As filed with the Securities and Exchange Commission on June 4, 2003
================================================================================
Tender Offer Statement Pursuant to Section 13(e)(1) of the
Securities Exchange Act of 1934 and Rule 13e-4 Thereunder
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4F
Issuer Tender Offer Statement Pursuant to Section 13(e)(1)
of the Securities Exchange Act of 1934
-------------
THE DESCARTES SYSTEMS GROUP INC.
--------------------------------------------------
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
ONTARIO, CANADA
--------------------------------------------------------
(JURISDICTION OF ISSUER'S INCORPORATION OR ORGANIZATION)
THE DESCARTES SYSTEMS GROUP INC.
---------------------------------------
(NAME(S) OF PERSON(S) FILING STATEMENT)
COMMON SHARES, NO PAR VALUE PER SHARE
-------------------------------------
(TITLE OF CLASS OF SECURITIES)
249906 10 8
----------------------------------------------------
(CUSIP NUMBER OF CLASS OF SECURITIES (IF APPLICABLE)
THE DESCARTES SYSTEMS GROUP INC.
120 RANDALL DRIVE
WATERLOO, ONTARIO
CANADA N2V1C6
ATTN: COLLEY CLARKE
(519) 746-6114
--------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER of PERSON(S) AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
June 4, 2003
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITYHOLDERS)
CALCULATION OF FILING FEE
================================================================================
Transaction Valuation Amount of Filing Fee
================================================================================
US$32,375,040 (1) US$2,619.14 (1)
================================================================================
(1) The fee has been calculated pursuant to the instructions for Schedule
13E-4F as prescribed by Section 13(e)(3) of the Securities Exchange Act of
1934, as amended, based on the purchase of up to 11,578,000 Common Shares
of The Descartes Systems Group Inc. at the maximum aggregate cash offer
price of Cdn$3.85 per share and based on an exchange rate of Cdn$1.00 to
US$0.7263, the inverse of the noon buying rates in New York for cable
transfers payable in Canadian dollars as certified for customs purposes by
the Federal Reserve Bank of New York on May 29, 2003.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: Registration No.:
Filing Party:
Form/Schedule: Date Filed:
================================================================================
PART I
INFORMATION REQUIRED TO BE SENT TO SHAREHOLDERS
-----------------------------------------------
Item 1. Home Jurisdiction Documents
Document 1: Letter to Shareholders
Document 2: Tender Offer Circular dated June 2, 2003
Document 3: Letter of Transmittal
Document 4: Notice of Guaranteed Delivery
Document 5: Form of Broker Letter to Clients
Item 2. Information Legends
See the cover of the Tender Offer Circular.
PART II
INFORMATION NOT REQUIRED TO BE SENT TO SHAREHOLDERS
---------------------------------------------------
The following exhibits have been filed as part of this Schedule:
1.1 Form 40-F (previously filed with the U.S. Securities and Exchange
Commission on July 17, 2002 and incorporated herein by reference).
1.2 Securities Act (Quebec) Report Under Section 189.1.3.
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
---------------------------------------------
Item 1. Undertaking.
-----------
The Issuer undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to this Schedule or to transactions in said securities.
The Issuer undertakes to disclose in the United States, on the same
basis as it is required to make such disclosure pursuant to applicable Canadian
federal and/or provincial or territorial laws, regulations or policies, or
otherwise discloses, information regarding purchases of the Issuer's securities
in connection with the cash tender or exchange offer covered by this Schedule.
Such information shall be set forth in amendments to this Schedule.
Item 2. Consent to Service of Process.
-----------------------------
Concurrently with the filing of this Schedule, the Issuer is filing
with the Commission a written irrevocable consent and power of attorney on Form
F-X.
SIGNATURES
The Descartes Systems Group Inc. consents without power of revocation
that any administrative subpoena may be served, or any administrative
proceeding, civil suit or civil action where the cause of action arises out of
or relates to or concerns any offering made or purported to be made in
connection with the filing on Schedule 13E-4F or any purchases or sales of any
securities in connection therewith, may be commenced against it in any
administrative tribunal or in any appropriate court in any place subject to the
jurisdiction of any state or of the United States by service of said subpoena or
process upon the registrant's designated agent.
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
THE DESCARTES SYSTEMS GROUP INC.
By: /s/ Colley Clarke
-------------------------
Name: Colley Clarke
Title: Executive Vice-President,
Finance and Chief
Financial Officer
Dated: June 4, 2003
EXHIBIT INDEX
-------------
Exhibit
Number Description
------ -----------
1.1 Form 40-F (previously filed with the U.S. Securities and Exchange
Commission on July 17, 2002 and incorporated herein by reference).
1.2 Securities Act (Quebec) Report Under Section 189.1.3.
[LOGO] DOCUMENT 1
----------
THE DESCARTES SYSTEMS GROUP INC.
CORPORATE HEADQUARTERS
120 RANDALL DRIVE, WATERLOO, ONTARIO, CANADA N2V 1C6
TELEPHONE (519) 746-8110 O FAX (519) 746-1984
WWW.DESCARTES.COM
June 2, 2003
Dear Shareholder:
We are pleased to inform you that The Descartes Systems Group Inc.
("Descartes") is offering to purchase up to 11,578,000 of its common shares (the
"Shares"), or about 22.2% of its total outstanding Shares, from existing
Shareholders (the "Share Offer"). Descartes will conduct the Share Offer through
a procedure referred to as a "Dutch Auction". The price range will be between
Cdn$3.00 and Cdn$3.85 per Share. The Share Offer will expire at 5:00 p.m.
(Toronto time) on July 11, 2003 (the "Expiration Date"), unless extended or
withdrawn by Descartes. A copy of the offer to purchase (the "Offer to
Purchase") setting out the details of the Share Offer is enclosed and we urge
you to read it carefully and to obtain professional advice before deciding
whether or not to tender your Shares.
There are two ways to deposit your Shares: auction tender or purchase price
tender. The auction tender option allows you to select a price within the
specified range, between Cdn$3.00 and Cdn$3.85, at which you are willing to sell
some or all of your Shares to Descartes. The purchase price tender option allows
you to submit your shares without specifying a price. Shareholders selecting
this option will be considered to have selected Cdn$3.00 but will receive the
clearing purchase price.
The "clearing purchase price" will be the lowest price within the range at
which Descartes will be able to purchase 11,578,000 Shares. If more than
11,578,000 Shares are deposited at prices up to or at the clearing purchase
price, the deposited Shares will be accepted for purchase on a PRO RATA basis.
Shareholders depositing pursuant to an auction tender at prices equal to or
lower than the clearing purchase price or depositing pursuant to a purchase
price tender will receive the clearing purchase price, subject to possible
proration. All Shares deposited at a price higher than the clearing purchase
price will be returned to Shareholders.
Payment for all Shares taken up by Descartes will be made in Canadian
dollars unless you elect on the appropriate form to receive payment in U.S.
dollars.
Each Shareholder must decide whether or not it wishes to participate in the
Share Offer based on its own situation, investment objectives and tax status. In
this regard, you should consult your accountant or tax advisor and read section
14 of the accompanying Offer to Purchase before making a decision.
Concurrent with the Share Offer, 3078393 Nova Scotia Company, a
wholly-owned subsidiary of Descartes, is offering to purchase up to an aggregate
principal amount of U.S.$45,000,000 of the 5.50% Convertible Unsecured
Subordinated Debentures due June 30, 2005 (the "Debentures") of Descartes, from
existing Debentureholders at a single price of U.S.$950 plus the amount of
unpaid interest (subject to any applicable withholding tax) accrued up to but
excluding the date of purchase per U.S.$1,000 principal amount of Debentures
(the "Debenture Offer"). The Debenture Offer will also expire at the Expiration
Date, unless extended or withdrawn by Descartes.
For additional information with respect to the Share Offer, you may contact
Credit Suisse First Boston Canada Inc. (in Canada) or Credit Suisse First Boston
LLC (in the United States), the information agent (D.F. King & Co.) or the
depositary (CIBC Mellon Trust Company), each at the contact numbers set forth on
the back cover of the Offer to Purchase. You may also contact a representative
of the financial institution holding the Shares in your name, if applicable, or
your financial adviser.
Sincerely,
/S/ MANUEL PIETRA
Chief Executive Officer and President
DOCUMENT 2
----------
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE IN
ANY DOUBT AS TO HOW TO DEAL WITH IT, YOU SHOULD CONSULT YOUR INVESTMENT DEALER,
STOCK BROKER, TRUST COMPANY MANAGER, BANK MANAGER, LAWYER OR OTHER PROFESSIONAL
ADVISER.
June 2, 2003
OFFER
BY
THE DESCARTES SYSTEMS GROUP INC.
TO PURCHASE FOR CASH
UP TO 11,578,000 OF ITS COMMON SHARES AT A PURCHASE PRICE OF
NOT MORE THAN $3.85 AND NOT LESS THAN $3.00 PER COMMON SHARE
ALL DOLLAR REFERENCES IN THIS OFFER TO PURCHASE
ARE IN CANADIAN DOLLARS, UNLESS OTHERWISE INDICATED
The Descartes Systems Group Inc. ("Descartes" or the "Company") invites holders
("Shareholders") of its common shares (the "Shares") to deposit Shares pursuant
to (i) auction tenders at prices of not more than $3.85 nor less than $3.00 per
Share specified by such Shareholders ("Auction Tenders") or (ii) pursuant to
purchase price tenders described below ("Purchase Price Tenders"), in either
case upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together, as amended or
supplemented from time to time, constitute the "Offer").
THE OFFER EXPIRES AT 5:00 P.M., TORONTO TIME, ON JULY 11, 2003, UNLESS EXTENDED.
Descartes reserves the right to withdraw the Offer and not take up and pay for
any Shares deposited under the Offer unless certain conditions are satisfied.
See Section 5, "Certain Conditions of the Offer".
Descartes will determine a single price per Share (not more than $3.85 nor less
than $3.00 per Share) (the "Purchase Price") that it will pay for Shares
properly deposited pursuant to the Offer, taking into account the number of
Shares deposited pursuant to Auction Tenders and Purchase Price Tenders and the
prices specified by Shareholders making Auction Tenders. Shares deposited
pursuant to Auction Tenders will not be purchased by Descartes pursuant to the
Offer if and to the extent that the price specified by the depositing
Shareholder is greater than the Purchase Price determined by Descartes. A
Shareholder who wishes to deposit Shares but does not wish to specify a price at
which his or her Shares may be purchased by Descartes should make a Purchase
Price Tender. Shares deposited pursuant to Purchase Price Tenders will be
considered to have been deposited at $3.00 per Share. The Purchase Price will be
the lowest price that will enable Descartes to purchase 11,578,000 Shares
pursuant to the Offer (or such lesser number of Shares as are properly deposited
at prices not more than $3.85 and not less than $3.00 per Share).
Each Shareholder who has properly deposited Shares pursuant to an Auction Tender
at or below the Purchase Price or pursuant to a Purchase Price Tender and who
has not withdrawn such Shares will receive the Purchase Price (subject to any
applicable withholding tax), payable in cash, for all Shares purchased upon the
terms and subject to the conditions of the Offer including the provisions
relating to proration described herein.
(CONTINUED ON FOLLOWING PAGE)
The Dealer Managers for the Offer are:
In the United States: In Canada:
CREDIT SUISSE FIRST BOSTON LLC CREDIT SUISSE FIRST BOSTON CANADA INC.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION TO ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE OFFER IS
NOT BEING MADE TO, NOR WILL DEPOSITS BE ACCEPTED FROM OR ON BEHALF OF,
SHAREHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE OFFER
WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER,
DESCARTES MAY, IN ITS SOLE JUDGEMENT, TAKE SUCH ACTION AS IT MAY DEEM NECESSARY
TO EXTEND THE OFFER TO SHAREHOLDERS IN SUCH JURISDICTION.
(CONTINUED FROM COVER)
If the number of Shares properly deposited by the Expiration Date pursuant to
Auction Tenders at prices at or below the Purchase Price and pursuant to
Purchase Price Tenders is greater than 11,578,000, Descartes will, upon the
terms and conditions of the Offer, purchase at the Purchase Price 11,578,000
Shares so deposited on a PRO RATA basis according to the number of Shares so
deposited by the depositing Shareholders.
On May 12, 2003, the last full trading day prior to the announcement of
Descartes' intention to make the Offer, the closing price of the Shares on the
Toronto Stock Exchange and Nasdaq National Market was $2.98 and U.S.$2.15,
respectively. To the knowledge of management of the Company after reasonably
inquiry, no director or senior officer of the Company intends to deposit Shares
under the Offer.
NEITHER DESCARTES, ITS BOARD OF DIRECTORS NOR ANY REPRESENTATIVE THEREOF MAKES
ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO DEPOSIT OR REFRAIN FROM
DEPOSITING SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO DEPOSIT
SHARES UNDER THE OFFER BASED ON THEIR PARTICULAR CIRCUMSTANCES. SHAREHOLDERS
SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF ACCEPTING THE OFFER.
SEE SECTION 14, "INCOME TAX CONSIDERATIONS".
Any Shareholder desiring to deposit all or any portion of his or her Shares
under the Offer should complete and sign the Letter of Transmittal (or a
manually executed photocopy thereof) in accordance with the instructions in such
Letter of Transmittal and deliver it and all other required documents to CIBC
Mellon Trust Company, as Depositary (the "Depositary") and either deliver the
certificates for such Shares to the Depositary according to the procedure set
forth in the Offer to Purchase under "Procedure for Depositing Shares" or
request his or her broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for him or her. ANY SHAREHOLDER HAVING SHARES
REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR
OTHER NOMINEE SHOULD CONTACT SUCH PERSON OR INSTITUTION IF THE SHAREHOLDER
DESIRES TO DEPOSIT SUCH SHARES.
INFORMATION FOR UNITED STATES SHAREHOLDERS ONLY:
THIS OFFER IS MADE BY DESCARTES, A FOREIGN ISSUER, FOR ITS OWN SECURITIES, AND
WHILE THE OFFER IS SUBJECT TO THE DISCLOSURE REQUIREMENTS OF THE PROVINCE OF
ONTARIO, CANADA, THE PROVINCE UNDER THE LAWS OF WHICH DESCARTES IS AMALGAMATED,
AND THE OTHER PROVINCES OF CANADA, SHAREHOLDERS SHOULD BE AWARE THAT IN SOME
RESPECTS THESE DISCLOSURE REQUIREMENTS ARE DIFFERENT FROM THOSE OF THE UNITED
STATES. THE ENFORCEMENT BY SHAREHOLDERS OF CIVIL REMEDIES UNDER U.S. SECURITIES
LAWS MAY BE ADVERSELY AFFECTED BY THE FACT THAT DESCARTES IS AMALGAMATED UNDER
THE LAWS OF ONTARIO, CANADA AND THAT SOME OF ITS DIRECTORS AND OFFICERS ARE
RESIDENTS OF A COUNTRY OTHER THAN THE UNITED STATES. ENFORCEMENT OF CIVIL
LIABILITIES UNDER U.S. SECURITIES LAWS MAY FURTHER BE ADVERSELY AFFECTED BY THE
FACT THAT SOME OR ALL OF THE EXPERTS NAMED IN THE OFFER MAY BE RESIDENTS OF
CANADA. SHAREHOLDERS SHOULD BE AWARE THAT THE ACCEPTANCE OF THE OFFER WILL HAVE
CERTAIN TAX CONSEQUENCES UNDER UNITED STATES AND CANADIAN LAW, AND SHOULD
CONSULT THEIR TAX ADVISERS WITH RESPECT TO THOSE CONSEQUENCES IN CONSIDERING
THIS OFFER.
DESCARTES WILL FILE WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AN ISSUER
TENDER OFFER STATEMENT ON SCHEDULE 13E-4F WITH RESPECT TO THE OFFER PURSUANT TO
APPLICABLE PROVISIONS OF THE U.S. SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(THE "EXCHANGE ACT").
NOTWITHSTANDING ANY IMPLICATION TO THE CONTRARY IN THIS OFFER TO PURCHASE,
FORWARD-LOOKING STATEMENTS MADE IN CONNECTION WITH THE OFFER AND INCLUDED HEREIN
ARE NOT PROTECTED BY THE U.S. PRIVATE SECURITIES LITIGATION REFORM ACT.
TABLE OF CONTENTS
PAGE
----
SUMMARY TERM SHEET............................................................ 1
SUMMARY....................................................................... 4
DEFINITIONS................................................................... 6
OFFER TO PURCHASE............................................................. 7
1. Number of Shares; Proration............................................. 7
2. Procedure for Depositing Shares......................................... 8
3. Withdrawal Rights.......................................................10
4. Acceptance for Payment and Payment for Shares...........................11
5. Certain Conditions of the Offer.........................................12
6. Extension and Variation of the Offer....................................14
7. Payment in the Event of Mail Service Interruption.......................15
8. Liens; Dividends; Proxies...............................................15
9. Certain Information Concerning Descartes................................15
10. Purpose and Effects of the Offer.......................................16
11. Valuation Exemption....................................................19
12. Price Range of Shares and Debentures; Purchases and Distributions......20
13. Interest of Directors and Senior Officers; Transactions and
Arrangements Concerning the Offer......................................22
14. Income Tax Considerations..............................................24
15. Certain Legal Matters; Regulatory Approvals............................31
16. Prior Valuations.......................................................31
17. Source and Amount of Funds.............................................31
18. Depositary.............................................................32
19. Financial Advisers.....................................................32
20. Fees and Expenses......................................................32
21. Statutory Rights.......................................................33
22. Notice.................................................................33
23. Other Terms............................................................33
24. Additional Information.................................................33
25. Recent Developments....................................................34
26. Summary Historical Consolidated Financial Information and
Unaudited Pro Forma Consolidated Financial Statements..................34
APPROVAL BY DESCARTES........................................................C-1
CONSENT OF GRIFFITHS MCBURNEY & PARTNERS.....................................C-1
CONSENT OF BLAKE, CASSELS & GRAYDON LLP......................................C-1
CONSENT OF TESTA, HURWITZ & THIBEAULT, LLP...................................C-2
CONSENT OF DELOITTE & TOUCHE LLP.............................................C-2
SCHEDULE "A".................................................................A-1
SUMMARY TERM SHEET
The following are answers to some of the questions that you may have about
the offer to purchase shares. In this summary term sheet, the terms "we", "us"
and "our" refer to Descartes, and the terms "you" and "your" refer to
shareholders. We urge you to read carefully the remainder of this offer and the
accompanying letter of transmittal because the information in this summary is
not complete and additional important information is contained in the remainder
of this offer and the letter of transmittal. We have included page references to
the remainder of this offer to let you know where you can find a more complete
description of the topics covered in this summary.
o WHAT SECURITIES IS DESCARTES OFFERING TO PURCHASE?
We are offering to purchase up to 11,578,000 of our common shares. Whether
or not we purchase the full amount will depend on the total number of shares
tendered in the offer. See "Number of Shares; Proration" on page 7.
o WHAT WILL DESCARTES PAY ME IN EXCHANGE FOR MY SHARES?
We will determine a single purchase price per share. All shares that we
purchase in the offer will be purchased in cash, at this single purchase price.
This purchase price will be not more than $3.85 nor less than $3.00 per share,
and will be the lowest price that will permit us to purchase 11,578,000 shares.
Such purchase price will be payable in Canadian dollars, or at your option,
in U.S. dollars. See "Acceptance for Payment and Payment for Shares" on page 11.
Our determination of the purchase price will take into account the
following factors:
o the number of shares tendered pursuant to "Auction Tenders" and
"Purchase Price Tenders" (see below), and
o the prices specified by persons making Auction Tenders.
An "Auction Tender" is a means of tendering your shares whereby you specify
in your letter of transmittal the minimum price (not more than $3.85 nor less
than $3.00 per share) at which you are willing to sell your shares to us.
A "Purchase Price Tender", on the other hand, is a means of tendering your
shares when you do not wish to specify a purchase price. If you elect to tender
your shares by means of a Purchase Price Tender, we will consider you to have
tendered your shares at $3.00 per share.
Once we have determined a single purchase price, we will purchase shares
deposited at or below the purchase price pursuant to Auction Tenders and shares
deposited pursuant to Purchase Price Tenders.
See "Number of Shares; Proration" on page 7. See also "Acceptance for
Payment and Payment for Shares" on page 11.
If fewer than 11,578,000 shares are properly deposited at prices not more
than $3.85 and not less than $3.00 per share, we will purchase all such properly
deposited shares.
o ARE THERE ANY OTHER OFFERS TO PURCHASE SECURITIES?
A wholly-owned subsidiary of Descartes has also made an offer to purchase
up to U.S.$45,000,000 aggregate principal amount of its 5.50% convertible
unsecured subordinated debentures at a purchase price of U.S.$950 plus the
amount of unpaid interest (subject to any applicable withholding tax) accrued up
to and as at the date immediately prior to the date on which the subsidiary
takes up and pays for debentures under the offer for each U.S.$1,000 principal
amount of debentures. See "Recent Developments" on page 34.
1
o CAN I TENDER SOME BUT NOT ALL OF MY SHARES? WHAT HAPPENS TO SHARES THAT I
DO NOT TENDER?
You can tender all, some or none of your shares. Any shares that you do not
tender will continue in effect in accordance with their current terms and
conditions. See "Procedure for Depositing Shares" on page 8.
o HOW DO I TENDER MY SHARES FOR PURCHASE?
If you wish to tender -- or "deposit" -- your shares, a properly completed
and executed letter of transmittal and any other documents required by the
letter of transmittal must be delivered to CIBC Mellon Trust Company, as
depositary, before the expiration date of the offer. As a number of shares are
currently registered in the name of The Canadian Depository for Securities
Limited ("CDS") or CEDE & Co. ("CEDE") as custodian for its participants, CDS
and CEDE will be issuing instructions to their respective participants as to the
method of depositing the shares under the terms of the offer. If you wish to
deposit shares under the offer that are registered with either CDS or CEDE, you
should immediately contact the investment dealer, stock broker, bank, trust
company or other nominee through which your shares are held in order that they
may take the necessary steps on your behalf to be able to deposit such shares
under the offer. See "Procedure for Depositing Shares" on page 8.
o WHEN DOES THE OFFER EXPIRE? CAN IT BE EXTENDED OR CHANGED?
The offer will expire on July 11, 2003 at 5:00 p.m., Toronto time. We may,
in our discretion, extend or otherwise modify the offer at any time. We will
make an announcement, and provide you with notice, of any extension or
modification we may make to the offer. If we modify the offer to increase the
purchase price to be paid in the offer, such increase will be applicable to all
the shares that we take up in the offer. If we extend the offer, we may delay
the acceptance of any shares that have been deposited. We cannot assure you that
we will extend the offer or, if we do extend it, for how long. If the offer
becomes over-subscribed as a result of deposits made during the extension
period, only those shareholders that have deposited shares in the extension
period will be subject to proration. See "Extension and Variation of the Offer"
on page 14.
o WHEN WILL I RECEIVE PAYMENT?
We will take up and pay for shares to be purchased in the offer as soon as
practicable (and in any event not later than 10 days) after the expiration of
the offer. See "Acceptance for Payment and Payment for Shares" on page 11.
o IF MY SHARES ARE PURCHASED IN THE OFFER, WILL I BE TAXED ON THE PAYMENT I
RECEIVE IN EXCHANGE?
There are tax consequences of participating in this offer, which are
described in "Income Tax Considerations" on page 24. The description of tax
consequences is of a general nature only and is not intended to be, and should
not be construed to be, legal or tax advice to any particular holder of shares.
Persons who are considering tendering shares in this offer should consult their
own tax advisers as to the tax consequences in their particular circumstances.
o WILL I BE REQUIRED TO PAY ANY BROKERAGE COMMISSIONS OR FEES IF I TENDER?
If you are a registered shareholder, you will not have to pay any brokerage
fee or commission in connection with tendering under the offer if you deposit
your shares directly with CIBC Mellon Trust Company as depositary pursuant to
the offer. If you hold your shares through your investment dealer, stock broker,
bank, trust company or other nominee, you should ask such nominee as to whether
any service charges or transaction fees are charged by it in connection with
tendering your shares under the offer. See "Acceptance for Payment and Payment
for Shares" on page 11.
o ARE THERE CONDITIONS TO THE OFFER?
There are a number of events that may cause us to delay or terminate this
offer. These events are described in "Certain Conditions of the Offer" on page
12.
2
o CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You may withdraw some or all of your tendered shares at any time before
5:00 p.m., Toronto time, on July 11, 2003; provided, however, that if we extend
the offer beyond that time, you may withdraw some or all of your tendered shares
at any time until the extended expiration date. You may also withdraw some or
all of your tendered shares if we have not paid for them within three business
days of being taken up. See "Withdrawal Rights" on page 10.
o WHAT DOES THE DESCARTES BOARD OF DIRECTORS THINK OF THE OFFER?
Although the Descartes Board of Directors has approved the offer, neither
Descartes, its Board of Directors nor any representative thereof makes any
recommendation as to whether you should deposit or refrain from depositing your
shares in the offer. You must decide for yourself whether to deposit shares
under the offer, and if so, what number of shares to deposit. See "Purpose and
Effects of the Offer" on page 16.
o WHO MAY I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?
For additional information or assistance, you may contact your investment
dealer, stock broker, bank, trust company or other nominee through which your
shares are held. You may also contact either of the dealer managers, Credit
Suisse First Boston Canada Inc. or Credit Suisse First Boston LLC, the
information agent, D.F. King & Co., or the depositary, CIBC Mellon Trust
Company, each at the contact numbers set forth on the back cover of this offer.
3
================================================================================
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT AND MORE
SPECIFIC DETAILS IN THE OFFER. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY
HAVE THE MEANINGS ASSIGNED IN THE "DEFINITIONS" SECTION OF THIS OFFER TO
PURCHASE.
HOW TO DEPOSIT Shareholders wishing to deposit Shares may do so either
SHARES pursuant to (i) Auction Tenders or (ii) Purchase Price
Tenders. Each Shareholder making an Auction Tender must
specify in the Letter of Transmittal the minimum price (not
more than $3.85 nor less than $3.00 per Share) at which such
Shareholder is willing to have his or her Shares purchased
by Descartes. A Shareholder who wishes to deposit Shares but
who does not wish to specify a price at which his or her
Shares may be purchased by Descartes should make a Purchase
Price Tender.
NUMBER OF SHARES 11,578,000 Shares will be purchased, subject to proration as
TO BE PURCHASED described herein and subject to sufficient Shares being
deposited pursuant to the Offer and not withdrawn.
PURCHASE PRICE Descartes will determine a single Purchase Price that will
be not more than $3.85 nor less than $3.00 per Share, taking
into account the number of Shares deposited pursuant to
Auction Tenders and Purchase Price Tenders and the prices
specified by Shareholders making Auction Tenders. Shares
deposited pursuant to Purchase Price Tenders will be
considered to have been deposited at $3.00 per Share. The
Purchase Price will be the lowest price that will enable
Descartes to purchase 11,578,000 Shares (or such lesser
number of Shares as are properly deposited at prices not
more than $3.85 nor less than $3.00 per Share). All Shares
purchased by Descartes will be purchased at the Purchase
Price (subject to any applicable withholding tax), including
Shares deposited at or below the Purchase Price pursuant to
Auction Tenders and Shares deposited pursuant to Purchase
Price Tenders.
PRORATION If the number of Shares properly deposited by the Expiration
Date pursuant to Auction Tenders at prices at or below the
Purchase Price or pursuant to Purchase Price Tenders is
greater than 11,578,000, Descartes will, upon the terms and
subject to the conditions of the Offer, purchase at the
Purchase Price 11,578,000 Shares so deposited on a PRO RATA
basis. See Section 1, "Number of Shares; Proration".
DEBENTURE OFFER On the date hereof, a wholly-owned subsidiary of Descartes
has made an offer to purchase up to U.S.$45,000,000
aggregate principal amount of 5.50% Convertible Unsecured
Debentures due June 30, 2005 of Descartes at a purchase
price of U.S.$950 plus the amount of any accrued and unpaid
interest for each U.S.$1,000 principal amount of such
debentures. See Section 25, "Recent Developments".
BROKERAGE No fee or commission will be payable by any registered
COMMISSIONS Shareholder that deposits Shares directly with the
Depositary pursuant to the Offer. Any Shareholder who holds
Shares through an investment dealer, stock broker, bank,
trust company or other nominee should ask such nominee as to
whether any service charges or transaction fees are charged
by it in connection with depositing Shares under the Offer.
CONDITIONS OF Descartes reserves the right to withdraw the Offer and not
THE OFFER take up and pay for Shares deposited under the Offer unless
the conditions described under Section 5, "Certain
Conditions of the Offer", are satisfied.
EXPIRATION DATE July 11, 2003 at 5:00 p.m., Toronto time, or such later date
and time to which the Offer may be extended by Descartes.
================================================================================
4
================================================================================
PAYMENT DATE Descartes will take up and pay for Shares as soon as
practicable after the Expiration Date, and in any event not
later than 10 days after the Expiration Date.
