Desjardins Insurance refers to Desjardins Financial Security Life Assurance Company. Business Continuation Planning

2/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  Who is going to run the business?  Will your spouse or family be involved?  What about remaining partner(s)/owner(s)?  Will the business be sold to them?  Will they want it?  How much would they pay for it?  Where would the funding come from?  What are your wishes? What would happen to your business if you died last night?

3/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  Is the business readily marketable?  Can the assets be easily converted to cash for the benefit of your family?  Is there a logical successor who can take over the business?  family member  key person  partner  other shareholder What would actually happen?

4/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  The business can be sold to an outsider  The remaining owner(s) can continue in business with the deceased’s spouse, or family  The deceased’s interest can be sold to the remaining owner(s), or other interested party  The assets may be sold and keep the company  The business can be liquidated. Options when a business owner dies…

5/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY Buy Sell Agreement How is this done?

6/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  A legal agreement which provides for the transfer of a business interest in the event of: Death Disability Retirement Desire to leave business Buy Sell Agreement What is it?

7/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  Business owners, either shareholders or partners  Business owner and key employee(s)  Business owner and child/children Buy Sell Agreement Who is it between?

8/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY For the deceased’s family …  They have a guaranteed market for the business interest  They are guaranteed a fair price  They are not forced to become involved in the business or be dependent upon remaining owner(s)  It facilitates the settlement of the deceased’s estate What are the benefits?

9/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  The business keeps running  They continue as sole owner(s) without involvement from deceased’s family  It provides a smooth transfer of the business interest  The sale price, or the method to determine it, is fixed in the agreement For the remaining owner(s)... What are the benefits?

10/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  There are NO SURPRISES!  The agreement is entered into when all parties are alive and have input into details of the business continuation plan. For all parties... What are the benefits?

11/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY The agreement establishes the terms of transfer of the business interestHowever where does the money come from to complete the transaction? Where does the money come from?

12/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  Sell personal assets  Borrow funds  Pay over time  Life insurance Let’s examine each of these sources... Sources of money at death

13/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  Potential loss of value if a forced sale  Possible loss of income producing assets  Potential tax consequences  Insufficient funds provided Sell Personal Assets except there might be …

14/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  Can a lender be found?  Interest payments will add to cost  Can business generate sufficient funds to repay loan? Borrow funds, however…

15/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  Deceased’s family is dependent on ongoing success of business  It could negatively affect the cash flow of the business  The remaining owners must pay both principal and interest Pay over time, but …

16/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  It provides immediate cash when required  It’s economical - the annual cost is a fraction of the benefit ultimately paid  The insurance proceeds are tax-free  The business continues unencumbered Life Insurance "The Economical Method"

17/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  Personally owned  Criss cross  Corporate owned  Promissory note  Share redemption Insurance Funding Methods

18/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY Personally Owned Criss Cross Company B owns 50% A owns 50% B owns Insurance on A A owns Insurance on B

19/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY A dies Insurance proceeds A’s shares Personally Owned Criss Cross B B owns 100% of company A's widow

20/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY Advantages  easy to understand  corporate creditors have no access to insurance proceeds  insurance proceeds received tax-free Disadvantages  insurance costs may be inequatable due to age, health and percentage of ownership  insurance premiums paid with after tax personal dollars Criss Cross

21/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY Company owns life insurance on A and B. Company is owner, premium payer and beneficiary. Corporate Owned Company B owns 50%A owns 50%

22/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY A dies Promissory note A's shares Corporate Owned Promissory Note Method B B owns 100% of company A's widow

23/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY Insurance proceeds Company Capital Dividend Account Tax free capital dividends B Repays note A’s widow Corporate Owned Promissory Note Method

24/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY Advantages  premiums paid with corporate dollars  impact of premium differentials reduced Disadvantages  more complex than criss cross  life insurance proceeds are not protected against corporate creditors at death Promissory Note

25/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY A dies Insurance proceeds Company A’s family $ from CDA A’s shares B now owns 100% of co. Corporate Owned Share Redemption Method

26/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY Advantages  premiums paid with corporate dollars  impact of premium differentials reduced Disadvantages  complex arrangement  life insurance proceeds are not protected against corporate creditors at death  no increase in survivor's ACB Share Redemption

27/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY Considerations:  Tax bracket of company and individual  Is capital gains exemption available?  Degree of complexity involved  Terms of the buy sell agreement  Number and ages of parties to agreement and percentage of ownership Which method is best?

28/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  What capital gains implications arise on transfer of business interest?  Do shares qualify for $750,000 capital gains exemption?  Does agreement allow for payment of tax free Capital Dividends?  Are wills co-ordinated with agreement?  Do Stop-Loss Rules apply? Income Tax Issues

29/30 DESJARDINS INSURANCE | FOR REPRESENTATIVES' USE ONLY  This presentation is a general overview of business continuation arrangements.  Consult your legal and accounting advisors for detailed information.  Regular review of agreement and funding is recommended.  Other relevant factors may be critical to final decision. Full Disclosure…

30/30 FOR REPRESENTATIVES' USE ONLY Thank You!