise Price resulting from such adjustment.

(b) In case the Company shall issue additional Common Shares as a special dividend on the Common Shares (a “ Special Dividend ”), from and after the day which is the record date for the determination of shareholders entitled to such Special Dividend, the holder of any Series C Warrant shall, until a further adjustment, be entitled to purchase the number of Warrant Shares, rounded down to the nearest whole share, obtained by multiplying the number of Warrant Shares purchasable hereunder immediately prior to said record date by a fraction, the numerator of which is the total number of Common Shares outstanding after the issuance of the Special Dividend, calculated on a fully diluted basis assuming the conversion of all outstanding convertible securities and the exercise of all outstanding options, warrants or other rights (including those with respect to convertible securities), and the denominator of which is the number of Common Shares outstanding immediately prior to said record date, calculated on a fully diluted basis assuming the conversion of all outstanding convertible securities and the exercise of all outstanding options, warrants, or other rights (including those with respect to convertible securities). Upon each adjustment pursuant to this Section 5.1(b) , the Exercise Price in effect immediately prior to such adjustment shall be reduced to an amount determined by dividing the product obtained by multiplying such Exercise Price by the number of Warrant Shares purchasable hereunder immediately prior to such adjustment by the number of Warrant Shares purchasable hereunder immediately following such adjustment.

Section 5.2 Reorganization or Reclassification . If at any time while there are Series C Warrants outstanding there shall be any reorganization or reclassification of the Common Shares of the Company (other than a subdivision or combination of shares provided for in Section 5.1 , or a Fundamental Transaction (as defined below)), the Holder shall thereafter be entitled to receive, upon exercise of its Series C Warrant(s) prior to the Expiration Date and upon payment of the Exercise Price, the number of shares of stock or other securities or property of the Company resulting from such reorganization or reclassification, as the case may be, to which a holder of the Common Shares, deliverable upon the exercise of a Series C Warrant, would have been entitled upon such reorganization or reclassification if such Series C Warrant had been exercised immediately prior to such reorganization or reclassification, and in any such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Company) shall be made in the application of the provisions with respect to the rights and interest thereafter of the Holder to the end that the provisions set forth herein (including the adjustment of the Exercise Price and the number of shares issuable upon the exercise of a Series C Warrant) shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon exercise. The provisions of this Section 5.2 shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers, other dispositions or similar transactions.

Section 5.3 Form of Warrant After Adjustments . The form of the Warrant Certificate need not be changed because of any adjustments in the Exercise Price or the number or kind of the Warrant Shares, and Series C Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated

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in the Series C Warrants, as initially issued. The Company, however, may at any time in its sole discretion make any change in the form of Warrant Certificate that it may deem appropriate to give effect to such adjustments and that does not affect the substance of the Warrant Certificate (including the rights, duties or obligations of the Warrant Agent), and any Warrant Certificate thereafter issued, whether in exchange or substitution for an outstanding Warrant Certificate, may be in the form so changed.

Section 5.4 Fundamental Transactions . If any (i) capital reorganization, reclassification of the Company Securities, consolidation, amalgamation or merger of the Company with another entity in which the issued and outstanding stock of the Company (excluding treasury shares) immediately prior to such transaction represents less than 50% of the voting power of the surviving entity immediately after such transaction, (ii) sale, transfer or other disposition of all or substantially all of the Company’s assets to another entity, or (iii) similar transaction requiring shareholder approval shall be effected (any such transaction being hereinafter referred to as a “ Fundamental Transaction ”), then the holders shall be permitted to exercise any Series C Warrants with the provisions of Section 4.2 immediately prior to the consummation of such Fundamental Transaction. If a holder does not exercise a Series C Warrant prior to the consummation of a Fundamental Transaction, then such Series C Warrant shall not at any time be, or become, exercisable and shall expire (and become null and void) automatically with no further action required on behalf of the Company upon consummation of the Fundamental Transaction.

Section 5.5 Notice to Warrant Holders .

(a) Notice of Adjustment. Whenever the number and/or kind of Warrant Shares or the Exercise Price is adjusted as herein provided, the Company shall (i) prepare and deliver, or cause to be prepared and delivered, forthwith to the Warrant Agent a statement setting forth the adjusted number and/or kind of Common Shares purchasable upon the exercise of the Series C Warrants and the Exercise Price of such Common Shares after such adjustment, the facts requiring such adjustment and the computation by which adjustment was made, and (ii) cause the Warrant Agent to give written notice to each Holder in the manner provided in Section 10.2 below, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

(b) Notice of Fundamental Transactions. In the event that the Company shall propose to effect a Fundamental Transaction, then the Company shall send to the Warrant Agent a notice and the shall cause the Warrant Agent within five days after receipt by the Warrant Agent to give written notice (in such form as shall be furnished to the Warrant Agent by the Company) to each Holder in the manner provided in Section 10.2 of such Fundamental Transaction. Such notice shall specify (i) the record date, if any, for the Fundamental Transaction, (ii) the date such Fundamental Transaction is expected to take place, and (iii) the effect, if any, of such action on the Common Shares, if any. Such notice shall be given to Holders at least 15 days prior to the date of the consummation of the Fundamental Transaction, but in no event shall the Company be required to give notice prior to public announcement if the Company has in good faith determined that the matters relating to such notice constitute material, nonpublic information relating to the Company or its Subsidiaries. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

Section 5.6 No Adjustment . No adjustment in the number of Warrant Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent in the number of Warrant Shares purchasable upon the exercise of each Series C Warrant; provided, however, that any adjustments that by reason of this Section 5.6 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest cent and to the nearest one-hundredth of a Common Share, as the case may be.

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ARTICLE VI. TRANSFER AND EXCHANGE OF WARRANTS AND

WARRANT SHARES

Section 6.1 Registration of Transfers and Exchanges .

(a) Transfer . No transfer of any Series C Warrant by a Warrantholder will be valid unless entered on the register of transfers referred to in Subsection 3.3(f) hereof upon surrender to the Warrant Agent of the Warrant Certificate evidencing such Series C Warrant, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Warrant Agent executed by the registered holder or his, her or its executors, administrators or other legal representatives or his, her or its or their attorney duly appointed by an instrument in writing in form and executed in a manner satisfactory to the Warrant Agent, and, upon compliance with such requirements and such other reasonable requirements as the Warrant Agent and the Company may prescribe, such transfer will be duly noted on one of such registers of transfers by the Warrant Agent.

(b) Register of Transfers . The transferee of any Series C Warrant pursuant to Subsection 6.1(a) hereof will, after surrender to the Warrant Agent of the Warrant Certificate evidencing such Series C Warrant as required by Subsection 6.1(a) hereof and upon compliance with all other conditions in respect thereof required by this Agreement or by law, be entitled to be entered on the register of holders referred to in Subsection 3.3(f) hereof as the owner of such Series C Warrant free from all equities or rights of set-off or counterclaim between the Company and the transferor or any previous holder of such Series C Warrant, except in respect of equities of which the Company is required to take notice by statute or by order of a court of competent jurisdiction.

(c) Refusal of Registration . The Company will be entitled, and may direct the Warrant Agent, to refuse to recognize any transfer, or enter the name of any transferee, of any Series C Warrant on the registers referred to in Subsection 3.3(f) hereof, if such transfer would constitute a violation of the securities laws of any jurisdiction or the rules, regulations or policies of any regulatory authority having jurisdiction. The Warrant Agent is entitled to assume compliance with all applicable securities legislation unless otherwise notified in writing by the Company. No duty will rest with the Warrant Agent to determine compliance of the transferee or transferor of any Series C Warrant with applicable securities legislation. The Warrant Agent may, when deemed necessary, acting reasonably, contact the Company or counsel to confirm the validity of any transfer of Series C Warrants prior to completing same.

(d) No Notice of Trusts . Subject to applicable law, neither the Company nor the Warrant Agent will be bound to take notice of or see to the execution of any trust, whether express, implied or constructive, in respect of any Series C Warrant, and may transfer any Series C Warrant on the direction of the person registered as the holder thereof, whether named as trustee or otherwise, as though that person were the beneficial owner thereof.

(e) Inspection . The register of Warrantholders shall be available for inspection by the Company and or any Warrantholder during the Warrant Agent’s regular business hours on a Business Day and upon payment to the Warrant Agent of its reasonable fees. Any Warrantholder exercising such right of inspection shall first provide an affidavit in form satisfactory to the Company and the Warrant Agent stating the name and address of the Warrantholder and agreeing not to use the information therein except in connection with an effort to call a meeting of Warrantholders or to influence the voting of Warrantholders at any meeting of Warrantholders.

(f) Restrictions on Transfer . No Series C Warrants or Warrant Shares shall be sold, exchanged or otherwise transferred in violation of Applicable Securities Laws.

Section 6.2 Exchange of Warrant Certificates .

(a) Exchange . One or more Warrant Certificates may, on compliance with the reasonable requirements of the Warrant Agent, be exchanged for one or more Warrant Certificates of different denominations evidencing in the aggregate an equal number of Series C Warrants as the Warrant Certificate or Warrant Certificates being exchanged.

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(b) Place of Exchange . Warrant Certificates may be exchanged only at the Warrant Agent’s office in Toronto, Ontario or at any other place designated by the Company with the approval of the Warrant Agent.

