Shared Ownership Life Insurance by Aaron Macdonald

Shared Ownership Life Insurance A Technical and Practical Guide for Financial Planners and Advisors

Revised April 2010

IA / IAP SHARED OWNERSHIP GUIDE - FOR USE BY ADVISORS ONLY

TABLE OF CONTENTS I.

Shared Ownership Life Insurance – an introduction ……………..

II. How does it work?

……………………………

…………………………… …………………………… …………………………… …………………………… …………………………… …………………………… ……………………………

5 6 6 7 7 7 8

III. The insurance product

……………………………

IV. Contract setup and documentation

……………………………

V. Tax considerations

…………………………… 10

1. Shared policy rights and obligations 2. Shared premium costs a) Equivalent coverage b) Premium payment period c) Life expectancy d) Discount rate e) Amortization calculation

1. On transfer of ownership …………………………… 2. Taxable benefit to the individual …………………………… 3. The “Pre-Payment Account” …………………………… 4. Interpretation by the Canada Revenue Agency………………….

10 11 12 12

VI. An example - sole shareholder

…………………………… 13

VII. Other relevant topics of discussion

……………………………

1. Face + Fund death benefit …………………………… 2. YRT or Level Cost of Insurance charges?..……………………… 3. Multi-Life UL contract ………………………....... 4. Leveraging …………………………... 5. Creditor protection …………………………… 6. Use of existing contracts …………………………… 7. Revisions to the calculations …………………………… 8. Dissolution or sale of the corporation …………………………… 9. Transfer of death benefit ownership to the individual..………..... 10. Administrative Issues .………………………....

14 14 14 15 15 15 15 16 16 16

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VIII. Samples of required documents (common law provinces) Shared Ownership Agreement …………………. ……….. Schedule 1 - Designation of Ownership Form …………………… Schedule 2 - Change of Beneficiary Form…………………………. Schedule 3 - Premium Deposits ..………………………….. Schedule 4 - Allocation of Policy Proceeds…..…………………….

19 26 28 30 31

IX. Additional Materials  

Specimen Loan and Bonus Covenant …………………………… Genesis Universal Life Illustration and CONCEPTIA presentation

32 36

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I. Shared Ownership Life Insurance - an introduction Industrial Alliance, and Industrial Alliance Pacific Insurance and Financial Services Inc., will hereinafter be referred to as “Industrial Alliance”. “Shared Ownership” is not a product. Rather, it is a financing arrangement between two or more parties to share the benefits and costs associated with an exempt life insurance policy. The arrangement consists of a life insurance policy, a shared ownership agreement and a special transfer of a portion of this policy. There are no explicit provisions in the Canadian Income Tax Act (the “ITA”) that address the various tax issues relating to shared ownership arrangements. The concept derives from the wording in various provisions in the ITA which refer to “an interest in a life insurance policy”. Although interests in a life insurance policy can be shared amongst any parties, the most common use of the Shared Ownership strategy involves a private Canadian corporation and the shareholder(s) of that corporation. Generally underlying this strategy is the corporation’s need to purchase life insurance to protect against financial losses arising from the premature death of a key shareholder / employee. Where additional funds are available inside the corporation and not currently needed to invest in the underlying business, the Shared Ownership strategy not only satisfies the need for life insurance coverage, but creates a tax-deferred investment vehicle that can benefit the shareholder / employee during retirement years. By utilizing a “Universal Life” insurance policy (explained later in this Guide), the two main components of the policy are apportioned between the corporation and the individual. The initial death benefit, which will be referred to hereinafter from time to time as the “Face Amount”, is owned by the corporation (the “Death Benefit Owner”) which is also the beneficiary thereof and the cash value or “Savings Element” is owned by the individual (which will be referred to hereinafter from time to time as the “Savings Element Owner”) and is payable as a tax-free death benefit to the individual’s named beneficiary. If the entire premium relating to the policy is paid by the corporation in a given year, the payment of the portion of that premium representing the premium payable for the Face Amount (which is calculated in the manner discussed below), if properly accounted for by way of a “Pre-Payment Account”, should not result in a taxable benefit in the hands of the Savings Element Owner in a given year. Where the entire premium paid by the corporation exceeds the premium relating to the Face Amount coverage then the excess portion of the premium is deemed a taxable benefit in the hands of the Savings Element Owner. The Shared Ownership strategy can be integrated with a business succession strategy, key-person life insurance coverage or the buy-sell / share redemption component of a shareholders agreement. It can also be used to fund estate liabilities. However, it is important to carefully plan and document all the terms and conditions. It is highly recommended that the financial, legal, accounting and tax advisors of the parties involved IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

be consulted to ensure the strategy meets the particular needs of the client and that all the relevant documentation (including the requisite corporate resolutions required to effect the transactions) is prepared and signed. The risks, if any, whether from an income tax perspective or otherwise, should be assessed by such independent advisors, as certain benefits of this strategy, as with any plan involving the use of life insurance in the overall estate planning process, can never be guaranteed.

II. How does it work? 1. Shared policy rights and obligations The first and most important step is to identify and quantify through proper analysis, a specific need, amount and duration of life insurance coverage which will be owned, and paid for, by the Death Benefit Owner. This information should be carefully documented and retained in the event of an audit by the Canada Revenue Agency (“CRA”). The next step in the Shared Ownership strategy involves the Savings Element Owner applying for the policy personally. Once the coverage is approved and the policy is in force, the Savings Element Owner transfers partial ownership so that the Death Benefit Owner and the Savings Element Owner become joint owners of the policy. The new joint owners appoint beneficiaries for the Face Amount and the Savings Element. Industrial Alliance’s Designation of Ownership form allows for joint ownership, and the Change of Beneficiary form allows for the different named beneficiaries (with all the necessary signatures to be obtained). The Death Benefit Owner will pay the premiums relating to, and will have the right to designate a beneficiary for, the initial Face Amount plus the “Pre-Payment Account”. The beneficiary named by the Savings Element Owner will be entitled to payment of the cash value on the death of the life insured. Only one annual premium notice is sent by Industrial Alliance, and it is to the joint owners of the policy, at one mailing address. If the premium is paid annually, two separate cheques can be sent, one from the Death Benefit Owner and one from the Savings Element Owner. They should indicate that the cheques relate to one policy, and the policy number should be noted with each cheque. If pre-authorized withdrawls (“PAC’s”) have been authorized, Industrial Alliance can only withdraw the premium once each month and from only one bank account. A Shared Ownership Agreement between the parties then sets out all the rights and obligations of each party. Industrial Alliance is not a party to it, and a copy of the Agreement should not be sent to us.

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2. Shared premium costs Once the Shared Ownership Agreement is in place, the parties are joint owners of the policy and therefore any requests relating to the policy must be approved and signed by all parties. Each owner is responsible for its share of the premiums relating to its respective interest in the policy, but to reiterate, only one annual premium notice will be generated and only one monthly PAC withdrawal can be processed. In order to avoid adverse income tax consequences, each party should pay fair market value (“FMV”) for its interest in the policy. Accordingly, the annual premiums to be paid by the Death Benefit Owner should represent the premiums that would be payable under an equivalent policy, i.e., one that would provide the same death benefit coverage, for the same period of time. The amount deposited into the policy by the Savings Element Owner can vary from year to year based on a number of factors including the individual’s available funds and perhaps certain minimum amounts as agreed to by the parties. The maximum that can be deposited into the policy by the Savings Element Owner, without jeopardizing the policy’s exempt status, will be indicated on the policy illustration. The administration system will also calculate the maximum deposit allowed to the next policy anniversary on each policy anniversary (this amount is available on the Industrial Alliance Extranet). An automatic notice is generated, approximately 60 days prior to the anniversary, to advise of the maximum deposits allowed prior to the next anniversary. The premiums to be paid by the Death Benefit Owner (i.e., the corporation) are based on the following parameters: a) Equivalent coverage The most important consideration in determining the FMV price the Death Benefit Owner should pay for its ownership interest is what type of insurance coverage is required. There are many ways to determine the FMV. For example, if the coverage is only required for a relatively short period, say, until retirement, some form of Term insurance such as ten-year term might be the most appropriate “benchmark”. If the company is expected to own the coverage for life or beyond the renewal period for term insurance, T100 may be a better measure of FMV. Even though the underlying insurance contract will be Genesis Universal Life (typically with level cost of insurance), the FMV price to be paid by the Death Benefit Owner could be based on any type of insurance such as T5, T10, T15, T20, T65, or T100. If the corporation requires a level amount of insurance coverage for the lifetime of the individual, rather than purchase the Universal Life policy, it could satisfy this need with Term 100 insurance. Accordingly, for the Shared Ownership strategy, the premium that would be paid for such a level, lifetime Term 100 premium for the amount of coverage required represents the corporation’s share of the premium costs. As discussed below in paragraph II.2.e), this level premium amount is then IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

discounted, based on the number of premium deposits to be made under the Share Ownership Agreement, to determine the premium that the Death Benefit Owner should pay in order to avoid any adverse tax consequences. b) Premium payment period The Universal Life policy will not be funded on a lifetime, level, annual basis. Rather, the policy will be funded on a “quick-pay” basis, with larger, but fewer premiums to be paid. This will accomplish two main objectives: 1) transfer large amounts of corporate cash into the policy in the shortest time possible, and 2) create tax-deferred cash value inside the policy. Over-funding of the policy can create a “shuttle fund” resulting in a T5 slip being generated in the joint owners’ names, for income earned in this fund. The owners will be responsible for reporting the appropriate amount. Since only one T5 is being generated, the parties will need to prepare a copy of the slip, and provide an explanation for CRA. Usually a period of 10 years is selected, although the payment period can be adjusted to fit the needs of the parties on a case-by-case basis. The FMV of the corporation’s annual premium, which is required to fund the Face Amount, will therefore be the “actuarial” equivalent of a level, lifetime Term 100 premium paid over a specific number of years. This “actuarial” equivalent must take into account the time value of money and projected mortality rates on the Term 100 coverage, the latter point addressing the question of how many years the T100 premiums would actually be paid. Rather than using projected mortality rates in our calculations, a simplification has been introduced as explained in paragraph II.2.c), below. c) Life expectancy Actuarial discounting of the Term 100 premiums involves accounting for mortality rates. The period over which the premiums are discounted depends on how long the Death Benefit Owner requires the insurance coverage. Typically, if the Savings Element Owner is a shareholder, it may be reasonable to assume the coverage is required until that person’s life expectancy. We set this life expectancy at age 85 for non-smokers and age 80 for smokers. So, for example, for a non-smoker, age 50, we would discount 35 (thirty-five) T100 premium payments, in determining the equivalent 10-pay premiums. d) Discount rate Since the respective costs of the arrangement are to be spread out over a number of years, it is important to determine a reasonable discount rate to be used in calculating the present value of these costs. There is some leeway involved in selecting a discount rate. Some might choose the current inflation rate while others might prefer IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

the cost of replacing capital or the current GIC rate. The discount rate used can be anything that is reasonable, considering that the lower the rate, the more aggressive the strategy. Both parties should agree to the rate used in determining the FMV of the benefits received. This rate is applied on an after-tax basis, using the corporate rate applicable to income earned on passive investments. e) Amortization calculation Once the desired number of premium payment years has been established, we calculate the present value of the equivalent Term 100 premiums determined in paragraph II.2.a) above, discounted using the interest rate determined in paragraph II.2.d) above, so that both “streams” of premiums are actuarially equivalent, on a present value basis. For example, for a 10-Pay concept:

Policy Year 1 2 3 4 5 10 15 20 25 30 … Age 85

Actuarial Equivalent Premium Paid by Corporation Term 100 10-Pay Term 100 10-Pay Term 100 10-Pay Term 100 10-Pay Term 100 10-Pay Term 100 10-Pay * Term 100 -----Term 100 -----Term 100 -----Term 100 -----Term 100 -----Term 100 -----* last payment based on 10-Pay

In this example, the present value of the T100 premiums paid annually to age 85 is equivalent to the 10 annual payments made in years 1 through 10, using the 10-pay methodology

III. The insurance product A Universal Life policy is the most appropriate vehicle for use with the Shared Ownership strategy as it offers flexibility and a variety of coverages and investment options that can be easily tracked and allocated to different parties. The death benefit IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

should always be structured as “Face Amount + Fund”. The Face Amount will be owned by, and paid to, the corporation and the Fund will be owned by the Savings Element Owner and paid to the individual’s named beneficiary at death. Once again, the ownership is on a policy level and is joint, with the joint owners appointing the beneficiaries. Both of these amounts are paid out tax-free at the time of the insured’s death. Industrial Alliance is able to manage, administratively, the separation of these interests. When a death claim is paid out, Industrial Alliance’s Claims Department will pay out the Face Amount and the cash value according to the beneficiary designations. The amount, and timing, of the premium payments relating to the policy are entirely flexible, subject to the minimum premium required on either an annual premium notice basis, or on a monthly PAC basis. The target premium is flexible and can be changed from time to time, by way of a completed and signed F4 - Request to Change form, to be signed by the joint owners. While the corporation’s premium schedule will show fixed and constant payments (so long as the face amount of the policy does not change), the premiums paid by the Savings Element Owner can vary. This provides the individual flexibility in deciding the level of personal funding. Therefore the individual can view the Shared Ownership strategy as not only an effective use of corporate assets, but also as a way of accumulating tax-deferred personal investments.