CURRENCY OF The Purchase Price will be denominated in Canadian dollars.
PAYMENT Amounts payable to depositing Shareholders will be in
Canadian dollars. Shareholders have the option to receive
payment in United States dollars. See Section 4, "Acceptance
for Payment and Payment for Shares".
POSITION OF Neither Descartes, its Board of Directors nor any
DESCARTES representative thereof makes any recommendation to any
AND ITS Shareholder as to whether to deposit or refrain from
DIRECTORS depositing Shares. See Section 10, "Purpose and Effects of
the Offer".
WITHDRAWAL Deposited Shares may be withdrawn at any time until 5:00
RIGHTS p.m., Toronto time, on July 11, 2003, and may also be
withdrawn if the Shares have not been paid for by Descartes
within three business days of being taken up. See Section 3,
"Withdrawal Rights".
TAX SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX
CONSEQUENCES OF ACCEPTING THE OFFER. SEE SECTION 14, "INCOME
TAX CONSIDERATIONS".
FURTHER Contact the Depositary, either of the Dealer Managers or the
INFORMATION Information Agent or consult your investment dealer, stock
REGARDING broker, bank, trust company or other nominee through which
THE OFFER your Shares are held. The respective addresses, telephone
and facsimile numbers of the Depositary, the Dealer Managers
and the Information Agent are set forth on the back cover of
this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF DESCARTES
AS TO WHETHER SHAREHOLDERS SHOULD DEPOSIT OR REFRAIN FROM DEPOSITING SHARES
PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN AS SET FORTH
IN THIS OFFER OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH
RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY DESCARTES.
================================================================================
5
DEFINITIONS
IN THIS OFFER TO PURCHASE, INCLUDING THE SUMMARY, UNLESS THE SUBJECT MATTER OR
CONTEXT IS INCONSISTENT THEREWITH, THE FOLLOWING TERMS HAVE THE MEANINGS SET
FORTH BELOW:
"AUCTION TENDER" means a tender made by a Shareholder pursuant to the Offer
where that Shareholder specifies a tender price of not more than $3.85 nor less
than $3.00 per Share, in increments per Share specified in the Letter of
Transmittal, at which that Shareholder is willing to have all such tendered
Shares purchased by the Company;
"BOARD OF DIRECTORS" means the board of directors of Descartes;
"DEALER MANAGERS" means Credit Suisse First Boston Canada Inc. and Credit Suisse
First Boston LLC;
"DEBENTURE OFFER" means the offer dated June 2, 2003 by a wholly-owned
subsidiary of Descartes to purchase up to U.S.$45,000,000 aggregate principal
amount of Debentures at a purchase price of U.S.$950 plus any accrued and unpaid
interest for each U.S.$1,000 of principal amount of Debentures;
"DEBENTURES" means the 5.50% Convertible Unsecured Subordinated Debentures due
June 30, 2005 of Descartes;
"DEPOSITARY" means CIBC Mellon Trust Company;
"DEPOSITED SHARES" means Shares validly deposited pursuant to the Offer;
"ELIGIBLE INSTITUTION" means a Canadian Schedule I chartered bank, a major trust
company in Canada, a member of the Securities Transfer Agents Medallion Program
(STAMP), a member of the Stock Exchange Medallion Program (SEMP) or a member of
the New York Stock Exchange Inc. Medallion Signature Program (MSP). Members of
these programs are usually members of recognized stock exchanges in Canada and
the United States, members of the Investment Dealers Association of Canada,
members of the National Association of Securities Dealers or banks and trust
companies in the United States;
"EXPIRATION DATE" means 5:00 p.m., Toronto time, on July 11, 2003, unless
Descartes, in its sole discretion, extends the period during which the Offer is
open, in which event the term "Expiration Date" shall refer to the latest time
and date on which the Offer, as so extended by Descartes, shall expire;
"LETTER OF TRANSMITTAL" means the letter of transmittal in the form accompanying
this Offer to Purchase;
"NOTICE OF GUARANTEED DELIVERY" means the notice of guaranteed delivery in the
form accompanying this Offer to Purchase;
"PURCHASE PRICE" means the price per Share (not more than $3.85 nor less than
$3.00 per Share) that Descartes will pay for Shares properly tendered pursuant
to the Offer, taking into account the number of Shares deposited pursuant to
Auction Tenders and Purchase Price Tenders and the prices specified by
Shareholders making Auction Tenders;
"PURCHASE PRICE TENDER" means a tender (or deemed tender) made by a Shareholder
where that Shareholder does not specify a price for the purchase of Shares by
Descartes but rather agrees to have his or her Shares purchased for the Purchase
Price as determined under the Offer;
"SEC" means the Securities and Exchange Commission of the United States;
"SHAREHOLDER" means a holder of Shares;
"SHARES" means issued and outstanding common shares of Descartes;
"TAX ACT" means the INCOME TAX ACT (Canada), as amended;
"TRADING DAY" means any day on which trading occurs on the TSX and the Nasdaq
National Market; and
"TSX" means the Toronto Stock Exchange.
6
OFFER TO PURCHASE
TO THE SHAREHOLDERS OF THE DESCARTES SYSTEMS GROUP INC.
Descartes hereby invites Shareholders to deposit Shares pursuant to (i)
Auction Tenders at prices of not more than $3.85 nor less than $3.00 per Share
specified by such Shareholders, or (ii) Purchase Price Tenders, in either case,
upon the terms and subject to the conditions set forth in this Offer to Purchase
and the related Letter of Transmittal (which together, as amended or
supplemented from time to time, constitute the "Offer"). Descartes will
determine the single Purchase Price (being not more than $3.85 nor less than
$3.00 per Share) that it will pay for Shares properly deposited pursuant to the
Offer, taking into account the number of Shares deposited pursuant to Auction
Tenders and pursuant to Purchase Price Tenders and the prices specified by
Shareholders making Auction Tenders. Shares deposited pursuant to Purchase Price
Tenders will be considered to have been deposited at $3.00 per Share. The
Purchase Price will be the lowest price that will enable Descartes to purchase
11,578,000 Shares, subject to proration as described herein, or such lesser
number of Shares as are properly deposited at prices not more than $3.85 nor
less than $3.00 per Share pursuant to the Offer.
THE OFFER IS NOT CONDITIONAL UPON ANY MINIMUM NUMBER OF SHARES BEING
DEPOSITED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 5, "CERTAIN CONDITIONS OF THE OFFER".
All Shareholders who have properly deposited and not withdrawn their
Shares pursuant to an Auction Tender at prices at or below the Purchase Price or
pursuant to Purchase Price Tenders will receive the Purchase Price (subject to
any applicable withholding tax), payable in cash, for all Shares purchased upon
the terms and subject to the conditions of the Offer, including the provisions
relating to proration described herein. A Shareholder who wishes to deposit
Shares but does not wish to specify a price at which his or her Shares may be
purchased by Descartes should make a Purchase Price Tender. If, prior to the
Expiration Date, more than 11,578,000 Shares are properly deposited at or below
the Purchase Price and not withdrawn, Descartes will accept for purchase at the
Purchase Price, on a PRO RATA basis (calculated to the nearest whole Share, so
as to avoid the creation of fractional Shares), 11,578,000 Shares, from
Shareholders making Auction Tenders who properly deposit their Shares at or
below the Purchase Price and from Shareholders making Purchase Price Tenders.
Descartes will return all Shares not purchased under the Offer, including Shares
deposited at prices greater than the Purchase Price and Shares not purchased
because of proration. Registered Shareholders will not be obligated to pay
brokerage fees or commissions on the purchase of their deposited Shares by
Descartes pursuant to the Offer. Shareholders who hold their Shares through an
investment dealer, stock broker, bank, trust company or other nominee should ask
such nominee as to whether any service charges or transaction fees are charged
by it in connection with depositing Shares under the Offer.
Neither Descartes nor its Board of Directors nor any representative
thereof makes any recommendation to any Shareholder as to whether to deposit or
refrain from depositing Shares. Each Shareholder must make his or her own
decision whether to deposit Shares and, if so, the number of Shares to deposit
and at what price.
SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF
ACCEPTING THE OFFER. SEE SECTION 14, "INCOME TAX CONSIDERATIONS".
As of May 30, 2003, there were 52,231,711 Shares outstanding. The
11,578,000 Shares that Descartes is offering to purchase represent 22.2% of the
number of Shares outstanding at May 30, 2003. On May 30, 2003, the closing price
per Share as reported on the Toronto Stock Exchange and on the Nasdaq National
Market was $3.17 and U.S.$2.31, respectively. Shareholders are urged to obtain
current market quotations for the Shares. See Section 12, "Price Range of Shares
and Debentures; Purchases and Distributions".
On May 30, 2003, the nominal noon rate of exchange for the conversion of
one U.S. dollar into Canadian dollars as reported by the Bank of Canada was
$1.3708.
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, Descartes will
accept for payment and purchase 11,578,000 Shares or such lesser number of
Shares as are properly deposited at or prior to the Expiration Date (and not
withdrawn in accordance with Section 3, "Withdrawal Rights"), pursuant to
Auction Tenders at prices not more than $3.85 nor less than $3.00 per Share or
pursuant to Purchase Price Tenders. For a description of Descartes' right to
7
extend the period of time during which Shares may be deposited under the Offer,
and to delay, terminate or amend the Offer, see Section 6, "Extension and
Variation of the Offer".
If more than 11,578,000 Shares are deposited at or below the Purchase
Price pursuant to Auction Tenders or pursuant to Purchase Price Tenders, the
Shares to be taken up and paid for will be subject to proration.
Descartes will, upon the terms and subject to the conditions of the Offer,
determine the Purchase Price (being not more than $3.85 nor less than $3.00 per
Share) that it will pay for Shares properly deposited pursuant to the Offer,
taking into account the number of Shares deposited pursuant to Purchase Price
Tenders and Auction Tenders and the prices specified by depositing Shareholders
pursuant to Auction Tenders. Shares deposited pursuant to Purchase Price Tenders
will be considered to have been deposited at $3.00 per Share. Descartes will
determine a single Purchase Price per Share, being the lowest price that will
allow it to purchase 11,578,000 Shares, or such lesser number of Shares as are
properly deposited at prices not more than $3.85 nor less than $3.00 per Share,
pursuant to the Offer.
Each Shareholder desiring to deposit Shares pursuant to an Auction Tender
must specify the price (in increments per Share specified in the Letter of
Transmittal), between $3.00 and $3.85 per Share, at which such Shareholder is
willing to have such Shares purchased by Descartes. A Shareholder who does not
wish to specify a price at which his or her Shares may be purchased by Descartes
should make a Purchase Price Tender. As promptly as practicable following the
Expiration Date, if the conditions set forth in Section 5, "Certain Conditions
of the Offer", have been satisfied or waived, Descartes will, in its sole
discretion, determine the Purchase Price. As promptly as practicable thereafter,
Descartes will publicly announce the Purchase Price, and upon the terms and
subject to the conditions of the Offer (including the proration provisions
described herein), all Shareholders who have properly deposited and not
withdrawn Shares pursuant to Auction Tenders at prices at or below the Purchase
Price or pursuant to Purchase Price Tenders will receive the Purchase Price
(subject to any applicable withholding tax), payable in cash, for each Share
purchased. Descartes will take up and pay for such Shares not later than 10 days
after the Expiration Date. Descartes will pay for such Shares as soon as
possible, and in any event not more than three business days after taking up the
Shares. All Shares not purchased pursuant to the Offer, including Shares
deposited pursuant to Auction Tenders at prices more than the Purchase Price and
Shares not purchased because of proration, will be returned to the depositing
Shareholders at Descartes' expense as promptly as practicable following the
Expiration Date.
If the total number of Shares properly deposited and not withdrawn by the
Expiration Date pursuant to Auction Tenders at or below the Purchase Price or
pursuant to Purchase Price Tenders is less than or equal to 11,578,000,
Descartes will, upon the terms and subject to the conditions of the Offer,
purchase at the Purchase Price (subject to any applicable withholding tax), all
Shares so deposited and not withdrawn.
If the total number of Shares properly deposited and not withdrawn by the
Expiration Date pursuant to Auction Tenders at prices at or below the Purchase
Price or pursuant to Purchase Price Tenders is greater than 11,578,000,
Descartes will, upon the terms and subject to the conditions of the Offer,
purchase at the Purchase Price (subject to any applicable withholding tax),
Shares so deposited on a PRO RATA basis (calculated to the nearest whole Share,
so as to avoid the creation of fractional Shares). Descartes' determination as
to proration shall be final and binding on all parties.
AS A RESULT OF THE PROVISIONS DESCRIBED ABOVE, A SHAREHOLDER MAKING AN
AUCTION TENDER AT $3.00 PER SHARE, THE LOWEST PRICE IN THE RANGE, AND A
SHAREHOLDER MAKING A PURCHASE PRICE TENDER WILL EACH HAVE THEIR SHARES PURCHASED
AT THE PURCHASE PRICE (SUBJECT TO ANY APPLICABLE WITHHOLDING TAX), IF ANY SHARES
ARE PURCHASED UNDER THE OFFER, SUBJECT TO THE PRORATION PROVISIONS DESCRIBED
HEREIN.
2. PROCEDURE FOR DEPOSITING SHARES
PROPER DEPOSIT OF SHARES. To deposit Shares pursuant to the Offer, (i) a
properly completed and duly executed Letter of Transmittal (or a manually
executed photocopy thereof) with any required signature guarantees and any other
documents required by the Letter of Transmittal must be received by CIBC Mellon
Trust Company, as depositary (the "Depositary") at its address set forth on the
back cover of this Offer to Purchase, by the Expiration Date, or (ii) the
guaranteed delivery procedure described below must be followed. A number of the
Shares are currently registered in the name of and held by or on behalf of The
Canadian Depository for Securities Limited ("CDS") or CEDE & Co. ("CEDE") as
custodian for its participants. Beneficial interests in the Shares, constituting
ownership of the Shares, are represented through book-entry accounts of
institutions acting on behalf of beneficial owners as direct and indirect
participants of CDS or CEDE, rather than by definitive certificates.
8
PARTICIPANTS OF CDS AND CEDE SHOULD CONTACT SUCH DEPOSITARY WITH RESPECT TO THE
DEPOSIT OF SHARES UNDER THE OFFER. EACH OF CDS AND CEDE WILL BE ISSUING
INSTRUCTIONS TO ITS PARTICIPANTS AS TO THE METHOD OF DEPOSITING SUCH SHARES
UNDER THE TERMS OF THE OFFER. SHAREHOLDERS WHO WISH TO DEPOSIT SHARES UNDER THE
OFFER SHOULD CONTACT THE INVESTMENT DEALER, STOCK BROKER, BANK, TRUST COMPANY OR
OTHER NOMINEE THROUGH WHICH THE SHARES ARE HELD IN ORDER TO TAKE THE NECESSARY
STEPS TO BE ABLE TO DEPOSIT SUCH SHARES UNDER THE OFFER.
In accordance with Instruction 5 of the Letter of Transmittal, each
Shareholder desiring to deposit Shares pursuant to the Offer must indicate, in
Box A captioned "Type of Tender" on such Letter of Transmittal, (a) whether the
Shareholder is tendering Shares pursuant to an Auction Tender or a Purchase
Price Tender, and (b) each Shareholder desiring to tender Shares pursuant to an
Auction Tender must further indicate, in the box captioned "Auction Tender Price
(In Canadian Dollars) Per Share at Which Shares Are Being Deposited" in such
Letter of Transmittal, the price (in increments per Share specified in the
Letter of Transmittal) at which such Shares are being deposited. Only one box
may be checked under each of (a) and (b). If a Shareholder desires to deposit
Shares in separate lots at a different price for each lot, such Shareholder must
complete a separate Letter of Transmittal for each lot and specify a price at
which the Shareholder is depositing Shares. The same Shares cannot be deposited
(unless previously properly withdrawn as provided in Section 3, "Withdrawal
Rights") pursuant to both an Auction Tender and a Purchase Price Tender, or
pursuant to an Auction Tender at more than one price.
PARTIAL TENDERS. A Shareholder desiring to deposit only a portion of his
or her Shares may do so, subject to the restriction set out below, by depositing
such portion of Shares in the manner described above and indicating in the
accompanying Letter of Transmittal the number of Shares that the Shareholder
wishes to deposit to the Offer. Descartes shall, as soon as practicable
following the completion of the Offer, issue a new certificate to such
Shareholder to evidence the remaining number of Shares retained by the
Shareholder.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered holder
of the Shares exactly as the name of the registered holder appears on the
certificate deposited therewith, and payment is to be made directly to such
registered holder, or (ii) Shares are deposited for the account of an Eligible
Institution. In all other cases, all signatures on the Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter
of Transmittal. If a certificate representing Shares is registered in the name
of a person other than the signer of a Letter of Transmittal, or if payment is
to be made, or certificates representing Shares not purchased or deposited are
to be issued to a person other than the registered owner, the certificate must
be endorsed or accompanied by an appropriate power of attorney, in either case,
signed exactly as the name of the registered owner appears on the certificate
with the signature on the certificate or power of attorney guaranteed by an
Eligible Institution.
METHOD OF DELIVERY. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE DEPOSITING SHAREHOLDER. FOR
THE SHAREHOLDER'S PROTECTION, DESCARTES RECOMMENDS THAT MATERIAL BE DELIVERED BY
HAND TO THE DEPOSITARY AND A RECEIPT OBTAINED; OTHERWISE THE USE OF REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED AND IT IS
SUGGESTED THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION
DATE TO PERMIT DELIVERY TO THE DEPOSITARY ON OR PRIOR TO SUCH DATE. DELIVERY
WILL ONLY BE MADE UPON ACTUAL RECEIPT OF SUCH SHARES BY THE DEPOSITARy.
GUARANTEED DELIVERY. If a Shareholder wishes to deposit Shares pursuant to
the Offer and cannot deliver certificates for such Shares or time will not
permit all required documents to reach the Depositary by the Expiration Date,
such Shares may nevertheless be deposited if all of the following conditions are
met:
(a) such deposit is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by Descartes (indicating the type
of tender and, in the case of an Auction Tender, the price at which
the Shares are being deposited) is received by the Toronto office of
the Depositary specified below by the Expiration Date; and
(c) the certificates for all deposited Shares in proper form for
transfer, together with a properly completed and duly executed Letter
of Transmittal (or a manually executed photocopy thereof) relating to
such Shares, with signatures guaranteed if so required in accordance
with the Letter of Transmittal, and any other documents required by
the Letter of Transmittal, are received by the Toronto office of the
Depositary specified below before 5:00 p.m., Toronto time, on the
third Trading Day after the Expiration Date.
9
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Toronto office of the Depositary
specified below and must include a guarantee by an Eligible Institution in the
form set forth in the Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares deposited
and accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for such Shares, a properly completed
and duly executed Letter of Transmittal (or a manually executed photocopy
thereof) relating to such Shares, with signatures guaranteed if so required and
any other documents required by the Letter of Transmittal. If a Share
certificate has been lost or destroyed, please follow the procedure described in
the Letter of Transmittal for obtaining replacement certificates.
DETERMINATION OF VALIDITY. All questions as to the number of Shares to be
accepted, the price to be paid therefor, the form of documents and the validity,
eligibility (including time of receipt) and acceptance for payment of any
deposit of Shares will be determined by Descartes, in its sole discretion, which
determination shall be final and binding on all parties. Descartes reserves the
absolute right to reject any or all deposits of Shares determined by it not to
be in proper form or the acceptance for payment of or payment for which may, in
the opinion of Descartes' counsel, be unlawful. Descartes also reserves the
absolute right to waive any of the conditions of the Offer or any defect or
irregularity in any deposit of Shares. No deposit of Shares will be deemed to be
properly made until all defects and irregularities have been cured or waived.
None of Descartes, the Depositary or any other person will be under any duty to
give notification of any defect or irregularity in deposits or incur any
liability for failure to give any such notice. Descartes' interpretation of the
terms and conditions of the Offer and the Notice of Guaranteed Delivery will be
final and binding.
FORMATION OF AGREEMENT. The proper deposit of Shares pursuant to any one
of the procedures described above will constitute a binding agreement between
the depositing Shareholder and Descartes, effective as of the Expiration Date,
upon the terms and subject to the conditions of the Offer.
It is a violation of Section 14(e) of the Exchange Act and Rule 14e-4
promulgated thereunder for a person, directly or indirectly, to deposit the
Shares for a person's own account unless, at the time of the deposit and at the
end of the pro ration period, such person (i) has a net long position equal to
or greater than the amount of (x) the Shares deposited or (y) other securities
immediately convertible into, exercisable, or exchangeable for the amount of the
Shares deposited and upon acceptance of such person's deposit, will acquire such
Shares for deposit by conversion, exercise or exchange of such other securities
and (ii) will deliver or cause such Shares to be delivered in accordance with
the terms of the Offer. Section 14(e) and Rule 14e-4 provide a similar
restriction applicable to the deposit or guarantee of deposit on behalf of
another person. The deposit of Shares to Descartes pursuant to any procedures
described herein will constitute a representation by such Shareholder that (i)
such Shareholder has a net long position in the Shares being deposited within
the meaning of Rule 14e-4 and (ii) the deposit of such Shares complies with Rule
14e-4.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section, deposits of Shares pursuant
to the Offer will be irrevocable. Unless otherwise required or permitted by
applicable law, any Shares deposited pursuant to the Offer may be withdrawn:
(a) at any time up to and including 5:00 p.m. (Toronto time) on July 11,
2003; or
(b) at any time where the Shares have not been taken up by Descartes
prior to the receipt by the Depositary of an effective notice of
withdrawal in respect of such Shares; or
(c) if the Shares have not been paid for by Descartes within three
business days after having been taken up; or
(d) at any time before the expiration of 10 days from the date upon which
is mailed, delivered, or otherwise properly communicated either:
(i) a notice of change relating to a change which has occurred in
the information contained in the Offer, as amended from time
to time, that would reasonably be expected to affect the
decision of a Shareholder to accept or reject the Offer (other
than a change that is not within the control of Descartes or
of an affiliate of Descartes), in the event that such change
occurs before the end of the period during which Shares may be
deposited under the Offer or after the end of such period but
before the expiry of all rights of withdrawal in respect of
the Offer; or
10
(ii) a notice of extension or variation extending the period of
time during which Shares may be deposited under the Offer
concerning a variation in the terms of the Offer (other than a
variation consisting solely of (A) an increase in the
consideration offered for the Shares if the period during
which Shares may be deposited under the Offer is not extended
for more than 10 days or (B) a waiver of a condition of the
Offer where the consideration offered for the Shares consists
solely of cash),
but subject to abridgement of that period pursuant to such order or
orders as may be granted by applicable courts or securities
regulatory authorities and only if such deposited Shares have not
been taken up by Descartes at the date of the notice.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be received in a timely manner by the Depositary at
the place of deposit of the relevant Shares before such Shares are taken up by
Descartes. Any such notice of withdrawal must be signed by or on behalf of the
person who signed the Letter of Transmittal accompanying, or the Notice of
Guaranteed Delivery in respect of, the Shares that are to be withdrawn and must
specify the name of the person who deposited the Shares to be withdrawn, the
name of the registered holder, if different from that of the person who
deposited such Shares, and the number of Shares to be withdrawn. If the
certificates have been delivered or otherwise identified to the Depositary,
then, prior to the release of such certificates, the depositing Shareholder must
submit the serial numbers shown on the particular certificates evidencing the
Shares to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution in the same manner as described in the
instructions and rules set out in the Letter of Transmittal, except in the case
of Shares deposited by an Eligible Institution. A WITHDRAWAL OF SHARES DEPOSITED
PURSUANT TO THE OFFER CAN ONLY BE ACCOMPLISHED IN ACCORDANCE WITH THE FOREGOING
PROCEDURE. THE WITHDRAWAL SHALL TAKE EFFECT ONLY UPON ACTUAL RECEIPT BY THE
DEPOSITARY OF THE PROPERLY COMPLETED AND EXECUTED WRITTEN NOTICE.
PARTICIPANTS OF CDS OR CEDE SHOULD CONTACT SUCH DEPOSITARY WITH RESPECT TO
THE WITHDRAWAL OF SHARES UNDER THE OFFER. SHAREHOLDERS WHO WISH TO WITHDRAW
SHARES UNDER THE OFFER SHOULD IMMEDIATELY CONTACT THE INVESTMENT DEALER, STOCK
BROKER, BANK, TRUST COMPANY OR OTHER NOMINEE THROUGH WHICH SHARES ARE HELD IN
ORDER TO TAKE THE NECESSARY STEPS TO BE ABLE TO WITHDRAW SUCH SHARES UNDER THE
OFFER.
ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF RECEIPT) OF
NOTICES OF WITHDRAWAL WILL BE DETERMINED BY DESCARTES, IN ITS SOLE DISCRETION,
WHICH DETERMINATION SHALL BE FINAL AND BINDING. NONE OF DESCARTES, THE
DEPOSITARY OR ANY OTHER PERSON SHALL BE OBLIGATED TO GIVE ANY NOTICE OF ANY
DEFECTS OR IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL AND NONE OF THEM SHALL
INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTICE.
Any Shares properly withdrawn will thereafter be deemed not deposited for
purposes of the Offer. However, withdrawn Shares may be redeposited prior to the
Expiration Date by again following any of the procedures described in Section 2,
"Procedure for Depositing Shares".
If Descartes is delayed in its purchase of Shares or is unable to purchase
Shares pursuant to the Offer for any reason, then, without prejudice to
Descartes' rights under the Offer, the Depositary may, subject to applicable
law, retain on behalf of Descartes all deposited Shares, and such Shares may not
be withdrawn except to the extent depositing Shareholders are entitled to
withdrawal rights as described in this Section 3, "Withdrawal Rights" or
pursuant to applicable law.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including
proration), Descartes will determine the Purchase Price that it will pay for
Shares properly deposited under the Offer and not withdrawn, taking into account
the number of Shares deposited pursuant to Purchase Price Tenders and Auction
Tenders and the prices specified by Shareholders making Auction Tenders. Shares
deposited pursuant to Purchase Price Tenders will be considered to have been
deposited at $3.00 per Share.
For purposes of the Offer, Descartes will be deemed to have accepted for
payment, subject to proration, Shares deposited and not withdrawn pursuant to
Auction Tenders at or below the Purchase Price and pursuant to Purchase Price
Tenders if, as and when Descartes gives oral (to be confirmed in writing) or
written notice to the Depositary of its acceptance of such Shares for payment
pursuant to the Offer. Descartes will take up and pay for such Shares not later
than 10 days after the Expiration Date. Descartes will pay for such Shares
validly deposited pursuant to the Offer as soon as possible and in any event not
more than three business days after taking up the Shares.
11
The Purchase Price payable under the Offer, and thus the amount owing to
any depositing Shareholder, will be denominated in Canadian dollars. In exchange
for their right to receive the Purchase Price, a Shareholder wishing to do so
may elect to receive an amount denominated in Unites States dollars. Such a
Shareholder must complete the box captioned "U.S. Dollar Election" in the Letter
of Transmittal and, if applicable, on the Notice of Guarantee Delivery.
Otherwise, payment will be received in Canadian dollars. The Depositary will
determine the amount payable to Shareholders receiving United States dollar
payment at the United States dollar equivalent of the Purchase Price calculated
at the average of the nominal noon rates of exchange quoted by the Bank of
Canada for the three business days next preceding the payment date. On May 30,
2003, the nominal noon rate of exchange for the conversion of one U.S. dollar
into Canadian dollars as reported by the Bank of Canada was $1.3708.
Payment for Shares accepted for payment pursuant to the Offer will be made
by depositing the aggregate Purchase Price for such Shares with the Depositary,
which will withhold any applicable withholding tax and which will act as agent
for the depositing Shareholders for the purpose of receiving payment from
Descartes and transmitting such payment to the depositing Shareholders. Receipt
of such payment by the Depositary will be deemed to constitute receipt of
payment by persons depositing Shares. Under no circumstances will interest be
paid by Descartes or the Depositary to persons depositing Shares by reason of
any delay in paying for any Shares.
In the event of proration of Shares deposited pursuant to Auction Tenders
and Purchase Price Tenders, Descartes will determine the proration factor and
pay for those deposited Shares accepted for payment as soon as practicable after
the Expiration Date. However, Descartes does not expect to be able to announce
the final results of any such proration until approximately three business days
after the Expiration Date.
Certificates for all Shares not purchased, including all Shares deposited
pursuant to Auction Tenders at prices more than the Purchase Price, and Shares
not purchased due to proration, will be returned as soon as practicable after
the Expiration Date or termination of the Offer without expense to the
depositing Shareholder.
The Purchase Price for Shares deposited and purchased (subject to any
applicable withholding tax), will be paid by cheque of the Depositary issued to
the order of, and certificate(s) representing Shares not deposited or not
purchased under the Offer will be issued to, the person signing the relevant
Letter of Transmittal or to the order of such other person as identified by the
person signing such Letter of Transmittal, by properly completing the box
captioned "Special Payment Instructions" in such Letter of Transmittal. In the
absence of an address being provided, cheques or certificates will be forwarded
by the Depositary to the address of the person as shown on the register for the
Shares.