(c) Cancellation . Any Warrant Certificate tendered for exchange pursuant to this Section 6.2 shall be surrendered to the Warrant Agent and cancelled.

(d) Authentication of Exchanged Warrant Certificates . The Warrant Agent shall Authenticate all Warrant Certificates necessary to carry out exchanges pursuant to this Section 6.2 .

(e) Charges . The Warrant Agent may charge Warrantholders requesting an exchange of Warrant Certificates a reasonable sum for each Warrant Certificate issued; and payment of such charges and reimbursement of the Warrant Agent or the Company for any and all taxes or governmental or other charges required to be paid shall be made by the party requesting such exchange as a condition precedent to such exchange.

ARTICLE VII.

OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS

Section 7.1 No Rights or Liability as Shareholder; Notice to Registered Holders . Nothing contained in the Series C Warrants shall be construed as conferring upon the Holder or his, her or its transferees the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or of any other matter, or any rights whatsoever as shareholders of the Company. No provision thereof and no mere enumeration therein of the rights or privileges of the Holder shall give rise to any liability of such holder for the Exercise Price hereunder or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

Section 7.2 Lost, Stolen, Mutilated or Destroyed Warrant Certificates . If any Warrant Certificate is lost, stolen, mutilated or destroyed, the Company shall issue, and the Warrant Agent shall countersign and deliver, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Series C Warrants, but only upon receipt of evidence and an affidavit reasonably satisfactory to the Company and the Warrant Agent of the loss, theft or destruction of such Warrant Certificate, and an indemnity of the Company and Warrant Agent for any losses in connection therewith, if requested by either the Company or the Warrant Agent, also satisfactory to them. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe and as required by applicable law.

Section 7.3 Restrictive Legends . Any legends which are stamped or imprinted on certificates of Common Shares shall also be stamped or imprinted on any stock certificate for Warrant Shares issued upon the exercise of any Series C Warrant and or stock certificate issued upon the direct or indirect transfer of any such Warrant Shares.

Section 7.4 Cancellation of Warrants . If the Company shall purchase or otherwise acquire Series C Warrants, the Warrant Certificates and any Uncertificated Warrants representing such Series C Warrants shall thereupon be delivered to the Warrant Agent, if applicable, and be cancelled by it and retired. The Warrant Agent shall cancel all Warrant Certificates surrendered for exchange, substitution, transfer or exercise in whole or in part. Such cancelled Warrant Certificates shall thereafter be disposed of in a manner satisfactory to the Company provided in writing to the Warrant Agent.

Section 7.5 Mutilated or Missing Warrant Certificates . If any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company shall issue, and the Warrant Agent shall countersign and deliver, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Series C Warrants, but only upon receipt of evidence reasonably satisfactory to the Company and the Warrant Agent of the loss, theft or destruction of such Warrant Certificate and an affidavit or the posting

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of an indemnity or bond, if requested by either the Company or the Warrant Agent, also satisfactory to them. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe.

Section 7.6 Right to Convene Meetings.

(a) Convening of Meeting . The Warrant Agent at any time and from time to time will convene a meeting of the Warrantholders upon receipt of a written request of the Company, and on being funded and indemnified to its reasonable satisfaction by the Company, against the costs which it may incur in connection with calling and holding such meeting.

(b) Failure to Convene . If the Warrant Agent fails, within fifteen (15) Business Days after receipt of such written request of the Company, funding and indemnification, to give notice convening a meeting, the Company may convene such meeting.

(c) Location of Meeting . Every such meeting shall be held in the City of Toronto, Ontario or such other location as is approved or determined by the Warrant Agent and the Company.

(d) Notice . At least twenty-one (21) Business Days’ prior written notice of any meeting must be given to the Warrantholders and to the Warrant Agent.

(e) Contents . The notice of the meeting must state the time, date and location of the meeting and must state briefly the general nature of the business to be transacted thereat, but it shall not be necessary for the notice to set out the terms of any resolution to be proposed or any of the provisions of this Section 7.6 .

(f) Chairman . Some person (who need not be a Warrantholder) designated in writing by the Warrant Agent shall be chairman of the meeting or, if no person is so designated or the person so designated is not present within 30 minutes after the time fixed for the holding of the meeting, the Warrantholders present in person or by proxy may choose some person present to be chairman.

(g) Quorum . Subject to the provisions of Section 7.6(s) hereof, at any meeting of Warrantholders a quorum shall consist of Warrantholders present either in person or by proxy at the commencement of the meeting holding in the aggregate not less than 10% of the total number of Series C Warrants then outstanding.

(h) No Quorum . If a quorum of Warrantholders is not present within 30 minutes after the time fixed for holding a meeting, the meeting, subject to Section 7.6(s) hereof, shall be adjourned to the date that is the fifth Business Day following the initial meeting date and shall be at the same time and location and no notice of the adjournment need be given.

(i) Adjourned Meeting . At the adjourned meeting, two Warrantholders present in person or by proxy shall form a quorum and may transact any business for which the meeting was originally convened notwithstanding the number of Series C Warrants that they hold.

(j) Power to Adjourn . The chairman of a meeting at which a quorum of the Warrantholders is present may, with the consent of the meeting, adjourn the meeting, and no notice of such adjournment need be given except as the meeting prescribes.

(k) Show of Hands . Every question submitted to a meeting, other than an Extraordinary Resolution (as defined below), shall be decided in the first place by a majority of the votes given on a show of hands and, unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact. In the case of an equality of votes on a show of hands, the chairman shall not have a casting vote.

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(l) Extraordinary Resolution . On every Extraordinary Resolution (as defined below), and on every other question submitted to a meeting on which a poll is directed by the chairman or requested by one or more Warrantholders acting in person or by proxy, a poll shall be taken in such manner as the chairman directs.

(m) Poll . Questions other than those required to be determined by Extraordinary Resolution (as defined below) shall be decided by a majority of the votes cast on the poll.

(n) Voting . On a show of hands each person present and entitled to vote, whether as a Warrantholder or as proxy for one or more absent Warrantholders, or both, shall have one vote, and on a poll each Warrantholder present in person or represented by a proxy duly appointed by instrument in writing shall be entitled to one vote, in respect of each Series C Warrant held by such holder. A proxy need not be a Warrantholder. The chairman of any meeting shall be entitled to vote in respect of any Series C Warrants and proxies held by him or her.

(o) Ability to Make Regulations . The Warrant Agent, or the Company with the approval of the Warrant Agent, may from time to time make or vary such regulations not contrary to the provisions of this Agreement, as it thinks fit:

(i) for the form of instrument appointing a proxy, the manner in which it must be executed and verification of the authority of a person who executes it on behalf of a Warrantholder;

(ii) governing the locations at which and the times by which voting certificates or instruments appointing proxies must be deposited;

(iii) generally for the calling of meetings of Warrantholders and the conduct of business thereat; and

(iv) for the deposit of instruments appointing proxies at some approved location or locations other than the location at which the meeting is to be held and enabling particulars of such instruments appointing proxies to be sent by mail, facsimile or other means of prepaid, transmitted or recorded communication before the meeting to the Company or to the Warrant Agent at the location where the meeting is to be held and for voting pursuant to instruments appointing proxies so deposited as though the instruments themselves were produced at the meeting.

Any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted.

(p) Recognition . Except as such regulations provide, the only persons who shall be recognized at a meeting as the holders of any Series C Warrants, or as entitled to vote or, subject to Subsection 7.6(q) hereof, to be present at the meeting in respect thereof, shall be the registered holders of such Series C Warrants or persons holding proxies on their behalf.

(q) The Company and Warrant Agent may be Represented . The Company and the Warrant Agent by their respective employees, officers or directors, and the counsel of the Company and the Warrant Agent, may attend any meeting of Warrantholders, but shall have no vote as such.

(r) Powers Exercisable by Extraordinary Resolution . Subject to any required stock exchange approval, in addition to all other powers conferred on them by the other provisions of this Agreement or by law, the Warrantholders at a meeting shall have the power, exercisable from time to time by Extraordinary Resolution (as defined below):

(i) to approve or sanction any amendment, modification, abrogation, alteration, compromise or arrangement of any right of the Warrantholders or, with the reasonable consent of the Warrant Agent, of the Warrant Agent in its capacity as Warrant Agent hereunder or on behalf of the Warrantholders against the Company, whether such right arises under this Agreement or otherwise, which may be agreed to by the Company, and to authorize the Warrant Agent to concur in and execute any agreement supplemental hereto in connection therewith;

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(ii) to amend, alter or repeal any Extraordinary Resolution (as defined below) previously passed;

(iii) subject to arrangements as to financing and indemnity satisfactory to the Warrant Agent, to direct or authorize the Warrant Agent to enforce any obligation of the Company under this Agreement or to enforce any right of the Warrantholders in any manner specified in the Extraordinary Resolution (as defined below);

(iv) to direct or authorize the Warrant Agent to refrain from enforcing any obligation or right referred to in clause (c) of this Section 7.6 ;

(v) to waive and direct the Warrant Agent to waive any default by the Company in complying with any provision of this Agreement, either unconditionally or on any condition specified in the Extraordinary Resolution (as defined below);

(vi) to appoint a committee with power and authority to exercise, and to direct the Warrant Agent to exercise, on behalf of the Warrantholders, such of the powers of the Warrantholders as are exercisable by Extraordinary Resolution (as defined below);

(vii) to restrain any Warrantholder from taking or instituting any suit, action or proceeding against the Company for the enforcement of any obligation of the Company under this Agreement or to enforce any right of the Warrantholders;

(viii) to direct any Warrantholder who, as such, has brought any suit, action or proceeding, to stay or discontinue or otherwise deal therewith on payment of the costs, charges and expenses reasonably and properly incurred by him, her or it in connection therewith;

(ix) to approve any change in or omission from the provisions contained in the Warrant Certificates and this Agreement or any ancillary or supplemental instrument which may be agreed to by the Company, and to authorize the Warrant Agent to concur in and execute any ancillary or supplemental agreement embodying the change or omission;

(x) to approve any compromise or arrangement made by the Company with all or substantially all of its creditors or any class or classes of creditors, whether secured or otherwise, and with all or substantially all of the holders of any shares or other securities of the Company; and

(xi) with the consent of the Company, not to be unreasonably withheld, from time to time and at any time to remove the Warrant Agent and appoint a successor Warrant Agent.

