Symbol: CVL (TSX)
CALGARY, Oct. 4, 2011 /CNW/ - Cervus Equipment Corporation ("Cervus") (TSX: CVL) today announced that it has provided a $10,212,042.10 short-term loan to its Chief Executive Officer (CEO), Mr. Peter Lacey, and a member of his immediately family ("the Related Parties"), to assist them with a transaction involving securities held in their RRSPs, as required by recent amendments to Income Tax Act (Canada) (the "Tax Act").
Pursuant to amendments to the Tax Act announced by the Canadian Department of Finance on June 16, 2011, the holder of a RRSP will be subject to a penalty tax on securities held in the RRSP if such securities are deemed "prohibited investments" for the purposes of the Tax Act. Securities of an entity are a prohibited investment for an individual's RRSP if that individual holds a "significant interest", as defined in the Tax Act, in that entity. The Related Parties own a significant interest in Proventure Income Fund, and therefore the units of Proventure Income Fund are no longer an eligible investment for their RRSPs.
As Cervus currently has excess cash that is earning interest at a rate of approximately 0.75% per annum, the Board of Directors agreed to provide the loan to the Related Parties for the purpose of removing Proventure Income Fund units from their respective RRSPs.
The loan is evidenced by a demand promissory note and is secured by the units of Proventure Income Fund held by the Related Parties. The loan bears interest at a rate of prime plus 0.25% per annum until December 31, 2011. It is anticipated that the loan will be repaid by that time; otherwise the interest rate for the loan will increase to prime plus 1.5% per annum.
Mr. Lacey is Cervus's Chairman of the Board, President and CEO, as well as Cervus's largest shareholder. As such, the loan is a "related party transaction" pursuant to Multi-lateral Instrument 61-101, however, Cervus is relying on the exemptions from the formal valuation and minority approval requirements of Multi-lateral Instrument 61-101 contained in sections 5.5(a) and 5.7(a) of that instrument as the fair market value of the transaction is less than 25% of Cervus's market capitalization.
About Cervus Equipment Corporation
Cervus acquires and manages authorized agricultural, commercial and industrial equipment dealerships in Western Canada through 30 dealership locations in Alberta, Saskatchewan and Manitoba. Cervus holds an approximate 60% equity interest in Agriturf Limited, a New Zealand-based corporation that offers authorized John Deere equipment, parts and service in the Manawatu, Rotorua, Hawke's Bay and Taranaki regions. The primary equipment brands represented by Cervus include John Deere agricultural equipment, Bobcat and JCB construction equipment, and Clark, Sellick, Nissan and Doosan material handling equipment. The common shares of Cervus are listed on the Toronto Stock Exchange and trade under the symbol "CVL".
Forward Looking Information
This press release contains certain forward-looking information ("forward-looking information") within the meaning of applicable Canadian securities laws. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this press release includes forward-looking information relating to the anticipation that the loan from Cervus to Mr. Lacey and his associates will be repaid before the end of the year. Cervus believes the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.
Forward-looking information is based on various assumptions. Those assumptions are based on information currently available to Cervus, including the stated intentions of the parties to the loan. You are cautioned that the preceding list of assumptions is not exhaustive.
Forward-looking information is not a guarantee of future performance and involves a number of risks and uncertainties some of which are described herein. Such forward-looking information necessarily involves known and unknown risks and uncertainties, which may cause Cervus' actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking information. Such risks include the risk that Mr. Lacey and his associates will not repay the loan by the date indicated or at all. Any forward-looking information is made as of the date hereof and, except as required by law, Cervus assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.