Goodness Growth Holdings Inc

Goodness Growth adopted the 2019 Incentive Plan effective March 18, 2019, permitting the grant of Awards, as more fully described below. In addition, from time to time, we may grant Goodness Options as incentives or compensation mechanisms for executives and directors pursuant to their employment agreements.

Shareholders are being asked at the Meeting to consider and, if thought appropriate, to pass the 2019 Incentive Plan Resolution in Proposal 3 and the Equity Award Ratification Resolution in Proposal 4. The discussion set out under the headings “Equity Compensation Plan Information” and “Summary of Terms and Conditions of the 2019 Incentive Plan” below includes important information regarding the principal features of the 2019 Incentive Plan and additional information regarding Goodness Growth’s equity compensation plans and arrangements.

Equity Compensation Plan Information

The following table sets out information as of December 31, 2023, with respect to outstanding security based compensation arrangements, including the 2019 Incentive Plan.

At April 29, 2024, the following Awards were outstanding under the 2019 Incentive Plan: (1) Goodness Options exercisable for a total of 5,267,073 Subordinate Voting Shares, representing 3.7% of the then outstanding number of Goodness Shares; and (2) RSUs covering the right to receive a total of 1,238,579 Subordinate Voting Shares, representing 0.9% of the then outstanding number of Goodness Shares.

At April 29, 2024, the following Awards were outstanding outside of the 2019 Incentive Plan: (1) Goodness Options exercisable for a total of 19,988,675 Subordinate Voting Shares, representing 14.0% of the then outstanding number of Goodness Shares; and (2) RSUs covering the right to receive a total of 1,238,091 Subordinate Voting Shares, representing 0.9% of the then outstanding number of Goodness Shares.

As of April 29, 2024, an aggregate of 4,699,767 Subordinate Voting Shares remained available for issuance under the 2019 Incentive Plan, representing approximately 3.3% of the then outstanding number of Goodness Shares. The maximum aggregate number of Subordinate Voting Shares that are available for issuance under the 2019 Incentive Plan is 10% of the aggregate number of Subordinate Voting Shares outstanding from time to time (assuming the conversion of all Multiple Voting Shares into Subordinate Voting Shares). No Subordinate Voting Shares are reserved and available for issuance outside of the 2019 Incentive Plan.

Summary of Terms and Conditions of the 2019 Incentive Plan

The principal features of the 2019 Incentive Plan are summarized below. The following description of the 2019 Incentive Plan is only a summary of its principal features and is qualified by reference to the actual text of the plan as set forth in Schedule “B”.

Purpose

The purpose of the 2019 Incentive Plan is to enable Goodness Growth and its affiliated companies to: (i) attract and retain the best available personnel for positions of substantial responsibility for Goodness Growth, (ii) to provide additional incentive to employees, directors, and consultants of Goodness Growth, and (iii) to promote the success of Goodness Growth’s business.

The 2019 Incentive Plan permits the grant of Awards, as defined herein and more fully described below.

Eligibility

Any employees, officers, directors, or consultants of Goodness Growth or its affiliated companies are eligible to participate in the 2019 Incentive Plan if selected by the administrator of the 2019 Incentive Plan, being the Compensation Committee, failing which the administrator of the Plan will be the Board (the “Participants”). The basis of participation of an individual under the 2019 Incentive Plan, and the type and amount of any Award that an individual will be entitled to receive under the 2019 Incentive Plan, will be determined by the Compensation Committee or the Board based on its judgment as to the best interests of Goodness Growth and its shareholders, and therefore cannot be determined in advance. As of March 1, 2024, there were approximately 490 employees of Goodness Growth and its affiliated companies (including directors who are also Goodness Growth employees), three non-employee directors of Goodness Growth and approximately 10 consultants of Goodness Growth and its affiliated companies eligible to participate in the 2019 Incentive Plan.