(s) Meaning of “Extraordinary Resolution” . The expression “Extraordinary Resolution” when used in this Agreement means, subject to the provisions of this Section 7.6 and of Subsections 7.6(aa) and 7.6(bb) hereof, a motion proposed at a meeting of Warrantholders duly convened for that purpose and held in accordance with the provisions of this Article VII at which there are present in person or by proxy Warrantholders holding in the aggregate more than 25% of the total number of Series C Warrants then outstanding and passed by the affirmative votes of Warrantholders who hold in the aggregate not less than 66 2/3% of the total number of Series C Warrants represented at the meeting and voted on the motion.

(t) Quorum for “Extraordinary Resolution”. If, at a meeting called for the purpose of passing an Extraordinary Resolution, the quorum required by Subsection 7.6(s) hereof is not present within 30 minutes after the time appointed for the meeting, the meeting shall stand adjourned to such day, being not less than five (5) Business Days or more than ten (10) Business Days later, and to such location and time, as is appointed by the chairman.

(u) Notice . Not less than three (3) Business Days’ notice must be given to the Warrantholders of the time, date and location of such adjourned meeting.

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(v) Form of Notice . The notice must state that at the adjourned meeting two Warrantholders present in person or by proxy shall form a quorum but it shall not be necessary to set forth the purposes for which the meeting was originally called or any other particulars.

(w) Quorum at Adjourned Meeting . At the adjourned meeting, two Warrantholders present in person or by proxy shall form a quorum and may transact any business for which the meeting was originally convened, and a motion proposed at such adjourned meeting and passed by the requisite vote as provided in Subsection 7.6(s) hereof shall be an Extraordinary Resolution within the meaning of this Agreement.

(x) Poll . Votes on an Extraordinary Resolution must always be given on a poll and no demand for a poll on an Extraordinary Resolution shall be necessary.

(y) Powers Cumulative . Any one or more of the powers, and any combination of the powers, in this Agreement stated to be exercisable by the Warrantholders by Extraordinary Resolution or otherwise, may be exercised from time to time, and the exercise of any one or more of such powers or any combination of such powers from time to time shall not prevent the Warrantholders from exercising such power or powers or combination of powers thereafter from time to time.

(z) Minutes . Minutes of all resolutions passed and proceedings taken at every meeting of the Warrantholders shall be made and duly entered in books from time to time provided for such purpose by the Company, and any such minutes, if signed by the chairman of the meeting at which such resolutions were passed or such proceedings were taken, shall be prima facie evidence of the matters therein stated, and, until the contrary is proved, every such meeting in respect of the proceedings of which minutes have been so made, entered and signed shall be deemed to have been duly convened and held, and all resolutions passed and proceedings taken thereat to have been duly passed and taken.

(aa) Instruments in Writing . Any action that may be taken and any power that may be exercised by Warrantholders at a meeting held as provided in this Article VII may also be taken and exercised by Warrantholders who hold in the aggregate not less than 50% of the total number of Series C Warrants at the time outstanding or in the case of an Extraordinary Resolution, Warrantholders who hold in the aggregate not less than 66 2/3% of the total number of Series C Warrants at the time outstanding, by their signing, each in person or by attorney duly appointed in writing, an instrument in writing in one or more counterparts, and the expression “Extraordinary Resolution” when used in this Agreement includes a resolution embodied in an instrument so signed.

(bb) Binding Effect of Resolutions . Every resolution and every Extraordinary Resolution passed in accordance with the provisions of this Article VII at a meeting of Warrantholders shall be binding on all Warrantholders, whether present at or absent from the meeting and whether voting for or against the resolution or abstaining, and every instrument in writing signed by Warrantholders in accordance with Subsection 7.6(aa) hereof shall be binding on all Warrantholders, whether signatories thereto or not, and every Warrantholder and the Warrant Agent (subject to the provisions for its indemnity herein contained) shall be bound to give effect accordingly to every such resolution and instrument in writing.

(cc) Holdings by the Company and Subsidiaries Disregarded . In determining whether Warrantholders holding the required total number of Series C Warrants are present in person or by proxy for the purpose of constituting a quorum, or have voted or consented to a resolution, Extraordinary Resolution, consent, waiver, Warrantholders’ Request or other action under this Agreement, a Series C Warrant held by the Company or by a Subsidiary of the Company shall be deemed to be not outstanding. The Company shall provide the Warrant Agent with a Certificate of the Company providing details of any Series C Warrants held by the Company or by a Subsidiary of the Company upon the written request of the Warrant Agent.

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ARTICLE VIII.

CONCERNING THE WARRANT AGENT AND OTHER MATTERS

Section 8.1 Payment of Taxes . The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of the Warrant Shares upon the exercise of Series C Warrants, but any taxes or charges in connection with the issuance of Series C Warrants or Warrant Shares in any name other than that of the Holder of the Series C Warrants shall be paid by such Holder; and in any such case, the Company shall not be required to issue or deliver any Series C Warrants or Warrant Shares until such taxes or charges shall have been paid or it is established to the Company’s satisfaction that no tax or charge is due.

Section 8.2 Resignation, Consolidation or Merger of Warrant Agent .

(a) Appointment of Successor Warrant Agent . The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of sixty (60) days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the Registered Holder of a Series C Warrant (who shall, with such notice, submit his Series C Warrant for inspection by the Company), then the Warrant Agent shall appoint a successor Warrant Agent or shall petition a court to approve a successor Warrant Agent at the Company’s cost. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, rights, immunities, duties and obligations of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent, the Company shall make, execute, acknowledge and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties and obligations.

(b) Notice of Successor Warrant Agent . In the event a successor Warrant Agent shall be appointed, the Company shall (i) give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Shares not later than the effective date of any such appointment, and (ii) cause written notice thereof to be delivered to each Registered Holder at such holder’s address appearing on the Warrant Register. Failure to give any notice provided for in this Section 8.2(b) or any defect therein shall not affect the legality or validity of the removal of the Warrant Agent or the appointment of a successor Warrant Agent, as the case may be.

(i)

Any corporation into which the Warrant Agent may be merged or with which it may be converted, consolidated or any corporation resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Agreement, without any further act or deed, if such person would be eligible for appointment as a successor Warrant Agent under the provisions of Section 8.2(a) . If any of the Warrant Certificates have been countersigned but not delivered at the time such successor to the Warrant Agent succeeds under this Agreement, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and if at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Agreement.

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(ii)

If at any time the name of the Warrant Agent is changed and at such time any of the Warrant Certificates have been countersigned but not delivered, the Warrant Agent whose name has changed may adopt the countersignature under its prior name; and if at that time any of the Warrant Certificates have not been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Agreement.

Section 8.3 Fees and Expenses of Warrant Agent .

(a) Remuneration . The Company agrees to pay the Warrant Agent reasonable remuneration for its services as Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder. Any amount owing under this Section 8.3 and unpaid thirty (30) days after request for such payment will bear interest from the expiration of such thirty (30) days at a rate per annum equal to the then current rate charged by the Warrant Agent.

(b) Further Assurances . The Company agrees to perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Agreement.

Section 8.4 Liability of Warrant Agent .

(a) Reliance on Company Statement . Whenever in the performance of its duties under this Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the Chief Executive Officer or Executive Vice President and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement.

(b) Indemnity . The Company covenants and agrees to indemnify and to hold the Warrant Agent and its officers, directors, employees, agents, successors and assigns harmless against any costs, expenses (including reasonable fees of its legal counsel), losses or damages, which may be paid, incurred or suffered by or to which it may become subject, arising from or out of, directly or indirectly, any claims or liability resulting from its actions as Warrant Agent pursuant hereto; provided, that such covenant and agreement does not extend to, and the Warrant Agent shall not be indemnified with respect to, such costs, expenses, losses and damages incurred or suffered by the Warrant Agent and its officers, directors, employees, agents, successors and assigns as a result of, or arising out of, its gross negligence, bad faith, or willful misconduct. Notwithstanding the foregoing, the Company shall not be responsible for any settlement made without its prior written consent. No provision in this Agreement shall be construed to relieve the Warrant Agent from liability for its own gross negligence, willful misconduct or bad faith.