The Depositary will forward cheques and certificates representing all
Shares not purchased by first-class mail to the person signing the relevant
Letter of Transmittal or to such other person or such other address as
identified by the person in such Letter of Transmittal (unless, in the case of a
cheque, the person signing the Letter of Transmittal instructs the Depositary to
hold such cheque for pick-up) by properly completing the box captioned "Special
Delivery Instructions" in such Letter of Transmittal. See Section 7, "Payment in
the Event of Mail Service Interruption" in the event of real or possible mail
service interruption.
Registered Shareholders depositing Shares will not be obligated to pay
brokerage fees or commissions in connection with depositing Shares under the
Offer. Shareholders who hold their Shares through an investment dealer, stock
broker, bank, trust company or other nominee should ask such nominee as to
whether any service charges or transaction fees are charged by it in connection
with depositing Shares under the Offer.
5. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Descartes shall not be
required to accept for purchase, purchase or pay for any Shares deposited and
may terminate or cancel the Offer or, subject to applicable law, may postpone
the payment for Shares deposited if, at any time on or after June 2, 2003 and at
or before the payment for any such Shares, any of the following events shall
have occurred (or shall have been determined by Descartes to have occurred) and
in any such case and regardless of the circumstances, Descartes determines in
its sole judgement, acting reasonably, that it is inadvisable to proceed with
the Offer or with such acceptance for purchase or payment:
(a) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental authority or regulatory
or administrative agency in any jurisdiction, or by any other person
in any jurisdiction, before any court or governmental authority or
regulatory or administrative agency in any jurisdiction, (i)
challenging or seeking to cease trade, make illegal, delay or
otherwise directly or indirectly restrain or prohibit the making of
the Offer, the acceptance for payment for some or all of the Shares
12
by Descartes or otherwise directly or indirectly relating in any
manner to or affecting the Offer, or (ii) that otherwise, in the sole
judgement of Descartes, acting reasonably, has or may have a material
adverse effect on the Shares or the business, income, assets,
liabilities, condition (financial or otherwise), properties,
operations, results of operations or prospects of Descartes or its
subsidiaries taken as a whole or has or may materially impair the
contemplated benefits of the Offer to Descartes;
(b) there shall have been any action or proceeding threatened, pending or
taken or approval withheld or any statute, rule, regulation, stay,
decree, judgement or order or injunction proposed, sought, enacted,
enforced, promulgated, amended, issued or deemed applicable to the
Offer or Descartes or any of its subsidiaries by any court,
government or governmental authority or regulatory or administrative
agency in any jurisdiction, that, in the sole judgement of Descartes,
acting reasonably, might, directly or indirectly, result in any of
the consequences referred to in clauses (i) or (ii) of paragraph (a)
above or would or might prohibit, prevent, restrict or delay
consummation of or materially impair the contemplated benefits to
Descartes of the Offer;
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any securities exchange,
automated quotation system operated by a national securities
association or in the over-the-counter market in Canada or the United
States, (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in Canada or the United
States (whether or not mandatory), (iii) the commencement or
escalation of a war, armed hostilities or other international or
national calamity directly or indirectly involving Canada or the
United States, (iv) any limitation by any governmental, regulatory or
administrative authority or agency or any other event that, in the
sole judgement of Descartes, acting reasonably, might affect the
extension of credit by banks or other lending institutions, (v) any
significant decrease in the market price of the Shares since the
close of business on June 2, 2003, (vi) a material change in U.S.
currency exchange rates or a general suspension of or material
limitation on the markets therefor, (vii) any change in the general
political, market economic or financial conditions that has or may
have a material adverse effect on Descartes' business, operations or
prospects or the trading in, or value of, the Shares, or (viii) any
decline in any of the S&P/TSX Composite Index, the S&P/TSX Canadian
Information Technology Index, the S&P/TSX Canadian Midcap Index, the
Dow Jones Industrial Average or the Standard and Poor's Index of 500
Industrial Companies by an amount in excess of 10%, measured from the
close of business on June 2, 2003;
(d) any change or changes shall have occurred (or any development shall
have occurred involving any prospective change or changes) in the
business, assets, liabilities, properties, condition (financial or
otherwise), operations, results of operations or prospects of
Descartes or its subsidiaries that, in the sole judgement of
Descartes, acting reasonably, have or may have material adverse
significance with respect to Descartes or its subsidiaries taken as a
whole;
(e) any take-over bid or tender or exchange offer with respect to some or
all of the securities of Descartes, or any merger, business
combination or acquisition proposal, disposition of assets, or other
similar transaction with or involving Descartes or any of its
affiliates, other than the Offer and the Debenture Offer, shall have
been proposed, announced or made by any individual or entity;
(f) Descartes shall have concluded that exemptions from the proportionate
take-up and valuation requirements under applicable securities
legislation in Canada are not available to Descartes for the Offer
and, if required under any such legislation, Descartes shall not have
received exemptions or waivers of the appropriate Canadian securities
regulatory authorities from such requirements in respect of the
Offer;
(g) any change shall have occurred or been proposed to the Tax Act or to
the published administrative policies or assessing practices of the
Canada Customs and Revenue Agency that, in the sole judgement of
Descartes, acting reasonably, is detrimental to Descartes or a
Shareholder; and
(h) Descartes, in its sole judgement, acting reasonably, shall have
concluded that the purchase of Shares properly deposited pursuant to
the Offer will constitute a "Rule 13e-3 transaction", as such term is
defined in Rule 13e-3 under the Exchange Act.
Any waiver of a condition or the withdrawal of the Offer shall be deemed
to be effective on the date on which written or oral (to be confirmed in
writing) notice of such waiver or withdrawal is delivered or otherwise
communicated to the Depositary. Descartes, after giving notice to the Depositary
of any waiver of a condition or the withdrawal of the Offer, shall forthwith
thereafter make a public announcement of such waiver or withdrawal and provide
13
or cause to be provided notice of such waiver or withdrawal to the Toronto Stock
Exchange, the Nasdaq National Market and applicable Canadian and U.S. securities
regulatory authorities. If the Offer is withdrawn, Descartes shall not be
obligated to take up, accept for purchase or pay for any Shares deposited under
the Offer, and the Depositary will return all certificates for deposited Shares
and related Letters of Transmittal and any other related documents to the
parties by whom they were deposited.
The foregoing conditions are for the sole benefit of Descartes and may be
asserted by Descartes in its sole discretion, acting reasonably, regardless of
the circumstances (including any action or inaction by Descartes) giving rise to
any such conditions, or may be waived by Descartes, in its sole discretion, in
whole or in part at any time. The failure by Descartes at any time to exercise
its rights under any of the foregoing conditions shall not be deemed a waiver of
any such right; the waiver of any such right with respect to particular facts
and circumstances shall not be deemed a waiver with respect to any other facts
and circumstances; and each such right shall be deemed an ongoing right which
may be asserted at any time or from time to time. Any determination by Descartes
concerning the events described in this Section shall be final and binding on
all parties.
6. EXTENSION AND VARIATION OF THE OFFER
Descartes expressly reserves the right, in its sole discretion, and
regardless of whether or not any of the conditions specified under Section 5,
"Certain Conditions of the Offer" shall have occurred, at any time or from time
to time, to extend the period of time during which Shares may be deposited under
the Offer or to vary the terms and conditions of the Offer by giving written or
oral notice (to be confirmed in writing) of extension or variation to the
Depositary and by causing the Depositary to provide, where required by law, as
soon as practicable thereafter, a copy of the notice in the manner set forth
under Section 22, "Notice", to all Shareholders. Promptly after giving notice of
an extension or variation to the Depositary, Descartes will make a public
announcement of the extension or variation and provide or cause to be provided
notice of such extension or variation to the Toronto Stock Exchange, the Nasdaq
National Market and the Canadian and U.S. securities regulatory authorities. Any
notice of extension or variation will be deemed to have been given and be
effective on the day on which it is delivered or otherwise communicated to the
Depositary at its principal office in Toronto.
Where the Offer is extended or the terms of the Offer are varied, the
period during which Shares may be deposited pursuant to the Offer shall not
expire before 10 days after the notice of extension or variation has been given
to Shareholders respectively unless otherwise permitted by applicable law.
If, in the unlikely event prior to the Expiration Date Descartes in its
sole discretion increases the consideration offered to Shareholders by a
variation in the terms of the Offer, such increase shall be applicable to all
Shareholders whose Shares are taken up pursuant to the Offer.
The Offer may not be extended by Descartes if all the terms and conditions
of the Offer, except those waived by Descartes, have been complied with, unless
Descartes first takes up and pays for all Shares properly deposited under the
Offer and not withdrawn. Notwithstanding the foregoing, if Descartes waives any
terms or conditions of the Offer and extends the Offer in circumstances where
rights of withdrawal are conferred by virtue of the mailing of a notice of
change, extension or variation, the Offer shall be extended without Descartes
first taking up the Shares which are subject to such rights of withdrawal.
If before the Expiration Date, or after the Expiration Date but before the
expiry of all rights of withdrawal with respect to the Offer, a change occurs in
the information contained in the Offer, as amended from time to time, that would
reasonably be expected to affect a decision of a Shareholder to accept or reject
the Offer (other than a change that is not within the control of Descartes or of
an affiliate of Descartes), Descartes will give written notice of such change to
the Depositary at its principal office in Toronto, and will cause the Depositary
to provide as soon as practicable thereafter a copy of such notice in the manner
set forth in Section 22, "Notice", to all Shareholders that have not been taken
up under the Offer at the date of the occurrence of the change. Promptly after
giving notice of a change in information to the Depositary, Descartes will make
a public announcement of the change in information and provide or cause to be
provided notice of such change to the Toronto Stock Exchange, the Nasdaq
National Market and the Canadian and U.S. securities regulatory authorities. Any
notice of change in information will be deemed to have been given and to be
effective on the day on which it is delivered or otherwise communicated to the
Depositary at its principal office in Toronto.
During any such extension or in the event of any such variation or change
in information, all Shares previously deposited and not taken up or withdrawn
will remain subject to the Offer and may be accepted for purchase by Descartes
in accordance with the terms of the Offer, subject to Section 3, "Withdrawal
14
Rights" of the Offer. An extension of the Expiration Date or a variation of the
Offer does not constitute a waiver by Descartes of its rights under Section 5,
"Certain Conditions of the Offer" of this Offer to Purchase.
If the Offer is under-subscribed at the Expiration Date and all the terms
and conditions of the Offer have been complied with, except those waived by
Descartes, and Descartes decides in its sole discretion to extend the Offer,
there would be no prorationing among the tenders taken up at such time. If the
Offer becomes over-subscribed by the expiry of any such extension, Descartes
would only prorate among tenders received during the extension and after the
original Expiration Date and not across tenders received prior to the extension
which have already been taken up. However, in no case shall the Purchase Price
be reduced as a result of tenders received during any extension as described in
this paragraph. The foregoing is subject to regulatory approval. See Section 15,
"Certain Legal Matters; Regulatory Approvals".
Without limiting the manner in which Descartes may choose to make any
public announcement referred to above, except as provided by applicable law,
Descartes shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release through
a distribution news service.
7. PAYMENT IN THE EVENT OF MAIL SERVICE INTERRUPTION
Notwithstanding the provisions of the Offer, cheques in payment for Shares
purchased under the Offer and certificates for any Shares to be returned will
not be mailed if Descartes determines that delivery by mail may be delayed.
Persons entitled to cheques or certificates which are not mailed for this reason
may take delivery at the office of the Depositary at which the deposited
certificates for the Shares were delivered until Descartes has determined that
delivery by mail will no longer be delayed. Descartes will provide notice as
provided under Section 22, "Notice", of any determination not to mail under this
Section as soon as reasonably practicable after such determination is made. The
deposit of cheques with the Depositary in these circumstances will constitute
delivery to the persons entitled to them.
8. LIENS; DIVIDENDS; PROXIES
Under the Letter of Transmittal, the depositing Shareholder will be bound
by a representation and warranty that such Shareholder has full power and
authority to deposit, sell, assign and transfer the deposited Shares and that if
the deposited Shares are accepted for payment by Descartes, Descartes will
acquire good title thereto, free and clear of all liens, charges, encumbrances,
security interests, claims, restrictions and equities whatsoever, together with
all rights and benefits arising therefrom, provided that any dividends or
distributions which may be declared, paid, issued, distributed, made or
transferred on or in respect of such Shares to Shareholders of record on or
prior to the date upon which the Shares are taken up under the Offer shall be
for the account of such Shareholders. Each Shareholder of record on that date
will be entitled to receive that dividend or distribution, whether or not such
Shareholder deposits Shares pursuant to the Offer.
Under the Letter of Transmittal, the depositing Shareholder will revoke,
effective from the time of take up and payment for its Shares under the Offer,
any and all proxies, voting instructions or other authority previously given or
conferred or agreed to be given or conferred by such Shareholder at any time
with respect to the deposited Shares to the extent that such Shares are taken up
and paid for under the Offer and will agree that no proxy, voting instructions
or other authority will be given or conferred with respect to the deposited
Shares, and the Shareholder shall not take any steps to vote the Shares, on or
after the time of take up and payment for such Shares under the Offer.
9. CERTAIN INFORMATION CONCERNING DESCARTES
Descartes was amalgamated under the BUSINESS CORPORATIONS ACT (Ontario) on
January 26, 1999. Its principal executive office is located at 120 Randall
Drive, Waterloo, Ontario N2V 1C6. The Company's telephone number is (519)
746-8110.
Descartes develops, markets, operates, implements and supports software
and network-based solutions for logistics management. The Company's solutions,
which are Internet-enabled and function with a variety of computer and network
hardware and operating systems, enable end-to-end shipment management, supply
chain visibility, logistics messaging, delivery optimization and carrier
contract management. In addition, the Company provides a variety of related
services, including support and maintenance services, consulting, implementation
and training. The Company's solutions are licensed to companies in over 60
countries. The Company markets and sells its products through a direct
world-wide sales force, as well as through distributors and alliances in Europe,
the Americas and Asia.
15
The authorized share capital of Descartes consists of an unlimited number
of Shares. As of May 30, 2003, there were 52,231,711 Common Shares issued and
outstanding and U.S.$71,995,000 aggregate principal amount of Debentures
outstanding. See Section 12, "Price Range of Debentures and Common Shares;
Purchases and Distributions; Previous Purchases and Sales of Securities by
Descartes".
The Company's Annual Information Form and Annual Report for the fiscal
year ended January 31, 2002, as filed with the SEC on Form 40-F, are
specifically incorporated by reference into, and form an integral part of, this
Offer to Purchase.
Descartes also hereby incorporates by reference any filings it makes with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of the Offer and before the Expiration Date or the termination of the
Offer, including the Company's Annual Report for the fiscal year ended January
31, 2003 as and when filed with the SEC on Form 40-F, which will contain the
audited consolidated financial statements of the Company for the fiscal year
ended January 31, 2003 prepared in accordance with U.S. generally accepted
accounting principles, and the unaudited financial statements of the Company for
the period ended April 30, 2003 as and when filed with the SEC on Form 6-K,
prepared in accordance with U.S. generally accepted accounting principles. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for the purposes
of this Offer to Purchase to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not constitute a part of this Offer to
Purchase, except as so modified or superseded. The modifying or superseding
statement need not state that it has modified or superseded a prior statement or
include any other information set forth in the document which it modifies or
supersedes. The making of such a modifying or superseding statement shall not be
deemed an admission for any purposes that the modified or superseded statement,
when made, constituted a misrepresentation, an untrue statement of a material
fact or an omission to state a material fact that is required to be stated or
that is necessary to make a statement not misleading in light of the
circumstances in which it was made. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Offer to Purchase.
The Company expects to mail to its shareholders and file with the
securities regulatory authorities of the provinces of Canada and the SEC in
accordance with applicable securities laws the Company's Annual Report for the
fiscal year ended January 31, 2003 in or about mid-June 2003 and the Company's
unaudited consolidated financial statements for the period ended April 30, 2003
on or about June 4, 2003. The Company expects that such documents will be
available on the following websites following their filing as described above:
WWW.SEDAR.COM, maintained by the Canadian Securities Administrators; and
WWW.SEC.GOV, maintained by the SEC.
The Company will provide to each Shareholder or other person to whom the
Offer to Purchase is delivered, without charge, upon the written or oral request
of such person, a copy of all of the foregoing documents incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents), as well as a copy,
without charge, of the Company's most recent unaudited interim financial
statements. Requests for such documents should be directed to the Company's
Chief Financial Officer, 120 Randall Drive, Waterloo, Ontario, Canada N2V 1C6,
(519) 746-8110. A copy of all of the foregoing documents, as and when filed, may
also be obtained by contacting the SEC in the manner described under Section 24,
"Additional Information".
10. PURPOSE AND EFFECTS OF THE OFFER
Descartes believes that the Common Shares have been trading in price
ranges that do not fully reflect the value of the Company's business and future
prospects, and that accordingly, the purchase of Shares under the Offer
represents an effective use of Descartes' financial resources and is in the best
interests of its Shareholders. The Offer is not expected to preclude Descartes
from pursuing its foreseeable business opportunities. Any Shares purchased
pursuant to the Offer will be transferred directly to Descartes by the
Depositary and cancelled.
As part of its ongoing consideration of the most effective use of the
Company's financial resources, the Board of Directors of the Company has,
together with management of the Company, examined at various times since 2001
the appropriateness of making offers to purchase either or both of its
Debentures and Common Shares.
In December 2001, pursuant to a normal course issuer bid, the Company
purchased for cancellation U.S.$1.5 million aggregate principal amount of
Debentures for U.S.$1.1 million. In March 2002, pursuant to a normal course
issuer bid, the Company purchased for cancellation U.S.$1.5 million aggregate
principal amount of Debentures for U.S.$1.1 million. On August 1, 2002,
Descartes offered to purchase for cancellation up to an aggregate of
16
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 accrued and
unpaid interest pursuant to a substantial issuer bid. Descartes purchased a
nominal principal amount of Debentures pursuant to such offer on September 6,
2002.
Based on consultations in April 2003 with members of the Board of
Directors respecting the possible purchase of its Debentures and Common Shares,
management of the Company undertook further analysis and obtained preliminary
advice respecting the appropriateness of issuer bids by Descartes to acquire
certain of its Debentures and Common Shares for consideration by the Board of
Directors.
At its meeting on April 25, 2003, the Board of Directors considered
presentations respecting the possible purchase of its Debentures and Common
Shares prepared by Credit Suisse First Boston Canada Inc. and Griffiths McBurney
& Partners. Following discussions with management of Descartes, the Board of
Directors determined to approve the engagement of financial advisers and
authorized management to undertake further analysis and develop a recommendation
respecting the terms on which the Company would undertake issuer bids to
purchase certain of either or both of its Debentures and Common Shares.
On May 5, 2003, the Board of Directors met to discuss all aspects of the
purchase certain of its Debentures and Common Shares considered relevant,
including:
(a) analysis of Descartes' financial resources and requirements;
(b) the advice of Descartes' financial and legal advisers respecting the
potential terms and structure of the Offer and the Debenture Offer;
(c) the markets for the Debentures and the Common Shares, the trading
prices and volume since August 2002, and the resulting impact of the
Offer and the Debenture Offer on the respective markets;
(d) the terms of the Debentures, including the obligation to repay the
Debentures at maturity on June 30, 2005 and the option of the Company
to repay the principal amount of the Debentures at maturity through
the issuance of Common Shares;
(e) the interest expense associated with the Debentures as compared to
the income generated and expected to be generated on the investment
of funds in accordance with Descartes' investment policy;
(f) the positive impact on earnings (loss) per share resulting from
successful completion of the Offer and the Debenture Offer;
(g) the potential terms upon which a holder of a significant principal
amount of the Debentures (the "Significant Debentureholder") would
agree to commit to sell its Debentures to Descartes pursuant to a
substantial issuer bid;
(h) the Company's access to additional capital in the context of the
Company's circumstances, the sector in which the Company operates and
the market as a whole; and
(i) the alternative uses of funds to purchasing securities under the
Offer and the Debenture Offer.
Following discussions with management of Descartes, the Board of Directors
approved proceeding with the Offer and the Debenture Offer including the maximum
price to be paid under each of the Offer and the Debenture Offer; the maximum
number of Shares to be subject to the Offer and the maximum principal amount of
Debentures to be subject to the Debenture Offer; and, subject to entering into a
commitment agreement with the Significant Debentureholder and finalizing the
pricing and size of each of the Offer and the Debenture Offer, the announcement
of such offers.
On May 12, 2003, Descartes finalized the pricing and size of each of the
Offer and the Debenture Offer; entered into a commitment agreement with the
Significant Debentureholder (see Section 13, "Interest of Directors and
Officers; Transactions and Arrangements Concerning the Offer; Contracts,
Arrangements and Understandings"); and announced its intention to make the Offer
and the Debenture Offer.
On May 28, 2003, the Board of Directors met and approved (i) the
documentation prepared in connection with the Offer and the Debenture Offer,
including this Offer to Purchase, the Letter of Transmittal, and the offer to
purchase in respect of the Debenture Offer and related letter of transmittal,
and (ii) the commencement of the Offer and the Debenture Offer.
17
Subject to certain exceptions, Canadian provincial securities legislation
prohibits Descartes and its affiliates from acquiring any Shares, other than
pursuant to the Offer, until at least 20 business days after the Expiration Date
or termination of the Offer. Descartes may in the future purchase additional
Shares on the open market, in private transactions, through issuer bids or
otherwise, subject to applicable law. Any such purchases may be on the same
terms or on terms which are more or less favourable to Shareholders than the
terms of the Offer. Any possible future purchases by Descartes will depend on
many factors, including the market price of the Shares, Descartes' business and
financial position, the results of the Offer and general economic and market
conditions.
Descartes currently has no intention to cause the Shares to be delisted
from the Toronto Stock Exchange or the Nasdaq National Market where they are
currently listed, or to acquire by compulsory means Shares from Shareholders who
do not accept the Offer. Following completion of the Offer, 40,653,711 Shares
will remain outstanding, assuming that 11,578,000 Shares are acquired by
Descartes under the Offer. Subject to Descartes meeting the continued listing
requirements of the Toronto Stock Exchange and the Nasdaq National Market and to
any possible future purchases of the Shares by Descartes, the Shares will
continue to be listed on the Toronto Stock Exchange and the Nasdaq National
Market provided that a minimum of 1.1 million Shares remain outstanding.
Except as disclosed in the Offer, Descartes has no plans or proposals that
relate to or in Descartes' view would be reasonably likely to result in (i) the
acquisition by any person of additional securities of Descartes or the
disposition of securities of Descartes, other than the Debenture Offer; (ii) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving Descartes or any or all of its subsidiaries; (iii) other
than as may have been previously announced, a purchase, sale or transfer of a
material amount of assets of Descartes or any of its subsidiaries; (iv) any
change in the present Board of Directors or management of Descartes; (v) any
material change in the present dividend policy, indebtedness or capitalization
of Descartes; (vi) any other material change in Descartes' corporate structure
or business; (vii) any change in Descartes' constating document or by-laws or
any actions which may impede the acquisition of control of Descartes by any
person; (viii) a class of equity security of Descartes being delisted from a
national securities exchange or ceasing to be authorized to be quoted in an
automated quotations system operated by a national securities association; (xi)
a class of equity security of Descartes becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act; or (x) the
suspension of Descartes' obligation, if any, to file reports pursuant to Section
15(d) of the Exchange Act.
In evaluating the Offer, Descartes believes that a number of factors,
including the following, should be considered by Shareholders:
(a) the Offer provides Shareholders who are considering the sale of all
or a portion of their Shares the opportunity to determine the price
at which they are willing to sell their Shares if such Shares are
deposited pursuant to an Auction Tender, or the opportunity to
deposit their Shares without specifying a price pursuant to a
Purchase Price Tender and, if any such Shares are purchased pursuant
to the Offer, to sell such Shares for cash at a premium to the
closing price for the Common Shares on the TSX in the period from May
6, 2003, being the trading day following the announcement on May 5,
2003 of the preliminary financial results of the Company for the
three months ended April 30, 2003 to May 12, 2003, being the date on
which the Offer and the Debenture Offer were announced (see Section
12, "Price Range of Debentures and Common Shares; Purchases and
Distributions");
(b) Shareholders who tender Shares will avoid the payment of the usual
brokerage commissions associated with market sales;
(c) Shareholders whose Shares are not purchased under the Offer will
realize a proportionate increase in their equity interest in
Descartes if any Shares are purchased pursuant to the Offer; and
(d) the Offer is not conditional upon any minimum number of Shares being
deposited.
NEITHER DESCARTES, ITS BOARD OF DIRECTORS NOR ANY REPRESENTATIVE THEREOF MAKES
ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO DEPOSIT OR REFRAIN FROM
DEPOSITING ANY OR ALL OF SUCH SHAREHOLDER'S SHARES. NO PERSON HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE
CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX
ADVISERS AND MAKE THEIR OWN DECISIONS BASED ON THEIR OWN PARTICULAR
CIRCUMSTANCES WHETHER TO DEPOSIT SHARES AND, IF SO, THE NUMBER OF SHARES TO
DEPOSIT AND AT THE PRICE OR PRICES AT WHICH SHARES SHOULD BE DEPOSITED.
18
SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF
ACCEPTING THE OFFER. SEE SECTION 14, "INCOME TAX CONSIDERATIONS".
11. VALUATION EXEMPTION
As of May 12, 2003, the last full trading date prior to the announcement
of Descartes' intention to make the Offer, the Company had outstanding
52,231,711 Shares, of which approximately 45,797,838 Shares comprise the "public
float", which excludes shares owned by "related parties" of the Company under
applicable securities laws. The Shares that Descartes is offering to purchase
pursuant to the Offer represent approximately 22.2% of the Shares outstanding as
of May 12, 2003. For the purpose of the Offer, the "related parties" are
PRIMECAP Management Company, its directors and senior officers and the directors
and senior officers of Descartes. In the event that Descartes takes up and
purchases 11,578,000 Shares pursuant to the Offer, and none of the "related
parties" deposit their Shares pursuant to the Offer, the "public float" will be
comprised of 34,219,838 Shares.
Descartes is relying on the "liquid market exemption" provided in Ontario
Securities Commission Rule 61-501 ("OSC Rule 61-501") and Quebec Securities
Commission Local Policy Statement Q-27 ("QSC Policy Q-27") and discretionary
exemptive relief orders in certain other provinces from the requirement to
obtain a formal valuation applicable to the Offer.
The Company has determined that there is a liquid market in the Shares
because:
(a) there is a published market for the Shares, namely the TSX;
(b) during the period of 12 calendar months preceding the announcement of
the Offer,
(i) the number of issued and outstanding Shares was at all times
at least 5,000,000, excluding Shares beneficially owned,
directly or indirectly, or over which control or direction was
exercised, by related parties and Shares that were not freely
tradeable,
(ii) the aggregate trading volume of the Shares was approximately
48,546,659 on the TSX,
(iii) there were at least 1,000 trades in Shares on each of the TSX,
(iv) the aggregate trading value based on the price of the trades
referred to in clause (iii) was approximately $224,470,771 on
the TSX; and
(c) the market value of the Shares on the TSX and the Nasdaq National
Market, as determined in accordance with applicable rules, was
approximately $168,536,044 for April, 2003, being the calendar month
preceding the calendar month in which the Offer was announced.
The Board of Directors considered the anticipated effect of the Offer on
the liquidity of the market for beneficial owners of Shares who do not deposit
Shares under the Offer and, in doing so, considered the following factors:
(a) the extent by which the trading volume, number of trades and
aggregate trading value of the Shares during the 12 month period
preceding the announcement of the Offer, the size of the public float
of the Shares and the market value of the Shares exceeds the minimum
"liquid market" requirements specified in both OSC Rule 61-501 and
QSC Policy Q-27;
(b) the number of Shares to be acquired under the Offer in relation to
the public float, the trading volumes of and the number of trades in
the Shares on the TSX, the value of trades on the TSX and the market
value of the Shares in the twelve months preceding the announcement
of the Offer; and
(c) the effect that the purchase of approximately 11,578,000 Shares by
Descartes would have on the aggregate shareholdings of PRIMECAP
Management Company and all senior officers and directors of
Descartes.
The Board of Directors unanimously determined that it is reasonable to
conclude that, following the completion of the Offer, there will be a market for
beneficial owners of the Shares who do not deposit Shares under the Offer that
is not materially less liquid than the market that existed at the time of the
making of the Offer.