IV. Contract setup and documentation It is crucial that the documentation describing the terms and conditions of the sharing of the ownership of the Universal Life insurance policy be properly drafted, and of course, signed by the parties. Once again, the Shared Ownership Agreement is between the two parties and should not be sent to Industrial Alliance. The following steps should be followed: Step ONE – Life insurance application The party who will be the Savings Element Owner (usually the individual) should apply for the life insurance initially. Special care should be taken when naming the beneficiary. The beneficiary named on the application should be the beneficiary that will remain the Savings Element Owner after the transfer described in Step FOUR below. The corporation will eventually become the beneficiary of the Face Amount once that interest is transferred to it using a Designation of Ownership form, and the Shared Ownership Agreement is signed. Once the ownership has been changed to joint, the new owners can appoint the beneficiaries. The beneficiary designations should be revocable. Step TWO – Life insurance contract The application must be processed and the underwriting completed before the insurance policy is issued. The remaining documentation (most importantly, the Shared Ownership Agreement) should be dated on or after the policy effective date as shown on the policy contract specifications page. The designation of ownership should be dated after the Shared Ownership Agreement and completed and signed by the applicant for the life IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

insurance coverage. The new joint owner, complete the change of beneficiary form, which should be completed and signed by the new joint owners, after the date of the designation of ownership. The most current forms as found on the Industrial Alliance Extranet should be used, and all owners will need to complete the Proceeds of Crime section (Corporation), and if the same section is not current for the individual, it will also need to be completed. Step THREE – Shared Ownership Agreement Your client’s lawyer should prepare the actual Shared Ownership Agreement. Although we provide a sample agreement in this Guide, it is made available as a courtesy to you so that you can provide it as a resource to the lawyer drafting the agreement. There may be substantial modifications required to it, as a result of the province of residence of the client or for a number of other reasons, based on the facts and the client’s particular situation. It is strongly recommended that legal advice be sought and that the attached sample be treated as only a guide and under no circumstances, a final document. Certain schedules must be attached to, and form part of, the Agreement. Those schedules include a list of the premium commitments made by each of the parties, the latest calculations of those premium amounts, a schedule showing the allocation of policy proceeds and benefits, and a copy of the Designation of Ownership Form. It is also essential for all parties to keep records of the final, signed illustration(s) relating to the life insurance policy, and any spreadsheets applicable to the Shared Ownership strategy. Step FOUR – Designation of ownership and change of beneficiary Upon completion of the Shared Ownership Agreement, the original owner/applicant should complete a Designation of Ownership Form to transfer the policy to the joint owners The current owner (the individual) signs, as well as the new additional owner (the corporation), and the Form is filed with Industrial Alliance. Concurrently, the parties should also fill out a change of beneficiary form, advising Industrial Alliance that the corporation is now the beneficiary of the Face Amount, while the beneficiary of the cash value is the individual. The originals are to be sent to Industrial Alliance head office for recording and registration. Copies of these documents should be attached as a schedule to the Shared Ownership Agreement.

V. Tax Considerations 1. On transfer of ownership Under the ITA, when an interest (full or partial) in a life insurance policy is disposed of, or transferred from one party to another, the result is a disposition of that interest for income tax purposes. The income inclusion resulting from that disposition is usually determined by calculating the amount by which the proceeds of disposition exceeds the adjusted cost base (“ACB”) of the interest in the policy transferred. There are exceptions to these rules when the transfer is between related parties, as IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

would be the case in a Shared Ownership strategy. With related parties, subsection 148(7) of the ITA deems the proceeds of disposition to the transferor, and the new ACB to the transferee, to be equal to the “value” of the policy at the time of disposition. The term “value” is defined in subsection 148(9) of the ITA as the amount that the holder of the policy would be entitled to receive if the policy were surrendered (essentially the cash surrender value of the policy net of any outstanding policy loans) where there is a cash surrender value component to the policy, and otherwise, nil. When the Face Amount is assigned to the corporation, since it has no cash value, the deemed proceeds of disposition are equal to zero, and there is no taxable disposition at the time of assignment. For these reasons it is preferable to have the eventual owner of the cash value component initially purchase the policy and then transfer the ownership to the individual and corporation, jointly. Although this is an actual disposition for income tax purposes, it should not result in a taxable event. 2. Taxable benefit to the individual An important consideration in the Shared Ownership strategy is ensuring that the annual payment of premiums (or monthly PAC) by the corporation for the death benefit component do not confer a taxable shareholder or employee benefit in the hands of the Savings Element Owner. If the corporation can demonstrate that it is paying an annual premium that represents FMV, based on its interest in the policy, this will lessen the chances that such a benefit is assessed by the CRA. By relating the corporation’s premiums to the cost of a level, Term 100 policy, the strategy ensures that the corporation is paying an annual premium equivalent to what it would be paying in the marketplace for the exact same benefit, i.e., a level death benefit for life, with no cash value. There may be situations where, in a given year, the parties prefer to have the entire premium paid for by the corporation. In this case, the individual should receive a T-4 tax reporting slip from the corporation, for any amount of premium paid for by the corporation in excess of the reasonable premium to be paid by the corporation for equivalent Face Amount coverage. If the Savings Element Owner is a shareholder (which is usually the case), the payment of its portion of the premium by the Corporation will result in a taxable shareholder benefit under subsection 15(1) of the ITA. Shareholder benefits are not tax deductible to the corporation, resulting in double taxation. To prevent this outcome, the corporation should record the payment of the Savings Element Owner’s share of the premium as a loan to the shareholder which will be repaid at the end of the year from additional salary or bonus. There is a separate document, attached as an Appendix, called a “Loan and Bonus Covenant”, which can be used for this purpose.

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3. The “Pre-Payment Account” In the Shared Ownership strategy, the corporation pays an annual premium for a specific number of years, which exceeds the annual premium which would have been required on a level, Term 100 basis. The Pre-Payment Account is a notional account that is updated annually and is used to keep track of the “excess” premiums paid by the corporation (i.e., those in excess of the level, Term 100 premiums that would have been payable under a comparable policy). In the first year that the corporation pays a premium, assuming that the corporation is only paying the amount that relates to the Face Amount, the PrePayment Account is increased by the amount by which the actual premium paid by it exceeds the level, Term 100 premium. Interest is applied to this notional account. In each subsequent year that the corporation pays a premium, the Pre-Payment Account is increased in the same manner. When the corporation has stopped paying premiums, which will occur once the corporation has made the intended number of premium payments, the Pre-Payment Account begins to be reduced each year by the amount of the level, Term 100 premium (which it would have paid annually), with interest still being applied on the remaining balance. Stated another way, the Pre-Payment Account keeps track of notional “overpayments” made by the corporation. Upon the happening of certain events, such as the early death of the insured, or surrender of the policy, the corporation is legally entitled to the balance of the Pre-Payment Account. However, keep in mind that Industrial Alliance will always, on a contractual basis, disburse the death benefit according to the contractual obligations of the policy contract and based on the most recent beneficiary designation. Accordingly, the underlying Shared Ownership Agreement should include specific wording to address how the corporation can recoup the positive balance in the Pre-Payment Account (if any) from the Savings Element Owner. 4. Interpretation by the Canada Revenue Agency The CRA has been unwilling to provide specific guidance on Shared Ownership arrangements using Universal Life insurance policies. In the past, when requested to comment on the issue of whether a taxable benefit results from a particular method of allocating the premium to be paid, it has indicated that such determination will be made on a case-by-case basis. To reiterate, Industrial Alliance strongly advises that anyone considering entering into a Shared Ownership Agreement seek independent legal advice in order to determine the specific income tax consequences that may arise.

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VI. An example - Sole Shareholder Johnny Print, 45 years of age, is the sole shareholder of a printing business with an estimated value of $1.0 million. Johnny is currently reviewing his business succession and key shareholder insurance needs and he has decided that $1.0 million of coverage should be acquired to protect the business in the event of his death, and to provide the funds necessary for his estate to redeem his shares. Johnny’s business has surplus cash, but those funds are not required to sustain future corporate growth. Johnny is at an age where he is contemplating enjoying the fruits of his labor. While he would prefer taking this cash out of his business and adding it to his retirement income plans, any cash he withdraws would be taxable to him (as a dividend or salary) and would attract further taxation to the extent it is reinvested personally. Johnny is looking for a way to access the corporate cash personally, with minimal tax consequences. Accordingly, he is an ideal candidate for the Shared Ownership strategy. His business can be the owner of the $1 million Face Amount and Johnny can be the owner of the cash value generated inside a tax deferred Universal Life policy as stipulated in the Shared Ownership Agreement. Industrial Alliance can provide all of the projections for a particular scenario (an example of which is attached at the end of this Guide, along with a Conceptia presentation that can be generated based on an illustration). In this example it is projected that a total premium of $40,000 annually would be paid into the Universal Life policy for 10 years by the corporation, with $24,028 deemed to be the equivalent fair market value of the premium relating to the Face Amount (i.e., the $ 1 million death benefit component) and the balance of $15,972 paid by Johnny. A complete presentation is available in Conceptia in the Genesis Illustration Software. Under the terms of the Shared Ownership Agreement, the cash value component of the policy is owned by Johnny, i.e., he is the Savings Element Owner and the named beneficiary of the funds will be paid out tax-free to his named beneficiary upon his death. During his lifetime, he can use this asset to secure a line of credit by way of pledging the policy as collateral for a loan (this strategy, which is also referred to as “back-end leveraging”, would be considered a collateral assignment and it must be clear as to what exactly is being assigned). This strategy provides him with liquidity on a non-taxable basis, with the loan to be repaid at the time of his death. Any borrowing in this regard is subject to the terms of the underlying Shared Ownership Agreement.

