IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO, Qu�bec, NOVA SCOTIA
AND
NEWFOUNDLAND
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF THE DESCARTES SYSTEMS GROUP INC.
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the "Decision Maker") in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Qu�bec, Nova Scotia and Newfoundland (the "Jurisdictions") has received an application (the "Application") from The Descartes Systems Group Inc. (the "Corporation") for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that, in connection with the proposed purchase by the Corporation of a portion of its outstanding 5.5% Convertible Unsecured Subordinated Debentures due June 30, 2005 (the "Debentures") pursuant to a formal issuer bid (the "Proposed Bid"):
(1) the Corporation be exempt from the requirements in the Legislation to obtain a valuation of the Debentures (the "Valuation Requirement"); and
(2) the Application and this MRRS Decision Document (the "Decision") be held in confidence by the Decision Makers, subject to certain conditions.
AND WHEREAS pursuant to the Mutual
Reliance Review
System for Exemptive Relief Applications (the "System"), the Ontario
Securities
Commission is the principal regulator for the Application;
AND WHEREAS the Corporation has represented to the
Decision Makers as follows:
1. The Corporation was amalgamated under the Business Corporations
Act (Ontario) on January 26, 1999.
2. The Corporation is authorized to issue an unlimited number of Common
Shares (the "Common Shares"). As of July 3, 2002, the Corporation had
outstanding 52,241,265 Common Shares. As of July 3, 2002, the Corporation had
outstanding
Debentures in the aggregate principal amount of U.S.$72,000,000.
3. The Corporation is a reporting issuer or the equivalent in each of
the Jurisdictions and its Common Shares are listed and posted for trading on
the Toronto
Stock Exchange (the "TSX") under the trading symbol "DSG" and
on the
Nasdaq National Market ("Nasdaq") under the trading symbol "DSGX".
The Debentures are listed and posted for trading on the TSX under the trading
symbol
"DSG.DB.U".
4. The Debentures were issued pursuant to an indenture dated June 30,
2000 (the "Indenture") between the Corporation and Montreal Trust Company
of Canada (now Computershare Trust Company of Canada) and distributed pursuant
to a short
form prospectus dated June 26, 2000.
5. The Indenture provides that, unless an "Event of Default" (as defined
in the Indenture) has occurred and is continuing under the Indenture, the Corporation
may purchase for cancellation any or all of the Debentures by invitation for
tenders. No Event of Default has occurred under the Indenture. There are no other
restrictions upon the Corporation's ability to purchase the Debentures.
6. The Debentures are convertible at the Debentureholder's option into
Common Shares at any time prior to the earlier of June 30, 2005 and the last
business day immediately preceding the date specified for redemption by the Corporation.
The conversion
price for the Debentures is U.S.$35.00 per Common Share, being a rate of approximately
28.57 Common Shares per U.S.$1,000 principal amount of Debentures.
7. On December 21, 2001, the Corporation filed and the TSX accepted a
Notice of Intention to Make a Normal Course Issuer Bid (the "Notice")
in respect
of the Debentures.
8. Pursuant to the Notice, the Corporation may acquire through the
facilities of the TSX up to a maximum of U.S.$7,500,000 of its outstanding Debentures,
representing approximately 10% of the public float of Debentures as at December
22, 2001. An aggregate principal amount of U.S.$3,000,000 have been acquired
pursuant to the Notice
up to and including March 13, 2002, the last date on which Debentures were acquired
pursuant to the Notice.
9. To the knowledge of management of the Corporation, no person or
company holds more than 10% of the aggregate principal amount of outstanding
Debentures.
10. Over the 12 complete months prior to July 3, 2002, the Debentures
traded on the TSX on 111 out of 250 trading days, with an average daily trading
volume of U.S.$68,396 on the days traded, and the price range over that period
was U.S.$580 to
U.S.$800 per U.S.$1,000 principal amount of Debentures.
11. As at July 3, 2002, the closing price of the Debentures on the TSX
was U.S.$680 per $1,000 aggregate principal amount outstanding.
12. The Debentures are convertible into Common Shares at a conversion
price which is significantly in excess of the current market price of the Common
Shares. The Debenture conversion price of U.S.$35.00 per Common Share for each
U.S.$1,000 in
aggregate principal amount of Debentures outstanding is equivalent to Cdn.$53.61
per Common Share based on the foreign exchange rates as of July 3, 2002. On July
3, 2002, the
closing price of the Common Shares on the TSX was Cdn.$4.73, which was approximately
8.8% of the conversion price of the Debentures at such time, based on the foreign
exchange
rates then in effect. Over the 12 months preceding that date, the Common Shares
traded on
the TSX in a range between Cdn.$4.10 and Cdn.$27.40 per Common Share.
13. In a letter (the "Opinion Letter") dated July 15, 2002,
Griffiths McBurney & Partners ("GMP") advised the Corporation that,
in GMP's
opinion:
(i) the convertibility feature of the Debentures is of no material value; and
(ii) the Debentures trade on the TSX like non-convertible, subordinated, unsecured debt based on the Corporation's underlying creditworthiness.
14. The Proposed Bid will proceed by way of an issuer bid
circular
which will include a summary and a copy of the Opinion Letter.
15. The Corporation intends to acquire up to an aggregate principal
amount of U.S.$51,428,571 of Debentures, representing approximately 71.4% of
the outstanding Debentures. The Corporation anticipates using cash on hand and
cash
equivalents to fund the Debenture acquisitions.
16. The Proposed Bid will be an "issuer bid" within the
meaning of the Legislation in the Jurisdictions because the Debentures are convertible
debt securities.
17. The Corporation has not yet announced its intention to proceed with
the Proposed Bid, which remains subject to approval by the Board of Directors
of the Corporation. Given the potential size of the Proposed Bid, release of
the Decision prior
to such an announcement could affect the market price of the Debentures.
AND WHEREAS pursuant to the System, this MRRS Decision
Document evidences the Decision of each Decision Maker;
AND WHEREAS each of the Decision Makers is satisfied
that the test contained in the Legislation that provides the Decision Maker with the
jurisdiction to make the Decision has been met;
THE DECISION, of the Decision Makers in the
Jurisdictions pursuant to the Legislation is that, in connection with the Proposed Bid,
the Corporation is exempt from the Valuation Requirement, provided that the Corporation
complies with the other applicable provisions of the Legislation relating to formal bids
made by issuers.
THE FURTHER DECISION of the Decision Makers pursuant
to the Legislation is that the Application and the Decision shall be held in confidence by
the Decision Makers until the earlier of the date that the Circular is filed in connection
with the Proposed Bid and August 14, 2002.
DATED July 30, 2002.
John Hughes - Manager, Continuous Disclosure