Accordingly, the valuation requirements of securities regulatory
authorities in Canada applicable to issuer bids generally are not applicable in
connection with the Offer or, it is anticipated, shall have been waived by such
regulatory authorities prior to the Expiration Date. Despite the fact that the
Board of Directors is of the view that both as of the date hereof and following
the taking up of Shares pursuant to the Offer there is and will continue to be a
liquid market for the Shares and that there is thus no legal requirement to
19
obtain a liquidity opinion, the Company has obtained, in further support of the
determination that there is and will be a liquid market for the Shares, a
liquidity opinion from Griffiths McBurney & Partners ("GMP").
GMP has concurred with the Company's determination that it meets the tests
for the "liquid market exemption" described above, and has provided an opinion
to the Board of Directors to the effect that there is a liquid market for the
Shares for the holders of the Shares at the time of the making of the Offer and
that it is reasonable for the Board of Directors to conclude that, following the
completion of the Offer in accordance with its terms, there will be a market for
beneficial owners of the Shares who do not tender to the Offer that is not
materially less liquid than the market that existed at the time of the making of
the Offer. A copy of the opinion of GMP is attached hereto as Schedule "A". This
summary of the opinion of GMP is qualified in its entirety by reference thereto.
For further information, see the table included in Section 12, "Price
Range of Shares and Debentures; Purchases and Distributions".
12. PRICE RANGE OF SHARES AND DEBENTURES; PURCHASES AND DISTRIBUTIONS
TRADING OF SHARES. The Shares are listed and posted for trading on the
Toronto Stock Exchange and the Nasdaq National Market under the symbols "DSG"
and "DSGX", respectively. The following table sets forth, for the periods
indicated, the high and low closing prices per share and the volumes traded on
the Toronto Stock Exchange and the Nasdaq National Market, as compiled by the
Toronto Stock Exchange and a published financial source, respectively.
TSX NASDAQ
------------------------------------- ---------------------------------------
MONTH ENDING HIGH (CDN$) LOW (CDN$) VOLUME HIGH (U.S.$) LOW (U.S.$) VOLUME
------------ ----------- ---------- ---------- ------------ ----------- ----------
2003
May......... 3.72 2.94 11,255,800 2.65 2.13 594,849
April ...... 4.02 3.23 4,442,542 2.76 2.22 352,500
March ...... 4.75 3.20 3,089,596 3.18 2.15 321,560
February ... 4.93 4.02 2,427,809 3.17 3.04 12,600
January .... 5.42 4.50 1,935,947 3.55 2.92 193,720
2002
December ... 5.95 4.52 3,962,203 3.85 2.85 352,900
November ... 5.59 4.06 4,856,516 3.53 2.59 493,180
October .... 4.85 3.21 5,159,217 3.10 2.04 256,850
September .. 4.47 3.53 2,883,008 2.90 2.22 236,600
August ..... 5.35 3.76 3,775,597 3.50 2.40 221,530
July ....... 5.55 4.32 3,304,976 3.60 2.80 444,600
June........ 6.06 4.10 3,029,806 3.96 2.68 704,400
May......... 5.58 4.48 9,679,842 3.59 2.87 916,400
April ...... 7.54 5.09 5,205,708 4.69 3.32 988,500
TSX NASDAQ
------------------------------------- ---------------------------------------
MONTH ENDING HIGH (CDN$) LOW (CDN$) VOLUME HIGH (U.S.$) LOW (U.S.$) VOLUME
------------ ----------- ---------- ---------- ------------ ----------- ----------
2003
March ...... 5.42 3.20 7,453,352 3.55 2.15 614,020
2002
December.... 5.95 3.21 13,977,936 3.85 2.04 1,102,930
September... 5.55 3.53 9,963,581 3.60 2.22 902,730
June........ 7.54 4.10 17,915,356 4.69 2.68 2,609,300
March ...... 14.24 6.63 16,912,588 8.91 4.18 3,100,300
2001
December ... 13.72 6.00 22,220,901 8.75 3.81 5,254,900
September... 27.40 6.11 34,204,047 18.57 3.90 13,865,100
June........ 37.27 15.80 32,717,385 24.15 10.06 15,837,800
March....... 44.35 18.00 30,498,080 29.43 11.62 18,544,100
20
On May 12, 2003, last full trading day prior to the announcement of
Descartes' intention to make the Offer, the closing price of the Shares on the
Toronto Stock Exchange and Nasdaq National Market was $2.98 and U.S.$2.15,
respectively.
PREVIOUS PURCHASES OF SHARES. During the twelve months preceding the
Offer, Descartes has not purchased any of its Shares.
PREVIOUS DISTRIBUTION OF SHARES. During the five years preceding the
Offer, the distribution of Shares made by Descartes to the date of the Offer are
as follows:
NUMBER OF AGGREGATE PROCEEDS
SHARES PRICE PER RECEIVED BY THE
DESCRIPTION OF DISTRIBUTION DATE OF DISTRIBUTION DISTRIBUTED SHARE(9) COMPANY(9)
--------------------------- -------------------- ----------- ---------- ------------------
Public Offering (1) January 26, 1999 2,760,000 U.S.$7.50 U.S.$20,700,000
Exercise of Over-Allotment Option
granted to Underwriters (2) February 2, 1999 375,000 U.S.$7.50 U.S.$2,812,500
Public Offering (3) January 10, 2000 3,000,000 U.S.$13.73 U.S.$41,190,000
Exercise of Over-Allotment Option
granted to Underwriters (4) January 10, 2000 450,000 U.S.$13.73 U.S.$6,178,500
Public Offering (5) October 24, 2000 3,000,000 U.S.$42.26 U.S.$126,777,600
Distributions in connection
with Acquisitions (6) May 1998 - May 2003 9,158,202
Distributions in connection with
Settlement of an Account (7) October 1999 145,454
Distributions in connection
with the Exercise of Options
to Purchase Shares (8) May 1998 - May 2003 2,217,238
-----------
21,105,894
===========
-------------------
(1) On January 26, 1999, the Company issued 2,760,000 Shares in a public
offering in Canada and the United States at a price of U.S.$7.50, the
issuance of which was qualified by a final prospectus dated January 26,
1999. Proceeds of the offering were U.S.$17.7 million, net of issuance
costs of U.S.$2.9 million.
(2) On February 2, 1999, the Company issued 375,000 Shares upon the exercise of
over-allotment options issued to underwriters at the price to public of
U.S.$7.50. The options were granted to underwriters in connection with the
Company's public offering on January 26, 1999. Proceeds from the
transaction were U.S.$2.6 million.
(3) On January 10, 2000, the Company issued 3,000,000 Shares in a public
offering in Canada at a price of U.S.$13.73, the issuance of which was
qualified by a short form prospectus dated December 30, 1999. Proceeds of
the offering were U.S.$38.8 million, net of issuance costs of U.S.$2.4
million.
(4) On January 10, 2000, the Company issued 450,000 Shares upon the exercise of
over-allotment options issued to underwriters at the price to public of
U.S.$13.73. The options were granted to underwriters in connection with the
Company's public offering on January 10, 2000. Proceeds from the
transaction were U.S.$5.9 million.
(5) On October 24, 2000, the Company issued 3,000,000 Shares in a public
offering in Canada at a price of Cdn.$64.00, the issuance of which was
qualified by a short form prospectus dated October 17, 2000. Proceeds of
the offering were U.S.$120.7 million, net of issuance costs of U.S.$6.1
million.
(6) During the previous five year period, the Company has issued an aggregate
of 9,158,202 Shares in connection with its acquisition activities, more
specifically detailed as follows:
a. On June 26, 1998, the Company issued 1,777,325 Shares valued at
U.S.$6.40 per Share, for all of the outstanding shares of common stock
of Lightstone Group, Inc.
21
b. On July 6, 1998, the Company issued 217,467 Shares, valued at
U.S.$6.00 per Share, for all of the outstanding shares of NRM Systems,
Inc.
c. On February 29, 2000, the Company issued 2,289,740 Shares, valued at
U.S.$33.65 per Share, to acquire all of the outstanding shares of
E-Transport Incorporated.
d. On September 27, 2000, the Company issued 39,526 Shares, valued at
U.S.$50.60 per Share as an investment in Maptuit Corporation.
e. On November 21, 2000, the Company issued 549,945 Shares, valued at
U.S.$28.37 per Share, for all of the outstanding shares of TraffiCop,
Inc.
f. On December 21, 2000, the Company issued 1,388,000 Shares, valued at
U.S.$23.07 per Share, to acquire the Transportation Services Vertical
of BCE Emergis Inc.
g. On May 11, 2001, the Company issued 50,030 Shares, valued at U.S.$20
per Share, to purchase certain technology assets from NeoModal.com
L.L.C.
h. On June 20, 2001, the Company issued 1,534,964 Shares, valued at
U.S.$15.15 per Share, to acquire all of the outstanding shares of
TranSettlements, Inc.
i. On July 2, 2001, the Company issued 1,311,205 Shares, valued at
U.S.$17.09 per Share, to acquire all of the outstanding shares of
Centricity, Inc.
(7) On October 18, 1999, the Company issued 145,454 Shares in settlement of an
account payable of U.S.$0.7 million.
(8) From May 16, 1998 to May 16, 2003, Shares were issued pursuant to the
exercise of stock options from the following plans in the following
amounts:
================================================== =======================
STOCK OPTION PLAN NUMBER OF SHARES ISSUED
================================================== =======================
The Descartes Systems Group Inc. stock option plan 2,111,022
-------------------------------------------------- -----------------------
Former E-Transport Incorporated stock option plans 93,264
-------------------------------------------------- -----------------------
Former Centricity, Inc. stock option plan 12,952
-------------------------------------------------- -----------------------
2,217,238
================================================== =======================
(9) Foreign currency amounts are converted to U.S. dollars using the applicable
exchange rate as of the date of the distribution.
DIVIDEND POLICY. Descartes has not paid any cash dividends on its Shares
to date. The Company currently intends to retain earnings to finance the
operations of the business, and therefore, the Company does not anticipate
paying cash dividends in the foreseeable future. The Company's dividend policy
will be reviewed from time to time in the context of the Company's earnings,
financial condition and other relevant factors.
PREVIOUS PURCHASES AND SALES OF DEBENTURES.
Descartes purchased for cancellation an aggregate principal amount of
U.S.$5,000 of Debentures pursuant to an offer dated August 1, 2002 by Descartes
to purchase up to U.S.$51,428,571 aggregate principal amount of its Debentures
at a purchase price of U.S.$700 for each U.S.$1,000 of principal amount of
Debentures.
13. INTEREST OF DIRECTORS AND SENIOR OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE OFFER
OWNERSHIP OF SHARES OF DESCARTES. The following table indicates, as of May
30, 2003, to the knowledge of management of Descartes after reasonable inquiry,
the number of Shares beneficially owned or over which control or direction is
exercised by each director and senior officer of Descartes and their
representatives and associates, by each person that holds more than 10% of the
outstanding Shares and by each person acting jointly or in concert with
Descartes.
PERCENTAGE OF
NUMBER OF OUTSTANDING
NAME POSITION WITH DESCARTES SHARES SHARES(15)
------------------------------------ ------------------------------------------ --------- -------------
Peter Schwartz (1).................. Director, Chairman of the Board 795,438 1.52%
John Albright (2)................... Director 69,546 .13%
James Balsillie (3)................. Director 72,370 .14%
Chris Hewat (4)..................... Director 18,248 .03%
Stephen Watt (5).................... Director 13,079 .03%
22
Manuel Pietra (6)................... Chief Executive Officer and President 83,330 .16%
Colley Clarke (7)................... Executive Vice-President, Finance & Chief 239,511 .46%
Financial Officer
Art Mesher (8)...................... Executive Vice-President, Corporate 497,520 .95%
Strategy and Business Development
Bruce Gordon (9).................... Senior-Vice-President, Products and 70,900 .14%
Technology
Brandon Nussey (10)................. Senior-Vice-President, Operations 5,060 .01%
Development
Alec Moore (11)..................... Senior Vice-President, Corporate Finance 12,500 .03%
Massood Oroomchi (12)............... Senior Vice-President, Finance & 14,500 .03%
Administration
Evros Psiloyenis.................... Senior-Vice-President, Infrastructure and 0 0%
Support
Eduardo Abreu....................... General Manager, Latin America 0 0%
John Kellett........................ General Manager, Canada 0 0%
Edward J. Ryan (13)................. General Manager, USA 29,899 .06%
Kevin Taylor........................ General Manager, Asia Pacific 0 0%
Scott Pagan (14).................... Corporate Secretary 5,000 .01%
All directors and senior officers
as a group (18 persons)............. 1,921,901 3.68%
PRIMECAP Management Company......... 5,698,600 10.91%
----------------------
(1) Includes options to acquire 182,834 Shares which are or will be exercisable over the next 60 days.
(2) Includes options to acquire 17,248 Shares which are or will be exercisable over the next 60 days.
(3) Includes options to acquire 17,248 Shares which are or will be exercisable over the next 60 days.
(4) Includes options to acquire 17,248 Shares which are or will be exercisable over the next 60 days.
(5) Includes options to acquire 13,079 Shares which are or will be exercisable over the next 60 days.
(6) Includes options to acquire 83,330 Shares which are or will be exercisable over the next 60 days.
(7) Includes options to acquire 237,496 Shares which are or will be exercisable over the next 60 days.
(8) Includes options to acquire 494,020 Shares which are or will be exercisable over the next 60 days.
(9) Includes options to acquire 70,900 Shares which are or will be exercisable over the next 60 days.
(10) Includes options to acquire 5,000 Shares which are or will be exercisable over the next 60 days.
(11) Includes options to acquire 12,000 Shares which are or will be exercisable over the next 60 days.
(12) Includes options to acquire 12,000 Shares which are or will be exercisable over the next 60 days.
(13) Includes options to acquire 22,550 Shares which are or will be exercisable over the next 60 days.
(14) Includes options to acquire 5,000 Shares which are or will be exercisable over the next 60 days.
(15) Based on 52,231,711 Shares outstanding.
To the knowledge of management of Descartes after reasonable inquiry, no person
named in the immediately preceding table beneficially owns or exercises control
or direction over any Debentures or intends to deposit Shares under the Offer.
COMMITMENTS TO ACQUIRE SECURITIES. Descartes has no commitments to
purchase Shares, other than pursuant to the Offer. To the knowledge of
management of Descartes, after reasonable enquiry, no person named under
"Interest of Directors and Officers; Transactions and Arrangements Concerning
the Offer; Ownership of Securities of Descartes" has any commitment to acquire
Debentures or Shares. Employees and directors of Descartes may, if eligible,
participate in and acquire Shares pursuant to the employee stock option plan and
employee share purchase plan of Descartes.
23
CONTRACTS, ARRANGEMENTS AND UNDERSTANDINGS. Other than as described in the
Offer, there are no contracts, arrangements or understandings, formal or
informal, between the Company and any holder of securities of Descartes with
respect to the Offer or any person with respect to any security of Descartes in
relation to the Offer.
The Significant Debentureholder has agreed, pursuant to a commitment
agreement dated as of May 12, 2003 (the "Commitment Agreement") with Descartes
to deposit under the Debenture Offer, within five days of the date of the
Debenture Offer, U.S.$30,856,500 aggregate principal amount of Debentures,
representing approximately 43% of the aggregate principal amount of outstanding
Debentures, at a purchase price of U.S.$950 plus the amount of accrued interest
for each U.S.$1,000 principal amount of Debentures. Under the Commitment
Agreement, the Significant Debentureholder may terminate its obligations if: (i)
the Significant Debentureholder's Debentures deposited under the Debenture Offer
have not been taken up and paid for on or before the date the Debentures, other
than the Significant Debentureholder's Debentures, are taken up and paid for
under the Debenture Offer, and on or before the expiry of ten days after the
expiry of the Debenture Offer; (ii) the Debenture Offer is withdrawn; or (iii)
in the event that a Change of Control (as defined in the Trust Indenture
pursuant to which the Debentures were created and issued) is publicly announced
prior to the date of take-up and payment of the Significant Debentureholder's
Debentures under the Debenture Offer. The Commitment Agreement shall terminate
if the Debentures deposited under the Debenture Offer are not taken up and paid
for prior to August 7, 2003. Other than the Commitment Agreement, there are no
contracts, arrangements or understandings, formal or informal, between the
Company and any holder of securities of Descartes with respect to the Debenture
Offer or any person with respect to any security of Descartes in relation to the
Debenture Offer.
14. INCOME TAX CONSIDERATIONS
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
Descartes has been advised by Blake, Cassels & Graydon LLP that the
following summary generally describes the principal Canadian federal income tax
considerations under the Tax Act generally applicable to a sale of Shares
pursuant to the Offer by a Shareholder who holds such Shares as capital
property, is not affiliated with Descartes and deals at arm's length with
Descartes, all within the meaning of the Tax Act. Certain Shareholders,
including financial institutions, registered securities dealers and corporations
controlled by one or more of the foregoing, are generally precluded from
treating Shares as capital property. This summary is not applicable to a
Shareholder which is a "financial institution" as defined in the Tax Act for the
purposes of the mark-to-market rules. Special rules which are not discussed in
this summary may apply to non-resident insurers carrying on an insurance
business in Canada and elsewhere. Shareholders to whom such rules apply should
consult their own tax advisers.
Depending upon all of the circumstances, including the date of issue of a
Share, the date of acquisition of a Share by a Shareholder that is a "specified
financial institution" or a "restricted financial institution" for the purposes
of the Tax Act and the extent of holdings of Shares by such a Shareholder and
persons with whom the Shareholder does not deal at arm's length, the Offer may
cause a Share to be treated as a "term preferred share" for the purposes of the
Tax Act in respect of the sale of the Share to Descartes pursuant to the Offer.
This summary is not applicable to a Shareholder which is a "specified financial
institution" or "restricted financial institution" as defined in the Tax Act,
and such Shareholders are urged to consult their own tax advisers.
The summary is based on the current provisions of the Tax Act, the
regulations thereunder, all specific proposals to amend the Tax Act and the
regulations thereunder publicly announced by or on behalf of the Minister of
Finance (Canada) prior to the date hereof (the "Tax Proposals") and the current
administrative policies and assessing practices of the Canada Customs and
Revenue Agency. There is no certainty that the Tax Proposals will be enacted in
the form proposed, if at all. This summary is not exhaustive of all Canadian
federal income tax considerations. Except as referred to above, this summary
does not take into account or anticipate changes in income tax law or
administrative practice, nor does it take into account provincial, territorial
or foreign tax considerations, which considerations may differ significantly
from those discussed herein.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND
SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR SHAREHOLDER
AND NO REPRESENTATION IS MADE WITH RESPECT TO CANADIAN TAX CONSEQUENCES TO ANY
PARTICULAR SHAREHOLDER. ACCORDINGLY, SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISERS WITH RESPECT TO THE CANADIAN TAX CONSIDERATIONS RELEVANT TO THEM,
HAVING REGARD TO THEIR PARTICULAR CIRCUMSTANCES.
This summary assumes that the paid-up capital for purposes of the Tax Act
of each Share will exceed the amount paid by Descartes for each Share under the
Offer. This summary also assumes that the Shares will at all relevant times be
24
listed on a prescribed stock exchange for purposes of the Tax Act (which
currently includes the TSX and the Nasdaq National Market).
For purposes of the Tax Act, all amounts relating to the acquisition,
holding or disposition of Shares, including dividends, adjusted cost base and
proceeds of disposition, must be expressed in Canadian dollars; each amount
denominated in U.S. dollars must be converted into Canadian dollars based on the
Canada/U.S. currency exchange rate prevailing at the time the particular amount
arises. A Shareholder who requests payment in U.S. dollars will be considered to
have received, in exchange for such Shareholder's Shares, a Canadian dollar
amount equal to the Purchase Price without regard to the Canadian dollar
equivalent of the U.S. dollar amount received.
RESIDENTS OF CANADA
-------------------
This part of the summary applies to Shareholders who are resident or
deemed to be resident in Canada for purposes of the Tax Act and any relevant tax
treaty or convention.
Shareholders who sell Shares to Descartes pursuant to the Offer will not
be deemed to receive a taxable dividend as result of the sale provided the
paid-up capital of each Share, for purposes of the Tax Act, exceeds the amount
paid for each Share under the Offer, expressed in Canadian dollars. Descartes
believes that the paid-up capital of each Share for purposes of the Tax Act
exceeds the maximum amount payable per Share under the Offer.
A Shareholder will realize a capital gain (or capital loss) on disposition
of a Share sold to Descartes pursuant to the Offer equal to the amount by which
the purchase price paid by Descartes for such Share exceeds (or is less than)
the aggregate of the adjusted cost base to the Shareholder of such Share and any
reasonable costs of disposition. In general, a capital loss otherwise arising on
the disposition of a Share by a corporation may be reduced by the amount of
dividends previously received or deemed to have been received thereon, to the
extent and under the circumstances described in the Tax Act. Similar rules may
apply where a corporation, partnership or trust is a member of a partnership or
a beneficiary of a trust that disposes of Shares pursuant to the Offer. A
Shareholder will be required to include one-half of the amount of any resulting
capital gain in income as a taxable capital gain, and may generally deduct
one-half of the amount of any resulting capital loss against taxable capital
gains realized in the year of disposition, in any of the three preceding years
or in any following year, to the extent and under the circumstances described in
the Tax Act. In certain circumstances, such as where a Shareholder (or person
affiliated with the Shareholder for purposes of the Tax Act) acquires other
Shares during the period that begins 30 days before and ends 30 days after the
disposition and at the end of that period owns such Shares, the Shareholder's
loss from the disposition may be deemed to be nil.
Individual Shareholders who realize a capital gain as a result of a sale
of Shares under the Offer should consult their own tax advisers with respect to
the "alternative minimum tax" rules set out in the Tax Act. A Shareholder that
is a Canadian-controlled private corporation throughout the year (as defined in
the Tax Act) may be liable to pay an additional refundable tax of 6% on its
"aggregate investment income" for the year, which is defined to include an
amount in respect of taxable capital gains (but not to include dividends or
deemed dividends that are deductible in computing taxable income).
NON-RESIDENTS OF CANADA
-----------------------
This part of the summary applies to Shareholders who, at all relevant
times, for purposes of the Tax Act and any applicable tax treaty or convention,
are not resident nor deemed to be resident in Canada, who do not use or hold and
are not deemed to use or hold such Shares in connection with carrying on a
business in Canada and to whom such shares are not taxable Canadian property ("a
non-resident Shareholder").
Shares will generally not be taxable Canadian property to a non-resident
Shareholder provided the non-resident Shareholder, either alone or together with
persons with whom the non-resident Shareholder does not deal at arm's length,
has not at any time within the 60-month period immediately preceding the
disposition owned 25% or more of the issued shares of any class or series of the
capital stock of Descartes, has not previously been resident in Canada and
elected under the Tax Act to treat the Shares as taxable Canadian property and
has not acquired the Shares in a tax deferred transaction for purposes of the
Tax Act.
Under the Tax Act, a non-resident Shareholder will not be subject to tax
in respect of any capital gain (and will not be entitled to deduct any capital
loss) realized on the disposition of Shares sold to Descartes pursuant to the
Offer.
25
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
The Company has been advised by Testa, Hurwitz & Thibeault, LLP that the
following general summary (exclusive of statements attributed to the Company)
describes certain United States federal income tax consequences generally
applicable to U.S. Holders (as defined below) who tender and sell Shares to the
Company pursuant to the Offer. This summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), U.S. Treasury regulations, administrative
rulings, and court decisions, all as in effect as of the date hereof and all of
which are subject to differing interpretations and/or change at any time
(possibly with retroactive effect). Except as specifically noted below, this
summary does not address any tax consequences applicable under proposed
legislation.
This summary is not a complete description of all of the U.S. federal
income tax consequences applicable to U.S. Holders participating in the Offer
and, in particular, does not address U.S. federal income tax considerations
applicable to Shareholders that are subject to special treatment under U.S.
federal income tax law (including, for example, financial institutions, dealers
in securities or currencies, traders that mark to market, Shareholders that hold
their Shares as part of a hedge, straddle or conversion transaction, insurance
companies, tax-exempt entities, Shareholders that have owned or are deemed to
have owned 10% or more of the total combined voting power of all classes of
stock of the Company at any time during the five-year period ending on the date
the Shareholder sells the Shares pursuant to the Offer, Shareholders who
acquired their Shares in connection with a stock option plan or in any other
compensatory transaction, and Shareholders that do not hold the Shares as
"capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Code). Shareholders that are subject to special treatment or
that are not U.S. Holders may be subject to different tax consequences,
including different information reporting and withholding consequences, and
should consult their own tax advisers.
In addition, this summary does not discuss any aspect of U.S. state and
local tax laws or non-U.S. tax laws that may be applicable to any Shareholder,
or any U.S. federal tax considerations other than U.S. federal income tax
considerations.
THIS SUMMARY IS OF A GENERAL NATURE ONLY. IT IS NOT INTENDED TO
CONSTITUTE, AND SHOULD NOT BE CONSTRUED TO CONSTITUTE, LEGAL OR TAX ADVICE TO
ANY PARTICULAR U.S. HOLDER. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS
AS TO THE TAX CONSEQUENCES IN THEIR PARTICULAR CIRCUMSTANCES.
Except as otherwise set forth below, and subject to the qualifications
noted above, the following discussion is limited to the U.S. federal income tax
consequences relevant to a U.S. Holder. A "U.S. Holder" is a Shareholder that
is:
o an individual who is a citizen or resident of the United States for
federal income tax purposes;
o a corporation (or other entity taxed as a corporation) created or
organized under the laws of the United States or a political subdivision
thereof;
o an estate the income of which (other than income that is effectively
connected with a U.S. trade or business) is subject to U.S. federal income
taxation regardless of source; or
o a trust if (a) a U.S. court is able to exercise primary supervision over
the trust's administration, and (b) one or more U.S. persons, as defined
under Section 7701(a)(30) of the Code, have authority to control all of
the trust's substantial decisions.
The tax treatment of a partner in a partnership may depend on both the
partnership's and the partner's status. Partnerships tendering Shares and
persons holding beneficial interests in Shares through a partnership are urged
to consult their own tax advisers.
U.S. HOLDERS WHO RECEIVE CASH PURSUANT TO THE OFFER
---------------------------------------------------
For United States federal income tax purposes, if a U.S. Holder tenders
and sells Shares for cash pursuant to the Offer, such transaction will be
treated either as a "sale or exchange" of the Shares by such U.S. Holder or as
"distribution" by the Company in respect of such U.S. Holder's Shares. As
described below, the specific treatment will depend, in part, upon the U.S.
Holder's particular circumstances.
SALE OR EXCHANGE OF SHARES. Under Section 302 of the Code, a U.S. Holder
whose Shares are tendered and sold for cash pursuant to the Offer will be
treated as having engaged in a "sale or exchange" of such Shares, and thus will
recognize gain or loss, if the transaction (i) has the effect of a
"substantially disproportionate" distribution by the Company with respect to
such U.S. Holder, (ii) results in "complete termination" of such Holder's equity
26
interest in the Company, or (iii) is "not essentially equivalent to a dividend"
with respect to the U.S. Holder. These tests (the "Section 302 tests") are
explained more fully below.
CONSTRUCTIVE OWNERSHIP OF SHARES. In determining whether any of the Section
302 tests is satisfied, a U.S. Holder must take into account not only Shares
actually owned by the U.S. Holder, but also Shares that are constructively owned
within the meaning of Section 318 of the Code. Under Section 318, a U.S. Holder
may constructively own Shares that are actually owned, and in some cases
constructively owned, by certain related individuals and certain entities in
which the U.S. Holder has an interest or that have an interest in the U.S.
Holder, as well as any Shares the U.S. Holder has a right to acquire by exercise
of an option or by the conversion or exchange of a security.
THE SECTION 302 TESTS. One of the following tests must be satisfied in
order for the sale of Shares pursuant to the Offer to be treated as a sale or
exchange rather than as a distribution.
(a) "SUBSTANTIALLY DISPROPORTIONATE" TEST. The receipt of cash by a U.S.
Holder will have the effect of a "substantially disproportionate"
distribution by the Company with respect to the U.S. Holder if the
percentage of the outstanding voting shares of the Company actually
and constructively owned by the U.S. Holder immediately following the
sale of Shares pursuant to the Offer (treating Shares purchased
pursuant to the Offer as not outstanding) is less than 80% of the
percentage of the outstanding voting shares of the Company actually
and constructively owned by the U.S. Holder immediately before the
exchange (treating Shares purchased pursuant to the Offer as
outstanding). U.S. Holders should consult their tax advisers
concerning the application of the substantially disproportionate test
to their particular circumstances.
(b) "COMPLETE TERMINATION" TEST. The receipt of cash by a U.S. Holder will
be treated as a complete termination of the U.S. Holder's equity
interest in the Company if either (i) all of the Shares actually and
constructively owned by the U.S. Holder are sold pursuant to the Offer
or (ii) all of the Shares actually owned by the U.S. Holder are sold
pursuant to the Offer and the U.S. Holder is eligible to waive, and
effectively waives, the attribution of all Shares constructively owned
by the U.S. Holder in accordance with the procedures described in
Section 302(c)(2) of the Code.
