OTTAWA, Dec. 11, 2012 /CNW/ - In-Touch Survey Systems Ltd. ("In-Touch" or the "Company") (TSX.V:INX) announces that, on or before December 31, 2012, it will make a loan in the amount of $193,725 to Michael Gaffney, its Chief Executive Officer and a director, and a loan in the amount of $173,800 to Neil Milton, a director and Chairman, to assist them in complying with recently enacted changes to the Income Tax Act (Canada) which prohibit individuals who hold greater than a 10% ownership in companies from holding any shares of such companies within registered plans. The Company has 14,276,312 common shares issued and outstanding. Mr. Gaffney holds 2,260,794 common shares of the Company (15.9%), of which 615,000 shares (4.3%) are held in his RRSP, and Mr. Milton owns 2,401,348 common shares of the Company (16.9%), of which 552,000 shares (3.9%) are held in his RRSP. Plan owners such as Messrs. Gaffney and Milton are obliged to divest such prohibited interests within their registered plans not later than December 31, 2012 or be faced with substantial tax penalties. The principal amount of each loan is based on the closing price of the common shares on the TSX Venture Exchange on December 10, 2012, namely, $0.315, and the loan proceeds will be used by each of Mr. Gaffney and Mr. Milton to purchase all of the common shares of the Company held by their respective RRSPs.
The loans will be repayable on December 10, 2013, and will bear interest at the rate of 3% per annum, being the current prime rate of Canadian chartered banks. The loans will be secured by a pledge of the shares purchased by each of Messrs. Gaffney and Milton from their RRSPs.
The loans from the Company to Messrs. Gaffney and Milton constitute related party transactions under Multilateral Instrument 61-101 Protection of Minority Security Holders (MI 61-101). These transactions are exempt from the requirement for minority approval under MI 61-101 pursuant to section 5.5(a), as the subject matter and consideration for the transaction does not exceed 25% of the market capitalization of In-Touch, and the transactions are also exempt from the formal valuation requirement under MI 61-101 based on both such market capitalization threshold and because In-Touch is listed on the TSX Venture Exchange.
The sole independent director of In-Touch, Rainer Paduch, has reviewed the proposed loan transactions pursuant to Section 5.2(1)(e) of MI 61-101, and approved the loans as being in the best interests of In-Touch, having regard to the potential for depressing the trading price of the Company's common shares if Messrs. Gaffney and Milton were required to cause their RRSPs to sell shares in the market in a short time frame in order to obtain the funds required to purchase all of the shares of the Company held in their RRSPs.
The material change report with respect to these transactions is being filed less than 21 days before the making of the loans as the transactions to remove the shares of the Company from the RRSPs of Messrs. Gaffney and Milton must be completed by them on or before December 31, 2012, and these changes to the Income Tax Act (Canada) came to the attention of Messrs. Gaffney and Milton and the Company only recently.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE: In-Touch Survey Systems Ltd.
For further information:
Controller and Corporate Secretary