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VII. Other relevant topics of discussion 1. Face + Fund death benefit The Face + Fund death benefit option is always used in a Shared Ownership strategy in order to create two clearly distinguishable benefits that are easy to track over time and easy to allocate between parties. The total policy death benefit is always equal to the sum of the initial death benefit (Face Amount) of the policy and the cash value. Under the Shared Ownership Agreement, the corporation is the owner/beneficiary of the Face Amount, and the individual is the owner of the cash value for which he/she can designate a beneficiary. To reiterate, the contract itself does not differentiate the components of the policy, as this is done through the beneficiary designations. The benefit to the individual of owning the cash value is two-fold: 1) it can be leveraged against, within the boundaries set forth in the agreement, to create additional tax-free retirement funds, and 2) it is paid out tax-free to the individual’s named beneficiary at death. 2. YRT or Level Cost of Insurance charges? A very important step in setting up any insurance contract is deciding whether to pay for the premiums based on a Yearly Renewable Term basis (“YRT”) or a level cost of insurance basis (“Level COI”). The YRT option will perform better in the short term and therefore yield higher cash values in the near term vis-à-vis the Level COI option. At the end of, say, a 10 year annual premium payment period, the cash value of the YRT option may be as much as 50% higher than that of the Level COI option. Depending on the investment returns on the cash value, then the YRT option may also perform better over the long term. If a client wishes to remain conservative in his or her investment return assumptions, the Level COI option is the better choice. Industrial Alliance’s Genesis UL product has no surrender charges on its Level COI option and this may be attractive to the client in the short term. 3. Multi-Life UL contract There may be situations where more than one individual can benefit from a Shared Ownership strategy. In these situations we recommend setting up separate insurance contracts for each individual, since a multi-life UL contract only has one cash value and that cash value cannot be split between two or more lives insured. With the Shared Ownership strategy, each Savings Element Owner must be able to track his or her own cash value in the policy. IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

4. Leveraging The Savings Element Owner may be able to leverage against the cash value, using a bank or other financial institution. The maximum collateral available to the Savings Element Owner will be the total policy cash value less the value of the Pre-Payment Account. Depending on the nature of the underlying investments, the Savings Element Owner may be able to leverage up to 90% of this amount. 5. Creditor Protection Current provincial legislation affords life insurance products protection from claims of creditors at the death of the insured, so long as a beneficiary (other than the deceased’s estate) is properly designated. In terms of the status of a life insurance product during the lifetime of the insured, if the beneficiary falls under a certain class – normally a spouse, parent, grandparent, child or grandchild of the life insured (commonly referred to as “Preferred Beneficiaries”) then, generally, creditor protection is available, subject to many potential overriding areas of law such as bankruptcy and CRA’s possible priority under the ITA. In terms of the creditor protection available in a given situation, Industrial Alliance recommends that a client seek the advice of a lawyer familiar with the rules in the province of residence. As the Death Benefit Owner, the corporation would not enjoy potential protection from creditors as the corporation is the beneficiary of the Face Amount and this falls outside the class of Preferred Beneficiaries. 6. Use of existing contracts An existing UL contract owned by an individual may be used in conjunction with a Shared Ownership strategy. Although this could not be made retroactive to the original “effective” date, an individual may transfer the ownership on a joint basis, and designate new beneficiaries, for an existing policy. The transfer of an ownership interest constitutes a disposition for tax purposes and may result in some tax cost. The annual premium requirement for the corporation would be calculated based on the age of the individual on the day the transfer of ownership takes place. If an existing Term policy is converted for the purpose of entering into a Shared Ownership Agreement, the UL contract can be treated as a new policy for the purposes of the calculations. The conversion would take place on an individual basis, and once the Shared Ownership agreement is completed, the designation of ownership and subsequent change of beneficiaries would take place. 7. Revisions to the calculations As in any financial arrangement, regular ongoing reviews are always recommended. However, with the Shared Ownership strategy, certain calculations cannot be revised once the strategy has been put into effect. The one figure which will always remain a constant is the premium paid by the corporation with respect to its obligation for the Face Amount. To reiterate, this premium has been calculated based on a guaranteed level Term 100 premium, and discounted at the after-tax discount rate then in effect. IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

The premiums paid by the individual are flexible and can be reviewed at any time. Reasons for reviewing the individual’s premium contributions include: 1) the availability of additional personal funds which can be deposited into a tax-free environment; 2) the need to increase the policy’s funding in case of lower-than-expected investment returns; and 3) a desire to gain greater retirement income. 8. Dissolution or sale of the corporation The Shared Ownership Agreement should include provisions addressing what happens if the corporation is dissolved, or is sold, prior to the death of the life insured. The most likely course of action will be for the individual to purchase from the corporation its interest in the Face Amount. Accordingly, the Shared Ownership Agreement should include some wording which provides the Savings Element Owner with a right of first refusal with respect to purchasing such interest. Professional advice should be sought in determining the proper purchase price. 9. Transfer of death benefit ownership to the individual The Death Benefit Owner may transfer its ownership to the Savings Element Owner. However, caution must be exercised, as this transfer could trigger a taxable benefit to the recipient. For example, if the Shared Ownership Agreement has been structured so that the Death Benefit Owner has prepaid the cost of its ownership interest (the Face Amount) to age 85 and its interest is transferred to the Savings Element Owner (who is a shareholder) at age 65 for no consideration, there will be a taxable shareholder benefit conferred upon the Savings Element Owner. 10. Administrative Issues Here is a summary of some important issues from an Industrial Alliance administration standpoint (most, but not all of these points have been mentioned above): 

The policy will be administered by Industrial Alliance as one single contract that is jointly owned. There will be only one annual premium notice sent to the joint owners that reflects the total premium due, and only one annual statement that reflects the total policy funds. These will not distinguish the ownership interests of each owner. Also, the ACB of the policy is not separated so there will be only one ACB for the policy as a whole.

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The “exempt” status of the life insurance contract must be maintained to preserve the tax benefits associated therewith. It is critical that the legal structure of the Shared Ownership arrangement does not inadvertently result in a split of the “single” life insurance policy into separate, distinct contracts instead of separate ownership interests. If the CRA considers the separate ownership interests to be actually separate insurance contracts with the insurer, the result will be that the Savings Element Owner’s interest, which has no pure protection/insurance component, would likely be viewed by the CRA as a non-exempt contract with

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potentially adverse tax consequences. This is one example of why joint ownership at the policy level is so crucial 

Industrial Alliance will require the permission and signature of all joint owners for any decisions relating to the policy such as a beneficiary change, the partial withdrawal of funds, a collateral assignment, a change in investment options, etc.

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If a request is being made to Industrial Alliance by only one of the joint owners, then a copy of the agreement should be sent to Industrial Alliance along with such request, specifying that this owner is authorized to make this request on its own, without the consent of the other owner. This will be noted, and the agreement will be returned. One way to deal with this inconvenience is to execute a special Power of Attorney, either as a separate document or contained within the Shared Ownership Agreement, which would allow one party (owner) to carry out certain transactions under the policy on behalf of the other party (owner).



The Shared Ownership Agreement does not form part of the policy contract, and is not to be submitted to Industrial Alliance.

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Only one mailing address is permitted. All outgoing correspondence will be generated in the name of the policyowners at the mailing address provided. This includes policy statements, notices, etc. Copies can be requested by the policyowners if needed.



Any income tax slips for the purpose of reporting taxable gains, dividends and/or interest for the shuttle account are prepared in the name of the policyowners (the individual and the corporation). The policyowners will need to photocopy the slips and report the applicable portion of the taxable amounts to the CRA, preferably with a cover letter explaining the situation and the filing position taken.



All disbursements such as loans, partial surrenders, premium refunds, etc., are payable to the policyowners.



A duplicate policy contract is only provided when the original has been lost; only one contract may be available at any given time. Duplicate contracts must be requested by the policyowners (with an applicable fee charged).



Each December, on the policy effective day, the net cost of pure insurance is updated and is available on the Industrial Alliance Extranet, appearing under the “history tab” details.



Premium payments are the responsibility of the policyowners and only one annual premium notice will be generated. If premiums are to be paid by PAC, only one single amount per month may be withdrawn from one account (draw days available are 1 – 28). A completed and signed PAC authorization is required from the holder of the account from which the funds will be withdrawn .

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

VIII. Samples of Required Documents (Common Law Provinces) Shared Ownership Agreement…………..……………………………………….19 Schedule 1 - Designation of Ownership Form *………………………………..26 Schedule 2 - Change of Beneficiary Form * …………………………………...28 Schedule 3 - Premium Deposits………………………………………………...30 Schedule 4 - Allocation of Policy Proceeds…..………………………………...31

* All forms should be obtained from the Industrial Alliance Extranet where the most current versions of these forms are available. The attached forms are valid as of April 2010, but the most recent version should always be used.

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

Notice : This specimen Shared Ownership Agreement has been prepared only as an example of the document which might be used in conjunction with the implementation of a Shared Ownership Strategy. It is not intended to be used in its current form, nor does it substitute for competent professional advice. It may be provided to the professional advisors of all parties involved, as a resource to them. The final Agreement must be customized to take into account the client’s needs, and should be prepared by the client’s legal advisors.

Shared Ownership Agreement BETWEEN : 1

S A M P L E

Name

(“the Savings Element Owner”)

And Name

(“the Death Benefit Owner”)

(each, a “Party” and collectively, the “Parties”) WHEREAS: 2 1. The Saving Element Owner is the owner of a Genesis life insurance policy insuring the life of the Savings Element Owner and bearing the policy number _______ (the “Policy”), issued by Industrial Alliance Pacific Life Insurance Company (“Industrial Alliance Pacific”); 2. The Savings Element Owner has agreed to make an absolute assignment of the Policy to the Death Benefit Owner and the Savings Element Owner, as tenants in common; 3. The Parties have agreed that the premium deposits for the Policy shall be paid partly by each of them in the amounts provided for in this Agreement; and

O N L Y

4. The Parties have agreed to share the rights and obligations created under the Policy in the manner provided for in this Agreement. Now this Agreement witnesses that in consideration of the mutual agreements and covenants herein contained, the Parties agree as follows:

1 “Saving Element Owner” and “Death Benefit Owner” have been used to identify the parties. The surnames, corporate names and titles of the Parties may be substituted in the actual Agreement, to make the document more reader-friendly. 2 The recitals set out the fact that the policy has been issued and is in force as well as the fact that one party is to assign the policy into joint ownership. It may be useful to insert an additional recital setting out the purpose of the shared ownership plan.

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

1. Definitions 3 In this Agreement, unless the context is inconsistent therewith, all terms have the meaning specified in the Policy. 2. Initial Assignment 4 The Savings Element Owner agrees forthwith to absolutely assign the Policy to the Death Benefit Owner and the Savings Element Owner as tenants in common in a form acceptable to Industrial Alliance Pacific.

S A M P L E O N L Y

3. Allocation of Death Benefit between the Parties 5 3.1. If the person whose life is insured dies while the Policy is in force, the total amount payable by Industrial Alliance Pacific pursuant to the Policy (the “Amount”) shall be paid to the Parties in the following manner: (a) The Death Benefit Owner, or the beneficiary(ies) designated by the Death Benefit Owner, shall be entitled to the lesser of: I) The Amount; and II) The face amount of the Policy. (b) The beneficiary named by the Savings Element Owner or, failing such designation, the estate of the Savings Element Owner shall be entitled to the remaining portion of the Amount not paid to the Death Benefit Owner’s named beneficiary, as set out in Article 3.1(a) herein. 3.2. The amount payable to each of the Parties pursuant to Article 3.1 herein shall be reduced by the amount of any outstanding policy loan granted by Industrial Alliance Pacific to each respective Party. 3.3. Any modification of the face amount of the insurance shall be agreed upon by both Parties. 3 This Agreement is subject to the terms of the underlying life insurance policy and it incorporates by reference the terminology used in the policy. 4 The assignment can be made on a standard Industrial Alliance Pacific form, unless the parties wish to include more details than the form provides, in which case a customized form may be prepared by the client’s legal advisors. Any customized form must include a disclaimer through which the parties acknowledge that Industrial Alliance Pacific does not accept responsibility for the form’s validity or effect. We note that if the insured under the policy dies resulting in a death benefit payable, and the Agreement has not yet been executed, depending on the conduct of the parties, this may result in a situation whereby one Party is holding some of the proceeds of the policy in the trust for the other. 5 The death benefit to be allocated can be set stated as a percentage, a specific amount, or based on a formula. Unless percentages are used, only the benefit payable to one party should be specified in the agreement, with the remainder payable to the other party. One of the advantages of using percentages is that, where loans are taken out against the policy, or withdrawals from or enhancements to the policy are made, the Agreement will not have to be amended.