(c) Exclusions . The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution of any Series C Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Series C Warrant; nor shall it be responsible to make any adjustments required under the provisions of Article V hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Warrant Shares to be issued pursuant to this Agreement or any Series C Warrant or as to whether any Warrant Shares will, when issued, be valid and fully paid and non-assessable.

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(d) Experts . The Warrant Agent may employ such counsel, accountants, engineers, appraisers, other experts, agents, agencies and advisors as it may reasonably require for the purpose of discharging its duties under this Agreement, and the Warrant Agent may act and shall be protected in acting in good faith on the opinion or advice or on information obtained from any such parties and shall not be responsible for any misconduct on the part of any of them. The reasonable costs of such services shall be added to and be part of the Warrant Agent’s fee hereunder.

(e) Funding . No provision of this Agreement shall require the Warrant Agent to expend or risk its own funds or otherwise incur financial liability in the performance of its duties or the exercise of any of its rights or powers unless indemnified as provided for herein, other than as a result of its own gross negligence or bad faith.

Section 8.5 Acceptance of Agency . The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth and, among other things, shall account promptly to the Company with respect to Series C Warrants exercised and concurrently account for and pay to the Company all moneys received by the Warrant Agent for the purchase of Warrant Shares through the exercise of Series C Warrants.

Section 8.6 Limitation on Liability . Notwithstanding anything contained herein to the contrary, except in the case of fraud, willful misconduct or gross negligence, the Warrant Agent’s aggregate liability during any term of this Agreement with respect to, arising from, or arising in connection with this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by the Company to Warrant Agent as fees and charges, but not including reimbursable expenses.

ARTICLE IX.

SUPPLEMENTAL WARRANT AGREEMENTS

Section 9.1 Provision for Supplemental Warrant Agreements for Certain Purposes From time to time the Company (when authorized by action of the directors) and the Warrant Agent may, subject to the provisions of this Agreement, and they shall, when so directed in accordance with the provisions of this Agreement, execute and deliver by their proper officers, agreements or instruments supplemental hereto, which hereafter shall form part hereof, for any one or more or all of the following purposes:

(a) setting forth any adjustments resulting from the application of the provisions of Article 4;

(b) adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of counsel, are necessary or advisable in the circumstances, provided that the same are not in the opinion of the Warrant Agent prejudicial to the interests of the Warrantholders;

(d) making such provisions not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions arising hereunder or for the purpose of obtaining a listing or quotation of the Series C Warrants on any stock exchange, provided that such provisions are not, in the opinion of the Warrant Agent, prejudicial to the interests of the Warrantholders;

(e) adding to or altering the provisions hereof in respect of the transfer of Series C Warrants, making provision for the exchange of Warrant Certificates, and making any modification in the form of the Warrant Certificates which does not affect the substance thereof;

(f) modifying any of the provisions of this Agreement, including relieving the Company from any of the obligations, conditions or restrictions herein contained, provided that such modification or relief shall be or become operative or effective only if, in the opinion of the Warrant Agent, such modification or relief in no way prejudices any of the rights of the Warrantholders or of the Warrant Agent, and provided further that the Warrant Agent may in its sole discretion decline to enter into any such supplemental agreement

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which in its opinion may not afford adequate protection to the Warrant Agent when the same shall become operative; and

(g) for any other purpose not inconsistent with the terms of this Agreement, including the correction or rectification of any ambiguities, defective or inconsistent provisions, errors, mistakes or omissions herein, provided that in the opinion of the Warrant Agent the rights of the Warrant Agent and of the Warrantholders are in no way prejudiced thereby.

ARTICLE X

MISCELLANEOUS PROVISIONS

Section 10.1 Binding Effects; Benefits . This Agreement shall inure to the benefit of and shall be binding upon the Company, the Warrant Agent and the Holders and their respective heirs, legal representatives, successors and assigns. Nothing in this Agreement, expressed or implied, is intended to or shall confer on any person other than the Company, the Warrant Agent and the Holders, or their respective heirs, legal representatives, successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

Section 10.2 Notices . Any notice or other communication required or which may be given hereunder shall be in writing and shall be sent by certified or registered mail, by overnight courier service (return receipt requested, postage prepaid), by personal delivery or by facsimile transmission. Such notice or communication shall be deemed given when sent, in each case as follows:

if to the Warrant Agent, to:

Computershare Trust Company of Canada

100 University Avenue

11 ^th Floor, South Tower

Toronto, ON M5J 2Y1

Attention: General Manager, Corporate Trust Department

if to the Company, to:

Kingsway Financial Services Inc.

150 Pierce Road, 6 ^th Floor

Itasca, IL 60143

if to Registered Holders, at their addresses as they appear in the Warrant Register.

Section 10.3 Persons Having Rights under this Agreement . Nothing in this Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the Holders, any right, remedy, or claim under or by reason of this Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Agreement shall be for the sole and exclusive benefit of the parties hereto, their successors and assigns and the Holders.

Section 10.4 Examination of this Agreement . A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent at 100 University Avenue, 11 ^th Floor, South Tower, Toronto, Ontario, M5J 2Y1, for examination by the Holder of any Series C Warrant. Prior to such examination, the Warrant Agent may require any such holder to submit his Series C Warrant for inspection by it.

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Section 10.5 Counterparts . This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Agreement transmitted electronically shall have the same authority, effect, and enforceability as an original signature.

Section 10.6 Effect of Headings . The section headings herein are for convenience only and are not part of this Agreement and shall not affect the interpretation hereof.

Section 10.7 Amendments . All and any provisions of this Agreement and the Warrant Certificates may from time to time be amended by agreement between the Company and the Warrant Agent on its own behalf and on behalf of the Warrantholders in any respect which they deem necessary or desirable, without the need for any additional consent by or on behalf of the Warrantholders, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provisions contained herein or in any manner which the Company and the Warrant Agent on its own behalf or on behalf of the Warrantholders may deem necessary or expedient and which does not in the opinion of the Warrant Agent materially prejudice the rights exercisable by extraordinary resolution of the Warrantholders within the meaning of and in accordance with the procedures set forth in Section 7.6 and any amendments are binding on all Warrantholders from and after the effective date thereof. If this Agreement is so amended, reference herein to this Agreement is, unless the context otherwise requires, construed, as and from the date from which such amendment is expressed to be made, as references to this Agreement as so amended.

Section 10.8 No Inconsistent Agreements; No Impairment . The Company will not, on or after the date hereof, enter into any agreement with respect to its securities which conflicts with the rights granted to the Holders in the Series C Warrants or the provisions hereof. The Company represents and warrants to the Holders that the rights granted hereunder do not in any way conflict with the rights granted to holders of the Company’s securities under any other agreements. The Company will not, by amendment of its organizational documents or through any reorganization, transfer of assets, consolidation, amalgamation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of the Series C Warrants and in the taking of all such action as may be necessary in order to preserve the exercise rights of the Holders against impairment.

Section 10.9 Integration/Entire Agreement . This Agreement, together with the Series C Warrants, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Company, the Warrant Agent and the Holders in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the Series C Warrants. This Agreement and the Series C Warrants supersede all prior agreements and understandings between the parties with respect to such subject matter.

Section 10.10 Governing Law, Etc . This Agreement and each Series C Warrant issued hereunder shall be deemed to be a contract made under the laws of the Province of Ontario. Each party hereto consents and submits to the jurisdiction of the courts of the Province of Ontario in connection with any action or proceeding brought against it that arises out of or in connection with, that is based upon, or that relates to this Agreement or the transactions contemplated hereby. In connection with any such action or proceeding in any such court, each party hereto hereby waives personal service of any summons, complaint or other process and hereby agrees that service thereof may be made in accordance with the procedures for giving notice set forth in Section 10.2 hereof. Each party hereto hereby waives any objection to jurisdiction or venue in any such court in any such action or proceeding and agrees not to assert any defense based on forum non conveniens or lack of jurisdiction or venue in any such court in any such action or proceeding.

Section 10.11 Termination . Subject to Section 4.1(a) , this Agreement shall terminate on the Expiration Date. Notwithstanding the foregoing, this Agreement will terminate on any earlier date when all Series C Warrants have

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been exercised. The provisions of Section 8.4 and this Article IX shall survive such termination and the resignation or removal of the Warrant Agent.

Section 10.12 Severability . In the event that any one or more of the provisions contained herein or in the Series C Warrants, or the application thereof in any circumstances, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provisions in every other respect and of the remaining provisions contained herein and therein shall not be affected or impaired thereby.

Section 10.13 Attorneys’ Fees . In any action or proceeding brought to enforce any provisions of this Agreement or any Series C Warrant, or where any provision hereof or thereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys’ fees and disbursements in addition to its costs and expenses and any other available remedy.

Section 10.14 Force Majeure . Notwithstanding anything to the contrary contained herein, neither party hereto will be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.

Section 10.15 Confidentiality . The Warrant Agent and the Company agree that all books, records, information and data pertaining to the business of the other party, including inter alia, personal, non-public Holder information, which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement, including the fees for services provided hereunder shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law, rule or regulation.

Section 10.16 Further Assurances . Each party hereto shall perform, acknowledge and deliver or cause to be performed, acknowledged and delivered all such further and other acts, documents, instruments and assurances as may be reasonably required by the other party for the carrying out or performing by such party of the provisions of this Agreement.

Section 10.17 Consequential Damages . Neither party to this Agreement shall be liable to the other party for any consequential, indirect, special or incidental damages under any provisions of this Agreement or for any consequential, indirect, penal, special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.