(c) "NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND" TEST. The receipt of cash
by a U.S. Holder will generally be treated as "not essentially
equivalent to a dividend" if the U.S. Holder's sale of Shares pursuant
to the Offer results in a meaningful reduction of the U.S. Holder's
proportionate interest in the Company. Whether the receipt of cash by
the U.S. Holder will be treated as not essentially equivalent to a
dividend will depend on the U.S. Holder's particular facts and
circumstances. In the case of a U.S. Holder holding a small minority
interest in the Company's Shares, it is possible that even a small
reduction in such interest may be treated as a "meaningful reduction,"
and thus may satisfy the "not essentially equivalent to a dividend"
test.
Under certain circumstances, it may be possible for a depositing U.S.
Holder to satisfy one of the Section 302 tests by contemporaneously selling or
otherwise disposing of all or some of the Shares that are actually or
constructively owned by the U.S. Holder but that are not purchased pursuant to
the Offer. Correspondingly, a U.S. Holder may fail to satisfy any of the Section
302 tests because of contemporaneous acquisitions of Shares by the U.S. Holder
or by a related party whose shares are constructively owned by the U.S. Holder.
U.S. Holders should consult their tax advisers regarding the consequences of
such sales or acquisitions in their particular circumstances.
If the Offer is over-subscribed, the Company's purchase of Shares deposited
may be prorated. Thus, even if all the Shares actually and constructively owned
by a U.S. Holder are deposited, it is possible that not all of the Shares will
be purchased by the Company, which in turn may affect the U.S. Holder's ability
to satisfy one of the Section 302 tests described above.
TAX TREATMENT OF A "SALE OR EXCHANGE" OF SHARES. If a U.S. Holder is
treated as having engaged in a "sale or exchange" of such U.S. Holder's shares
under any of the tests described above, such U.S. Holder will recognize gain or
loss equal to the difference between the amount realized by such U.S. Holder
(taking into account certain currency adjustments, as discussed below, and
before any withholding tax) and such U.S. Holder's tax basis in the Shares
exchanged therefor. Any such gain or loss will be capital gain or loss if the
Shares are held as a capital asset, and such capital gain or loss will be
long-term capital gain or loss if the holding period of the Shares exceeds one
year as of the date of the sale.
27
DISTRIBUTION IN RESPECT OF SHARES. If a U.S. Holder who sells Shares
pursuant to the Offer is not treated under Section 302 of the Code as having
engaged in a "sale or exchange" of such U.S. Holder's Shares, then the amount
realized (taking into account certain currency adjustments, as discussed below,
and before any withholding tax) by a U.S. Holder will be treated as a
distribution by the Company in respect of such U.S. Holder's Shares.
TAX TREATMENT OF A DISTRIBUTION IN RESPECT OF SHARES. For United States
federal income tax purposes, a distribution by the Company to a U.S. Holder in
respect of such U.S. Holder's Shares generally will be treated as follows:
o First, as a dividend to the extent such distribution is out of either the
Company's "current earnings and profits" or "accumulated earnings and
profits," the United States federal income tax consequences of which are as
described below;
o Second, as a tax-free return of capital, to the extent of the U.S. Holder's
tax basis in its Shares held as of the consummation of the Offer (including
Shares not tendered and sold pursuant to the Offer);
o Thereafter, as gain from the sale or exchange of Shares. Such gain will be
capital gain if the Shares are held as a capital asset, and such capital
gain will be long-term capital gain or loss if the holding period of the
Shares exceeds one year as of the date of the exchange.
DETERMINATION OF EARNINGS AND PROFITS. Accumulated earnings and profits for
the fiscal year that includes the date of the consummation of the Offer are
comparable to the Company's net taxable income (determined based on U.S. tax
principles, with certain adjustments) on a cumulative basis for all periods from
the Company's inception through Company's fiscal year ending prior to the fiscal
year that includes the Offer. The Company does not believe that it has any
accumulated earnings and profits for the period from the Company's inception
through its fiscal year ending January 31, 2003.
Current earnings and profits for any fiscal year is determined as of the
end of such year, and is comparable to the Company's taxable income for such
year (determined based on U.S. tax principles, with certain adjustments).
Because the Company's current earnings and profits are dependent on a number of
factors, including the amount of gross income and expenses during the year,
there can be no assurance that the Company will not have any current earnings
and profits for the year ending January 31, 2004. The Company has not assumed,
and does not assume, any obligation to make timely disclosure with respect to
its current earnings and profits for the year ending January 31, 2004. However,
to the extent that any distribution by the Company may be treated as a dividend
for United States federal income tax purposes, appropriate reporting
documentation will be sent to U.S. Holders.
BASIS IN REMAINING SHARES. If, with respect to a U.S. Holder, the tender
and sale of Shares pursuant to the Offer is treated as a distribution by the
Company with respect to such U.S. Holder's Shares, such U.S. Holder's tax basis
in its remaining Shares generally will be increased by such U.S. Holder's tax
basis in the Shares tendered and sold pursuant to the Offer and will be
decreased by the portion of such U.S. Holder's proceeds from the Offer that are
treated as a tax-free return of capital.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE RECEIPT OF A DIVIDEND.
The receipt by a U.S. Holder of a dividend generally will be treated as ordinary
income. However, under the Jobs and Growth Tax Relief Reconciliation Act of 2003
(the "Act") which was enacted into law as of May 28, 2003, for U.S. Holders who
are not corporations the receipt of a dividend may be taxable as an item of "net
capital gain" rather than taxable as ordinary income. As a result, dividends
received by U.S. persons other than corporations generally will be taxed at the
same tax rate as net capital gains. To qualify for this special treatment, the
dividend must be received by the U.S. Holder in a tax year of the U.S. Holder
beginning after December 31, 2002. In addition, the U.S. Holder must (1) have
held the shares with respect to which the dividends were paid for more than 60
days during the 120 day period beginning on the date that is 60 days before the
date on which the shares become ex-dividend with respect to such dividend and
(2) not be under an obligation (whether pursuant to a short sale or otherwise)
to make related payments with respect to positions in substantially similar
property. Any loss realized by an individual on the sale or exchange of a share
of stock with respect to which the individual received an "extraordinary
dividend" (within the meaning of Section 1059(c) of the Code) subject to the
reduced rate of tax shall be treated, to the extent of such dividend, as a
long-term capital loss The reduced rate of tax will not apply to all dividends,
however. For example, the reduced rate of tax is not applicable to a dividend
paid by a corporation incorporated outside of the United States if that
corporation is a passive foreign investment company (see discussion below). In
addition, the reduced rate of tax is also not applicable if the U.S. Holder
elects to treat such dividend as "investment income" for purposes of Section
163(d)(4) of the Code.
28
Since the Company is not a U.S. domestic corporation, dividends received by
a corporate U.S. Holder will not be eligible for the dividends received
deduction under Section 243 of the Code.
PROPOSED REGULATIONS. Under proposed regulations, if a corporation redeems
its stock from a shareholder and such transaction is treated as a distribution
(rather than a sale or exchange) to such shareholder, then the shareholder's tax
basis in the redeemed shares, after certain adjustments, would result in a loss
rather than be added to the shareholder's basis in its remaining shares in the
corporation. Such proposed regulations are effective for transactions occurring
after the date on which such regulations are finalized.
IN VIEW OF THE UNCERTAINTY OF THE UNITED STATES FEDERAL INCOME TAX
TREATMENT TO U.S. HOLDERS WHO PARTICIPATE IN THE OFFER, U.S. HOLDERS WHO ARE
DESIROUS OF DISPOSING OF ANY OR ALL OF THEIR SHARES MAY WISH TO CONSIDER SELLING
THEIR SHARES IN THE MARKET RATHER THAN PURSUANT TO THE OFFER. U.S. HOLDERS ARE
URGED TO CONSULT WITH THEIR TAX ADVISERS TO DETERMINE THE TAX CONSEQUENCES
ARISING FROM PARTICIPATION IN THE OFFER.
PASSIVE FOREIGN INVESTMENT COMPANIES
The rules governing "passive foreign investment companies" ("PFICs") can
have significant adverse tax effects on U.S. persons treated as owning stock or
other equity interests in the Company. Some, but not all, of the potential
adverse consequences under the PFIC rules are summarized in general terms below,
and Shareholders in the Company should consult their tax advisers in order to
consider these and other consequences in their particular circumstances under
the PFIC rules.
A foreign corporation such as the Company generally is classified as a PFIC
if, for any taxable year, either:
o 75% or more of its gross income constitutes "passive income"
(generally, interest, dividends, and certain types of gains, rents,
and royalties) (the "Income Test"), or
o the "average percentage of assets . . . held by such corporation
during the taxable year" which constitute "passive assets" (generally,
assets that produce passive income or are held for the production of
such income) is at least 50% (the "Assets Test").
Under proposed Treasury regulations, if a U.S. person has any equity
interest in a PFIC, including an option to acquire shares of a PFIC, such U.S.
person is treated for certain purposes as owning shares of a PFIC ("PFIC equity
interests"). PFIC equity interests held by a U.S. person will be treated as
stock in a PFIC if, at any time during the holding period of such U.S. person,
the Company was a PFIC. FOR THIS REASON, IT IS POSSIBLE THAT U.S. PERSONS WHO
ARE SHAREHOLDERS IN THE COMPANY, MAY SUFFER CERTAIN ADVERSE U.S. TAX
CONSEQUENCES IF THE COMPANY WAS A PFIC FOR ANY TAXABLE YEAR DURING ANY PART OF
WHICH SUCH PERSONS HELD THEIR INVESTMENTS IN THE COMPANY. Accordingly, U.S.
Holders should consider such potential adverse consequences in determining
whether to sell Shares pursuant to the Offer.
Under the PFIC rules, a penalty tax may be imposed on any U.S. person
treated as owning a PFIC equity interest when that person receives an "excess
distribution" with respect to such PFIC equity interest or disposes of such PFIC
equity interest at a gain. In general, the penalty tax is equivalent to U.S.
federal income tax imposed AT ORDINARY INCOME TAX RATES and calculated as if any
gain on that sale were realized (or the excess distribution were made) ratably
over the holding period of the PFIC equity interest (with the tax attributable
to prior years calculated as if the maximum ordinary income tax rates during
such years were applicable), plus an interest charge imposed with respect to
those taxes deemed to be attributable to prior years.
Determining whether a foreign corporation is a PFIC under either the Income
Test or the Assets Test generally requires an annual factual determination of
its proportions of passive income and passive assets in relation to its total
income and assets, respectively, under the PFIC rules. A determination of the
Company's PFIC status will depend upon the nature and sources of the Company's
income and the relative values of the Company's passive assets, such as cash,
and of its non-passive assets, including goodwill related to its non-passive
assets, during the year. A special rule in the Code provides that, under
specified circumstances, certain investments in stock of U.S. corporations made
by a qualifying U.S. subsidiary of the foreign corporation will generally be
treated as non-passive for purposes of applying these rules. The U.S. Internal
Revenue Service ("IRS") has indicated in an IRS Notice that in applying the
Assets Test it will take the position that "the average value of the assets for
the taxable year of the foreign corporation will be the average of the fair
market values of the assets determined as of the end of each quarterly
29
period" during such taxable year. There is legislative history indicating that,
in applying the PFIC rules, "it is intended that the total value of a
publicly-traded foreign corporation's assets generally will be treated as equal
to the sum of the aggregate value of its outstanding stock plus its
liabilities." Assuming the use of this method in applying the PFIC rules with
respect to the Company, the total value of the Company's assets for purposes of
determining its PFIC status would be largely a function of the trading price of
its shares, and thus subject to significant change during each year.
CERTAIN PFIC ELECTIONS AVAILABLE UNDER CERTAIN CONDITIONS TO U.S.
STOCKHOLDERS. If the Company were classified as a PFIC, a U.S. person actually
owning stock in the Company could, subject to certain conditions, elect to treat
such stock as stock in a "qualified electing fund" (a "QEF Election"), in which
case such stockholder would be required to include in current U.S. taxable
income a proportionate share of the Company's earnings and profits in years in
which the Company is classified as a PFIC, but under certain conditions any gain
subsequently recognized upon the sale of Company stock by such U.S. stockholder
generally may be taxed as capital gain. Alternatively, a U.S. stockholder of the
Company could make an election (a "Mark-to-Market Election") pursuant to which
such stockholder would recognize an amount of ordinary income or loss each year
in an amount equal to the difference between the fair market value of such
stockholder's shares in the Company and such stockholder's adjusted tax basis
therein. Losses would be allowed only to the extent of income, net of losses,
previously recognized pursuant to the Mark-to-Market Election. The Company does
not undertake to provide stockholders with the necessary information to make a
QEF Election or Mark-to-Market Election. U.S. persons should consult with their
own tax advisers regarding the availability, consequences, advisability, and
manner of making either the QEF Election or the Mark-to-Market Election if the
Company is treated as a PFIC.
The Company does not believe that it was a PFIC for its taxable year ending
on January 31, 2003. PFIC status is determined as of the end of each taxable
year, and is dependent on a number of factors, including the value and
composition of a corporation's assets and the amount and type of gross income
during the year. In addition, changes in the Company's stock price, changes in
the nature and magnitude of the Company's income or assets, changes in the
levels of cash or other potentially passive assets, changes in the level of the
Company's indebtedness, and other factors may affect the likelihood of PFIC
status in the current taxable year or other years. Accordingly, there can be no
assurance that the Company will not be classified as a PFIC for the current
taxable year or for any other period. The Company has not assumed, and does not
assume, any obligation to make timely disclosure with respect to its PFIC
status.
IN VIEW OF THE COMPLEXITY OF THE PFIC RULES AND THE LACK OF GUIDANCE AS TO
THEIR POTENTIAL APPLICATION TO A DISPOSITION OF SHARES, U.S. HOLDERS SHOULD
CONSULT WITH AND RELY SOLELY UPON THEIR OWN TAX ADVISERS REGARDING THE
APPLICATION OF THE PFIC RULES TO THE DISPOSITION OF SHARES PURSUANT TO THE
OFFER. U.S. STOCKHOLDERS AND ALL OTHER U.S. PERSONS TREATED AS OWNING EQUITY
INTERESTS IN THE COMPANY SHOULD SIMILARLY CONSULT WITH AND RELY SOLELY UPON
THEIR OWN TAX ADVISERS REGARDING THE APPLICATION OF THE PFIC AND OTHER U.S. TAX
RULES APPLICABLE WITH RESPECT TO STOCK OR OTHER EQUITY INTERESTS IN THE COMPANY.
CURRENCY TRANSLATION
--------------------
In the case of a U.S. Holder using the cash method of accounting ("a cash
basis U.S. Holder") who receives payment in Canadian dollars, the amount
realized from the tender and sale of Shares for Canadian dollars pursuant to the
Offer will be equal to the U.S. dollar value of such Canadian dollars determined
at the spot Canadian dollar/U.S. dollar rate on the date payment is made to the
Depositary. The amount realized in the case of a cash basis U.S. Holder who
elects to receive U.S. dollars will equal the amount received by such U.S.
Holder in U.S. dollars. In the case of a U.S. Holder using the accrual method of
accounting (an "accrual basis U.S. Holder"), the amount realized for United
States federal income tax purposes will equal the U.S. dollar value of the
Canadian dollars to which such U.S. Holder becomes entitled on the date its
Shares are accepted for purchase by the Company, determined at the relevant spot
exchange rate in effect on that date. An accrual basis U.S. Holder may elect to
be treated as a cash basis U.S. Holder for purposes of applying the foreign
exchange translation rules described herein, in which case the relevant spot
exchange rate would be the rate in effect on the date payment is made to the
Depositary. Such election must be applied consistently from year to year and may
not be revoked without the consent of the IRS. Generally, any gain or loss
resulting from currency exchange fluctuations during the period from the date a
U.S. Holder determines its amount realized for United States federal income tax
purposes to the date such payment is converted into U.S. dollars will be treated
as ordinary income or loss.
30
FOREIGN TAX CREDIT
------------------
Any withholding tax imposed by Canada with respect to the proceeds from the
tender and sale of Shares pursuant to the Offer may be treated as a foreign tax
eligible for credit against such U.S. Holder's United States federal income tax,
subject to applicable limitations on the use of foreign tax credits. U.S.
Holders should consult their own tax advisers regarding the application of the
foreign tax credit limitations and other rules in their particular situations.
UNITED STATES BACKUP WITHHOLDING AND INFORMATION REPORTING
----------------------------------------------------------
U.S. Holders that do not appropriately complete the substitute Form W-9 as
included in the Letter of Transmittal may be subject to United States "backup
withholding tax" with respect to payments made to them. The amount of backup
withholding tax will be allowed as a credit against such U.S. Holder's U.S.
federal income tax liability and, if backup withholding tax results in an
overpayment of U.S. federal income taxes, may entitle such U.S. Holder to a
refund or credit provided that the required information is furnished to the
Internal Revenue Service.
THE FOREGOING GENERAL SUMMARY IS NOT INTENDED TO BE A COMPLETE DESCRIPTION OF
ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS WITH RESPECT TO U.S.
HOLDERS PARTICIPATING IN THE OFFER, AND IT DOES NOT DESCRIBE ANY OTHER U.S.
FEDERAL, ANY U.S. STATE AND LOCAL, OR ANY NON-U.S. TAX CONSIDERATIONS. AS
INDICATED, THE SUMMARY IS NOT INTENDED TO CONSTITUTE TAX ADVICE TO ANY
PARTICULAR U.S. HOLDER, AND U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS
AS TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER TO THEM, INCLUDING TAX RETURN
REPORTING REQUIREMENTS, THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, AND
LOCAL AND NON-U.S. TAX LAWS, AND THE EFFECT OF ANY PROPOSED CHANGES IN
APPLICABLE TAX LAWS.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
The Shares are registered under the Exchange Act which requires, among
other things, that Descartes furnish certain information to the SEC. Descartes
believes that the purchase of Shares pursuant to the Offer will not result in
the Shares becoming eligible for deregistration under Section 12(g) of the
Exchange Act.
The Shares are currently "margin securities" under the rules of the U.S.
Federal Reserve Board. This has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Descartes believes
that, following the repurchase of Shares pursuant to the Offer, the Shares will
continue to be margin securities for the purposes of the U.S. Federal Reserve
Board's margin regulations.
Descartes is not aware of any license or regulatory permit that is
material to Descartes' business that might be adversely affected by Descartes'
acquisition of Shares pursuant to the Offer or of any approval or other action
by any government or governmental, administrative or regulatory authority or
agency in any jurisdiction, that would be required for the acquisition or
ownership of Shares by Descartes pursuant to the Offer other than as outlined in
this Section. Descartes has filed with various Canadian securities regulators an
application seeking exemptive relief from the proportionate take-up and
valuation requirements under provincial securities legislation with respect to
the Offer. Descartes anticipates receiving an order granting the necessary
relief prior to the Expiration Date. Should any such approval or other action be
required, Descartes currently contemplates that such approval or other action
will be sought. Descartes cannot predict whether it may determine that it must
delay the acceptance for payment of Shares deposited pursuant to the Offer
pending the outcome of any such matter. There can be no assurance that any such
approval or other action, if needed, would be obtained or would be obtained
without substantial conditions or that the failure to obtain any such approval
or other action might not result in adverse consequences to Descartes' business.
Descartes' obligations under the Offer to accept for payment and pay for Shares
are subject to certain conditions. See Section 5, "Certain Conditions of the
Offer".
16. PRIOR VALUATIONS
To the knowledge of the directors and officers of Descartes after
reasonable inquiry, no material appraisal or valuation regarding Descartes, its
securities or its material assets has been prepared within the two years
preceding the date hereof.
17. SOURCE AND AMOUNT OF FUNDS
The cash consideration for the Offer will be a maximum of $44,575,300
assuming a maximum of 11,578,000 Shares are purchased, disregarding any effects
of rounding to the nearest whole Share in the event that deposits of Shares
31
under the Offer are prorated as described in Section 1, "Number of Shares;
Proration". This cash consideration, together with any related fees and
expenses, will be financed by cash, cash equivalents and/or marketable
securities currently held by Descartes.
18. DEPOSITARY
Descartes has appointed CIBC Mellon Trust Company to act as a Depositary
for: (i) the receipt of certificates representing Shares and related Letters of
Transmittal deposited under the Offer; (ii) the receipt of certificates
representing Shares delivered pursuant to the procedures for guaranteed delivery
set forth in Section 2 of the Offer, "Procedure for Depositing Shares"; (iii)
the receipt from Descartes of cash to be paid in consideration of the Shares
acquired by Descartes under the Offer, as agent for the depositing Shareholders;
and (iv) the transmittal of such cash to the depositing Shareholders as agent
for the depositing Shareholders. The Depositary may contact Shareholders by
mail, telephone or facsimile and may request brokers, dealers and other nominee
Shareholders to forward materials relating to the Offer to beneficial owners.
The Depositary is not an affiliate of the Company.
19. FINANCIAL ADVISERS
Credit Suisse First Boston Canada Inc. ("CSFB") and Griffiths McBurney &
Partners ("GMP") have been retained by Descartes to act as its financial
advisers on various aspects of the Offer, including the structure and terms of
the Offer. CSFB and its U.S. broker-dealer affiliate, Credit Suisse First Boston
LLC, will act as Canadian and U.S. Dealer Managers, respectively, for the Offer.
GMP will be a member of the Canadian soliciting dealer group for the Offer. GMP
has also provided a liquidity opinion in connection with the Offer, a copy of
which is attached hereto as Schedule "A" (the "Liquidity Opinion"). See Section
11, "Valuation Exemption".
CSFB and GMP have also been retained by Descartes to act as its financial
advisers on various aspects of the Debenture Offer, including the structure and
terms of the Debenture Offer. In addition, Credit Suisse First Boston LLC, the
U.S. broker-dealer affiliate of CSFB, will act as U.S. Dealer Manager for the
Debenture Offer and GMP will act as Canadian Dealer Manager for the Debenture
Offer. GMP has provided an opinion on the value of the convertibility feature of
the Debentures and the basis upon which the Debentures trade (the "Debenture
Opinion").
In the two year period prior to the date of this Offer to Purchase, CSFB
acted as financial adviser to Descartes in connection with Descartes'
acquisition of all of the outstanding shares of TranSettlements, Inc. in June
2001 and all of the outstanding shares of Centricity, Inc. in July 2001.
In the two year period prior to the date of this Offer to Purchase, GMP
acted as broker appointed by Descartes for the purpose of purchases of
Debentures made pursuant to a normal course issuer bid and, together with its
U.S. broker-dealer affiliate, Griffiths McBurney & Partners Corp., as dealer
managers for the substantial issuer bid for Debentures of Descartes dated August
1, 2002. Prior thereto, GMP acted as lead underwriter on other financings by
Descartes including lead underwriter in connection with a public offering of
Shares for gross proceeds of $192,000,000 completed on October 24, 2000 and the
offering of the Debentures completed on June 30, 2000.
20. FEES AND EXPENSES
Descartes paid CSFB upon engagement a fee of U.S.$25,000 for strategic
advisory services provided by it to Descartes, including an evaluation of the
merits of making the Offer and the Debenture Offer. Descartes has also agreed to
pay CSFB a work fee of U.S.$25,000 for financial advisory services provided in
connection with the Offer, as well as a work fee of U.S.$25,000 for financial
advisory services provided on the Debenture Offer. Success fees are also payable
to CSFB in respect of the Offer and the Debenture Offer. A success fee of up to
U.S.$56,250 is payable in such proportion as the aggregate number of Shares
acquired by Descartes under the Offer bears to the 11,578,000 Shares which
Descartes has offered to acquire under the Offer. A success fee of up to
U.S.$106,250 is payable in such proportion as the aggregate principal amount of
Debentures acquired by Descartes under the Debenture Offer bears to the
U.S.$45,000,000 aggregate principal amount of Debentures which Descartes has
offered to acquire under the Debenture Offer. The success fees payable under the
Offer and the Debenture Offer are payable to CSFB upon completion or termination
of the Offer and the Debenture Offer.
Descartes paid GMP upon engagement a fee of U.S.$25,000 for strategic
advisory services provided by it to Descartes, including an evaluation of the
merits of making the Offer and the Debenture Offer. Descartes has also agreed to
pay GMP U.S.$37,500 upon delivery of the Debenture Opinion and U.S.$37,500 upon
delivery of the Liquidity Opinion. Descartes has agreed to pay a further fee to
GMP of U.S. $56,250 upon the earlier of (i) completion or termination of the
Offer and (ii) the termination of the engagement of GMP by Descartes. A further
fee of U.S. $106,250 is payable by Descartes to GMP in connection with the
Debenture Offer on the same terms.
32
Descartes has also agreed to reimburse CSFB and GMP for certain reasonable
out-of-pocket expenses incurred in connection with the Offer and the Debenture
Offer and to indemnify CSFB and GMP and their respective affiliates against
certain liabilities, including certain liabilities under securities legislation.
The Depositary will receive reasonable and customary compensation for its
respective services, will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities and expenses in
connection with the Offer, including certain liabilities under securities
legislation.
The Information Agent, D.F. King & Co., Inc., will receive customary
compensation for its information agency services, will be reimbursed for certain
reasonable out-of-pocket expenses and will be indemnified against certain
liabilities and expenses in connection with the Offer, including certain
liabilities under securities legislation.
Descartes will not pay any fees or commissions to any broker or dealer or
any other person (other than CSFB and GMP) for soliciting deposits of Shares
pursuant to the Offer or deposits of Debentures under the Debenture Offer.
Brokers, dealers, commercial banks and trust companies will, upon request, be
reimbursed by Descartes for reasonable and necessary costs and expenses incurred
by them in forwarding materials to their customers.
Descartes expects to incur expenses of approximately U.S.$500,000 in
connection with the Offer, including financial advisory fees, legal fees,
accounting fees, filing fees and printing expenses.
21. STATUTORY RIGHTS
Securities legislation in certain of the provinces and territories of
Canada provides securityholders with, in addition to any other rights they may
have at law, rights of rescission or to damages, or both, if there is a
misrepresentation in a circular or notice that is required to be delivered to
such securityholders. However, such rights must be exercised within prescribed
time limits. Shareholders should refer to the applicable provisions of the
securities legislation of their province or territory for particulars of those
rights or consult with a lawyer.
22. NOTICE
Any notice to be given by Descartes or the Depositary under the Offer will
be deemed to have been properly given if it is mailed by first-class mail,
postage prepaid, to the registered holders of Shares at their respective
addresses as shown on the debenture registers maintained in respect of the
Shares and will be deemed to have been received on the first business day
following the date of mailing. These provisions apply despite (i) any accidental
omission to give notice to any one or more Shareholders and (ii) an interruption
of mail service in Canada following mailing. In the event of an interruption of
mail service following mailing, Descartes will use reasonable efforts to
disseminate the notice by other means, such as publication. In the event that
post offices in Canada are not open for deposit of mail, or there is reason to
believe there is or could be a disruption in all or any part of the postal
service, any notice which Descartes or the Depositary may give or cause to be
given under the Offer will be deemed to have been properly given and to have
been received by Shareholders if it is issued by way of a public announcement
and if it is published once in an English language daily newspaper of general
circulation in Canada and in a French language daily newspaper of general
circulation in the province of Quebec.
23. OTHER TERMS
No broker, dealer or other person has been authorized to give any
information or to make any representation on behalf of Descartes other than as
contained in the Offer, and, if any such information or representation is given
or made, it must not be relied upon as having been authorized.
The Offer and all contracts resulting from the acceptance thereof shall be
governed by and construed in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein.
The Offer is not being made to nor will deposits of Shares be accepted
from or on behalf of Shareholders residing in any jurisdiction in which the
making of the Offer or the acceptance thereof would not be in compliance with
the laws of such jurisdiction. Descartes may, in its sole discretion, take such
action as it may deem necessary to make the Offer in any such jurisdiction and
extend the Offer to Shareholders in any such jurisdiction.
24. ADDITIONAL INFORMATION
Descartes is subject to the information and reporting requirements of the
securities regulatory authorities of the provinces of Canada relating to its
business, financial condition and other matters. The Company will file copies of
this Offer to Purchase and other material with such securities regulatory
authorities, copies of which may be accessed electronically by means of such
authorities' website on the Internet at WWW.SEDAR.COM.
33
Descartes is also subject to the information and reporting requirements of
the SEC relating to its business, financial condition and other matters. The
Company will file an Issuer Tender Offer Statement on Schedule 13E-4F with the
SEC. Such material and other information may be inspected at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information. Copies of such material may also be accessed electronically by
means of the SEC's website on the Internet at www.sec.gov.
25. RECENT DEVELOPMENTS
On May 6, 2003, Descartes announced its preliminary financial results for
the three months ended April 30, 2003. Descartes announced that, based on
preliminary information, total revenues for the period were expected to be
approximately U.S.$14.0 to U.S.$14.4 million, representing a decline of
approximately 15 percent when compared to total revenues of U.S.$16.8 million in
the three months ended April 30, 2002.