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

3.4. Each of the Parties and their respective heirs, administrators and assigns shall cooperate in making any proof of claim under the Policy.

S A M P L E O N L Y

3.5. It is agreed between the Parties that in the event that, at the time a payout is to be made under the Policy, the Pre-Payment Account balance is positive, as illustrated in accordance with the Policy, the Death Benefit Owner will be entitled to claim this amount from the Savings Element Owner’s estate. The Savings Element Owner and its respective heirs, administrators and assigns shall co-operate in paying this amount to the Death Benefit Owner. 4. Premiums Deposits 4.1. In consideration of the assignment of the full face amount to the Death Benefit Owner as set out in Article 2 of this Agreement, the Death Benefit Owner shall pay to the Savings Element Owner the following amount: _______ (as specified in Schedule A hereto), which represents the Death Benefit Owner’s portion of the premium deposits made by the Savings Element Owner prior to the execution of this Agreement. 4.2. The respective portion of the annual premium payable by each Party (each of which shall be hereinafter referred to as the “Respective Share”) on or after the date of this Agreement is set out in Schedule A, hereto. 4.3. The Savings Element Owner may increase its premium deposit in a given year, without requiring the consent of the Death Benefit Owner. 4.4. If Industrial Alliance Pacific is unable to deposit any portion of the premium paid by the Savings Element Owner into the Policy, for any reason whatsoever, the excess amount that has not been deposited into the Policy shall be applied to reduce the amount otherwise required to be paid by the Saving Elements Owner in a subsequent year or years. 4.5. If any additional premium is required to cover the cost of insurance under the Policy, as a result of an increase in the face amount of the Policy, such premium will be paid by the current Death Benefit Owner. 5. Withdrawal Option 6 5.1. The Savings Elements Owner may withdraw amounts pursuant to the terms of the policy, provided that sufficient funds remain in the Policy after the withdrawal to cover the cost of insurance. Withdrawals in excess of this amount require the express written consent of the Death Benefit Owner. 5.2. The Death Benefit Owner may withdraw amounts pursuant to the terms of the Policy only with the express written consent of the Savings Element Owner.

6 The amounts that may be withdrawn or borrowed from the policy should be dealt with in the Agreement, from two perspectives. First, the effect of a loan or withdrawal on the rights of the parties and the beneficiaries must be addressed. Second, provision should be made setting out whether one or both parties have the right to unilaterally make a withdrawal, or borrow from the Policy.

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

6. Loans

S A M P L E O N L Y

6.1. The maximum value of a loan taken by a Party under the terms of the Policy shall not exceed the amount which that Party is entitled to withdraw from the Policy pursuant to Article 5. The Parties agree not to borrow from the Policy except with the written consent of the other Party, and such consent cannot be unreasonably withheld. 7. Default 7 7.1 If either Party fails to pay its Respective Share as required by Schedule A within 30 days of the due date specified therein, then such Party is in default of this Agreement. In the event of such default, the non-defaulting Party may pay the defaulter’s Respective Share and take all steps required to recover such amount from the Party in default. In addition, either or both of the Parties shall be entitled to pay any overdue premiums within __ days. 7.2 The Parties may agree to both contribute to the payment of the premiums required to bring a Party out of default. In this event, the rights and obligations of the Parties under the Policy shall be re-allocated, in a manner that reflects and takes into account the proportion of such premiums paid by each of the Parties. 8. Reinstatement 8 8.1. One, or both, of the Parties may apply for reinstatement of the Policy if it lapses, in accordance with the terms of the Policy. 8.2. Where the Parties agree to share the payment of the premiums required to reinstate the Policy, all rights and obligations of the Parties under the Policy shall be divided and shared pursuant to the terms of this agreement, as it may be amended from time to time. 8.3. Where the Death Benefit Owner wishes to reinstate the Policy, the Savings Element Owner agrees to consent to such reinstatement and to provide relevant medical information to Industrial Alliance Pacific or its agents. 8.4. Where only one of the Parties pays the premiums required to reinstate the Policy, the other Party acknowledges that it shall not, after the happening of such event, have any right, title or interest in the Policy thereafter.

7 The rights of the Parties in the event one or both defaults with respect to payment of premiums must be considered. Note that in some provinces, life insurance law permits a life insured to compel termination of a life insurance contract where an insurable interest no longer exists. 8 The rights of each Party in the event that the Policy lapses should be addressed in the Agreement, including the Parties’ respective rights and responsibilities should one or both desire to reinstate the policy.

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

9. Policy features

S A M P L E O N L Y

9.1 Any option made available by Industrial Alliance Pacific to the owners of the Policy, except as otherwise provided in this Agreement, may be exercised by one Party only with the express written consent of the other Party. 10. Subsequent Assignment of Interest in Policy

10.1 The respective rights of each of the Parties under the Policy may be assigned to other persons without the consent of the other Party. 11. Termination 11 11.1 Subject to the provisions set out below, this Agreement shall terminate upon the happening of any of the following events (each, an “Event of Termination”): (a) A written agreement to that effect, signed by the Parties hereto; (b) The Death Benefit Owner is dissolved, wound up, granted articles of dissolution, makes an assignment in bankruptcy, has a receiving order against it, or there is a change in its control (unless the Savings Element Owner waives this event’s characterization as an Event of Termination); (c) The Savings Element Owner is adjudged bankrupt or makes an assignment in bankruptcy or for the general benefit of creditors, or the Savings Element Owner’s interest in the Policy is seized or otherwise taken to satisfy the claims of any one or more creditors (unless the Death Benefit Owner waives this event’s characterization as an Event of Termination); or (d) At the option of either Party upon the termination of employment of the Savings Element Owner otherwise than upon retirement. 11.2 In the event of termination of this Agreement pursuant to Article 11.1, the Savings Element Owner may purchase all the rights, title and interest of the Death Benefit Owner in the Policy by payment to the Death Benefit Owner of an amount equal to the amount that the Death Benefit Owner would have been entitled to withdraw from the Policy pursuant to Article 5.2 at the date of the Event of Termination with such amount to be adjusted upwards or downwards based on unpaid premiums as set out in Article 7.1. This option shall extend for a period of 60 days after the date of the Event of Termination. 11.3 If the Savings Element Owner shall fail to exercise the option referred to in Article 11.2 by the 61st day after the date of the Event of Termination, the Death Benefit Owner shall 9 The Genesis life insurance policy contract includes many policy features. This provision in the sample Agreement provides that such elections shall be made jointly by the Parties. 10 The ability of each party to assign their rights under the policy should be addressed. The sample Agreement allows either party to assign its interest in the policy unilaterally. 11 Any other potential grounds for termination should be considered and included. In addition, the consequences of termination must be considered. The income tax implications of these arrangements should be considered in advance. The Parties who are residents of provinces in which life insurance law permits a life insured to compel termination of a life insurance policy should pay particular attention to this issue.

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

S A M P L E

purchase all rights, title and interest of the Savings Element Owner in the Policy by payment to the Savings Element Owner of an amount equal to the aggregate of the amount that the Savings Element Owner would have been entitled to withdraw from the Policy pursuant to Article 5.2 at the date of the Event of Termination with such amount to be adjusted upwards or downwards based on unpaid premiums as set out in Article 7.1. 11.4 If the Death Benefit Owner fails to purchase the interest in the Policy owned by the Savings Element Owner pursuant to Article 11.3 within a period of 90 days after the date of the Event of Termination, the Death Benefit Owner hereby forfeits all rights, title and interest in the Policy and the Savings Element Owner thereafter becomes the sole owner of the Policy. 12. Notices and Amendment 12.1 The Parties agree that all elections and notices made under this Agreement shall be in writing and delivered to the other Party. 12.2 The Parties agree that they may mutually agree to amend this Agreement and such amendment shall be in writing and signed by the Parties. 13. General Provisions 13.1 The Parties hereto agree to execute any additional documents which may be necessary or proper in order to carry out the full purpose and intent of this Agreement. 13.2 This Agreement is governed by and shall be interpreted according to the laws of the province of _____________________.

O N L Y

13.3 Any notice to be provided hereunder may be made by personal delivery, mail, facsimile transmission or other electronic means to the other Party at that Partyâ&#x20AC;&#x2122;s last known address or facsimile number. 13.4 This Agreement shall enure to the benefit of the Parties hereto and their respective heirs, successors, executors, administrators and assigns. 14. Independent Legal Advice 12 The Parties acknowledge that they are executing this Agreement voluntarily and without reliance on any statement or representation made by the other. Each party acknowledges having been advised to seek independent legal advice before executing this document and that its nature and effect are fully understood.

12 Independent Legal Advice It is strongly recommended that each party to the agreement obtain independent and objective professional advice from both a legal and taxation perspective.

IA / IAP SHARED OWNERSHIP GUIDE â&#x20AC;&#x201C; FOR USE BY ADVISORS ONLY

IF WITNESS WHEREOF, the Parties hereto have executed 13 this Agreement this day of , 2010.

Signed in the presence of: _______________________________ Signature of Witness _________________________________ Printed Name of Witness _________________________________ Street Address of Witness _________________________________ City _________________________________ Occupation of Witness

Signed in the presence of: _______________________________ Signature of Witness _________________________________ Print Name of Witness _________________________________ Street Address of Witness _________________________________ City _________________________________ Occupation of Witness

) ) ) ) ) ) _________________________________ ) Savings Element Owner ) ) ) ) ) ) ) )

) ) ) ) ) ) _________________________________ ) Death Benefit Owner ) ) ) ) ) ) ) )

13 Execution Normally, the Agreement will be executed as soon as possible after the Policy has been issued in order to minimize tax consequences of the disposition.

IA / IAP SHARED OWNERSHIP GUIDE â&#x20AC;&#x201C; FOR USE BY ADVISORS ONLY

Schedule 1

S A M P L E

Shared Ownership Designation of Ownership Form

O N L Y

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

Schedule 2

S A M P L E

Shared Ownership Change of Beneficiary Form

O N L Y

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

Schedule 3 Shared Ownership Premium Deposits

S A M P L E O N L Y

Policy Year 1 2 3 4 5 6 7 8 9 10

Aggregate Premium Deposit

Portion owing by Death Benefit Owner

Portion owing by Savings Element Owner*

Due Date

PrePayment Account

(Show for premium payment period)

*The Savings Element Owner may vary premium deposits each year up to the maximum permitted under the Income Tax Act (Canada) to keep the policy’s exempt status.