[ Signature Page Follows ]

C-23

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written.



			KINGSWAY FINANCIAL SERVICES INC., as Company
			Per:
				Name:
				Title:



			COMPUTERSHARE TRUST COMPANY OF CANADA, as Warrant Agent
			Per:
				Name:
				Title:




			Per:
				Name:
				Title:

C-24

SCHEDULE “A”

Form of Warrant Certificate

SERIES C WARRANT

to acquire Common Shares of

KINGSWAY FINANCIAL SERVICES INC.

Warrant Certificate for _________________________ Series C


Certificate No. 2013 – C l	Warrants, each entitling the holder to acquire one Common Share (subject to adjustment as provided for in the Series C Warrant Agreement (as defined below))

THIS IS TO CERTIFY THAT, for value received,______________________________________ (the “ Warrantholder ”) is the registered holder of the number of Series C common share purchase warrants (the “ Series C Warrants ”) of Kingsway Financial Services Inc. (the “ Corporation ”) specified above, and is entitled, on exercise of these Series C Warrants upon and subject to the terms and conditions set forth herein and in the Series C Warrant Agreement, to purchase on or after September 16, 2016 until any time before 5:00 p.m. (Eastern time) (the “ Expiry Time ”) on September 15, 2023 (the “ Expiry Date ”), one common share in the capital of the Corporation (a “ Common Share ”) for each Series C Warrant, subject to adjustment in accordance with the terms of the Series C Warrant Agreement.

The right to purchase Common Shares may only be exercised by the Warrantholder within the time set forth above by:


(a)	duly completing and executing the exercise form (the “ Exercise Form ”) attached hereto; and

(a)

surrendering this warrant certificate (the “ Warrant Certificate ”), with the Exercise Form to Computershare Trust Company of Canada (the “ Warrant Agent ”) at the principal office of the Warrant Agent, in the city of Toronto, Province of Ontario, together with a certified cheque drawn against a U.S. or Canadian bank, U.S. or Canadian bank draft or U.S. or Canadian postal money order in the lawful money of the United States payable to the order of the Company in an amount equal to the aggregate Exercise Price (as defined below) for the Common Shares so subscribed for.

The surrender of this Warrant Certificate, the duly completed Exercise Form and payment as provided above will be deemed to have been effected only on personal delivery thereof to the Warrant Agent at its principal office in the city of Toronto, Province of Ontario.

Subject to adjustment thereof in the events and in the manner set forth in the Series C Warrant Agreement, the exercise price payable for each Common Share upon the exercise of each Series C Warrant is US$5.00 per Common Share (the “ Exercise Price ”).

Certificates for the Common Shares subscribed for will be mailed to the persons specified in the Exercise Form at their respective addresses specified therein or, if so specified in the Exercise Form, delivered to such persons at the office of the Warrant Agent where this Warrant Certificate is surrendered. If fewer Common Shares are purchased than the number that can be purchased pursuant to this Warrant Certificate, the holder hereof will be entitled to receive without charge a new Warrant Certificate in respect of the balance

C-25

of the Series C Warrants not so exercised. No fractional Common Shares will be issued upon exercise of any Warrant.

This Warrant Certificate evidences Series C Warrants issued or issuable under the provisions of a warrant agreement (which agreement together with all other instruments supplemental or ancillary thereto is herein referred to as the “ Series C Warrant Agreement ”) dated as of l , 2013 between the Corporation and Computershare Trust Company of Canada, as Warrant Agent, to which Series C Warrant Agreement reference is hereby made for particulars of the rights of the holders of Series C Warrants, the Corporation and the Warrant Agent in respect thereof and the terms and conditions on which the Series C Warrants are issued and held, all to the same effect as if the provisions of the Series C Warrant Agreement were herein set forth, to all of which the Warrantholder, by acceptance hereof, assents. The Corporation will furnish to the Warrantholder, on request and without charge, a copy of the Series C Warrant Agreement.

On presentation at the principal office of the Warrant Agent as set out above, subject to the provisions of the Series C Warrant Agreement and on compliance with the reasonable requirements of the Warrant Agent, one or more Warrant Certificates may be exchanged for one or more Warrant Certificates entitling the holder thereof to purchase in the aggregate an equal number of Common Shares as are purchasable under the Warrant Certificates so exchanged.

The Series C Warrant Agreement contains provisions for the adjustment of the Exercise Price and the number of Common Shares issuable upon the exercise of Series C Warrants, in the events and in the manner set forth therein.

The Series C Warrant Agreement also contains provisions making binding on all holders of Series C Warrants outstanding thereunder resolutions passed at meetings of holders of Series C Warrants held in accordance with the provisions of the Series C Warrant Agreement and instruments in writing signed by holders of Series C Warrants representing a specific majority of the then outstanding Series C Warrants.

Nothing contained in this Warrant Certificate, the Series C Warrant Agreement or elsewhere shall be construed as conferring upon the holder hereof any right or interest whatsoever as a holder of Common Shares or any other right or interest except as herein and in the Series C Warrant Agreement expressly provided. In the event of any discrepancy between anything contained in this Warrant Certificate and the terms and conditions of the Series C Warrant Agreement, the terms and conditions of the Series C Warrant Agreement shall govern.

Series C Warrants may only be transferred in compliance with the conditions of the Series C Warrant Agreement on the register to be kept by the Warrant Agent in the City of Toronto, Province of Ontario, or such other registrar as the Corporation, with the approval of the Warrant Agent, may appoint at such place or places, if any, as may be designated, upon surrender of this Warrant Certificate to the Warrant Agent or other registrar accompanied by a written instrument of transfer in form and execution satisfactory to the Warrant Agent or other registrar and upon compliance with the conditions prescribed in the Series C Warrant Agreement and with such reasonable requirements as the Warrant Agent or other registrar may prescribe and upon the transfer being duly noted thereon by the Warrant Agent or other registrar. Time is of the essence hereof.

This Warrant Certificate will not be valid for any purpose until it has been countersigned by or on behalf of the Warrant Agent from time to time under the Series C Warrant Agreement.

The parties hereto have declared that they have required that this Series C Warrant Agreement and all other documents related hereto be in the English language only. Les parties aux présentes déclarent qu’elles ont exigé que la présente convention, de même que tous les documents s’y rapportant, soient rédigés en anglais seulement.

C-26

IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be duly executed as of ________________, 2013.



			KINGSWAY FINANCIAL SERVICES INC.
			Per:
				Name:
				Title:

Countersigned and Registered by:



COMPUTERSHARE TRUST COMPANY OF CANADA
Per:
	Name:
	Title:

C-27

FORM OF TRANSFER

TO: Computershare Trust Company of Canada

100 University Avenue, 8 ^th Floor, Toronto, Ontario M5J 2Y1

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers to

(print name and address)

______________ (number) Series C Warrants represented by this Warrant Certificate and hereby irrevocably constitutes and appoints ____________________ as its attorney with full power of substitution to transfer the said securities on the appropriate register of the Warrant Agent.

In the case of a Warrant Certificate that contains a U.S. restrictive legend, the undersigned hereby represents, warrants and certifies that (one (only) of the following must be checked):

o (A) the transfer is being made only to the Corporation;


o	(B) the transfer is being made outside the United States in accordance with Rule 904 of Regulation S under the U.S. Securities Act, and in compliance with any applicable local securities laws and regulations and the holder has provided herewith the Declaration for Removal of Legend attached as Schedule “C” to the Series C Warrant Agreement;


o	(C) the transfer is being made within the United States or to, or for the account or benefit of, a U.S. Person or a person in the United States, in accordance with Rule 144A under the U.S. Securities Act; or

(D) the transfer is being made within the United States or to, or for the account or benefit of, a U.S. Person or a person in the United States, in accordance with another transaction that does not require registration under the U.S. Securities Act or any applicable state securities laws and the undersigned has furnished to the Corporation and the Warrant Agent an opinion of counsel of recognized standing or such other documentation in form and substance reasonably satisfactory to the Corporation and the Warrant Agent to such effect.

In the case of a Warrant Certificate that does not contain a U.S. restrictive legend, if the proposed transfer is to, or for the account or benefit of, a U.S. Person or a person in the United States, the undersigned hereby represents, warrants and certifies that the transfer of the Series C Warrants is being completed pursuant to an exemption from the registration requirements of the U.S. Securities Act and any applicable state securities laws, in which case the undersigned has furnished to the Corporation and the Warrant Agent an opinion of counsel of recognized standing or such other documentation in form and substance reasonably satisfactory to the Corporation and the Warrant Agent to such effect. The undersigned further acknowledges and agrees that the Warrant Certificate to be issued to the transferee will contain a U.S. restrictive legend in the manner required by the Series C Warrant Agreement.


o	If the Warrant Certificate does not contain a U.S. restrictive legend and the transfer is to, or for the account or benefit of, a U.S. Person or a person in the United States, check this box.

C-28

DATED this _______day of_______________________ , 20____.