Shares Subject to the 2019 Incentive Plan

Subject to adjustment as provided in the plan, the maximum aggregate number of Subordinate Voting Shares that may be issued under the 2019 Incentive Plan is 10% of the aggregate number of Subordinate Voting Shares outstanding from time to time (assuming the conversion of all Multiple Voting Shares into Subordinate Voting Shares). The Subordinate Voting Shares are referred to as the “Shares” for purposes of discussions of the 2019 Incentive Plan. Any Shares subject to an Award under the 2019 Incentive Plan that are forfeited, surrendered, cancelled, repurchased, expire unexercised, are settled in cash, or are used or withheld to pay an exercise price or to satisfy tax withholding obligations of a Participant are again available for Awards under the 2019 Incentive Plan. Notwithstanding the foregoing, the maximum number of Shares that may be issued pursuant to the exercise of ISOs is 14,312,633 plus the number of Shares that are again available as a result of the previous sentence, to the extent allowable under the United States Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations under the Code.

Options

The Goodness Options are referred to as “Options” for the purposes of discussions of the 2019 Incentive Plan. Options granted under the 2019 Incentive Plan are subject to the terms and conditions established by the Compensation Committee or the Board and set forth in the applicable award agreement. The Compensation Committee or the Board is authorized to grant Options to purchase Shares that are either ISOs, meaning they are intended to satisfy the requirements of Section 422 of the Code, or NSOs, meaning they are not intended to satisfy the requirements of Section 422 of the Code.

Under the terms of the 2019 Incentive Plan, the exercise price of the Options will not be less than 100% of the “Fair Market Value” per Share on the date of grant. The “Fair Market Value” on any date means (i) the closing price of the Shares on an established stock exchange on such date, (ii) if the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value will be the mean between the high bid and low asked prices for the Shares on the day of determination, or (iii) in the absence of an established market for the Shares, the Fair Market Value will be determined in good faith by the Compensation Committee or the Board. Notwithstanding the foregoing, in the case of (i) above, as the Shares are listed on the CSE, for the purposes of establishing the exercise price of any Options, the Fair Market Value shall not be lower than the greater of the closing market price of the Subordinate Voting Shares on the CSE on (A) the trading day prior to the date of grant of the Options, and (B) the date of grant of the Options. In addition, in the case of an ISO granted to an employee who owns stock representing more than 10% of the voting power of all classes of stock of Goodness Growth, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant.

The maximum term of an Option granted under the 2019 Incentive Plan will be ten years from the date of grant (or five years in the case of an ISO granted to a 10% shareholder).

Payment in respect of the exercise of an Option may be made in cash, cheque, promissory note (to the extent permitted by applicable law), other Shares, cashless exercise consideration, net exercise, or by such other method as the Compensation Committee or the Board may determine to be appropriate and permitted by applicable law, or any combination of the foregoing.

If a Participant ceases to be an employee, officer, director or consultant of Goodness Growth or an affiliated company, other than upon the Participant’s termination as the result of the Participant’s death or disability, the Participant may exercise his or her Option within 30 days of termination, or such longer period of time as is specified in the award agreement (but not later than the expiration of the term of such Option as set forth in the award agreement) to the extent that the Option is vested on the date of termination. If a Participant ceases to be an employee, officer, director or consultant of Goodness Growth or an affiliated company as a result of the Participant’s disability, the Participant may exercise his or her Option within 6 months of termination, or such longer period of time as is specified in the award agreement (but not later than the expiration of the term of such Option as set forth in the award agreement) to the extent the Option is vested on the date of termination. If a Participant dies while an employee, officer, director or consultant of Goodness Growth or an affiliated company, the Option may be exercised within 6 months following the Participant’s death, or within such longer period of time as is specified in the award agreement (but not later than the expiration of the term of such Option as set forth in the award agreement) to the extent that the Option is vested on the date of death, by the Participant’s designated beneficiary or personal representative or in accordance with the will or the laws of descent. In the case of any unvested Options, the Shares covered by the Option generally will revert to the 2019 Incentive Plan. Notwithstanding the foregoing, at any time after the grant of an Option, the Compensation Committee or the Board, in its sole discretion, may reduce or waive the vesting criteria applicable to the Option.