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

Schedule 4 Shared Ownership Allocation of Policy Proceeds

S A M P L E

Policy Year Death Benefit Owner Savings Element Owner 1 2 3 4 5 6 7 8 9 10 … … … (Show to age 100 if the Shared Ownership Agreement is for the life of the insured)

O N L Y

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

IX. Additional Materials Specimen Loan and Bonus Covenant Notice: This specimen Loan and Bonus Covenant has been prepared as an example only, of the documentation which may be used in the implementation of a Shared Ownership Strategy. It is not intended to be used as a form, nor does it substitute for independent, professional advice. It may be provided to professional advisors in the course of their preparation of the actual legal documentation required but the final documentation should be customized for the individual client’s situation and needs, and should be prepared and reviewed by the client’s professional advisors. LOAN AND BONUS COVENANT BETWEEN Name (the “Savings Element Owner”) -andName (the “Death Benefit Owner”) WHEREAS: 1. The Savings Element Owner and the Death Benefit Owner (the “Parties”) have entered into an agreement (the “Agreement”) to share in the payment of premiums and the rights and obligations created under a life insurance policy on the life of _______________ bearing the number _________ (the “Policy”), issued by Industrial Alliance Insurance and Financial Services Inc. (the “Insurer”); and 2. The Death Benefit Owner has agreed to make loans and /or pay bonuses to the Savings Element Owner to assist the Savings Element Owner in funding the payment of premiums relating to the Policy. NOW THIS AGREEMENT witnesses that in consideration of the mutual agreements and covenants herein contained, the Parties agree as follows: 1.

Loan

1.1 The Death Benefit Owner will make such advance or advances (the “Loans”) to the Savings Element Owner as may be required by the Savings Element Owner to pay premiums pursuant to the Agreement.

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

1.2 The Loans shall be made on or before the date specified in the Agreement for payment by the Savings Element Owner of the corresponding premium. 2.

Interest

2.1 No interest shall be payable by the Savings Element Owner on the Loans outstanding from time to time. 3.

Repayment

3.1 Subject to Article 6.1 below, the Savings Element Owner shall make repayments of the Loans according to Schedule A, hereto. These loan repayments will be equal to the amounts shown as “Executive Portion” on Schedule A hereto. 4.

Bonus Payments

4.1 The Death Benefit Owner may also make bonus payments to the Savings Element Owner according to Schedule A, hereto. These bonus payments will be equal to the amounts shown as the “Executive Portion” on Schedule A hereto, as grossed up to account for the personal income tax payable by the Savings Element Owner on such bonuses. 5.

Security

5.1 The Savings Element Owner assigns his/her interest in the Policy to the Death Benefit Owner as collateral security for the Loans made pursuant to this agreement. 5.2 The Death Benefit Owner covenants and agrees that the balance of any sums received from the Insurer, after repayment of the Loans, shall be paid to the persons entitled thereto under the terms of the Agreement. 5.3 The Death Benefit Owner shall release the Savings Element Owner’s assignment at such time as the Loans have been repaid in full. 6.

Termination

6.1 Upon termination of this agreement, the Savings Element Owner shall repay in full any Loans remaining outstanding at the date of termination. 7.

Amendment

7.1 The Parties may amend this agreement by notice in writing, signed by both Parties.

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

General Provisions

8.1 The Parties agree to execute any documents which may be necessary or proper in order to carry out this agreement. 8.2

This agreement is governed by the laws of the province of ________________ .

8.3 Any notice to be given hereunder shall be in writing and may be given by personal delivery, mail, facsimile transmission or other electronic means to the other Party at that Partyâ&#x20AC;&#x2122;s last known address or facsimile number. Any notice given by personal delivery shall be conclusively deemed to have been given on the date of actual delivery, or, if given by facsimile or electronic transmittal, on the first business day following transmittal, or if given by mail, after 5 days from the date of mailing. 8.4 This agreement shall enure to the benefit of the Parties hereto and their respective heirs, successors, executors, administrators and assigns. 9.

Independent Legal Advice

9.1 The parties each state that they are executing this agreement voluntarily and without reliance on any statement or representation made by the other. Each party acknowledges having been advised to seek independent legal advice before executing this document and that its nature and effect are fully understood. IN WITNESS WHEREOF the Parties hereto have executed this agreement this ___ day of ________ , 2010. Signed in the presence of: _______________________________ Signature of Witness _________________________________ Printed Name of Witness _________________________________ Street Address of Witness _________________________________ City _________________________________ Occupation of Witness

) ) ) ) ) ) _________________________________ ) Savings Element Owner ) ) ) ) ) ) ) )

IA / IAP SHARED OWNERSHIP GUIDE â&#x20AC;&#x201C; FOR USE BY ADVISORS ONLY

) ) ) ) ) ) _________________________________ ) Death Benefit Owner ) ) ) ) ) ) ) )

IA / IAP SHARED OWNERSHIP GUIDE â&#x20AC;&#x201C; FOR USE BY ADVISORS ONLY

Illustration

Prepared for:

Holdco

Prepared on:

April 16, 2010

Prepared by: Printed on:

March 2, 2010 - 5:23 PM

A PARTNER YOU CAN TRUST.

Page of

Holdco

A FINANCIAL SOLUTION FOR ALL YOUR NEEDS

WHAT IS UNIVERSAL LIFE INSURANCE?

GENESIS universal life insurance is a highly flexible product that combines the two elements that are essential to financial planning under the same contract: affordable life insurance protection and a profitable tax-sheltered savings account. In addition to insuring your financial security, GENESIS offers several fully guaranteed components, such as:

• •

Fully guaranteed GENESIS costs of insurance;

•

The assurance that investors can always benefit from a fixed-term account in their GENESIS policy, as well as a guaranteed return for fixed-term accounts of 1 to 5 and 10 years. In fact, these accounts currently guarantee investors a return of no less than 3% for a 10-year term, 2% for a 5-year term and 1% for a 4-year term. The guaranteed return for investors choosing the minimum fee option will be 3.7% for a 10-year term, 2.7% for a 5-year term and 1.7% for a 4-year term;

• • •

An optional guaranteed interest bonus, which increases the returns on your savings;

•

The annual management fees for the index accounts, which contain a guaranteed maximum.

THE GENESIS PLAN GUARANTEES

SOME OF THE MOST PROFITABLE INVESTMENT OPTIONS

TAXATION

Deposits to the Genesis index accounts of your contract are 75% to 100% guaranteed at death, depending on your age at the time the contract is issued, adjusted proportionally for any withdrawals. Regardless of fluctuations in financial markets, your savings are in good hands;

Policy fees that are guaranteed for the duration of your contract; The guarantee of knowing that the investor can always select from at least three index accounts in the GENESIS policy;

In addition to meeting your insurance needs, GENESIS helps you to reach your personal savings objectives. You will benefit from:

•

The option of transferring funds between the various GENESIS index accounts with no transaction fees;

• •

A simple and automatic management of your savings; An attractive additional bonus starting in the 1st year (not available for the low fees option).

With GENESIS, you determine the amount of premium you want to pay, subject to a minimum premium for the insurance and a maximum premium established by law. Limits on this accumulation are defined by the Canada Revenue Agency.

A PARTNER YOU CAN TRUST

Founded in 1892, Industrial Alliance Insurance and Financial Services Inc. is a life and health insurance company that offers a wide range of life and health insurance products, savings and retirement plans, RRSPs, mutual and segregated funds, securities and other financial products and services. The fifth largest life and health insurance company in Canada, the Industrial Alliance Group has operations across Canada. Industrial Alliance stock is listed on the Toronto Stock Exchange under the ticker symbol IAG. Industrial Alliance is among the 100 largest public companies in Canada.

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

Prepared by:

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

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Office: 5.30

Fax:

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PLAN DETAILS Applicant(s) Applicant:

Holdco

Province:

BC British Columbia

Illustration Date: April 16, 2010 Marginal rate

On dividends

On capital gain

Corporate tax rate:

45.67%

33.33%

22.84%

Personal tax rate:

43.70%

32.71%

21.85%

Insured(s) Face Amount + Fund

Death Benefit:

Portion of the accumulation fund payable automatically upon each insured's death:

PROTECTION Insured 1: Johnny Print Male, 45 yrs, NS (Non smoker)

GENESIS 5, Level cost.

$1,000,000.00 for life

100 % ANNUAL MINIMUM PREMIUM $7,937.16 for 55 yrs

Total annual minimum premium for insured:

$7,937.16

Premium Details Premiums at issue:

Minimum annual premium

$7,937.16

Maximum premium for the first year to retain the tax-free status $40,336.85 Premium frequency:

Annual

Premiums paid:

Specify for 10 years

$40,000.00

Investment Assumptions Accumulation Fund Interest Bonus: Low Fees Option Allocation

Interest Rate

DDA

Allocation

100%

5.00%

Yes

100%

Year 1 to 24

3.00%

Yes

100%

Year 25 to 55

Money Market

1st year average return:

Period

5.00%

The interest rates provided in this illustration are shown on a net basis, after deduction of management fees. These management fees influence the net return obtained. Current management fees are available on the Companyâ&#x20AC;&#x2122;s website. These fees are subject to change. However, there are guaranteed maximum fees defined in the contract (you may contact your advisor for more information).

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

Prepared by:

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

Page 2 of 9

Primary:

Agency: Version:

Office: 5.30

Fax:

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PLAN DETAILS Shuttle Fund Assumptions Shuttle account Automatic Investment Instructions (AII) : Identical to the accumulation fund AII Interest Rate

Period

6.00%

for life

According to the parameters used, this illustration does not contain any values in the shuttle fund for the entire duration of the projection.

Alternative Investment Assumptions

Allocation

Rate of Return

Tax Rate

Period

100.00%

6.00%

45.67%

for life

Term Plan

Protection

Annual Premium

Trad. Insurance - T100

$1,000,000.00

$7,890.00

Interest

Term Plan Assumptions

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

Prepared by:

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

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Comparison with an Alternative Investment and Term Plan Like all investors, your goal is to preserve the funds you have accumulated over the years and continue to accumulate savings in tax-sheltered investment vehicles so that you can leave a more valuable estate to your loved ones. Traditional investment vehicles such as GICs and mutual funds canâ&#x20AC;&#x2122;t completely meet all your financial needs. In fact, systematic taxation, year after year, on income generated by these investments means a very small increase in capital and therefore less to leave to your heirs. Your goal is to invest your available funds in a financial vehicle that allows you to bequeath the full value of your savings to your heirs upon your death. The following pages compare growth in the value, after taxes, of an estate invested in a universal life insurance policy and one invested in an alternative investment vehicle, both of which generate investment income. You will see that universal life insurance provides a higher estate value and that the difference continues to increase over the years. Universal life insurance is the perfect vehicle to leave your savings intact for your heirs without worrying about taxes.

UNIVERSAL LIFE INSURANCE FINANCIAL STRATEGY

ALTERNATIVE INVESTMENT AND TERM PLAN

ESTATE

VALUE NET OF TAXES

At age 65:

$1,359,456.94

At age 65:

$1,247,933.69

At age 79 (life expectancy):

$1,632,372.73

At age 79 (life expectancy):

$1,367,129.44

At age 100:

$1,999,260.48

At age 100:

$1,556,999.91

Note: The figures take additional deposits and withdrawals into account.