SPACE FOR GUARANTEES OF )

SIGNATURES (BELOW) )

)_________________________

) Signature of Transferor

)

_________________________ )_________________________

Guarantor’s Signature/Stamp ) Name of Transferor

CERTAIN REQUIREMENTS RELATING TO TRANSFERS – READ CAREFULLY

The signature(s) of the transferor(s) must correspond with the name(s) as written upon the face of the Warrant Certificate(s), in every particular, without alteration or enlargement, or any change whatsoever. The signature(s) on this form must be guaranteed in accordance with the Warrant Agent’s then current guidelines and requirements at the time of transfer. Notarized or witnessed signatures are not acceptable as guaranteed signatures. As at the time of transfer, you may choose one of the following methods (although subject to change in accordance with industry practice and standards):

•

Canada and the USA: A Medallion Signature Guarantee obtained from a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, NYSE MSP). Many commercial banks, savings banks, credit unions, and all broker dealers participate in a Medallion Signature Guarantee Program. The Guarantor must affix a stamp bearing the actual words “Medallion Guaranteed”, with the correct prefix covering the face value of the certificate.

•

Canada: A Signature Guarantee obtained from the Guarantor must affix a stamp bearing the actual words “Signature Guaranteed”. Signature Guarantees are not accepted from Treasury Branches, Credit Unions or Caisse Populaires unless they are members of a Medallion Signature Guarantee Program. For corporate holders, corporate signing resolutions, including certificate of incumbency, are also required to accompany the transfer, unless there is a “Signature & Authority to Sign Guarantee” Stamp affixed to the transfer (as opposed to a “Signature Guarantee” Stamp) obtained from an authorized officer of a major Canadian Schedule 1 chartered bank.


•	Outside North America: For holders located outside North America, present the certificates(s) and/or document(s) that require a guarantee to a local financial institution that has a corresponding Canadian or American affiliate which is a member of an acceptable Medallion Signature Guarantee Program. The corresponding affiliate will arrange for the signature to be over-guaranteed.

C-29

SCHEDULE “B”

EXERCISE FORM

TO: Kingsway Financial Services Inc.

AND TO: Computershare Trust Company of Canada

100 University Ave., 8 ^th Floor

Toronto, ON M5J 2Y1

Attention: General Manager, Corporate Trust Department

The undersigned holder of the Series C Warrants evidenced by this Warrant Certificate hereby exercises the right to acquire ______________________ (A) Common Shares of Kingsway Financial Services Inc.

Aggregate Exercise Price Payable: _______________________________________________________

((A) multiplied by US$ l , subject to adjustment)

The undersigned hereby exercises the right of such holder to be issued, and hereby subscribes for, Common Shares that are issuable pursuant to the exercise of such Series C Warrants on the terms specified in such Warrant Certificate and in the Series C Warrant Agreement.

The undersigned hereby acknowledges that the undersigned is aware that the Common Shares received on exercise may be subject to restrictions on resale under applicable securities legislation.

Any capitalized term in this Warrant Certificate that is not otherwise defined herein, shall have the meaning ascribed thereto in the Series C Warrant Agreement.

The undersigned represents, warrants and certifies as follows (one (only) of the following must be checked):

(A) the undersigned holder at the time of exercise of the Series C Warrants (i) is not in the United States, (ii) is not a U.S. Person, (iii) is not exercising the Series C Warrants for the account or benefit of a U.S. Person or a person in the United States, (iv) did not execute or deliver this exercise form in the United States, and (v) delivery of the underlying Common Shares will not be to an address in the United States; OR

(B) the undersigned holder (a) is the original U.S. purchaser who purchased the Series C Warrants pursuant to the Corporation’s Unit Offering, (b) is exercising the Series C Warrants for its own account or for the account of a disclosed principal that was named in the agreement pursuant to which it purchased such Units, (c) is, and such disclosed principal, if any, is either (i) an “accredited investor” as defined in Rule 501(a) of Regulation D under the U.S. Securities Act of 1933, as amended (the “ U.S. Securities Act ”) or (ii) a “qualified institutional buyer” within the meaning of Rule 144A under the U.S. Securities Act, at the time of exercise of these Series C Warrants, and (d) the undersigned holder has delivered to the Corporation and the Warrant Agent a completed and executed U.S. Purchaser Certification in substantially the form attached to the Series C Warrant Agreement as Schedule “D”; OR

(C) the undersigned holder is not an original U.S. purchaser who purchased the Series C Warrants pursuant to the Company’s Unit Offering, is either (i) a holder in the United States, (ii) a U.S. Person, (iii) a person exercising for the account or benefit of a U.S. Person or a person in the United States, (iv) executing or delivering this exercise form in the United States or (v) requesting delivery of the underlying Common Shares in the United States, and the undersigned holder has delivered to the

C-30

Corporation and the Warrant Agent (a) a completed and executed U.S. Purchaser Certification in substantially the form attached to the Series C Warrant Agreement as Schedule “D”, or (b) an opinion of counsel of recognised standing in form and substance reasonably satisfactory to the Corporation and the Warrant Agent that the exercise is exempt from the registration requirements of applicable securities laws of any state of the United States and the U.S. Securities Act.

It is understood that the Corporation and Computershare Trust Company of Canada may require evidence to verify the foregoing representations.

Notes: (1) Certificates will not be registered or delivered to an address in the United States unless

either Box B or C above is checked.


(2)	If Box C above is checked, holders are encouraged to consult with the Corporation and the Warrant Agent in advance to determine that U.S. Purchaser Certification or the legal opinion tendered in connection with the exercise will be satisfactory in form and substance to the Corporation and the Warrant Agent.

“ United States ” and “ U.S. Person ” are as defined in Rule 902 of Regulation S under the U.S. Securities Act.

The undersigned hereby irrevocably directs that the said Common Shares be issued, registered and delivered as follows:

Name(s) in Full and Address(es) (including Postal Number of Common Shares

Social Insurance Code/ZIP Code)

________________ _______________________ _____________________

Please print full name in which certificates representing the Common Shares are to be issued. If any Common Shares are to be issued to a person or persons other than the registered holder, the registered holder must pay to the Warrant Agent all eligible transfer taxes or other government charges, if any, and the Form of Transfer must be duly executed.

Once completed and executed, this Exercise Form must be mailed or delivered to Computershare Trust Company of Canada, 100 University Ave., 8 ^th Floor, Toronto, ON, M5J 2Y1, Attention: General Manager, Corporate Trust Department .

C-31

DATED this _______ day of ________________ , 20___ .

)

_____________________________ ) _______________________________________

(Witness ) (Signature of Warrantholder, to be the same as

appears on the face of this Warrant Certificate)

)

) _______________________________________

) Name of Registered Warrantholder


o	Please check if the certificates representing the Common Shares are to be delivered at the office where this Warrant Certificate is surrendered, failing which such certificates will be mailed to the address set out above. Certificates will be delivered or mailed as soon as practicable after the surrender of this Warrant Certificate to the Warrant Agent.

C-32

Exhibit 10.1

SUBSCRIPTION AGREEMENT FOR UNITS

INSTRUCTIONS : To properly complete this Subscription Agreement:

1 All subscribers must complete all boxes on these two face pages.

2 All persons subscribing as an accredited investor under Section 6(c)(i) of this Subscription Agreement must complete and sign Exhibits 1 or 2 (as applicable).

3 All persons subscribing under one or more of the exemptions enumerated in Section 6(c)(ii) of this Subscription Agreement must initial next to the applicable paragraph.

4 All subscribers should return their completed documents, to Kingsway Financial Services Inc., 150 Pierce Road, 6th Floor, Itasca, Illinois, 60143, Attention: Hassan Baqar (hbaqar@kingswayfinancial.com).

TO: Kingsway Financial Services Inc. (the "Corporation")

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



____________________________________________ (Name of Subscriber - please print) By: ________________________________________ (Authorized signature) ____________________________________________ (Official Capacity or Title - please print) ____________________________________________ (Please print name of individual whose signature appears above if different than the name of the Subscriber printed above.) ____________________________________________ (Subscriber's Residential Address) ____________________________________________ ____________________________________________ (Telephone Number) ____________________________________________ (E-Mail Address)		Number of Units:

		Aggregate Subscription Price: (No. of Units x US$25.00 per Unit)

		Disclosed Beneficial Purchase Information: If the Subscriber is signing as agent for a principal pursuant to section 3(e)(i) of this Subscription Agreement (the " Disclosed Beneficial Purchaser "), complete the following and ensure that Exhibit 1 is completed on behalf of such Disclosed Beneficial Purchaser or initial the applicable paragraph (ii) of section 3(d) of this Subscription Agreement on behalf of such Disclosed Beneficial Purchaser: ________________________________________ (Name of Disclosed Beneficial Purchaser) ________________________________________ (Disclosed Beneficial Purchaser's Residential Address and Telephone Number)
Register the Units as set forth below: ____________________________________________ (Name) ____________________________________________ (Account reference, if applicable) ____________________________________________ (Address) ____________________________________________		Deliver the Units as set forth below: ______________________________________ (Name) ______________________________________ (Account reference, if applicable) ______________________________________ (Contact Name) ______________________________________ (Address) ______________________________________



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

ACCEPTANCE : The Corporation hereby accepts the subscription as set forth above on the terms and conditions contained in this Subscription Agreement.

_____________________________________, 20___

KINGSWAY FINANCIAL SERVICES INC.

By: _________________________________

TERMS AND CONDITIONS OF SUBSCRIPTION FOR
UNITS OF KINGSWAY FINANCIAL SERVICES INC.