Restricted Stock

A restricted stock award is a grant of Shares to a Participant, which Shares are subject to forfeiture restrictions during a restriction period. The restriction period may be based on the passage of time, the achievement of target levels of performance, or the occurrence of such other events as determined by the Compensation Committee, or the Board. Each Award of restricted stock will be evidenced by an award agreement that will specify the restriction period, the number of Shares granted, and such other terms and conditions as the Compensation Committee or the Board determines. The Compensation Committee or the Board can impose such restrictions on the restricted stock as it deems advisable. The Compensation Committee or the Board, in their discretion, may accelerate the time at which any restrictions will lapse or be removed. During the restriction period, Participants holding shares of restricted stock under the 2019 Incentive Plan generally may not vote those Shares but will be entitled to receive all dividends and other distributions paid with respect to such Shares (unless the Compensation Committee or the Board provide otherwise).

RSUs

An RSU is a bookkeeping entry representing an amount equal to the Fair Market Value of one Share. The Compensation Committee or the Board will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of RSUs that will be paid out to the Participant. The Compensation Committee or the Board may set vesting criteria based upon the achievement of company-wide, business unit, or individual goals (including, but not limited to, continued employment or service), or any other basis determined by the Compensation Committee or the Board in its discretion. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as determined by the Compensation Committee or the Board. Notwithstanding the foregoing, at any time after the grant of RSUs, the Compensation Committee or the Board, in their sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout. RSUs may be paid in cash, Shares or a combination as determined by the Compensation Committee or the Board.

Stock Appreciation Rights

An SAR entitles the Participant to receive, upon exercise of the SAR, the increase in the Fair Market Value of a specified number of Shares from the date of the grant of the SAR and the date of exercise. Each SAR grant will be evidenced by an award agreement that will specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Compensation Committee, in its sole discretion, will determine; provided that the per share exercise price for the Shares that will determine the amount of the payment to be received upon exercise of a SAR will be no less than 100% of the Fair Market Value per Share on the date of grant. No SAR may be exercised more than ten years from the grant date. SARs may be paid in cash, Shares or a combination as determined by the Compensation Committee or the Board.

General

The Compensation Committee or the Board may impose restrictions on the grant, exercise or payment of an Award as it determines appropriate. Generally, Awards granted under the 2019 Incentive Plan shall be nontransferable except by will, by the laws of descent and distribution, by Rule 701 under the U.S. Securities Act of 1933, as amended, and by National Instrument 45-106 Prospectus Exemptions, to the extent applicable. No Participant shall have any rights as a shareholder with respect to Shares covered by Options, SARs, or RSUs, unless and until such Awards are settled in Shares.

No Option (or, if applicable, SARs) shall be exercisable, no Shares shall be issued, no certificates for Shares shall be delivered and no payment shall be made under the 2019 Incentive Plan except in compliance with all applicable laws.

The Board may amend, alter, suspend or terminate the 2019 Incentive Plan and the Compensation Committee or the Board may amend any outstanding Award at any time; provided that (i) such amendment, alteration, suspension, discontinuation, or termination shall be subject to the approval of Shareholders if such approval is necessary to comply with any applicable laws, (ii) no such amendment, alteration, suspension or termination may impair the rights of a Participant without the Participant’s written agreement, and (iii) such amendment, alteration, suspension, discontinuation, or termination is in compliance with CSE Policies.

In the event of any dividend, recapitalization, forward or reverse stock split, reorganization, merger, consolidation, split-up, split-off, combination, repurchase or exchange of Shares or other securities of Goodness Growth, or other change in the corporate structure of Goodness Growth affecting the Shares occurs, the Compensation Committee or the Board will make such adjustment, which is appropriate in order to prevent diminution or enlargement of the benefits or potential benefits to Participants under the 2019 Incentive Plan, to the number and class of shares of stock that may be delivered under the 2019 Incentive Plan and/or the number, class, and price of shares of stock covered by each outstanding Award.

In the event of a merger of Goodness Growth with or into another entity or a change in control, each outstanding Award will be treated as the Compensation Committee or Board determine without a Participant’s consent, including, without limitation, that (A) Awards will be assumed, or substantially equivalent Awards will be substituted, by the acquiring or succeeding corporation with appropriate adjustments as to the number and kind of shares and prices; (B) upon written notice to a Participant, that the Participant’s Awards will terminate upon or immediately prior to the consummation of such merger or change in control; (C) outstanding Awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to or upon consummation of such merger or change in control, and, to the extent the Compensation Committee or the Board determine, terminate upon or immediately prior to the effectiveness of such merger or change in control; (D) (I) the termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Compensation Committee or the Board determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by Goodness Growth without payment), or (II) the replacement of such Award with other rights or property selected by the Compensation Committee or Board in its sole discretion; or (E) any combination of the foregoing. In the event that the successor corporation does not assume or substitute for the Award (or portion thereof), the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and SARs, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on restricted stock and RSUs will lapse, and, with respect to Awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met.