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

Prepared by:

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

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Details of Comparison Net

Estate

Value

Death

Genesis Universal Life' Annual Premiums Paid

After Tax Withdrawals

(After

taxes)

ALTERNATIVE INVESTMENT and term plan

Total Funds Death Benefit Term Death Closing After Insured 1 Benefit Market Value Deferred Tax Estate Value

Gain

Year

Age

Net Estate Value Including Term Plan

Genesis advantage

1 2 3 4 5

46 47 48 49 50

40,000.00 40,000.00 40,000.00 40,000.00 40,000.00

0 0 0 0 0

33,173 67,992 104,564 142,965 183,286

1,038,669 1,067,992 1,104,564 1,142,965 1,183,286

1,000,000 1,000,000 1,000,000 1,000,000 1,000,000

33,157 67,394 102,748 139,254 176,950

1,033,157 1,067,394 1,102,748 1,139,254 1,176,950

18,253 26,013 39,831 54,242 69,292

6 7 8 9 10

51 52 53 54 55

40,000.00 40,000.00 40,000.00 40,000.00 40,000.00

0 0 0 0 0

225,622 270,076 316,752 365,762 417,223

1,225,622 1,270,076 1,316,752 1,365,762 1,417,223

1,000,000 1,000,000 1,000,000 1,000,000 1,000,000

215,875 256,069 297,573 340,430 384,684

1,215,875 1,256,069 1,297,573 1,340,430 1,384,684

85,033 101,507 118,755 136,816 155,733

11 12 13 14 15

56 57 58 59 60

0.00 0.00 0.00 0.00 0.00

0 0 0 0 0

430,097 443,614 457,807 472,710 488,358

1,430,097 1,443,614 1,457,807 1,472,710 1,488,358

1,000,000 1,000,000 1,000,000 1,000,000 1,000,000

389,077 393,613 398,296 403,133 408,127

1,389,077 1,393,613 1,398,296 1,403,133 1,408,127

162,630 169,805 177,269 185,038 193,109

16 17 18 19 20

61 62 63 64 65

0.00 0.00 0.00 0.00 0.00

0 0 0 0 0

504,789 522,041 540,155 559,175 579,147

1,504,789 1,522,041 1,540,155 1,559,175 1,579,147

1,000,000 1,000,000 1,000,000 1,000,000 1,000,000

413,284 418,609 424,108 429,786 435,648

1,413,284 1,418,609 1,424,108 1,429,786 1,435,648

201,239 209,637 218,255 227,056 236,024

25 34 40 55

70 79 85 100

0.00 0.00 0.00 0.00

0 0 0 0

681,711 809,178 915,073 1,278,644

1,681,711 1,809,178 1,915,073 2,278,644

1,000,000 1,000,000 1,000,000 1,000,000

467,958 540,930 602,692 820,686

1,467,958 1,540,930 1,602,692 1,820,686

279,219 323,855 374,338 542,324

The highlighted line in the previous table corresponds to the life expectancy of the insured covered by the basic protection.

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

Prepared by:

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

Page 5 of 9

Primary:

Agency: Version:

Office: 5.30

Fax:

(This illustration is incomplete if it is not presented with all its pages)

Page of

Holdco

Policy Projected Values Projected Annual Premiums Paid

Values

Based

your

Investment

After Tax Death Benefit Total Funds Shuttle Fund Withdrawals Insured 1 (Before Taxes)

Total Surrender Value

Assumptions

Year

Age

Weighted Average Yield (incl. bonus) (1)

Extended Insurance

1 2 3 4 5

46 47 48 49 50

40,000.00 40,000.00 40,000.00 40,000.00 40,000.00

0 0 0 0 0

1,038,669 1,067,992 1,104,564 1,142,965 1,183,286

33,173 67,992 104,564 142,965 183,286

0 0 0 0 0

33,173 67,992 104,564 142,965 183,286

5.00% 5.00% 5.00% 5.00% 5.00%

4 11 21 39 100

6 7 8 9 10

51 52 53 54 55

40,000.00 40,000.00 40,000.00 40,000.00 40,000.00

0 0 0 0 0

1,225,622 1,270,076 1,316,752 1,365,762 1,417,223

225,622 270,076 316,752 365,762 417,223

0 0 0 0 0

225,622 270,076 316,752 365,762 417,223

5.00% 5.00% 5.00% 5.00% 5.00%

100 100 100 100 100

11 12 13 14 15

56 57 58 59 60

0.00 0.00 0.00 0.00 0.00

0 0 0 0 0

1,430,097 1,443,614 1,457,807 1,472,710 1,488,358

430,097 443,614 457,807 472,710 488,358

0 0 0 0 0

430,097 443,614 457,807 472,710 488,358

5.00% 5.00% 5.00% 5.00% 5.00%

100 100 100 100 100

16 17 18 19 20

61 62 63 64 65

0.00 0.00 0.00 0.00 0.00

0 0 0 0 0

1,504,789 1,522,041 1,540,155 1,559,175 1,579,147

504,789 522,041 540,155 559,175 579,147

0 0 0 0 0

504,789 522,041 540,155 559,175 579,147

5.00% 5.00% 5.00% 5.00% 5.00%

100 100 100 100 100

25 34 40 55

70 79 85 100

0.00 0.00 0.00 0.00

0 0 0 0

1,681,711 1,809,178 1,915,073 2,278,644

681,711 809,178 915,073 1,278,644

0 0 0 0

681,711 809,178 915,073 1,278,644

3.00% 3.00% 3.00% 3.00%

100 100 100 100

Premiums are payable in years 1 to 10. Premiums are deposited at the beginning of each year and values are calculated at the end of each year. According to the investment assumptions shown, the policy will remain in effect until age 100. Thanks to the Automatic Optimization of the Face Amount (AOFA), an increase in the face amount is needed in year 1 to maintain the policyâ&#x20AC;&#x2122;s exempt status. The highlighted line in the previous table corresponds to the life expectancy of the insured covered by the basic protection. (1) With the "Low fees option" type of bonus, no annual bonus is paid, but the management expense ratios are lower than those of Genesis contracts with bonuses. This illustration is provided for information purposes to facilitate your understanding of the product. The above data must not be considered as a guarantee of the future results, which could be higher or lower depending on the real returns obtained on your investments. If there is any discrepancy, your policy contract prevails.

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

Prepared by:

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

Page 6 of 9

Primary:

Agency: Version:

Office: 5.30

Fax:

(This illustration is incomplete if it is not presented with all its pages)

Page of

Holdco

HIGHLIGHTS The illustration presented in the previous pages contains technical terms. The following text aims to clarify certain terms and present you with some of the product's features. Face Amount + Fund: Total Funds: This term means that, in addition to the face amount, the higher of the following amounts will be paid. The total of these amounts appears in the Death Benefit (Insured 1) column.

Costs:

Shuttle Fund (see Taxation):

At issue, the Level, Level Investor or Yearly Renewable Term (YRT) costs of insurance are guaranteed for life. Once issued, all additions made to the coverages will require new evidence of insurablility and will be calculated according to the insurance costs in effect at that time. The policy fees are also guaranteed as long as the number of insureds remains the same.

Preferred Rates ($200,000 and Over): The company is aware of the importance you place on your health. That is why we have developed a preferred rates program to reward you. If you are in excellent health, you may qualify for the "Preferred" or "Elite" categories, which allow you to reduce your insurance costs substantially.

Extended Insurance: Extended insurance represents the number of years during which your policy will remain in effect if you stop paying premiums. This duration is not guaranteed and can vary according to several factors, particularly the real returns that your investments obtain.

Maximum premium: The maximum premium indicated in this illustration is calculated by projecting various values in the contract over time at a fixed rate of return. Consequently, the actual residual tax room could differ over time from that illustrated, according to the actual returns of the investments selected by the policyholder.

This option will increase or decrease the face amount as needed. This results in a minimum of transfers being made to the shuttle fund and, by the same token, will maximize your tax-sheltered capitalization.

Adjusted Cost Basis (ACB): The Adjusted Cost Basis (ACB) is equal to the sum of the premiums paid adjusted for withdrawals less the accumulated Net Cost of Pure Insurance (NCPI) since issue of the policy. The NCPI is calculated based on the cost of a yearly renewable term set by the Income Tax Act. The ACB is used in the calculation of taxable gain at the time of surrender, by the applicant, of an interest in the policy.

Portfolio account:

Prepared by:

Total Surrender Value: The Total Surrender Value shown includes the shuttle fund and the Guaranteed Surrender Value if Option 10-15-20 is selected. It does not take into account market value adjustments that may exist on certain types of investments, or the Company's current transaction fees. However, it does take into account the surrender fees for coverage with YRT cost type which range from 7 to 10 years depending on the Death Benefit Type selected. Coverage with Level cost type do not have any surrender charges, except for Level Investor costs, which are applicable for 7 years. It is important to note that in all cases, the total surrender value payable is reduced by the current balance of all policy loans.

Premiums Paid: Premiums paid include the premiums received on a regular basis and additional deposits. They are subject to a 2.00 % premium tax. This tax may vary according to changes made to tax laws or following a change of province of residence. You do not have to pay a premium, provided that the premiums paid respect the minimum premiums required to keep your policy in force.

The amounts accumulated in the contract are tax exempt as long as they respect the maximum allowed to retain the policy's tax-free status. When the accumulated amounts exceed the maximum, a transfer is made to the shuttle fund. You must pay income taxes on the returns generated by this account. Also, a portion of any withdrawals, policy loans and surrender values may be subject to the Income Tax Act.

Duration of the Illustration: The fact that the illustration shows values until insured 1 reaches age 100 does not mean that the policy remains in force until that time. In reality, the policy remains in effect until the last insured dies if the premiums paid and funds are sufficient.

Weighted Average Yield:

The portfolio account is designed to receive the deposit of sums paid into the policy. All transactions are made through this account. Insurance costs are deducted from this account each month. Excess amounts are then transferred to different investment accounts according to the Automatic Investment Instructions (AII).

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

The amounts transferred to this account remain there temporarily. Amounts accumulated in the shuttle fund are returned to the accumulation fund as quickly as possible. The term "before tax" means that the taxes to be paid on the shuttle fund growth are supposed to be paid with additional and external money.

Taxation:

Automatic Optimization of the Face Amount:

The illustration software calculates a yearly average rate of return based on the different interest rate in each investment option, asset allocation and monthly deductions. This will result in a changing weighted average yield year by year as shown in the policy's projected values. The interest rates provided in this illustration are shown on a net basis (after deduction of management fees). The "weighted average rate (incl. bonus)" column shown in certain reports includes annual bonuses, if applicable, which may not be guaranteed depending on the type of bonus chosen.

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

Page 7 of 9

Primary:

Agency: Version:

The total funds represent the total amount invested in the policy's various accounts and the shuttle fund. The total funds must be sufficient to maintain your policy in force.

Office: 5.30

Fax:

(This illustration is incomplete if it is not presented with all its pages)

Page of

Holdco

INTEREST RATE SENSITIVITY TEST IMPORTANT NOTICE: The values shown are sensitive to the interest rates used. In order to make a comparison with your basic scenario, we suggest the following two additional scenarios. Your investment assumptions include at least one index account. Since this type of account has a more variable return, the illustration difference is 2%. The 0% minimum rate for fixed-term accounts of 3 years and less, 1% for 5-year average accounts and the 4-year fixed term, 2% for the 5-year fixed-term account and 3% for the 10-year fixed-term account has been used, if applicable. With the low fees option bonus, all rates are increased by 0.7%. The Company reserves the right to offer new investment options or cancel certain options, whenever it feels that such an approach is relevant and without requiring the prior approval of the policyholder; please refer to the contract clauses.

Universal Life Value

Current assumptions (5%)ยน

Assumptions (+2%)

Assumptions (-2%)

Estate Value Net of Taxes

Estate at age 65 Estate at age 79 (life expectancy) Estate at age 100

$1,359,456.94 $1,632,372.73 $1,999,260.48

$1,538,214.83 $2,223,663.80 $4,186,113.88

$1,227,003.35 $1,305,543.90 $1,234,518.94

100

Age at the end of the illustration

Alternative Investment and a Term Plan Value

Estate Value Net of Taxes

Estate at age 65 Estate at age 79 (life expectancy) Estate at age 100

Estate Value Net of Taxes

$1,247,933.69 $1,367,129.44 $1,556,999.91

$1,318,148.83 $1,541,913.67 $2,138,624.86

$1,188,547.55 $1,235,933.69 $1,235,949.64

100

Age at the end of the illustration

ยน1st year average return Even though all efforts are made to ensure the quality of the illustration or its use, the figures used in the illustration, particularly costs and/or premiums, are subject to approval by the Company. I, the undersigned, declare that I have read this illustration of the GENESIS product. I understand that the results obtained could be higher or lower than those illustrated. I also understand that the interest rates are not guaranteed and the tax rates may be different. I acknowledge that this illustration is not part of the contract.