Terms of the Offering


1.	The Subscriber acknowledges (on its own behalf and, if applicable, on behalf of each person on whose behalf the Subscriber is contracting) that this subscription is subject to rejection, acceptance or allotment by the Corporation in whole or in part.

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


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

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

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

Representations, Warranties and Covenants of the Subscriber


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

(a)

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

may be required by the Toronto Stock Exchange, any certificates representing the Series 1 Shares and Warrants comprising the Units and, if applicable, the Common Shares or the Warrant Shares, may bear the following legends indicating that the resale of such securities is restricted :

"Unless permitted under securities legislation, the holder of this security must not trade the security before [Insert date that is 4 months and a day after expected Closing Date] ."

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 AND ANY OTHER APPLICABLE SECURITIES LAWS, UNLESS THE HOLDER SHALL HAVE OBTAINED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.”

and the Subscriber further acknowledges that it has been advised to consult its own legal counsel in its jurisdiction of residence for full particulars of the resale restrictions applicable to it;

(b)

it has not received or been provided with, nor has it requested, nor does it have any need to receive, any offering memorandum, any prospectus, sales or advertising literature, or any other document (other than an annual report, annual information form, interim report, information circular or any other continuous disclosure document, the content of which is prescribed by statute or regulation) describing or purporting to describe the business and affairs of the Corporation which has been prepared for delivery to, and review by, prospective purchasers in order to assist them in making an investment decision in respect of the Units;

(c)

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

(i)

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


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



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

(d)

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

(i)

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


(e)	it acknowledges that:


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


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


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


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


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

(vi)

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


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

(f)

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

____ [check if applicable]

(g)

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

____ [check if applicable]


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

____ [check if applicable]

(i)

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

(j)

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


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


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

(m)

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

(n)

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


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


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

(q)

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


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

(s)

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


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

(u)

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


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

(w)

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


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


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

(z)

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


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

relevant to the Subscriber (and each person on whose behalf the Subscriber is contracting) for purposes of giving representations, warranties and covenants under this Subscription Agreement.

Closing

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


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

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

General

10.

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


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

12.

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

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


13.	The Subscriber acknowledges and agrees that all costs incurred by the Subscriber (including any fees and disbursements of any counsel retained by the Subscriber) relating to the sale of the Units to the Subscriber shall be borne by the Subscriber.


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


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


16.	Time is of the essence hereof.

17.

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


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


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


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


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


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


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


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

SCHEDULE "A"

KINGSWAY FINANCIAL SERVICES INC. UNIT OFFERING SUMMARY

The following summary of the principal terms of the Offering is qualified in its entirety by reference to the terms and conditions of the Series 1 Shares (attached as Schedule B), the warrant agreement between the Corporation and Computershare Trust Company of Canada (attached as Schedule C) and the Subscription Agreement relating thereto. Prior to making any investment, the forms of such documents should be reviewed carefully. If the terms described in this summary are inconsistent with or contrary to the terms of such documents, such documents will control.

The Offering


Amount to be Raised	US$6,571,900.


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


Issue Price	US$25.00 per Unit.


Number of Units to be Issued	262,876 Units.


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

Preferred Shares


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


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

Dividends

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

Restrictions on Payments

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

Series 1 Shares, unless (A) all dividends then payable on the Series 1 Shares then outstanding and on all other shares ranking as to the payment of dividends on a parity with the Series 1 Shares have been declared and paid or monies set apart for payment; and (B) after giving effect to the payment, the realizable value of the assets of the Corporation would not be less than the sum of the liabilities of the Corporation plus the amount that would be required to give effect to the rights of holders of shares (other than the Series 1 Shares) that have a right to be paid, on redemption or liquidation, rateably with or prior to holders of Series 1 Shares plus the amount required to redeem all of the then outstanding Series 1 Shares, all calculated at the date of such redemption, purchase or capital distribution, as the case may be, in accordance with applicable law. For avoidance of doubt, the Corporation will have no restriction on payments made in regards to its outstanding debt securities, options and warrants.

“ Required Approval ” means approval by a resolution signed by all of the holders of the then outstanding Series 1 Shares or by a resolution passed by the affirmative vote of at least two thirds of the votes cast by the holders of Series 1 Shares voted in respect of such resolution at a meeting of the holders of the Series 1 Shares duly called and held for that purpose in accordance with the by-laws of the Corporation.

Liquidation

In the event of the liquidation, dissolution or winding-up of the Corporation, the holders of Series 1 Shares will be entitled to receive US$25.00 per Series 1 Share, plus accrued but unpaid dividends thereon, whether declared or not, before any amount shall be paid or any assets distributed to holders of shares of the Corporation ranking junior as to the return of capital to the Series 1 Shares. After payment to the holders of Series 1 Shares of the amounts so payable to them, such holders shall not be entitled to share in any further payment in respect of the distribution of the assets of the Corporation.


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


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


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


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


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

dividends, subdivisions and consolidations, rights offerings, special distributions, capital reorganizations and reclassifications of Common Shares by the Corporation.

Registration Rights

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

Warrants


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


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


Redemption	The Warrants will not be redeemable by the Corporation.


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


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

SCHEDULE "B"

CLASS A PREFERRED SHARE, SERIES 1 TERMS AND CONDITIONS

SCHEDULE "C"

WARRANT AGREEMENT

SCHEDULE "D"

PAYMENT INSTRUCTIONS

SCHEDULE "E"

FORM OF ESCROW AGREEMENT

SCHEDULE "F"

FORM OF REGISTRATION RIGHTS AGREEMENT

EXHIBIT 1

REPRESENTATION LETTER

(FOR CANADIAN RESIDENT ACCREDITED INVESTORS)

TO: Kingsway Financial Services Inc. (the "Corporation")

(Capitalized terms not specifically defined in this Exhibit have the meaning ascribed to them in the Subscription Agreement to which this Exhibit is attached)

In connection with the execution by the undersigned Subscriber of the Subscription Agreement which this Representation Letter forms a part of, the undersigned Subscriber hereby represents, warrants, covenants and certifies to the Corporation that:

the undersigned Subscriber is resident in the jurisdiction set out as the "Subscriber's Residential Address" on the face page of the Subscription Agreement and if the undersigned Subscriber is purchasing as agent for a Disclosed Beneficial Purchaser, the Disclosed Beneficial Purchaser is resident in the jurisdiction set out as the "Disclosed Beneficial Purchaser's Residential Address" on the face page of the Subscription Agreement;

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


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


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


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

Dated: ___________________, 20_____.

___________________________________________

Print name of Subscriber

By: _______________________________________

Signature

___________________________________________

Print name of Signatory (if different from the Subscriber)

___________________________________________

Title

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

APPENDIX A

TO EXHIBIT 1

NOTE: PLEASE MARK YOUR INITIALS BESIDE THE APPLICABLE CATEGORY OR CATEGORIES OF "ACCREDITED INVESTOR" TO WHICH YOU BELONG.

Accredited Investor (defined in NI 45-106) means:



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

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

For the purposes hereof and the Subscription Agreement:

" affiliate " means an issuer connected with another issuer because


(a)	one of them is the subsidiary of the other, or


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

" bank " means a bank named in Schedule I or II of the Bank Act (Canada);

" Canadian financial institution " means


(a)	an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act, or


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

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

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


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


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

and includes


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


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

" control person " has the same meaning as in securities legislation;

" director " means


(a)	a member of the board of directors of a company or an individual who performs similar functions for a company, and


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

" eligibility adviser " means


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

(b)

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


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


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

" executive officer " means, for an issuer, an individual who is


(a)	a chair, vice-chair or president,


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


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

" financial assets " means


(a)	cash,

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(b)	securities, or


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

" foreign jurisdiction " means a country other than Canada or a political subdivision of a country other than Canada;

" founder " means, in respect of an issuer, a person who,


(a)	acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the issuer, and


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

" fully managed account " means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client's express consent to a transaction;

" holding entity " means a person that is controlled by an individual;

" individual " means a natural person, but does not include


(a)	a partnership, unincorporated association, unincorporated syndicate, unincorporated organization or a trust, or


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

" investment fund " means a mutual fund or a non-redeemable investment fund, and, for greater certainty in British Columbia, includes an employee venture capital corporation that does not have a restricted constitution, and is registered under Part 2 of the Employee Investment Act (British Columbia), R.S.B.C. 1996 c. 112, and whose business objective is making multiple investments and a venture capital corporation registered under Part 1 of the Small Business Venture Capital Act (British Columbia), R.S.B.C. 1996 c.429 whose business objective is making multiple investments;

" jurisdiction " means a province or territory of Canada except when used in the term "foreign jurisdiction";

" local jurisdiction " means the jurisdiction in which the applicable Canadian securities regulatory authority is situate;

" mutual fund " has the meaning ascribed to it under the securities legislation of the local jurisdiction;

" non-redeemable investment fund " means an issuer,


(a)	whose primary purpose is to invest money provided by its securityholders,


(b)	that does not invest:


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


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


(c)	that is not a mutual fund;

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

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


(b)	a holding entity of the person,


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


(d)	a spouse of the person,


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


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


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

" person " includes


(a)	an individual,


(b)	a corporation,


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


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

" regulator " means, for the local jurisdiction, the person referred to in Appendix D of National Instrument 14-101 opposite the name of the local jurisdiction;

" related entity " means, for an issuer, a person that controls or is controlled by the issuer or that is controlled by the same person that controls the issuer;

" related liabilities " means


(a)	liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or


(b)	liabilities that are secured by financial assets;

" Schedule III bank " means an authorized foreign bank named in Schedule III of the Bank Act (Canada);

" spouse " means an individual who,


(a)	is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,


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


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

" subsidiary " means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

Control

Other than in respect of the definitions of "holding entity" or "related entity" above, a person (first person) is considered to control another person (second person) if

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


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


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

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


(a)	ownership of or direction over voting securities in the second person,


(b)	a written agreement or indenture,


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


(d)	being a trustee of the second person.