Descartes also announced that it would implement a downsizing of its global
operations by approximately 130 employees and that it is expected that the total
annualized expense reduction of the downsizing would be U.S.$13.0 million once
completed and that it would record restructuring and other nonrecurring charges
of approximately U.S.$12.5 to U.S.$13.5 million.
Descartes also announced that concurrent with Descartes' downsizing
initiatives, the Board of Directors of Descartes would undertake a series of
corporate governance initiatives. The first of these is to separate the
positions of chairman and chief executive officer, providing for the desired
separation of management from the board of directors, effective as of May 6,
2003. Second, commencing with the reporting of its financial results for the
three months ended April 30, 2003, the Company will no longer refer to non-GAAP
financial measures in reporting its earnings (losses). Finally, the Board of
Directors has established a corporate governance committee with the objective of
developing recommendations on further initiatives aimed at enhancing the
effectiveness of the Board of Directors.
On May 15, 2003, Descartes announced that it had completed employee
communications related to the downsizing of its global operations and that its
vice chairman and its executive vice president, Corporate Development, had
departed from the Company.
On the date hereof, a wholly-owned subsidiary of Descartes has made the
Debenture Offer, pursuant to which it has offered to purchase up to
U.S.$45,000,000 aggregate principal amount of Debentures at a purchase price of
U.S.$950 for each U.S.$1,000 of principal amount of Debentures plus any accrued
and unpaid interest. Shareholders should review the Debenture Offer for the full
terms and conditions thereof. Descartes will provide to each Shareholder, upon
request, a copy of the Debenture Offer in the manner described under Section 9,
"Certain Information Concerning Descartes". A copy of the Debenture Offer may
also be obtained by contacting the Depositary at the contact numbers set forth
on the back cover of this Offer to Purchase, the SEC in the manner described
under Section 24, "Additional Information" or by accessing the websites
described under Section 24, "Additional Information".
The Company expects to hold its annual meeting of Shareholders in or about
mid-July 2003 and to mail to Shareholders its management information circular
and proxy-related material in respect of such meeting, together with the
Company's Annual Report for the fiscal year ended January 31, 2003 (which will
contain the audited consolidated financial statements of the Company for the
fiscal year ended January 31, 2003) in or about mid-June 2003.
26. SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION AND UNAUDITED PRO
FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following is the summary historical consolidated financial information
and unaudited pro forma consolidated financial statements of Descartes for the
years indicated. The unaudited pro forma consolidated financial statements are
provided to illustrate the financial impact of the purchase for cash of
11,578,000 Shares at the maximum price of $3.85 (U.S.$2.52) per Share under the
Offer. Additional pro forma adjustments are also provided to illustrate the
impact of the purchase of Debentures pursuant to the Debenture Offer, assuming
the purchase of the maximum aggregate principal amount of the Debentures of
U.S.$45,000,000 on the dates indicated.
34
THE DESCARTES SYSTEMS GROUP INC.
HISTORICAL CONSOLIDATED BALANCE SHEETS
(US dollars in thousands, except per share amounts; US GAAP)
------------------------------------------------------------------------------------------------
JANUARY 31, 2003 JANUARY 31, 2002
(UNAUDITED)
------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 21,195 36,101
Marketable securities 8,521 82,485
Accounts receivable
Trade 14,036 18,434
Other 2,819 7,540
Prepaid expenses and other 3,020 4,220
------------------------------------------------------------------------------------------------
49,591 148,780
MARKETABLE SECURITIES 144,386 82,444
CAPITAL ASSETS 12,151 10,261
LONG-TERM INVESTMENTS 3,300 3,250
GOODWILL 17,603 103,456
INTANGIBLE ASSETS 13,606 37,967
DEFERRED CHARGES 1,638 2,364
------------------------------------------------------------------------------------------------
242,275 388,522
------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 3,964 3,376
Accrued liabilities 8,673 10,428
Deferred revenue 2,923 5,616
------------------------------------------------------------------------------------------------
15,560 19,420
CONVERTIBLE DEBENTURES 71,995 73,500
------------------------------------------------------------------------------------------------
87,555 92,920
------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares
Authorized - Unlimited
Issued - 52,224,511 (January 31, 2002 - 52,229,333) 468,618 468,445
Additional paid-in capital 5,201 5,201
Unearned deferred compensation (690) (1,157)
Accumulated other comprehensive loss (1,506) (200)
Accumulated deficit (316,903) (176,687)
------------------------------------------------------------------------------------------------
154,720 295,602
------------------------------------------------------------------------------------------------
242,275 388,522
SHAREHOLDERS' EQUITY PER SHARE 2.96 5.66
------------------------------------------------------------------------------------------------
35
THE DESCARTES SYSTEMS GROUP INC.
HISTORICAL CONSOLIDATED STATEMENTS OF OPERATIONS
(US dollars in thousands, except per share amounts; US GAAP)
---------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31,
-----------------------------------------------------------
2003 2002 2001
(UNAUDITED)
---------------------------------------------------------------------------------------------------------------------
REVENUES
License and network 59,311 67,256 52,221
Service and maintenance 11,072 12,266 14,428
---------------------------------------------------------------------------------------------------------------------
70,383 79,522 66,649
---------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of license and network 16,573 16,223 10,256
Cost of service and maintenance 10,058 11,478 11,915
Sales and marketing 29,943 29,543 23,008
Research and development 15,223 25,385 16,189
General and administrative 12,895 10,751 8,618
Amortization of goodwill - 24,521 11,291
Amortization of intangible assets 10,100 8,039 2,924
Impairment of goodwill 86,689 - -
Impairment of intangible assets 17,980 - -
Write-down of long-term investments - 9,783 -
Purchased in-process research and development - 4,500 19,033
Restructuring cost 11,712 3,984 -
---------------------------------------------------------------------------------------------------------------------
211,173 144,207 103,234
---------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (140,790) (64,685) (36,585)
---------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense (4,619) (5,012) (2,985)
Investment income 6,493 10,705 8,254
---------------------------------------------------------------------------------------------------------------------
1,874 5,693 5,269
---------------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES, MINORITY INTEREST
AND EXTRAORDINARY ITEM (138,916) (58,992) (31,316)
INCOME TAX RECOVERY (EXPENSE) - CURRENT 362 (78) (310)
---------------------------------------------------------------------------------------------------------------------
LOSS BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM (138,554) (59,070) (31,626)
MINORITY INTEREST 448 - -
---------------------------------------------------------------------------------------------------------------------
LOSS BEFORE EXTRAORDINARY ITEM (138,106) (59,070) (31,626)
EXTRAORDINARY ITEM
Gain (loss) on purchase of convertible debentures
(net of income taxes of nil) (89) 352 -
---------------------------------------------------------------------------------------------------------------------
LOSS (138,195) (58,718) (31,626)
=====================================================================================================================
LOSS PER SHARE BEFORE EXTRAORDINARY ITEM
Basic and diluted (2.64) (1.16) (0.72)
=====================================================================================================================
LOSS PER SHARE AFTER EXTRAORDINARY ITEM
Basic and diluted (2.65) (1.15) (0.72)
=====================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted (thousands) 52,234 50,858 44,218
=====================================================================================================================
36
THE DESCARTES SYSTEMS GROUP INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(US dollars in thousands, except per share amounts; US GAAP)
------------------------------------------------------------------------------------------------------------------------
Pro Forma Pro Forma
Historical Common Share Pro Forma Debenture Pro Forma
January 31, Purchase January 31, Purchase January 31,
2003 Adjustments 2003 Adjustments 2003
(unaudited) (unaudited) Notes (unaudited) (unaudited) Notes (unaudited)
------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 21,195 (500) III A 1. 20,695 (710) III B 1. 19,985
Marketable securities 8,521 8,521 8,521
Accounts receivable - -
Trade 14,036 14,036 14,036
Other 2,819 2,819 2,819
Prepaid expenses and other 3,020 3,020 3,020
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
49,591 (500) 49,091 (710) 48,381
MARKETABLE SECURITIES 144,386 (29,152) III A 2. 115,234 (42,750) III B 4. 72,484
CAPITAL ASSETS 12,151 12,151 12,151
LONG-TERM INVESTMENTS 3,300 3,300 3,300
GOODWILL 17,603 17,603 17,603
INTANGIBLE ASSETS 13,606 13,606 13,606
DEFERRED CHARGES 1,638 1,638 (1,024) III B 2. 614
------------------------------------------------------------------------------------------------------------------------
242,275 (29,652) 212,623 (44,484) 168,139
========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 3,964 3,964 3,964
Accrued liabilities 8,673 8,673 (210) III B 1. 8,463
Deferred revenue 2,923 2,923 2,923
------------------------------------------------------------------------------------------------------------------------
15,560 -- 15,560 (210) 15,350
CONVERTIBLE DEBENTURES 71,995 71,995 (45,000) III B 3. 26,995
------------------------------------------------------------------------------------------------------------------------
87,555 -- 87,555 (45,210) 42,345
------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares
Authorized - Unlimited
Issued - 52,224,511 468,618 (29,652) III A 3. 438,966 438,966
Pro Forma Issued -
40,646,511
Additional paid-in capital 5,201 5,201 5,201
Unearned deferred (690) (690) (690)
compensation
Accumulated other (1,506) (1,506) (1,506)
comprehensive loss
Accumulated deficit (316,903) (316,903) 726 III B 4. (316,177)
------------------------------------------------------------------------------------------------------------------------
154,720 (29,652) 125,068 726 125,794
------------------------------------------------------------------------------------------------------------------------
242,275 (29,652) 212,623 (44,484) 168,139
========================================================================================================================
------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY PER SHARE 2.96 2.39 3.09
========================================================================================================================
37
THE DESCARTES SYSTEMS GROUP INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(US dollars in thousands, except per share amounts; US GAAP)
-------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma Pro Forma Pro Forma Pro Forma
Year Ended Common Share Year Ended Debenture Year Ended
January 31, Purchase January 31, Purchase January 31,
2003 Adjustments 2003 Adjustments 2003
(unaudited) (unaudited) Notes (unaudited) (unaudited) Notes (unaudited)
-------------------------------------------------------------------------------------------------------------------------------
REVENUES
License and network 59,311 59,311 59,311
Service and maintenance 11,072 11,072 11,072
-------------------------------------------------------------------------------------------------------------------------------
70,383 - 70,383 - 70,383
-------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of license and network 16,573 16,573 16,573
Cost of service and maintenance 10,058 10,058 10,058
Sales and marketing 29,943 29,943 29,943
Research and development 15,223 15,223 15,223
General and administrative 12,895 12,895 12,895
Amortization of goodwill - - -
Amortization of intangible assets 10,100 10,100 10,100
Impairment of goodwill 86,689 86,689 86,689
Impairment of intangible assets 17,980 17,980 17,980
Write-down of long-term investments - - -
Purchased in-process research and - - -
development
Restructuring cost 11,712 11,712 11,712
-------------------------------------------------------------------------------------------------------------------------------
211,173 - 211,173 - 211,173
-------------------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (140,790) - (140,790) - (140,790)
-------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense (4,619) (4,619) 2,899 IV B 1. (1,720)
Investment income 6,493 (830) IV A 1. 5,663 (1,190) IV B 2. 4,473
Gain on purchase of
debentures (Note I) (89) (89) 303 IV B 3. 214
-------------------------------------------------------------------------------------------------------------------------------
1,785 (830) 955 2,012 2,967
-------------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES AND (139,005) (830) (139,835) 2,012 (137,823)
MINORITY INTEREST
INCOME TAX RECOVERY (EXPENSE)-CURRENT 362 362 362
-------------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE MINORITY INTEREST (138,643) (830) (139,473) 2,012 (137,461)
MINORITY INTEREST 448 448 448
-------------------------------------------------------------------------------------------------------------------------------
LOSS (138,195) (830) (139,025) 2,012 (137,013)
-------------------------------------------------------------------------------------------------------------------------------
LOSS PER SHARE
Basic and diluted (2.65) (3.42) (3.37)
-------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted (thousands) 52,234 40,656 40,656
-------------------------------------------------------------------------------------------------------------------------------
38
THE DESCARTES SYSTEMS GROUP INC.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(US DOLLARS; US GAAP)
I. BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated balance sheet as at January
31, 2003 and unaudited pro forma consolidated statement of operations for the
year ended January 31, 2003 of Descartes have been prepared to illustrate the
effect of the purchase for cash of 11,578,000 Shares at the maximum price of
$3.85 (U.S.$2.52 as converted at the rate of exchange as at January 31, 2003)
per Share, on the basis of assumptions described below. Additional pro forma
adjustments are also provided to illustrate the effect of the purchase of up to
an aggregate principal amount of approximately U.S.$45,000,000 of Debentures
pursuant to the Debenture Offer, on the basis of assumptions described below.
The pro forma consolidated balance sheet and the pro forma consolidated
statement of operations of Descartes have been prepared from and should be read
in conjunction with the audited consolidated financial statements of Descartes
for the year ended January 31, 2003 prepared in accordance with generally
accepted accounting principles in the United States.
For the purposes of the pro forma statement of operations, gain on purchase of
Debentures which was historically shown as an extraordinary item has been
reclassified to other income (expense) in accordance with the requirements of
Statement of Financial Accounting Standards ("SFAS") 145, "Rescission of FASB
Statements 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections."
The unaudited pro forma consolidated balance sheet assumes that both the Offer
and the Debenture Offer took place on January 31, 2003. The unaudited pro forma
consolidated statement of operations assumes that both the Offer and the
Debenture Offer took place on February 1, 2002.
The pro forma consolidated balance sheet and statement of operations do not
necessarily indicate the actual financial condition and operating results that
would have been achieved had both the Offer and the Debenture Offer been
consummated on the dates indicated and should not be construed as indicative of
the future financial condition or the results of operations of the Company.
II. PRO FORMA ASSUMPTIONS
The pro forma financial statements assume that Descartes will purchase for
cancellation, for cash, up to 11,578,000 Shares at a purchase price of not more
than $3.85 and not less than $3.00 per Share. The pro forma financial statements
give effect to the Offer assuming purchase for cancellation, for cash, of
11,578,000 Shares for the maximum purchase price of $3.85 (U.S.$2.52 as
converted at the rate of exchange as at January 31, 2003).
Under the Debenture Offer, a wholly-owned subsidiary of Descartes has offered to
purchase an aggregate principal amount of approximately U.S.$45,000,000 of
Debentures at a price of U.S.$950 plus interest accrued to the date of the
purchase per U.S.$1,000 principal amount of Debentures for a total price of
U.S.$42,750,000 plus such interest. The pro forma financial statements assume
that the maximum aggregate principal amount of U.S.$45,000,000 of Debentures are
purchased at U.S.$950 plus interest accrued to the date of the purchase per
U.S.$1000 principal amount on the dates indicated.
III. PRO FORMA ADJUSTMENTS - UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS
AT JANUARY 31, 2003
The following provides a summary of the pro forma adjustments made in the
accompanying pro forma balance sheet:
A. PURCHASE OF SHARES
1. To reduce cash for estimated expenses directly related to the purchase of
Shares ($0.5 million).
39
2. To reduce long-term marketable securities for the amount required to
purchase the Shares ($29,152,000).
3. To reduce issued share capital with the cash required to purchase the
Shares including purchase costs.
B. PURCHASE OF DEBENTURES
1. To reduce cash for accrued interest to be paid ($0.2 million) and estimated
expenses directly related to the purchase of Debentures ($0.5 million).
2. To eliminate deferred issue costs of Debentures purchased ($1.0 million).
3. To reduce the convertible debenture liability for the face amount purchased
($45,000,000).
4. To record the gain (net of income taxes of nil) resulting from the purchase
of Debentures as shown below in thousands of U.S. dollars:
Face value purchased 45,000
Elimination of deferred issue costs (1,024)
Purchase expenses (500)
Purchase price (42,750)
----------
726
----------
IV. PRO FORMA ADJUSTMENTS - UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED JANUARY 31, 2003
The following provides a summary of the pro forma adjustments made in the
accompanying pro forma statement of operations:
A. PURCHASE OF SHARES
1. To record loss of interest income due to the use of cash for the purchase
of Shares ($0.8 million)
B. PURCHASE OF DEBENTURES
1. To reduce interest expense by the amount attributable to Debentures
purchased ($2.5 million) and the elimination of the amortization of the
related deferred issue costs ($0.4 million).
2. To record loss of interest income due to the use of cash for the purchase
of Debentures ($1.2 million).
3. To record the gain (net of income taxes of nil) resulting from the purchase
of Debentures as shown below in thousands of U.S. dollars:
Face value purchased 45,000
Elimination of deferred issue costs (1,447)
Purchase expenses (500)
Purchase price (42,750)
----------
303
----------
40
APPROVAL BY DESCARTES
The contents of the Offer, as well as the sending, communication or
delivery thereof to the Shareholders, has been approved by the Board of
Directors of The Descartes Systems Group Inc. The foregoing contains no untrue
statement of a material fact and does not omit to state a material fact that is
required to be stated or that is necessary to make a statement not misleading in
light of the circumstances in which it was made nor does it contain any
misrepresentation likely to affect the value or the market price of the Shares
within the meaning of the SECURITIES ACT (Quebec).
DATED: June 2, 2003
(Signed) MANUEL PIETRA (Signed) COLLEY CLARKE
Chief Executive Officer Executive Vice-President, Finance
and Chief Financial Officer
On behalf of the Board of Directors
(Signed) PETER SCHWARTZ (Signed) CHRIS HEWAT
Director and Director
Chairman of the Board
CONSENT OF GRIFFITHS MCBURNEY & PARTNERS
To: The Directors of The Descartes Systems Group Inc.
We consent to the inclusion of our name and reference to our opinion in the
section titled "Valuation Exemption" in the Offer to Purchase dated June 2, 2003
made by The Descartes Systems Group Inc. to the holders of its Shares, and to
the inclusion of the text of our opinion in Schedule "A" to the Offer to
Purchase, which schedule is incorporated by reference in the Offer to Purchase.
June 2, 2003 (Signed) GRIFFITHS MCBURNEY & PARTNERS
CONSENT OF BLAKE, CASSELS & GRAYDON LLP
To: The Directors of The Descartes Systems Group Inc.
We consent to the inclusion of our name and the reference to our discussion
of certain Canadian federal income tax considerations in the section titled
"Income Tax Considerations -- Canadian Federal Income Tax Considerations" in the
Offer to Purchase dated June 2, 2003 made by The Descartes Systems Group Inc. to
holders of its Shares.
June 2, 2003 (Signed) BLAKE, CASSELS & GRAYDON LLP
C-1
CONSENT OF TESTA, HURWITZ & THIBEAULT, LLP
To: The Directors of The Descartes Systems Group Inc.
We consent to the inclusion of our name and the reference to our discussion
of certain United States federal income tax matters in the section titled
"Income Tax Considerations -- Certain United States Federal Income Tax
Considerations" in the Offer to Purchase dated June 2, 2003 made by The
Descartes Systems Group Inc. to the holders of its Shares.
June 2, 2003 (Signed) TESTA, HURWITZ & THIBEAULT, LLP
CONSENT OF DELOITTE & TOUCHE LLP
To: The Directors of The Descartes Systems Group Inc.
We consent to the use of our report dated February 22, 2002 to the
shareholders of The Descartes Systems Group Inc. ("Descartes") with respect to
our audit, conducted in accordance with generally accepted auditing standards in
the United States of America, of the consolidated financial statements prepared
in accordance with generally accepted accounting principles in the United States
of America for the years ended January 31, 2002 and 2001 incorporated by
reference in the Offer to Purchase Common Shares by Descartes dated June 2,
2003.
June 2, 2003 (Signed) DELOITTE & TOUCHE LLP
Kitchener, Ontario
Canada
C-2
SCHEDULE "A"
OPINION OF GRIFFITHS MCBURNEY & PARTNERS
June 2, 2003
The Board of Directors
The Descartes Systems Group Inc.
120 Randall Drive
Waterloo, Ontario
N2V 1C6
Dear Sirs:
Griffiths McBurney & Partners ("GMP"), understands that:
(a) The Descartes Systems Group Inc. (the "Company") intends to make an
offer (the "Offer") to purchase for cash up to 11,578,000 of the
issued and outstanding common shares of the Company (the "Shares"), at
a price of not more than CDN $3.85 and not less than CDN $3.00 per
Share;
(b) the terms and conditions of the Offer will be described in an Offer to
Purchase to be issued by the Company and dated June 2, 2003 (the
"Offer to Purchase"); and
(c) pursuant to the terms of the Offer to Purchase, shareholders of the
Company may tender their Shares to the Company pursuant to an Auction
Tender or a Purchase Price Tender (each as defined in the Offer to
Purchase), at prices specified by them.
GRIFFITHS MCBURNEY & PARTNERS' ENGAGEMENT
Under an agreement dated May 9, 2003, the Company engaged GMP to prepare and
deliver a written opinion (the "Opinion") to the Board of Directors of the
Company (the "Board") as to: (i) whether there is a liquid market (as that term
is described in Rule 61-501 of the Ontario Securities Commission, referred to
below as "Rule 61-501") in the Shares before the making of the Offer; and (ii)
whether it would be reasonable for the Board to conclude that, following
completion of the Offer, there will be a market for the beneficial owners of
Shares who do not tender to the Offer that is not materially less liquid than
the market that existed at the time of making the Offer. GMP understands that
the Board has determined that the "liquid market exemption" under section
1.3(1)(a) of Rule 61-501 is available to the Company in connection with the
Offer, a determination with which GMP concurs. This Opinion is being delivered
as further confirmation and evidence of the existence of a liquid market for the
Shares.
GMP will receive a fee from the Company for its advisory services and for
providing the Opinion. In addition, the Company has agreed to reimburse GMP for
certain expenses incurred by GMP and to indemnify GMP for certain liabilities
arising out of GMP's engagement in connection with the Offer.
CREDENTIALS OF GMP
GMP is an employee-owned investment bank with offices in Toronto, Calgary,
Montreal and Geneva, Switzerland, which provides research, corporate finance
advice and services, and engages in trading and investment banking. GMP is
registered in all Canadian provinces and has a national client base. The Opinion
expressed herein represents the opinion of GMP and the form and content herein
have been approved for release by the Executive Committee of GMP, the members of
which have extensive experience in merger, acquisition, divestiture, valuation
and capital markets matters.
A-1
SCOPE AND REVIEW
In preparing the Opinion, we have reviewed and relied upon the following:
(i) a draft copy of the Offer to Purchase dated June 2, 2003;
(ii) the twelve-month historical trading activity and volumes of the
Shares on the Toronto Stock Exchange (the "TSX");
(iii) the trading activity and volumes of Shares of other companies listed
and traded on the TSX as we determined necessary in order to provide
the Opinion;
(iv) the distribution of ownership of the Shares to the extent publicly
disclosed;
(v) the number of Shares proposed to be purchased under the Offer
relative to (i) the number of issued and outstanding Shares less
(ii) the number of Shares owned by related parties of the Company
and Shares that to our knowledge are not freely tradeable (ie. the
"public float");
(vi) the customary difference (i.e. the "spread") between bid and ask
prices in trading activity in the Shares;
(vii) other public information with respect to the Company;
(viii) the meaning of "liquid market" for the purposes of Rule 61-501; and
(ix) such other information as we considered necessary or appropriate in
the circumstances.
We have conducted such additional analyses and investigations as we considered
to be appropriate in the circumstances for the purpose of arriving at the
Opinion.
ASSUMPTIONS AND LIMITATIONS
This Opinion is rendered on the basis of securities market, economic, and
general business and financial conditions prevailing as at the date hereof, and
conditions affecting the Company and the Shares as at the date hereof. In
formulating our Opinion, we have made several other assumptions, the material
assumption being that there shall be no significant change in the holdings of
Shares other than as a result of the Offer.
GMP has relied upon the completeness, accuracy and fair presentation of all of
the financial information, data, advice, opinions or representations obtained by
it from public sources (the "Information"). The Opinion assumes the
completeness, accuracy and fair presentation of such Information. Subject to the
exercise of professional judgment and except as expressly described herein, we
have not attempted to verify independently the completeness, accuracy or fair
presentation of any of the Information.
We have not prepared a formal valuation of the Company or any of its securities
or assets for the purposes of this Opinion and the Opinion should not be
construed as such.
The Opinion has been provided to the Board for its use as described herein and
may not be relied upon for any other purpose or by any other person without the
prior written consent of GMP. The Opinion is given as of the date hereof and GMP
disclaims any undertaking or obligation to advise any person of any change in
any fact or matter affecting the Opinion which may come or be brought to the
attention of GMP after the date hereof. Without limiting the foregoing if, after
the date hereof, we learn of any material change in any fact or matter affecting
the Opinion, GMP reserves the right to change, modify or withdraw the Opinion.
Our Opinion is not to be construed as a recommendation to any shareholder of the
Company as to whether or not to tender their Shares under the Offer. In
addition, for the purposes of this Opinion we are not expressing any opinion as
to the value of the Shares, or the prices at which such shares will trade after
completion of the Offer.
A-2
OPINION
Based upon and subject to the foregoing, it is our opinion as at the date hereof
that: (a) a liquid market exists for the Shares at the time of making the Offer;
and (b) it is reasonable for the Board to conclude that, following completion of
the Offer in accordance with its terms, that there will be a market for
beneficial owners of Shares who do not tender their Shares to the Offer, that is
not materially less liquid than the market for the Shares that existed at the
time of making the Offer.
Yours very truly,
"Griffiths McBurney & Partners"
Griffiths McBurney & Partners
A-3
Manually executed photocopies of the Letter of Transmittal will be accepted. The
Letters of Transmittal, certificates for Shares and any other required documents
should be sent or delivered by each depositing Shareholder or his or her broker,
dealer, commercial bank, trust company or other nominee to the Depositary at the
address set forth below:
THE DEPOSITARY, CIBC MELLON TRUST COMPANY
BY MAIL
P.O. Box 1036
Adelaide Street Postal Station
Toronto, Ontario
M5C 2K4
BY HAND OR BY COURIER
199 Bay Street
Commerce Court West
Securities Level
Toronto, Ontario
M5L 1G9
Attention: Courier Window
Telephone: (416) 643-5500
Toll Free: (800) 387-0825
E-Mail: inquiries@cibcmellon.com
Any questions or requests for assistance may be directed to the Depositary, in
respect of the completion of the Letter of Transmittal or the Notice of
Guaranteed Delivery, or the Dealer Managers, in respect of the details of the
Offer, at their respective addresses and telephone and facsimile numbers set
forth herein. Additional copies of the Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent at the address and telephone and facsimile numbers set forth
herein. Shareholders may also contact their investment dealer, stock broker,
bank, trust company or other nominee through which they hold Shares for
assistance concerning the Offer.
THE INFORMATION AGENT IS:
D.F. King & Co., Inc.
48 Wall Street
New York, NY 10005
Telephone: (800) 859-8508
THE DEALER MANAGERS FOR THE OFFER ARE:
IN THE UNITED STATES: IN CANADA:
Credit Suisse First Boston LLC Credit Suisse First Boston Canada Inc.
11 Madison Avenue 1 First Canadian Place, Suite 3000
New York, NY P.O. Box 301
10010-3629 Toronto, ON M5X 1C9
For further information contact: For further information contact:
Telephone: (800) 881-8320 Telephone: (416) 352-4536
DOCUMENT 3
----------
THE INSTRUCTIONS ACCOMPANYING THE LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. THE DEPOSITARY OR
YOUR BROKER OR OTHER FINANCIAL ADVISER CAN ASSIST YOU IN COMPLETING
THIS LETTER OF TRANSMITTAL.
LETTER OF TRANSMITTAL
TO DEPOSIT COMMON SHARES
OF
THE DESCARTES SYSTEMS GROUP INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 2, 2003
ALL DOLLAR REFERENCES IN THIS LETTER OF TRANSMITTAL
ARE IN CANADIAN DOLLARS, UNLESS OTHERWISE INDICATED
--------------------------------------------------------------------------------
THE OFFER WILL BE OPEN FOR ACCEPTANCE UNTIL 5:00 PM (TORONTO TIME) ON
JULY 11, 2003 UNLESS THE OFFER IS EXTENDED WITHDRAWN, OR VARIED.
--------------------------------------------------------------------------------
THE DEPOSITARY IS:
CIBC MELLON TRUST COMPANY
BY MAIL
CIBC Mellon Trust Company
P.O. Box 1036
Adelaide Street Postal Station
Toronto, Ontario
M5C 2K4
BY HAND OR BY COURIER (TO THE PRINCIPAL OFFICE IN TORONTO AT):
199 Bay Street
Commerce Court West
Securities Level
Toronto, Ontario
M5L 1G9
Attn: Courier Window
Telephone: 416 643 5500
Toll Free: 1 800 387 0825
E-Mail: inquiries@cibcmellon.com
------------------------
This Letter of Transmittal is to be used only if certificates for Shares (as
defined below) are to be forwarded with it pursuant to Section 2 of the Offer to
Purchase (as defined below).