The grant of an Award shall not be construed as giving a Participant the right to be retained as an employee, officer of consultant of Goodness Growth or any affiliate company, nor will it affect in any way the right of Goodness Growth or an affiliate company to terminate a Participant’s employment or engagement at any time, with or without cause, in accordance with applicable law.

Tax Withholding

Goodness Growth may take such action as it deems appropriate to ensure that all applicable federal, state, local, foreign or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant.

New Plan Benefits

Awards that may be granted to individuals under the 2019 Incentive Plan are subject to the discretion of the Compensation Committee or the Board, so the benefits or amounts that will be received or allocated to Goodness Growth’s current named executive officers, executive officers as a group, directors who are not executive officers as a group, and employees, including all current officers who are not executive officers, as a group are not currently determinable.

Certain U.S. Federal Income Tax Information

The following is a general summary of the material U.S. federal income tax consequences with respect to Awards that may be granted to an individual Participant who is a United States citizen, a permanent resident of the United States or other person treated as a U.S. resident for U.S. federal income tax purposes (“U.S. Holder”) pursuant to the 2019 Incentive Plan. This discussion is of a general nature only and does not take into account the particular facts and circumstances, with respect to U.S. federal income tax issues, of any particular U.S. Holder.

This summary is limited to persons who would hold the Shares as capital assets within the meaning of Section 1221 of the Code. This discussion does not address all the U.S. federal income tax consequences that may be relevant to such persons in light of their particular circumstances or to a person who may be subject to special treatment under U.S. federal income tax laws, including, but not limited to: (1) persons who hold the Shares as part of a hedge, straddle, wash sale, synthetic security, conversion transaction, or other integrated investment; (2) dealers in securities or currencies or traders in securities that elect the mark-to-market method of accounting for their securities holdings; (3) persons with a “functional currency”(as defined in Section 985 of the Code) other than the U.S. dollar; (4) U.S. expatriates; or (5) a person liable for alternative minimum tax. Further, this summary does not address the U.S. federal income tax consequences to persons other than Participants who are the initial recipients of Awards granted under the Plan.

The following discussion is based on the United States Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, related U.S. Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, and court decisions as of the date of this Circular, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. This summary is not intended to be a complete statement of applicable law, nor does it address non-U.S., state or local income tax, payroll tax, gift tax or estate tax considerations.

U.S. Tax Classification of the Company. Pursuant to Section 7874(b) of the Code and the U.S. Treasury Regulations promulgated thereunder, notwithstanding that Goodness Growth has been organized under Canadian law, solely for U.S. federal income tax purposes, Goodness Growth is classified as a U.S. domestic corporation. The remainder of this discussion assumes that Goodness Growth is classified as a U.S. domestic corporation.

Nonstatutory Stock Options

A U.S. Holder generally will not recognize taxable income upon the grant or vesting of a NSO. Upon the exercise of a NSO, a U.S. Holder generally will recognize compensation taxable as ordinary income in an amount equal to the excess of the fair market value of the Shares underlying the option on the date of exercise over the option exercise price. When a U.S. Holder sells the Shares, the U.S. Holder will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the U.S. Holder received from the sale and the tax basis of the Shares sold. The tax basis of the shares generally will be equal to the option exercise price plus any ordinary income the U.S. Holder realized on exercise of the NSO. Any long-term capital gain recognized upon a sale of the Shares by a U.S. Holder will be subject to U.S. federal income tax at the applicable long-term capital gains tax rate and potentially subject to an additional tax on such U.S. Holder’s “net investment income” (see “Net Investment Income Tax” below). Certain limitations apply to the deductibility of capital losses for U.S. federal income tax purposes.