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

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EXHIBIT 2

ACCREDITED INVESTOR QUESTIONNAIRE

(FOR U.S. RESIDENT ACCREDITED INVESTORS)

TO: Kingsway Financial Services Inc. (the "Corporation")

(Capitalized terms not specifically defined in this Exhibit have the meaning ascribed to them in the Subscription Agreement to which this Exhibit is attached)

In connection with the execution by the undersigned Subscriber of the Subscription Agreement which this Accredited Investor Questionnaire (the “Questionnaire”) forms a part of, the undersigned Subscriber hereby represents, warrants, covenants and certifies to the Corporation that:


1.	the undersigned Subscriber will notify the Corporation immediately of any material change in any statement made in Appendix A hereto occurring prior to the closing of the private placement offering contemplated by the Corporation;


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


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


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


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

Dated: , 20___.

_________________________________________

Print name of Subscriber

By: ______________________________________

Signature

__________________________________________

Print name of Signatory (if different from the Subscriber)

___________________________________________

Title

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

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APPENDIX A

TO EXHIBIT 2

NOTE: PLEASE MARK YOUR INITIALS BESIDE THE APPLICABLE CATEGORY OR CATEGORIES OF "ACCREDITED INVESTOR" TO WHICH YOU BELONG.

Accredited Investor (defined in Rule 501 of Regulation D under the Securities Act of 1933 (the "Securities Act")) means:



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

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

For the purposes hereof:

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

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “ Agreement ”), is made and entered into as of December __, 2013, by and among Kingsway Financial Services Inc., a corporation incorporated under the Business Corporations Act (Ontario) (the “ Company ”), and the persons identified on Schedule A hereto (collectively, the “ Investors ” and each individually, an “ Investor ”).

WHEREAS, each Investor is a party to a Subscription Agreement, dated as of December 19, 2013 (the “ Subscription Agreement ”) with the Company, pursuant to which the Investors are purchasing an aggregate of 262,876 units of the Company (“ Units ”), each unit consisting of (i) 1 share of Class A Preferred Shares, Series 1 (“ Series 1 Shares ”), and (ii) 6.25 Series C Warrants (“ Series C Warrants ”); and

WHEREAS, in connection with the consummation of the transactions contemplated by the Subscription Agreement, and pursuant to the terms of the Subscription Agreement, the parties desire to enter into this Agreement in order to grant certain registration rights to the Investors as set forth below.

NOW, THEREFORE, in consideration of the foregoing and the mutual and dependent covenants hereinafter set forth, the parties agree as follows:


1.	Defined Terms . As used in this Agreement, the following terms shall have the following meanings:

“ Affiliate ” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“ Agreement ” has the meaning set forth in the preamble.

“ Board ” means the board of directors of the Company (and any successor governing body of the Company or any successor of the Company).

“ Commission ” means the Securities and Exchange Commission or any other federal agency administering the Securities Act and the Exchange Act at the time.

“ Common Stock ” means the common stock, no par value per share, of the Company and any other common equity securities issued by the Company, and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation or other corporate reorganization).

“ Company ” has the meaning set forth in the preamble and includes the Company’s successors by merger, acquisition, reorganization or otherwise.

“ Demand Registration ” has the meaning set forth in Section 2(a) .

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect from time to time.

“ Governmental Authority ” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction.

“ Investors ” has the meaning set forth in the preamble.

“ Person ” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“ Piggyback Registrable Securities ” means the shares of Common Stock issuable upon conversion or exercise of Registrable Securities.

“ Piggyback Registration ” has the meaning set forth in Section 3(a) .

“ Prospectus ” means the prospectus or prospectuses included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses.

“ Registrable Securities ” means (a) the Series 1 Shares, (b) any shares of Common Stock issuable upon conversion of the Series 1 Shares, (c) the Series B Warrants issued in exchange for the Series C Warrants (the “ Exchange Warrants ”), (d) shares of Common Stock issuable upon the exercise of the Exchange Warrants (e) any shares of Common Stock issued or issuable with respect to any Registrable Securities by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization (it being understood that for purposes of this Agreement, a Person shall be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected). As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a Registration Statement covering such securities has been declared effective by the Commission and such securities have been disposed of pursuant to such effective Registration Statement, (ii) such securities are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, (iii) such securities are otherwise transferred and such securities may be resold without subsequent registration under the Securities Act, or (iv) such securities shall have ceased to be outstanding.

“ Registration ” means a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement has become effective.

“ Registration Statement ” means any registration statement of the Company which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference in such Registration Statement.

“ Rule 144 ” means Rule 144 promulgated under the Securities Act or any successor rule thereto or any complementary rule thereto (such as Rule 144A).

“ Securities Act ” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect from time to time.

“ Selling Expenses ” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities, underwriter expenses, and fees and disbursements of counsel for any holder of Registrable Securities, except for the reasonable fees and disbursements of counsel for the holders of Registrable Securities required to be paid by the Company pursuant to Section 6 .

“ Series 1 Shares ” has the meaning set forth in the recitals.

“ Series B Warrants ” means warrants of the Company, each exercisable to purchase one share of Common Stock at an initial exercise price of $5.00.

“ Series C Warrants ” has the meaning set forth in the recitals.

“ Subscription Agreement ” has the meaning set forth in the recitals.

“ Units ” has the meaning set forth in the recitals.


2.	Demand Registration .

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

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

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

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

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

3. Piggyback Registration .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

7. Indemnification .

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

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

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

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

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

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

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

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

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

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

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

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



If to the Company:	Kingsway Financial Services Inc. 150 Pierce Road, 6th Floor Itasca, IL 60143 Facsimile: (847) 952-4830 E-mail: hbaqar@kingswayfinancial.com Attention: Hassan Baqar
with a copy to:	McDermott Will & Emery LLP 340 Madison Avenue New York, New York 10173 Facsimile: (646) 390-1209 E-mail: jrubinstein@mwe.com Attention: Joel L. Rubinstein, Esq.
If to any Investor, to such Investor’s address as set forth on Schedule A hereto.

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

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

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

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

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

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

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

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

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

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

[SIGNATURE PAGES FOLLOW]

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



	KINGSWAY FINANCIAL SERVICES INC.
	By_____________________ Name: Title:

[Signature page to Registration Rights Agreement]



	[INVESTOR NAME]
	By_____________________ Name: Title:

[Signature page to Registration Rights Agreement]

Schedule A

Investors

Exhibit 99.1

Kingsway Announces U.S.$6.6 Million Financing

Toronto, Ontario (December 20, 2013) - (TSX: KFS, NYSE: KFS) Kingsway Financial Services Inc. ("Kingsway" or the “Company") today announced that it has entered into definitive agreements with several investors in connection with a private placement totaling approximately U.S.$6.6 million. Kingsway expects to use the proceeds, along with additional cash on hand, to repay the remaining amount outstanding on its 7.50% Senior Notes due February 2014.

Transaction Details

Upon the closing, which is expected to occur on February 3, 2014, the Company will receive gross proceeds of approximately U.S.$6.6 million, resulting from the sale and issuance of approximately 262,876 units for a purchase price of U.S.$25.00 per unit. Each unit consists of one class A convertible preferred share, series 1 (the “Preferred Shares”), and 6.25 common share class C purchase warrants. Each Preferred Share is convertible into 6.25 common shares at a conversion price of U.S.$4.00 per common share any time at the option of the holder prior to April 1, 2021. The maximum number of common shares issuable upon conversion of the Preferred Shares is 1,642,975 common shares. Each warrant will entitle the subscriber to purchase one common share of Kingsway at a price of U.S.$5.00 per common share at any time after September 16, 2016 and prior to expiry on September 15, 2023.

The private placement has received the conditional approval of the Toronto Stock Exchange. Funds received from investors in connection with the private placement will be held in escrow pending closing.

This press release shall not constitute an offer to sell or the solicitation of the offer to buy securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. The securities offered and sold in the private placement have not been registered under the Securities Act of 1933, or any state securities laws, and may not be offered or sold in the United States absent registration, or an applicable exemption from registration under the Securities Act of 1933 and applicable state securities laws.

About the Company

Kingsway is a holding company functioning as a merchant bank with a focus on long-term value-creation. The Company owns or controls stakes in several insurance industry assets and utilizes its subsidiaries, 1347 Advisors LLC and 1347 Capital LLC, to pursue opportunities acting as an advisor, an investor and a financier. The common shares of Kingsway are listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol “KFS.”

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Words such as “expects”, “believes”, “anticipates”, “intends”, “estimates”, “seeks” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect Kingsway management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including, without limitation, our potential inability to complete the proposed rights offering. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, please refer to the section entitled “Risk Factors” in the Company’s 2012 Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2013. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise.