Employees of Opco (Participants”) were granted stock options by Opco pursuant to “Grant Agreements” which specified the number of Options granted and their exercise price (which equaled the FMV of the subject shares at the time of such grant), but provided that such Options were not exercisable (and could not be surrendered to Opco for their cash surrender value) until the compensation committee of Opco had issued an “Exercise Notice” to the Participant. After finding that the “time the agreement was made” in s. 110(1)(d)(ii)(A) referenced the time of the sending of the Exercise Notice to the Participant, the Directorate went on to state:
[T]he fact that the Participants who did not directly or indirectly hold shares in the capital stock of Opco have seen substantially all of their Options expire each year without being able to exercise them, while some of the Participants who directly or indirectly held shares of the capital stock of Opco have been able to exercise substantially all of their Options before they expire, may be an indication that subsection 7(5) would apply … . [S]ection 7 [thereby] does not apply to situations where the benefit granted by an agreement was received by a person as a shareholder (directly or indirectly) of a corporation. In such a situation, it would be other provisions such as subsections 15(1) or 246(1) that would apply. … To the extent that … some of the Participants received the benefit of the issuance of the Exercise Notices in a capacity other than by virtue of an office or employment, we are of the view that section 7(5) could be invoked.