A Canadian public company ("Parentco") and non-resident subsidiaries ("Subco1 and Subco2", collectively "Subco") enter into a "Recharge Agreement" under which Subco pays to Parentco an amount equal to the stock option benefit enjoyed by Subco's employees on the exercise of options to acquire shares of Parentco or on a cash surrender of the options.
Provided that the payments received under the Recharge Agreement by Parentco are in respect of services rendered by the employees to Subco, for options granted after the date of the Recharge Agreement, or for the increase in the stock option benefit that arises after the date of the Recharge Agreement on pre-existing options, such payments are not included in the income of Parentco under ss. 9, 90, 5(1) or 56(2), or 12(1)(x).