IN THE MATTER OF
THE SECURITIES LEGISLATION
OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO, Qu�bec, NOVA SCOTIA
AND
NEWFOUNDLAND AND LABRADOR
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
THE DESCARTES SYSTEMS GROUP INC.
AND
IN THE MATTER OF 3078393 NOVA SCOTIA COMPANY
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory
authority
or regulator (the "Decision Maker") in each of British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario, Qu�bec, Nova Scotia and Newfoundland and Labrador (the
"Jurisdictions") has received an application (the "Application") from
The Descartes Systems Group Inc. (the "Corporation") and 3079393 Nova Scotia
Company, a wholly-owned subsidiary of the Corporation (the "Subsidiary" and,
together with the Corporation, the "Applicants"), for a decision under the
securities legislation of the Jurisdictions (the "Legislation") that the
requirement contained in the Legislation to obtain a valuation (the "Valuation
Requirement") shall not apply to the proposed purchase by the Subsidiary of a portion
of the Corporation's outstanding 5.5% Convertible Unsecured Subordinated Debentures due
June 30, 2005 (the "Debentures") pursuant to a formal issuer bid (the
"Proposed Issuer Bid");
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, unless otherwise defined, the terms
herein have the meaning set out in National Instrument 14-101 Definitions or
in Qu�bec
Commission Notice 14-101;
AND WHEREAS the Applicants have represented to the
Decision Makers that:
1. The Corporation was amalgamated under the Business Corporations Act (Ontario) on
January 26, 1999. Its principal executive office is located in Waterloo, Ontario.
2. The Corporation is authorized to issue an unlimited number of common shares
(the "Common Shares"). As of May 23, 2003, the Corporation had outstanding
52,231,711
Common Shares.
3. As of May 23, 2003 the Corporation had outstanding Debentures in the aggregate
principal amount of U.S.$71,995,000.
4. The Corporation is a reporting issuer or the equivalent in each of the Jurisdictions
and is not in default of any requirements of the Legislation. The 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 under the trading symbol
"DSGX" and its Debentures are listed and posted for trading on the TSX under the
trading symbol "DSG.DB.U".
5. The Subsidiary was incorporated on May 27, 2003 and is governed by the Nova Scotia
Companies Act. It is a wholly-owned subsidiary of the Corporation. The Subsidiary is
not a reporting issuer in any of the Jurisdictions.
6. 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.
7. 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
or by private contract. No Event of Default has occurred under the Indenture.
There are no other
restrictions upon the Corporation's and no restrictions on the Subsidiary's ability
to
purchase the Debentures.
8. 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.
9. On August 1, 2002, the Corporation announced an offer to repurchase for cancellation
by
way of a substantial issuer bid expiring on September 6, 2002 (the "2002 Debenture
Offer") up to an aggregate of U.S.$51,428,571 principal amount of its outstanding
Debentures at a price of U.S.$700 for each U.S.$1,000 principal amount of Debentures
plus unpaid interest accrued to the date of purchase. The Corporation purchased
for
cancellation a nominal amount of Debentures pursuant to the 2002 Debenture Offer.
10. A significant holder of Debentures has agreed with the Corporation to tender
U.S.$30,856,500 aggregate principal amount of Debentures under the Proposed Issuer Bid at
a purchase price of U.S.$950 for each U.S.$1,000 principal amount of Debentures. To the
knowledge of the Corporation no other person or company holds more than 10% of the
aggregate principal amount of outstanding Debentures.
11. The Corporation proposes to purchase, for a period concurrent with the Proposed
Issuer Bid, up to 11,578,000 Common Shares at a single purchase price within
the range of
Cdn.$3.00 to Cdn.$3.85 using a "Dutch Auction" procedure.
12. The Corporation announced the intention to make the Proposed Issuer Bid and
certain
anticipated details of the Proposed Issuer Bid on May 12, 2003 (the "Announcement
Date"). The purchase price is U.S.$950 for each U.S.$1,000 principal amount
of
Debentures.
13. Over the 12 complete months prior to the Announcement Date, the Debentures traded on
the TSX on 158 out of 272 trading days, with an average daily trading value of U.S.$48,596
on the days traded, and the price range over that period was U.S.$680 to U.S.$930 per
U.S.$1,000 principal amount of Debentures.
14. As at May 12, 2003 and May 13, 2003 (one day after the Announcement Date), the closing
price of the Debentures on the TSX was Cdn.$850.00 and U.S.$922.50 per U.S.$1,000
aggregate principal amount outstanding respectively.
15. 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.$48.55 per Common Share based on the
foreign exchange rates as of May 13, 2003. On May 13, 2003, the closing price of the
Common Shares on the TSX was Cdn.$3.20, which was approximately 6.4% of the conversion
price of the Debentures at such time, based on the foreign exchange rates then in effect.
Over the 12 months ended April 30, 2003, the Common Shares traded on the TSX in a range
between Cdn.$2.88 and Cdn.$6.06 per Common Share.
16. In a letter (the "Opinion Letter") dated June 2, 2003, 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.
17. The Proposed Issuer Bid is proceeding by way of an issuer bid circular dated June
2, 2003, which includes a summary and copy of the Opinion Letter. The Proposed Issuer Bid
will expire on July 11, 2003, unless extended.
18. The Subsidiary intends to acquire the aggregate principal amount of U.S.$45,000,000 of
Debentures at the Purchase Price, representing approximately 62.5% of the outstanding
principal amount of Debentures. The Corporation anticipates using cash on hand, cash
equivalents and/or marketable securities to fund the Debenture acquisitions.
19. The Proposed Issuer Bid is an "issuer bid" within the meaning of
the Legislation in the Jurisdictions because the Debentures are convertible debt
securities.
AND WHEREAS under the System, this MRRS Decision
Document evidences the decision of each Decision Maker (collectively, the "Decision");
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 under the Legislation is that the Valuation Requirement shall not apply to
Proposed Issuer Bid, provided that the Applicants comply with the other applicable
provisions of the Legislation relating to formal issuer bids.
DATED this 25th day of June 2003.
Ralph Shay