Advisor's Signature

Client's Signature

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

Prepared by:

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

Date

Page 8 of 9

Primary:

Agency: Version:

Application Number

Office: 5.30

Fax:

(This illustration is incomplete if it is not presented with all its pages)

Page of

Holdco

MEDICAL REQUIREMENTS INSURED 1 Johnny Print, 45 years old, NS (Non smoker) FACE AMOUNT: $1,000,000.00

A Paramedical examination A E.K.G. A Blood Profile

IMPORTANT NOTICE: For immigrants less than 1 year in Canada: Paramedical and blood profile. The Company reserves the right to require different medical requirements from those shown.

Please total the amount of insurance requested in all the applications submitted for a proposed insured when determining the underwriting requirements.

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

Prepared by:

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

Page 9 of 9

Primary:

Agency: Version:

Office: 5.30

Fax:

(This illustration is incomplete if it is not presented with all its pages)

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Holdco

INVESTOR PROFILE You have not selected any profile for your illustration.

Printed on: March 2, 2010 - 5:23 PM E. & O.E. Prepared on: April 16, 2010

Prepared by:

Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

Primary:

Agency: Version:

Office: 5.30

Fax:

Shared Ownership Objectives 1. Protect your business by insuring your key shareholder with a purchase of a Universal Life policy 2. Take advantage of tax-deferred investment growth and cost effective life insurance.

Designed for: Presented by:

Holdco

Industrial Alliance Pacific strongly encourages you to obtain independent advice from your tax advisor, legal counsel or accountant to ensure that this concept is right for you.

This presentation is incomplete w ithout the LEGAL NOTICE that appears on the last page of this document. (E&OE) Conceptia 5.30 uses GENESIS 5.30 ÂŠ Industrial Alliance Pacific Insurance and Financial Services Inc..

03-02-2010 15:55

General

GENESIS Universal Life Financial product that combines permanent life insurance coverage with an investment vehicle with tax-sheltered returns Some features of this product are guaranteed for life Flexibility in the choice of coverage combinations

A flexible, high-performance product A wide range of investments tied to the return of the stock or bond market indices, plus active management or guaranteed interest accounts Investments managed by renowned managers

GENESIS is the most complete and the most flexible financial vehicle with insurance coverage currently offered on the Canadian market

03-02-2010 15:55

Shared Ownership Your Goals Protect your business from financial hardship in the event of the death of the key shareholder As an added bonus, provide additional tax-deferred investment for the key shareholder to accumulate wealth for retirement Provide cost-effective life insurance for the company and the key shareholder

The solution that can do all of the above: Buy a GENESIS universal life insurance policy A Shared Ownership Agreement is drawn up between the company and the key shareholder outlining the benefits and costs to both parties GENESIS universal life insurance, an excellent product for the Shared Ownership strategy. It combines cost effective insurance with a choice of over 40 investment options.

03-02-2010 15:55

Shared Ownership Company

Key Shareholder Both parties contribute to the GENESIS insurance policy Key Shareholder owns the tax-deferred investment account

Death benefit owned by the company for 40 years

Death benefit transferred to Key Shareholder after 40 years

03-02-2010 15:55

Shared Ownership : Summary Company 100%

Death Benefit Split at Issue: Death Benefit Transfer at Age: Premium Split Basis : Trad. Insurance - T100 Canadian Controlled Private Corporation? Include pre-payment in Company's Death Benefit? Pre-payment Discount Rate: Marginal Tax Rate:

Key Shareholder 0% 85

$7,890.00 Y Y 2.00% 45.67%

N Pre-payment Growth Rate: 43.70%

Total Policy

2.00%

Holdco

GENESIS Details : Death Benefit Type: Cost Type: Bonus: Province: Initial Death Benefit: Projected Growth Rate:

Face Amount + Fund Level Low Fees Option British Columbia $1,000,000 5.00%

Johnny Print, Male, Non-smoker, 45

Year

Age

Deposits

Coverage

Fund Value

Deposits

Pre-Payment Account

Coverage

Capital Div. Acct. Credit

Deposits

Fund Value

Coverage

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 45 50 55

46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 70 75 80 85 90 95 100

40000 40000 40000 40000 40000 40000 40000 40000 40000 40000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

1038669 1067992 1104564 1142965 1183286 1225622 1270076 1316752 1365762 1417223 1430097 1443614 1457807 1472710 1488358 1504789 1522041 1540155 1559175 1579147 1686368 1780384 1893128 2028331 2190468 2384903 2618071

33173 67992 104564 142965 183286 225622 270076 316752 365762 417223 430097 443614 457807 472710 488358 504789 522041 540155 559175 579147 686368 780384 893128 1028331 1190468 1384903 1618071

24028 24028 24028 24028 24028 24028 24028 24028 24028 24028 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

16461 33251 50377 67845 85663 103837 122375 141283 160570 180242 175799 171267 166645 161930 157121 152215 147212 142108 136903 131593 103408 72290 37933 0 0 0 0

1016461 1033251 1050377 1067845 1085663 1103837 1122375 1141283 1160570 1180242 1175799 1171267 1166645 1161930 1157121 1152215 1147212 1142108 1136903 1131593 1103408 1072290 1037933 1000000 0 0 0

993473 987472 982019 977150 972899 969285 966375 964245 962993 962718 962995 963863 965370 967555 970516 975091 980747 987734 996278 1006548 1087654 1072290 1037933 1000000 0 0 0

15972 15972 15972 15972 15972 15972 15972 15972 15972 15972 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

16712 34741 54187 75120 97622 121785 147701 175469 205193 236981 254298 272347 291162 310780 331237 352573 374829 398047 422273 447554 582960 708094 855195 1028331 1190468 1384903 1618071

22209 34741 54187 75120 97622 121785 147701 175469 205193 236981 254298 272347 291162 310780 331237 352573 374829 398047 422273 447554 582960 708094 855195 1028331 2190468 2384903 2618071

03-02-2010 15:55

Shared Ownership : Details Company 100%

Key Shareholder 0% 85

$7,890.00 Y Y 2.00% 45.67%

GENESIS Details : Death Benefit Type: Cost Type: Bonus: Province: Initial Death Benefit: Projected Growth Rate:

N Pre-payment Growth Rate: 43.70%

Holdco

2.00%

Face Amount + Fund Level Low Fees Option British Columbia $1,000,000 5.00%

Johnny Print, Male, Non-smoker, 45

Year

Age

Deposits

PrePayment

Death Benefit

NCPI

ACB*

Capital Div. Acct. Credit

Deposits

Fund Value

Death Benefit

NCPI

ACB*

Total Deposits

Total ACB

1 2 3 4 5

46 47 48 49 50

24028 24028 24028 24028 24028

16461 33251 50377 67845 85663

1016461 1033251 1050377 1067845 1085663

1040 1237 1450 1690 1960

22988 45779 68358 90696 112764

993473 987472 982019 977150 972899

15972 15972 15972 15972 15972

16712 34741 54187 75120 97622

22209 34741 54187 75120 97622

0 0 0 0 0

15972 31944 47916 63887 79859

40000 40000 40000 40000 40000

38960 77723 116273 154583 192623

6 7 8 9 10

51 52 53 54 55

24028 24028 24028 24028 24028

103837 122375 141283 160570 180242

1103837 1122375 1141283 1160570 1180242

2240 2580 2990 3490 4080

134552 156000 177038 197576 217525

969285 966375 964245 962993 962718

15972 15972 15972 15972 15972

121785 147701 175469 205193 236981

0 0 0 0 0

95831 111803 127775 143747 159719

40000 40000 40000 40000 40000

230383 267803 304813 341323 377243

11 12 13 14 15

56 57 58 59 60

0 0 0 0 0

175799 171267 166645 161930 157121

1175799 1171267 1166645 1161930 1157121

4720 5400 6130 6900 7770

212805 207405 201275 194375 186605

962995 963863 965370 967555 970516

0 0 0 0 0

254298 272347 291162 310780 331237

0 0 0 0 0

159719 159719 159719 159719 159719

0 0 0 0 0

372523 367123 360993 354093 346323

16 17 18 19 20

61 62 63 64 65

0 0 0 0 0

152215 147212 142108 136903 131593

1152215 1147212 1142108 1136903 1131593

9480 10660 12090 13750 15580

177125 166465 154375 140625 125045

975091 980747 987734 996278 1006548

0 0 0 0 0

352573 374829 398047 422273 447554

0 0 0 0 0

159719 159719 159719 159719 159719

0 0 0 0 0

336843 326183 314093 300343 284763

21 22 23 24 25

66 67 68 69 70

0 0 0 0 0

126177 120653 115018 109271 103408

1126177 1120653 1115018 1109271 1103408

17500 19540 21680 23990 26580

107545 88005 66325 42335 15755

1018632 1032648 1048693 1066936 1087654

0 0 0 0 0

473939 501482 530236 560259 582960

0 0 0 0 0

159719 159719 159719 159719 159719

0 0 0 0 0

267264 247724 226044 202053 175473

26 27 28 29 30

71 72 73 74 75

0 0 0 0 0

97429 91329 85108 78763 72290

1097429 1091329 1085108 1078763 1072290

29550 32880 36500 40350 44370

0 0 0 0 0

1097429 1091329 1085108 1078763 1072290

0 0 0 0 0

606402 630609 655609 681428 708094

0 0 0 0 0

159719 159719 159719 159719 159719

0 0 0 0 0

145923 113043 76543 36193 0

03-02-2010 15:55

Shared Ownership : Details (page 2) Company 100%

Key Shareholder 0% 85

$7,890.00 Y Y 2.00% 45.67%

N Pre-payment Growth Rate: 43.70%

Holdco

2.00%

GENESIS Details : Death Benefit Type: Cost Type: Bonus: Province: Initial Death Benefit: Projected Growth Rate:

Face Amount + Fund Level Low Fees Option British Columbia $1,000,000 5.00%

Johnny Print, Male, Non-smoker, 45

Year

Age

Deposits

PrePayment

Death Benefit

NCPI

ACB*

Capital Div. Acct. Credit

Deposits

Fund Value

Death Benefit

NCPI

ACB*

Total Deposits

Total ACB

31 32 33 34 35

76 77 78 79 80

0 0 0 0 0

65688 58954 52085 45079 37933

1065688 1058954 1052085 1045079 1037933

48410 52720 57590 63160 69410

0 0 0 0 0

1065688 1058954 1052085 1045079 1037933

0 0 0 0 0

735637 764086 793474 823832 855195

0 0 0 0 0

159719 159719 159719 159719 159719

0 0 0 0 0

36 37 38 39 40

81 82 83 84 85

0 0 0 0 0

30644 23209 15625 7890 0

1030644 1023209 1015625 1007890 1000000

76390 84170 92860 102650 113280

0 0 0 0 0

1030644 1023209 1015625 1007890 1000000

0 0 0 0 0

887596 921073 955661 991401 1028331

0 0 0 0 0

159719 159719 159719 159719 35129

0 0 0 0 0

41 42 43 44 45

86 87 88 89 90

0 0 0 0 0

1058446 1089675 1122060 1155642 1190468

2058446 2089675 2122060 2155642 2190468

124590 136370 148520 160580 172790

0 0 0 0 0

46 47 48 49 50

91 92 93 94 95

0 0 0 0 0

1226582 1264032 1302867 1343140 1384903

2226582 2264032 2302867 2343140 2384903

185130 197600 210450 223860 238980

0 0 0 0 0

51 52 53 54 55

96 97 98 99 100

0 0 0 0 0

1428211 1473121 1519693 1567989 1618071

2428211 2473121 2519693 2567989 2618071

256860 278430 305620 340260 384440

0 0 0 0 0

03-02-2010 15:55

Shared Ownership : Loan Details Loan Amount: Assumed Loan Interest Rate: Loan Start Age: Loan End Age: Maximum Loan Ratio at Age 100:

