Algonquin Power & Utilities Corp. – Consolidated Financial Statements ALGONQUIN POWER & UTILITIES CORP.  Notes to the Consolidated Financial Statements  December 31, 2012 and 2011   (in thousands of Canadian dollars except as noted and amounts per share)  14.  Shareholders’ capital (continued)  (c)  Share-based compensation (continued)  Under the Company’s employee share purchase plan (“ESPP”), eligible employees may have a  portion of their earnings withheld to be used to purchase the Company’s common shares. The  Company will match a) 20% of the employee contribution amount for the first five thousand  dollars per employee contributed annually and 10% of the employee contribution amount for  contributions over five thousand dollars up to ten thousand dollars annually, for Canadian  employees, and b) 15% of the employee contribution amount for the first fifteen thousand dollar  per employee contributed annually, for U.S. employees. Shares purchased through the  Company match portion shall not be eligible for sale by the participant for a period of one year  following the contribution date on which such shares were acquired. At the Company’s option,  the shares may be (i) issued to participants from treasury at the average share price or (ii)  acquired on behalf of participants by purchases through the facilities of the TSX by an  independent broker. The aggregate number of shares reserved for issuance from treasury by  APUC under this plan shall not exceed 2,000,000 shares. The Company uses the fair value based method to measure the compensation expense related  to the Company’s contribution. For the year ended December 31, 2012, a total of 54,227  common shares (2011 – 7,176) were issued to employees under the ESPP plan.  Under the Company’s Deferred Share Unit Plan, non-employee directors of the Company may  elect annually to receive all or any portion of their compensation in Deferred Share Units  (“DSUs”) in lieu of cash compensation. Directors’ fees are paid on a quarterly basis and at the  time of each payment of fees, the applicable amount is converted to DSUs. A DSU has a value  equal to one of the Company’s common share. Dividends accumulate in the DSU account and  are converted to DSUs based on the market value of the shares on that date. DSUs cannot be  redeemed until the Director retires, resigns, or otherwise leaves the Board. The DSUs provide  for settlement in cash or shares at the election of the Company. As the Company does not  expect to settle these instruments in cash, these options are accounted for as equity awards. In 2012, 50,172 (2011 – nil) DSUs were issued pursuant to the election of the Directors to defer  a percentage of their 2011 and 2012 Director’s fee in the form of DSUs.  The Company offers a performance share unit plan to its employees as part of the Company’s  long-term incentive program. Performance share units (“PSUs”) are granted annually for three- year overlapping performance cycles. PSUs vest at the end of the three-year cycle and will be  calculated based on established performance criteria. At the end of the three-year performance  periods, the number of shares issued can range from 0% to 184% of the number of PSUs  granted. Dividends accumulating during the vesting period are converted to PSUs based on the  market value of the shares on that date and are recorded in equity as the dividend’s are  declared. None of these PSUs have voting rights. Any PSUs not vested at the end of a  performance period will expire. The PSUs provide for settlement in cash or shares at the  election of the Company. As the Company does not expect to settle these instruments in cash,  these PSUs will be accounted for as equity awards. Compensation expense associated with  PSUs is recognized ratably over the performance period based on the Company’s estimated  achievement of the established metrics. Compensation expense for awards with performance  conditions will only be recognized for those awards for which it is probable that the performance  conditions will be achieved and which are expected to vest.  2012 Annual Report 117 ii) Employee share purchase plan  iii) Directors deferred share units  iv) Performance share units