Incentive Stock Options

A U.S. Holder generally will not recognize taxable income upon the grant of an ISO. If a U.S. Holder exercises an ISO during employment as an employee or within three months after his or her employment ends (12 months in the case of permanent and total disability or any time after death), the U.S. Holder will not recognize taxable income at the time of exercise for regular U.S. federal income tax purposes (although the U.S. Holder generally will have taxable income for alternative minimum tax purposes at that time as if the option were a NSO). If a U.S. Holder sells or otherwise disposes of the Shares acquired upon exercise of an ISO after the later of (a) one year from the date the U.S. Holder exercised the option and (b) two years from the grant date of the option, the U.S. Holder generally will recognize long-term capital gain or loss equal to the difference between the amount the U.S. Holder received in the disposition and the option exercise price. If a U.S. Holder sells or otherwise disposes of Shares acquired upon exercise of an ISO before these holding period requirements are satisfied, the disposition will constitute a “disqualifying disposition,” and the U.S. Holder generally will recognize taxable ordinary income in the year of disposition equal to the excess of the fair market value of the Shares on the date of exercise over the option exercise price (or, if less, the excess of the amount realized on the disposition of the Shares over the option exercise price). The balance of the U.S. Holder’s gain on a disqualifying disposition, if any, will be taxed as short-term or long-term capital gain, as the case may be.

With respect to both NSOs and ISOs, special rules apply if a U.S. Holder uses Shares already held by the U.S. Holder to pay the exercise price or if the Shares received upon exercise of the option are subject to a substantial risk of forfeiture by the U.S. Holder.

Stock Appreciation Rights

A U.S. Holder generally will not recognize taxable income upon the grant or vesting of a SAR. Upon the exercise of a SAR, a U.S. Holder generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the Shares underlying the SAR on the date of exercise and the exercise price of the SAR established on the date of grant. For each Share received, the taxation of the post-receipt appreciation or depreciation is treated as either a short-term or long-term capital gain or loss upon sale of the Share, depending upon the length of time the U.S. Holder held the Shares.

Restricted Stock

A recipient of restricted stock generally will recognize compensation taxable as ordinary income when the Shares cease to be subject to a substantial risk of forfeiture (i.e., when the award vests). The amount of income generally is equal to the excess of the fair market value of the Shares on the date the restrictions lapse over the amount, if any, paid by the U.S. Holder with respect to the Shares.

Instead of postponing the federal income tax consequences of restricted stock until the restrictions lapse, the U.S. Holder may elect to recognize compensation taxable as ordinary income in the year of grant in an amount equal to the fair market value of the Shares at the time of receipt less the amount, if any, paid for the Shares. This election is made under Section 83(b) of the Code. A Section 83(b) election is made by filing a written notice with the Internal Revenue Service office with which the U.S. Holder files his or her federal income tax return. The notice must be filed within 30 days after the date of grant of the restricted stock award for which the election is made and must meet certain technical requirements.

If the U.S. Holder makes a subsequent disposition of the restricted Shares, the U.S. Holder will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the U.S. Holder received from the sale and the tax basis of the Shares sold. The tax basis of the Shares generally will be equal to the amount, if any, paid by the U.S. Holder with respect to the Shares, plus the amount of taxable ordinary income recognized by the U.S. Holder either at the time the restrictions lapse or at the time of the Section 83(b) election, as the case may be. If the U.S. Holder forfeits the Shares to the company (e.g., upon the U.S. Holder’s termination of employment before vesting), the U.S. Holder may be able to claim a short-term or long-term capital loss, as the case may be, as a result of the forfeiture equal to the amount the U.S. Holder paid for the Shares.

Any dividends paid with respect to unvested Shares of restricted stock generally will be taxable as ordinary income to the U.S. Holder at the time the dividends are received, except if a Section 83(b) election was made.

Restricted Stock Units

A U.S. Holder generally will not recognize taxable income upon the grant of a RSU award. Upon the distribution of cash, Shares or other property to a U.S. Holder pursuant to the terms of the award, the U.S. Holder generally will recognize compensation taxable as ordinary income equal to the sum of the cash and the fair market value of any Shares issued or paid to the U.S. Holder pursuant to the terms of the award. For each Share received, the taxation of the post-receipt appreciation or depreciation is treated as either a short-term or long-term capital gain or loss, depending upon the length of time the U.S. Holder held the Shares.

