Kingsway

Overview

Kingsway is adopting a modified version of a shareholder rights plan (the "Plan") with a term of three years and a triggering point of 5% of its shares rather than 20% in order to protect its U.S. net operating losses having regard to the Code s. 382 rule.

Purpose of Plan

Kingsway has determined that it has in excess of U.S.$150 million of net operating losses ("NOLs") potentially available to offset the future income of certain of the U.S. operations of Kingsway and its subsidiaries. The purpose of the Plan is to protect the NOLs by attempting to deter acquisitions of Common Shares that may result in an "ownership change" as determined under Code s. 382. An ownership change occurs if, among other things, the shareholders (or specified groups of shareholders) who own or have owned, directly or indirectly, 5% or more of Kingsway Common Shares or are otherwise treated as 5% shareholders under s. 382 increase their aggregate percentage ownership of Kingsway stock by more than 50% over the lowest percentage of the stock owned by these shareholders over a three-year rolling period.

Mechanics of Plan

Distribution. From and after the record date for the dividend distribution of Rights, each Common Share will have one Right attached to it until the Rights become exercisable (the "Distribution Date") or they expire. The Rights will not become exercisable until 10 days after a public announcement that a person or group has become an "Acquiring Person" by obtaining beneficial ownership of 5% or more of Kingsway's outstanding Common Shares (or if already the beneficial owner of at least 5%, by acquiring additional shares representing more than 0.1% of the Common Shares then outstanding), unless exempted from the Board.

Exercise

Once the Rights become exercisable, they will separate from the Common Shares. All holders of Rights except the Acquiring Person may, by paying the purchase price of Cdn.$100 per share (subject to adjustment), acquire Common Shares with a market value (as at the acquisition date of the Acquiring Person) of twice the purchase price.

Exchange

After a person or group becomes an Acquiring Person, the Board may extinguish the Rights by exchanging one Common Share for each Right (other than those of the Acquiring Person).

Expiration

The Rights will expire (subject to earlier redemption, exchange or Board termination) on the 3^rd anniversary of the Plan.