$44,203.00 4.75% 70 80 90%

Face Amount + Fund Level Low Fees Option British Columbia

Death Benefit Type: Cost Type: Bonus: Province:

Initial Death Benefit: Projected Growth Rate:

$1,000,000.00 5.00%

Johnny Print, Male, Non-smoker, 45

Year Age 1 46 2 47 3 48 4 49 5 50 6 51 7 52 8 53 9 54 10 55 11 56 12 57 13 58 14 59 15 60 16 61 17 62 18 63 19 64 20 65 21 66 22 67 23 68 24 69 25 70 26 71 27 72 28 73 29 74 30 75

Deposits 15,972 15,972 15,972 15,972 15,972 15,972 15,972 15,972 15,972 15,972 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Fund Value 16,712 34,741 54,187 75,120 97,622 121,785 147,701 175,469 205,193 236,981 254,298 272,347 291,162 310,780 331,237 352,573 374,829 398,047 422,273 447,554 473,939 501,482 530,236 560,259 582,960 606,402 630,609 655,609 681,428 708,094

Death Benefit 22,209 34,741 54,187 75,120 97,622 121,785 147,701 175,469 205,193 236,981 254,298 272,347 291,162 310,780 331,237 352,573 374,829 398,047 422,273 447,554 473,939 501,482 530,236 560,259 582,960 606,402 630,609 655,609 681,428 708,094

Loan Amount 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 44,203 44,203 44,203 44,203 44,203 44,203

Loan Interest 4.75% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2,100 4,299 6,603 9,016 11,544

Loan Balance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 44,203 90,506 139,008 189,814 243,033 298,780

Loan as a % of Fund Value 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Net of Loan Fund Value Death Benefit 16,712 22,209 34,741 34,741 54,187 54,187 75,120 75,120 97,622 97,622 121,785 121,785 147,701 147,701 175,469 175,469 205,193 205,193 236,981 236,981 254,298 254,298 272,347 272,347 291,162 291,162 310,780 310,780 331,237 331,237 352,573 352,573 374,829 374,829 398,047 398,047 422,273 422,273 447,554 447,554 473,939 473,939 501,482 501,482 530,236 530,236 560,259 560,259 538,757 538,757 515,896 515,896 491,602 491,602 465,795 465,795 438,395 438,395 409,314 409,314

Shared Ownership : Loan Details (page 2) $44,203.00 4.75% 70 80 90%

Loan Amount: Assumed Loan Interest Rate: Loan Start Age: Loan End Age: Maximum Loan Ratio at Age 100:

Face Amount + Fund Level Low Fees Option British Columbia

Death Benefit Type: Cost Type: Bonus: Province:

Initial Death Benefit: Projected Growth Rate:

$1,000,000.00 5.00%

Johnny Print, Male, Non-smoker, 45

Year Age 31 76 32 77 33 78 34 79 35 80 36 81 37 82 38 83 39 84 40 85 41 86 42 87 43 88 44 89 45 90 46 91 47 92 48 93 49 94 50 95 51 96 52 97 53 98 54 99 55 100

Deposits 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Fund Value 735,637 764,086 793,474 823,832 855,195 887,596 921,073 955,661 991,401 1,028,331 1,058,446 1,089,675 1,122,060 1,155,642 1,190,468 1,226,582 1,264,032 1,302,867 1,343,140 1,384,903 1,428,211 1,473,121 1,519,693 1,567,989 1,618,071

Death Benefit 735,637 764,086 793,474 823,832 855,195 887,596 921,073 955,661 991,401 1,028,331 2,058,446 2,089,675 2,122,060 2,155,642 2,190,468 2,226,582 2,264,032 2,302,867 2,343,140 2,384,903 2,428,211 2,473,121 2,519,693 2,567,989 2,618,071

Loan Amount 44,203 44,203 44,203 44,203 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Loan Interest 4.75% 14,192 16,966 19,871 22,915 26,103 27,343 28,642 30,002 31,427 32,920 34,484 36,122 37,837 39,635 41,517 43,489 45,555 47,719 49,986 52,360 54,847 57,452 60,181 63,040 66,034

Loan Balance 357,175 418,344 482,418 549,536 575,639 602,982 631,623 661,625 693,052 725,972 760,456 796,578 834,415 874,050 915,567 959,057 1,004,612 1,052,331 1,102,317 1,154,677 1,209,524 1,266,976 1,327,158 1,390,198 1,456,232

Loan as a % of Fund Value 49% 55% 61% 67% 67% 68% 69% 69% 70% 71% 72% 73% 74% 76% 77% 78% 79% 81% 82% 83% 85% 86% 87% 89% 90%

Net of Loan Fund Value Death Benefit 378,462 378,462 345,743 345,743 311,056 311,056 274,297 274,297 279,556 279,556 284,615 284,615 289,450 289,450 294,036 294,036 298,348 298,348 302,359 302,359 297,990 1,297,990 293,097 1,293,097 287,644 1,287,644 281,592 1,281,592 274,900 1,274,900 267,525 1,267,525 259,420 1,259,420 250,536 1,250,536 240,823 1,240,823 230,226 1,230,226 218,687 1,218,687 206,145 1,206,145 192,536 1,192,536 177,791 1,177,791 161,839 1,161,839

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Shared Ownership : Pre-Payment Details

Company 100%

Death Benefit Split at Issue: Death Benefit Transfer at Age: Premium Split Basis : Canadian Controlled Private Corporation? Include pre-payment in Company's Death Benefit? Pre-payment Discount Rate:

Key Shareholder 0% 85

Trad. Insurance - T100 Y Y 2.00%

Pre-Payment Reconciliation Report Excess Premium Paid by Insurance Cost Paid Company

GENESIS Details : Death Benefit Type: Cost Type: Bonus: Province: Initial Death Benefit: Projected Growth Rate:

N Pre-payment Growth Rate:

Excess + Interest @ 2.00%

Total Pre-Payment by Company

2.00%

Face Amount + Fund Level Low Fees Option British Columbia $1,000,000 5.00%

Pre-Payment Reconciliation Report Excess Premium Paid by Insurance Cost Paid Company

Excess + Interest @ 2.00%

Total Pre-Payment by Company

Year

Age

Year

Age

1 2 3 4 5

46 47 48 49 50

7,890 7,890 7,890 7,890 7,890

24,028 24,028 24,028 24,028 24,028

16,138 32,599 49,389 66,515 83,983

323 652 988 1,330 1,680

16,461 33,251 50,377 67,845 85,663

36 37 38 39 40

81 82 83 84 85

7,890 7,890 7,890 7,890 7,890

0 0 0 0 0

30,043 22,754 15,319 7,735 0

601 455 306 155 0

30,644 23,209 15,625 7,890 0

6 7 8 9 10

51 52 53 54 55

7,890 7,890 7,890 7,890 7,890

24,028 24,028 24,028 24,028 24,028

101,801 119,975 138,513 157,421 176,708

2,036 2,400 2,770 3,148 3,534

103,837 122,375 141,283 160,570 180,242

41 42 43 44 45

86 87 88 89 90

0 0 0 0 0

11 12 13 14 15

56 57 58 59 60

7,890 7,890 7,890 7,890 7,890

0 0 0 0 0

172,352 167,909 163,377 158,755 154,040

3,447 3,358 3,268 3,175 3,081

175,799 171,267 166,645 161,930 157,121

46 47 48 49 50

91 92 93 94 95

0 0 0 0 0

16 17 18 19 20

61 62 63 64 65

7,890 7,890 7,890 7,890 7,890

0 0 0 0 0

149,231 144,325 139,322 134,218 129,013

2,985 2,887 2,786 2,684 2,580

152,215 147,212 142,108 136,903 131,593

51 52 53 54 55

96 97 98 99 100

0 0 0 0 0

21 22 23 24 25

66 67 68 69 70

7,890 7,890 7,890 7,890 7,890

0 0 0 0 0

123,703 118,287 112,763 107,128 101,381

2,474 2,366 2,255 2,143 2,028

126,177 120,653 115,018 109,271 103,408

0 0 0 0 0

26 27 28 29 30

71 72 73 74 75

7,890 7,890 7,890 7,890 7,890

0 0 0 0 0

95,518 89,539 83,439 77,218 70,873

1,910 1,791 1,669 1,544 1,417

97,429 91,329 85,108 78,763 72,290

0 0

31 32 33 34 35

76 77 78 79 80

7,890 7,890 7,890 7,890 7,890

0 0 0 0 0

64,400 57,798 51,064 44,195 37,189

1,288 1,156 1,021 884 744

65,688 58,954 52,085 45,079 37,933

Explanation of calculations: Insurance Costs is based on selection made on Premium Split Basis x Company % Present value of Insurance Costs at Pre-Payment Discount Rate: $220,151.43 Premium Paid is payment of present value of Insurance Costs spread over premium paying period at Pre-Payment Growth Rate.

This presentation is incomplete without the LEGAL NOTICE that appears on the last page of this document. (E&OE) Conceptia 5.30 uses GENESIS 5.30 ÂŠ Industrial Alliance Pacific Insurance and Financial Services nc.. I

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About Industrial Alliance Pacific

A company with a solid presence in Canada Life and health insurance company whose origins go back to 1912 Operates in Canada, primarily in the western provinces and Ontario, as well as in the Western United States Mother company: Industrial Alliance Insurance and Financial services Inc. is listed on the Toronto Stock Exchange (symbol: IAG)

A financially solid company The Industrial Alliance group manages over $49 billion in assets Excellent solvency ratios that exceed standards One of the 100 largest public companies in Canada A network of 1,600 exclusive agents and 12,000 brokers The IA group contributes to the financial wellbeing of over three million Canadians and employs more than 3,400 people

This presentation is incomplete w ithout the LEGAL NOTICE that appears on the last page of this document.

(E&OE) Conceptia 5.30 uses GENESIS 5.30 ÂŠ Industrial Alliance Pacific Insurance and Financial Services Inc..

03-02-2010 15:55

LEGAL NOTICE Note: Use of this presentation is subject to the following conditions, by which you are legally bound. This presentation is not complete unless it is accompanied by the official illustration prepared by Industrial Alliance. Reliability of Information This presentation is intended for information purposes only, to provide you with a better understanding of the product. Although all efforts have been made to ensure the quality of the financial information, Industrial Alliance may not, under any circumstances, be held liable for any consequences resulting from inaccurate information, or for any damages suffered as a result of using this information. The data used in this presentation should not be taken as a guarantee of future performance, since this performance may fluctuate, upwards or downwards, depending on the actual returns generated by your investments. The Conceptia presentation and the official illustration prepared by Industrial Alliance are not part of the contract. In the event of discrepancy between these presentations and your contract, your contract shall prevail. No Liability Industrial Alliance and the member companies of the Industrial Alliance Group, along with their administrators, directors, employees and representatives, may not be held liable for any damages resulting directly or indirectly from actions or measures taken on the basis of the information contained in this presentation. Industrial Alliance does not guarantee the interest rate, the deductibility of interest on the loan, or the taxation rate. It is the client's responsibility to examine the tax rules in place in order to validate the interest rate, the deductibility of the interest and the taxation rate. The information contained in this presentation is not intended to take the place of legal, accounting, tax or other advice, and is not to be used for such purposes. As a result, Industrial Alliance strongly encourages its clients to consult an accountant, tax specialist or legal counsel for independent professional advice on the tax implications of this concept on their financial situation. Ownership and Prohibited Use The Conceptia presentation is owned by Industrial Alliance and the member companies of the Industrial Alliance Group. Any use of the illustration software for purposes other than those prescribed by Industrial Alliance is prohibited.

03-02-2010 15:55