Tax Consequences to the Company. In the foregoing cases, Goodness Growth generally will be entitled to a deduction at the same time and in the same amount as a U.S. Holder recognizes ordinary income, subject to certain limitations imposed under the Code. Because Goodness Growth is a publicly-held corporation, Code Section 162(m) may limit our income tax deductions for compensation paid to certain executive officers in excess of $1,000,000 each year.

Certain Additional Tax Consequences

Goodness Growth intends that awards granted under the 2019 Incentive Plan comply with, or otherwise be exempt from, Code Section 409A but makes no representation or warranty to that effect.

Participants are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with awards under the 2019 Incentive Plan (including but not limited to any taxes arising under Code Section 409A), and Goodness Growth has no obligation to indemnify or otherwise hold any participant harmless from any or all of such taxes. Goodness Growth has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result.

Distributions on the Shares

Any distribution received by a U.S. Holder with respect to the Shares will constitute a “dividend” for U.S. federal income tax purposes to the extent that Goodness Growth has sufficient current and accumulated earnings and profits (as determined for U.S. federal income tax purposes). If the distribution exceeds the company’s current and accumulated earnings and profits, the excess will be treated first as a tax-free return of the U.S. Holder’s adjusted basis in the Shares; any remaining excess will be treated as gain from the sale or exchange of the Shares. Any dividend received by a U.S. Holder will be treated as qualified dividend income and will be subject to U.S. federal income tax at the same rates applicable to long-term capital gains, provided that certain holding period requirements are met.

Redemptions of the Shares

A redemption payment received with respect to the Shares (other than with respect to any Award of restricted stock for which a Section 83(b) election has not been made), including a repurchase of the Shares, will be treated as a distribution (described in the preceding paragraph), rather than as a sale giving rise to a capital gain or loss, unless the redemption qualifies as an “exchange” under Code Section 302(b). If the redemption qualifies as an “exchange,” then the amount of gain realized and recognized will equal the excess of the amount of cash and the fair market value of any property that a U.S. Holder receives in the redemption over that U.S. Holder’s adjusted tax basis allocable to the portion of the Shares redeemed in the exchange. If the U.S. Holder’s adjusted basis allocable to the Shares redeemed exceeds the amount of cash received, then the U.S. Holder will recognize a loss for U.S. federal income tax purposes. Any gain or loss recognized on the redemption will be long-term capital gain or loss if the U.S. Holder has held the redeemed Shares for more than one year at the time of the redemption. A redemption will qualify as an “exchange” under Code Section 302(b) if the exchange sufficiently reduces the U.S. Holder’s proportionate stock interest in the company, as discussed below.

The determination of whether a redemption sufficiently reduces a U.S. Holder’s proportionate stock interest in the company will be made in accordance with the rules of Code Section 302, taking into account applicable attribution rules. Under these rules, a U.S. Holder’s actual and constructive proportionate stock interest in the company after the redemption is compared to the U.S. Holder’s actual and constructive proportionate stock interest in the company prior to the redemption. Exchange treatment will apply if (1) the applicable U.S. Holder’s stock interest in the company has been completely terminated; (2) there has been a “substantially disproportionate” reduction in the U.S. Holder’s stock interest in the company (i.e., if the resulting ownership percentage interest after the deemed redemption is less than 80% of the ownership percentage interest prior to the deemed redemption); or (3) based on the facts and circumstances, the redemption is not “essentially equivalent to a dividend.”

If the redemption does not sufficiently reduce the U.S. Holder’s proportionate stock interest in the company so as to be treated as an exchange, the amount of cash received in a redemption will be taxable in the manner described under “Distributions on the Shares” above.

Net Investment Income Tax

Certain U.S. Holders who are individuals will be subject to a 3.8% U.S. federal tax on all or a portion of their “net investment income,” which includes all or a portion of their dividends (or deemed dividends) on the Shares and net gains from the disposition of the Shares.

The foregoing discussion does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences for U.S. Holders of the Shares. The rules governing the tax treatment of Awards that may be granted under the 2019 Incentive Plan are quite technical, so that the above description of tax consequences is necessarily general in nature and is only a summary. Moreover, statutory provisions are, of course, subject to change, as are their interpretations, and their application may vary in individual circumstances.