A holder of common shares (a "Shareholder") of The Descartes Systems Group Inc.
who wishes to deposit Shares under the Offer (as defined below) and whose
certificate is registered in the name of an investment dealer, stock broker,
bank, trust company or other nominee should immediately contact such nominee in
order to take the necessary steps to be able to deposit such Shares under the
Offer.
This Letter of Transmittal, properly completed and duly executed, together with
all other required documents, must accompany the certificates for the Shares
deposited pursuant to the Offer to Purchase. Shareholders whose certificates are
not immediately available or who cannot deliver their certificates for Shares
and all other documents which this Letter of Transmittal requires to the
Depositary by the Expiration Date (as defined in the Offer to Purchase) must
deposit their Shares according to the guaranteed delivery procedure set forth in
Section 2 of the Offer to Purchase. See Instruction 2.
SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF DEPOSITING
SHARES UNDER THE OFFER. SEE SECTION 14 "INCOME TAX CONSIDERATIONS" IN THE OFFER
TO PURCHASE THAT ACCOMPANIES THIS LETTER OF TRANSMITTAL.
The undersigned delivers to The Descartes Systems Group Inc. the enclosed
certificate(s) for Shares and, subject only to the provisions of the Offer to
Purchase regarding withdrawal, irrevocably accepts the Offer for such Shares
upon the terms and conditions contained in the Offer to Purchase. The following
are the details of the enclosed certificate(s):
--------------------------------------------------------------------------------
DESCRIPTION OF SHARES DEPOSITED
(SEE INSTRUCTIONS 3 AND 4)
--------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S))
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
SHARES DEPOSITED (ATTACH SIGNED LIST IF NECESSARY)
-------------------------------------------------------------------------------------------------------
SHARE CERTIFICATE NUMBER(S) NUMBER OF SHARES REPRESENTED BY NUMBER OF SHARES DEPOSITED*
CERTIFICATE(S)
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
* If you desire to deposit fewer than all Shares evidenced by any Share certificate listed above,
indicate in this column the number of Shares you wish to deposit. Otherwise, all Shares evidenced
by such Share certificates will be considered to have been deposited. See Instruction 4.
-------------------------------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN PROVIDED HEREIN DOES
NOT CONSTITUTE A VALID DELIVERY.
TO: THE DESCARTES SYSTEMS GROUP INC. ("DESCARTES")
AND TO: CIBC MELLON TRUST COMPANY (THE "DEPOSITARY"), AS DEPOSITARY AT ITS
OFFICES SET OUT HEREIN.
The undersigned hereby deposits to Descartes the above-described common shares
of Descartes (the "Shares") at the price per Share indicated in this Letter of
Transmittal or pursuant to a Purchase Price Tender (as defined in the Offer to
Purchase) upon the terms and subject to the conditions set forth in Descartes'
Offer to Purchase dated June 2, 2003 and any supplements or amendments thereto
(the "Offer to Purchase") and in this Letter of Transmittal (which, as amended
or supplemented from time to time, together constitute the "Offer"), including
the provisions relating to proration described therein.
The terms and conditions of the Offer are incorporated by reference in this
Letter of Transmittal. Capitalized terms used and not defined in this Letter of
Transmittal have the meanings ascribed to them in the Offer to Purchase dated
June 2, 2003 that accompanies this Letter of Transmittal.
Subject to and effective upon acceptance for purchase of the Shares deposited
hereby pursuant to an Auction Tender (as defined in the Offer to Purchase) or
pursuant to a Purchase Price Tender (as defined in the Offer to Purchase) in
accordance with the terms of the Offer, the undersigned hereby sells, assigns
and transfers to or upon the order of Descartes all rights, title and interest
in and to all Shares deposited hereby and in and to any and all rights, benefits
and claims in respect thereof or arising, or having arisen as a result of the
undersigned's status as a Shareholder of Descartes and in and to any and all
distributions, payments, securities, rights, assets or other interests which may
be declared, paid, issued, distributed, made or transferred, or may be payable,
issuable, distributable or transferable, on or in respect of such Shares or any
of them on or after the date upon which the Shares are taken up and paid for
under the Offer and hereby irrevocably constitutes and appoints the Depositary
and any officer of Descartes as attorney-in-fact of the undersigned with respect
to such Shares effective from the time Descartes takes up and pays for Shares
(the "Effective Time"), with full power of substitution (such power of attorney
being an irrevocable power coupled with an interest), to:
2
(a) deliver certificates for such Shares, together with all accompanying
evidences of transfer and authenticity, to or upon the order of,
Descartes upon receipt by the Depositary, as the undersigned's agent, of
the Purchase Price (as defined below);
(b) present certificates for such Shares for cancellation and transfer on the
books of the trustee for the Shares;
(c) register or record, transfer and enter the transfer of such Shares in the
appropriate register of holders of such Shares; and
(d) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, subject to the next paragraph, all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants that:
(a) when and to the extent Descartes accepts the Shares for payment,
Descartes will acquire good, marketable, and unencumbered title thereto,
free and clear of all liens, charges, encumbrances, security interests,
claims, restrictions and equities whatsoever, together with all rights
and benefits arising therefrom, and the same will not be subject to any
adverse claim provided that any dividends or distributions which may be
declared, paid, issued, distributed, made or transferred on or in respect
of such Shares to Shareholders of record on or prior to the Effective
Time shall be for the account of the undersigned;
(b) on request, the undersigned will execute and deliver any additional
documents that the Depositary or Descartes deems necessary or desirable
to complete the assignment, transfer, and purchase of the Shares
deposited hereby; and
(c) the undersigned has received and agrees to all of the terms of this
Offer.
The undersigned hereby, effective from the Effective Time, revokes any and all
proxies, voting instructions or other authority, whether as agent,
attorney-in-fact, attorney or otherwise, previously given or conferred or agreed
to be given or conferred by the undersigned at any time with respect to the
Shares to the extent Shares are taken up and paid for under the Offer. No
proxies, voting instructions or authority, whether as agent, attorney-in-fact,
attorney or otherwise, will be given or conferred with respect to the Shares,
and the undersigned shall not take steps to vote the Shares on or after the
Effective Time unless the Shares are not taken up and paid for under the Offer.
All authority conferred or agreed to be conferred in this Letter of Transmittal
shall survive the death or incapacity of the undersigned, and any obligations of
the undersigned under this Letter of Transmittal shall be binding upon the
heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this deposit is irrevocable.
The names and addresses of the registered owners should be printed, if they are
not already printed above, as they appear on the certificates representing
Shares deposited hereby. The certificates and the number of Shares that the
undersigned wishes to deposit should be indicated in the appropriate boxes, and
if the deposit is being made pursuant to an Auction Tender, the purchase price
at which such Shares are being deposited should be indicated in Box B "Auction
Tender".
THE UNDERSIGNED UNDERSTANDS THAT HE OR SHE MUST INDICATE WHETHER HE OR SHE
DEPOSITS THE SHARES PURSUANT TO AN AUCTION TENDER OR A PURCHASE PRICE TENDER BY
COMPLETING BOX A "TYPE OF TENDER".
The undersigned understands that Descartes will determine a single price per
Share (not more than $3.85 nor less than $3.00 per Share) (the "Purchase Price")
that it will pay for Shares validly deposited and not withdrawn pursuant to the
Offer, taking into account the number of Shares deposited pursuant to Purchase
Price Tenders and Auction Tenders, the prices specified by depositing
Shareholders making Auction Tenders and the price at which Shares deposited
pursuant to Purchase Price Tenders are considered to have been deposited. The
undersigned understands that Descartes will select the Purchase Price that will
allow it to purchase 11,578,000 Shares deposited, subject to proration, (or such
lesser number of Shares as are properly deposited at prices not more than $3.85
nor less than $3.00 per Share) pursuant to the Offer. The undersigned
understands that all Shares properly deposited pursuant to Auction Tenders at
prices at or below the Purchase Price or pursuant to Purchase Price Tenders, and
not withdrawn, will be purchased at the Purchase Price, (but subject to
applicable withholding taxes), upon the terms and subject to the conditions of
the Offer, including the applicable proration provisions relating to Shares
deposited and that Descartes will return all other Shares, including Shares
deposited and not withdrawn at prices greater than the Purchase Price and Shares
not purchased because of proration.
3
The undersigned understands that if the total number of Shares properly
deposited by the Expiration Date pursuant to Auction Tenders at prices at or
below the Purchase Price or pursuant to Purchase Price Tenders and not withdrawn
is greater than 11,578,000 Shares, Descartes will, upon the terms and subject to
the conditions of the Offer, purchase at the Purchase Price Shares so deposited
on a PRO RATA basis (calculated to the nearest whole number of Shares, so as to
avoid the creation of fractional Shares). Descartes' determination as to
proration shall be final and binding on all parties.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, Descartes may terminate or amend the Offer or may not be
required to purchase any of the Shares deposited hereby or may accept for
payment, in accordance with the applicable proration provisions relating to
Shares deposited, fewer than all of the Shares deposited hereby. The undersigned
understands that certificate(s) for any Shares not deposited or not purchased
will be returned to the undersigned at the address indicated above, unless
otherwise indicated in Box D "Special Payment Instructions" or Box E "Special
Delivery Instructions". The undersigned recognizes that Descartes has no
obligation, pursuant to the Special Payment Instructions, to transfer any
certificates for Shares from the name of their registered owner.
The undersigned understands that acceptance of Shares by Descartes for payment
will constitute a binding agreement between the undersigned and Descartes,
effective as of the Expiration Time, upon the terms and subject to the
conditions of the Offer.
The undersigned understands that payment for Shares accepted for payment
pursuant to the Offer will be made by depositing the aggregate Purchase Price
for such Shares with the Depositary, which will act as agent for the depositing
Shareholders for the purpose of receiving payment from Descartes and
transmitting such payment to the depositing Shareholders. Receipt of payment by
the Depositary will be deemed to constitute receipt of payment thereof by
persons depositing Shares. Under no circumstances will interest be paid by
Descartes or the Depositary by reason of any delay in paying for any Shares or
otherwise.
The undersigned instructs Descartes and the Depositary to issue the cheque for
the Purchase Price for such of the deposited Shares as are purchased to the
order of the undersigned and mailed by first-class mail to the address indicated
above unless otherwise indicated in Box D "Special Payment Instructions", Box E
"Special Delivery Instructions" or Box F "Hold for Pick-Up".
THE UNDERSIGNED UNDERSTANDS THAT IF A SHARE CERTIFICATE HAS BEEN LOST OR
DESTROYED, THIS LETTER OF TRANSMITTAL SHOULD BE COMPLETED AS FULLY AS POSSIBLE
AND FORWARDED, TOGETHER WITH A LETTER DESCRIBING THE LOSS AND THE UNDERSIGNED'S
TELEPHONE NUMBER, TO THE DEPOSITARY. THE DEPOSITARY WILL RESPOND WITH THE
REPLACEMENT REQUIREMENTS, WHICH MUST BE PROPERLY COMPLETED AND SUBMITTED TO THE
DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.
By reason of the use by the undersigned of an English language form of Letter of
Transmittal, the undersigned and the addressees herein shall be deemed to have
required that any contract evidenced by the Offer as accepted through this
Letter of Transmittal, as well as all documents related thereto, be drawn
exclusively in the English language. En raison de l'usage d'une lettre d'envoi
en langue anglaise par le soussigne, le soussigne et les destinataires sont
presumes avoir requis que tout contrat atteste par l'offre et son acceptation
par cette lettre d'envoi, de meme que tous les documents qui s'y
rapportent, soient rediges exclusivement en langue anglaise.
4
--------------------------------------------------------------------------------
BOX A
TYPE OF TENDER
--------------------------------------------------------------------------------
Check only one box. If more than one box is checked or if no box is checked, all
Shares identified above will be deemed to have been tendered by way of a
Purchase Price Tender. Shares of Descartes are being deposited hereby pursuant
to (check one):
--------------------------------------------------------------------------------
[_] An Auction Tender [_] A Purchase Price Tender
(Please complete Box B) (Please complete Box C)
--------------------------------------------------------------------------------
------------------------------------- ---------------------------------------
BOX B BOX C
AUCTION TENDER PURCHASE PRICE TENDER
PRICE (IN CANADIAN DOLLARS) PER SHARE This box MUST be completed if Shares
AT WHICH SHARES ARE BEING DEPOSITED are being deposited pursuant to a
This box MUST be completed if Shares Purchase Price Tender.
are being deposited pursuant to an
Auction Tender. The undersigned either (check one):
------------------------------------- [_] is depositing Shares beneficially
CHECK ONLY ONE BOX. If more than one owned by the undersigned, or
box is checked, there is no proper
deposit of Shares. [_] is a broker, dealer, bank, trust
------------------------------------- company or other nominee that is
[_] $3.00 [_] $3.40 [_] $3.80 depositing, for the beneficial
[_] $3.10 [_] $3.50 [_] $3.85 owners thereof, Shares with
[_] $3.20 [_] $3.60 respect to which it is the owner
[_] $3.30 [_] $3.70 of record (list attached).
-------------------------------------
Shareholders may wish to refer to
Canadian/U.S. dollar exchange rates
on page 13 of the Offer to Purchase.
Also see Instruction 9 of the Letter
of Transmittal.
------------------------------------- ---------------------------------------
------------------------------------- ---------------------------------------
BOX D BOX E
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 6 AND 7) (SEE INSTRUCTIONS 1, 4, 6 AND 7)
To be completed ONLY if certificates To be completed ONLY if certificates
for Shares deposited but not for Shares deposited but not
purchased and/or the cheque for the purchased and/or the cheque for the
purchase of Shares purchased are to purchase price of Shares purchased
be issued in the name of someone are to be sent to someone other than
other than the undersigned. the the undersigned, or to the
undersigned at an address other than
Issue: [_] cheque and/or that shown above.
[_] certificate(s) to:
Mail: [_] cheque and/or
[_] certificate(s) to:
Name______________________________
(Please Print)
Address___________________________ Name______________________________
(Please Print)
__________________________________ Address___________________________
__________________________________ __________________________________
(Include Postal Code or Zip Code)
__________________________________
__________________________________ (Include Postal Code or Zip Code)
(SOCIAL INSURANCE NO.)
------------------------------------- ---------------------------------------
------------------------------------- ---------------------------------------
BOX F BOX G
HOLD FOR PICK-UP U.S. DOLLAR ELECTION
[_] Hold certificates and/or cheques [_] Check here if you wish to receive
for Shares for pick up payment in U.S. Dollars at the
specified exchange rate in the
Offer (see Instruction 8).
Otherwise, payment will be made in
Canadian Dollars.
------------------------------------- ---------------------------------------
5
--------------------------------------------------------------------------------
BOX H
[_] Check here if certificates for deposited Shares are being delivered
pursuant to a notice of guaranteed delivery previously sent to the
Depositary and complete the following:
Name(s) of Registered Owner(s):_______________________________________________
Date of Execution of Notice of Guaranteed Delivery:___________________________
Name of Institution Which Guaranteed Delivery:________________________________
--------------------------------------------------------------------------------
-------------------------------------- --------------------------------------
BOX I BOX J
SHAREHOLDER(S) SIGN HERE GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6) (SEE INSTRUCTIONS 1 AND 6)
Must be signed by registered owner(s) Authorized Signature:_________________
exactly as name(s) appear(s) on
certificate(s) or on a security ______________________________________
position listing or by person(s)
authorized to become registered Name(s):______________________________
owner(s) by certificate(s) and (Please Print)
documents transmitted with this Letter Title:________________________________
of Transmittal. If signature is by
attorney-in-fact, executor, Name of Firm:_________________________
administrator, trustee, guardian,
officer of a corporation or another Address:______________________________
acting in a fiduciary or
representative capacity, please set ______________________________________
forth the full title. See Instruction 6.
______________________________________
Authorized Signature:_________________ (Include Postal Code or Zip Code)
Signature(s) of Shareholder
or authorized representative Area Code and Telephone Number:_______
______________________________________
Name(s):______________________________
(Please Print)
Capacity:_____________________________ DATED___________________________, 2003
Address:______________________________ --------------------------------------
______________________________________
(Include Postal Code or Zip Code)
Area Code and Telephone Number:_______
______________________________________
SHAREHOLDERS MUST PROVIDE THEIR
SOCIAL INSURANCE NO.
DATED___________________________, 2003
--------------------------------------
--------------------------------------------------------------------------------
BENEFICIAL OWNERS OF SHARES
--------------------------------------------------------------------------------
If the undersigned is a broker, dealer, bank, trust company or other nominee
that is depositing for the beneficial owners thereof Shares of which it is the
holder of record and the undersigned would prefer any calculation of the number
of Shares to be taken up and paid for on a pro rata basis if the number of
Shares tendered (or deemed to have been tendered) under the Offer exceeds the
number to be purchased by Descartes, to be made for each such beneficial owner
individually on the basis of the Shareholder's beneficial ownership of Shares
tendered under the Offer, the undersigned must attach to this Letter of
Transmittal a list identifying such beneficial owners and the beneficial
ownership of Shares or their Shares tendered under the Offer, as the case may
be.
--------------------------------------------------------------------------------
[_] Beneficial Holders List Attached [_] Check Here If Diskette to Follow
--------------------------------------------------------------------------------
6
INSTRUCTIONS
FORMING PART OF THE TERMS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of the
Shares deposited with this Letter of Transmittal and payment and
delivery are to be made directly to such owner and such owner has not
completed either Box D "Special Payment Instructions" or Box E
"Special Delivery Instructions" above; or
(b) such Shares are deposited for the account of a firm which is a
Canadian Schedule I chartered bank, a major trust company in Canada, a
member of the Securities Transfer Agents Medallion Program (STAMP), a
member of the Stock Exchange Medallion Program (SEMP) or a member of
the New York Stock Exchange Inc. Medallion Signature Program (MSP),
whose members normally include members of recognized stock exchanges
in Canada and the United States, members of the Investment Dealers
Association of Canada, members of the National Association of
Securities Dealers or banks and trust companies in the United States
(each being referred to as an "Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures
on this Letter of Transmittal by completing Box J "Guarantee of
Signature(s)". See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES - GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used if certificates are to
be forwarded with it to the Depositary. Certificates for all physically
deposited Shares together with a properly completed and duly executed
Letter of Transmittal or facsimile thereof, and any other documents
required by this Letter of Transmittal, should be mailed or delivered to
the Depositary at the appropriate address set forth herein and must be
received by the Depositary by the Expiration Date (as defined in the Offer
to Purchase).
Shareholders whose certificates are not immediately available or who cannot
deliver certificates for Shares and all other required documents to the
Depositary by the Expiration Date may deposit their Shares by or through
any Eligible Institution by properly completing (including the type of
deposit and, if applicable, the price at which the Shares are being
deposited) and duly executing and delivering a Notice of Guaranteed
Delivery (or facsimile of it) and by otherwise complying with the
guaranteed delivery procedure set forth in Section 2 of the Offer to
Purchase. Pursuant to such procedure, the certificates for all physically
deposited Shares, as well as a properly completed and duly executed Letter
of Transmittal and all other documents required by this Letter of
Transmittal (or a manually executed photocopy thereof) must be received by
the Depositary at its Toronto office within three days on which trading
occurs on the Toronto Stock Exchange and the Nasdaq National Market (each
such day is referred to as a "Trading Day") after the Expiration Date, all
as provided in Section 2 of the Offer to Purchase.
The Notice of Guaranteed Delivery must be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary at its office in
Toronto, Ontario and must include a guarantee by an Eligible Institution in
the form set forth in such Notice of Guaranteed Delivery. For Shares to be
validly deposited pursuant to the guaranteed delivery procedure, the
Depositary must receive the Notice of Guaranteed Delivery by the Expiration
Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE DEPOSITING SHAREHOLDER. DELIVERY IS ONLY
EFFECTIVE UPON RECEIPT BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED AND IT IS SUGGESTED THAT THE MAILING BE MADE SUFFICIENTLY IN
ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE DEPOSITARY ON OR
PRIOR TO SUCH DATE.
Descartes will not purchase any fractional Shares, nor will it accept any
alternative, conditional or contingent deposits except as specifically
permitted by the Offer to Purchase. All depositing Shareholders, by
execution of this Letter of Transmittal and delivery of it in the manner
prescribed herein, waive any right to receive any notice of the acceptance
of their deposit.
3. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Shares Deposited" is inadequate, the certificate numbers and/or the
number of Shares should be listed on a separate signed schedule and
attached to this Letter of Transmittal.
4. PARTIAL DEPOSITS AND UNPURCHASED SHARES. If fewer than all of the Shares
evidenced by any certificate are to be deposited, fill in the number of
Shares which are to be deposited in the column entitled "Number of Shares
Deposited". In such case, if any deposited Shares are purchased, a new
certificate for the remainder of the Shares evidenced by the old
certificate(s) will be issued and sent to the registered holder, unless
otherwise specified in Box D "Special Payment Instructions" or Box E
"Special Delivery Instructions" on this Letter of Transmittal, as soon as
practicable after the Expiration Date. All Shares represented by the
certificate(s) listed and delivered to the Depositary are deemed to have
been deposited unless otherwise indicated.
7
5. (a) INDICATION OF TYPE OF TENDER. To deposit shares, the Shareholder must
complete Box A "Type of Tender" on this Letter of Transmittal or, if
applicable, on the Notice of Guaranteed Delivery indicating whether he or
she is depositing Shares pursuant to an Auction Tender or a Purchase Price
Tender. ONLY ONE BOX MAY BE CHECKED. The same Shares cannot be deposited
(unless previously properly withdrawn as provided in Section 3 of the Offer
to Purchase) pursuant to both an Auction Tender and a Purchase Price
Tender, or pursuant to Auction Tenders at more than one price. However, if
a Shareholder desires to deposit Shares in separate lots at a different
type of tender for each lot, such Shareholder must complete a separate
Letter of Transmittal or, if applicable, Notice of Guaranteed Delivery for
each lot which the Shareholder is depositing.
(b) INDICATION OF PRICE AT WHICH SHARES ARE BEING DEPOSITED. For Shares to
be properly deposited pursuant to an Auction Tender the Shareholder must
complete Box B "Auction Tender" on this Letter of Transmittal indicating
the price per Share in Canadian dollars at which he or she is depositing
Shares. A Shareholder wishing to deposit portions of his or her Shares
pursuant to Auction Tenders at different prices must complete a separate
Letter of Transmittal for each price at which he or she wishes to deposit
each such portion of his or her Shares. The same Shares cannot be deposited
pursuant to Auction Tenders (unless previously properly withdrawn as
provided in Section 3 of the Offer to Purchase) at more than one price. No
price can be specified by Shareholders making a Purchase Price Tender.
6. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK TRANSFER POWERS AND
ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered owner(s) of
the Shares deposited hereby, the signature(s) must correspond exactly
with the name(s) as written on the face of the certificate without any
change whatsoever.
(b) If the Shares are registered in the names of two or more joint owners,
each such owner must sign this Letter of Transmittal.
(c) If any deposited Shares are registered in different names on several
certificates, it will be necessary to complete, sign, and submit as
many separate Letters of Transmittal (or facsimile of it) as there are
different registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered owner(s)
of the Shares deposited and transmitted hereby, no endorsements of
certificate(s) representing such Shares or separate stock transfer
powers are required unless payment is to be made, or the certificates
for Shares deposited but not purchased are to be issued, to a person
other than the registered owner(s). Any signature(s) required on such
certificates or stock transfer powers must be guaranteed by an
Eligible Institution. If this Letter of Transmittal is signed by a
person other than the registered owner of the certificate(s) listed,
however, the certificates must be endorsed or accompanied by
appropriate stock transfer powers, in either case signed exactly as
the name(s) of the registered owner(s) appear(s) on the certificate,
and signatures on such certificate(s) or stock transfer power(s) must
be guaranteed by an Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock transfer
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate
when signing and must submit proper evidence satisfactory to Descartes
of their authority so to act.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificates for Shares
deposited but not purchased and/or cheques are to be issued in the name of
a person other than the signer of this Letter of Transmittal or if such
certificates and/or cheques are to be sent to someone other than the signer
of this Letter of Transmittal or to the signer at a different address, Box
D "Special Payment Instructions" and/or Box E "Special Delivery
Instructions" on this Letter of Transmittal must be completed. If a cheque
evidencing payment for Shares deposited is to be held by the Depositary for
pick-up by the undersigned or any person designated by the undersigned in
writing, Box F "Hold for Pick-Up" on this Letter of Transmittal must be
completed.
8. PAYMENT IN U.S. DOLLARS. The Purchase Price payable under the offer, and
thus the amount owing to any depositing Shareholder, will be denominated in
Canadian dollars. In exchange for their right to receive the Purchase
Price, a Shareholder wishing to do so may elect to receive an amount
denominated in United States dollars. Such a Shareholder must complete Box
G "U.S. Dollar Election" . Otherwise, payment will be received in Canadian
dollars. The Purchase Price payable to Descartes, and thus the amount owing
to any depositing Shareholder, will be denominated in Canadian dollars. The
Depositary will determine the amount payable to Shareholders receiving U.S.
dollar payment at the U.S. dollar equivalent of the relevant Canadian
dollar amount calculated at the average of the nominal noon rates of
exchange quoted by the Bank of Canada for the three business days next
preceding the payment date. See Section 4 of the Offer to Purchase
"Acceptance for Payment and Payment for Shares -- PAYMENT"
9. IRREGULARITIES. Descartes will determine, in its sole discretion, acting
reasonably, all questions as to the validity, form, eligibility (including
time of receipt) and acceptance for payment of any deposit of Shares and
8
its determination shall be final and binding on all parties. Descartes
reserves the absolute right to reject any or all deposits determined by it
not to be in proper form or the acceptance of or payment for which may, in
the opinion of Descartes' counsel, be unlawful. Descartes also reserves the
absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the deposit of any particular Shares and Descartes'
interpretation of the terms of the Offer (including these instructions)
will be final and binding on all parties. No deposit of Shares will be
deemed to be properly made until all defects and irregularities have been
cured or waived. Unless waived, any defects or irregularities in connection
with deposits must be cured within such time as Descartes shall determine.
None of Descartes, the Dealer Manager, the Information Agent, the
Depositary nor any other person is or will be obligated to give notice of
defects or irregularities in deposits, nor shall any of them incur any
liability for failure to give any such notice.
10. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance and additional copies of the Offer to Purchase, the
Notice of Guaranteed Delivery and this Letter of Transmittal may be
directed to the Depositary or the Information Agent at their respective
addresses and telephone and facsimile numbers set forth on the back cover
of the Offer to Purchase or from your broker, dealer, commercial bank, or
trust company.
11. SUBSTITUTE FORM W-9. Each tendering U.S. Shareholder is required to
properly complete and provide a Substitute Form W-9 which is attached
hereto. Failure to provide a properly completed Substitute Form W-9 will
subject the tendering Shareholder to a 30% U.S. federal backup withholding
tax on payments to be received by such Shareholder. If backup withholding
applies, 30% of the amounts otherwise payable to the Shareholder will be
withheld as backup withholding tax. Backup withholding tax is not an
additional tax. Rather, the federal income taxes payable by persons subject
to backup withholding will be reduced by the amount of any backup
withholding tax that is withheld. If withholding results in an overpayment
of taxes, a refund or credit may be obtained from the Internal Revenue
Service.
12. GOVERNING LAW. The Offer and any agreement resulting from the acceptance of
the Offer will be construed in accordance with and governed by the laws of
the Province of Ontario and the laws of Canada applicable therein.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR MANUALLY SIGNED PHOTOCOPY OF IT
(TOGETHER WITH CERTIFICATES FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS) OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR BEFORE
THE EXPIRATION DATE.
9
--------------------------------------------------------------------------------
NAME:
--------------------------------------------------------------------------------
BUSINESS NAME, IF DIFFERENT FROM ABOVE:
--------------------------------------------------------------------------------
CHECK APPROPRIATE BOX: [ ] Individual/Sole Proprietor [ ] Corporation
[ ] Partnership [ ] Other
--------------------------------------------------------------------------------
ADDRESS:
--------------------------------------------------------------------------------
SUBSTITUTE PART I - Please provide your TIN in
the box at right and certify by
signing and dating below.
----------------------------------- -------------------------
Social Security Number or
Employer Identification
Number (if awaiting TIN
write "Applied For ")
--------------------------------------------------------------
FORM W-9 PART II - For Payees exempt from backup withholding, see
the attached Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 and complete
as instructed therein.
--------------------------------------------------------------
Certification - Under penalties of perjury, I certify that:
DEPARTMENT OF THE (1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
TREASURY IDENTIFICATION NUMBER (OR I AM WAITING FOR A TAXPAYER
INTERNAL REVENUE IDENTIFICATION NUMBER TO BE ISSUED TO ME);
SERVICE
--------------------------------------------------------------
PAYOR'S REQUEST (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE:
FOR TAXPAYER (A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I HAVE
IDENTIFICATION NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS)
NUMBER ("TIN") THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A
FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE
IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO
BACKUP WITHHOLDING; AND
--------------------------------------------------------------
(3) I AM A U.S. PERSON (INCLUDING A U.S. RESIDENT ALIEN).
