Toronto, Ontario, Canada Making Shared Ownership a Profitable Reality 11/20/2018 www.esopbuilders.com

Global Equity Compensation Canadian Perspective October 29, 2001 Presented by Perry Phillips, CA, CBV, ASA President, ESOP Builders Inc.

ESOP Legislation in Canada and its provinces Government Legislation Incentive Federal Income Tax Act •RRSP eligibility for employees •Employees receive 20% matching tax credit •Available only in Saskatchewan and BC Nova Scotia Share Ownership Plan Act •Employees receive provincial tax credit 20% Quebec Quebec Stock Savings Plan & Societes de Placements dans L’Entreprise Quebecois •125% to 175% deduction on funds invested to a maximum of 30% of employee’s net income •RRSP eligible Ontario Community Small Business Investment Funds Act •Employees receive provincial tax credit 20% on first $3,500, 30% up to $15,000, $150,000 lifetime limit 11/20/2018 www.esopbuilders.com

ESOP Legislation in Canada and its provinces Government Legislation Incentive Saskatchewan Labour Sponsored Venture Capital Corporations Act •Employees receive provincial tax credit 20% •Matching Federal Tax Credit 20% •Maximum $1,000 British Columbia Employee Investment Act •Employees receive tax credit 20% •Matching Federal Tax Credit Manitoba Manitoba Employee Ownership Fund Corporation •Provincial tax credit $700 matching Federal tax credit of 20% 11/20/2018 www.esopbuilders.com

Canadian Global Equity Survey Findings 11/20/2018 www.esopbuilders.com

Canadian Global Equity Survey Findings 11/20/2018 www.esopbuilders.com

Canadian Global Equity Survey Findings 11/20/2018 www.esopbuilders.com

Canadian Global Equity Survey Findings (cont’d) PROBLEMS: Trouble finding reliable outsourcing companies Employee information not user friendly Fulfillment of buy / sells Internal accounting complexity Outsource administrator not knowledgeable Start up issues No real problems * * 8 out of 17 companies reported no real problems 11/20/2018 www.esopbuilders.com

Deferral of Stock Option Benefit for Public Company Employees* Canadian Federal Income Tax Consequences: An employee will generally have to pay Canadian personal income tax on a taxable benefit at the time stock options are exercised. The taxation of this taxable benefit generally applies whether or not the employee sells the shares received from the exercise of the stock options. However, due to recent Canadian tax changes, the employment benefit arising to public company employees on the exercise of stock options may be deferred in certain circumstances. In order for the deferral to be available the following criteria must be met: The shares must be acquired after February 27, 2000. The employee must be a Canadian resident at the time the shares are acquired. 11/20/2018 www.esopbuilders.com

Deferral of Stock Option Benefit for Public Company Employees* (cont’d) The employee must be arm’s length with the company at the time the option is granted. The employee cannot be a specified shareholder (i.e. they, together with non-arm’s length persons cannot own 10% or more of any class of shares in the company). The shares acquired must be of a class that is listed on a Canadian or prescribed foreign stock exchange. The employee must be carried to the 50% employment benefit deduction (i.e. the option price must be at least the fair market value (“FMV”) at the time the options were granted). The employee must elect to have the deferral provisions apply before January 16 of the year following the year in which the options are exercised. The election is filed with the employer. 11/20/2018 www.esopbuilders.com

Deferral of Stock Option Benefit for Public Company Employees Deferral of Stock Option Benefit for Public Company Employees* (Example) Value of Shares at Time of Granting Amount of Stock Options where Benefit Can be Deferred $ Year 1 50,000 Year 2 100,000 Year 3 150,000 Total 300,000 250,000 (*Authored by Michael J. Fremes, CA, ESOP Builders Inc. October 2001) 11/20/2018 www.esopbuilders.com