--------------------------------------------------------------
CERTIFICATION INSTRUCTIONS - You must cross out item (2) above
if you have been notified by the IRS that you are subject to
backup withholding because you have failed to report all
interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS
that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed
Guidelines.)
--------------------------------------------------------------
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO
ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
Signature: Date:
------------------------------- -------------
--------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 30% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
10
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
---------------------------------- --------------------- ------------------------------ ------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
NUMBER OF - NUMBER OF -
---------------------------------- --------------------- ------------------------------ ------------------------
1. An individual's account The individual 8. Sole proprietorship The owner (4)
account or single-owner
LLC account
2. Two or more individuals The actual owner of 9. A valid trust, estate, or The legal entity (Do not
(joint account) the account or, if pension trust furnish the identifying
combined funds, the number of personal
first individual on representative or trustee
the account (1) unless the legal entity
itself is not designated
in the account title.)(5)
3. Husband and wife The actual owner of 10. Corporate account or LLC The corporation
the account or, if (electing corporate status
joint funds, either on Form 8832) account
person (1)
4. Custodian account of a minor The minor (2) 11. Religious, charitable, The organization
(Uniform Gift to Minors Act) or educational
organization account
5. Adult and minor (joint The adult or, if the 12. Partnership account or The partnership
account) minor is the only multi-member LLC account
contributor, the
minor (1)
6. Account in the name of The ward, minor, or 13. Association, club, or The organization
guardian or committee for a incompetent person (3) other tax-exempt
designated ward, minor, or organization
incompetent person
7. a. The usual revocable The grantor-trustee 14. A broker or registered The broker or nominee
savings trust account (1) nominee
(grantor is also trustee)
b. So-called trust account The actual owner (1) 15. Account with the Department The public entity
that is not a legal or valid of Agriculture in the name
trust under State law of a public entity (such
as a State or local
government, school
district, or prison) that
receives agricultural
program payments
----------------------------------------------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
11
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees which may be exempt from backup withholding
and for which no information reporting is required. For interest and dividends,
all listed payees are exempt except item (9). For broker transactions, payees
listed in items (1) through (13) and a person registered under the Investment
Advisors Act of 1940 who regularly acts as a broker are exempt. Payments subject
to reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except
payments made to a corporation (other than certain hospitals described in
Regulations section 1.6041-3(c)) for medical and health care payments,
attorney's fees, and payments for services paid by a Federal executive agency
are not exempt from backup withholding or information reporting. Only payees
described in items (1) through (5) are exempt from backup withholding for barter
exchange transactions and patronage dividends.
(1) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or instrumentalities.
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Section 404(k) distributions made by an ESOP.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE SUBSTITUTE FORM W-9 TO AVOID POSSIBLE
ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE ``EXEMPT'' ON THE FACE OF THE FORM, SIGN
AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR
A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYOR AN
APPROPRIATE COMPLETED INTERNAL REVENUE FORM W-8 (EITHER FORM W-8BEN, FORM
W-8ECI, FORM W-8EXP, or FORM W-8 IMY, AS APPROPRIATE).
Certain payments other than interest, dividends and patronage dividends that are
not subject to information reporting are also not subject to backup withholding.
For details, see regulations under sections 6041, 6041A, 6042, 6044, 6045, 6049,
6050A and 6050N.
PRIVACY ACT NOTICE. - Section 6109 of the Internal Revenue Code requires you to
give your correct taxpayer identification number to persons who must file
information returns to the IRS to report interest, dividends, and certain other
income paid to you. The IRS uses the numbers for identification purposes and to
help verify the accuracy of your tax return. The IRS may provide this
information to the Department of Justice for civil and criminal litigation, and
to cities, states, and the District of Columbia to carry out their tax laws.
You must provide your tax identification number whether or not you are required
to file a tax return. Payers must generally withhold 30% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. - If you
fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure
is due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. - If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. - Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
12
DOCUMENT 4
----------
THIS IS NOT A LETTER OF TRANSMITTAL
NOTICE OF GUARANTEED DELIVERY
FOR THE
DEPOSIT OF COMMON SHARES
OF
THE DESCARTES SYSTEMS GROUP INC.
PURSUANT TO ITS OFFER TO PURCHASE DATED JUNE 2, 2003
As set forth in Section 2 of the Offer to Purchase (as defined below), this form
or one substantially equivalent hereto must be used to deposit common shares
("Shares") of The Descartes Systems Group Inc. ("Descartes") pursuant to the
Offer (as defined below) if certificates for Shares are not immediately
available or time will not permit all documents required by the Letter of
Transmittal to reach the Depositary by the Expiration Date (as defined in the
Offer to Purchase). Such form may be delivered by hand or transmitted by
facsimile transmission or mailed to the Depositary at the offices set forth
below. See Section 2 of the Offer to Purchase.
OFFICES OF THE DEPOSITARY, CIBC MELLON TRUST COMPANY
BY MAIL BY HAND OR COURIER
P.O. Box 1036 199 Bay Street
Adelaide Street Postal Station Commerce Court West
Toronto, Ontario Securities Level
M5C 2K4 Toronto, Ontario
M5L 1G9
Attn: Courier Window
BY FACSIMILE TRANSMISSION
(416) 643-3148
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR TRANSMISSION OF
THIS NOTICE OF GUARANTEED DELIVERY VIA A FACSIMILE NUMBER OTHER THAN SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on the Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Offer to Purchase),
such signature must appear in the applicable space in the Letter of Transmittal.
The undersigned hereby deposits to Descartes in the manner and at the price
per Share indicated below (subject to applicable withholding taxes), upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
June 2, 2003 (the "Offer to Purchase") and the related Letter of Transmittal
(which as amended or supplemented from time to time, together constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Shares
indicated below pursuant to the guaranteed delivery procedure set forth in
Section 2 of the Offer to Purchase.
SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF DEPOSITING
SHARES UNDER THE OFFER. SEE SECTION 14 "INCOME TAX CONSIDERATIONS" IN THE OFFER
TO PURCHASE THAT ACCOMPANIES THIS NOTICE OF GUARANTEED DELIVERY.
Number of Shares: Name(s) of Registered Holder(s):
------------------------------- ---------------------
Certificate Nos. (if available)
----------------- -------------------------------------------------------
(Please type or print)
Address:
-------------------------------------------------- ---------------------------------------------
Signature(s):
----------------------------------- -------------------------------------------------------
Sign Here Postal Code or Zip Code
Dated: Area Code and Tel. No.:
------------------------------------------ -------------------------------
--------------------------------------------------------------------------------
BOX A
TYPE OF TENDER
--------------------------------------------------------------------------------
Check only one box. If more than one box is checked or if no box is checked, all
Shares identified above will be deemed to have been tendered by way of a
Purchase Price Tender. Shares of Descartes are being deposited hereby pursuant
to (check one):
--------------------------------------------------------------------------------
[ ] An Auction Tender [ ] A Purchase Price Tender
(Please complete Box B) (Please complete Box C)
-------------------------------------------------------------------------------
---------------------------------------------- ------------------------------------------------------
BOX B BOX C
AUCTION TENDER PURCHASE PRICE TENDER
PRICE (IN CANADIAN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING DEPOSITED
This box MUST be completed if Shares are being This box MUST be completed if Shares are being
deposited pursuant to an Auction Tender. deposited pursuant to a Purchase Price Tender.
---------------------------------------------- The undersigned either (check one):
CHECK ONLY ONE BOX. If more than one box is
checked, there is no proper deposit of Shares. [ ] is depositing Shares beneficially owned by the
---------------------------------------------- undersigned, or
[ ] $3.00 [ ] $3.40 [ ] $3.80
[ ] $3.10 [ ] $3.50 [ ] $3.85 [ ] is a broker, dealer, bank, trust company or other
[ ] $3.20 [ ] $3.60 nominee that is depositing, for the beneficial
[ ] $3.30 [ ] $3.70 owners thereof, Shares with respect to which it
is the owner of record.
--------------------------------------------------------------------------------------------------------
Name: _____________________________ Signature: __________________________ Date: _____________________
--------------------------------------------------------------------------------------------------------
IMPORTANT: THIS NOTICE OF GUARANTEED DELIVERY OR A MANUALLY EXECUTED
PHOTOCOPY OF IT (TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY
THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE.
DO NOT SEND SHARE CERTIFICATES WITH THIS FORM
THE INSTITUTION THAT COMPLETES THIS FORM MUST COMMUNICATE THE GUARANTEE TO
THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL AND CERTIFICATES FOR
SHARES TO THE DEPOSITARY AT ITS TORONTO OFFICE WITHIN THE TIME PERIOD SHOWN
HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH INSTITUTION.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a Canadian Schedule I chartered bank, a major trust
company in Canada, a member of the Toronto Stock Exchange or a member in the
Securities Transfer Agents Medallion Program (STAMP), a member of the Stock
Exchange Medallion Signature Program (SEMP) or a member of the New York Stock
Exchange Inc. Medallion Signature Program (MSP) guarantees to deliver to the
Depositary at the principal office in Toronto as set forth above before 5:00
p.m. the certificate(s) representing the Shares deposited hereby, in proper form
for transfer, with delivery of a properly completed and duly executed Letter of
Transmittal (or manually-signed facsimile thereof) and any other required
documents, all within three Trading Days after the Expiration Date. As used
herein, a "Trading Day" means a day on which trading occurs on the Toronto Stock
Exchange and the Nasdaq National Market.
Name of Firm:
--------------------
Address of Firm: Authorized Signature:
----------------- ---------------------
Name:
---------------------------------- -------------------------------------
(Please type or print)
Title:
---------------------------------- ------------------------------------
Postal Code or Zip Code
Area Code and Tel. No.: Dated: , 2003
---------- ------------------------------
DOCUMENT 5
----------
BROKER LETTER TO CLIENTS
OFFER BY
THE DESCARTES SYSTEMS GROUP INC.
TO PURCHASE FOR CASH
UP TO 11,578,000 OF ITS COMMON SHARES AT A PURCHASE PRICE OF
NOT MORE THAN $3.85 AND NOT LESS THAN $3.00 PER COMMON SHARE
THE OFFER WILL EXPIRE AT 5:00 P.M., TORONTO TIME, ON JULY 11, 2003 UNLESS
WITHDRAWN OR EXTENDED
ALL DOLLAR REFERENCES IN THIS BROKER LETTER
ARE IN CANADIAN DOLLARS, UNLESS OTHERWISE INDICATED
To Our Clients:
Enclosed for your consideration are the offer to purchase, dated June 2,
2003 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
setting forth an offer by The Descartes Systems Group Inc. ("Descartes"), to
purchase common shares of Descartes (the "Shares"), (i) at a single price of not
more than $3.85 nor less than $3.00 per Share specified by such Shareholders
within that range ("Auction Tenders") or (ii) pursuant to purchase price tenders
described below ("Purchase Price Tenders"), in cash upon the terms and subject
to the conditions set forth in the Offer, including the provisions relating to
proration described therein.
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Offer. Also enclosed herewith is certain other material
related to the Offer, including a letter to Shareholders from Mr. Manuel Pietra,
Chief Executive Officer and President of Descartes.
Descartes will determine a single price per Share (not more than $3.85 nor
less than $3.00 per Share) (the "Purchase Price") that it will pay for Shares
properly deposited pursuant to the Offer, taking into account the number of
Shares deposited pursuant to Auction Tenders and Purchase Price Tenders, the
prices specified by Shareholders making Auction Tenders and the price at which
Shares deposited pursuant to Purchase Price Tenders are considered to have been
deposited. Shares deposited pursuant to Purchase Price Tenders will be
considered to have been deposited at $3.00 per Share. A Shareholder who wishes
to deposit Shares but does not wish to specify a price at which his or her
Shares may be purchased by Descartes should make a Purchase Price Tender.
Descartes will select a Purchase Price that will enable it to purchase
11,578,000 Shares at prices not more than $3.85 nor less than $3.00 per Share,
pursuant to the Offer, including the provisions relating to proration.
WE ARE A PARTICIPANT IN EITHER THE BOOK-ENTRY SYSTEM OF THE CANADIAN
DEPOSITORY FOR SECURITIES LIMITED ("CDS") OR CEDE & CO., WHICH ACT AS CUSTODIANS
(EACH A "CUSTODIAN") OF THE SHARES BEING HELD FOR YOUR ACCOUNT. AS SUCH, A
DEPOSIT OF SUCH SHARES CAN BE MADE ONLY BY THE APPLICABLE CUSTODIAN, AS THE
HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS GIVEN THROUGH US, AS A
NOMINEE OF THE APPLICABLE CUSTODIAN. THE LETTER OF TRANSMITTAL IS FURNISHED TO
YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO DEPOSIT SHARES HELD
BY THE APPLICABLE CUSTODIAN FOR YOUR ACCOUNT WHICH WE MAINTAIN.
We request instructions as to whether you wish us to deposit any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer. Your attention is invited to the following:
1. You may deposit Shares at prices not greater than $3.85 nor less than $3.00
per Share, as indicated in the attached Instruction Form.
2. Descartes will determine a single Purchase Price, being the lowest price
that will allow it to purchase 11,578,000 Shares, subject to proration as
described herein (or such lesser number of Shares as are properly deposited
at prices not in excess of $3.85 nor less than $3.00 per Share), pursuant
to the Offer.
3. As promptly as practicable thereafter, Descartes will publicly announce the
Purchase Price, and upon the terms and subject to the conditions of the
Offer (including the proration provisions described in Section 1, "Number
of Shares; Proration" of the Offer), all Shareholders who have properly
deposited and not withdrawn their Shares pursuant to Auction Tenders at
prices at or below the Purchase Price or pursuant to Purchase Price Tenders
will receive the Purchase Price (subject to any applicable withholding
tax), payable in cash, for all Shares purchased. The Purchase Price will be
denominated in Canadian dollars. However, depositing Shareholders can elect
to receive, in exchange for their right to receive the purchase price, an
amount denominated in United States dollars.
4. The Offer is not conditional upon a minimum number of Shares being
deposited, however it is subject to certain other conditions. See Section 5
of the Offer.
5. The Offer, proration period and withdrawal rights will expire at 5:00 p.m.,
Toronto time, on July 11, 2003, unless the Offer is extended. Your
instructions to us should be forwarded to us in ample time to permit us to
submit a deposit on your behalf.
6. As described in the Offer, if the number of Shares properly deposited by
the Expiration Date pursuant to Auction Tenders at prices at or below the
Purchase Price or pursuant to Purchase Price Tenders and not withdrawn is
greater than 11,578,000 Shares, Descartes will, upon the terms and subject
to the conditions of the Offer, purchase at the Purchase Price (subject to
any applicable withholding tax), 11,578,000 Shares on a pro rata basis
(calculated to the nearest whole Share, so as to avoid the creation of
fractional Shares). Descartes' determination as to proration shall be final
and binding on all parties.
7. Each tendering U.S. Shareholder is required to properly complete and
provide a Substitute Form W-9 which is attached hereto. Failure to provide
a properly completed Substitute Form W-9 will subject the tendering
Shareholder to a 30% U.S. federal backup withholding tax on payments to be
received by such Shareholder. If backup withholding applies, 30% of the
amounts otherwise payable to the Shareholder will be withheld as backup
withholding tax. Backup withholding tax is not an additional tax. Rather,
the federal income taxes payable by persons subject to backup withholding
will be reduced by the amount of any backup withholding tax that is
withheld. If withholding results in an overpayment of taxes, a refund or
credit may be obtained from the Internal Revenue Service.
SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO DEPOSIT SHARES AND,
IF SO, THE NUMBER OF SHARES TO DEPOSIT AND THE PRICE OR PRICES AT WHICH SHARES
SHOULD BE DEPOSITED. NEITHER DESCARTES, ITS BOARD OF DIRECTORS NOR ANY
REPRESENTATIVE THEREOF MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER
TO DEPOSIT OR REFRAIN FROM DEPOSITING SHARES.
If you wish to have us deposit any or all of your Shares held by us for
your account upon the terms and subject to the conditions set forth in the
Offer, please so instruct us by completing, executing and returning to us the
attached Instruction Form. An envelope to return your instructions to us is
enclosed. If you authorize deposit of your Shares, all such Shares will be
deposited unless otherwise specified on the Instruction Form.
If you wish to deposit Shares in separate lots at a different type of
deposit or for a different price for each lot, you must complete a separate
Instruction Form for each lot you wish to deposit. The same Shares cannot be
deposited pursuant to Auction Tenders (unless previously properly withdrawn as
provided in Section 3 of the Offer to Purchase) pursuant to both an Auction
Tender or a Purchase Price Tender, or pursuant to Auction Tenders at more than
one price. No price per Share can be specified by Shareholders making a Purchase
Price Tender. We must submit separate deposits on your behalf for each price you
will accept in respect of separate lots of your Shares pursuant to Auction
Tenders at different prices per Share
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO
SUBMIT A DEPOSIT ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. THE OFFER
WILL EXPIRE AT 5:00 P.M. TORONTO TIME, ON JULY 11, 2003 UNLESS WITHDRAWN OR
EXTENDED.
2
The Offer is being made to all holders of Shares. Descartes is not aware of
any jurisdiction where the making of the Offer is not in compliance with
applicable law. If Descartes becomes aware of any jurisdiction where the making
of the Offer is not in compliance with any valid applicable law, Descartes will
make a good faith effort to comply with such law. If, after such good faith
effort, Descartes cannot comply with such law, the Offer will not be made to
(nor will deposits be accepted from or on behalf of) the holders of Shares
residing in such jurisdiction. In any jurisdiction where the securities or blue
sky laws require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed made on Descartes' behalf by the Dealer Managers or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF
DEPOSITING SHARES UNDER THE OFFER. SEE SECTION 14 "INCOME TAX CONSIDERATIONS" IN
THE OFFER TO PURCHASE THAT ACCOMPANIES THIS LETTER.
3
INSTRUCTION FORM
WITH RESPECT TO AN OFFER BY THE DESCARTES SYSTEMS GROUP INC.
TO PURCHASE FOR CASH
UP TO 11,578,000 OF ITS COMMON SHARES AT A PURCHASE PRICE OF
NOT MORE THAN $3.85 AND NOT LESS THAN $3.00 PER COMMON SHARE
ALL DOLLAR REFERENCES IN THE INSTRUCTION FORM
ARE IN CANADIAN DOLLARS, UNLESS OTHERWISE INDICATED
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated June 2, 2003, and the related Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer"), in connection with the Offer by The Descartes Systems Group Inc.
("Descartes"), to purchase for cancellation up to 11,578,000 common shares of
Descartes (the "Shares"), (i) at prices of not more than $3.85 nor less than
$3.00 per Share specified by such Shareholders ("Auction Tenders") or (ii)
pursuant to purchase price tenders ("Purchase Price Tenders") (subject to any
applicable withholding tax), payable in cash, for all Shares purchased, in
either case upon the terms and subject to the conditions set forth in the Offer,
including the provisions relating to proration described therein.
This will instruct you to deposit to Descartes the number of Shares
indicated below (or, if no number is indicated below, all Shares) that are held
by you for the account of the undersigned, and in the case of an Auction Tender,
at the price per Share, upon the terms and subject to the conditions of the
Offer.
--------------------------------------------------------------------------------
BOX A
TYPE OF TENDER
--------------------------------------------------------------------------------
Check only one box. If more than one box is checked or if no box is checked, all
Shares identified below will be deemed to have been tendered by way of a
Purchase Price Tender. Shares of Descartes are being deposited hereby pursuant
to (check one):
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[ ] An Auction Tender [ ] A Purchase Price Tender
(Please complete Box B) (Please complete Box C)
-------------------------------------------------------------------------------
---------------------------------------------- ------------------------------------------------------
BOX B BOX C
AUCTION TENDER PURCHASE PRICE TENDER
PRICE (IN CANADIAN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING DEPOSITED
This box MUST be completed if Shares are being This box MUST be completed if Shares are being
deposited pursuant to an Auction Tender. deposited pursuant to a Purchase Price Tender.
---------------------------------------------- The undersigned either (check one):
CHECK ONLY ONE BOX. If more than one box is
checked, there is no proper deposit of Shares. [ ] is depositing Shares beneficially owned by the
---------------------------------------------- undersigned, or
[ ] $3.00 [ ] $3.40 [ ] $3.80
[ ] $3.10 [ ] $3.50 [ ] $3.85 [ ] is a broker, dealer, bank, trust company or other
[ ] $3.20 [ ] $3.60 nominee that is depositing, for the beneficial
[ ] $3.30 [ ] $3.70 owners thereof, Shares with respect to which it
is the owner of record.
---------------------------------------------- ------------------------------------------------------
BOX D BOX E
MUST BE COMPLETED ONLY IF PARTIAL SHARE LOTS U.S. DOLLAR ELECTION
ARE BEING DEPOSITED*
(SEE INSTRUCTION 3) [ ] Check here if you wish to receive payment in U.S.
Dollars at the specified exchange rate in the
Offer (see Instruction 4). Otherwise, payment
will be made in Canadian Dollars
NUMBER OF SHARES DEPOSITED
$_______________________
* IF FEWER THAN ALL THE SHARES BENEFICIALLY
OWNED ARE TO BE DEPOSITED, FILL IN THE NUMBER
OF SHARES THAT ARE TO BE DEPOSITED. UNLESS
OTHERWISE INDICATED, IT WILL BE ASSUMED THAT
ALL SHARES BENEFICIALLY OWNED BY THE
DEPOSITING SHAREHOLDER ARE BEING DEPOSITED.
---------------------------------------------- ------------------------------------------------------
4
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. INDICATE TYPE OF TENDER. Each Shareholder must check the box indicating
whether the Shareholder is depositing Shares under the Offer by way of an
Auction Tender or a Purchase Price Tender in the box entitled "Type of
Tender". Only one box may be chosen.
2. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to be
properly deposited pursuant to an Auction Tender, the Shareholder must
complete the Auction Tender box on this Instruction Form indicating the
price per Share at which the Shareholder is depositing Shares. A
Shareholder wishing to deposit portions of the Shareholder's Shares
pursuant to Auction Tenders at different prices must complete a separate
Instruction Form for each price which the Shareholder wishes to deposit
each such portion of the Shareholder's Shares. The same Shares or portion
thereof cannot be deposited pursuant to Auction Tenders (unless previously
properly withdrawn as provided in Section 3 of the Offer to Purchase) at
more than one price. No price can be specified by Shareholders making a
Purchase Price Tender.
3. PARTIAL TENDERS. If fewer than all the Shares beneficially owned are to be
deposited, fill in the number of Shares that are to be deposited in the box
entitled "Number of Shares Deposited". Unless otherwise indicated it will
be assumed that all Shares beneficially owned by the depositing Shareholder
are being deposited.
4. U.S. DOLLAR ELECTION. The Purchase Price payable under the Offer, and thus
the amount owing to any depositing Shareholder will be denominated in
Canadian dollars. In exchange for their right to receive the Purchase
Price, a Shareholder wishing to do so may elect to receive an amount
denominated in United States dollars by completing the box entitled "U.S.
Dollar Election". The Depositary will determine the amount payable to
Shareholders receiving U.S. dollar payment at the U.S. dollar equivalent of
the relevant Canadian dollar amount calculated at the average of the
nominal noon rates of exchange quoted by the Bank of Canada for the three
business days next preceding the payment date.
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE
DEPOSITING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
SIGN HERE
Dated: , 2003
---------------------- -------------------------------------
(Signature(s))
-------------------------------------
Name
Name:
--------------------------------
(Please Print)
Address:
-----------------------------
-------------------------------------
-------------------------------------
(include Postal Code/Zip Code)
Tax Identification, Business Number,
Social Insurance or
Social Security Number
(U.S. HOLDERS MUST COMPLETE ATTACHED
SUBSTITUTE FORM W-9)
5
--------------------------------------------------------------------------------
NAME:
--------------------------------------------------------------------------------
BUSINESS NAME, IF DIFFERENT FROM ABOVE:
--------------------------------------------------------------------------------
CHECK APPROPRIATE BOX: [ ] Individual/Sole Proprietor [ ] Corporation
[ ] Partnership [ ] Other
--------------------------------------------------------------------------------
ADDRESS:
----------------- -----------------------------------
PART I - Please provide your TIN in
the box at right and certify by
signing and dating below.
----------------------------------- -------------------------
Social Security Number or
Employer Identification
Number (if awaiting TIN
SUBSTITUTE write "Applied For ")
--------------------------------------------------------------
FORM W-9 PART II - For Payees exempt from backup withholding, see
the attached Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 and complete
as instructed therein.
--------------------------------------------------------------
Certification - Under penalties of perjury, I certify that:
DEPARTMENT OF THE (1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
TREASURY IDENTIFICATION NUMBER (OR I AM WAITING FOR A TAXPAYER
INTERNAL REVENUE IDENTIFICATION NUMBER TO BE ISSUED TO ME);
SERVICE
--------------------------------------------------------------
PAYOR'S REQUEST (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE:
FOR TAXPAYER (A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I HAVE
IDENTIFICATION NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS)
NUMBER ("TIN") THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A
FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE
IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO
BACKUP WITHHOLDING; AND
--------------------------------------------------------------
(3) I AM A U.S. PERSON (INCLUDING A U.S. RESIDENT ALIEN).
--------------------------------------------------------------
CERTIFICATION INSTRUCTIONS - You must cross out item (2) above
if you have been notified by the IRS that you are subject to
backup withholding because you have failed to report all
interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS
that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed
Guidelines.)
--------------------------------------------------------------
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO
ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
Signature: Date:
------------------------------- -------------
--------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 30% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
6
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. - Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
------------------------------------ ----------------------- -------------------------------- ------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
NUMBER OF - NUMBER OF -
------------------------------------ ----------------------- -------------------------------- ------------------------
1. An individual's account The individual 8. Sole proprietorship The owner(4)
account or single-owner
LLC account
2. Two or more individuals The actual owner of 9. A valid trust, estate, The legal entity (Do
(joint account) the account or, if or pension trust not furnish the
combined funds, the identifying number of
first individual on personal representative
the account(1) or trustee unless the
legal entity itself is
not designated in the
account title.)(5)
3. Husband and wife The actual owner of 10. Corporate account or LLC The corporation
the account or, if (electing corporate
joint funds, either status on Form 8832)
person(1) account
4. Custodian account of a minor The minor(2) 11. Religious, charitable, The organization
(Uniform Gift to Minors Act) or educational
organization account
5. Adult and minor (joint The adult or, if the 12. Partnership account or The partnership
account) minor is the only multi-member LLC account
contributor, the minor(1)
6. Account in the name of The ward, minor, or 13. Association, club, or The organization
guardian or committee for a incompetent person(3) other tax-exempt
designated ward, minor, or organization
incompetent person
7. a. The usual revocable The grantor-trustee(1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is also trustee)
b. So-called trust account The actual owner(1) 15. Account with the The public entity
that is not a legal or valid Department of Agriculture
trust under State law in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
------------------------------------ ----------------------- -------------------------------- ------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
7
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees which may be exempt from backup withholding
and for which no information reporting is required. For interest and dividends,
all listed payees are exempt except item (9). For broker transactions, payees
listed in items (1) through (13) and a person registered under the Investment
Advisors Act of 1940 who regularly acts as a broker are exempt. Payments subject
to reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except
payments made to a corporation (other than certain hospitals described in
Regulations section 1.6041-3(c)) for medical and health care payments,
attorney's fees, and payments for services paid by a Federal executive agency
are not exempt from backup withholding or information reporting. Only payees
described in items (1) through (5) are exempt from backup withholding for barter
exchange transactions and patronage dividends.
(1) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalitieS.
(5) An international organization or any of its agencies or instrumentalities.
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
o Payments of patronage dividends not paid in money.
o Payments to certain foreign organizations.
o Section 404(k) distributions made by an ESOP.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE SUBSTITUTE FORM W-9 TO AVOID POSSIBLE
ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYOR AN APPROPRIATE
COMPLETED INTERNAL REVENUE FORM W-8 (EITHER FORM W-8BEN, FORM W-8ECI, FORM
W-8EXP, or FORM W-8 IMY, AS APPROPRIATE).
Certain payments other than interest, dividends and patronage dividends that are
not subject to information reporting are also not subject to backup withholding.
For details, see regulations under sections 6041, 6041A, 6042, 6044, 6045, 6049,
6050A and 6050N.
PRIVACY ACT NOTICE. - Section 6109 of the Internal Revenue Code requires you to
give your correct taxpayer identification number to persons who must file
information returns to the IRS to report interest, dividends, and certain other
income paid to you. The IRS uses the numbers for identification purposes and to
help verify the accuracy of your tax return. The IRS may provide this
information to the Department of Justice for civil and criminal litigation, and
to cities, states, and the District of Columbia to carry out their tax laws.
You must provide your tax identification number whether or not you are required
to file a tax return. Payers must generally withhold 30% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. - If you
fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure
is due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. - If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. - Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
8